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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION JULY 10, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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BUCKEYE TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 2611 62-1518973
(State of incorporation) (Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification Number)
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1001 TILLMAN STREET
MEMPHIS, TENNESSEE 38112
(901) 320-8100
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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DAVID B. FERRARO
PRESIDENT
BUCKEYE TECHNOLOGIES INC.
1001 TILLMAN STREET
MEMPHIS, TENNESSEE 38112
(901) 320-8100
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPY TO:
LINDA M. CROUCH, ESQ.
BAKER, DONELSON, BEARMAN & CALDWELL
207 MOCKINGBIRD LANE
JOHNSON CITY, TENNESSEE 37604
(423) 975-7623
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO
PUBLIC: As soon as practicable after the effective date of this Registration
Statement.
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If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) 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 this form is a post-effective amendment filed pursuant to Rule 462(d)
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. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SECURITY OFFERING PRICE(1) FEE(1)
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8% Senior Subordinated Notes Due 2010... $150,000,000 100% $150,000,000 $44,250
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(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(f) of the Securities Act of 1933, as amended.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION, OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JULY , 1998
PROSPECTUS
$150,000,000
[BUCKEYE TECHNOLOGIES INC. LOGO]
BUCKEYE TECHNOLOGIES INC.
OFFER TO EXCHANGE ITS
8% SENIOR SUBORDINATED NOTES DUE 2010 WHICH HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
FOR ANY AND ALL OF ITS OUTSTANDING
8% SENIOR SUBORDINATED NOTES DUE 2010
($150,000,000 AGGREGATE PRINCIPAL AMOUNT)
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1998, UNLESS EXTENDED.
Buckeye Technologies Inc., a Delaware corporation (the "Company"), hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), to exchange its 8% Senior Subordinated Notes Due 2010 (the
"Exchange Notes"), in an offering which has been registered under the Securities
Act of 1933, as amended (the "Securities Act"), pursuant to a Registration
Statement of which this Prospectus constitutes a part, for an equal principal
amount of its outstanding 8% Senior Subordinated Notes Due 2010 (the "Old
Notes"), of which an aggregate $150,000,000 in principal amount is outstanding
as of the date hereof (the "Exchange Offer"). The Exchange Notes and the Old
Notes are sometimes referred to herein collectively as the "Notes." The form and
terms of the Exchange Notes will be the same as the form and terms of the Old
Notes except that the Exchange Notes will not bear legends restricting the
transfer thereof. The Exchange Notes will be obligations of the Company entitled
to the benefits of the Indenture, dated as of June 11, 1998 (the "Indenture"),
relating to the Notes. See "Description of the Exchange Notes."
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FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS IN
DECIDING WHETHER TO TENDER OLD NOTES IN THE EXCHANGE OFFER, SEE "RISK FACTORS"
BEGINNING ON PAGE 11.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS , 1998.
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[PICTURES TO COME]
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The Company will accept for exchange any and all Old Notes that are validly
tendered on or prior to 5:00 p.m., New York City time, on the date the Exchange
Offer expires, which will be , 1998 unless the Exchange
Offer is extended (the "Expiration Date"). Tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date. The
Exchange Offer is not conditioned upon any minimum principal amount of Old Notes
being tendered for exchange. The Company has not entered into any arrangement or
understanding with any person to distribute the Exchange Notes to be received in
the Exchange Offer.
The Old Notes initially sold to Qualified Institutional Buyers (as defined
in Rule 144A) in reliance on Rule 144A under the Securities Act of 1933 ("Rule
144A") were initially represented by a single, permanent global note in
definitive, fully registered form, registered in the name of Cede & Co., as
nominee of The Depository Trust Company ("DTC"), which was deposited with IBJ
Schroder, the agent (the "Agent"), under the Indenture. The Exchange Notes
exchanged for the Old Notes that are represented by the global note will
continue to be represented by a permanent global note (collectively, the "Global
Notes," and individually, a "Global Note") in definitive, fully registered form,
registered in the name of a nominee of DTC and deposited with the Agent as
custodian, unless the beneficial holders thereof request otherwise. See
"Description of the Exchange Notes -- Book Entry, Delivery and Form." Old Notes
may be tendered only in denominations of $1,000 and any integral multiple
thereof.
Interest on the Exchange Notes will be payable semi-annually in arrears on
April 15 and October 15 of each year (each an "Interest Payment Date"),
commencing on the first such date following their date of issuance. Interest on
the Exchange Notes will accrue from the last Interest Payment Date on which
interest was paid on the Old Notes that are accepted for exchange or, if no
interest has been paid, from June 11, 1998. Accordingly, interest which has
accrued since the last Interest Payment Date on the Old Notes accepted for
exchange will cease to be payable upon issuance of the Exchange Notes.
Untendered Old Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain outstanding and bear interest at a rate of 8% per
annum after the Expiration Date but will not retain any rights under the
Registration Rights Agreement dated as of June 11, 1998 between the Company and
the Placement Agents (as defined therein) (the "Registration Rights Agreement").
The Notes are redeemable at the option of the Company, in whole or in part,
at any time on or after October 15, 2003. The Exchange Notes will be, and the
Old Notes currently are, unsecured obligations of the Company ranking pari passu
with all other unsecured and subordinated indebtedness of the Company.
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Company believes
the Exchange Notes to be issued pursuant to the Exchange Offer may be offered
for resale, resold or otherwise transferred by a holder thereof (other than (i)
a broker-dealer who acquires such Exchange Notes directly from the Company to
resell pursuant to Rule 144A or any other available exemption under the
Securities Act or (ii) a person that is an affiliate of the Company (within the
meaning of Rule 405 under the Securities Act)) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that the holder is acquiring the Exchange Notes in the ordinary course of such
holder's business and is not participating, and has no arrangement or
understanding with any person to participate, in the distribution of the
Exchange Notes. Holders of Old Notes wishing to accept the Exchange Offer must
represent to the Company that such conditions have been met. Each broker-dealer
that receives Exchange Notes for its own account pursuant to the Exchange Offer
must acknowledge that it will deliver a prospectus in connection with any resale
of such Exchange Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Old Notes where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities. The Company
has agreed that it will make this Prospectus available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution."
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Prior to the Exchange Offer, there has been no public market for the Old
Notes. The Company does not intend to list the Exchange Notes on any securities
exchange or to seek approval for quotation through any automated quotation
system. There can be no assurance that an active market for the Exchange Notes
will develop. To the extent that a market for the Exchange Notes develops, the
market value of the Exchange Notes will depend on market conditions, the
Company's financial condition and operating results and the market for similar
securities. Such conditions might cause the Exchange Notes, to the extent that
they are actively traded, to trade at a significant discount from the face
value. See "Risk Factors -- Absence of Public Market."
The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to bear the expenses of the Exchange Offer. No underwriter is
being used in connection with the Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
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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, all
information in this Prospectus has been adjusted to give effect to the stock
split of the Common Stock (as defined) effected in February 1998. All references
in this Prospectus to the "Company" or "Buckeye" refer to Buckeye Technologies
Inc. (formerly known as Buckeye Cellulose Corporation), its direct and indirect
subsidiaries and the Predecessor (as defined).
THE COMPANY
The Company is a leading manufacturer and worldwide marketer of value-added
cellulose-based specialty products. The Company utilizes its expertise in
polymer chemistry and its state-of-the-art manufacturing facilities to develop
and produce innovative and proprietary products for its customers. The Company
sells its products to 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 offering
cellulose-based specialty products both made from wood and cotton and utilizing
wet-laid and air-laid technologies. As a result, the Company produces a broader
range of cellulose-based specialty products than any of its competitors.
The Company believes that it has leading positions in most of the high-end
niche markets in which it competes. Buckeye's focus on niche specialty cellulose
markets has enabled it to maintain consistently strong sales growth and stable
operating margins, even during downturns in the commodity cellulose markets.
Since fiscal 1994, the Company's net sales have grown at a compound annual
growth rate of 14.6% from $371.5 million to $558.9 million in fiscal 1997.
EBITDA margins have also increased from 22.0% to 25.6% over the same time
period.
Cellulose is a natural fiber derived from trees and other plants that is
used in the manufacture of a wide array of products. The cellulose market
generally can be divided into two categories: commodity and specialty. Commodity
cellulose is used in the manufacture of paper and packaging materials, a very
large, but highly cyclical market. The Company participates exclusively in the
estimated $7 billion annual specialty cellulose market, which accounts for
approximately 3% of the total cellulose market. Specialty cellulose is used to
impart unique chemical or physical characteristics to a broad and diverse range
of highly technical products.
Specialty cellulose generally commands higher prices and its markets tend
to be less cyclical than commodity cellulose. The more demanding performance
requirements for specialty cellulose limit customers' ability to replace it with
other products. There is only a small number of producers that can meet the
technical demands of specialty cellulose markets. To the Company's knowledge,
there are no new entrants in this field and no expansion of high-end specialty
cellulose capacity has been announced.
The Company has manufactured cellulose-based specialty products for over 75
years. The Company's cellulose-based specialty products can be broadly grouped
into three categories: chemical cellulose, customized paper cellulose, and
absorbent products. Chemical cellulose (38% of nine months' fiscal 1998 gross
sales) is used to impart purity, strength, and viscosity in the manufacture of
diversified products such as food casings, rayon filament, acetate fibers and
plastics, as well as thickeners for food, cosmetics, and pharmaceuticals.
Customized paper cellulose (23% of nine months' fiscal 1998 gross sales) is used
to provide porosity, color permanence, and tear resistance in automotive air and
oil filters, premium letterhead, currency paper, and personal stationery.
Absorbent products (39% of nine months' fiscal 1998 gross sales) are used to
increase absorbency and fluid transport in products such as disposable diapers,
feminine hygiene products, and adult incontinence products. The Company combines
its expertise in specialty cellulose fibers with modern air-laid nonwoven
technology to produce absorbent composite structures for companies that globally
market consumer hygienic products.
The Company's commitment to research and development focuses on introducing
new cellulose-based specialty products, improving the performance of existing
products, and creating new applications for its
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products. 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 cellulose for use in rayon
tire cord and food casings. In addition, the Company was the first to
commercialize mercerized southern softwood cellulose as the porosity-building
fiber in automotive air and oil filter applications. It was also the first to
apply fluff pulp for use in the absorbent core of disposable diapers. Buckeye's
most recent product developments include a high-purity cellulose for food
casings and a high-viscosity ether cellulose yielding superior thickening
performance in consumer products such as toothpaste and shampoo.
The Company's customer base is broadly diversified both geographically and
by end-use markets. The Company's nine months' fiscal 1998 gross sales reflect
this geographic diversity, with 31% of sales in the United States, 38% in
Europe, 17% 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
ability to respond to changing customer needs have enabled the Company to
develop and strengthen long-term alliances with its customers.
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 fluff pulp pursuant to a take-or-pay contract
expiring in calendar year 2002 (the "Supply Agreement"). Procter & Gamble is the
Company's largest customer, accounting for 32% of the Company's nine months'
fiscal 1998 gross sales. The Company's other large customers include Akzo Nobel
N. V. (rayon filament and cellulose ethers), A. Ahlstrom Corporation (automotive
filter paper) and Hercules Incorporated (cellulose ethers).
The Company's total manufacturing capacity is approximately 700,000 metric
tons annually (460,000 metric tons of wood-based cellulose, 200,000 metric tons
of cotton-based cellulose and 40,000 metric tons of air-laid nonwovens). The
Company's plant in Perry, Florida (the "Foley Plant") produces wood-based
specialty cellulose. The Company's plants in Memphis, Tennessee (the "Memphis
Plant"), Glueckstadt, Germany (the "Glueckstadt Plant") and Lumberton, North
Carolina (the "Lumberton Plant") produce cotton-based specialty cellulose. The
Company's plant near Vancouver, Canada and its new plant in Cork, Ireland
produce cellulose-based air-laid nonwovens for absorbent applications. The
Company also has an air-laid converting facility in King, North Carolina. See
"Business -- Properties."
COMPANY STRATEGY
The Company's strategy is to continue to strengthen its position as a
leading supplier of cellulose-based specialty products. 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 (and therefore less
cyclical) specialty cellulose niche markets in which only a limited number
of cellulose producers have the ability to compete effectively. Competition
in these niche markets is based on product performance, customer technical
service, and, to a lesser extent, price. The Company continues to upgrade
its product mix to more technically demanding applications in order to
produce products with high margins and significant growth potential. As the
Company successfully expands its market share of such products and
introduces new products, it becomes less reliant on low margin, less
technically advanced products.
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
cellulose-based products, enhancing existing products, and creating new
applications for its products. Company scientists are working on the next
generation of cellulose-based specialty products for both new and current
applications in such diverse areas as feminine hygiene pads and tampons,
thin diapers, high-performance automotive filters, and cellulose ethers.
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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 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, which tends
to make replacement of its products with competing products less likely.
The Company's commitment to product quality, dedication to customer
technical service, and ability to respond to changing customer needs have
enabled the Company to develop and strengthen long-term alliances with its
customers. The Company believes over two-thirds of Buckeye's nine months'
fiscal 1998 sales were to purchasers who have been customers of the Company
for over 30 years.
Expand Capacity To Support Growing Demand. Buckeye plans to expand
its capacity and global presence in niche markets through strategic
alliances with customers who are leaders in their respective markets and
through selective acquisitions. The Company also will continue to modernize
its existing facilities to increase their productive capacity.
The Company is incorporated in Delaware and its executive offices are
located at 1001 Tillman Street, Memphis, Tennessee 38112. The Company's
telephone number is (901) 320-8100.
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THE EXCHANGE OFFER
The Exchange Offer......... Up to $150,000,000 aggregate principal amount of
Exchange Notes are being offered in exchange for a
like principal amount of Old Notes. The terms of
the Exchange Notes and the Old Notes are
substantially identical. Old Notes may be tendered
for exchange in whole or in part in any integral
multiple of $1,000. The Company is making the
Exchange Offer in order to satisfy its obligations
under the Registration Rights Agreement relating to
the Old Notes. For a description of the procedures
for tendering the Old Notes, see "The Exchange
Offer -- Procedures for Tendering."
Expiration Date............ 5:00 p.m., New York City time,
, 1998, unless the Exchange
Offer is extended by the Company (in which case the
Expiration Date will be the latest date and time to
which the Exchange Offer is extended). See "The
Exchange Offer -- Terms of the Exchange Offer."
Conditions to the Exchange
Offer.................... The Exchange Offer is subject to certain customary
conditions, certain of which may be waived by the
Company in its sole discretion. The Exchange Offer
is not conditioned upon any minimum principal
amount of Old Notes being tendered. See "The
Exchange Offer -- Conditions to Exchange Offer."
The Company reserves the right in its sole and
absolute discretion, subject to applicable law, at
any time and from time to time, (i) to delay the
acceptance of the Old Notes for exchange, (ii) to
terminate the Exchange Offer if certain specified
conditions have not been satisfied, (iii) to extend
the Expiration Date of the Exchange Offer and
retain all Old Notes tendered pursuant to the
Exchange Offer, subject, however, to the right of
holders of Old Notes to withdraw their tendered Old
Notes, or (iv) to waive any condition or otherwise
amend the terms of the Exchange Offer in any
respect. See "The Exchange Offer -- Terms of the
Exchange Offer."
Withdrawal Rights.......... Tenders of Old Notes may be withdrawn at any time
on or prior to the Expiration Date by delivering a
written notice of such withdrawal to the Exchange
Agent in conformity with certain procedures set
forth under "The Exchange Offer -- Withdrawal of
Tenders."
Procedures for Tendering
Old Notes................ Tendering holders of Old Notes must complete and
sign a Letter of Transmittal in accordance with the
instructions contained therein and forward the same
by mail, facsimile or hand delivery, together with
any other required documents, to the Exchange
Agent, either with the Old Notes to be tendered or
in compliance with the specified procedures for
guaranteed delivery of Old Notes. Certain brokers,
dealers, commercial banks, trust companies and
other nominees may also effect tenders by
book-entry transfer. Holders of Old Notes
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee are
urged to contact such person promptly if they wish
to tender Old Notes pursuant to the Exchange Offer.
See "The Exchange Offer -- Procedures for
Tendering." Letters of Transmittal and certificates
representing Old Notes should not be sent to the
Company. Such documents should be sent only to the
Exchange Agent.
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Resales of Exchange
Notes.................... The Company is making the Exchange Offer in
reliance on the position of the staff of the
Division of Corporation Finance of the Commission
as set forth in certain interpretive letters
addressed to third parties in other transactions.
However, the Company has not sought its own
interpretive letter and there can be no assurance
that the staff of the Division of Corporation
Finance of the Commission would make a similar
determination with respect to the Exchange Offer as
it has in such interpretive letters to third
parties. Based on these interpretations by the
staff of the Division of Corporation Finance of the
Commission, and subject to the two immediately
following sentences, the Company believes that
Exchange Notes issued pursuant to this Exchange
Offer in exchange for Old Notes may be offered for
resale, resold and otherwise transferred by a
holder thereof (other than a holder who is a
broker-dealer) without further compliance with the
registration and prospectus delivery requirements
of the Securities Act, provided that such Exchange
Notes are acquired in the ordinary course of such
holder's business and that such holder is not
participating, and has no arrangement or
understanding with any person to participate, in a
distribution (within the meaning of the Securities
Act) of such Exchange Notes. However, any holder of
Old Notes who is an "affiliate" of the Company or
who intends to participate in the Exchange Offer
for the purpose of distributing the Exchange Notes,
or any broker-dealer who purchased the Old Notes
from the Company to resell pursuant to Rule 144A or
any other available exemption under the Securities
Act, (a) will not be able to rely on the
interpretations of the staff of the Division of
Corporation Finance of the Commission set forth in
the above-mentioned interpretive letters, (b) will
not be permitted or entitled to tender such Old
Notes in the Exchange Offer and (c) must comply
with the registration and prospectus delivery
requirements of the Securities Act in connection
with any sale or other transfer of such Old Notes
unless such sale is made pursuant to an exemption
from such requirements. In addition, as described
below, if any broker-dealer holds Old Notes
acquired for its own account as a result of
market-making or other trading activities and
exchanges such Old Notes for Exchange Notes, then
such broker-dealer must deliver a prospectus
meeting the requirements of the Securities Act in
connection with any resales of such Exchange Notes.
See "Plan of Distribution."
Each holder of Old Notes who wishes to exchange Old
Notes for Exchange Notes in the Exchange Offer will
be required to represent that (i) it is not an
"affiliate" of the Company, (ii) any Exchange Notes
to be received by it are being acquired in the
ordinary course of its business, (iii) it has no
arrangement or understanding with any person to
participate in a distribution (within the meaning
of the Securities Act) of such Exchange Notes, and
(iv) if such holder is not a broker-dealer, such
holder is not engaged in, and does not intend to
engage in, a distribution (within the meaning of
the Securities Act) of such Exchange Notes. Each
broker-dealer that receives Exchange Notes for its
own account in exchange for Old Notes must
acknowledge that such Old Notes were acquired by
such broker-dealer as a result of market-making
activities or other trading activities and must
agree that it will deliver a prospectus in
connection with any resale of such Exchange Notes.
See "Plan of Distribution." The Letter of
Transmittal states that,
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by so acknowledging and by delivering a prospectus,
a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the
Securities Act. Based on the position taken by the
staff of the Division of Corporation Finance of the
Commission in the interpretive letters referred to
above, the Company believes that Participating
Broker-Dealers (as defined herein) who acquired Old
Notes for their own accounts as a result of
market-making activities or other trading
activities may fulfill their prospectus delivery
requirements with respect to the Exchange Notes
received upon exchange of such Old Notes (other
than Old Notes which represent an unsold allotment
from the initial sale of the Old Notes) with a
prospectus meeting the requirements of the
Securities Act, which may be the prospectus
prepared for an exchange offer so long as it
contains a description of the plan of distribution
with respect to the resale of such Exchange Notes.
Accordingly, this Prospectus, as it may be amended
or supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with
resales of Exchange Notes received in exchange for
Old Notes where such Old Notes were acquired by
such Participating Broker-Dealer for its own
account as a result of market-making or other
trading activities, subject to certain provisions
set forth in the Registration Rights Agreement and
to the limitations described below under "The
Exchange Offer -- Resales of Exchange Notes." Any
Participating Broker-Dealer who is an "affiliate"
of the Company may not rely on such interpretive
letters and must comply with the registration and
prospectus delivery requirements of the Securities
Act in connection with any resale transaction. See
"The Exchange Offer -- Resales of Exchange Notes."
Exchange Agent............. The exchange agent with respect to the Exchange
Offer is IBJ Schroder Bank & Trust Company (the
"Exchange Agent"). The addresses, and telephone and
facsimile numbers, of the Exchange Agent are set
forth in "The Exchange Offer -- Exchange Agent" and
in the Letter of Transmittal.
Use of Proceeds............ The Company will not receive any cash proceeds from
the issuance of the Exchange Notes offered hereby.
See "Use of Proceeds."
Certain United States
Federal Income Tax
Considerations........... Holders of Old Notes should review the information
set forth under "Certain United States Federal
Income Tax Considerations" prior to tendering Old
Notes in the Exchange Offer.
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TERMS OF THE EXCHANGE NOTES
The Exchange Offer applies to an aggregate principal amount of $150,000,000
of the Old Notes. The form and terms of the Exchange Notes will be the same as
the form and terms of the Old Notes except that the Exchange Notes will not bear
legends restricting the transfer thereof. The Exchange Notes will be obligations
of the Company entitled to the benefits of the Indenture. See "Description of
the Exchange Notes."
Exchange Notes Offered..... $150.0 million aggregate principal amount of 8%
Senior Subordinated Notes due 2010.
Maturity................... October 15, 2010.
Interest................... Interest on the Exchange Notes is payable
semiannually in cash on April 15 and October 15 of
each year, commencing October 15, 1998. For a
description of the requirement to offer to exchange
the Exchange Notes and the possible effect on the
interest rate, see "-- Registration Rights" below.
Optional Redemption........ At any time on or after October 15, 2003, the
Exchange Notes will be redeemable, at the Company's
option, in whole or in part, at the redemption
prices set forth herein, plus accrued and unpaid
interest, if any, to the redemption date. See
"Description of the Exchange Notes -- Optional
Redemption."
In addition, at any time prior to October 15, 2001,
the Company, at its option, may redeem up to 35% of
the aggregate principal amount of the Exchange
Notes with the net proceeds of one or more Public
Equity Offerings (as defined), at a redemption
price of 108% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the
redemption date; provided, however, that after
giving effect to any such redemption, at least
$97.5 million in aggregate principal amount of the
Exchange Notes remains outstanding; and provided
further, that such redemption occurs within 60 days
following the closing of each such Public Equity
Offering. See "Description of the Exchange Notes --
Optional Redemption."
Change in Control.......... Upon a Change in Control (as defined), each holder
of the Exchange Notes will have the right to
require the Company to purchase such holder's
Exchange Notes at a price equal to 101% of the
principal amount thereof, plus accrued and unpaid
interest, if any, to the date of purchase. See
"Description of the Exchange Notes -- Certain
Covenants -- Purchase of Exchange Notes Upon a
Change in Control."
Ranking.................... The Exchange Notes will be unsecured senior
subordinated indebtedness of the Company and will
be subordinated to all existing and future Senior
Indebtedness (as defined), including borrowings
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 of the Company and senior to any
junior subordinated indebtedness of the Company.
The Exchange Notes will also be effectively
subordinated to all existing and future liabilities
of the Company's subsidiaries, including trade
payables and guarantees. At March 31, 1998, after
giving effect to the Offering and the application
of the proceeds therefrom, the Company had
approximately $469.2 million of indebtedness,
including approximately $70.2 million of Senior
Indebtedness. In addition, the Company's
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<PAGE> 13
subsidiaries had other liabilities (excluding
guarantees of the Company's indebtedness) of
approximately $84.1 million at March 31, 1998, all
of which would be effectively senior to the
Exchange Notes. See "Description of the Exchange
Notes -- Ranking."
Certain Covenants.......... 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) restriction
on transfer of assets; (viii) limitation on
subsidiary capital stock; (ix) limitation on
dividends and other payment restrictions affecting
subsidiaries; (x) limitation on unrestricted
subsidiaries; (xi) provision of financial
statements; and (xii) restrictions on
consolidations, mergers, and sales of assets. See
"Description of the Exchange Notes -- Certain
Covenants."
Book-Entry, Delivery and
Form..................... Exchange Notes originally sold in reliance on Rule
144A are represented by one or more permanent
global Exchange Notes in definitive, fully
registered form without interest coupons, deposited
with the Trustee (as defined) as custodian for, and
registered in the name of, a nominee of The
Depository Trust Company ("DTC"). Exchange Notes
originally sold in off-shore transactions in
reliance on Regulation S under the Securities Act
("Regulation S") are represented by one or more
permanent global Notes in definitive, fully
registered form deposited with the Trustee as
custodian for, and registered in the name of, a
nominee of DTC, for the accounts of Morgan Guaranty
Trust Company of New York, Brussels office, as
operator of the Euroclear System ("Euroclear"), and
Cedel Bank, societe anonyme ("Cedel Bank"). See
"Description of the Exchange Notes -- Book-Entry,
Delivery and Form."
RISK FACTORS
For a description of certain factors relating to an investment in the
Exchange Notes, see "Risk Factors" beginning on page 11.
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<PAGE> 14
SUMMARY FINANCIAL DATA
The following table sets forth summary financial data of the Company for
the fiscal years ended June 30, 1994, 1995, 1996 and 1997 and for the nine
months ended March 31, 1997 and 1998. The summary financial data for the fiscal
years ended June 30, 1994 and 1995 are derived from the audited financial
statements of the Company. The summary financial data for the fiscal years ended
June 30, 1996 and 1997 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, 1997 and 1998 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 accruals) necessary for a fair presentation of
the information included therein. The results of operations for the nine months
ended March 31, 1998 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 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>
NINE MONTHS ENDED
YEAR ENDED JUNE 30, MARCH 31,
----------------------------------------- -------------------
1994 1995 1996(1) 1997(2) 1997(3) 1998
-------- -------- -------- -------- -------- --------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales.......................... $371,526 $408,587 $470,979 $558,933 $409,005 $469,397
Cost of goods sold................. 291,833 305,150 335,377 411,751 304,359 344,303
-------- -------- -------- -------- -------- --------
Gross margin....................... 79,693 103,437 135,602 147,182 104,646 125,094
Selling, research and
administrative expenses.......... 24,004 24,265 27,035 37,790 26,192 33,842
-------- -------- -------- -------- -------- --------
Operating income................... 55,689 79,172 108,567 109,392 78,454 91,252
Interest income.................... 314 1,138 1,060 765 545 345
Interest expense and amortization
of debt costs.................... (26,859) (22,290) (18,061) (28,691) (20,111) (27,858)
Other expense...................... (632) (615) (451) (1,213) (700) (1,460)
Minority interest(4)............... (8,291) (23,223) (16,628) -- -- --
Secondary stock offering costs..... -- -- (1,945) -- -- --
-------- -------- -------- -------- -------- --------
Income before income taxes and
extraordinary loss............... 20,221 34,182 72,542 80,253 58,188 62,279
Income taxes....................... 7,253 12,470 25,532 26,979 19,526 21,576
-------- -------- -------- -------- -------- --------
Income before extraordinary loss... 12,968 21,712 47,010 53,274 38,662 40,703
Extraordinary loss, net of tax
benefit(5)....................... -- -- (3,949) -- -- --
-------- -------- -------- -------- -------- --------
Net income......................... $ 12,968 $ 21,712 $ 43,061 $ 53,274 $ 38,662 $ 40,703
======== ======== ======== ======== ======== ========
OTHER DATA:
Depreciation and amortization...... $ 27,415 $ 26,080 $ 26,693 $ 36,087 $ 26,473 $ 34,385
Capital expenditures............... 15,725 24,922 34,807 42,757 29,381 39,008
EBITDA(6).......................... 81,879 104,088 134,670 143,024 103,359 121,959
EBITDA as a percentage of net
sales............................ 22.0% 25.5% 28.6% 25.6% 25.3% 26.0%
Ratio of EBITDA to interest expense
and amortization of debt costs... 3.0x 4.7x 7.5x 5.0x 5.1x 4.4x
BALANCE SHEET DATA (AT END OF
PERIOD):
Working capital.................... $ 69,330 $ 77,107 $117,965 $118,092 $129,360 $126,304
Total assets....................... 374,204 379,056 452,799 737,464 519,130 724,560
Long-term debt less current
portion.......................... 203,482 166,202 217,873 474,631 299,870 462,753
Minority interest(4)............... 33,479 52,104 -- -- -- --
Equity............................. 62,828 84,621 140,888 128,190 119,505 144,270
</TABLE>
(footnotes on following page)
9
<PAGE> 15
- ---------------
(1) Includes the operations of the specialty cellulose business of Peter Temming
AG ("Temming") from May 1, 1996, the date of acquisition.
(2) Includes the operations of Alpha Cellulose Holdings, Inc. ("Alpha") from
September 1, 1996 and Merfin International Inc. ("Merfin") from May 28,
1997, their respective dates of acquisition.
(3) Includes the operations of Alpha from September 1, 1996, the date of
acquisition.
(4) The minority interest represents The Procter & Gamble Cellulose Company's
("P&GCC") limited partnership interest in Buckeye Florida Limited
Partnership ("BFLP"), which ceased on November 28, 1995.
(5) In fiscal 1996, the Company recognized an extraordinary loss of $3,949, net
of tax benefit, on the early retirement of a portion of the Existing Senior
Notes.
(6) 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.
EBITDA should not be construed as a substitute for income from operations,
net income or cash flow from operating activities for the purpose of
analyzing the Company's operating performance, financial position and cash
flows. The Company has presented EBITDA because it is commonly used by
certain investors to analyze and compare companies on the basis of operating
performance and to determine a company's ability to service debt.
RECENT DEVELOPMENTS
The Company redeemed the remaining $6.9 million principal amount of its
Existing Senior Notes on June 30, 1998, at a price of 103.875% of principal
amount, together with accrued and unpaid interest. See "Description of Certain
Indebtedness."
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<PAGE> 16
RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors in the Exchange Notes should carefully consider the
following risk factors before making an investment in the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Untendered Old Notes that are not exchanged for Exchange Notes pursuant to
the Exchange Offer will remain subject to the existing restrictions on transfer
of such Old Notes. Additionally, holders of any Old Notes not tendered in the
Exchange Offer will not have any rights under the Registration Rights Agreement
to cause the Company to register the Old Notes, and the interest rate on the Old
Notes will remain at its initial rate of 8% per annum.
DEPENDENCE ON SIGNIFICANT CUSTOMER
Procter & Gamble, the world's largest diaper manufacturer, is the Company's
largest customer, accounting for 32% of the Company's nine months' fiscal 1998
gross sales. The Company and Procter & Gamble are parties to the Pulp Supply
Agreement (the "Supply Agreement") which provides that Procter & Gamble will
purchase, under a take-or-pay arrangement, a specified tonnage (currently,
substantially all of the Company's output) of fluff pulp annually at a formula
price through calendar year 1998, at the higher of the formula price or market
price in calendar years 1999 and 2000, and at market price in calendar years
2001 and 2002. As a result of such formula pricing, the Company will be
partially protected through calendar year 2000 in periods of lower market
prices; however, it may not realize all of the benefits if market prices
increase during the remainder of calendar year 1998. Currently, the formula
price paid by Procter & Gamble pursuant to the Supply Agreement exceeds the
market price for fluff pulp. In the event that Procter & Gamble fails to perform
under the 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. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Sales and Customers."
INDUSTRY CYCLICALITY; SUPPLY IMBALANCE
While the Company believes that only approximately 5% of the Company's
products could be classified as commodity based, the Company's products are
influenced by the commodity cellulose markets. The market for cellulose is
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, as consumption
correlates with economic activity. The factors affecting such conditions are
beyond the Company's control. The production of cellulose 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. The price of
cellulose can fluctuate significantly when supply and demand become imbalanced.
The Company's financial performance can be influenced by these pricing
fluctuations and the cyclicality of the cellulose 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 commodity markets could have a material adverse effect on the
Company's business, results of operations and financial condition.
SIGNIFICANT LEVERAGE
The Company has significant debt service obligations. As of March 31, 1998,
after giving effect to the Offering and the application of proceeds therefrom,
the Company would have had total outstanding long-term indebtedness of $466.8
million and equity of $144.3 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 Exchange 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;
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<PAGE> 17
(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 (as defined) and the
Exchange Notes, thereby reducing the funds available to the Company for its
operations and other purposes; (iii) certain of the Company's borrowings are and
will continue to be at variable rates of interest, which exposes the Company to
the risk of increased interest rates; (iv) the Company may be substantially more
leveraged than certain of its competitors, which may place the Company at a
relative competitive disadvantage; (v) the Bank Credit Facility, the Existing
Notes, the Existing Notes Indentures (as defined) and the Indenture will contain
financial and restrictive covenants, and failure to comply with these covenants
may result in an event of default, which, if not cured or waived, could have a
material adverse effect on the Company's business, results of operations and
financial condition; 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. The Company believes that it will
generate sufficient cash flow from operations to be able to make the scheduled
interest payments under the Bank Credit Facility, the Existing Notes and the
Exchange Notes; however, the Company may not generate sufficient cash flow from
operations to make the principal payment due at maturity on the Exchange Notes
and, depending upon the principal amount then outstanding, on the Bank Credit
Facility and the Existing Notes. Accordingly, the Company may have to refinance
its obligations with respect to the Existing Notes and the Exchange Notes prior
to maturity, sell assets, or raise equity capital to repay the principal amount
of the Existing Notes and the Exchange 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 to provide for, or that future borrowing facilities will be
available for, the payment or refinancing of the Company's indebtedness. See
"Capitalization," "Selected Consolidated Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Description of Certain Indebtedness" and "Description of the Exchange Notes."
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 Exchange Notes. In addition, the Banks could elect to declare
all amounts borrowed under the Bank Credit Facility, together with accrued and
unpaid 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. The Company is currently negotiating certain
amendments to the Bank Credit Facility. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Description of
Certain Indebtedness" and "Description of the Exchange Notes."
COST OF RAW MATERIALS
Amounts paid by the Company for wood and cotton fiber represent the largest
component of the Company's variable costs of production. The cost of these
materials is subject to market fluctuations caused by
12
<PAGE> 18
factors beyond the Company's control, including weather conditions. Significant
increases in the cost of wood or cotton fiber, 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 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 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. The Company expects that, due to the nature of its
operations, it will be subject to increasingly stringent environmental
requirements (including standards applicable to waste water discharges and air
emissions) and will continue to incur substantial costs to comply with such
requirements. 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.
Pursuant to an agreement with the Florida Department of Environmental Protection
("FDEP"), approved by the U.S. Environmental Protection Agency ("EPA") in 1995,
the Company agreed to a comprehensive plan to attain Class III
("fishable/swimmable") status for the Fenholloway River under applicable Florida
law (the "Fenholloway Agreement"). The Fenholloway Agreement requires the
Company, among other things, to (i) make process changes within the Foley Plant,
reduce the coloration of its waste water discharge and restore certain wetlands
areas and (ii) relocate the waste water discharge point into the Fenholloway
River to a point closer to the mouth of the river and provide oxygen enrichment
to the effluent prior to discharge. The Company has already made significant
expenditures to make certain in-plant process changes required by the
Fenholloway Agreement, and the Company estimates it will incur additional
capital expenditures of approximately $40 million through fiscal 2001 to comply
with the remaining obligations under the Fenholloway Agreement.
Recently, at the request of the EPA, the Company and the FDEP verbally
agreed that the Company will finalize the process changes and wetlands
restoration contemplated by the Fenholloway Agreement, but defer relocation of
the discharge point pending further study to determine the most cost effective
technologies available to address both Class III water quality standards for the
Fenholloway River and anticipated EPA regulations (commonly known as the
"cluster rules") applicable to waste water discharges from dissolving kraft pulp
mills, like the Foley Plant. Consequently, a portion of the estimated $40
million in capital expenditures may be delayed beyond the period stated above,
and the total capital expenditures for the Foley Plant may increase as a result
of price escalation or the implementation of other technologies mandated by the
cluster rules.
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.
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<PAGE> 19
SUBORDINATION
The payment of principal of, premium, if any, and interest on, and any
other amounts owing in respect of the Exchange 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 Exchange 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
Exchange Notes. In addition, the Company may not pay principal of, premium, if
any, interest on or any other amounts owing in respect of the Exchange Notes,
make any deposit pursuant to defeasance provisions or purchase, redeem or
otherwise retire the Exchange 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
Exchange 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 Exchange Notes --
Ranking."
The Exchange Notes will also be effectively subordinated to all existing
and future liabilities of the Company's subsidiaries. On the date of the
Indenture, the Exchange 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 Exchange Notes -- Certain Covenants -- Limitations on
Issuances 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.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
The Company operates facilities in four countries and sells its products in
approximately 50 countries. For the nine months ended March 31, 1998, sales of
the Company's products outside the United States represented approximately 69%
of the Company's gross sales. Although over 90% of the Company's sales are
denominated in U. S. dollars, it is possible that as the Company expands
globally, the Company will have increased risks associated with operating in
foreign countries, including devaluations and fluctuations in currency exchange
rates, imposition of limitation on conversion of foreign currencies into U.S.
dollars or remittance of dividends and other payments by foreign subsidiaries,
imposition or increase of withholding and other taxes on remittances and other
payments by foreign subsidiaries, hyperinflation in certain foreign countries
and imposition or increase of investment and other restrictions by foreign
governments. No assurance can be given that such risks will not have a material
adverse effect on the Company's business, results of operations or financial
condition in the future. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business."
LABOR NEGOTIATIONS
On March 31, 1998, the Company employed approximately 1,750 individuals at
its facilities in Memphis, Tennessee; Perry, Florida; Lumberton and King, North
Carolina; Savannah, Georgia; Glueckstadt, Germany; Vancouver, Canada; Cork,
Ireland; and Geneva, Switzerland. Collective bargaining agreements are in place
at the Foley Plant (approximately 600 hourly employees) with the United
Paperworkers International Union, AFL-CIO, Local No. 1192 (the "Union"); and at
the Memphis Plant (approximately 180 hourly employees)
14
<PAGE> 20
with the Local Union 910 Pulp and Processing Workers and the Retail, Wholesale,
and Department Store Union, AFL-CIO. The agreement for the Memphis Plant expires
March 18, 2000 and the agreement for the Foley Plant expires April 1, 2002. A
Works Council provides employee representation for all non-management workers at
the Glueckstadt Plant. The Lumberton, Vancouver, Cork, and King plants are not
unionized. An extended interruption of operations at the Foley Plant or any of
the Company's facilities would have a material adverse effect on the Company's
business, results of operations and financial condition. See "Business --
Employees."
ABSENCE OF PUBLIC MARKET FOR THE EXCHANGE NOTES
There is no existing market for the Exchange Notes and, although the
Exchange Notes are eligible for trading in PORTAL, there can be no assurance as
to the liquidity of any markets that may develop for the Exchange Notes, the
ability of holders of the Exchange Notes to sell their Exchange Notes, or the
prices at which holders would be able to sell their Exchange Notes. Future
trading prices of the Exchange Notes will depend on many factors, including,
among other things, prevailing interest rates, the Company's operating results
and the market for similar securities. The Company does not intend to apply for
listing of the Exchange Notes on any securities exchange.
RISK OF YEAR 2000 NONCOMPLIANCE
The Company is dependent upon computerized information systems for all
phases of its operations including production, distribution and accounting.
During the last three years, the Company has replaced substantially all of its
financial systems, giving the Company the benefit of new technology and
functionality while becoming year 2000 compliant. However, the financial systems
of recent acquisitions are still being assessed for year 2000 compliance. The
Company's suppliers, distributors and customers may also have year 2000 problems
which could adversely affect the Company. The Company has developed a plan and
timetable to determine the impact of the year 2000 on its operations and to
achieve year 2000 compliance. While the Company believes at present that the
cost to achieve compliance will not have a material effect on its business,
results of operations and financial condition, there can be no assurance that
such will be the case.
FORWARD-LOOKING STATEMENTS
Except for the historical information contained herein, the matters
discussed in this Prospectus are forward-looking statements that involve risks
and uncertainties, including but not limited to economic, competitive,
governmental, and technological factors affecting the Company's operations,
markets, products, services and prices, and other factors. All statements,
trends, analyses and other information contained in this Prospectus relative to
trends in sales, margins, anticipated expense levels and liquidity and capital
resources, as well as other statements including, but not limited to, words such
as "anticipate," "believe," "plan," "estimate," "expect," "seek" and "intend"
and other similar expressions constitute forward-looking statements. These
forward-looking statements are not guarantees of future performance and are
subject to certain risks and uncertainties that are difficult to predict.
Accordingly, actual results may differ materially from those anticipated or
expressed in such statements. Potential risks and uncertainties include, among
others, those set forth herein under "Risk Factors," as well as "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Particular attention should be paid to the cautionary statements. The Company
undertakes no obligation to publicly release the result of any revisions to
these forward-looking statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.
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<PAGE> 21
THE EXCHANGE OFFER
GENERAL
In connection with the sale of the Old Notes, the Company entered into the
Registration Rights Agreement, which requires the Company to file with the
Commission a registration statement (the "Exchange Offer Registration
Statement") under the Securities Act with respect to an issue of senior
subordinated notes of the Company with terms identical to the Old Notes (except
with respect to restrictions on transfer) and to use its best efforts to cause
such registration statement to become effective under the Securities Act and,
upon the effectiveness of such registration statement, to offer to the holders
of the Old Notes the opportunity, for a period of 20 business days from the date
the notice of the Exchange Offer is mailed to holders of the Old Notes, to
exchange their Old Notes for a like principal amount of Exchange Notes (the
"Exchange Dates"). The Exchange Offer is being made pursuant to the Registration
Rights Agreement to satisfy the Company's obligations thereunder. The Company
has not entered into any arrangement or understanding with any person to
distribute the Exchange Notes to be received in the Exchange Offer.
Under existing interpretations of the staff of the Commission, the Exchange
Notes would, in general, be freely transferable after the Exchange Offer without
further registration under the Securities Act by holders thereof (other than (i)
a broker-dealer who acquires such Exchange Notes directly from the Company to
resell pursuant to Rule 144A or any other available exemption under the
Securities Act or (ii) a person that is an affiliate of the Company within the
meaning of Rule 405 under the Securities Act), without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such Exchange Notes are acquired in the ordinary course of such holders'
business and such holders have no arrangements with any person to participate in
the distribution of such Exchange Notes. Eligible holders wishing to accept the
Exchange Offer must represent to the Company that such conditions have been met.
Each broker-dealer that receives Exchange Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes.
In the event that applicable interpretations of the staff of the Commission
would not permit the Company to effect the Exchange Offer or for any other
reason the Exchange Offer is not consummated on or prior to December 11, 1998,
the Company has agreed to use its best efforts to cause to become effective a
shelf registration statement (the "Shelf Registration Statement") with respect
to the resale of the Old Notes and to keep the Shelf Registration Statement
effective until three years after the date of the initial sale of the Old Notes
or until all the Old Notes covered by the Shelf Registration Statement have been
sold pursuant to such Shelf Registration Statement.
TERMS OF THE EXCHANGE OFFER
Each holder of Old Notes who wishes to exchange Old Notes for Exchange
Notes in the Exchange Offer will be required to make certain representations,
including that (i) it is neither an affiliate of the Company nor a broker-dealer
tendering Old Notes acquired directly from the Company for its own account, (ii)
any Exchange Notes to be received by it were acquired in the ordinary course of
its business and (iii) at the time of commencement of the Exchange Offer, it has
no arrangement with any person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Notes. In addition, in connection
with any resales of Exchange Notes, any broker-dealer (a "Participating
Broker-Dealer") who acquired Old Notes for its own account as a result of
market-making activities or other trading activities must deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
the Exchange Notes. The Commission has taken the position that Participating
Broker-Dealers may fulfill their prospectus delivery requirements with respect
to the Exchange Notes (other than a resale of an unsold allotment from the
original sales of Old Notes) with the prospectus contained in the Exchange Offer
Registration Statement. Under the Registration Rights Agreement, the Company is
required to allow Participating Broker-Dealers (and other persons, if any,
subject to similar prospectus delivery requirements) to use the prospectus
contained in the Exchange Offer Registration Statement in connection with the
resale of such Exchange Notes, provided, however, the Company shall not be
required to amend or supplement such prospectus for a period exceeding 90 days
after the last Exchange Date. The Company has also agreed that in the event that
16
<PAGE> 22
either the Exchange Offer is not consummated or a Shelf Registration Statement
is not declared effective on or prior to December 11, 1998, the interest rate
borne by the Old Notes will be increased by one-half of one percent ( 1/2%) per
annum until the earlier of the consummation of the Exchange Offer or the
effectiveness of the Shelf Registration Statement, as the case may be.
In the event an exchange offer is consummated on or before December 11,
1998, the Company will not be required to file a Shelf Registration Statement to
register any outstanding Old Notes, and the interest rate on such Old Notes will
remain at its initial level of 8% per annum. The Exchange Offer shall be deemed
to have been consummated upon the Company having exchanged, pursuant to the
Exchange Offer, Exchange Notes for all Old Notes that have been properly
tendered and not withdrawn by the Expiration Date. In such event, holders of Old
Notes not participating in the Exchange Offer who are seeking liquidity in their
investment would have to rely on exemptions to registration requirements under
the securities laws, including the Securities Act.
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal, the Company will accept all Old
Notes validly tendered prior to 5:00 p.m., New York City time, on the Expiration
Date. The Company will issue $1,000 in principal amount of Exchange Notes (and
any integral multiple thereof) in exchange for an equal principal amount of
outstanding Old Notes tendered and accepted in the Exchange Offer. Holders may
tender some or all of their Old Notes pursuant to the Exchange Offer in any
denomination of $1,000 or in integral multiples thereof.
Based on no-action letters issued by the staff of the Commission to third
parties, the Company believes that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by holders thereof (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such Exchange Notes are
acquired in the ordinary course of such holders' business and such holders have
no arrangement with any person to participate in the distribution of such
Exchange Notes. Any holder of Old Notes who tenders in the Exchange Offer for
the purpose of participating in a distribution of the Exchange Notes cannot rely
on such interpretation by the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives
Exchange Notes for its own account in exchange for Old Notes, where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes.
The form and terms of the Exchange Notes will be the same as the form and
terms of the Old Notes except that the Exchange Notes will not bear legends
restricting the transfer thereof. The Exchange Notes will evidence the same debt
as the Old Notes. The Exchange Notes will be issued under and entitled to the
benefits of the Indenture.
As of the date of this Prospectus, $150,000,000 aggregate principal amount
of the Old Notes are outstanding. In connection with the issuance of the Old
Notes, the Company arranged for the Old Notes to be eligible for trading in the
Private Offering, Resale and Trading through Automated Linkages ("PORTAL")
Market, the National Association of Securities Dealers' screen based, automated
market trading of securities eligible for resale under Rule 144A and to be
issued and transferable in book-entry form through the facilities of DTC. The
Exchange Notes will also be issuable and transferable in book-entry form through
DTC.
This Prospectus, together with the accompanying Letter of Transmittal, is
being sent to all registered holders as of , 1998 (the
"Record Date").
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. See "-- Exchange Agent." The Exchange Agent will act as agent
for the tendering holders of Old Notes for the purpose of receiving Exchange
Notes from the Company and delivering Exchange Notes to such holders.
17
<PAGE> 23
If any tendered Old Notes are not accepted for exchange because of an
invalid tender or the occurrence of certain other events set forth herein,
certificates for any such unaccepted Old Notes will be returned, without
expense, to the tendering holder thereof as promptly as practicable after the
Expiration Date.
Holders of Old Notes who tender in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
"-- Fees and Expenses."
Holders of Old Notes do not have any appraisal or dissenters' rights under
the General Corporation Law of Delaware or the Indenture in connection with the
Exchange Offer. The Company intends to conduct the Exchange Offer in accordance
with the provisions of the Registration Rights Agreement and the applicable
requirements of the Exchange Act and the rules and regulations of the Commission
thereunder. Old Notes that are not tendered for exchange in the Exchange Offer
will remain outstanding and continue to accrue interest, but will not be
entitled to any rights or benefits under the Registration Rights Agreement.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m. New York City time, on
, 1998 unless the Company, in its sole discretion, extends
the Exchange Offer, in which case the term "Expiration Date" shall mean the
latest date to which the Exchange Offer is extended.
In order to extend the Expiration Date, the Company will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
record holders of Old Notes an announcement thereof, each prior to 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Such announcement may state that the Company is extending the
Exchange Offer for a specified period of time.
The Company reserves the right (i) to delay acceptance of any Old Notes, to
extend the Exchange Offer or to terminate the Exchange Offer and to refuse to
accept Old Notes not previously accepted, if any of the conditions set forth
herein under "Termination" shall have occurred and shall not have been waived by
the Company (if permitted to be waived by the Company), by giving oral or
written notice of such delay, extension or termination to the Exchange Agent,
and (ii) to amend the terms of the Exchange Offer in any manner deemed by it to
be advantageous to the holders of the Old Notes. Any such delay in acceptance,
extension, termination or amendment will be followed as promptly as practicable
by oral or written notice thereof. If the Exchange Offer is amended in a manner
determined by the Company to constitute a material change, the Company will
promptly disclose such amendment in a manner reasonably calculated to inform the
holders of the Old Notes of such amendment.
Without limiting the manner in which the Company may choose to make public
announcements of any delay in acceptance, extension, termination or amendment of
the Exchange Offer, the Company shall have no obligation to publish, advertise,
or otherwise communicate any such public announcement, other than by making a
timely release to the Dow Jones News Service.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest from the last Interest Payment Date
on which interest was paid on the Old Notes, or if interest has not yet been
paid on the Old Notes, from June 11, 1998. Such interest will be paid with the
first interest payment on the Exchange Notes. Interest on the Old Notes accepted
for exchange will cease to accrue upon issuance of the Exchange Notes.
The Exchange Notes will bear interest at a rate of 8% per annum. Interest
on the Exchange Notes will be payable semi-annually, in arrears, on each
Interest Payment Date following the consummation of the Exchange Offer.
Untendered Old Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will bear interest at a rate of 8% per annum after the Expiration
Date.
18
<PAGE> 24
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with the Old
Notes (unless the book-entry transfer procedures described below are used) and
any other required documents, to the Exchange Agent for receipt prior to 5:00
p.m., New York City time, on the Expiration Date.
Any financial institution that is a participant in DTC's Book-Entry
Transfer Facility system may make book-entry delivery of the Old Notes by
causing DTC to transfer such Old Notes into the Exchange Agent's account via the
ATOP system in accordance with DTC's procedure for such transfer. Although
delivery of Old Notes may be effected through book-entry transfer into the
Exchange Agent's account at DTC, the Letter of Transmittal (or facsimile
thereof), with any required signature guarantees and any other required
documents, must, in any case, be transmitted to and received or confirmed by the
Exchange Agent at its addresses set forth in this Prospectus prior to 5:00 p.m.,
New York City time, on the Expiration Date. DELIVERY OF DOCUMENTS TO DTC IN
ACCORDANCE WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
The tender by a holder of Old Notes will constitute an agreement between
such holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
Delivery of all documents must be made to the Exchange Agent at its address
set forth herein. Holders may also request that their respective brokers,
dealers, commercial banks, trust companies or nominees effect such tender for
such holders.
The method of delivery of Old Notes and the Letter of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the holders. Instead of delivery by mail, it is recommended that holders use an
overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure timely delivery. No Letter of Transmittal should be sent to
the Company.
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
The term "holder" with respect to the Exchange Offer means any person in whose
name Old Notes are registered on the books of the Company or any other person
who has obtained a properly completed bond power from the registered holder or
any person whose Old Notes are held of record by DTC who desires to deliver such
Old Notes by book-entry transfer at DTC.
Any beneficial holder whose Old Notes are registered in the name of such
holder's broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender should contact such registered holder promptly and instruct
such registered holder to tender on such holder's behalf. If such beneficial
holder wishes to tender on such holder's own behalf, such beneficial holder
must, prior to completing and executing the Letter of Transmittal and delivering
such holder's Old Notes, either make appropriate arrangements to register
ownership of the Old Notes in such holder's name or obtain a properly completed
bond power from the registered holder. The transfer of record ownership may take
considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act (an "Eligible Institution") that is a participant
in a recognized medallion signature guarantee program unless the Old Notes
tendered pursuant thereto are tendered (i) by a registered holder who has not
completed the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution.
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by appropriate bond powers which authorize such person
to tender the Old Notes on behalf of the registered holder, in either case
signed as the name of the registered holder or holders appears on the Old Notes.
If the Letter of Transmittal or any Old Notes or bond
19
<PAGE> 25
powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and
unless waived by the Company, submit evidence satisfactory to the Company of
their authority to so act with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Old Notes will be determined
by the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes the Company's acceptance of which would,
in the opinion of counsel for the Company, be unlawful. The Company also
reserves the absolute right to waive any irregularities or conditions of tender
as to particular Old Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such time as the Company shall determine. Neither the Company, the
Exchange Agent nor any other person shall be under any duty to give notification
of defects or irregularities with respect to tenders of Old Notes nor shall any
of them incur any liability for failure to give such notification. Tenders of
Old Notes will not be deemed to have been made until such irregularities have
been cured or waived. Any Old Notes received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned without cost by the Exchange Agent to the
tendering holder of such Old Notes unless otherwise provided in the Letter of
Transmittal as soon as practicable following the Expiration Date.
In addition, the Company reserves the right in its sole discretion to (a)
purchase or make offers for any Old Notes that remain outstanding subsequent to
the Expiration Date, or, as set forth under "Termination," to terminate the
Exchange Offer and (b) to the extent permitted by applicable law, purchase Old
Notes in the open market, in privately negotiated transactions or otherwise. The
terms of any such purchases or offers may differ from the terms of the Exchange
Offer.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, or if such holder cannot complete the procedure for book-entry
transfer on a timely basis, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder of the Old Notes, the
certificate number or numbers of such Old Notes and the principal amount of
Old Notes tendered, stating that the tender is being made thereby, and
guaranteeing that, within three business days after the Expiration Date,
the Letter of Transmittal (or facsimile thereof), together with the
certificate(s) representing the Old Notes (unless the book-entry transfer
procedures are to be used) to be tendered in proper form for transfer and
any other documents required by the Letter of Transmittal, will be
deposited by the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), together with the certificates representing all
tendered Old Notes in proper form for transfer (or confirmation of a
book-entry transfer into the Exchange Agent's account at DTC of Old Notes
delivered electronically) and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within three business days
after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
20
<PAGE> 26
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Old Notes to be withdrawn (the "Depositor"),
(ii) identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes), (iii) be signed by the
Depositor in the same manner as the original signature on the Letter of
Transmittal by which such Old Notes were tendered (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
permit the Trustee with respect to the Old Notes to register the transfer of
such Old Notes into the name of the Depositor withdrawing the tender and (iv)
specify the name in which any such Old Notes are to be registered, if different
from that of the Depositor. All questions as to the validity, form and
eligibility (including time of receipt) of such withdrawal notices will be
determined by the Company, whose determination shall be final and binding on all
parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offer, and no Exchange Notes will be
issued with respect thereto unless the Old Notes so withdrawn are validly
retendered. Any Old Notes that have been tendered but which are not accepted for
exchange will be returned to the holder thereof without cost to such holder as
soon as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Notes may be retendered by following one
of the procedures described above under "Procedures for Tendering" at any time
prior to the Expiration Date.
TERMINATION
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or exchange Exchange Notes for any Old Notes
not theretofore accepted for exchange, and may terminate or amend the Exchange
Offer as provided herein before the acceptance of such Old Notes if: (i) any
action or proceeding is instituted or threatened in any court or by or before
any governmental agency with respect to the Exchange Offer, which, in the
Company's judgment, might materially impair the Company's ability to proceed
with the Exchange Offer or (ii) any law, statute, rule or regulation is
proposed, adopted or enacted, or any existing law, statute, rule or regulation
is interpreted by the staff of the Commission in a manner, which, in the
Company's judgment, might materially impair the Company's ability to proceed
with the Exchange Offer.
If the Company determines that it may terminate the Exchange Offer, as set
forth above, the Company may (i) refuse to accept any Old Notes and return any
Old Notes that have been tendered to the holders thereof, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the expiration of the
Exchange Offer, subject to the rights of such holders of tendered Old Notes to
withdraw their tendered Old Notes, or (iii) waive such termination event with
respect to the Exchange Offer and accept all properly tendered Old Notes that
have not been withdrawn. If such waiver constitutes a material change in the
Exchange Offer, the Company will disclose such change by means of a supplement
to this Prospectus that will be distributed to each registered holder of Old
Notes, and the Company will extend the Exchange Offer for a period of five to
ten business days, depending upon the significance of the waiver and the manner
of disclosure to the registered holders of the Old Notes, if the Exchange Offer
would otherwise expire during such period.
Notwithstanding any other provisions of the Exchange Offer, and subject to
its obligations pursuant to the Registration Rights Agreement, the Company shall
not be required to accept for exchange, or to issue Exchange Notes in exchange
for, any Old Notes, and may terminate or amend the Exchange Offer, if, at any
time before the acceptance of such Exchange Notes for exchange, any of the
following events shall occur:
(i) any injunction, order or decree shall have been issued by any
court or any governmental agency that would prohibit, prevent or otherwise
materially impair the ability of the Company to proceed with the Exchange
Offer; or
(ii) the Exchange Offer will violate any applicable law or any
applicable interpretation of the staff of the Commission.
21
<PAGE> 27
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company in whole or in part at any time and from time to time in
its sole discretion. The failure by the Company at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right and such
right shall be deemed an ongoing right which may be asserted at any time and
from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no Exchange Notes will be issued in exchange for any such Old
Notes, if at such time any stop order is threatened by the Commission or in
effect with respect to the Registration Statement of which this Prospectus is a
part or with respect to the qualification of the Indenture under the Trust
Indenture Act of 1939, as amended.
The Exchange Offer is not conditioned on any minimum principal amount of
Old Notes being tendered for exchange.
EXCHANGE AGENT
IBJ Schroder Bank & Trust Company has been appointed as Exchange Agent for
the Exchange Offer. Questions and requests for assistance and requests for
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent addressed as follows:
BY HAND OR OVERNIGHT COURIER:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attention: Securities Processing Window, Subcellar One, (SC-1)
Telephone number: (212) 858-2611
Facsimile transmission: (212) 858-2103
BY MAIL:
IBJ Schroder Bank & Trust Company
P.O. Box 84
Bowling Green Station
New York, New York 10274-0084
Attention: Reorganization Operations Department
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. Additional solicitations may be made by
officers and regular employees of the Company and its affiliates in person, by
telegraph or by telephone.
The Company will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable customary fees for its services and will reimburse the
Exchange Agent for its reasonable out-of-pocket expenses in connection
therewith. The Company may also pay brokerage houses and other custodians,
nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them
in forwarding copies of this Prospectus, Letters of Transmittal and related
documents to the beneficial owners of the Old Notes and in handling or
forwarding tenders for exchange.
The expenses to be incurred in connection with the Exchange Offer,
including fees and expenses of the Exchange Agent and Trustee and accounting and
legal fees, will be paid by the Company.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes or Old Notes not tendered or accepted for exchange
are to be delivered to, or are to be registered or issued in the name of, any
person other than the registered holder of the Old Notes tendered, or if
tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than
22
<PAGE> 28
the exchange of Old Notes pursuant to the Exchange Offer, then the amount of any
such transfer taxes (whether imposed on the registered holder or any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the Old
Notes, which is face value, as reflected in the Company's accounting records on
the date of the exchange. Accordingly, no gain or loss for accounting purposes
will be recognized by the Company upon the consummation of the Exchange Offer.
The expenses of the Exchange Offer will be amortized by the Company over the
term of the Exchange Notes under generally accepted accounting principles.
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. In consideration for issuing the Exchange Notes
as contemplated in this Prospectus, the Company will receive in exchange the Old
Notes in like principal amount, the terms of which are identical to the Exchange
Notes. The Old Notes surrendered in exchange for the Exchange Notes will be
retired and canceled and cannot be reissued. Accordingly, issuance of the
Exchange Notes will not result in any increase in the indebtedness of the
Company.
The Company used all of the net proceeds from the Offering to reduce
outstanding borrowings under the Bank Credit Facility. The Bank Credit Facility
matures on May 28, 2002. Borrowings under the Bank Credit Facility bear interest
at (i) the greater of (a) the agent's prime rate and (b) the sum of 1/2% plus
the federal funds rate (the "Base Rate") or (ii) a LIBOR-based rate ranging from
LIBOR plus 0.450% per annum to 1.125% per annum. The interest rate applicable to
swingline loans is the Base Rate minus 1/2% per annum. Borrowings at March 31,
1998, were at a weighted average rate of 6.45%. See "Description of Certain
Indebtedness -- Bank Credit Facility."
23
<PAGE> 29
CAPITALIZATION
The following table sets forth the capitalization of the Company at March
31, 1998, and as adjusted to reflect the Offering and the application of the
proceeds therefrom. This table should be read in conjunction with the
consolidated financial statements of the Company and notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1998
----------------------
ACTUAL AS ADJUSTED
-------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
SHORT-TERM DEBT:
Notes payable............................................... $ 2,437 $ 2,437
======== ========
LONG-TERM DEBT:
Bank Credit Facility(1)..................................... $194,622 $ 48,622
Canadian bank debt.......................................... 11,599 11,599
Other....................................................... 593 593
10 1/4% Senior Notes due 2001............................... 6,913 6,913
8 1/2% Senior Subordinated Notes due 2005................... 149,531 149,531
9 1/4% Senior Subordinated Notes due 2008................... 99,495 99,495
Notes....................................................... -- 150,000
-------- --------
Total long-term debt(2)........................... $462,753 $466,753
-------- --------
EQUITY:
Preferred stock, par value $.01 per share; 5,000,000 shares
authorized, no shares issued and outstanding(3)........... $ -- $ --
Common stock, par value $.01 per share; 50,000,000 shares
authorized, 43,142,770 shares issued and 36,820,596 shares
outstanding(3)............................................ 431 431
Additional paid-in capital.................................. 65,911 65,911
Deferred stock compensation................................. (2,610) (2,610)
Cumulative translation adjustment........................... (15,453) (15,453)
Retained earnings........................................... 176,422 176,422
Treasury stock.............................................. (80,431) (80,431)
-------- --------
Total equity...................................... 144,270 144,270
-------- --------
Total capitalization........................................ $607,023 $611,023
======== ========
</TABLE>
- ---------------
(1) At March 31, 1998, after application of all of the net proceeds of the
Offering to repay amounts outstanding under the Bank Credit Facility and
after the adjustments in the availability for repayments exceeding $100.0
million, the Company would have had $175.5 million available under the Bank
Credit Facility. See "Description of Certain Indebtedness -- Bank Credit
Facility."
(2) Certain bank debt is denominated in Canadian dollars, Irish punts or
Deutsche marks and has been translated to U.S. dollars at March 31, 1998
exchange rates.
(3) On April 7, 1998, stockholders approved an increase in the Company's
authorized shares of preferred stock and common stock to 10,000,000 and
100,000,000, respectively.
24
<PAGE> 30
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data with
respect to (a) the Predecessor for the period July 1, 1992 through March 15,
1993 and (b) the Company for the period March 16, 1993 through June 30, 1993,
and for the fiscal years ended June 30, 1994, 1995, 1996 and 1997 and for the
nine months ended March 31, 1997 and 1998. The selected consolidated 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. The selected
consolidated financial data for the period March 16, 1993 through June 30, 1993
and for the fiscal years ended June 30, 1994 and 1995 are derived from the
audited financial statements of the Company. The selected consolidated financial
data for the fiscal years ended June 30, 1996 and 1997 are derived from the
audited financial statements of the Company appearing elsewhere in this
Prospectus. The selected consolidated financial data for the nine months ended
March 31, 1997 and 1998 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
accruals) necessary for a fair presentation of the information included therein.
The results of operations for the nine months ended March 31, 1998 are not
necessarily indicative of the results for the 1998 fiscal year. The data set
forth in the following table should be read in conjunction with the 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."
25
<PAGE> 31
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------ ---------------------------------------------------------------------------
MARCH 16, NINE MONTHS
JULY 1, 1992 1993 ENDED
THROUGH THROUGH YEAR ENDED JUNE 30, MARCH 31,
MARCH 15, JUNE 30, ----------------------------------------- -------------------
1993(1) 1993 1994 1995 1996(2) 1997(3) 1997(4) 1998
------------ --------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales............................ $233,460 $113,074 $371,526 $408,587 $470,979 $558,933 $409,005 $469,397
Cost of goods sold................... 189,808 86,047 291,833 305,150 335,377 411,751 304,359 344,303
-------- -------- -------- -------- -------- -------- -------- --------
Gross margin......................... 43,652 27,027 79,693 103,437 135,602 147,182 104,646 125,094
Selling, research and administrative
expenses:
Company............................ -- 5,996 24,004 24,265 27,035 37,790 26,192 33,842
Procter & Gamble allocations....... 22,286 -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Operating income..................... 21,366 21,031 55,689 79,172 108,567 109,392 78,454 91,252
Interest income...................... -- 351 314 1,138 1,060 765 545 345
Interest expense and amortization of
debt costs......................... -- (10,560) (26,859) (22,290) (18,061) (28,691) (20,111) (27,858)
Other expense........................ -- (184) (632) (615) (451) (1,213) (700) (1,460)
Minority interest(5)................. -- (3,083) (8,291) (23,223) (16,628) -- -- --
Secondary offering costs............. -- -- -- -- (1,945) -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Income before income taxes and
extraordinary loss................. 21,366 7,555 20,221 34,182 72,542 80,253 58,188 62,279
Income taxes......................... -- 2,851 7,253 12,470 25,532 26,979 19,526 21,576
-------- -------- -------- -------- -------- -------- -------- --------
Income before extraordinary loss..... 21,366 4,704 12,968 21,712 47,010 53,274 38,662 40,703
Extraordinary loss, net of tax
benefit(6)......................... -- -- -- -- (3,949) -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Net income................... $ 21,366 $ 4,704 $ 12,968 $ 21,712 $ 43,061 $ 53,274 $ 38,662 $ 40,703
======== ======== ======== ======== ======== ======== ======== ========
EARNINGS PER SHARE-BASIC:(7)
Income per share before extraordinary
loss............................... $ 1.11 $ 1.40 $ 1.01 $ 1.09
Extraordinary loss per share, net of
tax................................ (0.09) -- -- --
-------- -------- -------- --------
Net income per share................. $ 1.02 $ 1.40 $ 1.01 $ 1.09
======== ======== ======== ========
EARNINGS PER SHARE-DILUTED:(7)
Income per share before extraordinary
loss............................... $ 1.10 $ 1.38 $ 0.99 $ 1.06
Extraordinary loss per share, net of
tax................................ (0.09) -- -- --
-------- -------- -------- --------
Net income per share................. $ 1.01 $ 1.38 $ 0.99 $ 1.06
======== ======== ======== ========
OTHER DATA:
Depreciation and amortization........ $ 19,262 $ 7,436 $ 27,415 $ 26,080 $ 26,693 $ 36,087 $ 26,473 $ 34,385
Capital expenditures................. 17,761 4,898 15,725 24,922 34,807 42,757 29,381 39,008
EBITDA(8)............................ 40,628 28,185 81,879 104,088 134,670 143,024 103,359 121,959
EBITDA as a percentage of net
sales.............................. 17.4% 24.9% 22.0% 25.5% 28.6% 25.6% 25.3% 26.0%
Ratio of EBITDA to interest expense
and amortization of debt costs..... -- 2.7x 3.0x 4.7x 7.5x 5.0x 5.1x 4.4x
Ratio of earnings to fixed
charges(9)......................... -- 2.0x 2.1x 3.5x 5.8x 3.7x 3.8x 3.2x
BALANCE SHEET DATA (AT END OF
PERIOD):
Working capital(10).................. $144,419 $ 98,182 $ 69,330 $ 77,107 $117,965 $118,092 $129,360 $126,304
Total assets......................... 446,732 403,542 374,204 379,056 452,799 737,464 519,130 724,560
Long-term debt less current
portion............................ -- 278,713 203,482 166,202 217,873 474,631 299,870 462,753
Minority interest(5)................. -- 28,083 33,479 52,104 -- -- -- --
Equity............................... -- 43,260 62,828 84,621 140,888 128,190 119,505 144,270
</TABLE>
(footnotes on following page)
26
<PAGE> 32
- ---------------
(1) The Predecessor was historically operated as part of P&GCC. The Predecessor
was allocated certain expenses for services provided by P&GCC and Procter &
Gamble, including sales, general management, and financial services. Costs
and expenses were allocated using formulas, primarily based on estimates of
efforts expended and sales. Since debt obligations of Procter & Gamble were
not specifically identifiable with individual operating units, interest
charges are not reflected in the financial data of the Predecessor. Since
Procter & Gamble had no tax sharing agreement for allocating income taxes
to operating units, income tax expense or benefit is not reflected in the
financial data of the Predecessor. On March 16, 1993, the Company acquired
from P&GCC all of the assets of the Predecessor.
(2) Includes the operations of Temming from May 1, 1996, the date of
acquisition.
(3) Includes the operations of Alpha from September 1, 1996 and Merfin from May
28, 1997, their respective dates of acquisition.
(4) Includes the operations of Alpha from September 1, 1996, the date of
acquisition.
(5) The minority interest represents P&GCC's limited partnership interest in
BFLP, which ceased on November 28, 1995.
(6) In fiscal 1996, the Company recognized an extraordinary loss of $3,949, net
of tax benefit, on the early retirement of a portion of the Existing Senior
Notes.
(7) Historical net income per share has not been presented as it is not
considered relevant for periods prior to June 30, 1996.
(8) 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. EBITDA should not be construed as a substitute for income
from operations, net income or cash flow from operating activities for the
purpose of analyzing the Company's operating performance, financial
position and cash flows. The Company has presented EBITDA because it is
commonly used by certain investors to analyze and compare companies on the
basis of operating performance and to determine a company's ability to
service debt.
(9) 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.
(10) 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.
27
<PAGE> 33
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The Company manufactures specialty cellulose and absorbent products in the
United States, Canada, and Europe, and sells these products in worldwide
markets. The Company began operations under current management on March 16,
1993, by acquiring the Memphis, Tennessee based production, research and
administrative facilities of P&GCC. At the same time, current management formed
a partnership to acquire the Perry, Florida based production facilities of
P&GCC, in which P&GCC retained a financial interest. In November 1995, the
Company (1) acquired the remaining partnership interest of P&GCC and combined
the Memphis, Tennessee and Perry, Florida businesses under a common ownership;
(2) completed an initial primary and secondary public offering of common stock;
and (3) refinanced substantially all of its outstanding indebtedness. In May
1996, the Company acquired the specialty cellulose facilities of Temming,
located in Glueckstadt, Germany. In September 1996, the Company acquired Alpha,
with its specialty cellulose producing facility, located in Lumberton, North
Carolina. In May 1997, the Company completed its tender offer for Merfin, with
absorbent products facilities located in Delta (near Vancouver), Canada; Cork,
Ireland; and King, North Carolina.
RESULTS OF OPERATIONS
Comparison of Nine Months Ended March 31, 1998 and March 31, 1997
Net sales for the nine month period ended March 31, 1998 were $469.4
million compared to $409.0 million for the same period in the prior fiscal year,
an increase of $60.4 million or 14.8%. The increase for the nine month period
was primarily due to the acquisition of Merfin on May 28, 1997, and of Alpha on
September 1, 1996.
Operating income for the nine months ended March 31, 1998 was $91.3 million
compared to $78.5 million for the same period in the prior fiscal year.
Operating income as a percentage of sales increased to 19.4% year to date, an
increase of 0.2 percentage points as a result of lower overall raw material
costs partially offset by the increased investment in product development and
the startup of the new facility.
Net interest expense and amortization of debt costs was $27.5 million for
the nine months ended March 31, 1998. This is a $7.9 million increase compared
to the same period of the prior fiscal year. This increase was due to higher
average debt balances resulting from the acquisitions.
The Company's net income for the nine month period ended March 31, 1998 was
$40.7 million or $1.06 per share on a diluted basis compared to $38.7 million or
$0.99 per share on a diluted basis for the same period of the prior year.
Comparison of Fiscal Years Ended June 30, 1997 and June 30, 1996
Net sales for 1997 were $558.9 million compared to $471.0 million for 1996,
an increase of $87.9 million or 18.7%. The increase was primarily due to an 18%
increase in unit sales volume and by a move to a higher value-added product mix.
The unit sales volume increase consisted of a 5% increase from comparable
businesses plus the new volume contributed by acquisitions.
In 1997, operating income was $109.4 million compared to $108.6 million for
1996. Operating income as a percentage of sales declined to 19.6%, a decrease of
3.5 percentage points from 1996 due to a reduction in the average unit sales
price, excluding product mix changes, higher raw material costs, and higher
selling, research and administrative expenses. Selling, research and
administrative expenses were $10.8 million higher in 1997 than 1996, and
increased as a percentage of sales by 1.0 percentage point, primarily due to
added product development spending and non-compete agreements related to the
acquisitions.
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<PAGE> 34
Net interest and amortization of debt costs for 1997 were $27.9 million
compared to $17.0 million for 1996, an increase of $10.9 million. The increase
was due to substantially higher debt levels, primarily associated with the
acquisitions and a $50.0 million stock repurchase.
There was no minority interest in 1997 compared to $16.6 million for the
five month period July-November 1995.
The effective income tax rate was 33.6% for 1997 compared to 35.2% for
1996, primarily as the result of a full year's effect of the foreign sales
corporation established in November 1995.
The Company's net income for 1997 was $53.3 million, or $1.38 per share on
a diluted basis, compared to $43.1 million, or $1.01 per share on a diluted
basis, for 1996, an increase of $10.2 million or 23.7%. The 1996 fiscal year
reflected a $3.9 million extraordinary charge for the early retirement of debt.
Comparison of Fiscal Years Ended June 30, 1996 and June 30, 1995
Net sales for 1996 were $471.0 million compared to $408.6 million for 1995,
an increase of $62.4 million or 15.3%. The increase was primarily due to higher
average unit sales prices which, excluding the effect of product mix changes due
to the Temming acquisition, were 19.3% above 1995. The increase in net sales was
partially offset by a 4.2% decrease in unit sales volume in 1996 as the result
of softer market demand, in comparison to strong market demand in 1995.
In 1996, operating income was $108.6 million compared to $79.2 million for
1995, an increase of $29.4 million or 37.1%. Operating income as a percentage of
sales rose to 23.1%, an improvement of 3.7 percentage points from 1995. The
impact of higher sales discussed previously was partially offset by higher raw
material costs. Selling, research and administrative expenses were $2.8 million
higher in 1996 than 1995, but decreased as a percentage of sales from 5.9% to
5.7%. The increase in selling, research and administrative expenses was
primarily due to increased employment and transition expenses related to the
Temming acquisition.
Net interest and amortization of debt costs for 1996 were $17.0 million
compared to $21.2 million for 1995, a decrease of $4.2 million, primarily due to
lower average debt balances during the period preceding the November 1995
business combination, and lower interest rates following the business
combination as the result of the refinancing of indebtedness.
Minority interest for 1996 was $16.6 million for the five month period
July-November 1995, compared to $23.2 million for the full twelve months of
1995, a decrease of $6.6 million. The decrease is the result of the purchase of
P&GCC's remaining partnership interest as part of the November 1995 combination
of related businesses.
Non-recurring charges associated with the November 1995 and July 1996
secondary stock offerings totaled $1.9 million and reduced net income by $.05
per share in fiscal year 1996. There were no non-recurring charges in fiscal
year 1995.
The effective income tax rate decreased to 35.2% in 1996 from 36.5% in the
prior year, primarily as the result of establishing a foreign sales corporation
in November 1995.
The Company incurred an extraordinary loss of $3.9 million, net of taxes,
in 1996. This loss resulted from the retirement of $57.8 million in principal
amount of the Company's 10 1/4% Senior Notes due 2001.
The Company's income before extraordinary loss for 1996 was $47.0 million,
or $1.10 per share on a diluted basis, more than double 1995 net income of $21.7
million. Net income for 1996 was $43.1 million, or $1.01 per share on a diluted
basis, which is nearly double 1995 net income of $21.7 million.
FINANCIAL CONDITION
Stock Split
On January 21, 1998, the Board of Directors of the Company declared a
two-for-one stock split for stockholders of record as of February 10, 1998. The
stock split was paid in the form of a stock dividend of one
29
<PAGE> 35
share of common stock for each issued share of common stock on February 17,
1998. All share information and related amounts in this discussion have been
restated to reflect the stock split.
Cash Flow
Cash provided by operating activities for the nine months ended March 31,
1998 was $62.9 million. These funds were used, along with additional borrowings
from the Bank Credit Facility, to purchase and upgrade production equipment, to
repay certain Canadian bank, European bank, and other loans, acquire the
remaining outstanding stock of Merfin and repurchase stock. On February 4, 1998,
the Board of Directors authorized the repurchase of an additional 2.0 million
shares of common stock. Repurchased shares, which may be bought from
time-to-time in open market or private transactions, will be held as treasury
stock and will be available for general corporate purposes, including the
funding of employee benefit and stock related plans. During the nine month
period ended March 31, 1998, the Company repurchased 820,200 shares of common
stock bringing the total shares repurchased to 1,999,200, pursuant to the
Company's original 2.0 million share repurchase plan in effect since August
1996.
Cash provided by operating activities is a major source of funds for the
Company, totaling $117.4 million in 1997, $60.1 million in 1996, and $77.8
million in 1995. Net income increased in each of these years, contributing to
increased cash flow. In 1997, a decrease in inventories of $10.3 million, in
addition to higher net income, contributed to the increase in cash flow. In
1996, an increase of $22.7 million in accounts receivable and $27.6 million in
inventories offset the increase in net income.
Capital expenditures for property, plant and equipment were $42.8 million
in 1997, $34.8 million in 1996, and $24.9 million in 1995. The Company made
these expenditures to purchase, modernize, and upgrade production equipment and
to maintain its facilities. Capital expenditures (including environmental
expenditures) for 1998 are expected to increase by approximately $20.0 million
to approximately $60.0 million due primarily to the acquisitions.
During 1997, $67.1 million was used to purchase Company stock, and $172.7
million was used to purchase the common stock of Alpha and Merfin.
Leverage/Capitalization
Total debt increased to $478.1 million at June 30, 1997 from $219.5 million
at June 30, 1996, an increase of $258.6 million, of which the major components
are (1) a public offering for $100 million; (2) net increased borrowings against
the credit facilities of $110.6 million; and (3) assumed debt of $49.3 million
related to the acquisition of Merfin.
In July 1996, the Company issued $100 million in 9 1/4% Senior Subordinated
Notes due 2008. The Company used $50 million of the proceeds from the debt
offering to fund a stock repurchase of 4,519,774 shares of common stock. The
favorable impact on earnings per share resulting from this stock repurchase was
$0.08 per share. The remaining proceeds of the debt offering and borrowings from
the bank credit facility were used to fund the purchase of Alpha.
On May 28, 1997, the bank credit facility was increased to $275 million,
and $146.7 million in borrowings from the facility were used to purchase 97.5%
of the outstanding shares of Merfin. On July 30, 1997, the remaining outstanding
common shares of Merfin were acquired for $3.9 million. The total cost of the
Merfin acquisition is approximately $200 million including $49.3 million in
assumed debt.
On April 7, 1998, the stockholders of the Company approved an increase in
the Company's authorized shares of common and preferred stock to 100 million
shares and 10 million shares, respectively.
The Company redeemed the remaining $6.9 million principal amount of
Existing Senior Notes on June 30, 1998, at a price of 103.875% of principal
amount, together with accrued and unpaid interest.
30
<PAGE> 36
Liquidity
The Company believes that its cash flow from operations, together with the
borrowings available under the Bank Credit Facility, will be sufficient to fund
capital expenditures (including environmental expenditures), meet operating
expenses, fund any common stock repurchases, and service all debt requirements
for the foreseeable future. Consistent with the Company's stated policy, there
are no plans to pay dividends in the foreseeable future. At March 31, 1998, the
Company had unused borrowing capacity of $79.5 million on the Bank Credit
Facility. At March 31, 1998, after the application of all of the net proceeds
from the Offering to repay outstanding borrowings under the Bank Credit Facility
and after adjustment in the availability for payments exceeding $100.0 million,
the Company would have had $175.5 million available under the Bank Credit
Facility.
Foreign Currency Translation
The Company's net investment in foreign operations is subject to foreign
currency translation gains and losses, which are included as a separate
component of stockholders' equity. The decline since June 30, 1997 in the value
of the Canadian dollar, the Irish punt and the Deutsche mark as compared to the
U.S. dollar has resulted in an equity translation loss of $10.8 million for the
nine months ended March 31, 1998.
ENVIRONMENTAL MATTERS
The Company has already made substantial expenditures to make certain
in-plant process changes required by the Fenholloway Agreement, and the Company
estimates it will incur additional capital expenditures of approximately $40
million through fiscal 2001 to comply with the remaining obligations under the
Fenholloway Agreement. The ultimate cost and timing of expenditures to comply
with the Fenholloway Agreement may vary from previous estimates. The Company is
reviewing the recently issued cluster rules for air emissions and has not yet
quantified the estimated capital expenditures necessary to comply with these air
emission standards, but believes that such expenditures are not likely to have a
material adverse effect on the Company's business, results of operations or
financial condition. See "Business -- Environmental Matters." See "Risk
Factors -- Environmental Regulations and Liabilities."
YEAR 2000 COMPLIANCE
The Company is dependent upon computerized information systems for all
phases of its operations including production, distribution and accounting.
During the last three years, the Company has replaced substantially all of its
financial systems, giving the Company the benefit of new technology and
functionality while becoming year 2000 compliant. However, the financial systems
of recent acquisitions are still being assessed for year 2000 compliance. The
Company's suppliers, distributors and customers may also have year 2000 problems
which could adversely affect the Company. The Company has developed a plan and
timetable to determine the impact of the year 2000 on its operations and to
achieve year 2000 compliance. The Company believes at present that the cost to
achieve compliance will not have a material effect on its financial position,
liquidity, or results of operations.
31
<PAGE> 37
BUSINESS
THE COMPANY
The Company is a leading manufacturer and worldwide marketer of value-added
cellulose-based specialty products. The Company utilizes its expertise in
polymer chemistry and its state-of-the-art manufacturing facilities to develop
and produce innovative and proprietary products for its customers. The Company
sells its products to 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 offering
cellulose-based specialty products both made from wood and cotton and utilizing
wet-laid and air-laid technologies. As a result, the Company produces a broader
range of cellulose-based specialty products than any of its competitors.
The Company believes that it has leading positions in most of the high-end
niche markets in which it competes. Buckeye's focus on niche specialty cellulose
markets has enabled it to maintain consistently strong sales growth and stable
operating margins, even during downturns in the commodity cellulose markets.
Since fiscal 1994, the Company's net sales have grown at a compound annual
growth rate of 14.6% from $371.5 million to $558.9 million in fiscal 1997.
EBITDA margins have also increased from 22.0% to 25.6% over the same time
period.
Cellulose is a natural fiber derived from trees and other plants that is
used in the manufacture of a wide array of products. The cellulose market
generally can be divided into two categories: commodity and specialty. Commodity
cellulose is used in the manufacture of paper and packaging materials, a very
large, but highly cyclical market. The Company participates exclusively in the
estimated $7 billion annual specialty cellulose market, which accounts for
approximately 3% of the total cellulose market. Specialty cellulose is used to
impart unique chemical or physical characteristics to a broad and diverse range
of highly technical products.
Specialty cellulose generally commands higher prices and its markets tend
to be less cyclical than commodity cellulose. The more demanding performance
requirements for specialty cellulose limit customers' ability to replace it with
other products. There is only a small number of producers that can meet the
technical demands of the specialty cellulose markets. To the Company's
knowledge, there are no new entrants in this field and no expansion of high-end
specialty cellulose capacity has been announced.
The Company has manufactured cellulose-based specialty products for over 75
years. The Company's cellulose-based specialty products can be broadly grouped
into three categories: chemical cellulose, customized paper cellulose, and
absorbent products. Chemical cellulose (38% of nine months' fiscal 1998 gross
sales) is used to impart purity, strength, and viscosity in the manufacture of
diversified products such as food casings, rayon filament, acetate fibers and
plastics, as well as thickeners for food, cosmetics, and pharmaceuticals.
Customized paper cellulose (23% of nine months' fiscal 1998 gross sales) is used
to provide porosity, color permanence, and tear resistance in automotive air and
oil filters, premium letterhead, currency paper, and personal stationery.
Absorbent products (39% of nine months' fiscal 1998 gross sales) are used to
increase absorbency and fluid transport in products such as disposable diapers,
feminine hygiene products, and adult incontinence products. The Company combines
its expertise in specialty cellulose fibers with modern air-laid nonwoven
technology to produce absorbent composite structures for companies that globally
market consumer hygienic products.
The Company's commitment to research and development focuses on introducing
new cellulose-based specialty products, improving the performance of existing
products, and creating new applications for its products. 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 cellulose for use in rayon tire cord and food casings. In addition, the
Company was the first to commercialize mercerized southern softwood cellulose as
the porosity-building fiber in automotive air and oil filter applications. It
was also the first to apply fluff pulp for use in the absorbent core of
disposable diapers. Buckeye's most recent product developments include a
high-purity cellulose for food casings and a high-viscosity ether cellulose
yielding superior thickening performance in consumer products such as toothpaste
and shampoo.
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<PAGE> 38
The Company's customer base is broadly diversified both geographically and
by end-use markets. The Company's nine months' fiscal 1998 gross sales reflect
this geographic diversity, with 31% of sales in the United States, 38% in
Europe, 17% 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
ability to respond to changing customer needs have enabled the Company to
develop and strengthen long-term alliances with its customers.
Procter & Gamble, the world's largest diaper manufacturer, purchases
virtually all of the Company's current annual production of fluff pulp pursuant
to the Supply Agreement. Procter & Gamble is the Company's largest customer,
accounting for 32% of the Company's nine months' fiscal 1998 gross sales. The
Company's other large customers include Akzo Nobel N. V. (rayon filament and
cellulose ethers), A. Ahlstrom Corporation (automotive filter paper) and
Hercules Incorporated (cellulose ethers).
The Company's total manufacturing capacity is approximately 700,000 metric
tons annually (460,000 metric tons of wood-based cellulose, 200,000 metric tons
of cotton-based cellulose and 40,000 metric tons of air-laid nonwovens). The
Foley Plant produces wood-based specialty cellulose. The Memphis Plant, the
Glueckstadt Plant, and the Lumberton Plant produce cotton-based specialty
cellulose. The Company's plant near Vancouver, Canada and its new plant in Cork,
Ireland produce cellulose-based air-laid nonwovens for absorbent applications.
The Company also has an air-laid converting facility in King, North Carolina.
COMPANY STRATEGY
The Company's strategy is to continue to strengthen its position as a
leading supplier of cellulose-based specialty products. 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 (and therefore less
cyclical) specialty cellulose niche markets in which only a limited number
of cellulose producers have the ability to compete effectively. Competition
in these niche markets is based on product performance, customer technical
service, and, to a lesser extent, price. The Company continues to upgrade
its product mix to more technically demanding applications in order to
produce products with high margins and significant growth potential. As the
Company successfully expands its market share of such products and
introduces new products, it becomes less reliant on low margin, less
technically advanced products.
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
cellulose-based products, enhancing existing products, and creating new
applications for its products. Company scientists are working on the next
generation of cellulose-based specialty products for both new and current
applications in such diverse areas as feminine hygiene pads and tampons,
thin diapers, high-performance automotive filters, and cellulose ethers.
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 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, which tends
to make replacement of its products with competing products less likely.
The Company's commitment to product quality, dedication to customer
technical service, and ability to respond to changing customer needs have
enabled the Company to develop and strengthen long-term alliances with its
customers. The Company believes over two-thirds of Buckeye's nine months'
fiscal 1998 sales were to purchasers who have been customers of the Company
for over 30 years.
Expand Capacity To Support Growing Demand. Buckeye plans to expand
its capacity and global presence in niche markets through strategic
alliances with customers who are leaders in their respective
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<PAGE> 39
markets and through selective acquisitions. The Company also will continue
to modernize its existing facilities to increase their productive capacity.
PRODUCTS
The Company is the only manufacturer offering cellulose-based specialty
products both made from wood and cotton and utilizing both wet-laid and air-laid
technologies. As a result, the Company produces a broader range of
cellulose-based specialty products 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 cellulose can be broadly grouped into chemical
cellulose, customized paper cellulose, and absorbent products. The following
table summarizes the product attributes and end-use applications of Buckeye's
products:
<TABLE>
<CAPTION>
PERCENTAGE
OF NINE
MONTHS'
FISCAL 1998
PRODUCT GROUPS GROSS SALES PRODUCT ATTRIBUTES END-USE APPLICATIONS
-------------- ----------- ------------------ --------------------
<S> <C> <C> <C>
CHEMICAL CELLULOSE....... 38%
Food Casings........... Purity and strength Hot dog and sausage casings
Rayon Filament......... Strength and heat stability Coat linings, fashion wear, and
tire and hose reinforcement
Ethers................. High viscosity, purity, and Thickeners for food, cosmetics,
solution clarity pharmaceuticals, and construction
materials
Acetate................ Purity and uniformity High quality plastics,
photographic film, and fiber
CUSTOMIZED PAPER
CELLULOSE.............. 23%
Filters................ High porosity and product Automotive, laboratory, and
life industrial filters
Premium Papers......... Aesthetics, color Letterhead, currency, and personal
permanence, and tear stationery
resistance
ABSORBENT PRODUCTS....... 39%
Fluff Pulp and Air-laid
Nonwovens........... Absorbency and fluid Disposable diapers, feminine
transport hygiene products, and adult
incontinence products
</TABLE>
Chemical Cellulose
The Company is one of the world's largest manufacturers of chemical
cellulose and is the world's only manufacturer of both wood-based and
cotton-based chemical cellulose. Chemical cellulose, frequently referred to as
dissolving pulp, is dissolved in chemical solutions which modify the molecular
properties of the cellulose before it is regenerated to form an end-use product.
Chemical cellulose, a highly purified material, is the basic ingredient in the
production of food casings, rayon filament, photographic film, acetate fibers,
and thickeners for food, cosmetics and pharmaceuticals. Chemical cellulose is
selected for these applications for its chemical and molecular, rather than
physical, properties.
Customized Paper Cellulose
Customized paper cellulose is selected for its 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-based cellulose is used in currency
paper, premium
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<PAGE> 40
letterhead, 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 cellulose is used in other high-performance
applications, including laboratory and industrial filters, battery separators,
printed circuits, decorative laminates, maps and personal stationery.
Absorbent Products
The Company's absorbent products are used in applications such as
disposable diapers, feminine hygiene products, and adult incontinence products.
The Company believes that the long, thick-walled slash pine fiber used in the
production of the Company's absorbent products contributes to their excellent
quality in terms of fluid transport, absorbency, and structural integrity.
The Company is one of the world's major producers of air-laid nonwoven
materials for disposable products applications. Composite structures utilizing
air-laid nonwoven technology greatly simplify the manufacture of consumer
absorbent products such as feminine hygiene pads, tampons and diapers. The
Company believes that the use of these products is growing rapidly in the
world's developing countries.
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 are distributed to customers in approximately 50 countries around the
world. The Company's nine months' fiscal 1998 gross sales reflect this
geographic diversity, with 31% of sales in the United States, 38% in Europe, 17%
in Asia and 14% in other regions.
The high-end, technically demanding specialty cellulose niche markets that
Buckeye serves require a higher level of sales and technical service support
than do commodity cellulose sales. Most of the Company's technically trained
sales and service engineers began their careers in the Company's manufacturing
or product development operations. These professionals work with customers in
their plants to design cellulose 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 32% of the Company's nine months' fiscal 1998
gross sales. The Supply Agreement requires Procter & Gamble to purchase
specified tonnages of the Company's fluff pulp annually through the calendar
year 2002. Shipments of fluff pulp under the Supply Agreement are made to
Procter & Gamble affiliates worldwide, as directed by Procter & Gamble. The
price of the fluff pulp sold pursuant to the Supply Agreement through calendar
year 2000 is based on a formula specified in the Supply Agreement. Pricing in
the calendar years 1999 and 2000 will be at the higher of the contract formula
price or market, and pricing in the calendar years 2001 and 2002 will be at
market. The formula price has three components: (i) a specified provision to
cover the Company's manufacturing costs and profit margin (ii) a provision for
escalation based on Consumer Price Index changes, and (iii) a provision to
adjust for all actual changes in the price of wood, the major raw material
component of the fluff pulp purchased under the contract. Buckeye's next three
largest customers in the aggregate account for approximately 11% of gross sales.
Over 90% of the Company's worldwide sales are denominated in U.S. dollars,
and such sales are not subject to exchange rate fluctuations. 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 and absorbent products, 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 cellulose products for qualification in customers' plants. The
Company has a history of innovation in specialty
35
<PAGE> 41
cellulose products. The acquisition of Merfin added capability in the research
and development of new air-laid absorbent products. Research and development
costs of $4.7 million, $5.4 million, $8.4 million, and $7.7 million were charged
to expense as incurred during the years ended June 30, 1995, 1996 and 1997, and
the nine months ended March 31, 1998, respectively.
RAW MATERIALS
Slash pine timber and cotton fiber are the principal raw materials used in
the manufacture of the Company's specialty cellulose and absorbent cellulose
products. They represent the largest components of the Company's variable costs
of production. 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
north Florida and south Georgia. 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 P&GCC 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 1997, timber acquired pursuant to the Timber
Supply Agreements accounted for approximately 24% of the Company's total wood
purchases. The Timberlands Agreement has an initial term of ten years and is
subject to two renewals at Buckeye's option for five and three years,
respectively, which, if exercised, would result in the Timberlands Agreement's
extension through 2010. The initial term of the Timber Purchase Agreement
expires in 2002. 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 fiber either directly from cotton seed oil
mills or indirectly through agents or brokers. The Memphis Plant is
strategically located in the Mississippi Valley, one of the largest cotton fiber
producing regions in the world. Generally, the Company purchases substantially
all of its requirements of cotton fiber for the Memphis and Lumberton Plants
domestically. The Glueckstadt Plant purchases cotton fiber principally from
suppliers in the Middle East.
COMPETITION
Buckeye's competitors include the following: Borregaard Industries, Limited
(Norway), Concert Industries (Canada), Duni AB (Sweden), Fort James (U.S.),
Georgia-Pacific Corporation (U.S.), Havix (Japan), Honshu (Japan), Hosposables
(U.S.), International Paper Company (U.S.), Personal Care Group (U.S.),
Rayonier, Inc. (U.S.), Sappi Limited (South Africa), Southern Cellulose Products
Inc. (U.S.), Spontex (U.K.), Tembec Inc. (Canada), UPM-Kymmene Corporation
(Finland), Western Pulp Limited Partnership (Canada), and Weyerhaeuser Company
(U.S.). Competition is based on product performance, technical service, and, to
a lesser extent, price. Southern Cellulose Products Inc. is owned by Archer
Daniels Midland, a subsidiary of which supplies cotton linters to the Company.
The Company produces a broader range of specialty cellulose than any of its
competitors and is the only specialty cellulose producer offering both
wood-based and cotton-based products. Buckeye is the world's largest
cotton-based specialty cellulose producer. The Company believes that the number
of specialty cellulose
36
<PAGE> 42
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 five U.S. patents and three foreign patents,
and has 12 applications pending or in preparation. In addition, the Company has
access to royalty-free licenses for five U.S. patents and two foreign patents.
Buckeye intends to protect its patents, file the applications in preparation,
and file applications for any future inventions that are deemed to be important
to its business operations.
EMPLOYEES
On March 31, 1998, the Company employed approximately 1,750 individuals at
its facilities in Memphis, Tennessee; Perry, Florida; Lumberton and King, North
Carolina; Savannah, Georgia; Glueckstadt, Germany; Vancouver, Canada; Cork,
Ireland; and Geneva, Switzerland. Collective bargaining agreements are in place
at the Foley Plant (approximately 600 hourly employees) with the United
Paperworkers International Union, AFL-CIO, Local No.1192 (the "Union"); and at
the Memphis Plant (approximately 180 hourly employees) with the Local Union 910
Pulp and Processing Workers and the Retail, Wholesale, and Department Store
Union, AFL-CIO. The agreement for the Memphis Plant expires March 18, 2000 and
the agreement for the Foley Plant expires April 1, 2002. A Works Council
provides employee representation for all non-management workers at the
Glueckstadt Plant. The Lumberton, Vancouver, Cork, and King plants are not
unionized.
None of the Company's facilities have had labor disputes or work stoppages
in recent history. 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 REGULATIONS AND LIABILITIES
The Company's operations are subject to extensive general and
industry-specific federal, state, local and foreign environmental laws and
regulations relating to the generation, storage, treatment and disposal of
hazardous and non-hazardous materials, air emissions, waste water discharges and
the remediation of contamination. The Company devotes significant resources to
maintaining compliance with such requirements. The Company expects that, due to
the nature of its operations, it will be subject to increasingly stringent
environmental requirements (including standards applicable to waste water
discharges and air emissions) and will continue to incur substantial costs to
comply with such requirements. 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. In addition, because an environmental reserve is not established
until a liability is determined to be probable and reasonably estimable,
potential future environmental liabilities that are not yet probable or
reasonably estimable are not covered by the Company's reserves. Accordingly,
additional charges to earnings are possible. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Environmental
Matters."
The Foley Plant discharges treated waste water into the Fenholloway River.
Pursuant to the Fenholloway Agreement with the FDEP, approved by the EPA in
1995, the Company agreed to a comprehensive plan to attain Class III
("fishable/swimmable") status for the Fenholloway River under applicable Florida
law. The Fenholloway Agreement requires the Company, among other things, to (i)
make process changes within the Foley Plant, reduce the coloration of its waste
water discharge and restore certain wetlands areas and (ii) relocate the waste
water discharge point into the Fenholloway River to a point closer to the mouth
of the river and provide oxygen enrichment to the effluent prior to discharge.
The Company has already made significant expenditures to make certain in-plant
process changes required by the Fenholloway Agreement, and the Company estimates
it will incur additional capital expenditures of approximately $40 million
through fiscal 2001 to comply with the remaining obligations under the
Fenholloway Agreement.
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<PAGE> 43
Recently, in reviewing the renewal application of the Company's National
Pollutant Discharge Elimination System permit, the EPA has requested additional
environmental studies and further discussions with various regulatory agencies
to identify possible alternatives to the relocation of the discharge point to
determine the most cost effective technologies available to address both Class
III water quality standards for the Fenholloway River and anticipated EPA
cluster rules applicable to waste water discharges from dissolving kraft pulp
mills, like the Foley Plant. As a result, at the request of the EPA, the Company
and the FDEP verbally agreed that the Company will finalize the process changes
and wetlands restoration contemplated by the Fenholloway Agreement, but defer
relocation of the discharge point. Consequently, a portion of the estimated $40
million in capital expenditures may be delayed beyond the period stated above,
and the total capital expenditures for the Foley Plant may increase as a result
of price escalations or the implementation of other technologies mandated by the
cluster rules.
While the waste water standards under the cluster rules applicable to
dissolving kraft pulp mills like the Foley Plant have not yet been proposed, the
EPA has issued air emission standards applicable to the Foley Plant. The Company
is reviewing these air emission standards and has not yet quantified the
estimated capital expenditures necessary to comply with these air emission
standards, but believes that such expenditures are not likely to have a material
adverse effect on the Company's business, results of operations or financial
condition.
The Foley Plant is on the EPA 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.
PROPERTIES
Corporate Headquarters and Sales Offices. The Company owns its corporate
headquarters, research and development laboratories, and pilot plants which are
located in Memphis, Tennessee. The Company leases its sales offices in Geneva,
Switzerland and distribution facilities in Savannah, Georgia.
The Company operates the following manufacturing facilities generally at or
near their stated productive capacities:
<TABLE>
<CAPTION>
CAPACITY
PROCESS PLANT LOCATION(S) (METRIC TONS)
- ------- ----------------- -------------
<S> <C> <C>
Wood-based............ Perry, Florida 460,000
Cotton-based.......... Memphis, Tennessee; Lumberton, North Carolina;
Glueckstadt, Germany 200,000
Air-laid nonwovens.... Vancouver, Canada(1); Cork, Ireland; and King,
North Carolina 40,000
</TABLE>
- ---------------
(1) The Company has signed an agreement to purchase the land and building in
Delta, British Columbia, near Vancouver, Canada.
LEGAL PROCEEDINGS
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 business, results of operations or financial condition.
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<PAGE> 44
MANAGEMENT
The following table sets forth certain information concerning each of the
Company's directors and executive officers as of March 31, 1998:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Robert E. Cannon....................... 68 Chairman of the Board, Chief Executive
Officer and Director
David B. Ferraro....................... 60 President, Chief Operating Officer and
Director
Henry P. Doggrell...................... 49 Senior Vice President, Corporate
Affairs
George B. Ellis........................ 58 Senior Vice President, Manufacturing --
Specialty Cellulose
B. Jerry L. Huff....................... 59 Senior Vice President, Research and
Development
R. Howard Cannon....................... 35 Director
Red Cavaney............................ 55 Director
Henry F. Frigon........................ 63 Director
Samuel M. Mencoff...................... 41 Director
Harry J. Phillips, Sr. ................ 68 Director
</TABLE>
Robert E. Cannon has served as Chairman and Chief Executive Officer of the
Company since March 1993. Mr. Cannon served as Dean of the College of
Management, Policy and International Affairs at Georgia Tech from 1991 through
1992. Mr. Cannon served as Senior Vice President, Procter & Gamble from 1989 to
1991; Group Vice President -- Industrial Products of Procter & Gamble, which
included the operations of Buckeye from 1981 to 1989; and President of Buckeye
from 1971 through 1981.
David B. Ferraro has served as President and Chief Operating Officer of the
Company since March 1993. Prior to that time, he served as Manager of Strategic
Planning of Procter & Gamble from 1991 through 1992; President, Buckeye
Cellulose Corporation, a subsidiary of Procter & Gamble from 1989 through 1991;
Executive Vice President and Manager of Commercial Operations of Buckeye
Cellulose Corporation from 1987 through 1989; and Comptroller of Buckeye
Cellulose Corporation from 1973 through 1986.
Henry P. Doggrell has served as Senior Vice President, Corporate Affairs,
since July 1997. Prior to joining the Company in June 1996, Mr. Doggrell was a
partner in the law firm of Baker, Donelson, Bearman & Caldwell from 1988 until
May 1996 and served as the Company's principal outside counsel.
George B. Ellis has served as Senior Vice President,
Manufacturing -- Specialty Cellulose since July 1997. Mr. Ellis has been
employed by the Company since March 1993 and was an officer of Buckeye Cellulose
Corporation prior to that time.
B. Jerry L. Huff has served as Senior Vice President, Research and
Development since July 1997. Mr. Huff has been employed by the Company since
March 1993 and was an officer of Buckeye Cellulose Corporation, prior to that
time.
R. Howard Cannon has served as a Director of the Company since 1996. He has
been President of Dryve, Inc., a company consisting of 30 dry cleaning
operations, since 1987. He is Trustee of both the Robert E. Cannon and the
Kathryn G. Cannon Grantor Retained Annuity Trusts. R. Howard Cannon is the son
of Robert E. Cannon.
Red Cavaney has served as a Director of the Company since May 1996. Mr.
Cavaney currently acts as President and Chief Executive Officer of the American
Petroleum Institute, a position he has held since October 1997. Prior to that
time he served as President, Chief Executive Officer and a director of the
American Plastics Council, from 1994 to 1997, and prior to 1994, he served as
President of the American Forest & Paper Association ("AF&PA") and President of
the AF&PA's predecessor, the American Paper Institute.
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<PAGE> 45
Henry F. Frigon has served as a Director of the Company since 1996. Mr.
Frigon was Executive Vice President -- Corporate Development and Strategy and
Chief Financial Officer of Hallmark Cards, Inc. from 1991 to 1995 and was
President and Chief Executive Officer of BATUS Inc. from 1983 to 1991. Mr.
Frigon is a director of H&R Block Inc., CompuServe, Inc., Dimon International
Inc., Group Technologies Corp., Sypris Solutions Inc, and C2i Solutions Inc.
Samuel M. Mencoff has served as a Director of the Company since 1993. He
has been Vice President of Madison Dearborn Partners, Inc. since January 1993.
Prior to that time, he served as Vice President of First Chicago Venture Capital
from 1987 to 1993. 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. Mr. Mencoff is a director of Bay State Paper Holding Company and
Riverwood International Corporation.
Harry J. Phillips, Sr. has served as a Director of the Company since 1996.
Mr. Phillips has been Chairman of the Executive Committee of the Board of
Directors of Browning-Ferris Industries, Inc. since 1988. Prior to that time, he
served as Chairman and Chief Executive Officer of Browning-Ferris Industries,
Inc. Mr. Phillips is a director of National Commerce Bancorporation, RFS Hotel
Investors, Inc., Buckman Laboratories, Inc. and Morgan Keegan and Company, Inc.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Messrs. Cannon and Ferraro each executed Master Promissory Notes with Union
Planters National Bank (the "Bank"), as of March 21, 1994, in the amounts of
approximately $2.3 million and $0.6 million, respectively. Each of the notes was
secured by Bank certificates of deposit in the name of the Company in the
amounts of approximately $2.3 million and $0.6 million, respectively, pursuant
to two security agreements between the Bank and the Company. Both of the notes,
which matured on July 1, 1998, bore 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. The interest rates
were automatically adjusted every six months to correspond with the adjustments
made to the interest rates payable on the certificates of deposit. As security
for the Company having provided these certificates of deposit as collateral for
the notes, the Company entered into Pledge and Security Agreements with each of
Messrs. Cannon and Ferraro for the pledge by both Messrs. Cannon and Ferraro of
a specified number of shares of Common Stock, together with subsequently
acquired shares, dividend and other rights with respect thereto, to the Company.
Messrs. Cannon and Ferraro repaid the notes in full in July 1998 and the Pledge
and Security Agreements terminated.
Mr. Cannon is the sole owner of a limited liability company that owns an
aircraft that is leased to the Company from time to time for Company business.
The Company believes that the charges for the use of the aircraft by the Company
are no less favorable to the Company than those that would be paid in a
comparable transaction in arm's-length dealings with an unrelated third party.
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<PAGE> 46
DESCRIPTION OF CERTAIN INDEBTEDNESS
BANK CREDIT FACILITY
General. The Company has entered into the Bank Credit Facility with the
Banks. 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 $275.0 million. Up to $50.0 million
of the Bank Credit Facility is available for the issuance of letters of credit
on behalf of the Company. In addition, up to $15.0 million of the Bank Credit
Facility is available for swingline 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 $5.0 million in any year and $25.0 million in
the aggregate and occurring after May 28, 1997, 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 after certain adjustments as a
result of the acquisition of Merfin. The Company may repay the Bank Credit
Facility in whole or in part at any time without premium or penalty except for
make-whole payments on money market loans and LIBOR-based loans.
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 66% of the stock of certain foreign
subsidiaries acquired by the Company.
Maturity; Reduction of Commitments. The Bank Credit Facility will mature
on May 28, 2002. On May 28, 2001, borrowing availability reduces to $200.0
million. In addition, the availability of borrowings under the Bank Credit
Facility reduces one dollar for each dollar repaid with proceeds from the sale
of the Notes in excess of $100.0 million. At March 31, 1998, after the
application of all of the net proceeds of the Offering to repay amounts
outstanding under the Bank Credit Facility and after adjustment in the
availability as described in the preceding sentence, the Company would have had
$175.5 million available under the Bank Credit Facility.
Interest. The interest rate applicable to borrowings (other than swingline
or money market rate loans) under the Bank Credit Facility is (i) the greater of
(a) the agent's prime rate or (b) the sum of 1/2% plus the federal funds rate
(the "Base Rate") or (ii) a LIBOR-based rate ranging from LIBOR plus 0.450% to
1.125%. The interest rate applicable to swing line loans is the Base Rate minus
1/2%. Money market rate loans may be made under the Bank Credit Facility in the
sole discretion of the Banks upon request of the Company at rates determined at
the time of the request. 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 (i) quarterly in arrears in the case of prime rate loans; (ii) on
the last day of each interest period in the case of LIBOR loans; or (iii) on the
stated interest payment date for money market loans. Borrowings at March 31,
1998 were at a weighted average rate of 6.45%.
Covenants. The Bank Credit Facility contains covenants customary for
financings of this type, including, without limitation, minimum consolidated net
worth, of at least $96.0 million plus 50% of consolidated net income (if
positive) for each quarter, maximum ratio of consolidated total debt to
consolidated EBITDA of 375%, minimum consolidated EBITDA equal to or greater
than 300% (prior to September 30, 1999) and 325% (thereafter) 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.
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.
The Company is currently negotiating certain amendments to the Bank Credit
Facility.
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<PAGE> 47
EXISTING SENIOR SUBORDINATED NOTES
In July 1996, the Company issued and sold $100.0 million principal amount
of the Senior Subordinated Notes due 2008 which mature on September 15, 2008. At
March 31, 1998, $100.0 million principal amount of the Senior Subordinated Notes
due 2008 was outstanding. In November 1995, the Company issued and sold $150.0
million principal amount of the Senior Subordinated Notes due 2005 which mature
on December 15, 2005. At March 31, 1998, $150.0 million principal amount of the
Existing Senior Subordinated Notes was outstanding. The Existing Senior
Subordinated Notes are unsecured obligations of the Company and are subordinated
in right of payment to the prior payment in full of all Senior Indebtedness of
the Company, including the indebtedness under the Bank Credit Facility and the
outstanding Existing Senior Notes. The Senior Subordinated Notes due 2008 are
senior subordinated indebtedness of the Company ranking pari passu with the
Senior Subordinated Notes due 2005 and both rank 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 of
the Company. The Existing Senior Subordinated Notes are also effectively
subordinated to all indebtedness of the Company's subsidiaries. The Existing
Senior Subordinated Notes Indentures contain a number of covenants restricting
the operations of the Company and its subsidiaries. The Existing Senior
Subordinated Notes Indentures also provide for a change of control put, the
optional redemption of the Existing Senior Subordinated Notes by the Company at
any time on or after September 15, 2001 (for the Senior Subordinated Notes due
2008) and December 15, 2000 (for the Senior Subordinated Notes due 2005), and
events of default provisions that are typical of senior subordinated debt
financings. The Existing Senior Subordinated Notes Indentures do not provide for
a sinking fund.
EXISTING SENIOR NOTES
In May 1993, the Company issued and sold $70.0 million principal amount of
the Existing Senior Notes. The Company redeemed the remaining $6.9 million
principal amount on June 30, 1998, at a price of 103.875% of principal amount,
together with accrued and unpaid interest.
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<PAGE> 48
DESCRIPTION OF THE EXCHANGE NOTES
The Exchange Notes, like the Old Notes, will be issued under an Indenture
dated as of June 11, 1998 (the "Indenture") between the Company and Union
Planters National Bank, as trustee (the "Trustee"), in exchange for the Old
Notes. No Exchange Notes are currently outstanding. The terms of the Exchange
Notes include those stated in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act of 1939 (the "Trust Indenture Act"). The
terms of the Exchange Notes are substantially identical to the Old Notes in all
material respects (including interest rate and maturity), except that (i) the
Exchange Notes will not be subject to the restrictions on transfer and (ii) the
Registration Rights Agreement covenants regarding registration. The Old Notes
are subject to all such terms, and holders of the Old Notes are referred to the
Indenture and the Trust Indenture Act for a statement thereof. 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 Exchange Notes will mature on October 15, 2010, will be limited to
$150,000,000 aggregate principal amount, and will be unsecured senior
subordinated obligations of the Company. Each Exchange Note will bear interest
at the rate set forth on the cover page hereof from June 11, 1998 or from the
most recent interest payment date to which interest has been paid, payable
semiannually on October 15 and April 15 in each year, commencing October 15,
1998, to the Person in whose name the Exchange Note (or any predecessor Exchange
Note) is registered at the close of business on the October 1 or April 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 Exchange Notes will be
payable, and the Exchange 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 Exchange 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 Exchange 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 Exchange Notes will be subject to redemption at any time on or
after October 15, 2003, 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 October 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- ---- ----------------
<S> <C>
2003...................................................... 104.000%
2004...................................................... 102.667%
2005...................................................... 101.333%
</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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<PAGE> 49
(b) In addition, up to 35% of the aggregate principal amount of the
Exchange Notes will be redeemable at any time prior to October 15, 2001 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 108% 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 $97.5
million in aggregate principal amount of the Exchange Notes remains outstanding;
and provided further, that such redemption occurs within 60 days following the
closing of each such Public Equity Offering.
(c) If less than all of the Notes are to be redeemed, the Trustee shall
select the Exchange 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 Exchange Notes will not be entitled to the benefit of any sinking fund.
REGISTRATION RIGHTS
The Company has agreed with the Placement Agents, for the benefit of the
Holders, that the Company will use its best efforts, at its cost, to file and
cause to become effective a registration statement with respect to a registered
offer (the "Exchange Offer") to exchange the Old Notes for an issue of senior
subordinated notes of the Company (the "Exchange Notes") with terms identical to
the Old Notes (except that the Exchange Notes will not bear legends restricting
the transfer thereof). Upon such registration statement being declared
effective, the Company shall offer the Exchange Notes in return for surrender of
the Notes. Such offer shall remain open for not less than 20 business days after
the date notice of the Exchange Offer is mailed to Holders. For each Old Note
surrendered to the Company under the Exchange Offer, the Holder will receive an
Exchange Note of equal principal amount. Interest on each Exchange Note shall
accrue from the last interest payment date on which interest was paid on the Old
Notes so surrendered or, if no interest has been paid on the Old Notes, from
June 11, 1998. In the event that applicable interpretations of the staff of the
Securities and Exchange Commission (the "Commission") do not permit the Company
to effect the Exchange Offer, or under certain other circumstances, the Company
shall, at its cost, use its best efforts to cause to become effective a shelf
registration statement (the "Shelf Registration Statement") with respect to
resales of the Exchange Notes and to keep the Shelf Registration Statement
effective until the expiration of the time period referred to in Rule 144(k)
under the Securities Act after June 11, 1998, or such shorter period that will
terminate when all Exchange Notes covered by the Shelf Registration Statement
have been sold pursuant to the Shelf Registration Statement. The Company shall,
in the event of such a shelf registration, provide to each Holder copies of the
prospectus, notify each Holder when the Shelf Registration Statement for the
Exchange Notes has become effective and take certain other actions as are
required to permit resales of the Notes. A Holder that sells its Exchange Notes
pursuant to the Shelf Registration Statement generally will be required to be
named as a selling security holder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and will be
bound by the provisions of the Registration Rights Agreement that are applicable
to such a Holder (including certain indemnification obligations).
In the event that the Exchange Offer is not consummated and the Shelf
Registration Statement is not declared effective on or prior to December 11,
1998, the annual interest rate borne by the Old Notes will be increased by 0.5%
from December 11, 1998 until the Exchange Offer is consummated or the Shelf
Registration Statement is declared effective ("Additional Interest").
If the Company effects the Exchange Offer, the Company will be entitled to
close the Exchange Offer 20 business days after the commencement thereof,
provided that it has accepted all Exchange Notes theretofore validly surrendered
in accordance with the terms of the Exchange Offer. Old Notes not tendered in
the
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<PAGE> 50
Exchange Offer shall bear interest at the rate set forth on the cover page of
this Prospectus and be subject to all of the terms and conditions specified in
the Indenture and to the transfer restrictions described in "Transfer
Restrictions."
This summary of certain provisions of the Registration Rights Agreement
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is available from the Company upon request as set
forth below in "-- Available Information."
RANKING
The payment of the principal of, premium, if any, and interest on, the
Exchange 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
Exchange 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 Exchange 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 Exchange Notes or on account
of the purchase, redemption, defeasance or other acquisition of, or in respect
of, the Exchange 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 Exchange 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 Exchange Notes or on account of the purchase, redemption,
defeasance or other acquisition of, or in respect of, the Exchange 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
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
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<PAGE> 51
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 Exchange 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 Exchange 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
Exchange Notes or on account of the purchase, redemption, defeasance or other
acquisition of, or in respect of, the Exchange 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 Exchange Notes, and funds which would be
otherwise payable to the holders of the Exchange 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 Exchange 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 Exchange 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 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 Exchange 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.
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<PAGE> 52
"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, 1998, after giving effect to the Offering and the
application of the proceeds therefrom, there would have been outstanding
approximately $469.2 million of Indebtedness of the Company including Senior
Indebtedness of approximately $70.2 million and indebtedness under the Existing
Senior Subordinated Notes and the Exchange Notes of $399.0 million. Further,
Subsidiaries of the Company would have had $132.7 million in other liabilities
(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)
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
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<PAGE> 53
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) $50 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, 1998 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;
(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
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<PAGE> 54
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 Exchange Notes;
and (4) is expressly subordinated in right of payment to the Exchange 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 Exchange Notes
upon Change in 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 Exchange 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
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<PAGE> 55
Company has made an Offer to purchase the Exchange Notes as provided in
such covenant and has repurchased all Exchange 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 Exchange 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
Exchange 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 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
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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 Exchange 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
Exchange Notes in accordance with the procedures set forth in the Indenture in
the maximum principal amount (expressed as a multiple of $1,000) of Exchange
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 Exchange Notes, and the denominator
of which is the sum of the outstanding principal amount of the Exchange 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 Exchange
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 Exchange Notes
will be payable in cash in an amount equal to 100% of the principal amount of
the Exchange 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 Exchange 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 Exchange Notes and Pari
Passu Indebtedness surrendered by holders thereof exceeds the amount of Excess
Proceeds, the Trustee shall select the Exchange Notes to be purchased on a pro
rata basis. Upon the completion of the purchase of all the Exchange 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 Exchange 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 Exchange 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 Exchange 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
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 Exchange Notes and the Pari
Passu Indebtedness shall be purchased by the Company,
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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 Exchange 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 Exchange Notes or, if such Offer is made, to pay for the
Exchange 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 Exchange Notes or subordinate in right
of payment to the Exchange Notes at least to the same extent as the Exchange
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
Exchange 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 Exchange 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 Exchange 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 Exchange 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 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 Exchange Notes
on a senior subordinated basis to the same extent as the Exchange Notes are
subordinated to Senior Indebtedness. (Section 1015)
Purchase of Exchange Notes Upon a Change in Control. If a Change in
Control shall occur at any time, then each holder of Exchange Notes shall have
the right to require that the Company purchase such holder's Exchange 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 Exchange Notes, plus accrued and unpaid interest, if
any, to the date of purchase (the "Change in Control Purchase
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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 Exchange 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 Exchange
Note not tendered will continue to accrue interest; that, unless the Company
defaults in the payment of the purchase price, any Exchange 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 Exchange 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 Exchange Notes that might be delivered by holders
of the Exchange 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 Exchange 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 Exchange 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 Exchange 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 Exchange 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 Exchange 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 Exchange Notes
the right to require the Company to repurchase the Exchange 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 Exchange Notes, if such transaction is not a
transaction defined as a Change in 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
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make a Change in Control Offer to purchase the Exchange Notes or, if such Change
in Control Offer is made, to pay for the Exchange 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
Exchange 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 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
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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 Exchange Notes and the
Indenture, as the case may be, and the Exchange 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 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
Exchange Notes. (Section 802)
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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
Exchange 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 Exchange 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 Exchange 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 Exchange 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 $10 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 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,
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(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 Exchange 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 Exchange 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 Exchange 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 Exchange Notes shall ipso
facto become and be due and payable immediately in an amount equal to the
principal amount of the Exchange Notes, together with premium, if any, and
accrued and unpaid interest, if any, to the date the Exchange 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 Exchange 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 Exchange 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
Exchange Notes then outstanding, (iii) the principal of and premium, if any, on
any Exchange Notes then outstanding which have become due otherwise than by such
declaration of acceleration and interest thereon at a rate borne by the Exchange
Notes and (iv) to the extent that payment of such interest is lawful, interest
upon overdue interest at the rate borne by the Exchange Notes; and (b) all
Events of Default, other than the non-payment of principal of the Exchange 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 Exchange Notes outstanding may on behalf of the holders of all outstanding
Exchange 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 Exchange 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 Exchange 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 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 Exchange 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)
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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 Exchange Notes
discharged with respect to the outstanding Exchange 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 Exchange Notes, except for (i) the rights of holders of such
outstanding Exchange Notes to receive payments in respect of the principal of,
premium, if any, and interest on such Exchange Notes when such payments are due,
(ii) the Company's obligations with respect to the Exchange Notes concerning
issuing temporary Exchange Notes, registration of Exchange Notes, mutilated,
destroyed, lost or stolen Exchange 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 Exchange 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 Exchange 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 Exchange 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 Exchange Notes on the Stated Maturity (or on any date after
October 15, 2003 (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 Exchange 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 Exchange 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 Exchange 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 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
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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 Exchange 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 Exchange 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
Exchange Notes as expressly provided for in the Indenture) as to all outstanding
Exchange Notes under the Indenture when (a) either (i) all such Exchange Notes
theretofore authenticated and delivered (except lost, stolen or destroyed
Exchange Notes which have been replaced or paid or Exchange 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 Exchange 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 Exchange 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 Exchange Notes then outstanding; provided,
however, that no such modification or amendment may, without the consent of the
holder of each outstanding Exchange 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 Exchange 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 Exchange 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 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 Exchange Notes Upon a Change in Control,"
including, in each case, amending, changing or modifying any definitions
relating
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thereto; (iii) reduce the percentage in principal amount of such outstanding
Exchange 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
Exchange 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 Exchange 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 Exchange Notes in any manner adverse to the
holders of the Exchange Notes. (Section 902)
Notwithstanding the foregoing, without the consent of any holders of the
Exchange 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 Exchange Notes in accordance with "-- Consolidation,
Merger, Sale of Assets"; (b) to add to the covenants of the Company or any other
obligor upon the Exchange Notes for the benefit of the holders of the Exchange
Notes or to surrender any right or power conferred upon the Company or any other
obligor upon the Exchange Notes, as applicable, in the Indenture or in the
Exchange Notes; (c) to cure any ambiguity, or to correct or supplement any
provision in the Indenture or the Exchange Notes which may be defective or
inconsistent with any other provision in the Indenture or the Exchange Notes or
make any other provisions with respect to matters or questions arising under the
Indenture or the Exchange Notes; provided that, in each case, such provisions
shall not adversely affect the interest of the holders of the Exchange 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 Exchange 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 Exchange
Notes outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture. (Section 1022)
BOOK-ENTRY, DELIVERY AND FORM
Old Notes offered and sold to Qualified Institutional Buyers ("QIBs") in
reliance on Rule 144A under the Securities Act are represented by a single,
permanent Global Note in definitive, fully registered book-entry form (the "Rule
144A Global Note") and are registered in the name of Cede & Co., as nominee of
DTC on behalf of purchasers of the Old Notes represented thereby for credit to
the respective accounts of such purchasers (or to such other accounts as they
may direct) at DTC.
Old Notes originally offered and sold in reliance on Regulation S under the
Securities Act, if any, are initially represented by a single, permanent Global
Note in definitive, fully registered book-entry form (the "Regulation S Global
Note") registered in the name of Cede & Co., as nominee of DTC and deposited on
behalf of the purchasers of the Old Notes represented thereby with a custodian
for DTC for credit to the respective accounts of such purchasers (or to such
other accounts as they directed) at the Euroclear System ("Euroclear") or Cedel
Bank, societe anonyme ("Cedel"). Prior to the 40th day after the later of the
commencement of the issuance of the Original Notes and the Issue Date, interests
in the Regulation S Global Note may only be held through Euroclear or Cedel.
Old Notes held by QIBs who elected to take physical delivery of their
certificates instead of holding their interest through the Rule 144A Global Note
(and which are thus ineligible to trade through DTC) (the "Series A Non-Global
Purchasers") are issued in fully registered form ("Certificated Notes"). Upon
the
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transfer of such Certificated Notes to a QIB or in an offshore transaction under
Rule 903 or 904 of Regulation S under the Securities Act, such Certificated
Notes will, unless such Rule 144A Global Note has previously been exchanged in
whole for Certificated Notes, be exchanged for an interest in the Rule 144A
Global Note and/or the Regulation S Global Note upon delivery of appropriate
certifications to the Trustee. Transfers of Certificated Notes, any interest in
the Rule 144A Global Note and any interest in the Regulation S Global Note are
subject to certain restrictions.
Exchange Notes
Exchange Notes issued in exchange for Old Notes originally offered and sold
(i) to QIBs in reliance on Rule 144A under the Securities Act or (ii) in
reliance on Regulation S under the Securities Act will be represented by a
single, permanent Global Note in definitive, fully registered book-entry form
(the "Exchange Global Note" and together with the Rule 144A Global Note and the
Regulation S Global Note, the "Global Notes"), which will be registered in the
name of Cede & Co., as nominee of DTC on behalf of persons who receive Exchange
Notes represented thereby for credit to the respective accounts of such persons
(or to such other accounts as they may direct) at DTC.
Exchange Notes issued in exchange for Old Notes will be issued, upon
request, in fully registered form (together with the Certificated Notes, the
"Certificated Notes"), but otherwise such holders will only be entitled to
registration of their respective Exchange Notes in book-entry form under the
Exchange Global Note.
The Global Notes
The Company expects that pursuant to procedures established by DTC (a) upon
deposit of the Global Notes, DTC or its custodian will credit on its internal
system portions of the Global Notes, which shall be comprised of the
corresponding respective amount of the Global Notes to the respective accounts
of persons who have accounts with such depository and (b) ownership of the Notes
will be shown on, and the transfer of ownership thereof will be effected only
through, records maintained by DTC or its nominee (with respect to interests of
Participants (as defined below) and the records of Participants (with respect to
interests of persons other than Participants)). Ownership of beneficial
interests in the Global Notes will be limited to persons who have accounts with
DTC ("Participants") or persons who hold interests through Participants. Holders
may hold their interests in the Global Notes directly through DTC if they are
Participants in such system, or indirectly through organizations which are
Participants in such system.
So long as DTC or its nominee is the registered owner or holder of any of
the Notes, DTC or such nominee will be considered the sole owner or holder of
such Notes represented by the Global Notes for all purposes under the Indenture
and under the Notes represented thereby. No beneficial owner of an interest in
the Global Notes will be able to transfer such interest except in accordance
with the applicable procedures of DTC in addition to those provided for under
the Indenture.
Payments of the principal of, premium, if any, and interest on the Global
Notes will be made to DTC or its nominee, as the case may be, as the registered
owner thereof. None of the Company, the Trustee or any Paying Agent under the
Indenture will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global Notes or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
the principal of, premium, if any, and interest on the Global Notes will credit
Participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Notes as
shown on the records of DTC or its nominee. The Company also expects that
payments by Participants to owners of beneficial interests in the Global Notes
held through such Participants will be governed by standing instructions and
customary practice as is now the case with Notes held for the accounts of
customers registered in the names of nominees for such customers. Such payment
will be the responsibility of such Participants.
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Transfers between Participants in DTC will be effected in accordance with
DTC rules and will be settled in immediately available funds. If a holder
requires physical delivery of a Certificated Note for any reason, including to
sell Senior Notes to persons in states which require physical delivery of such
Notes or to pledge such Senior Notes, such holder must transfer its interest in
the Global Notes in accordance with the normal procedures of DTC and in
accordance with the procedures set forth in the Indenture.
Before the 40th day after the later of the commencement of the issuance of
the Notes and the Issue Date, transfers by an owner of a beneficial interest in
the Regulation S Global Note to a transferee who takes delivery of such interest
through the Rule 144A Global Note will be made only in accordance with the
applicable procedures and upon receipt by the Trustee and the Company of a
written certification from the transferor of the beneficial interest in the form
provided in the Indenture to the effect that such transfer is being made to a
person whom the transferor reasonably believes is a QIB within the meaning of
Rule 144A in a transaction meeting the requirements of Rule 144A and as
permitted consistent with Regulation S.
Transfers by an owner of a beneficial interest in the Rule 144A Global Note
to a transferee who takes delivery of such interest through the Regulation S
Global Note, whether before, on or after the 40th day after the later of the
commencement of the issuance of the Notes and the Issue Date, will be made only
upon receipt by the Trustee and the Company of a certification to the effect
that such transfer is being made in accordance with Regulation S. Transfers of
Certificated Notes held by institutional Accredited Investors to persons who
will hold beneficial interests in the Rule 144A Global Note or the Regulation S
Global Note will be subject to certifications provided by the Trustee.
Any beneficial interest in one of the Global Notes that is transferred to a
person who takes delivery in the form of an interest in the other Global Note
will, upon transfer, cease to be an interest in such Global Note and become an
interest in the other Global Note and, accordingly, will thereafter be subject
to all transfer restrictions, if any, and other procedures applicable to
beneficial interests in such other Global Note for as long as it remains such an
interest.
DTC has advised the Company that DTC will take any action permitted to be
taken by a holder of Notes (including the presentation of Notes for exchange as
described below) only at the direction of one or more Participants to whose
account the DTC interests in the Global Notes are credited and only in respect
of the aggregate principal amount as to which such Participant or Participants
has or have given such direction.
However, if there is an Event of Default under the Indenture, DTC will
exchange the Global Notes for Certificated Notes, which it will distribute to
its Participants and which, in the case of Certificated Notes, will be legended.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and facilitate the clearance and settlement of
securities transactions between Participants through electronic book-entry
changes in accounts of its Participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly.
Although DTC, Euroclear and Cedel are expected to follow the foregoing
procedures in order to facilitate transfers of interests in the Global Notes
among Participants of DTC, Euroclear and Cedel, as applicable, they are under no
obligation to perform such procedures, and such procedures may be discontinued
at any time. None of the Company, the Trustee, Registrar or the Paying Agent
will have any responsibility for the performance by DTC, Euroclear or Cedel or
their respective direct or indirect Participants of their respective obligations
under the rules and procedures governing their operations.
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Certificated Notes
Interests in Global Notes will be exchanged for Certificated Notes if (i)
DTC notifies the Company that it is unwilling or unable to continue as
depository for the Global Notes, or DTC ceases to be a "Clearing Agency"
registered under the Exchange Act, and a successor depository is not appointed
by the Company within 90 days, or (ii) an Event of Default has occurred and is
continuing with respect to the Notes. Upon the occurrence of any of the events
described in the preceding sentence, the Company will cause the appropriate
Certificated Notes to be delivered.
GOVERNING LAW
The Indenture and the Exchange 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 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 $10 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 May 28,
1997, 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
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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 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 Bank, N.A.;
provided that Union Planters Bank, N.A. 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
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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 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 Technologies Inc. (formerly known as 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,
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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 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
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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 Notes Indentures" means the Indentures related to the Existing
Senior Notes and the Existing Senior Subordinated Notes.
"Existing Notes" means the Existing Senior Notes and the Existing Senior
Subordinated Notes.
"Existing Senior Notes" means the 10 1/4% Senior Notes due 2001 of the
Company.
"Existing Senior Subordinated Notes" means the 9 1/4% Senior Subordinated
Notes due 2008 and 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.
"Fenholloway River" means the river in Florida into which the Company's
Foley Plant discharges treated waste water.
"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 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 Exchange 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
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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 Exchange 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 Exchange Notes and the performance of all other obligations
to the Trustee and the holders under the Indenture and the Exchange 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.
"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 Exchange Notes, the date on
which the principal of the Exchange 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
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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 Exchange 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) $225 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 Exchange 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 Exchange 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 Exchange 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
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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 environmental expenditures related to the Fenholloway River, 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
$10 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 Exchange Notes at least
to the same extent as the Indebtedness being refinanced and (B) in the case
of Pari Passu Indebtedness or Subordinated Indebtedness, as the case may
be, such refinancing does not reduce the Average Life 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
$50 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 $5 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
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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; and (ix) in addition to Investments described in clauses (i)
through (viii) of this definition of "Permitted Investments," Investments valued
at Fair Market Value at the time made not to exceed $30 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 Exchange Notes are issued; provided that
(i) the security agreement or conditional sales or other title retention
contract pursuant to which the Lien on such assets is created (collectively a
"Purchase Money Security Agreement") shall be entered into within 90 days after
the purchase, acquisition or substantial completion of the construction of such
assets and shall at all times be confined solely to the assets so purchased,
acquired or constructed, any additions and accessions thereto and any proceeds
therefrom, (ii) at no time shall the aggregate principal amount of the
outstanding Indebtedness secured thereby be increased, except in connection with
the purchase of additions and accessions thereto and except in respect of fees
and other obligations in respect of such Indebtedness and (iii)(A) the aggregate
outstanding principal amount of Indebtedness secured thereby (determined on a
per asset basis in the case of any additions and accessions) shall not at the
time such Purchase Money Security Agreement is entered into exceed 100% of the
purchase price to the Company or its Subsidiaries of the assets subject thereto
or (B) the Indebtedness secured thereby shall be with 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.
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<PAGE> 77
"Senior Subordinated Notes due 2008" means the Company's 9 1/4% Senior
Subordinated Notes due 2008.
"Senior Subordinated Notes due 2005" means the Company's 8 1/2% Senior
Subordinated Notes due 2005.
"Senior Subordinated Note due 2008 Indenture" means the indenture dated
July 2, 1996 between the Company and Union Planters National Bank, as trustee,
relating to the Senior Subordinated Notes due 2008.
"Senior Subordinated Note due 2005 Indenture" means the indenture dated
November 25, 1995 between the Company and Union Planters National Bank, as
trustee, relating to the Senior Subordinated Notes due 2005.
"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 Exchange 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 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.
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<PAGE> 78
"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.
73
<PAGE> 79
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain U.S. federal income tax
considerations relevant to of the acquisition, ownership and disposition of the
Exchange Notes by initial beneficial owners of the Exchange Notes (other than
the Placement Agents). This discussion is based upon the Internal Revenue Code
of 1986, as amended (the "Code"), Treasury Regulations, Internal Revenue Service
("IRS") rulings and judicial decisions now in effect, all of which are subject
to change (possible with retroactive effect) or different interpretations. This
discussion does not purport to deal with all aspects of U.S. federal income
taxation that may be relevant to a particular investor's decision to purchase
the Exchange Notes and it is not intended to be wholly applicable to all
categories of investors, some of which, such as dealers in securities, banks,
insurance companies and tax-exempt organizations, may be subject to special
rules. In addition, this discussion is limited to persons that will hold the
Exchange Notes represented thereby as a "capital asset" within the meaning of
section 1221 of the Code.
U.S. HOLDERS
As used herein, a U.S. Holder means a holder of Exchange Notes who or which
is (i) an individual who is a citizen or resident of the United States for U.S.
federal income tax purposes, (ii) a corporation or other entity taxable as a
corporation created or organized under the laws of the United States or any
political subdivision thereof (including the States and the District of
Columbia), (iii) an estate whose income is includible in gross income for U.S.
federal income tax purposes regardless of its source, (iv) a trust, if a United
States court is able to exercise primary jurisdiction over the administration of
the trust and one or more United States persons have the authority to control
all substantial decisions of the trust or (v) a person whose worldwide income or
gain is otherwise subject to U.S. federal income taxation on a net income basis.
INTEREST INCOME
Interest on the Exchange Notes will be includable in the income of a U.S.
Holder under such holder's regular method of accounting for U.S. federal income
tax purposes. The Exchange Notes will not be treated as having been issued with
original issue discount.
SALE, EXCHANGE OR RETIREMENT OF THE EXCHANGE NOTES
A U.S. Holder of Exchange Notes generally will recognize gain or loss upon
the sale, exchange, repurchase, redemption, retirement or other disposition of
those Exchange Notes measured by the difference (if any) between (i) the amount
of cash and the fair market value of any property received (except to the extent
that such cash or other property is attributable to the payment of accrued
interest not previously included in income, which amount will be taxable as
ordinary income) and (ii) the holder's adjusted tax basis in those Exchange
Notes. Any such gain or loss recognized on the sale, exchange, repurchase,
redemption, retirement or other disposition of a Exchange Note will be capital
gain or loss, and will be long-term capital gain or loss if the Exchange Note
had been held for more than one year at the time of the sale, exchange,
repurchase, redemption, retirement or other disposition. If the Exchange Notes
had been held by a noncorporate holder for more than 12 months but not more than
18 months, such capital gains generally shall be subject to tax at a maximum 28%
rate. If the Exchange Notes had been held for more than 18 months, however, such
capital gain generally will be subject to tax at a maximum 20% rate. The ability
to use capital losses to offset ordinary income in determining taxable income is
generally limited. A holder's initial tax basis in an Exchange Note will be the
cash price it paid therefor.
BACKUP WITHHOLDING
A U.S. Holder of Exchange Notes may be subject to "backup withholding" at a
rate of 31% with respect to certain "reportable payments," including interest
payments and, under certain circumstances, principal payments on the Exchange
Notes. These backup withholding rules apply if the holder, among other things,
(i) fails to furnish a social security number or other taxpayer identification
number ("TIN") certified under penalties of perjury within a reasonable time
after the request therefor, (ii) furnishes an incorrect TIN,
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<PAGE> 80
(iii) fails properly to report interest, or (iv) under certain circumstances,
fails to provide a certified statement, signed under penalties of perjury, that
the TIN furnished is the correct number and that such holder is not subject to
backup withholding. A U.S. Holder who does not provide the Issuer with its
correct TIN also may be subject to penalties imposed by the IRS. Any amount
withheld from a payment to a holder under the backup withholding rules is
creditable against the holder's U.S. federal income tax liability, provided that
the required information is furnished to the IRS. Backup withholding will not
apply, however, with respect to payments made to certain holders, including
corporations, tax-exempt organizations and certain foreign persons ("exempt
recipients"), provided their exemptions from backup withholding are properly
established.
The amount of any "reportable payments" including interest made to the
holders of Exchange Notes (other than to holders which are exempt recipients)
and the amount of tax withheld, if any, with respect to such payments will be
reported to such holders and to the IRS for each calendar year.
FOREIGN HOLDERS
As used herein, the term "Foreign Person" means a nonresident alien
individual or foreign corporation, but only if the income or gain on the
Exchange Note is not "effectively connected with the conduct of a trade or
business within the U.S." If the income or gain on the Exchange Note is
"effectively connected with the conduct of a trade or business within the U.S.,"
then the nonresident alien individual or foreign corporation will be subject to
tax on such income or gain in essentially the manner as a U.S. citizen or
resident or a domestic corporation, as discussed above, and in the case of a
foreign corporation, may also be subject to the branch profits tax.
Under the portfolio interest exception to the general rules for the
withholding of tax on interest paid to a Foreign Person, a Foreign Person will
not be subject to U.S. federal income tax (or to withholding) on interest
payments on a Note, provided that (i) the Foreign Person does not actually or
constructively own 10% or more of the total combined voting power of all classes
of stock of the Company entitled to vote and is not a controlled foreign
corporation with respect to the U.S. that is related to the Company through
stock ownership and (ii) the Company, its paying agent or the person who would
otherwise be required to withhold tax received either (A) a statement (an
"Owner's Statement") signed under penalties of perjury by the beneficial owner
of the Exchange Note in which the owner certifies that the owner is not a U.S.
person, or in the case of an individual, that he is neither a citizen nor a
resident of the United States, and which provides the owner's name and address,
or (B) a statement signed under penalties of perjury by the Financial
Institution holding the Exchange Note on behalf of the beneficial owner,
together with a copy of the Owner's Statement. The term "Financial Institution"
means a securities clearing organization, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or business
and that holds an Exchange Note on behalf of the owner of the Exchange Note. A
Foreign Person who does not qualify for the "portfolio interest" exception,
would, under current law, generally be subject to U.S. federal withholding tax
at a flat rate of 30% (or lower applicable treaty rate) on interest payments
unless the beneficial owner of the Exchange Note provides the Company or its
paying agent, as the case may be, with a properly executed (1) IRS Form 1001 (or
successor form) claiming an exemption from withholding under the benefit of a
tax treaty or (2) IRS Form 4224 (or successor form) stating that interest paid
on the Exchange Note is not subject to withholding tax because it is effectively
connected with the beneficial owner's conduct of a trade or business in the
United States. Under recently finalized Treasury regulations, Foreign Persons
will generally be required to provide IRS Form W-8 in lieu of the IRS Form 1001
and IRS Form 4224, although alternative documentation may be applicable in
certain situations.
In general, gain recognized by a Foreign Person upon the redemption, sale
or exchange of an Exchange Note will not be subject to U.S. federal income tax.
However, a Foreign Person may be subject to U.S. federal income tax at a flat
rate of 30% (unless exempt by an applicable treaty) on any such gain if the
Foreign Person is an individual present in the U.S. for 183 days or more during
the taxable year in which the Exchange Note is redeemed, sold or exchanged, and
certain other requirements are met.
No information reporting or backup withholding tax (which is a withholding
tax imposed at the rate of 31% on certain payments to persons who fail to
furnish the information required under United States
75
<PAGE> 81
information reporting requirements) will be required with respect to payments
made by the Company or any paying agent to Foreign Persons if a statement
described in the above discussion of the portfolio interest exception has been
received and the payor does not have actual knowledge that the beneficial owner
is a United States person.
In addition, backup withholding and information reporting generally will
not apply if payments of the principal or interest on an Exchange Note are paid
or collected by a foreign office of a custodian, nominee or other foreign agent
on behalf of the beneficial owner of such Exchange Note, or if a foreign office
of a broker (as defined in applicable Treasury regulations) pays the proceeds of
the sale of a Note to the owner thereof. If, however, such nominee, custodian,
agent or broker is, for U.S. federal income tax purposes, a United States
person, a controlled foreign corporation or a foreign person that derives 50% or
more of its gross income for certain periods from the conduct of a trade or
business in the United States, or, for taxable years beginning after December
31, 1999, a foreign partnership, in which one or more United States persons, in
the aggregate, own more than 50% of the income or capital interests in the
partnership or which is engaged in a trade or business in the United States,
such payments will not be subject to backup withholding but will be subject to
information reporting, unless (1) such custodian, nominee, agent or broker has
documentary evidence in its records that the beneficial owner is not a United
States person and certain other conditions are met or (2) the beneficial owner
otherwise establishes an exemption.
Payments of principal or interest, on an Exchange Note paid to the
beneficial owner of an Exchange Note by a United States office of a custodian,
nominee or agent, or the payment by the United States office of a broker of the
proceeds of a sale of an Exchange Note will be subject to both backup
withholding and information reporting unless the beneficial owner provides the
statement referred to in (a)(iii) above and the payor does not have actual
knowledge that the beneficial owner is a United States person or otherwise
establishes an exemption.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against such holder's U.S. federal income tax liability
provided the required information is furnished to the IRS.
EXCHANGE OFFER
The exchange of the Exchange Notes for the Old Notes pursuant to the
Exchange Offer will not be treated as an "exchange" for U.S. federal income tax
purposes because the Exchange Notes will not be considered to differ materially
in kind or extent from the Old Notes. Rather, the Exchange Notes received by a
holder will be treated as a continuation of the Old Notes in the hands of such
holder. As a result, there will be no U.S. federal income tax consequences to
holders exchanging the Old Notes for the Exchange Notes pursuant to the Exchange
Offer and any such holder will have the same adjusted tax basis and holding
period in the Exchange Notes as it had in the Old Notes immediately before the
exchange. The holder must continue to include stated interest in income as if
the exchange had not occurred. Similarly, there would be no U.S. federal income
tax consequences to a holder of Old Notes that does not participate in the
Exchange Offer.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Old Notes where such Old Notes were acquired as a result of
market-making activities or other trading activities.
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive
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<PAGE> 82
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such Exchange Notes. Any broker-dealer
that resells Exchange Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Notes may be deemed to be an "underwriter" within
the meaning of the Securities Act, and any profit on any such resale of Exchange
Notes and any commissions or concessions received by such persons may be deemed
to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
The Company will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Company has agreed to pay all
expenses incident to the Exchange Offer (including the expenses of one counsel
for the holders of the Notes) other than commissions or concessions of any
brokers or dealers and will indemnify holders of the Old Notes (including any
broker-dealers) against certain liabilities, including certain liabilities under
the Securities Act.
LEGAL MATTERS
Certain legal matters relating to the Exchange Offer will be passed upon
for the Company by Baker, Donelson, Bearman & Caldwell, Memphis, Tennessee.
EXPERTS
The consolidated financial statements and related schedules of Buckeye
Technologies Inc. as of June 30, 1996 and 1997, and for the years ended June 30,
1995, 1996 and 1997 included in this Prospectus have been audited by Ernst &
Young LLP, independent auditors, as set forth in their reports thereon appearing
elsewhere herein and are included in reliance upon such report given on their
authority as experts in accounting and auditing.
The consolidated financial statements of Merfin International Inc. as of
December 31, 1995 and 1996 and for the years ended December 31, 1994, 1995 and
1996 included in this Prospectus have been audited by PriceWaterhouseCoopers,
independent auditors, as set forth in their report thereon appearing elsewhere
herein and are included in reliance upon such report given on their authority as
experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Commission a registration statement on Form
S-4 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act with respect to the Exchange
Notes offered hereby. This Prospectus, which forms a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to the Company and the Exchange Notes offered
hereby, reference is made to the Registration Statement. Any statements made in
this Prospectus concerning the provisions of certain documents are not
necessarily complete and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission. Copies of the Registration Statement and the exhibits
thereto may be inspected, without charge, at the offices of the Commission at
the address set forth below.
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 Room 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
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Trade Center, New York, New York 10048; and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Information on the operation
of the Public Reference Room of the Commission may be obtained by calling the
Commission at 1-800-SEC-0330. The Commission also maintains a Web site
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding the Company. In addition, 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.
INCORPORATION OF DOCUMENTS BY REFERENCE
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the Exchange Offer hereunder shall be
deemed to be incorporated by reference herein and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein, or in any other subsequently filed documents 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.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST AS
PROVIDED BELOW. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST
SHOULD BE MADE BY , 1998, FIVE BUSINESS DAYS PRIOR TO THE
EXPIRATION DATE.
The Company will provide without charge to each person to whom this
Prospectus is delivered upon written or oral request, a copy of any or all of
documents that may be incorporated by reference into this Prospectus (other than
exhibits to such documents which are not specifically incorporated by reference
into such documents). Requests for such documents should be directed to Ms.
Sheila Jordan Cunningham, Vice President and General Counsel, Buckeye
Technologies Inc., 1001 Tillman Street, Memphis, Tennessee 38112, telephone
number, (901) 320-8100.
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BUCKEYE TECHNOLOGIES INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
BUCKEYE TECHNOLOGIES INC.
Report of Independent Auditors............................ F-2
Consolidated Statements of Income -- For the years ended
June 30, 1995, 1996 and 1997........................... F-3
Consolidated Balance Sheets -- June 30, 1996 and 1997..... F-4
Consolidated Statements of Stockholders' Equity -- For the
years ended June 30, 1995, 1996 and 1997............... F-5
Consolidated Statements of Cash Flows -- For the years
ended June 30, 1995, 1996 and 1997..................... F-6
Notes to Consolidated Financial Statements................ F-7
Unaudited Condensed Consolidated Statements of
Income -- For the nine months ended March 31, 1997 and
1998................................................... F-22
Unaudited Condensed Consolidated Balance Sheets -- June
30, 1997 and March 31, 1998............................ F-23
Unaudited Condensed Consolidated Statements of Cash
Flows -- For the nine months ended March 31, 1997 and
1998................................................... F-24
Notes to Condensed Consolidated Financial Statements...... F-25
MERFIN INTERNATIONAL INC.
Auditors' Report.......................................... F-28
Consolidated Statements of Income and Retained
Earnings -- For the years ended December 31, 1994, 1995
and 1996............................................... F-29
Consolidated Balance Sheets -- December 31, 1995 and
1996................................................... F-30
Consolidated Statements of Changes in Financial
Position -- For the years ended December 31, 1994, 1995
and 1996............................................... F-31
Notes to Consolidated Financial Statements................ F-32
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
INCOME -- FOR THE YEAR ENDED JUNE 30, 1997................ F-44
</TABLE>
F-1
<PAGE> 85
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of Buckeye Technologies Inc.
We have audited the accompanying consolidated balance sheets of Buckeye
Technologies Inc. (formerly Buckeye Cellulose Corporation) as of June 30, 1996
and 1997 and the related consolidated statements of income, stockholders'
equity, and cash flows for each of the three years in the period ended June 30,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Buckeye
Technologies Inc. at June 30, 1996 and 1997, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
June 30, 1997 in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Memphis, Tennessee
August 7, 1997, except for Note 17, as to
which the date is February 17, 1998
F-2
<PAGE> 86
BUCKEYE TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Net sales................................................... $408,587 $470,979 $558,933
Cost of goods sold.......................................... 305,150 335,377 411,751
-------- -------- --------
Gross margin................................................ 103,437 135,602 147,182
Selling, research and administrative expenses............... 24,265 27,035 37,790
-------- -------- --------
Operating income............................................ 79,172 108,567 109,392
Other income (expense):
Interest income............................................. 1,138 1,060 765
Interest expense and amortization of debt costs............. (22,290) (18,061) (28,691)
Other....................................................... (615) (451) (1,213)
Minority interest........................................... (23,223) (16,628) --
Secondary offering costs.................................... -- (1,945) --
-------- -------- --------
(44,990) (36,025) (29,139)
-------- -------- --------
Income before income taxes and extraordinary loss........... 34,182 72,542 80,253
Income taxes................................................ 12,470 25,532 26,979
-------- -------- --------
Income before extraordinary loss............................ 21,712 47,010 53,274
Extraordinary loss, net of tax benefit...................... -- (3,949) --
-------- -------- --------
Net income................................................ $ 21,712 $ 43,061 $ 53,274
======== ======== ========
Earnings per share:
Income before extraordinary loss.......................... $ 1.11 $ 1.40
Extraordinary loss, net of tax benefit.................... (0.09) --
-------- --------
Net income................................................ $ 1.02 $ 1.40
======== ========
Earnings per share -- assuming dilution:
Income before extraordinary loss.......................... $ 1.10 $ 1.38
Extraordinary loss, net of tax benefit.................... (.09) --
-------- --------
Net income................................................ $ 1.01 $ 1.38
======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 87
BUCKEYE TECHNOLOGIES INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30,
-------------------
1996 1997
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ -- $ 5,164
Short-term investments.................................... 2,900 2,900
Accounts receivable -- trade, net of allowance for
doubtful accounts of $980 and $1,322 at June 30, 1996
and 1997, respectively................................. 65,423 76,527
Accounts receivable -- other.............................. 1,382 3,176
Inventories............................................... 101,028 107,390
Deferred income taxes..................................... 3,225 3,479
Prepaid expenses and other................................ 5,414 2,487
-------- --------
Total current assets.............................. 179,372 201,123
Property, plant and equipment, net.......................... 257,598 382,677
Goodwill.................................................... 6,624 140,845
Deferred debt costs and other............................... 9,205 12,819
-------- --------
Total assets...................................... $452,799 $737,464
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable.................................... $ 23,226 $ 29,761
Accrued expenses.......................................... 36,561 49,830
Notes payable............................................. 1,620 3,440
-------- --------
Total current liabilities......................... 61,407 83,031
Long-term debt.............................................. 217,873 474,631
Accrued postretirement benefits............................. 13,487 14,208
Deferred income taxes....................................... 14,976 29,846
Other liabilities........................................... 4,168 7,558
Commitments and contingencies (Notes 6, 13, and 14).........
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 5,000,000 shares
authorized; none issued or outstanding................. -- --
Common stock, $.01 par value; 50,000,000 shares
authorized; 42,814,446 and 43,142,770 shares issued and
42,814,446 and 37,449,196 shares outstanding at June
30, 1996 and 1997, respectively........................ 428 431
Additional paid-in capital................................ 61,071 65,928
Deferred stock compensation............................... (2,373) (2,200)
Cumulative translation adjustment......................... (683) (4,673)
Retained earnings......................................... 82,445 135,719
Treasury shares, 5,693,574 shares......................... -- (67,015)
-------- --------
Total stockholders' equity........................ 140,888 128,190
-------- --------
Total liabilities and stockholders' equity........ $452,799 $737,464
======== ========
</TABLE>
See accompanying notes.
F-4
<PAGE> 88
BUCKEYE TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ADDITIONAL DEFERRED CUMULATIVE
COMMON PAID-IN STOCK TRANSLATION RETAINED TREASURY
STOCK CAPITAL COMPENSATION ADJUSTMENT EARNINGS SHARES TOTAL
------ ---------- ------------ ----------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JULY 1, 1994........ $389 $44,767 $ -- $ -- $ 17,672 $ -- $ 62,828
Issuance of 534,452 shares of
common stock................. 5 76 -- -- -- -- 81
Net income..................... -- -- -- -- 21,712 -- 21,712
---- ------- ------- ------- -------- -------- --------
BALANCE AT JUNE 30, 1995....... 394 44,843 -- -- 39,384 -- 84,621
Issuance of 3,451,530 shares of
common stock................. 34 13,115 -- -- -- -- 13,149
Compensation charge for stock
options...................... -- 635 -- -- -- -- 635
Deferred stock compensation.... 2,478 (2,478) -- -- -- --
Amortization of deferred stock
compensation................. -- -- 105 -- -- -- 105
Translation adjustment......... -- -- -- (683) -- -- (683)
Net Income..................... -- -- -- -- 43,061 -- 43,061
---- ------- ------- ------- -------- -------- --------
BALANCE AT JUNE 30, 1996....... 428 61,071 (2,373) (683) 82,445 -- 140,888
Purchase of 5,698,774 shares... -- -- -- -- -- (67,063) (67,063)
Issuance of 333,524 shares of
common stock................. 3 4,248 -- -- -- 48 4,299
Deferred stock compensation.... -- 609 (609) -- -- -- --
Amortization of deferred stock
compensation................. -- -- 782 -- -- -- 782
Translation adjustment......... -- -- -- (3,990) -- -- (3,990)
Net income..................... -- -- -- -- 53,274 -- 53,274
---- ------- ------- ------- -------- -------- --------
BALANCE AT JUNE 30, 1997....... $431 $65,928 $(2,200) $(4,673) $135,719 $(67,015) $128,190
==== ======= ======= ======= ======== ======== ========
</TABLE>
See accompanying notes.
F-5
<PAGE> 89
BUCKEYE TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
--------------------------------
1995 1996 1997
-------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 21,712 $ 43,061 $ 53,274
Adjustments to reconcile net income to net cash provided by
operating activities:
Extraordinary loss, net of tax benefit.................... -- 3,949 --
Minority interest......................................... 23,223 16,628 --
Depreciation.............................................. 23,784 25,212 30,287
Amortization.............................................. 2,113 1,481 5,800
Deferred income taxes..................................... 4,179 8,797 8,769
Other..................................................... 1,915 1,523 4,198
Changes in operating assets and liabilities:
Accounts receivable.................................... (4,709) (22,700) (4)
Inventories............................................ 3,099 (27,609) 10,347
Prepaid expenses and other assets...................... (1,124) (3,325) 3,998
Accounts payable and other current liabilities......... 3,595 13,043 736
-------- --------- ---------
Net cash provided by operating activities................... 77,787 60,060 117,405
INVESTING ACTIVITIES
Acquisitions of businesses.................................. -- (89,192) (172,670)
Purchases of property, plant and equipment.................. (24,922) (34,807) (42,757)
Purchases of short-term investments......................... (13,616) (2,920) --
Proceeds from sale of short-term investments................ 14,685 9,726 --
Other....................................................... (1,074) (954) (440)
-------- --------- ---------
Net cash used in investing activities....................... (24,927) (118,147) (215,867)
FINANCING ACTIVITIES
Proceeds from sale of equity interests...................... 81 13,149 48
Purchase of treasury shares................................. -- -- (67,063)
Net borrowings under revolving line of credit............... 2,500 54,620 110,612
Proceeds from long-term debt................................ -- 149,439 99,449
Payments for debt issuance costs............................ -- (5,506) (4,677)
Minority interest distribution.............................. (4,598) (1,590) --
Principal payments on long-term debt and other.............. (46,155) (163,687) (34,992)
-------- --------- ---------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES......... (48,172) 46,425 103,377
EFFECT OF FOREIGN CURRENCY RATE FLUCTUATIONS ON CASH........ -- (127) 249
-------- --------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ 4,688 (11,789) 5,164
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.............. 7,101 11,789 --
-------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR.................... $ 11,789 $ -- $ 5,164
======== ========= =========
</TABLE>
See accompanying notes.
F-6
<PAGE> 90
BUCKEYE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
1. ACCOUNTING POLICIES
BUSINESS DESCRIPTION AND BASIS OF PRESENTATION
The financial statements for the year ended June 30, 1995 are combined
consolidated financial statements of Buckeye Technologies Inc. (formerly Buckeye
Cellulose Corporation (BCC)) and Buckeye Florida Corporation (BFC). The
financial statements as of and for the year ended June 30, 1996 and 1997 are
consolidated financial statements of Buckeye Technologies Inc. and its
subsidiaries (the Company). All significant intercompany accounts and
transactions have been eliminated in consolidation and combination.
Under an agreement dated March 16, 1993, Madison Dearborn Capital Partners,
L.P. (MDCP) and members of the Company's current management organized BCC and
BFC to acquire the assets comprising the cotton linter and wood pulp businesses
and certain assets of the headquarters of the Cellulose & Specialties Division
of The Procter & Gamble Cellulose Company (P&GCC). BFC served as the sole
general partner of and held a 50% interest in Buckeye Florida, Limited
Partnership (BFLP), which operated the wood pulp business located in Perry,
Florida (the Foley Plant). P&GCC retained a limited partnership interest in the
wood pulp business and granted BFC an option to purchase P&GCC's limited
partnership interest (the P&G Call Option). On November 28, 1995, shareholders
of BFC exchanged all of their outstanding common stock for common stock of BCC,
and BFC became a wholly-owned subsidiary of BCC. Concurrently, through the
exercise of the P&G Call Option, the Company and its subsidiaries redeemed
and/or acquired the limited partnership interest in BFLP for $62,078 in cash.
The Company manufactures and distributes a broad variety of wood and cotton
linter-based specialty cellulose products used in numerous applications
including disposable diapers, engine air and oil filters, food casings, rayon
textile filament, tapes, thickeners, and papers. With the purchase of Merfin
International Inc. on May 28, 1997, the Company now manufactures and distributes
air-laid nonwovens for use in personal hygiene, baby wipes, and industrial
products.
CASH AND CASH EQUIVALENTS
The Company considers cash equivalents to be temporary cash investments
with a maturity of three months or less when purchased.
SHORT-TERM INVESTMENTS
Short-term investments consist of a $2,900 certificate of deposit which the
Company has pledged as collateral to secure loans obtained by certain officers
of the Company.
INVENTORIES
Inventories are stated at the lower of cost (determined on the average cost
method or on a first-in, first-out basis) or market.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. The cost of major renewals
and improvements is capitalized. Depreciation is computed by the straight-line
method over the following estimated useful lives: buildings -- 30 to 40 years;
machinery and equipment -- 5 to 13 years.
INTANGIBLE ASSETS
Goodwill is amortized by the straight-line method over thirty to forty
years. The Company periodically reviews the value of its goodwill to determine
if an impairment has occurred. Potential impairment of recorded
F-7
<PAGE> 91
BUCKEYE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
goodwill is measured by the undiscounted value of expected future operating cash
flows in relation to its net capital investment in the subsidiary. Approximately
95% of the Company's goodwill is attributable to the Company's 1997 acquisitions
(see Note 2). Goodwill is net of accumulated amortization of $1,854 and $3,035
at June 30, 1996 and 1997, respectively. Deferred debt costs are amortized by
the interest method over the life of the related debt and are net of accumulated
amortization of $531 and $1,236 at June 30, 1996 and 1997, respectively.
Non-compete agreements, which are included in deferred debt costs and other on
the consolidated balance sheet, are amortized over the agreement term using the
straight-line method, and are net of accumulated amortization of $123 and $2,756
at June 30, 1996 and 1997, respectively.
INCOME TAXES
The Company has provided for income taxes under the liability method.
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. No provision is
made for U.S. income taxes applicable to undistributed earnings of foreign
subsidiaries that are indefinitely reinvested in foreign operations.
RISK MANAGEMENT
The Company selectively uses interest rate swap contracts and foreign
currency forward and option contracts to offset the effects of interest and
exchange rate risk. The differentials to be received or paid under interest rate
contracts are recognized in income over the life of the contracts as adjustments
to interest expense. Gains or losses on termination of interest rate contracts
are recognized as other income or expense when terminated in conjunction with
the retirement of associated debt. The foreign currency forward and option
contracts that are designated as effective hedges are deferred and included in
income as part of the underlying transactions.
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 are recognized when title to the goods passes to the customer. Net
sales is comprised of sales reduced by sales allowances and distribution costs.
FOREIGN CURRENCY TRANSLATION
Company management has determined that the local currency of its German,
Canadian and Irish subsidiaries is the functional currency, and accordingly
Deutsche mark, Canadian dollar, and Irish punt denominated balance sheet
accounts are translated into United States dollars at the rate of exchange in
effect at fiscal year end. Income and expense activity for the period is
translated at the weighted average exchange rate during the period. Translation
adjustments are included as a separate component of stockholders' equity.
F-8
<PAGE> 92
BUCKEYE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from the
estimates and assumptions used.
EARNINGS PER SHARE (SEE NOTE 17)
Earnings per share have been computed based on the weighted average number
of common shares outstanding during the period plus, when their effect is
dilutive, common stock equivalents, representing outstanding stock options.
Fully diluted earnings per share are not materially different from primary
earnings per share, and accordingly are not presented.
Earnings per share have not been presented for years prior to June 30,
1996, as they are not considered relevant.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings Per Share, which is required to be adopted in the quarter
ending December 31, 1997. At that time, the Company will be required to change
the method currently used to compute earnings per share and to restate all prior
periods. Basic earnings per share presented under Statement 128 will be
equivalent to earnings per share as previously reported. Upon adoption of
Statement 128, the Company will report diluted earnings per share including the
effect of stock options, which for all periods presented was less than 3%
dilutive.
STOCK-BASED COMPENSATION
As allowed under the provisions of SFAS No. 123, Accounting for Stock-Based
Compensation, which the Company adopted in fiscal 1997, the Company applies the
provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees, and related interpretations to account for its stock option
plans.
RECLASSIFICATIONS
Certain amounts in the 1995 and 1996 financial statements have been
reclassified to conform with the 1997 financial statement presentation.
2. BUSINESS COMBINATIONS
The November 1995 acquisition of the P&GCC limited partnership interest 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,
and resulted in an increase to property, plant and equipment of $4,098 and a
reduction in goodwill of $9,951. The operations of BFLP are consolidated in the
accompanying financial statements and the limited partnership interest is
recorded as a minority interest prior to the date of acquisition/redemption.
F-9
<PAGE> 93
BUCKEYE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Effective May 1, 1996, Buckeye Cellulose GmbH, a wholly-owned subsidiary of
the Company, purchased the property, plant, equipment, and inventories of the
specialty cellulose business of Peter Temming AG (the Temming Business) in
Glueckstadt, Germany for $27,114 in cash plus assumed liabilities of $2,994. The
acquisition was accounted for 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.
TEMMING PURCHASE PRICE ALLOCATION
<TABLE>
<S> <C>
Inventory................................................... $11,721
Property, plant and equipment............................... 16,870
Non-compete agreement....................................... 1,517
-------
$30,108
=======
</TABLE>
On September 1, 1996, the Company acquired all of the issued and
outstanding stock of Alpha Cellulose Holdings, Inc. (Alpha) for $25,921 in cash,
328,324 shares of Company common stock valued at $4,244 and the assumption of
long-term debt of $34,276. Alpha is located in Lumberton, North Carolina and its
primary business is the manufacture of specialty cellulose. The acquisition was
accounted for 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. The excess of the purchase price over the fair value
of the net assets has been recorded as goodwill, and is being amortized on a
straight line basis over 30 years.
ALPHA PURCHASE PRICE ALLOCATION
<TABLE>
<S> <C>
Working capital, net of cash................................ $13,950
Property, plant and equipment............................... 27,538
Other assets................................................ 390
Non-compete agreement....................................... 4,000
Goodwill.................................................... 25,021
Other liabilities........................................... (6,458)
-------
$64,441
=======
</TABLE>
On May 28, 1997, the Company's wholly-owned subsidiary, Buckeye Acquisition
Inc. (BAI), acquired 97.5% of the common shares of Merfin International Inc.
(Merfin) for $146,749 in cash. On July 30, 1997, BAI acquired the remaining
outstanding common shares of Merfin for $3,869 in cash. The total purchase price
includes $150,618 in cash and the assumption of debt of $49,323. Merfin is one
of the leading manufacturers of air-laid nonwovens which are used as ultra thin
absorbent cores in feminine hygiene and adult incontinence products, with
facilities located in Canada, Ireland, and the United States. The acquisition
was accounted for 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. The excess of the purchase price over the fair value
of the net assets has been recorded as goodwill, and is being amortized on a
straight-line method over 40 years.
MERFIN PURCHASE PRICE ALLOCATION
<TABLE>
<S> <C>
Working capital, net of cash................................ $ 3,012
Property, plant and equipment............................... 89,025
Goodwill.................................................... 110,991
Other liabilities........................................... (3,087)
--------
$199,941
========
</TABLE>
F-10
<PAGE> 94
BUCKEYE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The consolidated operating results of the Temming Business, Alpha, and
Merfin have been included in the consolidated statements of income from the
respective date of acquisition. The following unaudited pro forma results of
operations assume that the acquisition of P&GCC's limited partnership interest
in BFLP, the acquisitions of the Temming Business, Alpha, and Merfin, the
Company Stock Repurchase (see Note 7), and related financing transactions
occurred at the beginning of the periods presented.
PRO FORMA RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
1996 1997
-------- --------
<S> <C> <C>
Net sales................................................... $630,456 $618,686
Income before extraordinary loss............................ 47,522 41,255
Net income.................................................. 43,553 41,255
Earnings per common share -- basic:
Income before extraordinary loss.......................... $ 1.25 $ 1.08
Net income................................................ 1.15 1.08
Earnings per common share -- assuming dilution:
Income before extraordinary loss.......................... $ 1.24 $ 1.06
Net income................................................ 1.13 1.06
</TABLE>
The pro forma financial information is presented for information purposes
only and is not necessarily indicative of the operating results that would have
occurred had the business combinations and related transactions been consummated
as of the above dates, nor is it necessarily indicative of future operating
results. The pro forma results of operations for the year ended June 30, 1997
include certain non-recurring charges, including acquisition related costs
incurred by Alpha and Merfin prior to the date of acquisition. These charges
reduced pro forma net income and net income per share -- assuming dilution by
$4,360 and $.11, respectively, for the year ended June 30, 1997.
3. INVENTORIES
COMPONENTS OF INVENTORIES
<TABLE>
<CAPTION>
JUNE 30,
-------------------
1996 1997
-------- --------
<S> <C> <C>
Raw materials............................................... $ 20,340 $ 25,409
Finished goods.............................................. 65,276 63,932
Storeroom and other supplies................................ 15,412 18,049
-------- --------
$101,028 $107,390
======== ========
</TABLE>
F-11
<PAGE> 95
BUCKEYE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY, PLANT AND EQUIPMENT
COMPONENTS OF PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
JUNE 30,
-------------------
1996 1997
-------- --------
<S> <C> <C>
Land and land improvements.................................. $ 5,415 $ 7,270
Buildings................................................... 42,301 49,727
Machinery and equipment..................................... 252,824 348,834
Construction in progress.................................... 14,341 63,798
-------- --------
314,881 469,629
Accumulated depreciation.................................... (57,283) (86,952)
-------- --------
$257,598 $382,677
======== ========
</TABLE>
5. ACCRUED EXPENSES
COMPONENTS OF ACCRUED EXPENSES
<TABLE>
<CAPTION>
JUNE 30,
-----------------
1996 1997
------- -------
<S> <C> <C>
Retirement plans............................................ $11,212 $12,042
Vacation Pay................................................ 3,287 3,998
Maintenance accrual......................................... 9,482 6,901
Sales program accrual....................................... 3,268 5,728
Interest.................................................... 1,117 5,171
Employee compensation....................................... 2,085 3,076
Other....................................................... 6,110 12,914
------- -------
$36,561 $49,830
======= =======
</TABLE>
6. DEBT
COMPONENTS OF LONG-TERM DEBT
<TABLE>
<CAPTION>
JUNE 30,
-------------------
1996 1997
-------- --------
<S> <C> <C>
Senior Subordinated Notes due 2005.......................... $149,460 $149,499
Senior Subordinated Notes due 2008.......................... -- 99,475
Senior Notes due 2001....................................... 6,913 6,913
Credit Facility............................................. 61,500 170,000
Canadian Bank Loans......................................... -- 24,969
European Bank and Other Loans............................... -- 22,552
Other....................................................... -- 1,223
-------- --------
$217,873 $474,631
======== ========
</TABLE>
The Company completed a public offering of $150,000 principal amount of
8 1/2% Senior Subordinated Notes due December 15, 2005 (the Senior Subordinated
Notes) during November 1995. The Senior Subordinated Notes are unsecured senior
subordinated obligations and are subordinated in right of payment to the prior
payment in full of all senior indebtedness, including the indebtedness under the
Credit Facility and the outstanding Senior Notes due 2001. A portion of the
proceeds from the Senior Subordinated Notes were used to retire $45,594 of the
Senior Notes, resulting in an extraordinary loss of $3,228, net of tax benefit.
F-12
<PAGE> 96
BUCKEYE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Senior Subordinated Notes are redeemable at the option of the Company,
in whole or in part, at any time on or after December 15, 2000, at redemption
prices varying from 104.25% of principal amount to 100.00% of principal amount
on or after December 15, 2003, in each case together with accrued and unpaid
interest to the date of redemption.
The Company completed a public offering of $100,000 principal amount of
9 1/4% Senior Subordinated Notes due September 15, 2008 (the Subordinated Notes)
on July 2, 1996. The Subordinated Notes are unsecured senior subordinated
obligations and are subordinated in right of payment to the prior payment in
full of all senior indebtedness, including the indebtedness under the Credit
Facility, the outstanding Senior Notes and the Senior Subordinated Notes.
The Subordinated Notes are redeemable at the option of the Company, in
whole or in part, at any time on or after September 15, 2001, at redemption
prices varying from 104.625% of principal amount to 100.00% of principal amount
on or after September 15, 2004, in each case together with accrued and unpaid
interest to the date of redemption.
The Company entered into a new credit facility (the Credit Facility) on May
28, 1997, providing for borrowings up to $275,000. The Credit Facility matures
May 28, 2002, and on May 28, 2001, borrowing availability reduces to $200,000.
The interest rate applicable to borrowings under the Credit Facility is the
agent's prime rate or a LIBOR based rate ranging from LIBOR plus 0.450% to
1.125%. Borrowings at June 30, 1997 were at an average rate of 6.48%. Letters of
credit issued through the Credit Facility aggregating $1,332 are outstanding at
June 30, 1997. The amount available for borrowing under the Credit Facility,
assuming the refinancing of existing Canadian and European Bank and Other Loans
of $47,521, is $56,147 at June 30, 1997.
The 10 1/4% Senior Notes due May 15, 2001 (the Senior Notes) are unsecured
obligations and are equal (pari passu) in the right of payment with all existing
and future indebtedness of the Company which is not subordinated indebtedness.
During the year ended June 30, 1996, the Company purchased and retired $57,807
of its Senior Notes.
The Senior Notes are redeemable at the option of the Company, in whole or
in part, at any time on or after May 15, 1998, at redemption prices varying from
103.875% of principal amount to 100.00% of principal amount on or after May 15,
2000, in each case together with accrued and unpaid interest to the date of
redemption.
On May 28, 1997, the Company assumed the debt of Merfin including Canadian
Bank Loans and European Bank and Other Loans. The European Bank and Other Loans
were valued at fair market value at the date of acquisition and retired on
August 1, 1997 at no additional cost using borrowings under the Credit Facility.
The first Canadian bank loan has outstanding principal of $15,570 and bears
interest at the bank's prime lending rate plus 3/4% per year on the unfixed
portion of the outstanding balance. Of this amount, $9,135 and $5,800 have been
fixed through interest rate swaps at 8% and 6.22%, respectively. The second
Canadian bank loan has outstanding principal of $7,286, with interest fixed at a
rate of 8.3% through an interest rate swap. The third Canadian bank loan has
outstanding principal of $1,696 with interest fixed at a rate of 6% through an
interest rate swap. Included in Canadian Bank Loans is the fair market value of
interest rate swap agreements aggregating $417.
At June 30, 1997, the Company classified $24,969 under the Canadian Bank
Loans, due within one year, as long-term debt. The Company has both the intent
and the ability, through its existing Credit Facility, to refinance these
amounts on a long-term basis.
Aggregate maturities of long-term debt assuming the Canadian Bank Loans are
refinanced under the Credit Facility are as follows: 1998 -- none; 1999 -- none;
2000 -- none; 2001 -- $25,657; 2002 -- $200,000; and $248,974 thereafter. Under
the terms of substantially all long-term debt agreements, the Company is
F-13
<PAGE> 97
BUCKEYE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
required to comply with certain covenants including minimum net worth, interest
coverage ratios, and limitations on restricted payments and levels of
indebtedness. At June 30, 1997, the amount available for the payment of
dividends or the acquisition of treasury stock was approximately $17,000 under
the most restrictive of these agreements.
The Company has a revolving credit line of approximately $7,750 with a
financial institution at a rate of interest of 4.8% at June 30, 1997. The
outstanding balance under this revolving line of credit was $3,440 at June 30,
1997 and is classified as notes payable in the consolidated balance sheet.
Letters of credit issued through the revolving line of credit of $1,647 are
outstanding at June 30, 1997. The revolving line of credit expires April 30,
1998.
Total interest paid by the Company for the years ended June 30, 1995, 1996,
and 1997 was $21,755, $17,460 and $24,311, respectively.
7. STOCKHOLDERS' EQUITY
Immediately prior to the Company's initial public offering of its Common
Stock, the previously outstanding Class A Common and Class B Common of BCC and
BFC were converted into shares of Common Stock of the Company. The aggregate
number of shares of Common Stock issued to the holders of Class A Common and
Class B Common, respectively, was determined based on the accreted liquidation
preference of the Class A Common at the time of conversion and the total equity
valuation of the Company. The Company also effected an approximate 9.2:1.0 stock
split. Share and per share amounts presented have been restated to reflect the
conversion and stock split, with an offsetting adjustment to additional paid-in
capital.
In November 1995, 16,445,000 shares of Common Stock were sold through an
initial public offering of the Company's Common Stock. Of the 16,445,000 shares,
14,950,000 were shares sold by a selling stockholder and the remaining 1,495,000
shares were issued and sold by the Company. Net proceeds to the Company were
$12,819, net of underwriting discounts and expenses associated with the
offering. The proceeds were used to retire $12,213 (principal amount) of Senior
Notes in January 1996, resulting in an extraordinary loss of $721, net of tax
benefit.
On July 2, 1996, BKI Investment Corporation, a newly formed, wholly-owned
subsidiary of the Company, purchased 4,519,774 shares of Common Stock from MDCP
for $11.06 per share (the Company Stock Repurchase) for an aggregate purchase
price of $50,000. Additionally, on July 2, 1996, MDCP sold to certain
individuals employed by the Company and their related trusts, in an exempt
transaction under the Securities Act of 1933, as amended, an aggregate of
2,770,538 shares of Common Stock for $11.06 per share (the Individuals' Stock
Purchase). The purchase price for the Company Stock Repurchase and the
Individuals' Stock Purchase reflected the prevailing market price when the
parties decided to pursue definitive agreements and sought board approval.
Concurrently with the completion of the Company Stock Repurchase and the
Individuals' Stock Purchase, MDCP sold 5,775,870 shares of Common Stock in a
public offering and the Company issued and sold $100,000 principal amount of
Senior Subordinated Notes, the net proceeds of which were used to fund the
Company Stock Repurchase and, together with borrowings under the Company's
credit facility, to acquire the stock of Alpha.
In addition to the Company Stock Repurchase, the Company acquired as
treasury stock 1,179,000 common shares under a 2,000,000 share buy-back program
authorized in August 1996. These treasury shares are being reserved for issuance
under existing stock option programs and for other purposes.
The Company's stock option plans provide for the granting of either
incentive or nonqualified stock options to employees and non-employee directors.
Options are subject to terms and conditions determined by
F-14
<PAGE> 98
BUCKEYE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the Compensation Committee of the Board of Directors, and generally are
exercisable in increments of 20% per year beginning one year from date of grant
and expire ten years from date of grant.
OPTION PLAN ACTIVITY
<TABLE>
<CAPTION>
AVERAGE AVERAGE
EXERCISE EXERCISE
OPTIONS PRICE
--------- --------
<S> <C> <C>
Outstanding at June 30, 1996................................ 2,140,000 $8.78
Granted..................................................... 150,000 9.46
Exercised................................................... (5,200) 9.25
--------- -----
Outstanding at June 30, 1997................................ 2,284,800 $8.83
========= =====
Exercisable at June 30, 1997................................ 524,034 $9.15
========= =====
</TABLE>
There were 2,760,000 and 2,610,000 shares reserved for grants of options at
June 30, 1996 and 1997, respectively. The following summary provides information
about stock options outstanding and exercisable at June 30, 1997:
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
----------------------------------------- ------------------------
AVERAGE
AVERAGE REMAINING AVERAGE
EXERCISE PRICE OPTIONS EXERCISE PRICE LIFE (YEARS) OPTIONS EXERCISE PRICE
- -------------- --------- -------------- ------------ ------- --------------
<S> <C> <C> <C> <C> <C>
$7-$11......................... 2,044,800 $ 8.37 8.5 446,034 $ 8.53
$12-$14........................ 240,000 12.72 9.0 78,000 12.66
--------- ------ --- ------- ------
Total................ 2,284,800 $ 8.83 8.6 524,034 $ 9.15
========= ====== === ======= ======
</TABLE>
In connection with the grant of certain stock options to employees in 1996
and 1997, the Company recorded deferred stock compensation of $2,478 and $609,
respectively, for the difference between the fair value at the date of grant and
the option price. Such amount is presented as a reduction of stockholders equity
and is amortized over the vesting period of the related stock options.
The Company has estimated the fair value of each option grant using the
Black-Scholes option pricing model. The fair value was estimated with the
following weighted average assumptions: expected life of the stock options of
eight years; volatility of the expected market price of common stock of .27; a
risk-free interest rate of 6%; and no dividends. Option pricing models, such as
the Black-Scholes model, require the input of highly subjective assumptions
including the expected stock price volatility which are subject to change from
time to time. Pro forma amounts for 1997 reflect total compensation expense from
the awards made in 1996 and 1997. Since compensation expense from stock options
is recognized over the future years' vesting period, and additional awards
generally are made each year, pro forma amounts for 1997 may not be
representative of future years' amounts. During 1997, 100,000 options were
granted with an exercise and market price of $7.60 and $13.69, respectively, and
an estimated grant-date fair value of $9.15. Additionally, 50,000 options were
granted in 1997, with an exercise and market price of $13.19, and an estimated
grant-date fair value of $6.18.
F-15
<PAGE> 99
BUCKEYE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following pro forma information has been prepared as if the Company had
accounted for its employee stock options using the fair value based method of
accounting established by SFAS No. 123:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
1996 1997
-------- --------
<S> <C> <C>
Net income:
As reported............................................... $43,061 $53,274
Pro forma................................................. 42,373 51,866
Earnings per share:
As reported............................................... $ 1.02 $ 1.40
Pro forma................................................. 1.00 1.36
Earnings per share -- assuming dilution:
As reported............................................... $ 1.01 $ 1.38
Pro forma................................................. 0.99 1.34
</TABLE>
8. INCOME TAXES
PROVISION FOR INCOME TAXES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Current:
Federal................................................... $ 7,256 $15,701 $17,472
State and other........................................... 1,035 1,034 738
------- ------- -------
8,291 16,735 18,210
Deferred:
Federal................................................... 3,652 8,414 8,242
State..................................................... 527 383 527
------- ------- -------
4,179 8,797 8,769
------- ------- -------
$12,470 $25,532 $26,979
======= ======= =======
</TABLE>
The provision for income taxes differs from the amount computed by applying
the statutory federal income tax rate of 35% to income before income taxes and
extraordinary loss due to the following:
RATE ANALYSIS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Expected tax expense...................................... $11,964 $25,390 $28,089
State taxes............................................... 693 857 850
Foreign sales corporation................................. -- (2,112) (3,030)
Nondeductible items....................................... -- 681 1,104
Other..................................................... (187) 716 (34)
------- ------- -------
$12,470 $25,532 $26,979
======= ======= =======
</TABLE>
F-16
<PAGE> 100
BUCKEYE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of the Company's deferred tax assets (liabilities)
are as follows:
DEFERRED TAX ASSETS (LIABILITIES)
<TABLE>
<CAPTION>
JUNE 30,
-------------------
1996 1997
-------- --------
<S> <C> <C>
Deferred tax liabilities:
Depreciation.............................................. $(24,807) $(39,339)
Other..................................................... (2,210) (4,167)
-------- --------
(27,017) (43,506)
Deferred tax assets:
Postretirement benefits................................... 4,786 5,113
Inventory costs........................................... 843 1,102
Alternative minimum tax credit............................ 1,902 --
Net operating losses...................................... 1,598 3,942
Nondeductible reserves.................................... 5,196 3,720
Other..................................................... 941 3,262
-------- --------
15,266 17,139
-------- --------
$(11,751) $(26,367)
======== ========
</TABLE>
The Company paid income taxes of $6,884, $16,832, and $16,965 during the
years ended June 30, 1995, 1996 and 1997, respectively.
The Company has a foreign net operating loss carryforward of approximately
$7,884 which has no expiration date.
The Company's extraordinary loss of $3,949 for the year ended June 30, 1996
is net of an income tax benefit of $2,383.
9. EMPLOYEE BENEFIT PLANS
The Company has a defined contribution retirement plan covering U.S.
employees. The Company contributes 1% of the employee's gross compensation plus
1/2% for each year of service up to a maximum of 11% of the employee's gross
compensation. The plan also provides for additional contributions by the Company
contingent upon the Company's results of operations. Contribution expense for
the retirement plan for the years ended June 30, 1995, 1996, and 1997 was
$7,125, $7,424, and $7,528, respectively.
Also, the Company provides medical, dental, and life insurance
postretirement plans covering U.S. employees who meet specified age and service
requirements. Certain employees who met specified age and service requirements
on March 15, 1993 are covered by the Procter & Gamble plans and are not covered
by these plans. The Company's current policy is to fund the cost of these
benefits as payments to participants are required. Expense for postretirement
benefits for the years ended June 30, 1995, 1996, and 1997 was $376, $536, and
$721, respectively.
F-17
<PAGE> 101
BUCKEYE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ACCRUED POSTRETIREMENT BENEFITS
<TABLE>
<CAPTION>
JUNE 30,
-----------------
1996 1997
------- -------
<S> <C> <C>
Accumulated postretirement benefits:
Eligible active plan participants......................... $ 146 $ 108
Retirees.................................................. 84 154
Other active plan participants............................ 8,022 9,226
------- -------
8,252 9,488
Unrecognized gain from plan amendments...................... 5,906 5,256
Unrecognized net loss....................................... (1,222) (1,066)
Other....................................................... 551 530
------- -------
$13,487 $14,208
======= =======
</TABLE>
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
9.0% for 1998 and is assumed to decrease gradually to 5.75% in 2005 and remain
level thereafter. Due to the benefit cost limitations in the plan, the health
care cost trend rate assumption does not have a significant effect on the
amounts reported.
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5% and 7.75% at June 30, 1996 and 1997,
respectively.
10. SIGNIFICANT CUSTOMER
The Company has entered into an agreement whereby Procter & Gamble will
purchase a specified tonnage of fluff pulp from the Company each 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. Net sales to Procter & Gamble for the years ended June 30,
1995, 1996, and 1997 were $157,901, $171,819, and $189,461, respectively.
11. GEOGRAPHIC REPORTING
GEOGRAPHIC SEGMENTS
The Company has manufacturing operations in the United States, Canada,
Germany, and Ireland. Net sales and identifiable assets by geographic area are
as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Net sales:
United States........................................ $408,587 $460,321 $501,124
Other................................................ -- 10,658 57,809
Identifiable assets:
United States........................................ $379,056 $413,022 $498,690
Other................................................ -- 39,777 238,774
</TABLE>
Operating data of foreign subsidiaries was not material during the
relatively short period since acquisition. Other identifiable assets for the
year ended June 30, 1997, includes $139,908 pertaining to operations in Canada.
F-18
<PAGE> 102
BUCKEYE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EXPORT SALES
Gross export sales by U.S. operations as a percent of consolidated total
gross sales are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30,
------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Europe...................................................... 30% 32% 32%
Asia........................................................ 26 23 18
Other....................................................... 14 14 10
-- -- --
70% 69% 60%
== == ==
</TABLE>
12. RESEARCH AND DEVELOPMENT EXPENSES
Research and development costs of $4,656, $5,365, and $8,423 were charged
to expense as incurred for the years ended June 30, 1995, 1996, and 1997,
respectively.
13. PURCHASE COMMITMENTS
At June 30, 1997, under four separate agreements expiring at various dates
through December 31, 2002, the Company is required to purchase certain timber
from specified tracts of land that is available for harvest. At the option of
the Company, certain of these timber purchase commitments may be extended
through December 31, 2010. The contract price under the 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, 1997, are as
follows:
TIMBER PURCHASE COMMITMENTS
<TABLE>
<CAPTION>
AMOUNTS
-------
<S> <C>
1998........................................................ $19,150
1999........................................................ 18,633
2000........................................................ 16,479
2001........................................................ 14,620
2002........................................................ 11,906
Thereafter.................................................. 5,531
-------
$86,319
=======
</TABLE>
Purchases under these agreements for the years ended June 30, 1995, 1996,
and 1997 were $21,819, $25,443, and $23,441, respectively.
14. CONTINGENCIES
The Company is subject to various environmental laws and regulations. The
Company has reached an agreement (the Fenholloway Agreement) with the Florida
Department of Environmental Regulation based upon the results of an
environmental study of the Company's operations. In order to comply with the
Fenholloway Agreement, the Company expects future capital expenditures of
approximately $40,000 through 2000 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.
F-19
<PAGE> 103
BUCKEYE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 operation.
15. 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 the Company's
long-term debt is based on an average of the bid and offer prices at year-end.
The carrying value and fair value of long-term debt at June 30, 1996 were
$217,873 and $209,924, respectively, and at June 30, 1997 were $474,631 and
$476,995, respectively.
16. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
YEAR ENDED JUNE 30, 1996
Net sales............................................. $108,566 $117,013 $113,246 $132,154
Gross margin.......................................... 33,495 33,801 34,380 33,926
Operating income...................................... 27,303 27,872 28,004 25,388
Income before extraordinary loss...................... 7,737 9,902 15,513 13,858
Net income............................................ 7,737 6,674 14,792 13,858
Earnings per share -- basic:
Income before extraordinary loss.................... $ 0.19 $ 0.24 $ 0.36 $ 0.32
Extraordinary loss.................................. -- (0.08) (0.01) --
-------- -------- -------- --------
Net income.......................................... $ 0.19 $ 0.16 $ 0.35 $ 0.32
======== ======== ======== ========
Earnings per share -- assuming dilution:
Income before extraordinary loss...................... $ 0.19 $ 0.23 $ 0.36 $ 0.32
Extraordinary loss.................................... -- (0.07) (0.02) --
-------- -------- -------- --------
Net income............................................ $ 0.19 $ 0.16 $ 0.34 $ 0.32
======== ======== ======== ========
YEAR ENDED JUNE 30, 1997
Net sales............................................. $126,514 $142,992 $139,499 $149,928
Gross margin.......................................... 32,318 35,914 36,414 42,536
Operating income...................................... 24,543 26,828 27,083 30,938
Net income............................................ 11,942 12,757 13,963 14,612
Earnings per share:
Basic................................................. $ 0.31 $ 0.33 $ 0.37 $ 0.39
Assuming dilution..................................... $ 0.31 $ 0.33 $ 0.36 $ 0.38
</TABLE>
F-20
<PAGE> 104
BUCKEYE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
17. SUBSEQUENT EVENTS
During the second quarter of the 1998 fiscal year, the Company adopted the
Financial Accounting Standards Board's Statement of Financial Accounting
Standards (SFAS) No. 128, Earnings per Share. SFAS No. 128 specifies the
computation, presentation and disclosure requirements for earnings per share
(EPS). On January 21, 1998, the Board of Directors of the Company declared a
two-for-one stock split for stockholders of record as of February 10, 1998. The
stock split was paid on February 17, 1998 in the form of a stock dividend of one
share of common stock for each issued share of common stock. All share data and
related amounts have been restated to reflect the stock split. All prior period
EPS data has been restated to conform with the provisions of SFAS No. 128. The
following is a reconciliation of the numerators and denominators used to
calculate net income per share in the consolidated statements of income:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
NUMERATOR:
Net income for basic and diluted earnings per share:
Income before extraordinary loss............................ $ 47,010 $ 53,274
Extraordinary loss, net of tax benefit...................... (3,949) --
----------- -----------
Net income.................................................. $ 43,061 $ 53,274
=========== ===========
DENOMINATOR:
Weighted average shares outstanding -- used for basic
earnings per share........................................ 42,223,586 38,127,212
Effect of dilutive options.................................. 382,561 593,560
----------- -----------
Denominator for diluted earnings per share.................. 42,611,147 38,720,772
=========== ===========
Earnings per share:
Income before extraordinary loss.......................... $ 1.11 $ 1.40
Extraordinary loss, net of tax benefit.................... (.09) --
----------- -----------
Net income per share...................................... $ 1.02 $ 1.40
=========== ===========
Earnings per share -- assuming dilution:
Income before extraordinary loss.......................... $ 1.10 $ 1.38
Extraordinary loss, net of tax benefit.................... (.09) --
----------- -----------
Net income per share................................... $ 1.01 $ 1.38
=========== ===========
</TABLE>
F-21
<PAGE> 105
BUCKEYE TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
-------------------
1997 1998
-------- --------
<S> <C> <C>
Net sales................................................... $409,005 $469,397
Cost of goods sold.......................................... 304,359 344,303
-------- --------
Gross margin................................................ 104,646 125,094
Selling, research and administrative expenses............... 26,192 33,842
-------- --------
Operating income............................................ 78,454 91,252
Net interest expense and amortization of debt costs......... 19,566 27,513
Other....................................................... 700 1,460
-------- --------
Income before income taxes.................................. 58,188 62,279
Income taxes................................................ 19,526 21,576
-------- --------
Net income.................................................. $ 38,662 $ 40,703
======== ========
Net income per share........................................ $ 1.01 $ 1.09
======== ========
Net income per share -- assuming dilution................... $ 0.99 $ 1.06
======== ========
</TABLE>
See accompanying notes.
F-22
<PAGE> 106
BUCKEYE TECHNOLOGIES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1997 1998
-------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 5,164 $ --
Short-term investments.................................... 2,900 2,900
Accounts receivable -- net................................ 79,703 87,259
Inventories............................................... 107,390 99,576
Deferred income taxes and other........................... 5,966 6,558
-------- ---------
Total current assets.............................. 201,123 196,293
Property, plant and equipment............................... 469,629 497,319
Less allowances for depreciation............................ (86,952) (113,710)
-------- ---------
382,677 383,609
Goodwill.................................................... 140,845 134,701
Deferred debt costs and other............................... 12,819 9,957
-------- ---------
Total assets...................................... $737,464 $ 724,560
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 29,761 $ 21,264
Accrued expenses.......................................... 49,830 46,288
Notes payable............................................. 3,440 2,437
-------- ---------
Total current liabilities......................... 83,031 69,989
Noncurrent liabilities:
Long-term debt............................................ 474,631 462,753
Accrued postretirement benefit obligation................. 14,208 14,912
Deferred income taxes..................................... 29,846 30,459
Other liabilities......................................... 7,558 2,177
Stockholders' equity...................................... 128,190 144,270
-------- ---------
Total liabilities and stockholders' equity........ $737,464 $ 724,560
======== =========
</TABLE>
See accompanying notes.
F-23
<PAGE> 107
BUCKEYE TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
-----------------
1997 1998
------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $38,662 $40,703
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation.............................................. 22,358 27,953
Amortization and other.................................... 7,035 7,448
Deferred income taxes..................................... 6,649 1,224
Changes in operating assets and liabilities:
Accounts receivable.................................... 2,282 (6,341)
Inventories............................................ 9,180 6,974
Other assets........................................... 1,632 (1,038)
Accounts payable and other current liabilities......... (14,115) (14,041)
------- -------
Net cash provided by operating activities................. 73,683 62,882
INVESTING ACTIVITIES
Acquisition of businesses................................... (60,196) (3,869)
Net purchases of property, plant and equipment.............. (29,381) (39,008)
Other....................................................... (385) 346
------- -------
Net cash used in investing activities....................... (89,962) (42,531)
FINANCING ACTIVITIES
Purchase of treasury shares................................. (62,398) (16,392)
Proceeds from sale of equity interests...................... 33 1,690
Net (repayments) borrowings under revolving line of
credit.................................................... (13,769) 22,961
Proceeds from long term debt................................ 99,449 --
Principal payments on long term debt and other.............. -- (33,613)
Payments for debt issuance costs............................ (3,777) --
------- -------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES......... 19,538 (25,354)
EFFECT OF FOREIGN CURRENCY RATE FLUCTUATIONS ON CASH........ (71) (161)
------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ 3,188 (5,164)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ -- 5,164
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 3,188 $ --
======= =======
</TABLE>
See accompanying notes.
F-24
<PAGE> 108
BUCKEYE TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Buckeye Technologies Inc. (formerly Buckeye Cellulose Corporation) and its
subsidiaries (the Company) have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. 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, 1998 are not necessarily indicative of the results
that may be expected for the year ended June 30, 1998. All significant
intercompany accounts and transactions have been eliminated in consolidation and
combination. For further information and a listing of the Company's significant
accounting policies, refer to the financial statements and notes thereto
included in the Company's annual report on Form 10-K and included elsewhere
herein for the year ended June 30, 1997.
NOTE B -- BUSINESS COMBINATION
On September 1, 1996, the Company acquired all of the issued and
outstanding stock of Alpha Cellulose Holdings, Inc. (Alpha). On May 28, 1997,
the Company's wholly owned subsidiary, Buckeye Acquisition Inc. (BAI), acquired
97.5% of the common shares of Merfin International Inc. (Merfin). On July 30,
1997, BAI acquired the remaining outstanding common shares of Merfin. These
transactions were as discussed and disclosed in the annual report. The
consolidated operating results of Alpha and Merfin have been included in the
consolidated statements of income from the respective date of acquisition.
The following unaudited pro forma results of operations assume that the
acquisitions of Alpha and Merfin occurred as of the beginning of the periods
presented.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
----------------------
PRO FORMA ACTUAL
1997 1998
---------- ---------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
Net sales................................................... $460,617 $469,397
Net income.................................................. 32,596 40,703
Net income per share........................................ 0.85 1.09
Net income per share -- assuming dilution................... 0.84 1.06
</TABLE>
Pro forma results of operations for the nine months ended March 31, 1997
include certain non-recurring charges incurred by Alpha prior to its acquisition
by the Company. These charges include acquisition related costs and the excess
of raw materials cost over replacement value and in the aggregate reduced pro
forma net income by $1.8 million or $0.05 per share -- assuming dilution.
The pro forma financial information is presented for information purposes
only and is not necessarily indicative of the operating results that would have
occurred had the business combinations been consummated as of the above dates,
nor is it necessarily indicative of future operating results.
F-25
<PAGE> 109
BUCKEYE TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
NOTE C -- INVENTORIES
The components of inventory consist of the following:
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1997 1998
-------- ---------
(IN THOUSANDS)
<S> <C> <C>
Raw materials............................................... $ 25,409 $23,838
Finished goods.............................................. 63,932 56,985
Storeroom and other supplies................................ 18,049 18,753
-------- -------
$107,390 $99,576
======== =======
</TABLE>
NOTE D -- EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share". SFAS No.
128 specifies the computation, presentation and disclosure requirements for
earnings per share (EPS) and became effective for both interim and annual
periods ending after December 15, 1997. On January 21, 1998, the Board of
Directors of the Company declared a two-for-one stock split for stockholders of
record as of February 10, 1998. The stock split was paid on February 17, 1998 in
the form of a stock dividend of one share of common stock for each issued share
of common stock. All share data and related amounts have been restated to
reflect the stock split. All prior period EPS data has been restated to conform
with the provisions of SFAS No. 128. The following is a reconciliation of the
numerators and denominators used to calculate net income per share in the
condensed consolidated statements of income:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
-------------------------
1997 1998
----------- -----------
<S> <C> <C>
NUMERATOR:
Net income for basic and dilutive earnings per share (in
thousands)................................................ $ 38,662 $ 40,703
DENOMINATOR:
Weighted average shares outstanding -- used for basic
earnings per share........................................ 38,333,344 37,212,345
Effect of dilutive options.................................. 532,607 1,094,943
----------- -----------
Denominator for diluted earnings per share.................. 38,865,951 38,307,288
=========== ===========
Net income per share........................................ $ 1.01 $ 1.09
=========== ===========
Net income per share -- assuming dilution................... $ 0.99 $ 1.06
=========== ===========
</TABLE>
NOTE E -- FOREIGN CURRENCY TRANSLATION
The Company's net investment in foreign operations is subject to foreign
currency translation gains and losses, which are included as a separate
component of stockholders' equity. The decline since June 30, 1997 in the value
of the Canadian dollar, the Irish punt and the Deutsche mark as compared to the
U.S. dollar has resulted in an equity translation loss of $10.8 million for the
nine months ended March 31, 1998.
NOTE F -- RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement No.
130, "Reporting Comprehensive Income". This statement establishes requirements
for disclosure of comprehensive income and will become effective for the
Company's 1999 fiscal year, with reclassification of earlier financial
statements for comparative purposes. Comprehensive income generally includes
changes in stockholders'
F-26
<PAGE> 110
BUCKEYE TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
equity such as foreign currency translation gains and losses. The Company is
evaluating alternative formats for presenting this information.
In June 1997, the Financial Accounting Standards Board issued Statement No.
131, "Disclosures about Segments of an Enterprise and Related Information" (SFAS
131). This statement establishes standards for disclosure about operating
segments in annual financial statements and selected information in interim
financial reports. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. This statement
supersedes Statement of Financial Accounting Standards No. 14, "Financial
Reporting for Segments of a Business Enterprise". SFAS 131 will become effective
for the Company's 1999 fiscal year and requires that comparative information
from earlier years be restated to conform to the requirements of this standard.
The Company is evaluating the requirements of SFAS 131 and the effects, if any,
on the Company's current reporting and disclosures.
In February 1998, the Financial Accounting Standards Board issued Statement
No. 132, "Employers' Disclosures About Pensions and Other Postretirement
Benefits". This statement revises employers' disclosures about pension and other
postretirement benefit plans and will become effective for the Company's 1999
fiscal year, with reclassification of earlier periods for comparative purposes.
It standardizes disclosure requirements and requires additional information on
changes in the benefit obligations and fair value of plan assets. The Company is
evaluating the requirements and the effects on the Company's current
disclosures.
NOTE G -- ENVIRONMENTAL MATTERS
The Company previously reached an agreement (the Fenholloway Agreement)
with the Florida Department of Environmental Protection, to make approximately
$40 million in capital expenditures to modify its facilities to meet the
proposed reclassification of the Fenholloway River from an industrial stream to
a fishable/swimmable stream. In 1998, the U.S. Environmental Protection Agency
(EPA), in its review of the Company's proposed National Pollutant Discharge
Elimination System (NPDES) permit, has requested additional environmental
studies and further discussions with the various regulatory agencies to identify
possible alternatives to the Fenholloway Agreement which would comply with Class
III water quality requirements. The ultimate cost and timing of expenditures for
compliance with these water quality requirements may vary from previous
estimates.
NOTE H -- QUARTERLY RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
FIRST SECOND THIRD
QUARTER QUARTER QUARTER
--------- --------- ---------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
YEAR ENDED JUNE 30, 1998
Net sales.................................................. $153,313 $153,610 $162,474
Gross margin............................................... 42,141 40,356 42,597
Operating income........................................... 30,769 30,220 30,263
Net income................................................. 13,161 13,338 14,204
Earnings per share:
Basic...................................................... $ 0.35 $ 0.36 $ 0.38
Diluted.................................................... $ 0.34 $ 0.35 $ 0.37
</TABLE>
NOTE I -- SUBSEQUENT EVENTS
On April 7, 1998, the stockholders of the Company approved an increase in
the Company's authorized shares of common and preferred stock to 100 million
shares and 10 million shares, respectively.
On April 30, 1998, the Company delivered to Bankers Trust Company (the
Trustee) notice of its intent to redeem on June 30, 1998 the remaining $6.9
million principal amount of its outstanding 10 1/4% Senior Notes at a price of
103.875%.
F-27
<PAGE> 111
March 10, 1997
AUDITORS' REPORT
To the Directors of
Merfin International Inc.
We have audited the consolidated balance sheets of Merfin International
Inc. as at December 31, 1995 and 1996 and the consolidated statements of income
and retained earnings and changes in financial position for each of the years in
the three-year period ended December 31, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance 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.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at December 31,
1995 and 1996 and the results of its operations and the changes in its financial
position for each of the years in the three-year period ended December 31, 1996
in accordance with generally accepted accounting principles in Canada. As
required by the British Columbia Company Act, we report that, in our opinion,
these principles have been applied on a consistent basis.
/s/ Price Waterhouse
Chartered Accountants
Vancouver, B.C., Canada
F-28
<PAGE> 112
MERFIN INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------
1994 1995 1996
--------- --------- ---------
(IN THOUSANDS OF CANADIAN
DOLLARS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $46,902 $68,909 $79,686
Cost of goods sold........................................ 32,924 47,584 56,338
------- ------- -------
Gross profit................................................ 13,978 21,325 23,348
Expenses
Research and product development.......................... 887 1,417 1,943
Selling and marketing..................................... 1,934 1,788 2,029
Administrative and corporate.............................. 3,533 5,316 7,206
Interest.................................................. -- 1,512 1,885
Amortization.............................................. 1,674 2,286 3,679
------- ------- -------
8,028 12,319 16,742
------- ------- -------
Income before discontinued project and income taxes......... 5,950 9,006 6,606
Discontinued project (Note 10).............................. -- 945 --
------- ------- -------
Income before income taxes.................................. 5,950 8,061 6,606
Income taxes (Note 9)....................................... 1,629 3,422 2,393
------- ------- -------
Net income for the year..................................... 4,321 4,639 4,213
Retained earnings (deficit), beginning of year.............. (1,610) 2,711 7,350
Equity distribution on convertible loan..................... -- -- 88
------- ------- -------
Retained earnings, end of year.............................. $ 2,711 $ 7,350 $11,475
Basic and fully diluted net income per share (Note 13)...... $ 0.18 $ 0.19 $ 0.17
</TABLE>
F-29
<PAGE> 113
MERFIN INTERNATIONAL INC.
(INCORPORATED UNDER THE COMPANY ACT OF BRITISH COLUMBIA)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1996
------------ ------------
(IN THOUSANDS OF CANADIAN
DOLLARS)
<S> <C> <C>
ASSETS
Current
Cash and cash equivalents................................. $ 11,883 $ 6,774
Accounts receivable (Note 2).............................. 16,152 11,401
Inventories (Note 3)...................................... 11,864 10,273
Prepaid expenses and deposits............................. 529 497
------------ ------------
40,428 28,945
Capital assets (Note 4)................................... 80,593 116,478
Product development costs (Note 5)........................ 2,600 2,429
------------ ------------
$ 123,621 $ 147,852
============ ============
LIABILITIES
Current liabilities
Bank indebtedness (Note 6)................................ $ 3,428 $ --
Accounts payable and accrued liabilities.................. 5,928 10,851
Current portion of long-term debt (Note 7)................ 4,265 5,584
------------ ------------
13,621 16,435
Long-term debt (Note 7)..................................... 37,158 58,664
Deferred credits (Note 8)................................... -- 605
Deferred income taxes (Note 9).............................. 4,761 6,576
Minority interest (Note 10)................................. 9,244 164
------------ ------------
64,784 82,444
SHAREHOLDERS' EQUITY
Share capital (Note 11)..................................... 51,487 53,933
Retained earnings........................................... 7,350 11,475
------------ ------------
58,837 65,408
------------ ------------
$ 123,621 $ 147,852
============ ============
Commitments and contingencies (Note 12)
</TABLE>
F-30
<PAGE> 114
MERFIN INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------
1994 1995 1996
--------- --------- ---------
(IN THOUSANDS OF CANADIAN
DOLLARS)
<S> <C> <C> <C>
Cash provided by (used in)
OPERATING ACTIVITIES
Net income for the year................................... $ 4,321 $ 4,639 $ 4,213
Items not affecting cash
Amortization of capital assets......................... 1,674 2,286 3,679
Amortization of dispensers (included in cost of goods
sold)................................................ 296 579 422
Amortization of product development costs.............. 173 173 171
Amortization of deferred credits....................... -- -- (165)
Deferred income taxes.................................. 1,529 3,232 1,815
-------- -------- --------
7,993 10,909 10,135
Changes in non-cash working capital
Accounts receivable.................................... (2,721) (8,071) 4,751
Inventories............................................ (929) (7,917) 1,591
Prepaid expenses and deposits.......................... 157 (198) 32
Accounts payable and accrued liabilities............... 2,820 849 4,923
-------- -------- --------
(673) (15,337) 11,297
-------- -------- --------
7,320 (4,428) 21,432
FINANCING ACTIVITIES
Proceeds of long-term debt................................ 13,866 22,661 29,361
Repayment of long-term debt............................... -- -- (6,536)
Net proceeds on issuance of share capital................. 981 7,915 2,446
Deferred credits.......................................... -- -- 770
-------- -------- --------
14,847 30,576 26,041
INVESTING ACTIVITIES
Purchase of capital assets................................ (30,826) (29,761) (39,986)
Deposit on capital assets................................. 5,061 -- --
-------- -------- --------
(25,765) (29,761) (39,986)
OTHER ACTIVITIES
Minority interest......................................... -- 9,244 (9,080)
Equity distribution on convertible loan................... -- -- (88)
-------- -------- --------
-- 9,244 (9,168)
-------- -------- --------
(10,918) 10,059 (23,113)
-------- -------- --------
Increase (decrease) in cash................................. (3,598) 5,631 (1,681)
Cash, beginning of year..................................... 6,422 2,824 8,455
-------- -------- --------
Cash, end of year........................................... $ 2,824 $ 8,455 $ 6,774
======== ======== ========
Cash represented by
Cash and cash equivalents................................. $ 2,824 $ 11,883 $ 6,774
Bank indebtedness......................................... -- (3,428) --
-------- -------- --------
$ 2,824 $ 8,455 $ 6,774
======== ======== ========
</TABLE>
F-31
<PAGE> 115
MERFIN INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(IN THOUSANDS OF CANADIAN DOLLARS EXCEPT PER SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
The principal business of Merfin International Inc. (the "Company") is the
development and production of air-laid fabrics for use in hygiene, medical,
table top and industrial products with the majority of sales in North America,
Europe and Asia. A subsidiary also converts commercial and industrial wipes and
bathroom tissues under the Company's trademarks for sale primarily in North
America. During the year the Company changed its name to Merfin International
Inc. from Merfin Hygienic Products Ltd.
BASIS OF PRESENTATION
The consolidated financial statements of the Company have been prepared in
accordance with accounting principles generally accepted in Canada. 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 reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
The consolidated financial statements include the accounts of the Company
and its subsidiaries as follows:
<TABLE>
<CAPTION>
(PERCENTAGE OWNERSHIP)
--------------------------
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Merfin Converted Products Ltd............................ 100.00% 100.00% 100.00%
Merfin Systems Inc....................................... 100.00 100.00 100.00
Merfin Europe a.s........................................ -- 55.56 55.56
Merfin Europe Limited.................................... -- 100.00 100.00
Merfin Trading Limited................................... -- -- 100.00
</TABLE>
INVENTORIES
Inventories of raw materials and supplies are valued at the lower of cost
and net replacement value. Costs of raw materials are determined at average
cost. Finished products are valued at the lower of cost, which includes the cost
of raw materials, direct labour and manufacturing overhead expenses, or net
realizable value.
PRODUCT DEVELOPMENT COSTS
Product development costs, including direct costs and related overhead
costs, are capitalized during the development phase and are amortized on a
straight-line basis over 20 years, the estimated life of the product.
CAPITAL ASSETS AND AMORTIZATION
Capital assets are recorded at cost. Interest incurred during construction
of an air-laid plant and production line is capitalized to the asset.
Amortization of capital assets is provided on a basis and at rates considered
adequate to amortize the cost of the assets over their estimated useful lives as
follows:
<TABLE>
<S> <C>
Air-laid plant and production line............ Units of production
Machinery, equipment, furniture and
fixtures.................................... 20% declining balance
Leasehold improvements........................ Straight-line over lease term
Dispensers.................................... 3 years straight-line
Moulds........................................ 10 years straight-line
</TABLE>
F-32
<PAGE> 116
MERFIN INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Construction in progress is stated at cost and includes tangible costs
together with related finance and overhead costs. Amortization is not provided
until the assets are brought into use.
During the year ended December 31, 1995, the Company changed its policy of
amortizing "Air-laid plant and production line" from 20 years straight-line to
units of production.
RESEARCH AND DEVELOPMENT COSTS
The Company's policy is to expense research costs as they are incurred. The
development costs are also expensed if the costs do not meet generally accepted
criteria for capitalization and amortization.
FOREIGN EXCHANGE
The Company follows the temporal method of foreign currency translation.
Under this method, monetary assets and liabilities are translated at the rate of
exchange in effect at the end of the year. Non-monetary assets and liabilities
are translated at historical rates. Revenue and expense items are translated at
the rate of exchange in effect on the dates they occur. Exchange gains or losses
are reflected in net income of the year, except for unrealized foreign currency
gains or losses on long-term monetary assets and liabilities, which are deferred
and amortized in income over the remaining lives of the related items.
DEFERRED CREDITS
Deferred credits arising from the foreign currency translation of long-term
monetary liabilities are amortized over the lives of the related debt.
INCOME TAXES
Deferred income taxes are provided for all significant timing differences
between the recognition of income and expenses for financial statement and tax
purposes.
DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments are utilized by the Company to reduce
interest rate and foreign exchange risks. The Company does not hold or issue
derivative financial instruments for trading purposes.
INTEREST RATE SWAP CONTRACTS
The differentials to be received or paid under interest rate contracts are
recognized in income over the life of the contracts as adjustments to interest
expense. Gains and losses on terminations of a contract are deferred and
amortized to income over the remaining life of the contract or the related debt,
whichever is earlier.
2. ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Trade accounts receivable................................... $11,282 $11,074
Other accounts receivable................................... 4,898 680
Allowance for doubtful accounts............................. (28) (353)
------- -------
$16,152 $11,401
======= =======
</TABLE>
F-33
<PAGE> 117
MERFIN INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. INVENTORIES
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Raw materials and supplies.................................. $ 9,831 $ 7,606
Finished products........................................... 2,033 2,667
------- -------
$11,864 $10,273
======= =======
</TABLE>
4. CAPITAL ASSETS
<TABLE>
<CAPTION>
ACCUMULATED
COST AMORTIZATION NET
------- ------------ -------
<S> <C> <C> <C>
DECEMBER 31, 1995
Air-laid plant and production line.......................... $67,002 $5,342 $61,660
Machinery, equipment, furniture and fixtures................ 5,015 2,642 2,373
Leasehold improvements...................................... 724 181 543
Dispensers.................................................. 1,965 1,092 873
Moulds...................................................... 471 140 331
Construction in progress.................................... 14,813 -- 14,813
------- ------ -------
$89,990 $9,397 $80,593
======= ====== =======
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED
COST AMORTIZATION NET
-------- ------------ --------
<S> <C> <C> <C>
DECEMBER 31, 1996
Air-laid plant and production line.......................... $ 68,600 $ 8,068 $ 60,532
Machinery, equipment, furniture and fixtures................ 6,862 3,473 3,389
Leasehold improvements...................................... 1,179 266 913
Dispensers.................................................. 2,333 1,504 829
Moulds...................................................... 471 187 284
Construction in progress.................................... 50,531 -- 50,531
-------- ------- --------
$129,976 $13,498 $116,478
======== ======= ========
</TABLE>
In 1996, interest on long-term debt of $1,555 ( 1994 -- $nil; 1995 -- $nil)
was capitalized to construction in progress; $nil (1994 -- $196; 1995 -- $745)
was capitalized to the cost of the air-laid plant and production line.
5. PRODUCT DEVELOPMENT COSTS
<TABLE>
<CAPTION>
ACCUMULATED
COST AMORTIZATION NET
------ ------------ -------
<S> <C> <C> <C>
December 31, 1995........................................... $3,404 $804 $ 2,600
December 31, 1996........................................... $3,404 $975 $ 2,429
</TABLE>
6. BANK INDEBTEDNESS
<TABLE>
<CAPTION>
1995 1996
------ ----
<S> <C> <C>
Bank indebtedness bears interest at a chartered bank prime
rate plus 1/2%. It is secured by accounts receivable,
inventories and a first fixed and floating debenture on
assets of the Company..................................... $3,428 $nil
</TABLE>
F-34
<PAGE> 118
MERFIN INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The bank prime rate of interest at December 31, 1996 was 4.75% and the
weighted average interest rate in the year was 6.52%.
7. LONG-TERM DEBT
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Canadian Bank Loan.......................................... $26,300 $23,012
This loan bears interest at the Bank's prime lending rate
plus 3/4% per annum on the balance unfixed, $14,400
(1995 -- $18,000) fixed through interest rate swaps at
8.0% and $8,000 at 6.22% per annum. Principal of $274 plus
interest is payable monthly over a sixty-six month period
commencing January 31, 1996. Additional principal payments
of $2,000 are due March 31, 1998, $3,000 due March 31,
1999 and $3,000 due March 31, 2000.
Canadian Bank Loan.......................................... -- 2,600
This loan bears interest at the Bank's prime lending rate
plus 3/4% per annum. The interest rate is fixed through an
interest rate swap at 6% per annum. Principal of $43 plus
interest is payable monthly over a five year period
commencing January 2, 1997.
Canadian Bank Loan.......................................... 10,000 10,000
This loan bears interest at the Bank's prime lending rate
plus 1% per annum. The interest rate is fixed through an
interest rate swap at 8.3% per annum. Principal of $167
plus interest is payable monthly over a five year period
commencing January 2, 1998.
European Bank Loan.......................................... -- 19,580
The term loan in the amount of 22,000 Deutschmarks bears
interest at the Bank's prime interest rate. The interest
is fixed through an interest swap at 9.04% per annum. The
loan is repayable semi-annually in 14 equal payments
commencing on December 31, 1997 if the project completion
date occurs prior to November 16, 1997, otherwise, the
first payment is due June 30, 1998.
Convertible Loan............................................ -- 2,731
This loan bears interest at 7% per annum, with interest
payable semi-annually and principal due December 31, 2005.
This loan is secured by a debenture creating a second
fixed and floating charge over the assets of Merfin
International Inc.
This loan with a face value of $4,000 has been recorded as
a financial instrument for financial statement purposes.
The principal balance represents the long-term debt
component of this loan.
Term Loan................................................... $ -- $ 4,450
This term loan in the amount of 5,000 Deutschmarks bears
interest at 10% per annum, and is repayable in twelve
quarterly installments commencing March 31, 1999. An
additional payment of 5% of the average loan balance,
between inception of the loan and September 30, 1997, plus
2% of the average balance, between October 1, 1997 and the
end of the term is payable on December 31, 2001. The loan
is subordinated to the European Bank loan.
In the event of default, the loan has conversion rights to
common shares in Merfin Europe Limited to a maximum of 49%
of the outstanding shares.
</TABLE>
F-35
<PAGE> 119
MERFIN INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Government of Canada Loan................................... 2,250 1,875
Interest at 6% per annum with principal and interest
payments commencing January, 1996 and continuing until
December, 1998 at $31 per month with additional payments
of $563 payable on January 1, 1998 and January 1, 1999.
Province of British Columbia Loan........................... 2,873 --
------- -------
41,423 64,248
Less: Current portion....................................... 4,265 5,584
------- -------
Total............................................. $37,158 $58,664
======= =======
</TABLE>
The various Canadian Bank loans are secured by a debenture that creates a
first fixed and floating charge over the assets of Merfin International Inc. The
European Bank loan is secured by a debenture that creates a first fixed and
floating charge over the assets of Merfin Europe Limited.
These interest rate swap contracts were acquired to balance the Company's
fixed rate and floating rate debt portfolios. Under the interest rate swaps, the
Company agrees with the other parties to exchange, at specified intervals, the
difference between fixed rate and floating rate interest amounts calculated by
reference to an agreed notional principal amount, for terms that match the
original terms of the debt.
Interest expense includes interest on long-term debt in the amount of
$2,109 (1994 -- $187; 1995 -- $1,295) and interest income in the amount of $223
(1994 -- $nil, 1995 -- $nil).
Interest paid out in the year amounted to $3,440 (1994 -- $383;
1995 -- $3,241).
Minimum principal repayments required in the next five years.
<TABLE>
<S> <C>
1997........................................................ $ 5,584
1998........................................................ $11,545
1999........................................................ $13,653
2000........................................................ $13,090
2001........................................................ $ 8,652
</TABLE>
8. DEFERRED CREDITS
<TABLE>
<CAPTION>
ACCUMULATED
COST AMORTIZATION NET
---- ------------- ----
<S> <C> <C> <C>
December 31, 1995........................................... $nil $nil $nil
December 31, 1996........................................... $770 $165 $605
</TABLE>
9. INCOME TAXES
The Company and its subsidiaries have accumulated operating losses for
income tax purposes of approximately $6,450 which may be used to offset future
taxable income and which will expire at various dates up to 2001. These losses
have been recognized as a reduction of deferred tax credits related to
previously
F-36
<PAGE> 120
MERFIN INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
recorded timing differences. During the year, income taxes in the amount of $392
(1994 and 1995 -- $nil) and the large corporations tax of $186 (1994 -- $100;
1995 -- $190) were paid out in cash.
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Net income before income taxes.............................. $5,950 $8,061 $6,606
Income taxes using combined statutory federal and provincial
rates of 45.58% (1995 -- 45.58%; 1994 -- 45.43%).......... 2,698 3,674 3,014
Manufacturing and processing credit......................... (417) (564) (426)
Large corporations tax...................................... 100 190 186
Recovery due to loss carry forwards......................... (700) (149) (501)
Other....................................................... (52) 271 120
------ ------ ------
Income taxes................................................ $1,629 $3,422 $2,393
====== ====== ======
Income taxes comprise:
Current taxes............................................. $ 100 $ 190 $ 578
Deferred income taxes..................................... 1,529 3,232 1,815
------ ------ ------
$1,629 $3,422 $2,393
====== ====== ======
</TABLE>
10. MINORITY INTEREST
Minority interest represents the minority shareholders' interest in the
shareholders' equity of the Company's subsidiary, Merfin Europe a.s.
On November 15, 1995, the Company decided to relocate its air-laid project
(the construction of a building and installation of an air-laid plant and
production line) from the Czech Republic to the Republic of Ireland, and project
funds were returned to minority interest shareholders.
11. SHARE CAPITAL (NUMBER OF SHARES IS EXPRESSED IN THOUSANDS)
Authorized 1994, 1995 and 1996 100,000 common shares without par value.
<TABLE>
<CAPTION>
1994 1995 1996
---------------- ---------------- ----------------
ISSUED SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ------ ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Balance, beginning of year....................... 23,205 $42,591 23,610 $43,572 25,123 $51,487
Issued for cash pursuant to employee share
ownership plan................................. 142 531 128 544 148 759
Issued in private placement...................... -- -- 1,275 7,013 -- --
Issued for cash on exercise of options........... 163 450 110 358 199 523
------ ------- ------ ------- ------ -------
23,610 43,572 25,123 51,487 25,470 52,769
Equity component on issuance of Convertible
Loan........................................... -- -- -- -- -- 1,164
------ ------- ------ ------- ------ -------
Balance, end of year............................. 23,610 $43,572 25,123 $51,487 25,470 $53,933
====== ======= ====== ======= ====== =======
</TABLE>
CONVERTIBLE LOAN
This loan issued during the year with a face value of $4,000 has been
recorded as a financial instrument, $1,164 net of financing costs of $105, has
been included in shareholders' equity and classified as part of share capital
for financial statement purposes. During the year, $88 which represents a
portion of the payments on the Convertible Loan, has been recorded as an equity
distribution and is reflected as a reduction of retained earnings (see Note 7).
F-37
<PAGE> 121
MERFIN INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SHARE OPTIONS
The Company does not have a formal plan for the granting of incentive share
options to its directors, officers and employees. However, the Company has from
time to time granted share options to its directors, officers and employees.
These options are ratified at each annual general meeting of the Company. The
purpose of the granting of such options has been to assist the Company in
attracting, compensating, motivating and retaining its officers, directors and
employees and to more closely align the personal interests of those persons to
the interests of the shareholders.
<TABLE>
<CAPTION>
COMMON
SHARES OPTION PRICES
------ -------------
<S> <C> <C>
Share options outstanding December 31, 1993................. 1,990 $2.35 - 3.87
Granted................................................... 80 3.87 - 4.00
Exercised................................................. (163) 2.35 - 3.87
Surrendered or expired.................................... (660) 2.35 - 3.87
----- ------------
Share options outstanding December 31, 1994................. 1,247 $2.35 - 4.00
Granted................................................... 505 4.00 - 6.66
Exercised................................................. (110) 3.06 - 3.87
Surrendered or expired.................................... -- --
----- ------------
Share options outstanding December 31, 1995................. 1,642 $2.35 - 6.66
Granted................................................... 416 5.20 - 5.91
Exercised................................................. (199) 2.35 - 3.87
Surrendered or expired.................................... (5) 6.06
----- ------------
Share options outstanding December 31, 1996................. 1,854 $2.35 - 6.66
===== ============
</TABLE>
Share options outstanding at December 31, 1996 are due to expire between
December 13, 1998 and December 13, 2001.
12. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company is committed to operating leases, expiring at various dates up
to and including 2003.
Annual lease commitments for the next five years are as follows:
<TABLE>
<S> <C>
1997........................................................ $1,975
1998........................................................ $2,028
1999........................................................ $1,305
2000........................................................ $ 549
2001........................................................ $ 506
</TABLE>
RELATED PARTY
The Company has a Licence and Supply Agreement terminating in 1997 with
Merfin Plastics Ltd., a company in which Merfin International Inc. has a 5%
ownership interest. The agreement obligates Merfin International Inc. to
purchase dispensers having a minimum aggregate value of $600 per year. During
the year, purchases from Merfin Plastics Ltd. totalled $716 (1995 -- $840).
FOREIGN EXCHANGE RISK MANAGEMENT TRANSACTIONS
The Company has adopted a strategy of hedging foreign currencies through
the use of interest rate swap contracts, and forward exchange contracts.
F-38
<PAGE> 122
MERFIN INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The amounts of the Company's foreign exchange risk management contracts are
as follows:
<TABLE>
<CAPTION>
CONTRACT
AMOUNT
IN $ CDN DATE OF MATURITY
-------- -----------------------------
<S> <C> <C>
1995
Forward contracts.............................. $18,550 Feb. 14, 1997
Interest rate swap contracts................... --
1996
Forward contracts.............................. $14,277 Jan. 2, 1997
Interest rate swap contracts................... 6,954 Jan. 2, 1997 -- Feb. 3, 1997
</TABLE>
Gains and losses on forward contracts are recognized into income upon
completion of the hedged transaction.
The Company continually monitors its positions with and the credit quality
of, the financial institutions which are counterparties to its financial
instruments and does not anticipate non-performance by the counterparties.
Gains and losses on forward contracts are recognized in income upon
completion of the hedged transaction. The unrealized gains or losses on the
Company's foreign exchange risk management contracts approximates NIL
(1995-NIL).
EXPANSION OF AIR-LAID PRODUCTION CAPACITY
During 1995, the Company entered into multi-year contracts to expand its
air-laid production capacity through the construction of a building and the
purchase and installation of an air-laid plant and production line. In November
1995, the Company decided to relocate the project to the Republic of Ireland
where the total estimated project cost, net of grants, is $60,500. To accelerate
the start up of the Irish project and support a number of smaller capital
modifications a further $3,500 has been allocated for the project budget with an
additional contingency of $1,500. In the event of cost overruns, the Company has
committed 10,000 DEM ($8,900) of standby equity backed by a 5,000 DEM ($4,450)
letter of credit from the Company's Canadian Bank. The Company may have to repay
up to 2,000 DEM ($1,780) of the grant to the Irish Government if the number of
employees is less than that required by the grant on December 31, 2001.
CREDIT RISK EXPOSURES
The Company's exposures to credit risk are as indicated by the carrying
amounts of its assets except for its exposure on interest rate swaps as stated
in Note 7.
INTEREST RATE RISK EXPOSURES
Short-term financial instruments are valued at their carrying amounts
included in the statement of financial position which are reasonable estimates
of fair value due to the relatively short period to maturity of the instruments.
This approach applies to cash, receivables and certain other liabilities.
Rates currently available to the Company for long-term debt with similar
terms and remaining maturities are used to estimate the fair value of existing
borrowings as the present value of expected cash flows.
13. NET INCOME PER SHARE (NUMBER OF SHARES IS EXPRESSED IN THOUSANDS)
Net income per share is calculated using the weighted average number of
common shares outstanding for the year which amounted to 25,406 (1994 -- 23,395;
1995 -- 23,838). Fully diluted net income per share includes the weighted
average number of common share options outstanding for the year and the number
of common shares available for conversion from the convertible debenture which,
aggregated with the weighted average number of common shares, amounted to 27,900
(1994 -- 24,642; 1995 -- 25,480).
F-39
<PAGE> 123
MERFIN INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. SEGMENTED INFORMATION
The Company operates out of Canada, the Republic of Ireland and the United
States of America. The following schedule provides financial information by
geographic segments for 1996 and 1995.
<TABLE>
<CAPTION>
CANADA U.S.A. EUROPE CONSOLIDATED
------- ------ ------ ------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1994
Net sales to customers outside the enterprise
Domestic sales............................................ $ 8,088 $1,631 $ -- $ 9,719
Export sales to:
North America -- external customers..................... 17,014 996 -- 18,010
Europe.................................................. 13,525 -- -- 13,525
Asia.................................................... 5,500 148 -- 5,648
------- ------ ---- -------
Total net sales................................. $44,127 $2,775 $ -- $46,902
North America -- other segments........................... 619 -- -- --
------- ------ ---- -------
Total gross sales............................... $44,746 $2,775 -- $46,902
Net income for year....................................... $ 4,565 $ (244) $ -- $ 4,321
Identifiable assets....................................... $68,271 $3,382 $ -- $71,653
Capital expenditures...................................... $30,059 $ 767 $ -- $30,826
Amortization of capital assets, dispensers and product
development............................................. $ 2,069 $ 74 $ -- $ 2,143
</TABLE>
In the Canadian segment, 37.1% of the Company's sales were to two
customers, 25.9% and 11.2%, who each represented more than 10% of total sales.
In the U.S.A. segment, no single customer represented more than 10% of total
sales.
<TABLE>
<CAPTION>
CANADA U.S.A. EUROPE CONSOLIDATED
------- ------- ------- ------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1995
Net sales to customers outside the enterprise
Domestic sales......................................... $10,259 $ 8,421 $ -- $ 18,680
Export sales to:
North America -- external customers.................. 20,000 5,490 -- 25,490
Europe............................................... 16,121 -- -- 16,121
Asia................................................. 8,416 202 -- 8,618
------- ------- ------- --------
Total net sales.............................. $54,796 $14,113 $ -- $ 68,909
North America -- other segments........................ 3,909 -- -- --
------- ------- ------- --------
Total gross sales............................ $58,705 $14,113 -- $ 68,909
Net income for year.................................... $ 5,347 $ 237 $ (945) $ 4,639
Identifiable assets.................................... $97,805 $ 5,133 $20,683 $123,621
Capital expenditures................................... $16,111 $ 475 $13,175 $ 29,761
Amortization of capital assets, dispensers and product
development.......................................... $ 2,459 $ 579 $ -- $ 3,038
</TABLE>
F-40
<PAGE> 124
MERFIN INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In the Canadian segment, 47.4% of the Company's sales were to two
customers, 31.7% and 15.7%, who each represented more than 10% of total sales.
In the U.S.A. segment, no single customer represented more than 10% of total
sales.
<TABLE>
<CAPTION>
CANADA U.S.A. EUROPE CONSOLIDATED
------- ------- ------- ------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1996
Net sales to customers outside the enterprise
Domestic sales....................................... $13,552 $10,681 $ -- $ 24,233
Export sales to:
North America -- external customers.................... 23,260 5,343 -- 28,603
Europe................................................. 18,173 -- -- 18,173
Asia................................................... 8,391 286 -- 8,677
------- ------- ------- --------
Total net sales.............................. $63,376 $16,310 $ -- $ 79,686
North America -- other segments........................ 2,240 -- -- --
------- ------- ------- --------
Total gross sales............................ $65,616 $16,310 $ -- $ 79,686
Net income for year.................................... $ 3,854 $ 359 $ -- $ 4,213
Identifiable assets.................................... $92,353 $ 7,130 $48,369 $147,852
Capital expenditures................................... $ 6,167 $ 1,337 $32,482 $ 39,986
Amortization of capital assets, dispensers and product
development.......................................... $ 3,842 $ 430 $ -- $ 4,272
</TABLE>
In the Canadian segment, 45.0% of the Company's sales were to two
customers, 30.2% and 14.8%, who each represented more than 10% of total sales.
In the U.S.A. segment, no single customer represented more than 10% of total
sales.
15. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES OF AMERICA ACCOUNTING
PRINCIPLES AND PRACTICES
The consolidated financial statements have been prepared in accordance with
accounting principles and practices generally accepted in Canada ("Canadian
basis") which differ in certain respects from those principles and practices
that the Company would have followed had its consolidated financial statements
been prepared in accordance with accounting principles and practices generally
accepted in the United States of America ("U.S.A. basis").
On a U.S.A. basis, the cumulative effect of the change in amortization
policy, based on retroactive computation, would have been included in net income
in 1995, the year of change. An accounting change of $562 (net of income taxes
of $414) would be reported as cumulative adjustments in 1995 and prior periods
would not be restated. On a Canadian basis a prior period adjustment to the 1994
consolidated financial statements was made to accumulated amortization of $976,
to deferred income taxes of $375 and to retained earnings of $601.
On a U.S.A. basis, the costs capitalized to product development costs would
have been a charge to net income in 1991, the year incurred. On a Canadian
basis, costs for product development may be deferred to the extent that, the
expenditure is directly related to producing the new product; the expenditure is
incremental and would not have been incurred without the product; and, the
expenditure is recoverable from future operations. The costs have been
capitalized and are being amortized over the life of the asset.
On a U.S.A. basis, tax benefits related to losses are recognized when
incurred and reduced by a valuation allowance if it is more likely than not that
some portion of all of the deferred rates will not be realized. The valuation
allowance for loss carry forwards would be reversed in 1993 as it became more
likely than not that the tax credit benefits of such amount would be realized.
F-41
<PAGE> 125
MERFIN INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On a U.S.A. basis, the deferred credits associated with the translation of
foreign currency financial statements are recognized immediately in the income
statement. On a Canadian basis, the deferred credits with the translation of a
foreign currency financial statement's long-term monetary assets are deferred
and amortized over the lives of those monetary items.
These would have been reported in the consolidated balance sheets,
consolidated statements of income and retained earnings and consolidated
statements of changes in financial position as follows:
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------
1994 1995 1996
------------------- ------------------ -------------------
CANADIAN U.S.A. CANADIAN U.S.A. CANADIAN U.S.A.
BASIS BASIS BASIS BASIS BASIS BASIS
-------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Capital assets....................... $ 53,697 $ 52,721 $80,593 $80,593 $116,478 $116,478
Product development costs............ 2,773 -- 2,600 -- 2,429 --
Deferred tax assets.................. -- -- -- -- -- 2,515
Deferred credits..................... -- -- -- -- 605 --
Deferred tax liabilities............. 1,529 (119) 4,761 3,743 6,576 8,465
Retained earnings, end of year....... 2,711 610 7,350 5,768 11,475 10,277
</TABLE>
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------
1994 1995 1996
------------------ ----------------- ------------------
CANADIAN U.S.A. CANADIAN U.S.A. CANADIAN U.S.A.
BASIS BASIS BASIS BASIS BASIS BASIS
-------- ------- -------- ------ -------- -------
<S> <C> <C> <C> <C> <C> <C>
Research and product development.......... $ 887 $ 744 $1,417 $1,244 $ 1,943 $ 1,772
Administrative and corporate.............. 3,533 3,533 5,316 5,316 7,208 6,383
Amortization of capital assets............ 1,674 1,722 2,286 1,310 3,679 3,679
Income taxes.............................. 1,629 2,383 3,422 4,052 2,393 2,782
Net income for year....................... 4,321 3,692 4,639 5,158 4,213 4,820
Retained earnings (deficit), beginning of
year.................................... (1,610) (3,082) 2,711 610 7,350 5,768
Retained earnings, end of year............ 2,711 610 7,350 5,768 11,475 10,277
Basic and fully diluted net income per
share................................... $ 0.18 $ 0.16 $ 0.19 $ 0.22 $ 0.17 $ 0.19
</TABLE>
On a U.S.A. basis, bank indebtedness would be classified as a financing
activity. On a Canadian basis, bank indebtedness is classified as a component of
cash.
On a U.S.A. basis, advances to minority interests would be classified as an
investing activity. On a Canadian basis, advances to minority interests is
classified as a component of accounts receivable.
F-42
<PAGE> 126
MERFIN INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------------
1994 1995 1996
------------------- ------------------- -----------------
CANADIAN U.S.A. CANADIAN U.S.A. CANADIAN U.S.A.
BASIS BASIS BASIS BASIS BASIS BASIS
-------- -------- -------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income for the year............... $ 4,321 $ 3,692 $ 4,639 $ 5,158 $4,213 $4,820
ITEMS NOT AFFECTING CASH
Amortization of capital assets...... $ 1,674 $ 1,722 $ 2,286 $ 1,310 $ -- $ --
Amortization of product development
costs............................ 173 -- 173 -- 171 --
Amortization of deferred credits.... -- -- -- -- (165) (990)
Deferred income taxes............... 1,529 2,283 3,232 3,862 1,815 2,204
CHANGES IN NON-CASH WORKING CAPITAL
Accounts receivable................... (2,721) (2,721) (8,071) (3,173) -- --
7,320 7,320 (4,428) 470 -- --
FINANCING ACTIVITIES
Bank indebtedness..................... -- (3,327) -- 3,428 -- --
14,847 11,520 30,576 34,004 -- --
INVESTING ACTIVITIES
Advances to minority interests........ -- -- -- (4,898) -- --
(25,765) (25,765) (29,761) (34,659) -- --
-------- -------- -------- -------- ------ ------
Cash, end of year..................... $ 2,824 $ 2,824 $ 8,455 $ 11,883 $6,774 $6,774
======== ======== ======== ======== ====== ======
Represented by:
Cash and cash equivalents............. $ 2,824 $ 2,824 $ 11,883 $ 11,883 $6,774 $6,774
Bank indebtedness..................... -- -- (3,428) -- -- --
-------- -------- -------- -------- ------ ------
$ 2,824 $ 2,824 $ 8,455 $ 11,883 $6,774 $6,774
======== ======== ======== ======== ====== ======
</TABLE>
16. COMPARATIVE FIGURES
Certain of the comparative figures have been restated to conform to the
current year's presentation.
17. SUBSEQUENT EVENTS
On May 28, 1997, 97.5% of Merfin International Inc.'s common shares were
acquired by Buckeye Acquisition Inc. (BAI), a wholly-owned subsidiary of Buckeye
Technologies Inc. On July 30, 1997, BAI acquired the remaining outstanding
common shares of Merfin International Inc. On August 31, 1997, the Company and
BAI were amalgamated as one company under the name Merfin International Inc.
F-43
<PAGE> 127
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
The following unaudited pro forma condensed consolidated statement of
income for the year ended June 30, 1997, gives effect to (i) the acquisition of
the common stock of Merfin International Inc. (Merfin) which was consummated on
May 28, 1997 and (ii) the acquisition of the common stock of Alpha Cellulose
Holdings, Inc. (Alpha) consummated on September 1, 1996 as if such acquisitions
had taken place as of July 1, 1996. These acquisitions are reflected in the
historical balance sheets of Buckeye Technologies Inc. (the Company) at June 30,
1997 and March 31, 1998 and the historical statement of income for the nine
months ended March 31, 1998.
The historical statement of operations of Merfin included in this unaudited
pro forma condensed consolidated statement of income has been derived from
financial statements prepared in accordance with accounting principles generally
accepted in Canada and stated in Canadian dollars. This statement of operations
has been conformed to comply with accounting principles generally accepted in
the United States and has been translated to United States dollars. Such
translation should not be construed as a representation that the Canadian dollar
amounts represent, or have been, or could be converted into, United States
dollars at this or any other rate.
The unaudited pro forma condensed consolidated financial information is not
necessarily indicative of the results that would have been obtained had the
Alpha and Merfin acquisitions been completed as of July 1, 1996 or for any
future period. Pro forma adjustments are based on estimates and available
information and certain assumptions that management deems appropriate. The
unaudited pro forma condensed consolidated statement of income should be read in
conjunction with the Company's and Merfin's consolidated financial statements
and notes thereto included elsewhere herein.
F-44
<PAGE> 128
BUCKEYE TECHNOLOGIES INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED JUNE 30, 1997
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------------------------ PRO FORMA ADJUSTMENTS
ALPHA MERFIN ---------------------------
BUCKEYE CELLULOSE INTERNATIONAL ALPHA MERFIN PRO FORMA
TECHNOLOGIES INC. HOLDINGS, INC.(A) INC.(B) ACQUISITION ACQUISITION CONSOLIDATION
----------------- ----------------- -------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net sales............... $ 558,933 $ 7,436 $52,317 $ -- $ -- $ 618,686
Cost of goods sold...... 411,751 9,177 36,248 -- -- 457,176
----------- ------- ------- ------- -------- -----------
Gross margin............ 147,182 (1,741) 16,069 -- -- 161,510
Selling, research and
administrative
expenses.............. 37,790 2,803 12,054 333 (c) -- 52,980
----------- ------- ------- ------- -------- -----------
Operating income
(loss)................ 109,392 (4,544) 4,015 (333) -- 108,530
Other income (expense):
Interest expense and
amortization of debt
costs................. (28,691) (795) (1,136) 28 (d) (9,281)(e) (39,875)
Other................... (448) (83) (1,963) (85)(f) (2,564)(f) (5,143)
----------- ------- ------- ------- -------- -----------
(29,139) (878) (3,099) (57) (11,845) (45,018)
Income (loss) before
income taxes.......... 80,253 (5,422) 916 (390) (11,845) 63,512
Income taxes
(benefit)............. 26,979 (2,060) 1,088 (130)(g) (3,620)(g) 22,257
----------- ------- ------- ------- -------- -----------
Net income
(loss)........ $ 53,274 $(3,362) $ (172) $ (260) $ (8,225) $ 41,255
=========== ======= ======= ======= ======== ===========
Weighted average shares
outstanding
Basic................. 38,127,212 54,721 38,181,933
Diluted............... 38,720,772 54,721 38,775,493
Earnings per share:
Basic................. $ 1.40 $ 1.08
Assuming dilution..... 1.38 1.06
</TABLE>
See accompanying notes.
F-45
<PAGE> 129
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF INCOME
JUNE 30, 1997
(DOLLARS IN THOUSANDS)
(a) Reflects the unaudited statement of operations of Alpha for the two
months ended August 31, 1996. Operations from September 1, 1996, the date of the
acquisition, are included in the Company's historical consolidated results.
(b) Reflects the unaudited statement of operations for Merfin for the
eleven months ended May 27, 1997, derived from the historical financial
statements and translated into United States dollars using the average exchange
rate of Canadian $1.3671 to U.S. $1 for the period then ended. The conversion of
the statement of operations from Canadian generally accepted accounting
principles to those generally accepted in the United States resulted in a
decrease in selling, research and administrative expenses of $1,787. The
decrease in selling, research and administrative expenses is a result of changes
in accounting for foreign currency translation. Operations from May 28, 1997,
the date of acquisition, are included in the Company's historical consolidated
results.
(c) The purchase price allocation for the Alpha acquisition results in
amortization of a $4,000 non-compete agreement over a two year period.
(d) Adjustment to reflect the decrease in interest expense resulting from
the refinancing of debt acquired in the Alpha acquisition, offset by the
interest cost of the purchase price which was financed using 9 1/4% Senior
Subordinated Notes.
(e) Adjustment to reflect the increase in interest expense for borrowings
to finance the Merfin acquisition. Borrowings under the Credit Facility bear
interest at a LIBOR based rate.
(f) Adjustments to reflect the increase in amortization of goodwill
resulting from the Alpha and Merfin acquisitions. Goodwill is amortized over 30
years for the Alpha acquisition and 40 years for the Merfin acquisition.
(g) Adjustment to record the income tax effects at the applicable statutory
rate, except as to amortization of goodwill which generates no tax benefit.
F-46
<PAGE> 130
- ------------------------------------------------------
- ------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND THE
ACCOMPANYING LETTER OF TRANSMITTAL, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. NEITHER THIS PROSPECTUS, NOR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR
BOTH TOGETHER, NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE
AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF. NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF
TRANSMITTAL, OR BOTH TOGETHER, CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY 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>
Summary................................ 1
Risk Factors........................... 11
Forward-Looking Statements............. 15
The Exchange Offer..................... 16
Use of Proceeds........................ 23
Capitalization......................... 24
Selected Consolidated Financial Data... 25
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 28
Business............................... 32
Management............................. 39
Certain Relationships and Related
Transactions......................... 40
Description of Certain Indebtedness.... 41
Description of the Exchange Notes...... 43
Certain United States Federal Income
Tax Considerations................... 74
Plan of Distribution................... 76
Legal Matters.......................... 77
Experts................................ 77
Available Information.................. 77
Incorporation of Documents by
Reference............................ 78
Index to Consolidated Financial
Statements........................... F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
[Buckeye Technologies Inc. Logo]
BUCKEYE TECHNOLOGIES INC.
OFFER TO EXCHANGE ITS
8% SENIOR SUBORDINATED NOTES
DUE 2010 WHICH HAVE BEEN
REGISTERED UNDER THE
SECURITIES ACT OF 1933,
AS AMENDED, FOR ANY AND ALL
OF ITS OUTSTANDING 8% SENIOR SUBORDINATED NOTES
DUE 2010
------------
PROSPECTUS
, 1998
------------
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 131
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company is incorporated under the laws of the State of Delaware.
Section 145 of the General Corporation Law of the State of Delaware ("Section
145") provides that a Delaware corporation may indemnify any 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
amount 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
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.
II-1
<PAGE> 132
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <C> <S>
3.1 -- Second Amended and Restated Certificate of Incorporation,
previously filed and incorporated herein by reference from
the Company's *****
3.1(a) -- Articles of Amendment to the Second Amended and Restated
Certificate of Incorporation of Registrant
3.2 -- Amended and Restated Bylaws of the Company*
4.1 -- Indenture for 8 1/2% Senior Subordinated Notes due 2005,
dated November 28, 1995*
4.2 -- Indenture for 9 1/4% Senior Subordinated Notes due 2008,
dated July 2, 1996**
4.3 -- Indenture for the 8% Senior Subordinated Notes due 2010,
dated June 11, 1998, by and between the Company and Union
Planters Bank, N.A., Trustee
4.4 -- Form of Note (included in Exhibit 4.3 hereto)
4.5 -- Registration Rights Agreement, dated as of June 8, 1998,
between the Company and the Placement Agents
5.1 -- Opinion of Baker, Donelson, Bearman & Caldwell
10.1 -- 1995 Management Stock Option Plan of the Registrant*
10.2 -- Amended and Restated 1995 Incentive and Nonqualified Stock
Option Plan for Management Employees of the Registrant
10.3 -- Form of Management Stock Option Subscription Agreement*
10.4 -- Form of Stock Option Subscription Agreement*
10.5 -- The Formula Plan for Non-Employee Directors**
10.6 -- Offer to Purchase for Cash all of the Common Shares of
Merfin International Inc. at a price of Cdn. $6.00 per
Common Share by Buckeye Acquisition Inc. dated March 25,
1997***
10.7 -- Notice of Variation of the Offer to Purchase for Cash all of
the Common Shares of Merfin International Inc. at a price of
Cdn. $6.00 per Common Share by Buckeye Acquisition, Inc.
dated April 15, 1997***
10.8 -- Second Notice of Variation of the Offer to Purchase for Cash
all of the Common Shares of Merfin International Inc. at an
increased price of Cdn. $6.50 per Common Share by Buckeye
Acquisition Inc. dated April 25, 1997***
10.9 -- Third Notice of Variation of the Offer to Purchase for Cash
all of the Common Shares of Merfin International Inc. at an
increased price of $7.00 per Common Share by Buckeye
Acquisition Inc. dated May 5, 1997***
10.10 -- Fourth Notice of Variation of the Offer to Purchase for Cash
all of the Common Shares of Merfin International Inc. at an
increased price of $7.50 per Common Share by Buckeye
Acquisition Inc. dated May 15, 1997***
10.11 -- Credit Agreement dated as of May 28, 1997 among the
Registrant, Fleet National Bank; SunTrust Bank, Central
Florida, N.A.; Toronto Dominion (Texas), Inc.; and the other
lenders party thereto****
12.1 -- Computation of Ratio of Earnings to Fixed Charges
21.1 -- Subsidiaries of the Registrant
</TABLE>
II-2
<PAGE> 133
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <C> <S>
23.1 -- Consent of Baker, Donelson, Bearman & Caldwell (included in
Exhibit 5.1)
23.2 -- Consent of Ernst & Young LLP
23.3 -- Consent of PriceWaterhouseCoopers
24.1 -- Powers of Attorney (included on signature page hereto)
25.1 -- Statement of Eligibility and Qualification of Trustee under
the Trust Indenture Act of 1939 on Form T-1
99.1 -- Form of Letter of Transmittal
</TABLE>
* Incorporated by reference to the Registrant's Registration Statement on
Form S-1, file No. 33-9736, 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-3, File No. 33-05139, as filed with the Securities and Exchange
Commission on June 4, 1996 and as amended on June 11, 1996 and June 27,
1996.
*** Incorporated by reference to the Registrant's Current Report on Form 8-K
dated June 10, 1997.
**** Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended June 30, 1997.
***** Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the quarterly period ended December 31, 1997.
(b) Financial Statement Schedules --
Schedule II -- Valuation and Qualifying Accounts
(c) Not Applicable
ITEM 22. UNDERTAKINGS
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 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.
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 Securities and Exchange 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 for 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.
II-3
<PAGE> 134
(b) The undersigned Registrant hereby undertakes:
(l) to file, during any period in which offers or sales of the
securities are being made, a post-effective amendment to this Registration
Statement:
(i) to include any Prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect any facts or events arising after the effective
date (or most recent post-effective amendment) which, individually, or
in the aggregate, represent a fundamental change in the information set
forth in the Registration Statement;
(iii) to include any material information with respect to the plan
of distribution not previously disclosed or any material change to such
information set forth in the Registration Statement.
Provided, however,that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the registration statement is on Form S-3, Form S-8, and the information
required [or] to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant
pursuant to section 13 or section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement.
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment shall be deemed to be
a new Registration Statement relating to the securities offered therein and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(c) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or 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.
(d) The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(e) The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (d) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(f) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Proxy
Statement-Prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request.
(g) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-4
<PAGE> 135
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Memphis,
State of Tennessee on July 9, 1998.
BUCKEYE TECHNOLOGIES INC.
By: /s/ ROBERT E. CANNON
------------------------------------
Robert E. Cannon
Chief Executive Officer and Chairman
of the Board
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Robert E. Cannon and David B. Ferraro and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities (including his capacity as a director and/or officer of
Buckeye Technologies Inc. (The "Company")), to sign any or all amendments
(including post-effective amendments) to this Registration Statement on Form S-4
of the Company relating to the exchange offer (the "Offering") by the Company to
exchange its 8% Senior Subordinated Notes due 2010 for new notes, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their or
his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
NAME POSITION DATE
---- -------- ----
<C> <S> <C>
/s/ ROBERT E. CANNON Chief Executive Officer, July 9, 1998
- ----------------------------------------------------- Chairman of the Board and
Robert E. Cannon Director (Principal executive
officer)
/s/ DAVID B. FERRARO President, Chief Operating July 9, 1998
- ----------------------------------------------------- Officer and Director (Principal
David B. Ferraro financial officer)
/s/ DAVID H. WHITCOMB Senior Vice President, Finance July 9, 1998
- ----------------------------------------------------- and Accounting (Principal
David H. Whitcomb accounting officer)
/s/ R. HOWARD CANNON Director July 9, 1998
- -----------------------------------------------------
R. Howard Cannon
/s/ RED CAVANEY Director July 9, 1998
- -----------------------------------------------------
Red Cavaney
Director July , 1998
- -----------------------------------------------------
Henry F. Frigon
</TABLE>
II-5
<PAGE> 136
<TABLE>
<CAPTION>
NAME POSITION DATE
---- -------- ----
<C> <S> <C>
/s/ SAMUEL M. MENCOFF Director July 9, 1998
- -----------------------------------------------------
Samuel M. Mencoff
/s/ HARRY J. PHILLIPS, SR. Director July 8, 1998
- -----------------------------------------------------
Harry J. Phillips, Sr.
</TABLE>
II-6
<PAGE> 137
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN B COLUMN C COLUMN D COLUMN E
---------- ----------------------- ---------- ----------
ADDITIONS
-----------------------
CHARGED TO
BALANCE AT CHARGED TO OTHER (A) BALANCE AT
BEGINNING COSTS AND ACCOUNTS DEDUCTIONS END OF
DESCRIPTION OF PERIOD EXPENSES --DESCRIBE --DESCRIBE PERIOD
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year Ended June 30, 1997
Deducted from asset accounts:
Allowance for doubtful accounts....... $ 980 $ -- $591(b) $ (249) $1,322
====== ==== ==== ======= ======
Year Ended June 30, 1996
Deducted from asset accounts:
Allowance for doubtful accounts....... $1,152 $ -- $ -- $ (172) $ 980
====== ==== ==== ======= ======
Year Ended June 30, 1995
Deducted from asset accounts:
Allowance for doubtful accounts....... $2,494 $500 $ -- $(1,842) $1,152
====== ==== ==== ======= ======
</TABLE>
- ---------------
(a) Uncollectible accounts written off, net of recoveries.
(b) Acquired allowance for doubtful accounts at the date of acquisition.
II-7
<PAGE> 138
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <C> <S>
3.1 -- Second Amended and Restated Certificate of Incorporation,
previously filed and incorporated herein by reference from
the Company's *****
3.1(a) -- Articles of Amendment to the Second Amended and Restated
Certificate of Incorporation of Registrant
3.2 -- Amended and Restated Bylaws of the Company*
4.1 -- Indenture for 8 1/2% Senior Subordinated Notes due 2005,
dated November 28, 1995*
4.2 -- Indenture for 9 1/4% Senior Subordinated Notes due 2008,
dated July 2, 1996**
4.3 -- Indenture for the 8% Senior Subordinated Notes due 2010,
dated June 11, 1998, by and between the Company and Union
Planters Bank, N.A., Trustee
4.4 -- Form of Note (included in Exhibit 4.3 hereto)
4.5 -- Registration Rights Agreement, dated as of June 8, 1998,
between the Company and the Placement Agents
5.1 -- Opinion of Baker, Donelson, Bearman & Caldwell
10.1 -- 1995 Management Stock Option Plan of the Registrant*
10.2 -- Amended and Restated 1995 Incentive and Nonqualified Stock
Option Plan for Management Employees of the Registrant
10.3 -- Form of Management Stock Option Subscription Agreement*
10.4 -- Form of Stock Option Subscription Agreement*
10.5 -- The Formula Plan for Non-Employee Directors**
10.6 -- Offer to Purchase for Cash all of the Common Shares of
Merfin International Inc. at a price of Cdn. $6.00 per
Common Share by Buckeye Acquisition Inc. dated March 25,
1997***
10.7 -- Notice of Variation of the Offer to Purchase for Cash all of
the Common Shares of Merfin International Inc. at a price of
Cdn. $6.00 per Common Share by Buckeye Acquisition, Inc.
dated April 15, 1997***
10.8 -- Second Notice of Variation of the Offer to Purchase for Cash
all of the Common Shares of Merfin International Inc. at an
increased price of Cdn. $6.50 per Common Share by Buckeye
Acquisition Inc. dated April 25, 1997***
10.9 -- Third Notice of Variation of the Offer to Purchase for Cash
all of the Common Shares of Merfin International Inc. at an
increased price of $7.00 per Common Share by Buckeye
Acquisition Inc. dated May 5, 1997***
10.10 -- Fourth Notice of Variation of the Offer to Purchase for Cash
all of the Common Shares of Merfin International Inc. at an
increased price of $7.50 per Common Share by Buckeye
Acquisition Inc. dated May 15, 1997***
10.11 -- Credit Agreement dated as of May 28, 1997 among the
Registrant, Fleet National Bank; SunTrust Bank, Central
Florida, N.A.; Toronto Dominion (Texas), Inc.; 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 Baker, Donelson, Bearman & Caldwell (included in
Exhibit 5.1)
23.2 -- Consent of Ernst & Young LLP
23.3 -- Consent of PriceWaterhouseCoopers
24.1 -- Powers of Attorney (included on signature page hereto)
</TABLE>
II-8
<PAGE> 139
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <C> <S>
25.1 -- Statement of Eligibility and Qualification of Trustee under
the Trust Indenture Act of 1939 on Form T-1
99.1 -- Form of Letter of Transmittal
</TABLE>
* Incorporated by reference to the Registrant's Registration Statement on
Form S-1, file No. 33-9736, 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-3, File No. 33-05139, as filed with the Securities and Exchange
Commission on June 4, 1996 and as amended on June 11, 1996 and June 27,
1996.
*** Incorporated by reference to the Registrant's Current Report on Form 8-K
dated June 10, 1997.
**** Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended June 30, 1997.
***** Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the quarterly period ended December 31, 1997.
II-9
<PAGE> 1
EXHIBIT 3.1(a)
ARTICLES OF AMENDMENT TO THE
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
BUCKEYE TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
Adopted in accordance with
the provisions of Section 242 of
the General Corporation Law of
the State of Delaware
- --------------------------------------------------------------------------------
Robert E. Cannon, being the Chairman of the Board of Buckeye
Technologies Inc., a corporation organized on December 18, 1992 as Buckeye
Specialties Corporation, and existing under and by virtue of the General
Corporation Law of the State of Delaware (the "Corporation"), does hereby
certify as follows:
1. That the Board of Directors of the Corporation, in accordance with
Section 242 of the General Corporation Law of the State of Delaware, adopted the
resolution set forth below:
RESOLVED, that paragraph (a) of Article Four of the Second
Amended and Restated Certificate of Incorporation of the Corporation be
deleted in its entirety and in lieu thereof the following paragraph
(the "Amendment") shall be substituted:
(a) The total number of shares of common stock that the
corporation shall have authority to issue is 100,000,000, par value
$.01 per share (the "Common Stock"). The total number of shares of
preferred stock that the corporation shall have authority to issue is
10,000,000, par value $.01 per share (the "Preferred Stock").
2. That the stockholders of the Corporation approved and adopted the
Amendment to the Second Amended and Restated Certificate of Incorporation in
accordance with Section 242 of the General Corporation Law of the State of
Delaware.
<PAGE> 2
3. The foregoing Amendment to the Second Amended and Restated
Certificate of Incorporation has been duly adopted pursuant to the provisions of
Section 242 of the General Corporation Law of the State of Delaware.
4. The Amendment to the Second Amended and Restated Certificate of
Incorporation shall be effective on April 9, 1998 at 12:01 a.m. Eastern Time
(the "Effective Time").
5. Notwithstanding the full adoption of the Amendment to the Second
Amended and Restated Certificate of Incorporation, the Amendment to the Second
Amended and Restated Certificate of Incorporation may be abandoned at any time
prior to the Effective Time with the Secretary of State of Delaware without
further action by the stockholders.
IN WITNESS WHEREOF, the undersigned, being the Chairman of the Board
hereinabove named, for the purpose of amending the Second Amended and Restated
Certificate of Incorporation of the Corporation pursuant to the General
Corporation Law of the State of Delaware, under penalties of perjury does hereby
declare and certify that this is the act and deed of the Corporation and the
facts stated herein are true, and accordingly has hereunto signed this Second
Amended and Restated Certificate of Incorporation this 7th day of April, 1998.
By: /s/ Robert E. Cannon
---------------------------------
Robert E. Cannon, Chairman
of the Board
2
<PAGE> 1
EXHIBIT 4.3
BUCKEYE TECHNOLOGIES INC., as Issuer
and
UNION PLANTERS BANK, N.A., as Trustee
_________
INDENTURE
Dated as of June 11, 1998
_________
$150,000,000
8% Senior Subordinated Notes due 2010
<PAGE> 2
Reconciliation and tie between Trust Indenture Act of 1939
and Indenture, dated as of June 11, 1998
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- --------------- ---------
<S> <C> <C>
Section 310 (a)(1) .................................................... 609
(a)(2) .................................................... 609
(b) ................................................... 607,610
Section 311 (a) ....................................................... 613
Section 312 (a) ....................................................... 701
(c) ....................................................... 702
Section 313 (a) ....................................................... 703
(c) ................................................... 703,704
Section 314 (a) ....................................................... 704
(a)(4) ................................................... 1020
(c)(1) .................................................... 103
(c)(2) .................................................... 103
(e) ....................................................... 103
Section 315 (a) .................................................... 601(b)
(b) ....................................................... 602
(c) .................................................... 601(a)
(d) ............................................... 601(c), 603
(e) ....................................................... 514
Section 316 (a) (last sentence) ....................... 101 ("Outstanding")
(a)(1)(A) ............................................. 502,512
(a)(1)(B) ................................................. 513
(b) ....................................................... 508
(c) ....................................................... 105
Section 317 (a)(1) .................................................... 503
(a)(2) .................................................... 504
(b) ...................................................... 1003
Section 318 (a) ....................................................... 108
</TABLE>
Note: This reconciliation and tie shall not, for any purpose, be deemed to be
a part of this Indenture.
i
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PARTIES ................................................................ 1
RECITALS ............................................................... 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 101. Definitions .......................................... 1
Acquired Indebtedness ................................ 2
Affiliate ............................................ 2
Asset Sale ........................................... 2
Average Life to Stated Maturity ...................... 3
Bank Credit Facility ................................. 3
Bankruptcy Law ....................................... 3
Banks ................................................ 3
Board of Directors ................................... 3
Board Resolution ..................................... 3
Business Day ......................................... 3
Capital Lease Obligation ............................. 3
Capital Stock ........................................ 4
Cash Equivalents ..................................... 4
Certified Securities ................................. 4
Change in Control .................................... 4
Commission ........................................... 5
Commodity Price Protection Agreement ................. 5
Common Stock ......................................... 5
Company .............................................. 5
Company Request or Company Order ..................... 6
Consolidated Fixed Charge Coverage Ratio ............. 6
Consolidated Income Tax Expense ...................... 6
Consolidated Interest Expense ........................ 6
Consolidated Net Income (Loss) ....................... 6
</TABLE>
- ---------------------
Note: This table of contents shall not, for any purpose, be deemed to be a
part of this Indenture.
<PAGE> 4
<TABLE>
<S> <C>
Consolidated Net Worth..................................................7
Consolidated Non-cash Charges...........................................7
Consolidated Tangible Assets............................................7
Consolidation...........................................................7
Corporate Trust Office..................................................7
Currency Hedging Arrangements...........................................8
Default.................................................................8
Depositary..............................................................8
Designated Senior Indebtedness..........................................8
Disinterested Director..................................................8
Event of Default........................................................8
Exchange Act............................................................8
Exchange Certificated Securities........................................8
Exchange Global Securities..............................................8
Exchange Offer Registration.............................................8
Exchange Securities.....................................................8
Existing Notes Indentures...............................................9
Existing Notes..........................................................9
Existing Senior Notes...................................................9
Existing Senior Subordinated Notes......................................9
Fair Market Value.......................................................9
Fenholloway River.......................................................9
Final Memorandum........................................................9
Generalll Accepted Accounting Priniples or GAAP.........................9
Global Securities.......................................................9
Guarantee...............................................................9
Guaranteed Debt.........................................................9
Guarantor..............................................................10
Holder.................................................................10
Indebtedness...........................................................10
Indenture..............................................................11
Indenture Obligations..................................................11
Initial Certificated Securities........................................11
Initial Global Security................................................11
Initial Securities.....................................................11
Initial Placement......................................................11
Inerest Payment Date...................................................11
Interest Rate Agreements...............................................11
Investment.............................................................11
Lien...................................................................12
Maturity...............................................................11
Moody's................................................................12
Net Cash Proceeds......................................................12
Officers' Certificate..................................................13
Opinion of Counsel.....................................................13
Opinion of Independent Counsel.........................................13
Outstanding............................................................13
Pari Passu Indebtedness................................................14
</TABLE>
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<TABLE>
<S> <C> <C>
Paying Agent .................................................................. 14
Permitted Holders ............................................................. 14
Permitted Indebtedness ........................................................ 14
Permitted Investment .......................................................... 16
Permitted Lien ................................................................ 16
Permitted Subsidiary Indebtedness ............................................. 17
Person ........................................................................ 17
Placement Agents .............................................................. 17
Placement Agreement ........................................................... 17
Predecessor Security .......................................................... 17
Preferred Stock ............................................................... 17
Private Placement Legends ..................................................... 17
Public Equity Offering ........................................................ 17
Purchase Money Obligation ..................................................... 17
Qualified Capital Stock ....................................................... 18
Redeemable Capital Stock ...................................................... 18
Redemption Date ............................................................... 18
Redemption Price .............................................................. 18
Registrar ..................................................................... 18
Registration Rights Agreement ................................................. 18
Regular Record Date ........................................................... 18
Responsible Officer ........................................................... 18
Rule 144 ...................................................................... 19
Rule 144A ..................................................................... 19
S&P ........................................................................... 19
Securities .................................................................... 19
Securities Act ................................................................ 19
Senior Indebtedness ........................................................... 19
Senior Note Indenture ......................................................... 20
Senior Representative ......................................................... 20
Senior Subordinated Notes due 2005 ............................................ 20
Senior Subordinated Notes due 2008 ............................................ 20
Senior Subordinated Notes due 2005 Indenture .................................. 20
Senior Subordinated Notes due 2008 Indenture .................................. 20
Shelf Registration Statement .................................................. 20
Special Record Date ........................................................... 20
Stated Maturity ............................................................... 20
Subordinated Indebtedness ..................................................... 20
Subsidiary .................................................................... 20
Trust Indenture Act ........................................................... 21
Trustee ....................................................................... 21
Unrestricted Subsidiary ....................................................... 21
Unrestricted Subsidariy Indebtedness .......................................... 21
Voting Stock .................................................................. 22
Wholly Owned Subsidiary ....................................................... 22
Section 102. Other definitions ............................................................. 22
Section 103. Compliance Certificates and Opinions .......................................... 23
Section 104. Form of Documents Delivered to Trustee ........................................ 24
</TABLE>
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<TABLE>
<S> <C> <C> <C>
Section 105 Acts of Holders ....................................... 24
Section 106 Notices, etc., to the Trustee and the Company ......... 26
Section 107 Notice to Holders; Waiver ............................. 26
Section 108 Conflict with Trust Indenture Act ..................... 27
Section 109 Effect of Headings and Table of Contents .............. 27
Section 110 Successors and Assigns ................................ 27
Section 111 Separability Clause ................................... 27
Section 112 Benefits of Indenture ................................. 27
Section 113 GOVERNING LAW ......................................... 27
Section 114 Legal Holidays ........................................ 28
Section 115 Independence of Covenants ............................. 28
Section 116 Schedules and Exhibits ................................ 28
Section 117 Counterparts .......................................... 28
ARTICLE TWO
SECURITY FORMS
Section 201 Forms Generally ....................................... 28
Section 202 Form of Face of Security .............................. 31
Section 203 Form of Reverse of Securities ......................... 31
ARTICLE THREE
THE SECURITIES
Section 301 Title and Terms ....................................... 32
Section 302 Denominations ......................................... 33
Section 303 Execution, Authentication, Delivery and Dating ........ 33
Section 304 Temporary Securities .................................. 34
Section 305 Registration, Registration of Transfer and Exchange ... 35
Section 306 Mutilated, Destroyed, Lost and Stolen Securities ...... 39
Section 307 Payment of Interest; Interest Rights Preserved ........ 39
Section 308 Persons Deemed Owners ................................. 41
Section 309 Cancellation .......................................... 41
Section 310 Computation of Interest ............................... 41
Section 311 CUSIP Numbers ......................................... 41
ARTICLE FOUR
DEFEASANCE AND COVENANT DEFEASANCE
Section 401 Company's Option to Effect Defeasance or Covenant
Defeasance ............................................ 42
Section 402 Defeasance and Discharge .............................. 42
Section 403 Covenant Defeasance ................................... 42
Section 404 Conditions to Defeasance or Covenant Defeasance ....... 43
Section 405 Deposited Money and U.S. Government Obligations to Be
Held in Trust; Other Miscellaneous Provisions ......... 45
Section 406 Reinstatement ......................................... 46
</TABLE>
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<PAGE> 7
ARTICLE FIVE
REMEDIES
<TABLE>
<S> <C> <C> <C>
Section 501 Events of Default ..................................... 47
Section 502 Acceleration of Maturity; Recession and Annulment ..... 49
Section 503 Collection of Indebtedness and Suits for Enforcement
by Trustee ........................................... 50
Section 504 Trustee May File Proofs of Claim ...................... 51
Section 505 Trustee May Enforce Claims without Possession of
Securities ............................................ 51
Section 506 Application of Money Collected ........................ 51
Section 507 Limitation on Suits ................................... 52
Section 508 Unconditional Right of Holders to Receive Principal,
Premium and Interest .................................. 53
Section 509 Restoration or Rights and Remedies .................... 53
Section 510 Rights and Remedies Cumulative ........................ 53
Section 511 Delay or Omission Not Waiver .......................... 53
Section 512 Control by Holders .................................... 54
Section 513 Waiver of Past Defaults ............................... 54
Section 514 Undertaking for Costs ................................. 54
Section 515 Waiver of Stay, Extension or Usury Laws ............... 55
Section 516 Remedies Subject to Applicable Law .................... 55
ARTICLE SIX
THE TRUSTEE
Section 601 Duties of Trustee ..................................... 55
Section 602 Notice of Defaults .................................... 57
Section 603 Certain Rights of Trustee ............................. 57
Section 604 Trustee Not Responsible for Recitals, Dispositions
of Securities or Application of Proceeds Thereof ...... 58
Section 605 Trustee and Agents May Hold Securities; Collections;
etc. .................................................. 59
Section 606 Money Held in Trust ................................... 59
Section 607 Compensation and Indemnification of Trustee
and Its Prior Claim ................................... 59
Section 608 Conflicting Interests ................................. 60
Section 609 Corporate Trustee Required; Eligibility ............... 60
Section 610 Resignation and Removal; Appointment of
Successor Trustee ..................................... 61
Section 611 Acceptance of Appointment by Successor ................ 62
Section 612 Merger, Conversion, Consolidation or Succession
to Business ........................................... 63
Section 613 Preferential Collection of Claims Against Company ..... 63
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 701 Company to Furnish Trustee Names and Addresses
of Holders ............................................ 64
Section 702 Disclosure of Names and Addresses of Holders .......... 64
Section 703 Reports by Trustee .................................... 65
Section 704 Reports by Company .................................... 65
</TABLE>
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<TABLE>
<CAPTION>
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
<S> <C> <C>
Section 801. Company May Consolidate, etc., Only on Certain Terms ........................... 66
Section 802. Successor Substituted .......................................................... 67
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 901. Supplemental Indentures and Agreements without
Consent of Holders ............................................................. 68
Section 902. Supplemental Indentures and Agreements with Consent
of Holders ..................................................................... 69
Section 903. Execution of Supplemental Indentures ........................................... 70
Section 904. Effect of Supplemental Indentures .............................................. 70
Section 905. Conformity with Trust Indenture Act ............................................ 70
Section 906. Reference in Securities to Supplemental Indentures ............................. 70
Section 907. Notice of Supplemental Indentures .............................................. 71
Section 908. Revocation and Effect of Consents .............................................. 71
ARTICLE TEN
COVENANTS
Section 1001. Payment of Principal, Premium and Interest ..................................... 71
Section 1002. Maintenance of Office or Agency ................................................ 71
Section 1003. Money for Security Payments to Be Held in Trust ................................ 72
Section 1004. Corporate Existence ............................................................ 73
Section 1005. Payment of Taxes and Other Claims .............................................. 74
Section 1006. Maintenance of Properties ...................................................... 74
Section 1007. Insurance ...................................................................... 74
Section 1008. Limitation on Indebtedness ..................................................... 75
Section 1009. Limitation on Restricted Payments .............................................. 75
Section 1010. Limitation on Transactions with Affiliates ..................................... 79
Section 1011. Limitation on Liens ............................................................ 79
Section 1012. Limitation on Sale of Assets ................................................... 80
Section 1013. Limitation on Senior Subordinated Indebtedness ................................. 85
Section 1014. Limitation on Issuance of Guarantees of Subordinated and Pari Passu
Indebtedness ................................................................... 85
Section 1015. Restriction on Transfer of Assets .............................................. 85
Section 1016. Purchase of Securities upon a Change in Control ................................ 86
Section 1017. Limitation on Subsidiary Capital Stock ......................................... 90
Section 1018. Limitation on Dividends and Other Payment Restrictions
Affecting Subsidiaries ......................................................... 90
Section 1019. Limitation on Unrestricted Subsidiaries ........................................ 91
Section 1020. Provision of Financial Statements .............................................. 91
Section 1021. Statement by Officers as to Default ............................................ 91
Section 1022. Waiver of Certain Covenants .................................................... 92
</TABLE>
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<TABLE>
<CAPTION>
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
<S> <C> <C>
Section 1101. Rights of Redemption ................................................. 92
Section 1102. Applicability of Article ............................................. 93
Section 1103. Election to Redeem; Notice to Trustee ................................ 93
Section 1104. Selection by Trustee of Securities to Be Redeemed .................... 93
Section 1105. Notice of Redemption ................................................. 93
Section 1106. Deposit of Redemption Price .......................................... 95
Section 1107. Securities Payable on Redemption Date ................................ 95
Section 1108. Securities Redeemed or Purchased in Part ............................. 95
ARTICLE TWELVE
SUBORDINATION OF SECURITIES
Section 1201. Securities Subordinate to Senior Indebtedness ........................ 96
Section 1202. Payment Over of Proceeds Upon Dissolution, Etc. ...................... 96
Section 1203. Suspension of Payment When Senior Indebtedness
in Default ........................................................... 98
Section 1204. Payment Permitted if No Default ...................................... 99
Section 1205. Subrogation to Rights of Holders of Senior Indebtedness .............. 99
Section 1206. Provisions Solely to Define Relative Rights .......................... 99
Section 1207. Trustee to Effectuate Subordination .................................. 100
Section 1208. No Waiver of Subordination Provisions ................................ 100
Section 1209. Notice to Trustee .................................................... 101
Section 1210. Reliance on Judicial Orders or Certificates .......................... 102
Section 1211. Rights of Trustee as a Holder of Senior Indebtedness
Preservation of Trustee's Rights ..................................... 102
Section 1212. Article Applicable to Paying Agents .................................. 103
Section 1213. No Suspension of Remedies ............................................ 103
Section 1214. Trustee's Relation to Senior Indebtedness ............................ 103
ARTICLE THIRTEEN
SATISFACTION AND DISCHARGE
Section 1301. Satisfaction and Discharge of Indenture .............................. 103
Section 1302. Application of Trust Money ........................................... 104
TESTIMONIUM
SIGNATURE AND SEALS
ACKNOWLEDGEMENTS
SCHEDULE I Permitted Holders
</TABLE>
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<PAGE> 10
SCHEDULE II Existing Indebtedness
SCHEDULE III Existing Dividend Restrictions
EXHIBIT A Form of Initial Global Security
EXHIBIT B Form of Initial Certificated Security
EXHIBIT C Form of Exchange Global Security
EXHIBIT D Form of Exchange Certificated Security
EXHIBIT E Registration Rights Agreement
<PAGE> 11
INDENTURE, dated as of June 11, 1998, between Buckeye Technologies
Inc., a Delaware corporation (the "Company"), and Union Planters Bank, N.A., 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 8% Senior
Subordinated Notes due 2010 (the "Initial Securities"), of substantially the
tenor and amount hereinafter set forth, and to provide therefor and for, if and
when issued in exchange for the Initial Securities pursuant to the Indenture and
the Registration Rights Agreement, the Company's 8% Senior Subordinated Notes
due 2010 (the "Exchange Securities," and together with the Initial Securities,
the "Securities") the Company has duly authorized the execution and delivery of
this Indenture and the Securities;
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
Initial Securities by the Holders (as defined therein) 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;
(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;
<PAGE> 12
(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 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
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<PAGE> 13
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
$10 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 May 28, 1997, 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.
"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.
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<PAGE> 14
"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 "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" (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 Bank, N.A.;
provided that Union Planters Bank, N.A. has combined capital and surplus and
undivided profits of not less than $100 million.
"Certificated Securities" means the Securities issued in
definitive, fully registered and certificated form.
"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
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<PAGE> 15
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 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 Technologies Inc. (formerly known as
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.
-5-
<PAGE> 16
"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 Senior Vice President (regardless of Senior 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 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
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<PAGE> 17
calculating such net income (or loss), by excluding, without duplication, (i)
all extraordinary gains or losses (less all fees and expenses relating thereto),
(ii) the portion of net income (or loss) of such Person and its Subsidiaries on
a Consolidated basis allocable to minority interests in unconsolidated Persons
to the extent that cash dividends or distributions have not actually been
received by such Person or one of its Consolidated Subsidiaries, (iii) net
income (or loss) of any Person combined with such Person or any of its
Subsidiaries on a "pooling of interests" basis attributable to any period prior
to the date of combination, (iv) any gain or loss, net of taxes, realized upon
the termination of any employee pension benefit plan, (v) net gains (or losses)
(less all fees and expenses relating thereto) in respect of dispositions of
assets other than in the ordinary course of business, (vi) the net income of any
Subsidiary of such Person to the extent that the declaration of dividends or
similar distributions by that Subsidiary of that income is not at the time
permitted, directly or indirectly, by operation of the terms of its charter or
any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary or its stockholders, (vii)
any restoration to income of any contingency reserve, except to the extent
provision for such reserve was made out of income accrued at any time following
the date of 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
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<PAGE> 18
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.
"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.
"Depositary" means the Depository Trust Company, its nominees
and their respective successors.
"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.
"Exchange Certificated Securities" means Securities issued in
definitive, fully registered form to beneficial owners of interests in the
Exchange Global Securities pursuant to Section 305 hereof.
"Exchange Global Securities" has the meaning set forth in
Article II hereof.
"Exchange Offer Registration" has the meaning set forth in the
Registration Rights Agreement.
"Exchange Securities" has the meaning set forth in the
Recitals of the Company and more particularly means any of the Securities
authenticated and delivered under this Indenture pursuant to the Registered
Exchange Offer.
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<PAGE> 19
"Existing Notes Indentures" means the Indentures related to
the Existing Senior Notes and the Existing Senior Subordinated Notes.
"Existing Notes" means the Existing Senior Notes and the
Existing Senior Subordinated Notes.
"Existing Senior Notes" means the 10 1/4% Senior Notes Due
2001 of the Company.
"Existing Senior Subordinated Notes" means the 9 1/4% Senior
Subordinated Notes due 2008 of the Company and 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.
"Fenholloway River" means the river in Florida into which the
Company's Foley Plant discharges treated waste water.
"Final Memorandum" means the final Offering Memorandum, dated
June 8, 1998, used in connection with the Initial Placement.
"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.
"Global Securities" means the Initial Global Securities and
the Exchange Global Security.
"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)
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<PAGE> 20
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 (i) in the case of any Certificated Security,
the Person in whose name such Certificated Security is registered in the
Security Register, and (ii) in the case of any Global Security, the Depositary.
"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 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
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<PAGE> 21
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.
"Initial Certificated Securities" means Securities issued in
definitive, fully registered form to beneficial owners of interest in the
Initial Global Security pursuant to Section 305 hereof.
"Initial Global Security" has the meaning set forth in Article
II hereof.
"Initial Securities" has the meaning set forth in the Recitals
of the Company and, more particularly, means any of the Securities authenticated
and delivered under this Indenture other than pursuant to the Registered
Exchange Offer.
"Initial Placement" means the initial sales of the Securities
by the Placement Agents.
"Interest Payment Date" means the Stated Maturity of an
installment of interest on the Securities.
"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 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 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
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<PAGE> 23
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 Senior Vice President (regardless of
Senior 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.
"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;
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<PAGE> 24
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.
"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) $225 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;
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(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 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 environmental expenditures related to the Fenholloway River,
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 $10 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;
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<PAGE> 26
(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
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 $50 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 $5 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; and (ix) in
addition to Investments described in clauses (i) through (viii) of this
definition of "Permitted Investments," Investments valued at Fair Market Value
at the time made not to exceed $30 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.
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<PAGE> 27
"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.
"Placement Agents" means the Placement Agents, as such item is
defined in the Placement Agreement.
"Placement Agreement" means the Placement Agreement relating
to the Securities, dated June 8, 1998, among the Company and the Placement
Agents.
"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.
"Private Placement Legends" means the legends in the form set
forth in Article II hereof.
"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
(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
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<PAGE> 28
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.
"Registrar" means any Person (including the Company)
authorized by the Company to maintain the Security Register.
"Registration Rights Agreement" means the Registration Rights
Agreement relating to the Securities, dated June 8, 1998 among the Company and
the Placement Agents, and attached hereto as Exhibit E.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the April 1 or October 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, including any vice president, assistant vice
president, assistant secretary, or any other officer or assistant
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<PAGE> 29
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.
"Rule 144" means Rule 144 under the Securities Act (including
any successor regulation thereto), as it may be amended from time to time.
"Rule 144A" means Rule 144A under the Securities Act
(including any successor regulation thereto), as it may be amended from time to
time.
"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 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 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
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<PAGE> 30
Subsidiaries and (viii) that portion of any Indebtedness which at the time of
issuance is issued in violation of this Indenture.
"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.
"Senior Representative" means a representative of one or more
holders of Designated Senior Indebtedness.
"Senior Subordinated Notes due 2005" means the Company's 8
1/2% Senior Subordinated Notes due 2005.
"Senior Subordinated Notes due 2008" means the Company's 9
1/4% Senior Subordinated Notes due 2008.
"Senior Subordinated Notes due 2005 Indenture" means the
Indenture dated November 25, 1995 between the Company and Union Planters
National Bank, as trustee, relating to the Senior Subordinated Notes due 2005.
"Senior Subordinated Notes due 2008 Indenture" means the
Indenture dated July 2, 1996 between the Company and Union Planters National
Bank, as trustee, relating to the Senior Subordinated Notes due 2008.
"Shelf Registration Statement" has the meaning set forth in
the Registration Rights Agreement.
"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.
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"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 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
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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.
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
"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>
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<PAGE> 33
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> 34
(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.
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.
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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 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
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<PAGE> 36
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 38112, Attention: Sheila Jordan Cunningham, or at any other
address previously furnished in writing to the Trustee by the Company.
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.
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<PAGE> 37
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.
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).
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<PAGE> 38
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.
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.
(a) The Initial Securities and the Trustee's certificate
of authentication thereon shall be in substantially the forms set forth in
Exhibit A or Exhibit B hereto, as applicable, which are hereby incorporated in
and expressly made a part of this Indenture. The Exchange Securities and the
certificate of authentication of the Trustee thereon shall be substantially in
the form of Exhibit C or Exhibit D hereto, as applicable, which are hereby
incorporated in and expressly
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<PAGE> 39
made a part of this Indenture. The Securities may have 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.
(b) Initial Securities shall be issued initially in the form of a
permanent, global note in definitive, fully registered form, without coupons,
substantially in the form of Exhibit A hereto (the "Initial Global Security").
Upon issuance, such Initial Global Security shall be duly executed by the
Company and authenticated by the Trustee as hereinafter provided and deposited
with the Trustee as custodian for the Depositary. Any Initial Certificated
Security that may be issued pursuant to Section 305 hereof, shall be issued in
the form of a note in definitive, fully registered form, without coupons,
substantially in the form set forth in Exhibit B hereto. Upon issuance, any such
Initial Certificated Security shall be duly executed by the Company and
authenticated by the Trustee as hereinafter provided.
(c) In the event Exchange Securities are issued pursuant to an
Exchange Offer Registration in exchange for Initial Securities held in the form
of the Initial Global Security, such Exchange Securities shall be issued
initially in the form of a permanent global note in definitive, fully registered
form, without coupons, substantially in the form set forth in Exhibit C hereto
(the "Exchange Global Security"). Upon issuance, such Exchange Global Security
shall be duly executed by the Company and authenticated by the Trustee as
hereinafter provided and deposited with the Trustee as custodian for the
Depositary. Any Exchange Certificated Security that may be issued pursuant to
Section 305 hereof or in exchange for Initial Certificated Securities pursuant
to a Registered Exchange Offer, shall be issued in the form of a note in
definitive, fully registered form, without coupons, substantially in the form
set forth in Exhibit D hereto. Upon issuance, any such Exchange Certificate
Securities shall be duly executed by the Company and authenticated by the
Trustee as hereinafter provided.
(d) The following legends shall appear on each Global Security and
each Certificated Security as indicated below:
(i) Except as provided in Section 305 hereof, each
Initial Global Security and Initial Certificated Security shall bear
the following legend on the face thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH BELOW. BY
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<PAGE> 40
ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) OR (B) IT IS AN "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3), OR (7)
UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT
IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS
AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR
OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER
THEREOF OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED
STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH
RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED
STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S.
BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM THE TRUSTEE FOR THIS SECURITY),
(D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM
THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS
SECURITY, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO
THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS
OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE
TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S
UNDER THE SECURITIES ACT.
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(ii) Each Global Security shall bear the following legend
on the face thereof:
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY TO BUCKEYE TECHNOLOGIES, INC.
OR THE REGISTRAR FOR REGISTRATION OF TRANSFER OR EXCHANGE AND
ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER ENTITY AS HAS BEEN REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY
PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY
AS HAS BEEN REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFER OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, AND NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST
COMPANY OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE
AND TRANSFERS OF INTERESTS IN THIS GLOBAL NOTE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN SECTION 305 OF THE INDENTURE, DATED AS OF JUNE 8,
1998, BETWEEN BUCKEYE TECHNOLOGIES, INC. AND THE TRUSTEE NAMED
THEREIN, PURSUANT TO WHICH THIS NOTE WAS ISSUED.
(e) 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 determined by the officers executing such
Securities, as evidenced by their execution of such Securities.
Section 202. Form of Face of Security.
See Exhibit A.
Section 203. Form of Reverse of Securities.
See Exhibit A.
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ARTICLE THREE
THE SECURITIES
Section 301. Title and Terms.
The Securities may be issued in two series, a series of
Initial Securities and a series of Exchange Securities. The aggregate principal
amount of Securities which may be authenticated and delivered under this
Indenture is limited to $150,000,000 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 "8% Senior
Subordinated Notes due 2010" of the Company. The Stated Maturity of the
Securities shall be October 15, 2010, and the Securities shall each bear
interest at the rate of 8% from June 11, 1998, or from the most recent Interest
Payment Date to which interest has been paid, as the case may be, payable
semiannually on April 15 and October 15, in each year, commencing October 15,
1998, 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.
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.
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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 Senior 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.
Upon compliance by the Company with the provisions of the previous
paragraph, the Trustee shall, upon receipt of a Company Order requesting such
action, authenticate (a) Initial Securities for original issuance in an
aggregate principal amount not to exceed $150,000,000 in the form of the Initial
Global Security or (b) Exchange Securities for issuance pursuant to an Exchange
Offer Registration for Initial Securities in a principal amount equal to the
principal amount of Initial Securities exchanged in such registered Exchange
Offer. Such Company Order shall specify the amount of Securities to be
authenticated and the date on which, in the case of clause (a) above, the
Initial Securities or, in the case of clause (b) above, the Exchange Securities
are to be authenticated and shall further provide instructions concerning
registration, amounts for each Holder and delivery.
Upon the occurrence of any event specified in Section 305 hereof and
compliance by the Company with the provisions of the paragraph preceding the
immediately preceding paragraph, the Company shall execute and the Trustee shall
authenticate and deliver to each beneficial owner identified by the Depositary,
in exchange for such beneficial owner's interest in the Initial Global Security
or Exchange Global Security, as the case may be, Initial Certificated Securities
or Exchange Certificated Securities, as the case may be, representing Securities
theretofore represented by the Initial Global Security or Exchange Global
Security, as the case may be.
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.
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
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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.
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
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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 alike
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.
(a) The following provisions of this paragraph (a) are applicable
only to Initial Securities:
(i) By its acceptance of any Initial Security represented
by a certificate bearing the Private Placement Legend, each Holder of,
and beneficial owner of an interest in, such Initial Security
acknowledges the restrictions on transfer of such Initial Security set
forth in the Private Placement Legend and under the heading "Transfer
Restrictions" in the Final Memorandum and agrees that it will transfer
such Initial Security only in accordance with the Private Placement
Legend and the restrictions set forth under the heading "Transfer
Restrictions" in the Final Memorandum.
(ii) In connection with any transfer of an Initial
Security bearing the Private Placement Legend other than to a Person
whom the Holder reasonably believes to be a "qualified institutional
buyer" under the Securities Act, such Holder shall deliver to the
Company such satisfactory evidence, which may include an opinion of
independent counsel licensed to practice law in the State of New York,
as reasonably may be requested by the Company to confirm that such
transfer is being made in accordance with the limitations set forth in
the Private Placement Legend. In the event the Company reasonably
determines that any such transfer is not in accordance with the Private
Placement Legend, the Company shall so inform the Registrar who shall
not register such transfer; provided that the Registrar shall not be
required to determine (but may rely on a determination made by the
Company with respect to) the sufficiency of any such evidence.
(iii) Upon the registration of transfer, exchange or
replacement of an Initial Security not bearing the Private Placement
Legend, the Trustee shall deliver an Initial Security or Initial
Securities that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of an Initial Security bearing the
Private Placement Legend, the Trustee shall deliver an Initial Security
or Initial Securities bearing the Private Placement Legend, unless such
legend may be removed from such Security as provided in the next
sentence. The Private Placement Legend may be removed from an Initial
Security if there is delivered to the Company such satisfactory
evidence, which may include an opinion of independent counsel licensed
to practice law in the State of
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<PAGE> 46
New York, as reasonably may be requested by the Company to confirm that
neither such legend nor the restrictions on transfer set forth therein
are required to ensure that transfers of such Initial Security will not
violate the registration and prospect us delivery requirements of the
Securities Act; provided that the Trustee shall not be required to
determine (but may rely on a determination made by the Company with
respect to) the sufficiency of any such evidence. Upon provision of
such evidence, the Trustee shall authenticate and deliver in exchange
for such Initial Security an Initial Security or Initial Securities
(representing the same aggregate principal amount of the Initial
Security being exchanged) without such legend. If the Private Placement
Legend has been removed from an Initial Security, as provided above, no
other Initial Security issued in exchange for all or any part of such
Initial Security shall bear such legend, unless the Company has
reasonable cause to believe that such other Initial Security represents
a "restricted security" within the meaning of Rule 144 and instructs
the Trustee in writing to cause a legend to appear thereon.
(iv) The Company shall deliver to the Trustee, and the
Trustee shall retain for two years, copies of all documents received
pursuant to this Section 305. The Company shall have the right to
inspect and make copies of all such documents at any reasonable time
upon the giving of reasonable written notice to the Trustee.
(b) Any Initial Securities which are presented to the Registrar
for exchange pursuant to an Exchange Offer Registration shall be exchanged for
Exchange Securities or equal principal amount upon surrender to the Registrar of
the Initial Securities to be exchanged in accordance with the terms of the
Exchange Offer Registration; provided that the Initial Securities so surrendered
for exchange are duly endorsed and accompanied by a letter of transmittal or
written instrument of transfer in form satisfactory to the Company, the Trustee
and the Registrar and duly executed by the Holder thereof or such Holder's
attorney who shall be duly authorized in writing to execute such document on
behalf of such Holder. Whenever any Initial Securities are so surrendered for
exchange, the Company shall execute, and the Trustee shall authenticate and
deliver to the surrendering Holder thereof Exchange Securities in the same
aggregate principal amount as the Initial Securities so surrendered.
(c) The Initial Global Security or Exchange Global Security, as
the case may be, shall be exchanged by the Company for one or more Initial
Certificated Securities or Exchange Certificated Securities, as the case may be,
if (a) the Depositary (i) has notified the Company that it is unwilling or
unable to continue as, or ceases to be, a clearing agency registered under
Section 17A of the Exchange Act and (ii) a successor to the Depositary
registered as a clearing agency under Section 17A of the Exchange Act is not
able to be appointed by the Company within 20 calendar days or (b) the
Depositary is at any time unwilling or unable to continue as Depositary and a
successor to the Depositary is not able to be appointed by the Company within 90
calendar days. If an Event of Default occurs and is continuing, the Company
shall, at the request of the Holder thereof, exchange all or part of the Initial
Global Security or Exchange Global Security, as the case may be, for one or more
Initial Certificated Securities or Exchange
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Certificated Securities, as the case may be; provided that the principal amount
of each of such Initial Certificated Securities or Exchange Certificated
Securities, as the case may be, and such Global Security, after such exchange,
shall be $1,000 or an integral multiple thereof. Whenever a Global Security is
exchanged as a whole for one or more Initial Certificated Securities or Exchange
Certificated Securities, as the case may be, it shall be surrendered by the
Holder thereof to the Trustee for cancellation. Whenever a Global Security is
exchanged in part for one or more Initial Certificated Securities or Exchange
Certificated Securities, as the case may be, it shall be surrendered by the
Holder thereof to the Trustee and the Trustee shall make the appropriate
notations thereon. All Initial Certificated Securities or Exchange Certificated
Securities, as the case may be, issued in exchange for a Global Security or any
portion thereof shall be registered in such names, and delivered, as the
Depositary shall instruct the Trustee. Any Initial Certificated Securities
issued pursuant to this Section 305 shall include the Private Placement Legend,
except as set forth in this Section 305 hereof. Interests in a Global Security
may not be exchanged for Certificated Securities other than as provided in this
Section 305.
(d) No service charge shall be made for any registration of
transfer or exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer of Securities (other than in
respect of an Exchange Offer Registration, except as provided in the
Registration Rights Agreement).
(e) All Securities issued upon any registration of transfer or
exchange pursuant to the terms of this Indenture will evidence the same debt and
will be entitled to the same benefits under this Indenture as the Securities
surrendered for such registration of transfer or exchange.
(f) Prior to the effectiveness under the Securities Act of a Shelf
Registration Statement, or at any time during the suspension or following the
termination thereof, Holders of Initial Securities (or holders of interests
therein) and prospective purchasers designated by such Holders of Initial
Securities (or such holders of interests therein) shall have the right to obtain
from the Company upon request by such Holders (or such holders of interests) or
prospective purchasers, during any period in which the Company is not subject to
Section 13 or Section 15(d) of the Exchange Act, or is exempt from reporting
pursuant to 12g3- 2(b) under the Exchange Act, the information required by
paragraph (d)(4)(i) of Rule 144A in connection with any transfer or proposed
transfer of such Securities or interests.
(g) Any Holder of a Global Security shall, by acceptance of such
Global Security, agree that transfers of beneficial interests in such Global
Security may be effected only through a book entry system maintained by the
Holder of such Global Security (or its agent), and that ownership of a
beneficial interest in the Security represented thereby shall be required to be
reflected in book entry form. Transfers of a Global Security shall be limited to
transfers in whole and not in part, to the Depositary, its successors, and their
respective nominees. Interests of beneficial owners in a Global Security may be
transferred in accordance with the rules and procedures of the Depositary (or
its successors).
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(h) IBJ Schroder Bank and Trust Company shall initially be the
"Registrar" for the purpose of registering Securities and transfers of
Securities as herein provided. The Company shall cause the Registrar to keep, so
long as it is the Security Registrar, at its corporate office at One State
Street, New York, New York 10004, or such other office as the Registrar 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 Registrar may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. 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.
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.
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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 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
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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 "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 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
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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.
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
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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 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
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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.
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 October 15, 2003
(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
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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. 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.
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
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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 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.
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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 "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 $10 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
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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, 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).
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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 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.
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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:
(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.
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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 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, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
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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;
(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;
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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 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
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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
(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
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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).
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
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same degree of care and skill in its exercise thereof as a prudent person would
exercise or use under the circumstances in the conduct of his own affairs.
(b) except during the continuance of a Default or an
Event of Default:
(1) the Trustee need perform only those duties
as are specifically set forth in this Indenture and no
covenants or obligations shall be implied in this Indenture
that are adverse to the Trustee; 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.
(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.
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(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;
(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
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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 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
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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 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
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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 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 the provisions of this Section 609, the Trustee shall resign
immediately in the manner and with the effect hereinafter specified in this
Article.
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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 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
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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.
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
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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.
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;
(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
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(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:
(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 of 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;
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(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, sale, assignment, conveyance, transfer,
lease or other transaction and the supplemental indenture in
respect 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.
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ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 901. 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;
(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.
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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 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.
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
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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 Holder's 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.
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
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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 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
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(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 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.
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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, 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 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
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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.
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
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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 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) $50 million;
(B) 50% of the aggregate cumulative Consolidated Net Income of the
Company accrued on a cumulative basis during the period
beginning July 1, 1998 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);
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(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 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
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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;
(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 (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 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 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;
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(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 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
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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 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
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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 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.
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(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 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;
(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 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
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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 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
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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
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 borne 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.
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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 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.
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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.
(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
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(iii) 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 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.
(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
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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 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
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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 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
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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), (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
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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 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
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specifying each Default and the nature and status thereof and any actions being
taken by the Company with respect thereto.
(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 October 15, 2003, 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 35% of the aggregate principal amount of the
Securities may be redeemed at any time prior to October 15, 2001, 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 to the Holders, in amounts of $1,000 or integral multiples of $1,000, at
a redemption price equal to 108.000% 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
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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 $97.5 million 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 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.
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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;
(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.
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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 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
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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 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
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(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 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 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
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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.
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.
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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).
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.
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(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 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.
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<PAGE> 112
(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 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> 113
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.
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
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<PAGE> 114
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
(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.
* * *
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<PAGE> 115
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 TECHNOLOGIES INC.
[SEAL] By:
Name: HENRY P. DOGGRELL
Title: Senior Vice President,
Corporate Affairs
Attest:
Name: SHEILA JORDAN CUNNINGHAM
Title: Vice President and General Counsel, Corporate Secretary
UNION PLANTERS BANK, N.A., as Trustee
[SEAL] By:
Name: ROSEMARY CLARK
Title: Vice President and
Corporate Trust
Officer
Attest:
Name:
Title:
<PAGE> 116
STATE OF TENNESSEE
COUNTY OF SHELBY
On the 11th day of June, 1998, before me personally came Henry
P. Doggrell, to me known, who, being by me duly sworn, did depose and say that
he resides at 1657 Peabody, Memphis, Tennessee 38104; that he is Senior Vice
President, Corporate Affairs of Buckeye Technologies Inc., 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.
----------------------------
Notary Public
My commission expires:
<PAGE> 117
STATE OF TENNESSEE
COUNTY OF SHELBY
On the 11th day of June, 1998, before me personally came Rosemary Clark to me
known, who, being by me duly sworn, did depose and say that she resides at
Memphis, Tennessee; that she is Vice President and Corporate Trust Officer of
Union Planters Bank, N.A., 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:
<PAGE> 118
SCHEDULE I
Permitted Holders
1) Robert E. Cannon
2) Kathryn G. Cannon
3) R. Howard Cannon
4) Robert E. Cannon Grantor Retained Annuity Trust
5) Kathryn Gracey Cannon Grantor Retained Annuity Trust
6) David B. Ferraro
7) Barbara A. Ferraro
8) David B. Ferraro Grantor Retained Annuity Trust
<PAGE> 119
SCHEDULE II
Existing Indebtedness
I. Buckeye Florida, Limited Partnership has pledged certificates of
deposit in the amounts of $2,300,000 and $900,000 to Union Planters Bank, N.A.,
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 leases:
Capital Lease for Scanner with Measurex from April 1997 - April 2002.
Capital Lease for Copier with Woodchester from July 1996 - July 1999.
Capital Lease for FAX Machine with Woodchester from September 1996 -
September 1999.
Operating Lease for Copiers with Xerox Corporation from April 1997 -
April 2001
Operating Lease for Computer Hardware with Winthrop Resources from
February 1997 - February 2000
Operating Lease for Computer Hardware with Winthrop Resources from
October 1997 October 2000
Operating Lease for Computer Hardware with Winthrop Resources from
April 1998 - April 2001
Operating Lease for Computer Hardware with Winthrop Resources from
August 1998 - August 2001
Operating Lease for Personal Computer Equipment with Winthrop Resources
from June 1998 - June 2000
Operating Leases for Copiers with Xerox Corporation from November 1995
-November 2000.
Operating Leases for Forklifts with various vendors from December 1995
- August 2001.
Operating Leases for Trucks and Trailers with Ryder from May 1996 - May
2003.
<PAGE> 120
III. The Company has outstanding the following additional Indebtedness:
Indebtedness under the Company's 10 1/4% Senior Notes due 2001 of
$6,913,000.
$150,000,000 aggregate principal amount of 8 1/2% Senior Subordinated
Notes due 2005.
$100,000,000 aggregate principal amount of 9 1/4% Senior Subordinated
Notes due 2008.
Indebtedness under the Credit Agreement dated May 28, 1997, with Fleet
National Bank, as Agent, and Suntrust Bank, Central Florida, N.A., as
Documentation Agent and Toronto Dominion (Texas), Inc. as Documentation
Agent, as amended.
Indebtedness under the Credit Agreement dated April 23, 1996, between
Buckeye Cellulose GmbH and Dresdner Bank A.G., Frankfurt, Germany.
Indebtedness under the Credit Agreement dated November 6, 1997 between
the Canadian Imperial Bank of Commerce and Buckeye Canada Inc.
<PAGE> 121
SCHEDULE III
Existing Dividend Restrictions
I. Indenture dated as of May 27, 1993 between the Company and Bankers
Trust Company, as trustee, as amended November 9, 1995
II. Credit Agreement dated May 28, 1997, with Fleet National Bank as Agent,
SunTrust Bank, Central Florida, N.A., as Documentation Agent and Toronto
Dominion (Texas), Inc. as Documentation Agent.
III. Indenture dated as of November 28, 1995 between the Company and Union
Planters Bank, N.A., as Trustee, pertaining to the Company's $150,000,000 8 1/2%
Senior Subordinated Notes due 2005.
IV. Indenture dated as of July 2, 1996 between the Company and Union
Planters Bank, N.A., as Trustee, pertaining to the Company's $100,000,000 9 1/4%
Senior Subordinated Notes due 2008.
<PAGE> 122
EXHIBIT A
Form of Face of Initial Securities
Form of Reverse of Initial Securities
<PAGE> 123
EXHIBIT A
FORM OF INITIAL GLOBAL SECURITY
BUCKEYE TECHNOLOGIES INC.
No. 001 CUSIP No. 118255 AA 6
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO.
THE SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT
OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3), or (7) UNDER THE SECURITIES
ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL
ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A)
TO THE ISSUER THEREOF OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO
A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S.
BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS
AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE
FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE FOR THIS SECURITY), (D)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904
UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT
IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF
THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER
MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM OR IN A TRANSACTION NOT SUBJECT TO, THE
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<PAGE> 124
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANING GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY TO BUCKEYE TECHNOLOGIES INC. OR THE REGISTRAR FOR
REGISTRATION OF TRANSFER OR EXCHANGE AND ANY SECURITY ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR SUCH OTHER ENTITY AS HAS BEEN REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS HAS BEEN REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFER OF THIS GLOBAL SECURTIY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, AND NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF INTERESTS IN THIS
GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTION 305 OF THE INDENTURE, DATED AS OF JUNE 11,
1998, BETWEEN BUCKEYE TECHNOLOGIES INC. AND THE TRUSTEE NAMED THEREIN, PURSUANT
TO WHICH THIS SECURITY WAS ISSUED.
GLOBAL SECURITY
REPRESENTING 8% SENIOR SUBORDINATED NOTES DUE 2010
Buckeye Technologies Inc., a Delaware corporation, for value
received, hereby promises to pay to CEDE & CO., or its registered assigns, the
principal sum indicated on Schedule A hereof, on October 15, 2010.
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 by manual signature,
this Security shall not be entitled to any benefit under the Indenture or be
valid or obligatory for any purposes.
IN WITNESS WHEREOF, the Company has caused this Security to be
fully executed.
A-2
<PAGE> 125
Dated:
BUCKEYE TECHNOLOGIES INC.
By:
---------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
- -----------------------,
as Trustee, certifies that this is one of
the Securities referred to in the Indenture.
By:
-----------------------------------------
Authorized Officer
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<PAGE> 126
REVERSE SIDE OF FORM OF INITIAL GLOBAL SECURITY
BUCKEYE TECHNOLOGIES INC.
GLOBAL SECURITY
REPRESENTING 8% SENIOR SUBORDINATED NOTES DUE 2010
1. Indenture.
This Security is one of a duly authorized issue of debt
securities of the Company (as defined below) designated as its "8% Senior
Subordinated Notes due 2010" (herein called the "Securities") limited in
aggregate principal amount at Stated Maturity to $150,000,000, issued under an
indenture dated as of June 11, 1998 (as amended or supplemented from time to
time, the "Indenture") between the Company and Union Planters Bank, N.A., as
trustee (the "Trustee," which term includes any successor Trustee under the
Indenture), to which Indenture reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Trustee and each Holder of Securities and of the terms upon
which the Securities are, and are to be, authenticated and delivered. The
summary of the terms of this Security contained herein does not purport to be
complete and is qualified by reference to the Indenture. All terms used in this
Security which are not defined herein shall have the same meanings assigned to
them in the Indenture or the Registration Rights Agreement, dated June 11, 1998,
among the Company and the Placement Agents (the "Registration Rights
Agreement"), which agreement is attached to the Indenture as Exhibit E thereto.
The Indenture imposes certain limitations on the ability of
the Company to, among other things, make certain Investments and Restricted
Payments, pay dividends and other distributions, incur Indebtedness, enter into
consensual restrictions upon the payment of certain dividends and distributions
by its Subsidiaries, enter into or permit certain transactions with Affiliates,
create or incur Liens, and make Asset Sales. The Indenture also imposes
limitations on the ability of the Company to consolidate or merge with or into
any other Person or permit any other Person to merge with or into the Company,
or sell, convey, assign, transfer, lease or otherwise dispose of all or
substantially all of the Property of the Company to any other Person and on the
ability of the Company's Subsidiaries to issue Capital Stock.
2. Principal and Interest.
Buckeye Technologies Inc., a Delaware corporation (such
corporation, and its successors and assigns under the Indenture, being herein
called the "Company"), promises to pay the principal amount set forth on
Schedule A of this Security to the Holder hereof on October 15, 2010.
The Company shall pay interest at a rate of 8%, per annum,
from June 11, 1998, or from the most recent Interest Payment Date thereafter to
which interest has been paid or duly
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<PAGE> 127
provided for, semiannually on April 15 and October 15 of each year, commencing
on October 15, 1998, in cash, to the Holder hereof until the principal amount
hereof is paid or made available for payment. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, subject
to certain exceptions provided in the Indenture, be paid to the Person in whose
name this Security (or the Security in exchange or substitution for which this
Security was issued) is registered at the close of business on the Regular
Record Date for interest payable on such Interest Payment Date. The Regular
Record Date for any interest payment is the close of business on April 1 or
October 1, as the case may be, whether or not a Business Day, immediately
preceding the Interest Payment Date on which such interest is payable. Any such
interest not so punctually paid or duly provided for ("Defaulted Interest")
shall forthwith cease to be payable to the Holder on such Regular Record Date
and shall be paid as provided in Section 307 of the Indenture. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
Each payment of interest in respect of an Interest Payment
Date will include interest accrued through the day before such Interest Payment
Date. If an Interest Payment Date falls on a day that is not a Business Day, the
interest payment to be made on such Interest Payment Date will be made on the
next succeeding Business Day with the same force and effect as if made on such
Interest Payment Date, and no additional interest will accrue as a result of
such delayed payment.
If this Security is exchanged in an Exchange Offer (as such
term is defined in the Registration Rights Agreement (as defined herein)) prior
to the Regular Record Date for the first Interest Payment Date following such
exchange, accrued and unpaid interest, if any, on this Security, up to but not
including the date of issuance of the Exchange Security or Exchange Securities
issued in exchange for this Security, shall be paid on the first Interest
Payment Date for such Exchange Security or Exchange Securities to the Holder or
Holders of such Exchange Security or Exchange Securities on the first Regular
Record Date with respect to such Exchange Security or Exchange Securities. If
this Security is exchanged in an Exchange Offer subsequent to the Regular Record
Date for the first Interest Payment Date following such exchange but on or prior
to such Interest Payment Date, then any such accrued and unpaid interest with
respect to this Security and any accrued and unpaid interest on the Exchange
Security or Exchange Securities issued in exchange for this Security, through
the day before such Interest Payment Date, shall be paid on such Interest
Payment Date to the Holder of this Security on such Regular Record Date.
3. Additional Interest.
The Holder of this Security is entitled to the benefits of the
Registration Rights Agreement. If the Company fails to file a Registration
Statement within the time periods specified in the Registration Rights Agreement
or if the Exchange Offer Registration Statement or the Shelf Registration
Statement fails to become effective, then, as liquidated damages, additional
interest (the "Additional Interest") shall become payable in respect of the
Securities as follows:
(a) if (A) neither the Exchange Offer Registration Statement
nor the Shelf Registration Statement is filed with the Commission within 60 days
following the Issue Date or (B)
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<PAGE> 128
notwithstanding that the Company has consummated or will consummate an Exchange
Offer, the Company is required to file a Shelf Registration Statement and such
Shelf Registration Statement is not filed on or prior to the date required by
the Registration Rights Agreement, then commencing on the day after either such
required filing date, Additional Interest shall be paid on the principal amount
of the Securities at a rate per annum equal to 0.5% of the principal amount of
the Securities; or
(b) if (A) neither the Exchange Offer Registration Statement
nor the Shelf Registration Statement is declared effective by the Commission
within six (6) months following the Closing Date or (B) notwithstanding that the
Company has consummated or will consummate a Exchange Offer, the Company is
required to file a Shelf Registration Statement and such Shelf Registration
Statement is not declared effective by the Commission on or prior to the date
which is six (6) months following the Closing Date, then, commencing on the day
after either such required effective date, Additional Interest shall be paid on
the principal amount of the Securities at a rate per annum equal to 0.5% of the
principal amount of the Securities; or
(c) if applicable, the Shelf Registration Statement has been
declared effective and such Shelf Registration Statement ceases to be effective
at any time prior to the second anniversary of the Issue Date (other than after
such time as all Securities have been disposed of thereunder and other than
during any Suspension Period (as defined in the Registration Rights Agreement)),
then Additional Interest shall be paid on the principal amount of the Securities
at a rate per annum equal to 0.5% of the principal amount of the Securities
commencing on the day such Shelf Registration Statement ceases to be effective;
provided, however, that the Additional Interest rate on the
Securities may not exceed in the aggregate 1.5% per annum of the principal
amount; provided, further, however, that (1) upon the filing of the Exchange
Offer Registration Statement or a Shelf Registration Statement (in the case of
clause (a) above), (2) upon the effectiveness of the Exchange Offer Registration
Statement or a Shelf Registration Statement (in the case of clause (b) above),
or (3) upon the effectiveness of the Shelf Registration Statement which had
ceased to remain effective (in the case of clause (c) above). Additional
Interest on the Securities as a result of such clause (or the relevant subclause
thereof), as the case may be, shall cease to accrue and the terms of the
Securities shall revert to their original terms.
Any amounts of Additional Interest due pursuant to clause (a),
(b) or (c) above will be payable in cash on April 15 and October 15 of each
year.
Except as expressly provided in this paragraph 3, Additional
Interest shall be treated as interest and any date on which Additional Interest
is due and payable shall be treated as an Interest Payment Date, for all
purposes under this Security and the Indenture.
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<PAGE> 129
4. Method of Payment.
The Company, through the Paying Agent, shall pay interest on
this Security to the registered Holder of this Security, as provided above. The
Holder must surrender this Security to a Paying Agent to collect principal
payments. The Company will pay principal and interest in money of the United
States of America that at the time of payment is legal tender for payment of all
debts public and private. Principal and interest will be payable at the office
of the Paying Agent but, at the option of the Company, interest may be paid by
check mailed to the registered Holders at their registered addresses.
5. Paying Agent and Registrar.
Initially, IBJ Schroder Bank and Trust Company will act as the
Transfer Agent, Paying Agent and Registrar under the Indenture. The Company may,
upon written notice to the Paying Agent and Trustee, appoint and change any
Transfer Agent, Paying Agent or Registrar. The Company or any of its
subsidiaries may act as Transfer Agent, Paying Agent or Registrar.
6. Optional Redemption.
After October 15, 2003, the Securities will be subject to
redemption at the option of the Company, in whole or in part, upon not less than
30 calendar days, nor more than 60 calendar days' notice, at the prices
(expressed as percentages of principal amounts) set forth below, plus accrued
and unpaid interest thereon (if any) at the applicable Redemption Date, if
redeemed during the twelve-month period beginning Octoebr 15 of the years
indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003 104.000%
2004 102.667%
2005 101.333%
2006 and thereafter 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to October
15, 2001, the Company may redeem up to 35% of the aggregate principal amounts of
Securities with the net proceeds of one or more Equity Offerings of the Company
at a redemption price equal to 108% of the aggregate principal amount thereof,
on the date of redemption; provided, however, that, after giving effect to any
such redemption, at least $97.5 million aggregate principal amount of the
Securities remain outstanding.
7. Notice of Redemption.
At least 30 calendar days but not more than 60 calendar days
before a Redemption Date, the Company will send a notice of redemption,
first-class mail, postage prepaid, to Holders of Securities to be redeemed at
the addresses of such Holders as they appear in the Security Register.
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<PAGE> 130
If less than all of the Securities are to be redeemed at any
time, the Securities to be redeemed will be chosen by the Trustee in accordance
with the Indenture. If any Security is redeemed subsequent to a Regular Record
Date with respect to any Interest Payment Date specified above and on or prior
to such Interest Payment Date, then any accrued interest will be paid on such
Interest Payment Date to the Holder of the Security on such Regular Record Date.
If money in an amount sufficient to pay the Redemption Price of all Securities
(or portions thereof) to be redeemed on the Redemption Date is deposited with
the Paying Agent on or before the applicable Redemption Date and certain other
conditions are satisfied, interest on the Securities to be redeemed on the
applicable Redemption Date will cease to accrue.
The Securities are not subject to any sinking fund.
8. Repurchase at the Option of Holders upon Change of
Control.
Upon the occurrence of a Change of Control, each Holder of
Securities shall have the right to require the Company to purchase such Holder's
Securities, in whole, or in part in a principal amount that is an integral
multiple of $1,000, pursuant to a Change of Control Offer, at a purchase price
in cash equal to 101% of the aggregate principal amount thereof on any Change of
Control Purchase Date, plus accrued and unpaid interest, if any, to the Change
of Control Purchase Date.
Within 30 calendar days following any Change of Control, the
Company shall send, or cause to be sent, by first-class mail, postage prepaid, a
notice regarding the Change of Control Offer to each Holder of Securities. The
Holder of this Security may elect to have this Security or a portion hereof in
an authorized denomination purchased by completing the form entitled "Option of
Holder to Require Purchase" appearing below and tendering this Security pursuant
to the Change of Control Offer. Unless the Company defaults in the payment of
the Change of Control Purchase Price with respect thereto, all Securities or
portions thereof accepted for payment pursuant to the Change of Control Offer
will cease to accrue interest from and after the Change of Control Purchase
Date.
9. Repurchase at the Option of Holders upon Asset Sale.
If at any time the aggregate amount of Excess Proceeds
(including any Net Cash Proceeds to be applied to the permanent reduction of
Indebtedness represented by the Existing Senior Subordinated Notes) calculated
as of such date exceeds $15 million, the Company shall, within 30 days of the
date the amount of Excess Proceeds exceeds $15 million, use such Excess Proceeds
to make an offer to purchase (an "Asset Sale Offer") on a pro rata basis, from
all holders, outstanding Securities, Existing Senior Subordinated Notes in an
aggregate principal amount equal to the maximum principal amount that may be
purchased out of Excess Proceeds, at a purchase price (the "Offered Price") in
cash equal to (a) with respect to the Existing Notes, 100% of the Accreted Value
thereof (as defined in the relevant indenture) and (b) with respect to the
Securities, 100% of the principal amount thereof, plus, in each case, accrued
and unpaid interest, if any, to the purchase date, in accordance with the
procedures set forth in the relevant indenture. Upon completion of an
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<PAGE> 131
Asset Sale Offer (including payment of the Offered Price), any surplus Excess
Proceeds that were the subject of such offer shall cease to be Excess Proceeds,
and the Company may then use such amounts for general corporate purposes.
Within 30 calendar days of the date 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, a notice regarding the Asset Sale
Offer to each Holder of Securities. The Holder of this Security may elect to
have this Security or a portion hereof in an authorized denomination purchased
by completing the form entitled "Option of Holder to Require Purchase" appearing
below and tendering this Security pursuant to the Asset Sale Offer. Unless the
Company defaults in the payment of the Offered Price with respect thereto, all
Securities or portions thereof selected for payment pursuant to the Asset Sale
Offer will cease to accrue interest from and after the Offer Date.
10. The Global Security.
So long as this Global Security is registered in the name of
the Depositary or its nominee, members of, or participants in, the Depositary
("Agent Members") shall have no rights under the Indenture with respect to this
Global Security held on their behalf by the Depositary or the Trustee as its
custodian, and the Depositary may be treated by the Company, the Trustee and any
agent of the Company or the Trustee as the absolute owner of this Global
Security for all purposes. Notwithstanding the foregoing, nothing herein shall
(i) prevent the Company, the Trustee or any agent of the Company or the Trustee,
from giving effect to any written certification, proxy or other authorization
furnished by the Depositary or (ii) impair, as between the Depositary and its
Agent Members, the operation of customary practices governing the exercise of
the rights of a Holder of Securities.
The Holder of this Global Security may grant proxies and
otherwise authorize any Person, including Agent Members and Persons that may
hold interests in this Global Security through Agent Members, to take any action
which a Holder of Securities is entitled to take under the Indenture or the
Securities.
Whenever, as a result of optional redemption by the Company, a
Change of Control Offer, an Asset Sale Offer, a Registered Exchange Offer or an
exchange for Certificated Securities, this Global Security is redeemed,
repurchased or exchanged in part, this Global Security shall be surrendered by
the Holder thereof to the Trustee who shall cause an adjustment to be made to
Schedule A hereof so that the principal amount of this Global Security will be
equal to the portion not redeemed, repurchased or exchanged and shall thereafter
return this Global Security to such holder; provided that this Global Security
shall be in a principal amount of $1,000 or an integral multiple of $1,000.
11. The Registered Exchange Offer.
A-9
<PAGE> 132
Any Initial Securities represented by this Global Security
which are presented to the Registrar for exchange pursuant to the Exchange Offer
Registration shall be exchanged for a Global Security representing Exchange
Securities of equal principal amount upon surrender of this Global Security to
the Registrar in accordance with the terms of the Exchange Offer Registration
and the Indenture.
12. Transfer and Exchange.
By its acceptance of any Security represented by a certificate
bearing the Private Placement Legend, each Holder of, and beneficial owner of an
interest in, such a Security acknowledges the restrictions on transfer of such a
Security set forth in the Private Placement Legend and under the heading
"Transfer Restrictions" in the Final Memorandum, and agrees that it will
transfer such a Security only in accordance with the Private Placement Legend
and that it will transfer such a Security only in accordance under the heading
"Transfer Restrictions" in the Final Memorandum.
In connection with any registration of transfer of a Security
bearing the Private Placement Legend other than to a Person whom the Holder
reasonably believes to be a "qualified institutional buyer" under the Securities
Act, such Holder shall deliver to the Company such satisfactory evidence, which
may include an opinion of independent counsel licensed to practice law in the
State of New York, as reasonably may be requested by the Company to confirm that
such transfer is being made in accordance with the limitations set forth in the
Private Placement Legend. In the event the Company reasonably determines that
any such transfer is not in accordance with the Private Placement Legend, the
Company shall so inform the Registrar who shall not register such transfer;
provided that the Registrar shall not be required to determine (but may rely on
a determination made by the Company with respect to) the sufficiency of any such
evidence.
Upon the registration of transfer, exchange or replacement of
a Security not bearing the Private Placement Legend, the Trustee shall deliver a
Security that does not bear the Private Placement Legend. Upon the registration
of transfer, exchange or replacement of a Security bearing the Private Placement
Legend, the Trustee shall deliver a Security bearing the Private Placement
Legend, unless such legend may be removed from such Security as provided in the
next sentence. The Private Placement Legend may be removed from a Security if
there is delivered to the Company such satisfactory evidence, which may include
an opinion of independent counsel licensed to practice law in the State of New
York, as reasonably may be requested by the Company to confirm that neither such
legend nor the restrictions on transfer set forth therein are required to ensure
that transfers of such Security will not violate the registration and prospectus
delivery requirements of the Securities Act; provided that the Trustee shall not
be required to determine (but may rely on a determination made by the Company
with respect to) the sufficiency of any such evidence. Upon provision of such
evidence, the Trustee shall authenticate and deliver in exchange for such
Security, a Security or Securities (representing the same aggregate principal
amount of the Security being exchanged) without such legend. If the Private
Placement Legend has been removed from a Security, as provided above, no other
Security issued in exchange for all or any part of such Security
A-10
<PAGE> 133
shall bear such legend, unless the Company has reasonable cause to believe that
such other Security represents a "restricted security" within the meaning of
Rule 144 and instructs the Trustee to cause a legend to appear thereon.
The Holder of this Global Security shall, by acceptance of
this Global Security, agree that transfers of beneficial interests in this
Global Security may be effected only through a book entry system maintained by
such Holder (or its agent), and that ownership of a beneficial interest in the
Securities represented thereby shall be required to be reflected in book entry
form.
Transfers of this Global Security shall be limited to
transfers in whole, and not in part, to the Depositary, its successors and their
respective nominees. Interests of beneficial owners in this Global Security may
be transferred in accordance with the rules and procedures of the Depositary (or
its successors).
This Global Security will be exchanged by the Company for one
or more Certificated Securities if (a) the Depositary (i) has notified the
Company that it is unwilling to or unable to continue as, or ceases to be, a
clearing agency registered under Section 17A of the Exchange Act and (ii) a
successor to the Depositary registered as a clearing agency under Section 17 A
of the Exchange Act is not able to be appointed by the Company within 90
calendar days or (b) the Depositary is at any time unwilling to or unable to
continue as Depositary and a successor to the Depositary is not able to be
appointed by the Company within 90 calendar days. If an Event of Default occurs
and is continuing, the Company shall, at the request of the Holder hereof,
exchange all or part of this Global Security for one or more Certificated
Securities; provided that the principal amount of each of such Certificated
Securities and this Global Security, after such exchange, shall be $1,000 or an
integral multiple thereof. Whenever this Global Security is exchanged as a whole
for one or more Certificated Securities, it shall be surrendered by the Holder
to the Trustee for cancellation. Whenever this Global Security is exchanged in
part for one or more Certificated Securities, it shall be surrendered by the
Holder to the Trustee and the Trustee shall make the appropriate notations
thereon pursuant to Section 305 of the Indenture. All Certificated Securities
issued in exchange for this Global Security or any portion hereof shall be
registered in such names as the Depositary shall instruct the Trustee. Any
Certificated Securities issued in exchange for this Global Security shall
include the Private Placement Legend except as set forth in Section 305 of the
Indenture. Interests in this Global Security may not be exchanged for
Certificated Securities other than as provided in this paragraph.
Prior to the effectiveness of a Shelf Registration Statement
or following the suspension or termination thereof, the Holder of this Security
(or holders of interests therein) and prospective purchasers designated by such
Holder (or such holders of interests therein) shall have the right to obtain
from the Company upon request by such Holder (or such holders of interests) or
prospective purchasers, during any period in which the Company is not subject to
Section 13 or 15(d) of the Exchange Act, or exempt from reporting pursuant to
12g3-2(b) under the Exchange Act, the information required by paragraph
(d)(4)(i) of Rule 144A in connection with any transfer or proposed transfer of
such Security or interest.
A-11
<PAGE> 134
13. Denominations.
The Securities are issuable only in registered form without
coupons in denominations of $1,000 and integral multiples thereof of principal
amount.
14. Unclaimed Money.
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back to
the Company at its request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Company and not to the Trustee for payment unless such abandoned property
law designates another Person.
15. Discharge and Defeasance.
Subject to certain conditions, the Company at any time may
terminate some or all of its obligations under the Securities and the Indenture
if the Company irrevocably deposits with the Trustee money or U.S. Government
Obligations for the payment of principal and interest on the Securities to
redemption or maturity, as the case may be.
16. Amendment, Waiver.
Subject to certain exceptions set forth in the Indenture, (i)
the Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount of the Outstanding Securities
and (ii) any past Default and its consequences may be waived with the written
consent of the Holders of at least a majority in principal amount of the
Outstanding Securities. Subject to certain exceptions set forth in the
Indenture, without the consent of any Holder of Securities, the Company and the
Trustee may amend Indenture or the Securities (i) to evidence the succession of
another Person to the Company and the assumption by such successor of the
covenants of the company under the Indenture and contained in the Securities;
(ii) to add additional covenants or to surrender rights and powers conferred on
the Company; (iii) to add any additional Events of Default; (iv) to provide for
uncertificated Securities in addition to or in place of Certificated Securities;
(v) to evidence and provide for the acceptance of appointment under the
Indenture of a successor Trustee; (vi) to secure the Securities; (vii) to cure
any ambiguity in the Indenture, to correct or supplement any provision in the
Indenture which may be inconsistent with any other provision therein or to add
any other provisions with respect to matters or questions arising under the
Indenture, provided that such actions shall not adversely affect the interests
of the Holders in any material respect; or (viii) to comply with the
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act.
17. Defaults and Remedies.
A-12
<PAGE> 135
If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in principal amount of the Securities, subject to
certain limitations, may declare all the Securities to be immediately due and
payable. Certain events of bankruptcy or insolvency are Events of Default and
shall result in the Securities being immediately due and payable upon the
occurrence of such Events of Default without any further act of the Trustee or
any Holder.
Holders of Securities may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may refuse to
enforce the Indenture or the Securities unless it receives reasonable indemnity
or security. Subject to certain limitations, Holders of a majority in principal
amount of the Securities may direct the Trustee in its exercise of any trust or
power under the Indenture. The Holders of a majority in principal amount of the
outstanding Securities, by written notice to the Company and the Trustee, may
rescind any declaration of acceleration and its consequences if the rescission
would not conflict with any judgment or decree, and if all Events of Default
have been cured or waived except nonpayment of principal and interest that has
become due solely because of the acceleration.
18. Individual Rights of Trustee.
Subject to certain limitations imposed by the Trust Indenture
Act, the Trustee or any Paying Agent or Registrar, in its individual or any
other capacity, may become the owner or pledgee of Securities and may otherwise
deal with the Company or its Affiliates with the same rights it would have if it
were not Trustee, Paying Agent or Registrar, as the case may be, under the
Indenture.
19. No Recourse Against Certain Others.
No director, officer, employee, incorporator or stockholder of
the Company, as such, shall have any liability for any obligations of the
Company under the Securities or the Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation, solely by
reason of its status as a director, officer, employee, incorporator or
stockholder of the Company. By accepting a Security, each Holder waives and
releases all such liability (but only such liability) as part of the
consideration for issuance of such Security to such Holder.
20. Governing Law.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE.
The Company will furnish to any Holder of Securities upon
written request and without charge to the Holder a copy of the Indenture which
has in it the text of this Security. Requests may be made to:
A-13
<PAGE> 136
Buckeye Technologies Inc.
1001 Tillman Street
Memphis, Tennessee 38112
Attention: Sheila Jordan Cunningham
A-14
<PAGE> 137
SCHEDULE A
SCHEDULE OF PRINCIPAL AMOUNT
The initial principal amount of this Security shall be $144,735,000.00. The
following decreases/increases in the principal amount of this Security have been
made:
<TABLE>
<CAPTION>
Total Principal Notation
Amount Made by
Date of Decrease in Increase in Following Such or on
Decrease/ Principal Principal Decrease/ Behalf of
Increase Amount Amount Increase Trustee
<S> <C> <C> <C> <C>
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
</TABLE>
A-15
<PAGE> 138
ASSIGNMENT
(To be executed by the registered Holder
if such Holder desires to transfer this Security)
FOR VALUE RECEIVED _________________________ hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER TAX IDENTIFYING NUMBER OF
TRANSFEREE
----------------------------
-------------------------------------------------------------------
(Please print name and address of transferee)
-------------------------------------------------------------------
this Security, together with all right, title and interest herein, and
does hereby irrevocably constitute and appoint ______________________
Attorney to transfer this Security on the Security Register, with full
power of substitution.
--------------------------------------------------------------------
Dated:
-----------------
------------------------------- -----------------------------
Signature of Holder Signature Guaranteed:
Commercial Bank or Trust Company
Or Member Firm of the New York
Stock Exchange, Inc.
NOTICE: The signature to the foregoing Assignment must correspond to
the Name as written upon the face of this Security in every particular,
without alteration or any change whatsoever.
A-16
<PAGE> 139
OPTION OF HOLDER TO ELECT PURCHASE
(Check as appropriate)
[ ] In connection with the Change of Control Offer made pursuant to Section
_____ of the Indenture, the undersigned hereby elects to have
[ ] $__________($1,000 in principal amount or an integral multiple
thereof) of this Security
repurchased by the Company. The undersigned hereby directs the
Trustee or Paying Agent to pay it or ___________ an amount in cash
equal to 101% with respect to the principal amount indicated in the
preceding sentence or the principal amount indicated in the preceding
sentences, as the case may be, plus accrued and unpaid interest
thereon, if any, to the Change of Control Payment Date.
[ ] In connection with the Asset Sale Offer made pursuant to Section _____
of the Indenture, the undersigned hereby elects to have
[ ] $_________($1,000 in principal amount or an integral multiple
thereof) of this Security
repurchased by the Company. The undersigned hereby directs
the Trustee or Paying Agent to pay it or _____________ an amount
in cash equal to 100% with respect to the principal amount
indicated in the preceding sentence, plus accrued and unpaid
interest thereon, if any, to the Asset Sale Payment Date.
Dated:
--------------------
- ------------------------------------ ---------------------------------
Signature of Holder Signature Guaranteed:
Commercial Bank or Trust Company
Or Member Firm of the New York
Stock Exchange, Inc.
NOTICE: The signature to the foregoing Assignment must correspond to the Name as
written upon the face of this Security in every particular, without alteration
or any change whatsoever.
A-17
<PAGE> 140
EXHIBIT B
Form of Face of Initial Securities
Form of Reverse of Initial Securities
<PAGE> 141
EXHIBIT B
FORM OF INITIAL CERTIFICATED SECURITY
BUCKEYE TECHNOLOGIES INC.
No. 001 CUSIP No. UO563M AA 5
THE SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT
OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3), or (7) UNDER THE SECURITIES
ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL
ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A)
TO THE ISSUER THEREOF OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO
A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S.
BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS
AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE
FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE FOR THIS SECURITY), (D)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904
UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT
IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF
THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER
MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATIONS UNDER
THE SECURITIES ACT.
B-1
<PAGE> 142
8% SENIOR SUBORDINATED NOTES DUE 2010
Buckeye Technologies Inc., a Delaware corporation, for value
received, hereby promises to pay to CEDE & CO., or its registered assigns,
$5,265,000.00, on October 15, 2010.
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 by manual signature,
this Security shall not be entitled to any benefit under the Indenture or be
valid or obligatory for any purposes.
B-2
<PAGE> 143
IN WITNESS WHEREOF, the Company has caused this Security to be
fully executed.
Dated:
BUCKEYE TECHNOLOGIES INC.
By:
----------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
- ----------------,
as Trustee, certifies that this is one of
the Securities referred to in the Indenture.
By:
------------------------------------------
Authorized Officer
B-3
<PAGE> 144
REVERSE SIDE OF FORM OF INITIAL CERTIFICATED SECURITY
BUCKEYE TECHNOLOGIES INC.
CERTIFICATED SECURITY
8% SENIOR SUBORDINATED NOTES DUE 2010
1. Indenture.
This Security is one of a duly authorized issue of debt
securities of the Company (as defined below) designated as its "8% Senior
Subordinated Notes due 2010" (herein called the "Securities") limited in
aggregate principal amount at Stated Maturity to $150,000,000, issued under an
indenture dated as of June 11, 1998 (as amended or supplemented from time to
time, the "Indenture") between the Company and Union PlanterS Bank, N.A., as
trustee (the "Trustee," which term includes any successor Trustee under the
Indenture), to which Indenture reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Trustee and each Holder of Securities and of the terms upon
which the Securities are, and are to be, authenticated and delivered. The
summary of the terms of this Security contained herein does not purport to be
complete and is qualified by reference to the Indenture. All terms used in this
Security which are not defined herein shall have the same meanings assigned to
them in the Indenture or the Registration Rights Agreement, dated June 11, 1998,
among the Company and the Placement Agents (the "Registration Rights
Agreement"), which agreement is attached to the Indenture as Exhibit E thereto.
The Indenture imposes certain limitations on the ability of
the Company to, among other things, make certain Investments and other
Restricted Payments, pay dividends and other distributions, incur Indebtedness,
enter into consensual restrictions upon the payment of certain dividends and
distributions by its Subsidiaries, enter into or permit certain transactions
with Affiliates, create or incur Liens, and make Asset Sales. The Indenture also
imposes limitations on the ability of the Company to consolidate or merge with
or into any other Person or permit any other Person to merge with or into the
Company, or sell, convey, assign, transfer, lease or otherwise dispose of all or
substantially all of the Property of the Company to any other Person and on the
ability of the Company's Subsidiaries to issue Capital Stock.
2. Principal and Interest.
Buckeye Technologies Inc., a Delaware corporation (such
corporation, and its successors and assigns under the Indenture, being herein
called the "Company"), promises to pay $5,265,000.00 to the Holder hereof on
October 15, 2010.
The Company shall pay interest at a rate of 8%, per annum,
from June 11, 1998, or from the most recent Interest Payment Date thereafter to
which interest has been paid or duly provided for, semiannually on April 15 and
October 15 of each year, commencing on October 15,
B-4
<PAGE> 145
1998, in cash, to the Holder hereof until the principal amount hereof is paid or
made available for payment. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, subject to certain exceptions
provided in the Indenture, be paid to the Person in whose name this Security (or
the Security in exchange or substitution for which this Security was issued) is
registered at the close of business on the Regular Record Date for interest
payable on such Interest Payment Date. The Regular Record Date for any interest
payment is the close of business on April 1 or October 1, as the case may be,
whether or not a Business Day, immediately preceding the Interest Payment Date
on which such interest is payable. Any such interest not so punctually paid or
duly provided for ("Defaulted Interest") shall forthwith cease to be payable to
the Holder on such Regular Record Date and shall be paid as provided in Section
307 of the Indenture. Interest will be computed on the basis of a 360-day year
of twelve 30-day months.
Each payment of interest in respect of an Interest Payment
Date will include interest accrued through the day before such Interest Payment
Date. If an Interest Payment Date falls on a day that is not a Business Day, the
interest payment to be made on such Interest Payment Date will be made on the
next succeeding Business Day with the same force and effect as if made on such
Interest Payment Date, and no additional interest will accrue as a result of
such delayed payment.
If this Security is exchanged in an Exchange Offer (as such
term is defined in the Registration Rights Agreement (as defined herein)) prior
to the Regular Record Date for the first Interest Payment Date following such
exchange, accrued and unpaid interest, if any, on this Security, up to but not
including the date of issuance of the Exchange Security or Exchange Securities
issued in exchange for this Security, shall be paid on the first Interest
Payment Date for such Exchange Security or Exchange Securities to the Holder or
Holders of such Exchange Security or Exchange Securities on the first Regular
Record Date with respect to such Exchange Security or Exchange Securities. If
this Security is exchanged in an Exchange Offer subsequent to the Regular Record
Date for the first Interest Payment Date following such exchange but on or prior
to such Interest Payment Date, then any such accrued and unpaid interest with
respect to this Security and any accrued and unpaid interest on the Exchange
Security or Exchange Securities issued in exchange for this Security, through
the day before such Interest Payment Date, shall be paid on such Interest
Payment Date to the Holder of this Security on such Regular Record Date.
3. Additional Interest.
The Holder of this Security is entitled to the benefits of the
Registration Rights Agreement. If the Company fails to file a Registration
Statement within the time periods specified in the Registration Rights Agreement
or if the Exchange Offer Registration Statement or the Shelf Registration
Statement fails to become effective, then, as liquidated damages, additional
interest (the "Additional Interest") shall become payable in respect of the
Securities as follows:
(a) if (A) neither the Exchange Offer Registration Statement
nor the Shelf Registration Statement is filed with the Commission within 60 days
following the Issue Date or (B) notwithstanding that the Company has consummated
or will consummate an Exchange Offer, the
B-5
<PAGE> 146
Company is required to file a Shelf Registration Statement and such Shelf
Registration Statement is not filed on or prior to the date required by the
Registration Rights Agreement, then commencing on the day after either such
required filing date, Additional Interest shall be paid on the principal amount
of the Securities at a rate per annum equal to 0.5% of the principal amount of
the Securities; or
(b) if (A) neither the Exchange Offer Registration Statement
nor the Shelf Registration Statement is declared effective by the Commission
within six (6) months following the Closing Date or (B) notwithstanding that the
Company has consummated or will consummate an Exchange Offer, the Company is
required to file a Shelf Registration Statement and such Shelf Registration
Statement is not declared effective by the Commission on or prior to the date
which is six (6) months following the Closing Date, then, commencing on the day
after either such required effective date, Additional Interest shall be paid on
the principal amount of the Securities at a rate per annum equal to 0.5% of the
principal amount of the Securities; or
(c) if applicable, the Shelf Registration Statement has been
declared effective and such Shelf Registration Statement ceases to be effective
at any time prior to the third anniversary of the Issue Date (other than after
such time as all Securities have been disposed of thereunder and other than
during any Suspension Period (as defined in the Registration Rights Agreement)),
then Additional Interest shall be paid on the principal amount of the Securities
at a rate per annum equal to 0.5% of the principal amount of the Securities
commencing on the day such Shelf Registration Statement ceases to be effective;
provided, however, that the Additional Interest rate on the
Securities may not exceed in the aggregate 1.5% per annum of the principal
amount; provided, further, however, that (1) upon the filing of the Exchange
Offer Registration Statement or a Shelf Registration Statement (in the case of
clause (a) above), (2) upon the effectiveness of the Exchange Offer Registration
Statement or a Shelf Registration Statement (in the case of clause (b) above),
or (3) upon the effectiveness of the Shelf Registration Statement which had
ceased to remain effective (in the case of clause (c) above). Additional
Interest on the Securities as a result of such clause (or the relevant subclause
thereof), as the case may be, shall cease to accrue and the terms of the
Securities shall revert to their original terms.
Any amounts of Additional Interest due pursuant to clause (a),
(b) or (c) above will be payable in cash on April 15 and October 15 of each
year.
Except as expressly provided in this paragraph 3, Additional
Interest shall be treated as interest and any date on which Additional Interest
is due and payable shall be treated as an Interest Payment Date, for all
purposes under this Security and the Indenture.
B-6
<PAGE> 147
4. Method of Payment.
The Company, through the Paying Agent, shall pay interest on
this Security to the registered Holder of this Security, as provided above. The
Holder must surrender this Security to a Paying Agent to collect principal
payments. The Company will pay principal and interest in money of the United
States of America that at the time of payment is legal tender for payment of all
debts public and private. Principal and interest will be payable at the office
of the Paying Agent but, at the option of the Company, interest may be paid by
check mailed to the registered Holders at their registered addresses.
5. Transfer Agent, Paying Agent and Registrar.
Initially, IBJ Schroder Bank and Trust Company will act as
Transfer Agent, Paying Agent and Registrar ("Paying Agent") under the Indenture.
The Company may, upon written notice to the Paying Agent and Trustee, appoint
and change any Transfer Agent, Paying Agent or Registrar. The Company or any of
its subsidiaries may act as Transfer Agent, Paying Agent or Registrar.
6. Optional Redemption.
After October 15, 2003, the Securities will be subject to
redemption at the option of the Company, in whole or in part, upon not less than
30 calendar days, nor more than 60 calendar days' notice, at the prices
(expressed as percentages of principal amounts) set forth below, plus accrued
and unpaid interest thereon (if any) at the applicable Redemption Date, if
redeemed during the twelve-month period beginning October 15 of the years
indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003 104.000%
2004 102.667%
2005 101.333%
2006 and thereafter 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to October
15, 2001, the Company may redeem up to 35% of the aggregate principal amounts of
Securities with the net proceeds of one or more Equity Offerings of the Company
at a redemption price equal to 108% of the aggregate principal amount thereof,
on the date of redemption; provided, however, that, after giving effect to any
such redemption, at least $97.5 million aggregate principal amount of the
Securities remain outstanding.
7. Notice of Redemption.
At least 30 calendar days but not more than 60 calendar days
before a Redemption Date, the Company will send a notice of redemption,
first-class mail, postage prepaid, to Holders of Securities to be redeemed at
the addresses of such Holders as they appear in the Security Register.
B-7
<PAGE> 148
If less than all of the Securities are to be redeemed at any
time, the Securities to be redeemed will be chosen by the Trustee in accordance
with the Indenture. If any Note is redeemed subsequent to a Regular Record Date
with respect to any Interest Payment Date specified above and on or prior to
such Interest Payment Date, then any accrued interest will be paid on such
Interest Payment Date to the Holder of the Security on such Regular Record Date.
If money in an amount sufficient to pay the Redemption Price of all Securities
(or portions thereof) to be redeemed on the Redemption Date is deposited with
the Paying Agent on or before the applicable Redemption Date and certain other
conditions are satisfied, interest on the Securities to be redeemed on the
applicable Redemption Date will cease to accrue.
The Securities are not subject to any sinking fund.
8. Repurchase at the Option of Holders upon Change of
Control.
Upon the occurrence of a Change of Control, each Holder of
Securities shall have the right to require the Company to purchase such Holder's
Securities, in whole, or in part in a principal amount that is an integral
multiple of $1,000, pursuant to a Change of Control Offer, at a purchase price
in cash equal to 101% of the aggregate principal amount thereof on any Change of
Control Purchase Date, plus accrued and unpaid interest, if any, to the Change
of Control Purchase Date.
Within 30 calendar days following any Change of Control, the
Company shall send, or cause to be sent, by first-class mail, postage prepaid, a
notice regarding the Change of Control Offer to each Holder of Securities. The
Holder of this Security may elect to have this Security or a portion hereof in
an authorized denomination purchased by completing the form entitled "Option of
Holder to Require Purchase" appearing below and tendering this Security pursuant
to the Change of Control Offer. Unless the Company defaults in the payment of
the Change of Control Purchase Price with respect thereto, all Securities or
portions thereof accepted for payment pursuant to the Change of Control Offer
will cease to accrue interest from and after the Change of Control Purchase
Date.
9. Repurchase at the Option of Holders upon Asset Sale.
If at any time the aggregate amount of Excess Proceeds
(including any Net Cash Proceeds to be applied to the permanent reduction of
Indebtedness represented by the Existing Senior Subordinated Notes) calculated
as of such date exceeds $15 million, the Company shall, within 30 days of the
date the amount of Excess Proceeds exceeds $15 million, use such Excess Proceeds
to make an offer to purchase (an "Asset Sale Offer") on a pro rata basis, from
all holders, outstanding Notes, Existing Senior Subordinated Notes in an
aggregate principal amount equal to the maximum principal amount that may be
purchased out of Excess Proceeds, at a purchase price (the "Offer Purchase
Price") in cash equal to (a) with respect to the Existing Notes, 100% of the
Accreted Value thereof (as defined in the relevant indenture) and (b) with
respect to the Securities, 100% of the principal amount thereof, plus, in each
case, accrued and unpaid interest, if any, to the purchase date, in accordance
with the procedures set forth in the relevant indenture. Upon
B-8
<PAGE> 149
completion of an Asset Sale Offer (including payment of the Offered Price), any
surplus Excess Proceeds that were the subject of such offer shall cease to be
Excess Proceeds, and the Company may then use such amounts for general corporate
purposes.
Within 30 calendar days of the date the amount of Excess
Proceeds exceeds $10,000,000, the Company shall send, or cause to be sent, by
first-class mail, postage prepaid, a notice regarding the Asset Sale Offer to
each Holder of Securities. The Holder of this Security may elect to have this
Security or a portion hereof in an authorized denomination purchased by
completing the form entitled "Option of Holder to Require Purchase" appearing
below and tendering this Security pursuant to the Asset Sale Offer. Unless the
Company defaults in the payment of the Offered Price with respect thereto, all
Securities or portions thereof selected for payment pursuant to the Asset Sale
Offer will cease to accrue interest from and after the Offer Date.
10. The Registered Exchange Offer.
Any Initial Securities represented by this Certificated
Security which are presented to the Registrar for exchange pursuant to the
Exchange Offer Registration shall be exchanged for a Certificated Security
representing Exchange Securities of equal principal amount upon surrender of
this Certificated Security to the Registrar in accordance with the terms of the
Exchange Offer Registration and the Indenture.
11. Transfer and Exchange.
By its acceptance of any Security represented by a certificate
bearing the Private Placement Legend, each Holder of, and beneficial owner of an
interest in, such a Security acknowledges the restrictions on transfer of such a
Security set forth in the Private Placement Legend and under the heading
"Transfer Restrictions" in the Final Memorandum, and agrees that it will
transfer such a Security only in accordance with the Private Placement Legend
and that it will transfer such a Security only in accordance under the heading
"Transfer Restrictions" in the Final Memorandum.
In connection with any registration of transfer of a Security
bearing the Private Placement Legend other than to a Person whom the Holder
reasonably believes to be a "qualified institutional buyer" under the Securities
Act, such Holder shall deliver to the Company such satisfactory evidence, which
may include an opinion of independent counsel licensed to practice law in the
State of New York, as reasonably may be requested by the Company to confirm that
such transfer is being made in accordance with the limitations set forth in the
Private Placement Legend. In the event the Company reasonably determines that
any such transfer is not in accordance with the Private Placement Legend, the
Company shall so inform the Registrar who shall not register such transfer;
provided that the Registrar shall not be required to determine (but may rely on
a determination made by the Company with respect to) the sufficiency of any such
evidence.
B-9
<PAGE> 150
Upon the registration of transfer, exchange or replacement of
a Security not bearing the Private Placement Legend, the Trustee shall deliver a
Security that does not bear the Private Placement Legend. Upon the registration
of transfer, exchange or replacement of a Security bearing the Private Placement
Legend, the Trustee shall deliver a Security bearing the Private Placement
Legend, unless such legend may be removed from such Security as provided in the
next sentence. The Private Placement Legend may be removed from a Security if
there is delivered to the Company such satisfactory evidence, which may include
an opinion of independent counsel licensed to practice law in the State of New
York, as reasonably may be requested by the Company to confirm that neither such
legend nor the restrictions on transfer set forth therein are required to ensure
that transfers of such Security will not violate the registration and prospectus
delivery requirements of the Securities Act; provided that the Trustee shall not
be required to determine (but may rely on a determination made by the Company
with respect to) the sufficiency of any such evidence. Upon provision of such
evidence, the Trustee shall authenticate and deliver in exchange for such
Security, a Security or Securities (representing the same aggregate principal
amount of the Security being exchanged) without such legend. If the Private
Placement Legend has been removed from a Security, as provided above, no other
Security issued in exchange for all or any part of such Security shall bear such
legend, unless the Company has reasonable cause to believe that such other
Security represents a "restricted security" within the meaning of Rule 144 and
instructs the Trustee to cause a legend to appear thereon.
Prior to the effectiveness of a Shelf Registration Statement
or following the suspension or termination thereof, the Holder of this Security
(or holders of interests therein) and prospective purchasers designated by such
Holder (or such holders of interests therein) shall have the right to obtain
from the Company upon request by such Holder (or such holders of interests) or
prospective purchasers, during any period in which the Company is not subject to
Section 13 or 15(d) of the Exchange Act, or exempt from reporting pursuant to
12g3-2(b) under the Exchange Act, the information required by paragraph
(d)(4)(i) of Rule 144A in connection with any transfer or proposed transfer of
such Security or interest.
12. Denominations.
The Securities are issuable only in registered form without
coupons in denominations of $1,000 and integral multiples thereof of principal
amount.
13. Unclaimed Money.
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back to
the Company at its request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Company and not to the Trustee for payment unless such abandoned property
law designates another Person.
14. Discharge and Defeasance.
B-10
<PAGE> 151
Subject to certain conditions, the Company at any time may
terminate some or all of its obligations under the Securities and the Indenture
if the Company irrevocably deposits with the Trustee money or U.S. Government
Obligations for the payment of principal and interest on the Securities to
redemption or maturity, as the case may be.
15. Amendment, Waiver.
Subject to certain exceptions set forth in the Indenture, (i)
the Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount of the Outstanding Securities
and (ii) any past Default and its consequences may be waived with the written
consent of the Holders of at least a majority in principal amount of the
Outstanding Securities. Subject to certain exceptions set forth in the
Indenture, without the consent of any Holder of Securities, the Company and the
Trustee may amend Indenture or the Securities (i) to evidence the succession of
another Person to the Company and the assumption by such successor of the
covenants of the company under the Indenture and contained in the Securities;
(ii) to add additional covenants or to surrender rights and powers conferred on
the Company; (iii) to add any additional Events of Default; (iv) to provide for
uncertificated Securities in addition to or in place of Certificated Securities;
(v) to evidence and provide for the acceptance of appointment under the
Indenture of a successor Trustee; (vi) to secure the Securities; (vii) to cure
any ambiguity in the Indenture, to correct or supplement any provision in the
Indenture which may be inconsistent with any other provision therein or to add
any other provisions with respect to matters or questions arising under the
Indenture, provided that such actions shall not adversely affect the interests
of the Holders in any material respect; or (viii) to comply with the
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act.
16. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in principal amount of the Securities, subject to
certain limitations, may declare all the Securities to be immediately due and
payable. Certain events of bankruptcy or insolvency are Events of Default and
shall result in the Securities being immediately due and payable upon the
occurrence of such Events of Default without any further act of the Trustee or
any Holder.
Holders of Securities may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may refuse to
enforce the Indenture or the Securities unless it receives reasonable indemnity
or security. Subject to certain limitations, Holders of a majority in principal
amount of the Securities may direct the Trustee in its exercise of any trust or
power under the Indenture. The Holders of a majority in principal amount of the
outstanding Securities, by written notice to the Company and the Trustee, may
rescind any declaration of acceleration and its consequences if the rescission
would not conflict with any judgment or decree, and if all Events of Default
have been cured or waived except nonpayment of principal and interest that has
become due solely because of the acceleration.
B-11
<PAGE> 152
17. Individual Rights of Trustee.
Subject to certain limitations imposed by the Trust Indenture
Act, the Trustee or any Transfer Agent, Paying Agent or Registrar, in its
individual or any other capacity, may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not Trustee, Transfer Agent, Paying Agent or Registrar,
as the case may be, under the Indenture.
18. No Recourse Against Certain Others.
No director, officer, employee, incorporator or stockholder of
the Company, as such, shall have any liability for any obligations of the
Company under the Securities or the Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation, solely by
reason of its status as a director, officer, employee, incorporator or
stockholder of the Company. By accepting a Security, each Holder waives and
releases all such liability (but only such liability) as part of the
consideration for issuance of such Security to such Holder.
19. Governing Law.
THE INDENTURE AND THIS SECURITYNOTE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE.
The Company will furnish to any Holder of Securities upon
written request and without charge to the Holder a copy of the Indenture which
has in it the text of this Security. Requests may be made to:
Buckeye Technologies Inc.
1001 Tillman Street
Memphis, Tennessee 38112
Attention: Sheila Jordan Cunningham
B-12
<PAGE> 153
ASSIGNMENT
(To be executed by the registered Holder
if such Holder desires to transfer this Security)
FOR VALUE RECEIVED _____________________________ hereby sells, assigns
and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER TAX IDENTIFYING NUMBER OF
TRANSFEREE
----------------------------
-------------------------------------------------------------------
(Please print name and address of transferee)
-------------------------------------------------------------------
this Security, together with all right, title and interest herein, and
does hereby irrevocably constitute and appoint ______________________
Attorney to transfer this Security on the Security Register, with full
power of substitution.
--------------------------------------------------------------------
Dated:
------------------
------------------------------- -----------------------------
Signature of Holder Signature Guaranteed:
Commercial Bank or Trust Company
Or Member Firm of the New York
Stock Exchange, Inc.
NOTICE: The signature to the foregoing Assignment must correspond to
the Name as written upon the face of this Security in every particular,
without alteration or any change whatsoever.
B-13
<PAGE> 154
OPTION OF HOLDER TO ELECT PURCHASE
(Check as appropriate)
[ ] In connection with the Change of Control Offer made pursuant to Section
_____ of the Indenture, the undersigned hereby elects to have
[ ] $__________($1,000 in principal amount or an integral multiple
thereof) of this Security
repurchased by the Company. The undersigned hereby directs the
Trustee or Paying Agent to pay it or ___________ an amount in cash
equal to 101% with respect to the principal amount indicated in the
preceding sentence or the principal amount indicated in the preceding
sentences, as the case may be, plus accrued and unpaid interest
thereon, if any, to the Change of Control Payment Date.
[ ] In connection with the Asset Sale Offer made pursuant to Section ______
of the Indenture, the undersigned hereby elects to have
[ ] $_________($1,000 in principal amount or an integral multiple
thereof) of this Security
repurchased by the Company. The undersigned hereby directs
the Trustee or Paying Agent to pay it or ______________ an amount
in cash equal to 100% with respect to the principal amount
indicated in the preceding sentence, plus accrued and unpaid
interest thereon, if any, to the Asset Sale Payment Date.
Dated:
---------------------
- ------------------------------------ ---------------------------------
Signature of Holder Signature Guaranteed:
Commercial Bank or Trust Company
Or Member Firm of the New York
Stock Exchange, Inc.
NOTICE: The signature to the foregoing Assignment must correspond to the Name as
written upon the face of this Security in every particular, without alteration
or any change whatsoever.
B-14
<PAGE> 155
EXHIBIT C
Form of Face of Exchange Securities
Form of Reverse of Exchange Securities
<PAGE> 156
EXHIBIT C
FORM OF EXCHANGE GLOBAL SECURITY
BUCKEYE TECHNOLOGIES INC.
No. __ CUSIP No. _____
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO.
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY TO BUCKEYE TECHNOLOGIES INC. OR THE REGISTRAR FOR
REGISTRATION OF TRANSFER OR EXCHANGE AND ANY SECURITY ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR SUCH OTHER ENTITY AS HAS BEEN REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS HAS BEEN REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFER OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, AND NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF INTERESTS IN THIS
GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTION ___ OF THE INDENTURE, DATED AS OF June 11,
1998, BETWEEN BUCKEYE TECHNOLOGIES INC. AND THE TRUSTEE NAMED THEREIN, PURSUANT
TO WHICH THIS SECURITY WAS ISSUED.
C-1
<PAGE> 157
GLOBAL SECURITY
REPRESENTING 8% SENIOR SUBORDINATED NOTES DUE 2010
Buckeye Technologies Inc., a Delaware corporation, for value
received, hereby promises to pay to CEDE & CO., or its registered assigns, the
principal sum indicated on Schedule A hereof, on October 15, 2010.
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 by manual signature,
this Security shall not be entitled to any benefit under the Indenture or be
valid or obligatory for any purposes.
C-2
<PAGE> 158
IN WITNESS WHEREOF, the Company has caused this Security to be
fully executed.
Dated:
BUCKEYE TECHNOLOGIES INC.
By:
--------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
- ----------------,
as Trustee, certifies that this is one of
the Securities referred to in the Indenture.
By:
-------------------------------------------
Authorized Officer
C-3
<PAGE> 159
REVERSE SIDE OF FORM OF EXCHANGE GLOBAL SECURITY
BUCKEYE TECHNOLOGIES INC.
GLOBAL SECURITY
REPRESENTING 8% SENIOR SUBORDINATED NOTES DUE 2010
1. Indenture.
This Security is one of a duly authorized issue of debt
securities of the Company (as defined below) designated as its "8% Senior
Subordinated Notes due 2010" (herein called the "Securities") limited in
aggregate principal amount at Stated Maturity to $150,000,000, issued under an
indenture dated as of June 11, 1998 (as amended or supplemented from time to
time, the "Indenture") between the Company and Union Planters Bank, N.A., as
trustee (the "Trustee," which term includes any successor Trustee under the
Indenture), to which Indenture reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Trustee and each Holder of Securities and of the terms upon
which the Securities are, and are to be, authenticated and delivered. The
summary of the terms of this Security contained herein does not purport to be
complete and is qualified by reference to the Indenture. All terms used in this
Security which are not defined herein shall have the same meanings assigned to
them in the Indenture.
The Indenture imposes certain limitations on the ability of
the Company and its Restricted Subsidiaries to, among other things, make certain
Investments and other Restricted Payments, pay dividends and other
distributions, incur Indebtedness, enter into consensual restrictions upon the
payment of certain dividends and distributions by such Restricted Subsidiaries,
enter into or permit certain transactions with Affiliates, create or incur
Liens, enter into or permit certain Sale and Leaseback Transactions and make
Asset Sales. The Indenture also imposes limitations on the ability of the
Company to consolidate or merge with or into any other Person or permit any
other Person to merge with or into the Company, or sell, convey, assign,
transfer, lease or otherwise dispose of all or substantially all of the Property
of the Company to any other Person and on the ability of the Company's
Restricted Subsidiaries to issue Capital Stock.
2. Principal and Interest.
Buckeye Technologies Inc., a Delaware corporation (such
corporation, and its successors and assigns under the Indenture, being herein
called the "Company"), promises to pay the principal amount set forth on
Schedule A of this Security to the Holder hereof on October 15, 2010.
The Company shall pay interest at a rate of 8%, per annum,
from June 11, 1998, or from the most recent Interest Payment Date thereafter to
which interest has been paid or duly provided for, semiannually on April 15 and
October 15 of each year, commencing on October 15,
C-4
<PAGE> 160
1998, in cash, to the Holder hereof until the principal amount hereof is paid or
made available for payment. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, subject to certain exceptions
provided in the Indenture, be paid to the Person in whose name this Security (or
the Security in exchange or substitution for which this Security was issued) is
registered at the close of business on the Record Date for interest payable on
such Interest Payment Date. The Record Date for any interest payment is the
close of business on April 1 or October 1, as the case may be, whether or not a
Business Day, immediately preceding the Interest Payment Date on which such
interest is payable. Any such interest not so punctually paid or duly provided
for ("Defaulted Interest") shall forthwith cease to be payable to the Holder on
such Record Date and shall be paid as provided in Section 307 of the Indenture.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
Each payment of interest in respect of an Interest Payment
Date will include interest accrued through the day before such Interest Payment
Date. If an Interest Payment Date falls on a day that is not a Business Day, the
interest payment to be made on such Interest Payment Date will be made on the
next succeeding Business Day with the same force and effect as if made on such
Interest Payment Date, and no additional interest will accrue as a result of
such delayed payment.
3. Method of Payment.
The Company, through the Paying Agent, shall pay interest on
this Security to the registered Holder of this Security, as provided above. The
Holder must surrender this Security to a Paying Agent to collect principal
payments. The Company will pay principal and interest in money of the United
States of America that at the time of payment is legal tender for payment of all
debts public and private. Principal and interest will be payable at the office
of the Paying Agent but, at the option of the Company, interest may be paid by
check mailed to the registered Holders at their registered addresses.
4. Transfer Agent, Paying Agent and Registrar.
Initially, IBJ Schroder Bank and Trust Company will act as
Transfer Agent, Paying Agent and Registrar under the Indenture. The Company may,
upon written notice to the Trustee and Paying Agent, appoint and change any
Transfer Agent, Paying Agent or Registrar. The Company or any of its
subsidiaries may act as Transfer Agent, Paying Agent or Registrar.
5. Optional Redemption.
After October 15, 2003, the Securities will be subject to
redemption at the option of the Company, in whole or in part, upon not less than
30 calendar days, nor more than 60 calendar days' notice, at the prices
(expressed as percentages of principal amounts) set forth below, plus accrued
and unpaid interest thereon (if any) at the applicable Redemption Date, if
redeemed during the twelve-month period beginning Octoebr 15 of the years
indicated below:
C-5
<PAGE> 161
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003 104.000%
2004 102.667%
2005 101.333%
2006 and thereafter 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to October
15, 2001, the Company may redeem up to 35% of the aggregate principal amounts of
Securities with the net proceeds of one or more Equity Offerings of the Company
at a redemption price equal to 108% of the aggregate principal amount thereof,
on the date of redemption; provided, however, that, after giving effect to any
such redemption, at least $97.5 million aggregate principal amount of the
Securities remain outstanding.
6. Notice of Redemption.
At least 30 calendar days but not more than 60 calendar days
before a Redemption Date, the Company will send a notice of redemption,
first-class mail, postage prepaid, to Holders of Securities to be redeemed at
the addresses of such Holders as they appear in the Security Register.
If less than all of the Securities are to be redeemed at any
time, the Securities to be redeemed will be chosen by the Trustee in accordance
with the Indenture. If any Security is redeemed subsequent to a Record Date with
respect to any Interest Payment Date specified above and on or prior to such
Interest Payment Date, then any accrued interest will be paid on such Interest
Payment Date to the Holder of the Security on such Record Date. If money in an
amount sufficient to pay the Redemption Price of all Securities (or portions
thereof) to be redeemed on the Redemption Date is deposited with the Paying
Agent on or before the applicable Redemption Date and certain other conditions
are satisfied, interest on the Securities to be redeemed on the applicable
Redemption Date will cease to accrue.
The Securities are not subject to any sinking fund.
7. Repurchase at the Option of Holders upon Change of
Control.
Upon the occurrence of a Change of Control, each Holder of
Securities shall have the right to require the Company to purchase such Holder's
Securities, in whole, or in part in a principal amount that is an integral
multiple of $1,000, pursuant to a Change of Control Offer, at a purchase price
in cash equal to 101% of the aggregate principal amount thereof on any Change of
Control Payment Date, plus accrued and unpaid interest, if any, to the Change of
Control Payment Date.
Within 30 calendar days following any Change of Control, the
Company shall send, or cause to be sent, by first-class mail, postage prepaid, a
notice regarding the Change of Control Offer to each Holder of Securities. The
Holder of this Security may elect to have this Security or a portion hereof in
an authorized denomination purchased by completing the form entitled "Option
C-6
<PAGE> 162
of Holder to Require Purchase" appearing below and tendering this Security
pursuant to the Change of Control Offer. Unless the Company defaults in the
payment of the Change of Control Purchase Price with respect thereto, all
Securities or portions thereof accepted for payment pursuant to the Change of
Control Offer will cease to accrue interest from and after the Change of Control
Payment Date.
8. Repurchase at the Option of Holders upon Asset Sale.
If at any time the aggregate amount of Excess Proceeds
(including any Net Cash Proceeds to be applied to the permanent reduction of
Indebtedness represented by the Existing Senior Subordinated Securities)
calculated as of such date exceeds $10 million, the Company shall, within 30
days of the date the amount of Excess Proceeds exceeds $10 million, use such
Excess Proceeds to make an offer to purchase (an "Asset Sale Offer") on a pro
rata basis, from all holders, outstanding Securities, Existing Senior
Subordinated Notes in an aggregate principal amount equal to the maximum
principal amount that may be purchased out of Excess Proceeds, at a purchase
price (the "Offer Purchase Price") in cash equal to (a) with respect to the
Existing Notes, 100% of the Accreted Value thereof (as defined in the relevant
indenture) and (b) with respect to the Securities, 100% of the principal amount
thereof, plus, in each case, accrued and unpaid interest, if any, to the
purchase date, in accordance with the procedures set forth in the relevant
indenture. Upon completion of an Asset Sale Offer (including payment of the
Offer Purchase Price), any surplus Excess Proceeds that were the subject of such
offer shall cease to be Excess Proceeds, and the Company may then use such
amounts for general corporate purposes.
Within 30 calendar days of the date the amount of Excess
Proceeds exceeds $10,000,000, the Company shall send, or cause to be sent, by
first-class mail, postage prepaid, a notice regarding the Asset Sale Offer to
each Holder of Securities. The Holder of this Security may elect to have this
Security or a portion hereof in an authorized denomination purchased by
completing the form entitled "Option of Holder to Require Purchase" appearing
below and tendering this Security pursuant to the Asset Sale Offer. Unless the
Company defaults in the payment of the Offer Purchase Price with respect
thereto, all Securities or portions thereof selected for payment pursuant to the
Asset Sale Offer will cease accrue interest from and after the Asset Sale
Payment Date.
9. The Global Security.
So long as this Global Security is registered in the name of
the Depositary or its nominee, members of, or participants in, the Depositary
("Agent Members") shall have no rights under the Indenture with respect to this
Global Security held on their behalf by the Depositary or the Trustee as its
custodian, and the Depositary may be treated by the Company, the Trustee and any
agent of the Company or the Trustee as the absolute owner of this Global
Security for all purposes. Notwithstanding the foregoing, nothing herein shall
(i) prevent the Company, the Trustee or any agent of the Company or the Trustee,
from giving effect to any written certification, proxy or other authorization
furnished by the Depositary or (ii) impair, as between the Depositary and its
Agent
C-7
<PAGE> 163
Members, the operation of customary practices governing the exercise of the
rights of a Holder of Securities.
The Holder of this Global Security may grant proxies and
otherwise authorize any Person, including Agent Members and Persons that may
hold interests in this Global Security through Agent Members, to take any action
which a Holder of Securities is entitled to take under the Indenture or the
Securities.
Whenever, as a result of optional redemption by the Company, a
Change of Control Offer, an Asset Sale Offer, a Registered Exchange Offer or an
exchange for Certificated Securities, this Global Security is redeemed,
repurchased or exchanged in part, this Global Security shall be surrendered by
the Holder thereof to the Trustee who shall cause an adjustment to be made to
Schedule A hereof so that the principal amount of this Global Security will be
equal to the portion not redeemed, repurchased or exchanged and shall thereafter
return this Global Security to such holder; provided that this Global Security
shall be in a principal amount of $1,000 or an integral multiple of $1,000.
10. Transfer and Exchange.
The Holder of this Global Security shall, by acceptance of
this Global Note, agree that transfers of beneficial interests in this Global
Security may be effected only through a book entry system maintained by such
Holder (or its agent), and that ownership of a beneficial interest in the
Securities represented therby shall be required to be reflected in book entry
form.
Transfers of this Global Security shall be limited to
transfers in whole, and not in part, to the Depositary, its successors and their
respective nominees. Interests of beneficial owners in this Global Security may
be transferred in accordance with the rules and procedures of the Depositary (or
its successors).
This Global Security will be exchanged by the Company for one
or more Certificated Securities if (a) the Depositary (i) has notified the
Company that it is unwilling to or unable to continue as, or ceases to be, a
clearing agency registered under Section 17A of the Exchange Act and (ii) a
successor to the Depositary registered as a clearing agency under Section 17 A
of the Exchange Act is not able to be appointed by the Company within 90
calendar days or (b) the Depositary is at any time unwilling to or unable to
continue as Depositary and a successor to the Depositary is not able to be
appointed by the Company within 90 calendar days. If an Event of Default occurs
and is continuing, the Company shall, at the request of the Holder hereof,
exchange all or part of this Global Security for one or more Certificated
Securities; provided that the principal amount of each of such Certificated
Securities and this Global Security, after such exchange, shall be $1,000 or an
integral multiple thereof. Whenever this Global Security is exchanged as a whole
for one or more Certificated Securities, it shall be surrendered by the Holder
to the Trustee for cancellation. Whenever this Global Security is exchanged in
part for one or more Certificated Securities, it shall be surrendered by the
Holder to the Trustee and the Trustee shall make the appropriate notations
C-8
<PAGE> 164
thereon pursuant to Section ___ of the Indenture. All Certificated Securities
issued in exchange for this Global Security or any portion hereof shall be
registered in such names as the Depositary shall instruct the Trustee. Interests
in this Global Security may not be exchanged for Certificated Securities other
than as provided in this paragraph.
11. Denominations.
The Securities are issuable only in registered form without
coupons in denominations of $1,000 and integral multiples thereof of principal
amount.
12. Unclaimed Money.
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back to
the Company at its request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Company and not to the Trustee for payment unless such abandoned property
law designates another Person.
13. Discharge and Defeasance.
Subject to certain conditions, the Company at any time may
terminate some or all of its obligations under the Securities and the Indenture
if the Company irrevocably deposits with the Trustee money or U.S. Government
Obligations for the payment of principal and interest on the Securities to
redemption or maturity, as the case may be.
14. Amendment, Waiver.
Subject to certain exceptions set forth in the Indenture, (i)
the Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount of the Outstanding Securities
and (ii) any past Default and its consequences may be waived with the written
consent of the Holders of at least a majority in principal amount of the
Outstanding Securities. Subject to certain exceptions set forth in the
Indenture, without the consent of any Holder of Securities, the Company and the
Trustee may amend Indenture or the Securities (i) to evidence the succession of
another Person to the Company and the assumption by such successor of the
covenants of the company under the Indenture and contained in the Securities;
(ii) to add additional covenants or to surrender rights and powers conferred on
the Company; (iii) to add any additional Events of Default; (iv) to provide for
uncertificated Securities in addition to or in place of Certificated Securities;
(v) to evidence and provide for the acceptance of appointment under the
Indenture of a successor Trustee; (vi) to secure the Securities; (vii) to cure
any ambiguity in the Indenture, to correct or supplement any provision in the
Indenture which may be inconsistent with any other provision therein or to add
any other provisions with respect to matters or questions arising under the
Indenture, provided that such actions shall not adversely affect the interests
of the Holders
C-9
<PAGE> 165
in any material respect; or (viii) to comply with the requirements of the
Commission in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act.
15. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in principal amount of the Securities, subject to
certain limitations, may declare all the Securities to be immediately due and
payable. Certain events of bankruptcy or insolvency are Events of Default and
shall result in the Securities being immediately due and payable upon the
occurrence of such Events of Default without any further act of the Trustee or
any Holder.
Holders of Securities may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may refuse to
enforce the Indenture or the Securities unless it receives reasonable indemnity
or security. Subject to certain limitations, Holders of a majority in principal
amount of the Securities may direct the Trustee in its exercise of any trust or
power under the Indenture. The Holders of a majority in principal amount of the
outstanding Securities, by written notice to the Company and the Trustee, may
rescind any declaration of acceleration and its consequences if the rescission
would not conflict with any judgment or decree, and if all Events of Default
have been cured or waived except nonpayment of principal and interest that has
become due solely because of the acceleration.
16. Individual Rights of Trustee.
Subject to certain limitations imposed by the Trust Indenture
Act, the Trustee or any Transfer Agent, Paying Agent or Registrar, in its
individual or any other capacity, may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not Trustee, Transfer Agent, Paying Agent or Registrar,
as the case may be, under the Indenture.
17. No Recourse Against Certain Others.
No director, officer, employee, incorporator or stockholder of
the Company, as such, shall have any liability for any obligations of the
Company under the Securities or the Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation, solely by
reason of its status as a director, officer, employee, incorporator or
stockholder of the Company. By accepting a Security, each Holder waives and
releases all such liability (but only such liability) as part of the
consideration for issuance of such Security to such Holder.
18. Governing Law.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE.
C-10
<PAGE> 166
The Company will furnish to any Holder of Securities upon
written request and without charge to the Holder a copy of the Indenture which
has in it the text of this Security.
Requests may be made to:
Buckeye Technologies Inc.
1001 Tillman Street
Memphis, Tennessee 38112
Attention: Sheila Jordan Cunningham
C-11
<PAGE> 167
SCHEDULE A
SCHEDULE OF PRINCIPAL AMOUNT
The initial principal amount of this Security shall be $144,735,000.00. The
following decreases/increases in the principal amount of this Security have been
made:
<TABLE>
<CAPTION>
Total Principal Notation
Amount Made by
Date of Decrease in Increase in Following Such or on
Decrease/ Principal Principal Decrease/ Behalf of
Increase Amount Amount Increase Trustee
<S> <C> <C> <C> <C>
- ---------- ---------- ----------- ---------- ---------
- ---------- ---------- ----------- ---------- ---------
- ---------- ---------- ----------- ---------- ---------
- ---------- ---------- ----------- ---------- ---------
- ---------- ---------- ----------- ---------- ---------
- ---------- ---------- ----------- ---------- ---------
- ---------- ---------- ----------- ---------- ---------
- ---------- ---------- ----------- ---------- ---------
- ---------- ---------- ----------- ---------- ---------
- ---------- ---------- ----------- ---------- ---------
- ---------- ---------- ----------- ---------- ---------
- ---------- ---------- ----------- ---------- ---------
- ---------- ---------- ----------- ---------- ---------
- ---------- ---------- ----------- ---------- ---------
- ---------- ---------- ----------- ---------- ---------
- ---------- ---------- ----------- ---------- ---------
</TABLE>
C-12
<PAGE> 168
ASSIGNMENT
(To be executed by the registered Holder
if such Holder desires to transfer this Security)
FOR VALUE RECEIVED _____________________________ hereby sells, assigns
and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER TAX IDENTIFYING NUMBER OF
TRANSFEREE
----------------------------
-------------------------------------------------------------------
(Please print name and address of transferee)
-------------------------------------------------------------------
this Security, together with all right, title and interest herein, and
does hereby irrevocably constitute and appoint ______________________
Attorney to transfer this Security on the Security Register, with full
power of substitution.
--------------------------------------------------------------------
Dated:
------------------
------------------------------- -----------------------------
Signature of Holder Signature Guaranteed:
Commercial Bank or Trust Company
Or Member Firm of the New York
Stock Exchange, Inc.
NOTICE: The signature to the foregoing Assignment must correspond to
the Name as written upon the face of this Security in every particular,
without alteration or any change whatsoever.
C-13
<PAGE> 169
OPTION OF HOLDER TO ELECT PURCHASE
(Check as appropriate)
[ ] In connection with the Change of Control Offer made pursuant to Section
_____ of the Indenture, the undersigned hereby elects to have
[ ] $__________($1,000 in principal amount or an integral multiple
thereof) of this Security
repurchased by the Company. The undersigned hereby directs the
Trustee or Paying Agent to pay it or ___________ an amount in cash
equal to 101% with respect to the principal amount indicated in the
preceding sentence or the principal amount indicated in the preceding
sentences, as the case may be, plus accrued and unpaid interest
thereon, if any, to the Change of Control Payment Date.
[ ] In connection with the Asset Sale Offer made pursuant to Section ______
of the Indenture, the undersigned hereby elects to have
[ ] $_________($1,000 in principal amount or an integral multiple
thereof) of this Security
repurchased by the Company. The undersigned hereby directs
the Trustee or Paying Agent to pay it or ______________ an amount
in cash equal to 100% with respect to the principal amount
indicated in the preceding sentence, plus accrued and unpaid
interest thereon, if any, to the Asset Sale Payment Date.
Dated:
---------------------
- ------------------------------------ ---------------------------------
Signature of Holder Signature Guaranteed:
Commercial Bank or Trust Company
Or Member Firm of the New York
Stock Exchange, Inc.
NOTICE: The signature to the foregoing Assignment must correspond to the Name as
written upon the face of this Security in every particular, without alteration
or any change whatsoever.
C-14
<PAGE> 170
EXHIBIT D
Form of Face of Exchange Securities
Form of Reverse of Exchange Securities
<PAGE> 171
EXHIBIT D
FORM OF EXCHANGE CERTIFICATED SECURITY
BUCKEYE TECHNOLOGIES INC.
No. __ CUSIP No. ____
8% SENIOR SUBORDINATED NOTES DUE 2010
Buckeye Technologies Inc., a Delaware corporation, for value
received, hereby promises to pay to CEDE & CO., or its registered assigns, the
principal sum indicated on Schedule A hereof, on October 15, 2010.
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 by manual signature,
this Security shall not be entitled to any benefit under the Indenture or be
valid or obligatory for any purposes.
D-1
<PAGE> 172
IN WITNESS WHEREOF, the Company has caused this Security to be
fully executed.
Dated:
BUCKEYE TECHNOLOGIES INC.
By:
----------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
- ----------------,
as Trustee, certifies that this is one of
the Securities referred to in the Indenture.
By:
-----------------------------------------
Authorized Officer
D-2
<PAGE> 173
REVERSE SIDE OF FORM OF EXCHANGE CERTIFICATED SECURITY
BUCKEYE TECHNOLOGIES INC.
CERTIFICATED SECURITY
REPRESENTING 8% SENIOR SUBORDINATED NOTES DUE 2010
1. Indenture.
This Security is one of a duly authorized issue of debt
securities of the Company (as defined below) designated as its "8% Senior
Subordinated Notes due 2010" (herein called the "Securities") limited in
aggregate principal amount at Stated Maturity to $150,000,000, issued under an
indenture dated as of June 11, 1998 (as amended or supplemented from time to
time, the "Indenture") between the Company and Union Planters Bank, N.A., as
trustee (the "Trustee," which term includes any successor Trustee under the
Indenture), to which Indenture reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Trustee and each Holder of Securities and of the terms upon
which the Securities are, and are to be, authenticated and delivered. The
summary of the terms of this Security contained herein does not purport to be
complete and is qualified by reference to the Indenture. All terms used in this
Security which are not defined herein shall have the same meanings assigned to
them in the Indenture.
The Indenture imposes certain limitations on the ability of
the Company and its Restricted Subsidiaries to, among other things, make certain
Investments and other Restricted Payments, pay dividends and other
distributions, incur Indebtedness, enter into consensual restrictions upon the
payment of certain dividends and distributions by such Restricted Subsidiaries,
enter into or permit certain transactions with Affiliates, create or incur
Liens, enter into or permit certain Sale and Leaseback Transactions and make
Asset Sales. The Indenture also imposes limitations on the ability of the
Company to consolidate or merge with or into any other Person or permit any
other Person to merge with or into the Company, or sell, convey, assign,
transfer, lease or otherwise dispose of all or substantially all of the Property
of the Company to any other Person and on the ability of the Company's
Restricted Subsidiaries to issue Capital Stock.
2. Principal and Interest.
Buckeye Technologies Inc., a Delaware corporation (such
corporation, and its successors and assigns under the Indenture, being herein
called the "Company"), promises to pay $5,625,000.00 to the Holder hereof on
October 15, 2010.
The Company shall pay interest at a rate of 8%, per annum,
from June 11, 1998, or from the most recent Interest Payment Date thereafter to
which interest has been paid or duly provided for, semiannually on April 15 and
October 15 of each year, commencing on October 15, 1998, in cash, to the Holder
hereof until the principal amount hereof is paid or made available for
D-3
<PAGE> 174
payment. The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, subject to certain exceptions provided in the
Indenture, be paid to the Person in whose name this Security (or the Security in
exchange or substitution for which this Security was issued) is registered at
the close of business on the Record Date for interest payable on such Interest
Payment Date. The Record Date for any interest payment is the close of business
on April 1 or October 1, as the case may be, whether or not a Business Day,
immediately preceding the Interest Payment Date on which such interest is
payable. Any such interest not so punctually paid or duly provided for
("Defaulted Interest") shall forthwith cease to be payable to the Holder on such
Record Date and shall be paid as provided in Section 307 of the Indenture.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
Each payment of interest in respect of an Interest Payment
Date will include interest accrued through the day before such Interest Payment
Date. If an Interest Payment Date falls on a day that is not a Business Day, the
interest payment to be made on such Interest Payment Date will be made on the
next succeeding Business Day with the same force and effect as if made on such
Interest Payment Date, and no additional interest will accrue as a result of
such delayed payment.
3. Method of Payment.
The Company, through the Paying Agent, shall pay interest on
this Security to the registered Holder of this Security, as provided above. The
Holder must surrender this Security to a Paying Agent to collect principal
payments. The Company will pay principal and interest in money of the United
States of America that at the time of payment is legal tender for payment of all
debts public and private. Principal and interest will be payable at the office
of the Paying Agent but, at the option of the Company, interest may be paid by
check mailed to the registered Holders at their registered addresses.
4. Transfer Agent, Paying Agent and Registrar.
Initially, IBJ Schroder Bank and Trust Company will act as
Transfer Agent, Paying Agent and Registrar under the Indenture. The Company may,
upon written notice to the Trustee and Paying Agent, appoint and change any
Transfer Agent, Paying Agent or Registrar. The Company or any of its
subsidiaries may act as Transfer Agent, Paying Agent or Registrar.
5. Optional Redemption.
After October 15, 2003, the Securities will be subject to
redemption at the option of the Company, in whole or in part, upon not less than
30 calendar days, nor more than 60 calendar days' notice, at the prices
(expressed as percentages of principal amounts) set forth below, plus accrued
and unpaid interest thereon (if any) at the applicable Redemption Date, if
redeemed during the twelve-month period beginning October 15 of the years
indicated below:
D-4
<PAGE> 175
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003 104.000%
2004 102.667%
2005 101.333%
2006 and thereafter 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to October
15, 2001, the Company may redeem up to 35% of the aggregate principal amounts of
Securities with the net proceeds of one or more Equity Offerings of the Company
at a redemption price equal to 108% of the aggregate principal amount thereof,
on the date of redemption; provided, however, that, after giving effect to any
such redemption, at least $97.5 million aggregate principal amount of the
Securities remain outstanding.
6. Notice of Redemption.
At least 30 calendar days but not more than 60 calendar days
before a Redemption Date, the Company will send a notice of redemption,
first-class mail, postage prepaid, to Holders of Securities to be redeemed at
the addresses of such Holders as they appear in the Security Register.
If less than all of the Securities are to be redeemed at any
time, the Securities to be redeemed will be chosen by the Trustee in accordance
with the Indenture. If any Security is redeemed subsequent to a Record Date with
respect to any Interest Payment Date specified above and on or prior to such
Interest Payment Date, then any accrued interest will be paid on such Interest
Payment Date to the Holder of the Security on such Record Date. If money in an
amount sufficient to pay the Redemption Price of all Securities (or portions
thereof) to be redeemed on the Redemption Date is deposited with the Paying
Agent on or before the applicable Redemption Date and certain other conditions
are satisfied, interest on the Securities to be redeemed on the applicable
Redemption Date will cease to accrue.
The Securities are not subject to any sinking fund.
7. Repurchase at the Option of Holders upon Change of
Control.
Upon the occurrence of a Change of Control, each Holder of
Securities shall have the right to require the Company to purchase such Holder's
Securities, in whole, or in part in a principal amount that is an integral
multiple of $1,000, pursuant to a Change of Control Offer, at a purchase price
in cash equal to 101% of the aggregate principal amount thereof on any Change of
Control Payment Date, plus accrued and unpaid interest, if any, to the Change of
Control Payment Date.
Within 30 calendar days following any Change of Control, the
Company shall send, or cause to be sent, by first-class mail, postage prepaid, a
notice regarding the Change of Control Offer to each Holder of Securities. The
Holder of this Security may elect to have this Security or a portion hereof in
an authorized denomination purchased by completing the form entitled "Option of
Holder to Require Purchase" appearing below and tendering this Security pursuant
to the Change
D-5
<PAGE> 176
of Control Offer. Unless the Company defaults in the payment of the Change of
Control Purchase Price with respect thereto, all Securities or portions thereof
accepted for payment pursuant to the Change of Control Offer will cease to
accrue interest from and after the Change of Control Payment Date.
8. Repurchase at the Option of Holders upon Asset Sale.
If at any time the aggregate amount of Excess Proceeds
(including any Net Cash Proceeds to be applied to the permanent reduction of
Indebtedness represented by the Existing Senior Subordinated Securities)
calculated as of such date exceeds $10 million, the Company shall, within 30
days of the date the amount of Excess Proceeds exceeds $10 million, use such
Excess Proceeds to make an offer to purchase (an "Asset Sale Offer") on a pro
rata basis, from all holders, outstanding Securities, Existing Senior
Subordinated Notes in an aggregate principal amount equal to the maximum
principal amount that may be purchased out of Excess Proceeds, at a purchase
price (the "Offer Purchase Price") in cash equal to (a) with respect to the
Existing Notes, 100% of the Accreted Value thereof (as defined in the relevant
indenture) and (b) with respect to the Securities, 100% of the principal amount
thereof, plus, in each case, accrued and unpaid interest, if any, to the
purchase date, in accordance with the procedures set forth in the relevant
indenture. Upon completion of an Asset Sale Offer (including payment of the
Offer Purchase Price), any surplus Excess Proceeds that were the subject of such
offer shall cease to be Excess Proceeds, and the Company may then use such
amounts for general corporate purposes.
Within 30 calendar days of the date the amount of Excess
Proceeds exceeds $10,000,000, the Company shall send, or cause to be sent, by
first-class mail, postage prepaid, a notice regarding the Asset Sale Offer to
each Holder of Securities. The Holder of this Security may elect to have this
Security or a portion hereof in an authorized denomination purchased by
completing the form entitled "Option of Holder to Require Purchase" appearing
below and tendering this Security pursuant to the Asset Sale Offer. Unless the
Company defaults in the payment of the Offer Purchase Price with respect
thereto, all Securities or portions thereof selected for payment pursuant to the
Asset Sale Offer will cease accrue interest from and after the Asset Sale
Payment Date.
9. Transfer and Exchange.
A Holder may transfer a Security upon the surrender of such
Security for registration of transfer. No such transfer shall be effected until,
and such transferee shall succeed to the rights of a Holder only upon, final
acceptance and registration of this transfer in the Security Register by the
Registrar. When Securities are presented to the Registrar with a request to
register the transfer of, or to exchange, such Securities, the Registrar shall
register the transfer or make such exchange as requested if its requirements for
such transactions and any applicable requirements hereunder are satisfied.
D-6
<PAGE> 177
No service charge shall be made for any registration of
transfer or exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer of Securities.
10. Denominations.
The Securities are issuable only in registered form without
coupons in denominations of $1,000 and integral multiples thereof of principal
amount.
11. Unclaimed Money.
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back to
the Company at its request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Company and not to the Trustee for payment unless such abandoned property
law designates another Person.
12. Discharge and Defeasance.
Subject to certain conditions, the Company at any time may
terminate some or all of its obligations under the Securities and the Indenture
if the Company irrevocably deposits with the Trustee money or U.S. Government
Obligations for the payment of principal and interest on the Securities to
redemption or maturity, as the case may be.
13. Amendment, Waiver.
Subject to certain exceptions set forth in the Indenture, (i)
the Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount of the Outstanding Securities
and (ii) any past Default and its consequences may be waived with the written
consent of the Holders of at least a majority in principal amount of the
Outstanding Securities. Subject to certain exceptions set forth in the
Indenture, without the consent of any Holder of Securities, the Company and the
Trustee may amend Indenture or the Securities (i) to evidence the succession of
another Person to the Company and the assumption by such successor of the
covenants of the company under the Indenture and contained in the Securities;
(ii) to add additional covenants or to surrender rights and powers conferred on
the Company; (iii) to add any additional Events of Default; (iv) to provide for
uncertificated Securities in addition to or in place of Certificated Securities;
(v) to evidence and provide for the acceptance of appointment under the
Indenture of a successor Trustee; (vi) to secure the Securities; (vii) to cure
any ambiguity in the Indenture, to correct or supplement any provision in the
Indenture which may be inconsistent with any other provision therein or to add
any other provisions with respect to matters or questions arising under the
Indenture, provided that such actions shall not adversely affect the interests
of the Holders
D-7
<PAGE> 178
in any material respect; or (viii) to comply with the requirements of the
Commission in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act.
14. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in principal amount of the Securities, subject to
certain limitations, may declare all the Securities to be immediately due and
payable. Certain events of bankruptcy or insolvency are Events of Default and
shall result in the Securities being immediately due and payable upon the
occurrence of such Events of Default without any further act of the Trustee or
any Holder.
Holders of Securities may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may refuse to
enforce the Indenture or the Securities unless it receives reasonable indemnity
or security. Subject to certain limitations, Holders of a majority in principal
amount of the Securities may direct the Trustee in its exercise of any trust or
power under the Indenture. The Holders of a majority in principal amount of the
outstanding Securities, by written notice to the Company and the Trustee, may
rescind any declaration of acceleration and its consequences if the rescission
would not conflict with any judgment or decree, and if all Events of Default
have been cured or waived except nonpayment of principal and interest that has
become due solely because of the acceleration.
15. Individual Rights of Trustee.
Subject to certain limitations imposed by the Trust Indenture
Act, the Trustee or any Transfer Agent, Paying Agent or Registrar, in its
individual or any other capacity, may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not Trustee, Transfer Agent, Paying Agent or Registrar,
as the case may be, under the Indenture.
16. No Recourse Against Certain Others.
No director, officer, employee, incorporator or stockholder of
the Company, as such, shall have any liability for any obligations of the
Company under the Securities or the Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation, solely by
reason of its status as a director, officer, employee, incorporator or
stockholder of the Company. By accepting a Security, each Holder waives and
releases all such liability (but only such liability) as part of the
consideration for issuance of such Security to such Holder.
17. Governing Law.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE.
D-8
<PAGE> 179
The Company will furnish to any Holder of Securities upon
written request and without charge to the Holder a copy of the Indenture which
has in it the text of this Security. Requests may be made to:
Buckeye Technologies Inc.
1001 Tillman Street
Memphis, Tennessee 38112
Attention: Sheila Jordan Cunningham
D-9
<PAGE> 180
ASSIGNMENT
(To be executed by the registered Holder
if such Holder desires to transfer this Security)
FOR VALUE RECEIVED _____________________________ hereby sells, assigns
and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER TAX IDENTIFYING NUMBER OF
TRANSFEREE
----------------------------
-------------------------------------------------------------------
(Please print name and address of transferee)
-------------------------------------------------------------------
this Security, together with all right, title and interest herein, and
does hereby irrevocably constitute and appoint ______________________
Attorney to transfer this Security on the Security Register, with full
power of substitution.
--------------------------------------------------------------------
Dated:
--------------------
------------------------------- -----------------------------
Signature of Holder Signature Guaranteed:
Commercial Bank or Trust Company
Or Member Firm of the New York
Stock Exchange, Inc.
NOTICE: The signature to the foregoing Assignment must correspond to
the Name as written upon the face of this Security in every particular,
without alteration or any change whatsoever.
D-10
<PAGE> 181
OPTION OF HOLDER TO ELECT PURCHASE
(Check as appropriate)
[ ] In connection with the Change of Control Offer made pursuant to Section
_____ of the Indenture, the undersigned hereby elects to have
[ ] $__________($1,000 in principal amount or an integral multiple
thereof) of this Security
repurchased by the Company. The undersigned hereby directs the
Trustee or Paying Agent to pay it or ___________ an amount in cash
equal to 101% with respect to the principal amount indicated in the
preceding sentence or the principal amount indicated in the preceding
sentences, as the case may be, plus accrued and unpaid interest
thereon, if any, to the Change of Control Payment Date.
[ ] In connection with the Asset Sale Offer made pursuant to Section ______
of the Indenture, the undersigned hereby elects to have
[ ] $_________($1,000 in principal amount or an integral multiple
thereof) of this Security
repurchased by the Company. The undersigned hereby directs
the Trustee or Paying Agent to pay it or ______________ an amount
in cash equal to 100% with respect to the principal amount
indicated in the preceding sentence, plus accrued and unpaid
interest thereon, if any, to the Asset Sale Payment Date.
Dated:
--------------------
- ------------------------------------ ---------------------------------
Signature of Holder Signature Guaranteed:
Commercial Bank or Trust Company
Or Member Firm of the New York
Stock Exchange, Inc.
NOTICE: The signature to the foregoing Assignment must correspond to the Name as
written upon the face of this Security in every particular, without alteration
or any change whatsoever.
D-11
<PAGE> 1
Exhibit 4.5
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated June 8, 1998
between
BUCKEYE TECHNOLOGIES INC.
and
MORGAN STANLEY & CO. INCORPORATED
SALOMON BROTHERS INC
CREDIT SUISSE FIRST BOSTON CORPORATION
TD SECURITIES (USA) INC.
================================================================================
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made
and entered into on June 8, 1998, between BUCKEYE TECHNOLOGIES INC., a Delaware
corporation (the "Company"), and MORGAN STANLEY & CO. INCORPORATED, SALOMON
BROTHERS INC, CREDIT SUISSE FIRST BOSTON CORPORATION and TD SECURITIES (USA)
INC. (the "Placement Agents").
This Agreement is made pursuant to the Placement Agreement
dated June 8, 1998, between the Company and the Placement Agents (the "Placement
Agreement"), which provides for the sale by the Company to the Placement Agents
of an aggregate of $150,000,000 principal amount of the Company's 8% Senior
Subordinated Notes due 2010 (the "Securities"). In order to induce the Placement
Agents to enter into the Placement Agreement, the Company has agreed to provide
to the Placement Agents and their direct and indirect transferees the
registration rights set forth in this Agreement. The execution of this Agreement
is a condition to the closing under the Placement Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions.
As used in this Agreement, the following capitalized defined
terms shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended
from time to time.
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"Closing Date" shall mean the Closing Date as defined in the
Placement Agreement.
"Company" shall have the meaning set forth in the preamble and
shall also include the Company's successors.
"Exchange Offer" shall mean the exchange offer by the Company
of Exchange Securities for Registrable Securities pursuant to Section
2(a) hereof.
<PAGE> 3
2
"Exchange Offer Registration" shall mean a registration under
the 1933 Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an exchange
offer registration statement on Form S-4 (or, if applicable, on another
appropriate form) and all amendments and supplements to such
registration statement, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by
reference therein.
"Exchange Securities" shall mean securities issued by the
Company under the Indenture containing terms identical to the
Securities (except that (i) interest thereon shall accrue from the last
date on which interest was paid on the Securities or, if no such
interest has been paid, from June 11, 1998 and (ii) the Exchange
Securities will not contain restrictions on transfer) and to be offered
to Holders of Securities in exchange for Securities pursuant to the
Exchange Offer.
"Holder" shall mean the Placement Agents, for so long as they
own any Registrable Securities, and each of their successors, assigns
and direct and indirect transferees who become registered owners of
Registrable Securities under the Indenture; provided that for purposes
of Sections 4 and 5 of this Agreement, the term "Holder" shall include
Participating Broker-Dealers (as defined in Section 4(a)).
"Indenture" shall mean the Indenture relating to the
Securities dated as of June 11, 1998 between the Company and Union
Planters National Bank, as trustee, and as the same may be amended from
time to time in accordance with the terms thereof.
"Majority Holders" shall mean the Holders of a majority of the
aggregate principal amount of outstanding Registrable Securities;
provided that whenever the consent or approval of Holders of a
specified percentage of Registrable Securities is required hereunder,
Registrable Securities held by the Company or any of its affiliates (as
such term is defined in Rule 405 under the 1933 Act) (other than the
Placement Agents or subsequent Holders of Registrable Securities if
such subsequent holders are deemed to be such affiliates solely by
reason of their holding of such Registrable Securities) shall not be
counted in determining whether such consent or approval was given by
the Holders of such required percentage or amount.
<PAGE> 4
3
"Person" shall mean an individual, partnership, limited
liability company, corporation, trust or unincorporated organization,
or a government or agency or political subdivision thereof.
"Placement Agents" shall have the meaning set forth in the
preamble.
"Placement Agreement" shall have the meaning set forth in the
preamble.
"Prospectus" shall mean the prospectus included in a
Registration Statement, including any preliminary prospectus, and any
such prospectus as amended or supplemented by any prospectus
supplement, including a prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities covered by
a Shelf Registration Statement, and by all other amendments and
supplements to such prospectus, and in each case including all material
incorporated by reference therein.
"Registrable Securities" shall mean the Securities; provided,
however, that the Securities shall cease to be Registrable Securities
(i) when a Registration Statement with respect to such Securities shall
have been declared effective under the 1933 Act and such Securities
shall have been disposed of pursuant to such Registration Statement,
(ii) when such Securities have been sold to the public pursuant to Rule
144(k) (or any similar provision then in force, but not Rule 144A)
under the 1933 Act or (iii) when such Securities shall have ceased to
be outstanding.
"Registration Expenses" shall mean any and all expenses
incident to performance of or compliance by the Company with this
Agreement, including without limitation: (i) all SEC, stock exchange or
National Association of Securities Dealers, Inc. registration and
filing fees, (ii) all fees and expenses incurred in connection with
compliance with state securities or blue sky laws (including reasonable
fees and disbursements of counsel for any underwriters or Holders in
connection with blue sky qualification of any of the Exchange
Securities or Registrable Securities), (iii) all expenses of any
Persons in preparing or assisting in preparing, word processing,
printing and distributing any Registration Statement, any Prospectus,
any amendments or supplements thereto, any underwriting agreements,
securities sales agreements and other documents relating to the
<PAGE> 5
4
performance of and compliance with this Agreement, (iv) all rating
agency fees, (v) all fees and disbursements relating to the
qualification of the Indenture under applicable securities laws, (vi)
the fees and disbursements of the Trustee and its counsel, (vii) the
fees and disbursements of counsel for the Company and, in the case of a
Shelf Registration Statement, the fees and disbursements of one counsel
for the Holders (which counsel shall be selected by the Majority
Holders and which counsel may also be counsel for the Placement Agent)
and (viii) the fees and disbursements of the independent public
accountants of the Company, including the expenses of any special
audits or "cold comfort" letters required by or incident to such
performance and compliance, but excluding fees and expenses of counsel
to the underwriters (other than fees and expenses set forth in clause
(ii) above) or the Holders and underwriting discounts and commissions
and transfer taxes, if any, relating to the sale or disposition of
Registrable Securities by a Holder.
"Registration Statement" shall mean any registration statement
of the Company that covers any of the Exchange Securities or
Registrable Securities pursuant to the provisions of this Agreement and
all amendments and supplements to any such Registration Statement,
including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
"Shelf Registration" shall mean a registration effected
pursuant to Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf"
registration statement of the Company pursuant to the provisions of
Section 2(b) of this Agreement which covers all of the Registrable
Securities (but no other securities unless approved by the Holders
whose Registrable Securities are covered by such Shelf Registration
Statement) on an appropriate form under Rule 415 under the 1933 Act, or
any similar rule that may be adopted by the SEC, and all amendments and
supplements to such registration statement, including post-effective
amendments, in each case including the Prospectus contained therein,
all exhibits thereto and all material incorporated by reference
therein.
<PAGE> 6
5
"Trustee" shall mean the trustee with respect to the
Securities under the Indenture.
"Underwriter" shall have the meaning set forth in
Section 3 hereof.
"Underwritten Registration" or "Underwritten Offering" shall
mean a registration in which Registrable Securities are sold to an
Underwriter for reoffering to the public.
2. Registration Under the 1933 Act.
(a) To the extent not prohibited by any applicable law or
applicable interpretation of the Staff of the SEC, the Company shall use its
best efforts to cause to be filed an Exchange Offer Registration Statement
covering the offer by the Company to the Holders to exchange all of the
Registrable Securities for Exchange Securities and to have such Registration
Statement remain effective until the closing of the Exchange Offer. The Company
shall commence the Exchange Offer promptly after the Exchange Offer Registration
Statement has been declared effective by the SEC and use its best efforts to
have the Exchange Offer consummated not later than 60 days after such effective
date. The Company shall commence the Exchange Offer by mailing the related
exchange offer Prospectus and accompanying documents to each Holder stating, in
addition to such other disclosures as are required by applicable law:
(i) that the Exchange Offer is being made pursuant to this
Registration Rights Agreement and that all Registrable Securities
validly tendered will be accepted for exchange;
(ii) the dates of acceptance for exchange (which shall be a
period of at least 20 business days from the date such notice is
mailed) (the "Exchange Dates");
(iii) that any Registrable Security not tendered will remain
outstanding and continue to accrue interest, but will not retain any
rights under this Registration Rights Agreement;
(iv) that Holders electing to have a Registrable Security
exchanged pursuant to the Exchange Offer will be required to surrender
such Registrable Security, together with the enclosed letters of
transmittal, to the institution and at the address (located in the
Borough of Manhattan, The City of New York) specified
<PAGE> 7
6
in the notice prior to the close of business on the last Exchange
Date; and
(v) that Holders will be entitled to withdraw their election,
not later than the close of business on the last Exchange Date, by
sending to the institution and at the address (located in the Borough
of Manhattan, The City of New York) specified in the notice a telegram,
telex, facsimile transmission or letter setting forth the name of such
Holder, the principal amount of Registrable Securities delivered for
exchange and a statement that such Holder is withdrawing his election
to have such Securities exchanged.
As soon as practicable after the last Exchange Date, the
Company shall:
(i) accept for exchange Registrable Securities or portions
thereof tendered and not validly withdrawn pursuant to the Exchange
Offer; and
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Registrable Securities or portions thereof so accepted
for exchange by the Company and issue, and cause the Trustee to
promptly authenticate and mail to each Holder, an Exchange Security
equal in principal amount to the principal amount of the Registrable
Securities surrendered by such Holder.
The Company shall use its best efforts to complete the Exchange Offer as
provided above and shall comply with the applicable requirements of the 1933
Act, the 1934 Act and other applicable laws and regulations in connection with
the Exchange Offer. The Exchange Offer shall not be subject to any conditions,
other than that the Exchange Offer does not violate applicable law or any
applicable interpretation of the Staff of the SEC. The Company shall inform the
Placement Agents of the names and addresses of the Holders to whom the Exchange
Offer is made, and the Placement Agents shall have the right, subject to
applicable law, to contact such Holders and otherwise facilitate the tender of
Registrable Securities in the Exchange Offer.
(b) In the event that (i) the Company determines that the
Exchange Offer Registration provided for in Section 2(a) above is not available
or may not be consummated as soon as practicable after the last Exchange Date
because it would violate applicable law or the applicable interpretations of the
Staff of the SEC, (ii) the
<PAGE> 8
7
Exchange Offer is not for any other reason consummated by December 11, 1998 or
(iii) the Exchange Offer has been completed and in the opinion of counsel for
the Placement Agents a Registration Statement must be filed and a Prospectus
must be delivered by the Placement Agents in connection with any offering or
sale of Registrable Securities, the Company shall use its best efforts to cause
to be filed as soon as practicable after such determination, date or notice of
such opinion of counsel is given to the Company, as the case may be, a Shelf
Registration Statement providing for the sale by the Holders of all of the
Registrable Securities and to have such Shelf Registration Statement declared
effective by the SEC. In the event the Company is required to file a Shelf
Registration Statement solely as a result of the matters referred to in clause
(iii) of the preceding sentence, the Company shall use its best efforts to file
and have declared effective by the SEC both an Exchange Offer Registration
Statement pursuant to Section 2(a) with respect to all Registrable Securities
and a Shelf Registration Statement (which may be a combined Registration
Statement with the Exchange Offer Registration Statement) with respect to offers
and sales of Registrable Securities held by the Placement Agents after
completion of the Exchange Offer. The Company agrees to use its best efforts to
keep the Shelf Registration Statement continuously effective until the
expiration of the period referred to in Rule 144(k) with respect to the
Registrable Securities or such shorter period that will terminate when all of
the Registrable Securities covered by the Shelf Registration Statement have been
sold pursuant to the Shelf Registration Statement. The Company further agrees to
supplement or amend the Shelf Registration Statement if required by the rules,
regulations or instructions applicable to the registration form used by the
Company for such Shelf Registration Statement or by the 1933 Act or by any other
rules and regulations thereunder for shelf registration or if reasonably
requested by a Holder with respect to information relating to such Holder, and
to use its best efforts to cause any such amendment to become effective and such
Shelf Registration Statement to become usable as soon as thereafter practicable.
The Company agrees to furnish to the Holders of Registrable Securities copies of
any such supplement or amendment promptly after its being used or filed with the
SEC.
(c) The Company shall pay all Registration Expenses in
connection with the registration pursuant to Section 2(a) and Section 2(b). Each
Holder shall pay all underwriting discounts and commissions and transfer taxes,
if any, relating to the sale or disposition of such Holder's
<PAGE> 9
8
Registrable Securities pursuant to the Shelf Registration Statement.
(d) An Exchange Offer Registration Statement pursuant to
Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b)
hereof will not be deemed to have become effective unless it has been declared
effective by the SEC; provided, however, that, if, after it has been declared
effective, the offering of Registrable Securities pursuant to a Shelf
Registration Statement is interfered with by any stop order, injunction or other
order or requirement of the SEC or any other governmental agency or court, such
Registration Statement will be deemed not to have become effective during the
period of such interference until the offering of Registrable Securities
pursuant to such Registration Statement may legally resume. In the event the
Exchange Offer is not consummated and the Shelf Registration Statement is not
declared effective on or prior to December 11, 1998, the interest rate on the
Securities will be increased by 0.5% per annum until the Exchange Offer is
consummated or the Shelf Registration Statement is declared effective by the
SEC.
(e) Without limiting the remedies available to the Placement
Agents and the Holders, the Company acknowledges that any failure by the Company
to comply with its obligations under Section 2(a) and Section 2(b) hereof may
result in material irreparable injury to the Placement Agents or the Holders for
which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of any such
failure, the Placement Agents or any Holder may obtain such relief as may be
required to specifically enforce the Company's obligations under Section 2(a)
and Section 2(b) hereof.
3. Registration Procedures.
In connection with the obligations of the Company with respect
to the Registration Statements pursuant to Section 2(a) and Section 2(b) hereof,
the Company shall as expeditiously as possible:
(a) prepare and file with the SEC a Registration Statement on
the appropriate form under the 1933 Act, which form (x) shall be
selected by the Company, (y) shall, in the case of a Shelf
Registration, be available for the sale of the Registrable Securities
by the selling Holders thereof and (z) shall comply as to form in all
material respects with the requirements of the applicable form and
include all financial
<PAGE> 10
9
statements required by the SEC to be filed therewith, and use its best
efforts to cause such Registration Statement to become effective and
remain effective in accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be
necessary to keep such Registration Statement effective for the
applicable period and cause each Prospectus to be supplemented by any
required prospectus supplement and, as so supplemented, to be filed
pursuant to Rule 424 under the 1933 Act; to keep each Prospectus
current during the period described under Section 4(3) and Rule 174
under the 1933 Act that is applicable to transactions by brokers or
dealers with respect to the Registrable Securities or Exchange
Securities;
(c) in the case of a Shelf Registration, furnish to each
Holder of Registrable Securities, to counsel for the Placement Agents,
to counsel for the Holders and to each Underwriter of an Underwritten
Offering of Registrable Securities, if any, without charge, as many
copies of each Prospectus, including each preliminary Prospectus, and
any amendment or supplement thereto and such other documents as such
Holder or Underwriter may reasonably request, in order to facilitate
the public sale or other disposition of the Registrable Securities; and
the Company consents to the use of such Prospectus and any amendment or
supplement thereto in accordance with applicable law by each of the
selling Holders of Registrable Securities and any such Underwriters in
connection with the offering and sale of the Registrable Securities
covered by and in the manner described in such Prospectus or any
amendment or supplement thereto in accordance with applicable law;
(d) use its best efforts to register or qualify the
Registrable Securities under all applicable state securities or "blue
sky" laws of such jurisdictions as any Holder of Registrable Securities
covered by a Registration Statement shall reasonably request in writing
by the time the applicable Registration Statement is declared effective
by the SEC, to cooperate with such Holders in connection with any
filings required to be made with the National Association of Securities
Dealers, Inc. and do any and all other acts and things which may be
reasonably necessary or advisable to enable such Holder to consummate
the disposition in each such jurisdiction of such Registrable
Securities owned by such Holder;
<PAGE> 11
10
provided, however, that the Company shall not be required to (i)
qualify as a foreign corporation or as a dealer in securities in any
jurisdiction where it would not otherwise be required to qualify but
for this Section 3(d), (ii) file any general consent to service of
process or (iii) subject itself to taxation in any such jurisdiction if
it is not so subject;
(e) in the case of a Shelf Registration, notify each Holder of
Registrable Securities, counsel for the Holders and counsel for the
Placement Agents promptly and, if requested by any such Holder or
counsel, confirm such advice in writing (i) when a Registration
Statement has become effective and when any post-effective amendment
thereto has been filed and becomes effective, (ii) of any request by
the SEC or any state securities authority for amendments and
supplements to a Registration Statement and Prospectus or for
additional information after the Registration Statement has become
effective, (iii) of the issuance by the SEC or any state securities
authority of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that
purpose, (iv) if, between the effective date of a Registration
Statement and the closing of any sale of Registrable Securities covered
thereby, the representations and warranties of the Company contained in
any underwriting agreement, securities sales agreement or other similar
agreement, if any, relating to the offering cease to be true and
correct in all material respects or if the Company receives any
notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation
of any proceeding for such purpose, (v) of the happening of any event
during the period a Shelf Registration Statement is effective which
makes any statement made in such Registration Statement or the related
Prospectus untrue in any material respect or which requires the making
of any changes in such Registration Statement or Prospectus in order to
make the statements therein not misleading and (vi) of any
determination by the Company that a post-effective amendment to a
Registration Statement would be appropriate;
(f) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement at
the earliest possible moment and provide immediate notice to each
Holder of the withdrawal of any such order;
<PAGE> 12
11
(g) in the case of a Shelf Registration, furnish to each
Holder of Registrable Securities, without charge, at least one
conformed copy of each Registration Statement and any post-effective
amendment thereto (without documents incorporated therein by reference
or exhibits thereto, unless requested);
(h) in the case of a Shelf Registration, cooperate with the
selling Holders of Registrable Securities to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be sold and not bearing any restrictive legends and
enable such Registrable Securities to be in such denominations
(consistent with the provisions of the Indenture) and registered in
such names as the selling Holders may reasonably request at least one
business day prior to the closing of any sale of Registrable
Securities;
(i) in the case of a Shelf Registration, upon the occurrence
of any event contemplated by Section 3(e)(v) hereof, use its best
efforts to prepare and file with the SEC a supplement or post-effective
amendment to a Registration Statement or the related Prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of the
Registrable Securities, such Prospectus will not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances under
which they were made, not misleading. The Company agrees to notify the
Holders to suspend use of the Prospectus as promptly as practicable
after the occurrence of such an event, and the Holders hereby agree to
suspend use of the Prospectus until the Company has amended or
supplemented the Prospectus to correct such misstatement or omission;
(j) a reasonable time prior to the filing of any Registration
Statement, any Prospectus, any amendment to a Registration Statement or
amendment or supplement to a Prospectus or any document which is to be
incorporated by reference into a Registration Statement or a Prospectus
after initial filing of a Registration Statement, provide copies of
such document to the Placement Agents and their counsel (and, in the
case of a Shelf Registration Statement, the Holders and their counsel)
and make such of the representatives of the Company as shall be
reasonably requested by the Placement Agents or their counsel (and, in
the case of
<PAGE> 13
12
a Shelf Registration Statement, the Holders or their counsel) available
for discussion of such document, and shall not at any time file or make
any amendment to the Registration Statement, any Prospectus or any
amendment of or supplement to a Registration Statement or a Prospectus
or any document which is to be incorporated by reference into a
Registration Statement or a Prospectus, of which the Placement Agents
and their counsel (and, in the case of a Shelf Registration Statement,
the Holders and their counsel) shall not have previously been advised
and furnished a copy or to which the Placement Agents or their counsel
(and, in the case of a Shelf Registration Statement, the Holders or
their counsel) shall object;
(k) obtain a CUSIP number for all Exchange Securities or
Registrable Securities, as the case may be, not later than the
effective date of a Registration Statement;
(l) cause the Indenture to be qualified under the Trust
Indenture Act of 1939, as amended (the "TIA"), in connection with the
registration of the Exchange Securities or Registrable Securities, as
the case may be, cooperate with the Trustee and the Holders to effect
such changes to the Indenture as may be required for the Indenture to
be so qualified in accordance with the terms of the TIA and execute,
and use its best efforts to cause the Trustee to execute, all documents
as may be required to effect such changes and all other forms and
documents required to be filed with the SEC to enable the Indenture to
be so qualified in a timely manner;
(m) in the case of a Shelf Registration, make available for
inspection by a representative of the Holders of the Registrable
Securities, any Underwriter participating in any disposition pursuant
to such Shelf Registration Statement, and attorneys and accountants
designated by the Holders, at reasonable times and in a reasonable
manner, all financial and other records, pertinent documents and
properties of the Company, and cause the respective officers, directors
and employees of the Company to supply all information reasonably
requested by any such representative, Underwriter, attorney or
accountant in connection with a Shelf Registration Statement;
(n) in the case of a Shelf Registration, use its best efforts
to cause all Registrable Securities to be listed on any securities
exchange or any automated
<PAGE> 14
13
quotation system on which similar securities issued by the Company are
then listed if requested by the Majority Holders, to the extent such
Registrable Securities satisfy applicable listing requirements;
(o) use its best efforts to cause the Exchange Securities or
Registrable Securities, as the case may be, to be rated by two
nationally recognized statistical rating organizations (as such term is
defined in Rule 436(g)(2) under the 1933 Act);
(p) if reasonably requested by any Holder of Registrable
Securities covered by a Registration Statement, (i) promptly
incorporate in a Prospectus supplement or post-effective amendment such
information with respect to such Holder as such Holder reasonably
requests to be included therein and (ii) make all required filings of
such Prospectus supplement or such post-effective amendment as soon as
the Company has received notification of the matters to be incorporated
in such filing; and
(q) in the case of a Shelf Registration, enter into such
customary agreements and take all such other actions in connection
therewith (including those requested by the Holders of a majority of
the Registrable Securities being sold) in order to expedite or
facilitate the disposition of such Registrable Securities including,
but not limited to, an Underwritten Offering and in such connection,
(i) to the extent possible, make such representations and warranties to
the Holders and any Underwriters of such Registrable Securities with
respect to the business of the Company and its subsidiaries, the
Registration Statement, Prospectus and documents incorporated by
reference or deemed incorporated by reference, if any, in each case, in
form, substance and scope as are customarily made by issuers to
underwriters in underwritten offerings and confirm the same if and when
requested, (ii) obtain opinions of counsel to the Company (which
counsel and opinions, in form, scope and substance, shall be reasonably
satisfactory to the Holders and such Underwriters and their respective
counsel) addressed to each selling Holder and Underwriter of
Registrable Securities, covering the matters customarily covered in
opinions requested in underwritten offerings, (iii) obtain "cold
comfort" letters from the independent certified public accountants of
the Company (and, if necessary, any other certified public accountant
of any subsidiary of the Company, or of any business acquired by the
Company
<PAGE> 15
14
for which financial statements and financial data are or are required
to be included in the Registration Statement) addressed to each selling
Holder and Underwriter of Registrable Securities, such letters to be in
customary form and covering matters of the type customarily covered in
"cold comfort" letters in connection with underwritten offerings, and
(iv) deliver such documents and certificates as may be reasonably
requested by the Holders of a majority in principal amount of the
Registrable Securities being sold or the Underwriters, and which are
customarily delivered in underwritten offerings, to evidence the
continued validity of the representations and warranties of the Company
made pursuant to clause (i) above and to evidence compliance with any
customary conditions contained in an underwriting agreement.
In the case of a Shelf Registration Statement, the Company may
require each Holder of Registrable Securities to furnish to the Company such
information regarding the Holder and the proposed distribution by such Holder of
such Registrable Securities as the Company may from time to time reasonably
request in writing.
In the case of a Shelf Registration Statement, each Holder
agrees that, upon receipt of any notice from the Company of the happening of any
event of the kind described in Section 3(e)(v) hereof, such Holder will
forthwith discontinue disposition of Registrable Securities pursuant to a
Registration Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 3(i) hereof, and, if
so directed by the Company, such Holder will deliver to the Company (at its
expense) all copies in its possession, other than permanent file copies then in
such Holder's possession, of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice. If the Company shall give any
such notice to suspend the disposition of Registrable Securities pursuant to a
Registration Statement, the Company shall extend the period during which the
Registration Statement shall be maintained effective pursuant to this Agreement
by the number of days during the period from and including the date of the
giving of such notice to and including the date when the Holders shall have
received copies of the supplemented or amended Prospectus necessary to resume
such dispositions. The Company may give any such notice only twice during any
365-day period and any such suspensions may not exceed 30 days for each
suspension and there may not be more than two suspensions in effect during any
365-day period.
<PAGE> 16
15
The Holders of Registrable Securities covered by a Shelf
Registration Statement who desire to do so may sell such Registrable Securities
in an Underwritten Offering. In any such Underwritten Offering, the investment
banker or investment bankers and manager or managers (the "Underwriters") that
will administer the offering will be selected by the Majority Holders of the
Registrable Securities included in such offering.
4. Participation of Broker-Dealers in Exchange Offer.
(a) The Staff of the SEC has taken the position that any
broker-dealer that receives Exchange Securities for its own account in the
Exchange Offer in exchange for Securities that were acquired by such
broker-dealer as a result of market-making or other trading activities (a
"Participating Broker-Dealer"), may be deemed to be an "underwriter" within the
meaning of the 1933 Act and must deliver a prospectus meeting the requirements
of the 1933 Act in connection with any resale of such Exchange Securities.
The Company understands that it is the Staff's position that
if the Prospectus contained in the Exchange Offer Registration Statement
includes a plan of distribution containing a statement to the above effect and
the means by which Participating Broker-Dealers may resell the Exchange
Securities, without naming the Participating Broker-Dealers or specifying the
amount of Exchange Securities owned by them, such Prospectus may be delivered by
Participating Broker-Dealers to satisfy their prospectus delivery obligation
under the 1933 Act in connection with resales of Exchange Securities for their
own accounts, so long as the Prospectus otherwise meets the requirements of the
1933 Act.
(b) In light of the above, notwithstanding the other
provisions of this Agreement, the Company agrees that the provisions of this
Agreement as they relate to a Shelf Registration shall also apply to an Exchange
Offer Registration to the extent, and with such reasonable modifications thereto
as may be, reasonably requested by the Placement Agents or by one or more
Participating Broker-Dealers, in each case as provided in clause (ii) below, in
order to expedite or facilitate the disposition of any Exchange Securities by
Participating Broker-Dealers consistent with the positions of the Staff recited
in Section 4(a) above; provided that:
(i) the Company shall not be required to amend or
supplement the Prospectus contained in the Exchange
<PAGE> 17
16
Offer Registration Statement, as would otherwise be contemplated by
Section 3(i), for a period exceeding 180 days after the last Exchange
Date (as such period may be extended pursuant to the penultimate
paragraph of Section 3 of this Agreement) and Participating
Broker-Dealers shall not be authorized by the Company to deliver and
shall not deliver such Prospectus after such period in connection with
the resales contemplated by this Section 4; and
(ii) the application of the Shelf Registration procedures set
forth in Section 3 of this Agreement to an Exchange Offer Registration,
to the extent not required by the positions of the Staff of the SEC or
the 1933 Act and the rules and regulations thereunder, will be in
conformity with the reasonable request to the Company by the Placement
Agents or with the reasonable request in writing to the Company by one
or more broker-dealers who certify to the Placement Agents and the
Company in writing that they anticipate that they will be Participating
Broker-Dealers; and provided further that, in connection with such
application of the Shelf Registration procedures set forth in Section 3
to an Exchange Offer Registration, the Company shall be obligated (x)
to deal only with one entity representing the Participating
Broker-Dealers, which shall be Morgan Stanley & Co. Incorporated unless
it elects not to act as such representative, (y) to pay the fees and
expenses of only one counsel representing the Participating
Broker-Dealers, which shall be counsel to the Placement Agents unless
such counsel elects not to so act and (z) to cause to be delivered only
one, if any, "cold comfort" letter with respect to the Prospectus in
the form existing on the last Exchange Date and with respect to each
subsequent amendment or supplement, if any, effected during the period
specified in clause (i) above.
(c) The Placement Agents shall have no liability to the
Company or any Holder with respect to any request that it may make pursuant to
Section 4(b) above.
<PAGE> 18
17
5. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless the
Placement Agents, each Holder and each Person, if any, who controls any
Placement Agent or any Holder within the meaning of either Section 15 of the
1933 Act or Section 20 of the 1934 Act, or is under common control with, or is
controlled by, any Placement Agent or any Holder, from and against all losses,
claims, damages and liabilities (including, without limitation, any legal or
other expenses reasonably incurred by any Placement Agents, any Holder or any
such controlling or affiliated Person in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement (or any amendment thereto) pursuant to which Exchange Securities or
Registrable Securities were registered under the 1933 Act, including all
documents incorporated therein by reference, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or caused by any
untrue statement or alleged untrue statement of a material fact contained in any
Prospectus (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto), or caused by any omission or alleged
omission to state therein a material fact necessary to make the statements
therein in light of the circumstances under which they were made not misleading,
except insofar as such losses, claims, damages or liabilities are caused by any
such untrue statement or omission or alleged untrue statement or omission based
upon information relating to the Placement Agents or any Holder furnished to the
Company in writing through Morgan Stanley & Co. Incorporated or any selling
Holder expressly for use therein. In connection with any Underwritten Offering
permitted by Section 3, the Company will also indemnify the Underwriters, if
any, selling brokers, dealers and similar securities industry professionals
participating in the distribution, their officers and directors and each Person
who controls such Persons (within the meaning of the 1933 Act and the 1934 Act)
to the same extent as provided above with respect to the indemnification of the
Holders, if requested in connection with any Registration Statement.
(b) Each Holder agrees, severally and not jointly, to
indemnify and hold harmless the Company, the Placement Agents and the other
selling Holders, and each of their respective directors, officers who sign the
Registration Statement and each Person, if any, who controls the Company, any
Placement Agent and any other selling Holder within the meaning of either
Section 15 of the 1933
<PAGE> 19
18
Act or Section 20 of the 1934 Act to the same extent as the foregoing indemnity
from the Company to the Placement Agents and the Holders, but only with
reference to information relating to such Holder furnished to the Company in
writing by such Holder expressly for use in any Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto).
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any Person in respect of which
indemnity may be sought pursuant to either paragraph (a) or paragraph (b) above,
such Person (the "indemnified party") shall promptly notify the Person against
whom such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for (a) the fees and expenses of more than one separate
firm (in addition to any local counsel) for the Placement Agents and all
Persons, if any, who control any Placement Agent within the meaning of either
Section 15 of the 1933 Act or Section 20 of the 1934 Act, (b) the fees and
expenses of more than one separate firm (in addition to any local counsel) for
the Company, its directors, its officers who sign the Registration Statement and
each Person, if any, who controls the Company within the meaning of either such
Section and (c) the fees and expenses of more than one separate firm (in
addition to any local counsel) for all Holders and all Persons, if any, who
control any Holders within the meaning of either such Section 15 of the 1933 Act
or Section 20 of the 1934 Act, and that all such fees and expenses shall be
reimbursed as they are incurred. In such case involving the Placement Agents and
Persons who control the Placement Agents, such firm shall be designated in
writing by Morgan Stanley & Co.
<PAGE> 20
19
Incorporated. In such case involving the Holders and such Persons who control
Holders, such firm shall be designated in writing by the Majority Holders. In
all other cases, such firm shall be designated by the Company. The indemnifying
party shall not be liable for any settlement of any proceeding effected without
its written consent but, if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by the second
and third sentences of this paragraph, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party for such fees
and expenses of counsel in accordance with such request prior to the date of
such settlement. No indemnifying party shall, without the prior written consent
of the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which such indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
(d) If the indemnification provided for in paragraph (a) or
paragraph (b) of this Section 5 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative fault
of the indemnifying party or parties on the one hand and of the indemnified
party or parties on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative fault of the
Company and the Holders shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company
<PAGE> 21
20
or by the Holders and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Holders' respective obligations to contribute pursuant to this Section 5(d)
are several in proportion to the respective principal amount of Registrable
Securities of such Holder that were registered pursuant to a Registration
Statement.
(e) The Company and each Holder agree that it would not be
just or equitable if contribution pursuant to this Section 5 were determined by
pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in paragraph (d) above. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in paragraph (d) above shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 5, no Holder shall be required to indemnify or
contribute any amount in excess of the amount by which the total price at which
Registrable Securities were sold by such Holder exceeds the amount of any
damages that such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 1933 Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation. The remedies provided for in this
Section 5 are not exclusive and shall not limit any rights or remedies which may
otherwise be available to any indemnified party at law or in equity.
The indemnity and contribution provisions contained in this
Section 5 shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by or on behalf
of the Placement Agents, any Holder or any Person controlling any Placement
Agent or any Holder, or by or on behalf of the Company, its officers or
directors or any Person controlling the Company, (iii) acceptance of any of the
Exchange Securities or (iv) any sale of Registrable Securities pursuant to a
Shelf Registration Statement.
<PAGE> 22
21
6. Miscellaneous.
(a) No Inconsistent Agreements. The Company has not entered
into, and on or after the date of this Agreement will not enter into, any
agreement which is inconsistent with the rights granted to the Holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with the rights granted to the holders of
the Company's other issued and outstanding securities under any such agreements.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of Holders
of at least a majority in aggregate principal amount of the outstanding
Registrable Securities affected by such amendment, modification, supplement,
waiver or consent; provided, however, that no amendment, modification,
supplement, waiver or consent to any departure from the provisions of Section 5
hereof shall be effective as against any Holder of Registrable Securities unless
consented to in writing by such Holder.
(c) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address given by such Holder to
the Company by means of a notice given in accordance with the provisions of this
Section 6(c), which address initially is, with respect to the Placement Agents,
the address set forth in the Placement Agreement; and (ii) if to the Company,
initially at the Company's address set forth in the Placement Agreement and
thereafter at such other address, notice of which is given in accordance with
the provisions of this Section 6(c).
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
on the next business day, if timely delivered to an air courier guaranteeing
overnight delivery.
<PAGE> 23
22
Copies of all such notices, demands, or other communications
shall be concurrently delivered by the Person giving the same to the Trustee, at
the address specified in the Indenture.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; provided that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Securities in violation of the terms of the Placement Agreement. If any
transferee of any Holder shall acquire Registrable Securities, in any manner,
whether by operation of law or otherwise, such Registrable Securities shall be
held subject to all of the terms of this Agreement, and by taking and holding
such Registrable Securities such Person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement and such Person shall be entitled to receive the benefits hereof. The
Placement Agents (in their capacity as Placement Agents) shall have no liability
or obligation to the Company with respect to any failure by a Holder to comply
with, or any breach by any Holder of, any of the obligations of such Holder
under this Agreement.
(e) Purchases and Sales of Securities. The Company shall not,
and shall use its best efforts to cause its affiliates (as defined in Rule 405
under the 1933 Act) not to, purchase and then resell or otherwise transfer any
Securities.
(f) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Placement Agents, on the other hand, and shall have the right to
enforce such agreements directly to the extent it deems such enforcement
necessary or advisable to protect its rights or the rights of Holders hereunder.
(g) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
<PAGE> 24
23
(i) Governing Law. This Agreement shall be governed by the
laws of the State of New York.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
BUCKEYE TECHNOLOGIES INC.
By /s/ Henry P. Doggrell
------------------------------------
Name: Henry P. Doggrell
Title: Senior Vice President,
Corporate Affairs
Confirmed and accepted as of
the date first above written:
MORGAN STANLEY & CO. INCORPORATED
SALOMON BROTHERS INC
CREDIT SUISSE FIRST BOSTON CORPORATION
TD SECURITIES (USA) INC.
By: MORGAN STANLEY & CO. INCORPORATED
By /s/ David J. Frey
-----------------------------------
Name: David J. Frey
Title: Vice President
<PAGE> 1
EXHIBIT 5.1
[LETTERHEAD OF BAKER, DONELSON, BEARMAN & CALDWELL]
July 10, 1998
Buckeye Technologies Inc.
1001 Tillman Street
Memphis, Tennessee 38112
Re: Buckeye Technologies Inc.
Registration Statement on Form S-4
Ladies and Gentlemen:
We have acted as counsel to Buckeye Technologies Inc., a Delaware
corporation (the "Company"), in connection with the proposed registration by the
Company of up to $150,000,000 of the Company's 8% Senior Subordinated Notes Due
2010 (the "Exchange Notes") pursuant to a Registration Statement on Form S-4
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"). The Exchange Notes will be offered in exchange for the Company's
issued and outstanding 8% Senior Subordinated Notes Due 2010, all as described
in 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 Second Amended and Restated Certificate of
Incorporation and Amended and Restated By-Laws of the Company, (ii) minutes and
records of the corporate proceedings of the Company with respect to the Exchange
Notes, (iii) the Registration Statement and exhibits thereto, (iv) the form of
Indenture (the "Indenture") entered into between the Company and Union Planters
Bank, N.A., as trustee, (v) the Registration Rights Agreement entered into
between the Company and the Placement Agents (as defined therein) 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 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 Tennessee and
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 Exchange Notes, (iii) the Indenture has been duly
qualified under the Trust Indenture Act of 1939, as amended, and (iv) the
Exchange Notes have been duly executed and authenticated in accordance with the
provisions of the Indenture and duly delivered to the holders thereof in
accordance with the terms of the Exchange Offer, the Exchange 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
<PAGE> 2
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 Tennessee 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 Exchange 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/ Baker, Donelson, Bearman &
Caldwell
<PAGE> 1
EXHIBIT 10.2
AMENDED AND RESTATED
1995 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN FOR
MANAGEMENT EMPLOYEES OF BUCKEYE CELLULOSE CORPORATION
BUCKEYE CELLULOSE CORPORATION, a Delaware corporation (the "Company"),
hereby adopts this Incentive and Nonqualified Stock Option Plan for management
employees of Buckeye Cellulose Corporation and Subsidiaries. The purposes of
this Plan are as follows:
(1) To further the growth, development and financial success of the
Company by providing additional incentives to certain key management employees
of the Company and its Subsidiaries who have been or will be given
responsibility for the management or administration of the Company's business
affairs, by assisting them to become owners of capital stock of the Company and
thus to benefit directly from its growth, development and financial success.
(2) To enable the Company to obtain and retain the services of the type
of managerial employees considered essential to the long range success of the
Company by providing and offering them an opportunity to become owners of
capital stock of the Company under Options.
ARTICLE I.
DEFINITIONS
1.1 General. Whenever the following terms are used in this Plan they
shall have the meaning specified below unless the context clearly indicates to
the contrary.
1.2 Board. "Board" shall mean the Board of Directors of the Company.
1.3 Code. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.4 Committee. "Committee" shall mean the Compensation Committee of
the Board, appointed as provided in Section 6.1.
1.5 Common Stock. "Common Stock" shall mean the common stock, par
value $.01 per share, of the Company.
1.6 Company. "Company" shall mean Buckeye Cellulose Corporation and
those corporations, if any, which are from time to time, its Subsidiaries.
1.7 Director. "Director" shall mean a member of the Board.
<PAGE> 2
1.8 Employee. "Employee" shall mean any employee (as defined in
accordance with the regulations and revenue rulings then applicable under
Section 3401(c) of the Code) of the Company or any of its Subsidiaries whether
such employee is so employed at the time this Plan is adopted or becomes so
employed subsequent to the adoption of this Plan.
1.9 Exercise Price. "Exercise Price" shall have the meaning given
in Section 4.2.
1.10 Fair Market Value. "Fair market value" of any shares of Common
Stock of the Company for purposes of the Plan shall be (a) the last price at
which shares of the Company were traded on the New York Stock Exchange on the
specified date or, if there were no trades on that day, then on the last day
prior to such date during which there were trades, or (b) solely in the case of
any Options granted on the date of the initial public offering of the Common
Stock of the Company, the price at which the Common Stock is sold to the public.
1.11 Incentive Stock Option. "Incentive Stock Option" shall mean any
portion of an Option which (i) is not specifically designated by the Committee
at the time of the grant as a Nonqualified Stock Option, (ii) can be expected at
the time of grant to satisfy the requirements for treatment as an incentive
stock option under Section 422 of the Code, (iii) continues at all times
thereafter to satisfy the requirements for treatment as an incentive stock
option under Section 422 of the Code, and (iv) is exercised by either a citizen
or resident alien of the United States (as defined in the Code and the
regulations thereunder).
1.12 Nonqualified Stock Option. "Nonqualified Stock Option" shall
mean any portion of the Option which is not an Incentive Stock Option.
1.13 Option. "Option" shall mean an option granted under the Plan to
purchase Common Stock.
1.14 Optionee. "Optionee" shall mean an Employee to whom an Option is
granted under the Plan.
1.15 Plan. "Plan" shall mean the 1995 Incentive and Nonqualified Stock
Option Plan for Management Employees of the Company and Subsidiaries, as amended
or restated from time to time.
1.16 Pronouns. The masculine pronoun shall include the feminine and
neuter and the singular shall include the plural, where the context so
indicates.
1.17 Stock Option Agreement. "Stock Option Agreement" shall mean a
Stock Option Subscription Agreement between the Optionee and the Company.
- 2 -
<PAGE> 3
1.18 Subsidiary. "Subsidiary" shall mean any corporation (other than
the Company) in an unbroken chain of corporations beginning with the Company if
each of the corporations, or if each group of commonly controlled corporations,
other than the last corporation in an unbroken chain then owns stock possessing
fifty percent (50%) or more of the total combined voted power of all classes of
stock in one of the other corporations in such chain.
ARTICLE II.
SHARES SUBJECT TO PLAN
2.1 Shares Subject to Plan. The shares of stock subject to Options
shall be shares of Common Stock of the Company. The aggregate number of shares
of Common Stock which may be issued upon exercise of Options under the Plan
shall not exceed one million six hundred fifty thousand (1,650,000) shares,
subject to adjustment as provided in Section 4.6 hereof.
2.2 Unexercised Options. If any Option expires or is canceled without
having been fully exercised, the number of shares subject to such Option but as
to which such Option was not exercised prior to its expiration or cancellation
may again be optioned hereunder, subject to the limitations of Section 2.1.
ARTICLE III.
GRANTING OF OPTIONS
3.1 Eligibility. Any management Employee of the Company shall be
eligible to be granted Options. The determination by the Committee of the status
of an employee as a member of management shall be conclusive.
3.2 Granting of Options. The Committee shall from time to time, in its
absolute discretion:
(i) determine which Employees are key management Employees and
select from such Employees (including those to whom Options have been
previously granted under the Plan) such of them as in its opinion shall
be granted Options; and
(ii) determine the number of shares to be subject to such
Options granted to such selected management Employees; and
(iii) determine the terms and conditions of such Options,
consistent with the Plan; and
(iv) establish such conditions as to the manner of exercise of
such Options as it may deem necessary, including but not limited to
requiring Optionees to enter into
- 3 -
<PAGE> 4
agreements regarding transferability and other restrictions with
respect to shares issuable upon exercise of such Options.
3.3 Expiration of Time to Make Grants. No Option may be granted under
this Plan after the expiration of ten (10) years from the date the Plan is
adopted by the Board or the date the stockholders of the Company approve this
Plan, if earlier.
ARTICLE IV.
TERMS OF OPTIONS
4.1 Option Agreement. Each Option shall be evidenced by a written Stock
Option Agreement, which shall be executed by the Optionee and an authorized
officer of the Company, and which shall contain such terms and conditions as the
Committee shall determine, consistent with the Plan.
4.2 Exercise Price. The purchase price under each Option shall be
determined by the Committee at the time the Option is granted, but in no event
shall such purchase price be less than one hundred percent (100%) of the Fair
Market Value of the shares of Common Stock of the Company on the date of grant.
4.3 Commencement of Exercisability. Subject to the provisions of
Section 7.2, Options shall become exercisable at such times and in such
installments (which may be cumulative) as the Committee shall provide in the
terms of each individual Stock Option Agreement; provided, however, that by a
resolution adopted after an Option is granted the Committee may, on such terms
and conditions as it may determine to be appropriate and subject to Section 7.2,
accelerate the time at which such Option or any portion thereof may be
exercised.
4.4 Expiration of Options. No Option may be exercised to any extent by
anyone after, and every Option shall expire no later than, the expiration of ten
(10) years from the date the Option was granted. Subject to the provisions of
this Section 4.4, the Committee shall provide, in the terms of each individual
Stock Option Agreement, when the Option expires and becomes unexercisable.
4.5 No Right to Continue in Employment. Nothing in this Plan or in any
Stock Option Agreement hereunder shall confer upon any Optionee any right to
continue in the employ or service of the Company or shall interfere with or
restrict in any way the rights of the Company, which are hereby expressly
reserved, to discharge any Optionee at any time for any reason whatsoever, with
or without good cause.
4.6 Adjustments in Outstanding Options. If the outstanding shares of
Common Stock subject to Options are, from time to time, changed into or
exchanged for a different number or
- 4 -
<PAGE> 5
kind of shares of capital stock or other securities of the Company, or of
another corporation, by reason of a reorganization, merger, consolidation,
recapitalization, reclassification, stock split-up, stock dividend, combination
of shares or otherwise, the Committee shall make an appropriate adjustment in
the aggregate number and kind of shares which may be issued pursuant to Section
2.1 hereof and the number and kind of shares as to which all outstanding
Options, or portions thereof then unexercised, shall be exercisable. Such
adjustment in an outstanding Option shall be made without change in the total
price applicable to the Option or the unexercised portion of the Option (except
for any change in the aggregate price resulting from rounding-off of share
quantities or prices) and with any necessary corresponding adjustment in
Exercise Price per share. No fractional shares shall be issued, and any
fractional shares resulting from computations pursuant to this Section 4.6 shall
be eliminated from the respective Options. Any such adjustment made by the
Committee shall be final and binding upon all Optionees, the Company and all
other interested persons.
ARTICLE V.
EXERCISE OF OPTIONS
5.1 Persons Eligible to Exercise. Except with respect to an Option
which is specifically made transferable pursuant to Section 7.1, (i) during the
lifetime of the Optionee, only the Optionee or the Optionee's guardian or
conservator may exercise an Option granted to such Optionee, or any portion
thereof, and (ii) after the death of the Optionee, any exercisable portion of an
Option may, prior to the time when such portion becomes unexercisable under the
terms of Section 4.4 or the Optionee's Stock Option Agreement, be exercised by
the Optionee's personal representative or by any person empowered to do so under
the deceased Optionee's will or under the then applicable laws of descent and
distribution.
5.2 Partial Exercise. At any time prior to the time when any
exercisable Option or exercisable portion thereof expires or becomes
unexercisable under the terms of Section 4.4 or the Optionee's Stock Option
Agreement, such Option or portion thereof may be exercised in whole or in part;
provided, however, that the Company shall not be required to issue fractional
shares.
5.3 Manner of Exercise. An exercisable Option, or any exercisable
portion thereof, may be exercised solely by delivery to the Secretary of the
Company or his or her office of all of the following prior to the time when such
Option or such portion becomes unexercisable under the terms of Section 4.4 or
the Optionee's Stock Option Agreement:
(i) Notice in writing signed by the Optionee or other person
then entitled to exercise such Option or portion thereof, stating that
such Option or portion thereof is exercised; and
- 5 -
<PAGE> 6
(ii) Full payment of the Exercise Price (as hereinafter
provided) for the shares with respect to which such Option or portion
thereof is thereby exercised, together with payment or arrangement for
payment of federal income or other tax, if any, required to be withheld
by the Company with respect to such shares; and
(iii) In the event that the Option or portion thereof shall be
exercised pursuant to Section 5.1 by any person or persons other than
the Optionee, appropriate proof of the right of such person or persons
to exercise the Option or portion thereof; and
(iv) Such representations and documents as the Committee deems
reasonably necessary or advisable to effect compliance with all
applicable provisions of the Securities Act of 1933, as amended, and
any other federal, state or foreign securities laws or regulations. The
Committee may, in its absolute discretion, also take whatever
additional actions it deems appropriate to effect such compliance,
including, without limitation, placing legends on share certificates
and issuing stock-transfer orders to transfer agents and registrars.
The Exercise Price shall be payable in cash, by check, by tendering
shares of Common Stock of the Company, or by any combination thereof, as time to
time determined by the Committee. Any shares of Common Stock acceptable to the
Committee in payment of the Exercise Price may be tendered by either actual
delivery of the certificates or by such other procedures as the Committee may
establish from time to time and shall be valued at Fair Market Value as of the
date of exercise.
5.4 Rights as Stockholders. The holders of Options shall not be, nor
have any of the rights or privileges of, stockholders of the Company in respect
of any shares purchasable upon the exercise of any part of an Option, unless and
until certificates representing such shares have been issued by the Company to
such holders. No adjustment shall be made for cash dividends for which the
record date is prior to the date such stock certificate is issued.
ARTICLE VI.
ADMINISTRATION
6.1 Stock Option Committee. The Committee shall consist of at least
three (3) Directors. Appointment of Committee members by the Board shall be
effective upon acceptance of appointment, and Committee members may resign at
any time by delivering written notice to the Board. Vacancies in the Committee
shall be filled by the Board. Committee members shall be appointed by and shall
serve at the pleasure of the Board, and the Board may from time to time remove
members from, or add members to, the Committee and shall fill any vacancy on the
Committee. No person shall be eligible to serve on the Committee unless such
person is then a "non-employee director" within the meaning of paragraph (b) of
- 6 -
<PAGE> 7
Rule 16b-3 which has been adopted by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as such Rule or its equivalent is
then in effect.
6.2 Duties and Powers of Committee. It shall be the duty of the
Committee to conduct the general administration of the Plan in accordance with
its provisions. The Committee shall have the power to interpret the Plan and the
Options and to adopt such rules for the administration, interpretation, and
application of the Plan as are consistent herewith and to interpret, amend or
revoke any such rules. Any such interpretation and rules shall be consistent
with the basic purpose of the Plan to grant Options. The Board may, in its
absolute discretion, at any time and from time to time, exercise any and all
rights and duties of the Committee under the Plan.
6.3 Majority Rule. The Committee shall act by a majority of its members
in office and the Committee may act either by vote at a telephonic or other
meeting or by a memorandum or other written instrument signed by a majority of
the Committee. The Secretary of the Company shall keep minutes of all meetings
of the Committee. The Committee shall make such rules of procedure for the
conduct of its business as it shall deem advisable.
6.4 Compensation; Professional Assistance; Good Faith Actions. Members
of the Committee shall not receive compensation for their services as members in
addition to the compensation otherwise payable to them as members of the Board,
but all expenses and liabilities they incur in connection with the
administration of the Plan shall be borne by the Company. The Committee may
employ attorneys, consultants, accountants, appraisers, brokers or other
persons. The Committee, the Company and the officers and Directors of the
Company shall be entitled to rely upon the advice, opinions or valuations of any
such persons. No member of the Committee shall be personally liable for any
action, determination or interpretation made in good faith with respect to the
Plan or the Options, and all members of the Committee shall be fully protected
by the Company in respect to any such action, determination or interpretation.
ARTICLE VII.
MISCELLANEOUS PROVISIONS
7.1 Transferability of Options. The Committee may grant Nonqualified
Stock Options which are transferable to the extent expressly provided in the
Stock Option Agreement. Except as expressly provided therein, no Option or
interest or right therein shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means,
whether such disposition be voluntary or involuntary or by operation of law or
by judgment, levy, attachment, garnishment or any other legal or equitable
proceeding (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect; provided, however, that nothing in this
Section 7.1 shall prevent transfers by will or by the applicable laws of descent
and distribution to the extent contemplated hereby.
- 7 -
<PAGE> 8
7.2 Amendment, Suspension or Termination of the Plan. The Plan may be
wholly or partially amended or otherwise modified, suspended or terminated at
any time or from time to time by the Committee. Notwithstanding the foregoing,
without approval of the Company's stockholders given within twelve (12) months
before or after the action by the Committee, no action of the Committee or the
Board may increase any limit imposed in Section 2.1 on the maximum number of
shares which may be issued upon exercise of Options, reduce the minimum option
price requirements in Section 4.2 or extend the limit imposed in Section 3.3 on
the period during which Options may be granted. Neither the amendment,
suspension nor termination of the Plan shall, without the consent of the holder
of the Option, alter or impair any rights or obligations under any Option
theretofore granted. No Option may be granted during any period of suspension
nor after termination of the Plan.
7.3 Effect of Plan Upon Other Options and Compensation Plans. The
adoption of the Plan shall not affect any other compensation or incentive plans
in effect for the Company. Nothing in this Plan shall be construed to limit the
right of the Company (a) to establish any other forms of incentives or
compensation for Employees of the Company; or (b) to grant or assume options
otherwise than under the Plan in connection with any proper corporate purpose,
including, but not by way of limitation, the grant or assumption of options in
connection with the acquisition by purchase, lease, merger, consolidation or
otherwise, of the business, stock or assets of any corporation, firm or
association.
7.4 Application of Proceeds. The proceeds received by the Company from
the sale of its shares of Common Stock under the Plan will be used for general
corporate purposes.
7.5 Titles. Titles are provided for convenience only and are not to
serve as a basis for interpretation or construction of the Plan.
7.6 Interpretation. Any Options granted under this Plan as Incentive
Stock Options are intended to satisfy all requirements of Section 422 of the
Code insofar as possible, and the provisions of this Plan and all Stock Option
Agreements shall be construed in accordance with that intention. If any
provision of this Plan or any Stock Option Agreement shall be inconsistent or in
conflict with any applicable requirement for an Incentive Stock Option, then
such requirement shall be deemed to override and supersede the inconsistent or
conflicting provision; provided, however, the foregoing provision shall not
limit the Company from granting to any Optionee Options which are in excess of
the amount which may be treated as Incentive Stock Options, and any Options so
granted in excess of the limitations in Section 422(d) of the Code shall be
treated as Nonqualified Stock Options; provided further, however, if the normal
date of exercise of the Option is accelerated because of a sale of the Company
or other similar event as provided in any Stock Option Agreement or because of
the exercise of the Committee's discretion under Section 4.3, such acceleration
shall nevertheless occur even if it shall cause all or a part of the Option to
no longer be an Incentive Stock Option. Any required provision for an Incentive
Stock Option that is omitted from this Plan
- 8 -
<PAGE> 9
or the Stock Option Agreement shall be incorporated herein by reference and
shall apply retroactively, if necessary, and shall be deemed a part of this Plan
and any Stock Option Agreement entered into under this Plan to the same extent
as though expressly set forth herein. The Committee may amend this Plan or amend
the terms of any Stock Option Agreement in any manner that may be required in
order for the Options granted under this Plan to comply with the applicable
requirements for Incentive Stock Options, and, if necessary, any such amendments
shall apply retroactively to the adoption of this Plan.
7.7 Effective Date. This Plan first became effective on October 27,
1995, the date of its adoption by the Board, and was approved on November 17,
1995 by the vote of the holders of a majority of the outstanding shares of the
Company's Common Stock . This Plan as amended and restated shall become
effective with respect to Options granted on or after the date of its adoption
by the Board. Pursuant to Section 7.2, the amendment and restatement does not
require approval by the shareholders of the Company.
- 9 -
<PAGE> 1
EXHIBIT 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 16,
1993 NINE
THROUGH MONTHS ENDED
JUNE 30, MARCH 31,
1993 1994 1995 1996 1997 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C>
Combined consolidated income before income taxes 7,555 20,221 34,182 72,542 80,253 58,188 62,279
Minority interest 3,083 8,291 23,223 16,628 -- -- --
Interest expense 10,462 26,266 21,741 17,411 27,602 19,290 27,122
Amortization of debt costs 98 593 549 650 1,089 821 736
Interest portion of rental expense 198 284 342 426 553 387 906
Earnings 21,396 55,655 80,037 107,657 109,497 78,686 91,043
Interest expense 10,462 26,266 21,741 17,411 27,602 19,290 27,122
Amortization of debt costs 98 593 549 650 1,089 821 736
Interest portion of rental expense 198 284 342 426 553 387 906
Fixed Charges 10,758 27,143 22,632 18,487 29,244 20,498 28,764
Ratio of Earnings to Fixed Charges 1.99 2.05 3.54 5,82 3.74 3,84 3.17
</TABLE>
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
SUBSIDIARY JURISDICTION OF INCORPORATION
- ---------- -----------------------------
<S> <C>
Buckeye Florida Corporation Delaware
Buckeye Foley Corporation Delaware
Buckeye Florida, Limited Partnership Delaware
Buckeye S.A. Switzerland
Buckeye (Barbados) Ltd. Barbados
Buckeye Technologies GmbH Germany
BKI Management Company, L.P Tennessee
BKI Holding Corporation Delaware
BKI Finance Corporation Tennessee
BKI Asset Management Corporation Delaware
BKI Limited Corporation Delaware
Buckeye Lumberton Inc. North Carolina
Buckeye Canada Inc. Canada
Merfin Europe Ltd. Ireland
Merfin Systems Inc. Delaware
</TABLE>
<PAGE> 1
Exhibit 23.2
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated July 10, 1997 (except for Note 17, as to which the date
is February 17, 1998), with respect to the consolidated financial statements of
Buckeye Technologies Inc. included in the Registration Statement (Form S-4 No.
33- ) and related prospectus of Buckeye Technologies Inc. for the registration
of $150,000,000 8% Senior Subordinated Notes Due 2010.
Our audits also included the financial statement schedules of Buckeye
Technologies Inc. listed in Item 21(b). These schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion based
on our audits. In our opinion, the financial statement schedules referred to
above, when considered in relation to the basic financial statements taken as a
whole, present fairly in all material respects the information set forth
therein.
ERNST & YOUNG LLP
Memphis, Tennessee
July 15, 1998
<PAGE> 1
Exhibit 23.3
Consent of Independent Auditors
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Buckeye Technologies Inc. of our report
dated March 10, 1997, except for Note 17 which is as of August 31, 1997,
relating to the financial statements of Merfin International Inc. which appears
in such Prospectus. We also consent to the reference to our firm under the
caption "Experts" in such Prospectus.
PRICEWATERHOUSECOOPERS
July 15, 1998
Surrey, B.C., Canada
<PAGE> 1
Exhibit 25.1
-----------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
-----
------------------------
UNION PLANTERS BANK, N.A.
(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 Bank, N.A.
6200 Poplar Avenue, Third Floor
Memphis, Tennessee 38119
(901) 580-5510
(Name, Address and Telephone Number of Agent for Service)
BUCKEYE TECHNOLOGIES INC.
(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 38112
Memphis, Tennessee
(Address of principal executive office) (Zip code)
------------------------
8% Senior Subordinated Notes Due 2010
-----------------------------------------------
<PAGE> 2
Item 1. General information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Comptroller of the Currency, Washington, D.C.
Federal Deposit Insurance Corporation,
Washington, D.C.
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 Holding Corporation, incorporated
under the laws of Tennessee and headquartered at 7130 Goodlett
Farms Parkway, Memphis, Tennessee ("Parent"). The following is
information as to all outstanding voting securities of Parent
as of July 8, 1998.
Col. A Col. B
Title of Class Amount Outstanding
-------------- ------------------
Common Stock 1,000
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:
2
<PAGE> 3
(a) Title of the securities outstanding under each such other
indenture.
Buckeye Technologies Inc. (formerly Buckeye Cellulose
Corporation) 8 1/2% Senior Subordinated Notes due 2005
Buckeye Technologies Inc. 9 1/4% Senior Subordinated Notes
due 2008
Buckeye Technologies Inc. 8% Senior Subordinated Notes
Due 2010
(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.
All of these notes are unsecured obligations of the
Company ranking pari passu with all other unsecured
and subordinated indebtedness of the Company, and
therefore the Trustee has the same interest in
enforcing the Company's obligation under all of these
Indentures.
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
3
<PAGE> 4
Item 7. Voting Securities of the trustee owned by underwriters or
their officials.
Furnish the following information as to the voting securities
of the trustee owned beneficially by each underwriter for the obligor
and each director, partner and executive officer of each such
underwriter:
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
in Col. C
- ------------- -------------- ------------ ----------------------
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:
<TABLE>
<S> <C> <C> <C>
Col. A Col. B Col. C Col. D
Title of Class Whether the secur- Amount owned Percent of class repre-
ities are voting or beneficially or held sented by amount given
nonvoting securities as collateral security in Col. C.
for obligations in
default
- -------------- -------------------- ---------------------- -----------------------
</TABLE>
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 Percent of class
and title of Outstanding beneficially or represented by
classes held as collateral amount given
security for in Col. C
obligations in default
by trustee
- --------------- ----------- ---------------------- ----------------
4
<PAGE> 5
Not Applicable
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:
<TABLE>
<S> <C> <C> <C>
Col. A Col. B. Col. C Col. D
Title of issuer Amount Amount owned Percent of
and title of Outstanding beneficially class represented by
classes or held as collateral amount given
security for obligations in Col. C
in default
by trustee
- --------------- ----------- ------------------------ --------------------
</TABLE>
Not Applicable
Item 12. Indebtedness of the Obligor to the Trustee.
5
<PAGE> 6
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
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.
Not Applicable
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. *
6
<PAGE> 7
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.
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 filed as Exhibit
25.1 to the Registration Statement on Form S-1 of the Company filed with the
Securities and Exchange Commission on October 6, 1995 (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 Bank, N.A. 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.
7
<PAGE> 8
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, Union Planters Bank, N.A. a national banking association organized and
existing under the laws of the United States of America, has duly caused this
statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Memphis, and State of Tennessee,
on the 8th day of July, 1998.
UNION PLANTERS BANK, N. A.
(Trustee)
By: /s/ Rosemary Clark
---------------------------
Rosemary Clark
Vice President and
Corporate Trust Counsel
<PAGE> 9
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 Technologies, Inc. of its 8%
Senior Subordinated Notes Due 2010, 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 BANK, N.A.
(Trustee)
By: /s/ Rosemary Clark
--------------------------
Rosemary Clark
Vice President and
Corporate Trust Counsel
Dated: July 8, 1998
T-1form
<PAGE> 10
EXHIBIT 7
The following is the latest report of condition of the Trustee at the
close of business on March 31, 1998, 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> 11
EXHIBIT 5
Not Applicable
<PAGE> 12
------
9
------
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR MARCH 31, 1998
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>
Dollar Amounts in Thousands
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <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 536,246 1.a
----------
b. Interest-bearing balances (2).......................................................... 0071 679 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 2,743,709 2.b
----------
3. Federal funds sold and securities purchased under agreements to resell.................... 1350 305,275 3
----------
4. Loans and lease financing receivables: RCON
------------------
a. Loans and leases, net of unearned income (from Schedule RC-C)........... 2122 11,060,658 4.a
----------
b. LESS: Allowance for loan and lease losses............................... 3123 190,831 4.b
----------
c. LESS: Allocated transfer risk reserve................................... 3128 0 4.c
----------
d. Loans and leases, net of unearned income, RCON
-----------------
allowance, and reserve (item 4.a minus 4.b and 4.c)..................................... 2125 10,869,827 4.d
----------
5. Trading assets (from Schedule RC-D)........................................................ 3545 163,698 5.
----------
6. Premises and fixed assets (including capitalized leases)................................... 2145 301,010 6.
----------
7. Other real estate owned (from Schedule RC-M)............................................... 2150 19,895 7.
----------
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M)... 2130 1,158 8.
----------
9. Customers' liability to this bank on acceptances outstanding............................... 2155 13,295 9.
----------
10. Intangible assets (from Schedule RC-M)..................................................... 2143 173,905 10.
----------
11. Other assets (from Schedule RC-F).......................................................... 2160 556,469 11.
----------
12. Total assets (sum of items 1 through 11)................................................... 2170 15,685,166 12.
----------
</TABLE>
- --------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE> 13
------
10
------
SCHEDULE RC - CONTINUED
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LIABILITIES
13. Deposits: RCON
----------------
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E)....... RCON 2200 11,923,581 13.a.
----------------- ----------
(1) Noninterest-bearing (1).................................................... 6631 1,956,416 13.a.1
---------
(2) Interest-bearing........................................................... 6636 9,967,165 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........................... 2800 451,165 14
----------
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 (includes mortgage indebtedness and obligations under capitalized leases):
----------
a. With a remaining maturity of one year or less..................................................... 2332 633,087 16.a
----------
b. With a remaining maturity of more than one year through three years............................... A547 385,921 16.b
----------
c. With a remaining maturity of more than three years................................................ A548 282,648 16.c
----------
17. Not applicable
----------
18. Bank's liability on acceptances executed and outstanding............................................. 2920 13,295 18
----------
19. Subordinated notes and debentures (2)................................................................ 3200 301,856 19
----------
20. Other liabilities (from Schedule RC-G)............................................................... 2930 262,347 20
----------
21. Total liabilities (sum of items 13 through 20)....................................................... 2948 14,253,900 21
----------
22. Not applicable
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 841,454 25
----------
26. a. Undivided profits and capital reserves............................................................ 3632 543,684 26.a
----------
b. Net unrealized holding gains (losses) on available-for-sale securities............................ 8434 28,081 26.b
----------
27. Cumulative foreign currency translation adjustments.................................................. 27
----------
28. Total equity capital (sum of items 23 through 27).................................................... 3210 1,431,266 28
----------
29. Total liabilities and equity capital (sum of items 21 and 28)........................................ 3300 15,685,166 29
----------
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 1997............................ 6724 2 M.1
----------
</TABLE>
<TABLE>
<S> <C>
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by
submits a report on the consolidated holding company (but external auditors
not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in accordance 8 = No external audit work
with generally accepted auditing standards by a certified
public accounting firm (may be required by state chartering
authority)
</TABLE>
- ---------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
(2) Includes limited-life preferred stock and related surplus.
<PAGE> 1
FORM OF LETTER OF TRANSMITTAL
BUCKEYE TECHNOLOGIES INC.
OFFER TO EXCHANGE
8% SENIOR SUBORDINATED NOTES DUE 2010
FOR ANY AND ALL OF THE OUTSTANDING
8% SENIOR SUBORDINATED NOTES DUE 2010
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS
WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1998, UNLESS THE OFFER IS EXTENDED
IBJ SCHRODER BANK & TRUST COMPANY
(THE "EXCHANGE AGENT")
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------
By Mail (registered or By Facsimile Transmission (for By Hand or Overnight Courier:
certified mail recommended): Eligible Institutions only):
- ---------------------------------------------------------------------------------------------------
IBJ Schroder Bank & Trust (212) 858-2611 IBJ Schroder Bank & Trust
Company Company
P.O. Box 84 One State Street
Bowling Green Station New York, New York 10004
New York, New York 10274-0084 Attn: Securities Processing
Attn: Reorganization Window, Subcellar One, (SC-1)
Operations Department
- ---------------------------------------------------------------------------------------------------
Confirm Receipt of Facsimile Transmission by Telephone:
(212) 858-2103
- ---------------------------------------------------------------------------------------------------
</TABLE>
Delivery of this instrument to an address other than as set forth above or
transmission of instructions via a facsimile number other than as set forth
above will not constitute a valid delivery. The instructions accompanying this
Letter of Transmittal should be read carefully before this Letter of Transmittal
is completed.
By execution hereof, the undersigned hereby acknowledges receipt of the
Prospectus dated July , 1998 (the "Prospectus") of Buckeye Technologies Inc.
(the "Company") and this Letter of Transmittal, which together constitute the
Company's offer (the "Exchange Offer") to exchange $1,000 in principal amount of
its 8% Senior Subordinated Notes due 2010 (the "Exchange Notes"), which have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to a Registration Statement of which the Prospectus is a part,
for each $1,000 in principal amount of its outstanding 8% Senior Subordinated
Notes due 2010 (the "Notes"). The term "Expiration Date" shall mean 5:00 p.m.,
New York City time, on , 1998, unless the Exchange Offer is
extended, in which case the term "Expiration Date" means the latest date and
time to which the Exchange Offer is extended. Capitalized terms used but not
defined herein have the meaning given to them in the Prospectus.
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE
INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
List on the next page the Notes to which this Letter of Transmittal
relates. If the space indicated is inadequate, the Certificate or Registration
Numbers and the Principal Amounts should be listed on a separately signed
schedule affixed hereto.
<PAGE> 2
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
DESCRIPTION OF SENIOR SUBORDINATED NOTES TENDERED HEREBY
- ----------------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF REGISTERED OWNER PRINCIPAL AMOUNT TENDERED**
(PLEASE FILL IN, IF BLANK) (ATTACH LIST IF NECESSARY)
- ----------------------------------------------------------------------------------------------------------
CERTIFICATE OR
REGISTRATION AGGREGATE PRINCIPAL AMOUNT
NUMBERS* REPRESENTED BY NOTES
- ----------------------------------------------------------------------------------------------------------
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
TOTAL
- ----------------------------------------------------------------------------------------------------------
* Need not be completed by Book-Entry Holders.
** Unless otherwise indicated, the Holder will be deemed to have tendered the full aggregate principal
amount represented by such Notes. All tenders must be in integral multiples of $1,000.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
This Letter of Transmittal is to be used (i) if certificates representing
Notes are to be forwarded herewith, (ii) if tender of Notes is to be made by
book-entry transfer to an account maintained by the Exchange Agent at The
Depository Trust Company (the "Depository" or "DTC"), pursuant to the procedures
set forth in the Prospectus under "The Exchange Offer -- Procedures for
Tendering" or (iii) if tender of the Notes is to be made according to the
guaranteed delivery procedures described in the Prospectus under "The Exchange
Offer -- Guaranteed Delivery Procedures." See Instruction 2. DELIVERY OF
DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE
EXCHANGE AGENT.
Unless the context requires otherwise, the term "Holder" with respect to
the Exchange Offer means any person (i) in whose name Notes are registered on
the books of the Company or any other person who has obtained a properly
completed bond power from the registered holder or (ii) whose Notes are held of
record by DTC who desires to deliver such Notes by book-entry transfer at DTC.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Notes must complete this
letter in its entirety.
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE
TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE DEPOSITORY AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution:
- ---------------------------------------------------------------------------
Account Number:
- --------------------------------------------------------------------------------
Transaction Code Number:
- --------------------------------------------------------------------------------
Holders whose Notes are not immediately available or who cannot deliver
their Notes and all other documents required hereby to the Exchange Agent on or
prior to the Expiration Date may tender their Notes according to the guaranteed
delivery procedures set forth in the Prospectus under the caption "The Exchange
Offer -- Guaranteed Delivery Procedures." See Instruction 2.
<PAGE> 3
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s):
-------------------------------------------------------------------------------
Name of Eligible Institution that Guaranteed Delivery:
------------------------------------------------------
If delivery by book-entry transfer:
Account Number:
-----------------------------------------------------------------------------
Transfer Code Number:
-----------------------------------------------------------------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE TEN ADDITIONAL
COPIES OF THE PROSPECTUS AND TEN COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
----------------------------------------------------------------------------
Address:
----------------------------------------------------------------------------
<PAGE> 4
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the principal amount of the Notes
indicated above. Subject to, and effective upon, the acceptance for exchange of
such Notes tendered hereby, the undersigned hereby exchanges, sells, assigns and
transfers to, or upon the order of, the Company all right, title and interest in
and to such Notes as are being tendered hereby, including all rights to accrued
and unpaid interest thereon as of the Expiration Date. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent as the true and lawful
agent and attorney-in-fact of the undersigned (with full knowledge that said
Exchange Agent acts as the agent of the Company in connection with the Exchange
Offer) to cause the Notes to be assigned, transferred and exchanged. The
undersigned represents and warrants that it has full power and authority to
tender, exchange, sell, assign and transfer the Notes tendered hereby and to
acquire Exchange Notes issuable upon the exchange of such tendered Notes, and
that when the same are accepted for exchange, the Company will acquire good and
unencumbered title to the tendered Notes, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim.
The undersigned represents to the Company that (i) the Exchange Notes
acquired pursuant to the Exchange Offer are being obtained in the ordinary
course of business of the person receiving such Exchange Notes, whether or not
such person is the undersigned; (ii) neither the undersigned nor any such other
person has an arrangement or understanding with any person to participate in a
distribution of such Exchange Notes; and (iii) the undersigned and any such
other person acknowledge that, if they are participating in the Exchange Offer
for the purpose of distributing the Exchange Notes, (a) they cannot rely on the
position of the staff of the Securities and Exchange Commission enunciated in
Exxon Capital Holdings Corporation (available April 13, 1989), Morgan Stanley &
Co., Inc. (available June 5, 1991) or similar no-action letters and, in the
absence of an exemption therefrom, must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with the
resale transaction and (b) failure to comply with such requirements in such
instance could result in the undersigned or any such other person incurring
liability under the Securities Act for which such persons are not indemnified by
the Company. If the undersigned or the person receiving the Exchange Notes
covered by this letter is an affiliate (as defined under Rule 405 of the
Securities Act) of the Company, the Exchange Notes may not be offered for
resale, resold or otherwise transferred by the undersigned or such other person
without registration under the Securities Act or an exemption therefrom. If the
exchange offeree is a broker-dealer holding Notes acquired for its own account
as a result of market-making activities or other trading activities, it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of Exchange Notes received in respect of such Notes
pursuant to the Exchange Offer; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
The undersigned also warrants that it will, upon request, execute and
deliver any additional documents deemed by the Exchange Agent or the Company to
be necessary or desirable to complete the exchange, sale, assignment and
transfer of tendered Notes or transfer ownership of such Notes on the account
books maintained by a book-entry transfer facility. The undersigned further
agrees that acceptance of any tendered Notes by the Company and the issuance of
Exchange Notes in exchange therefor shall constitute performance in full by the
Company of its obligations under the Registration Rights Agreement and that the
Company shall have no further obligations or liabilities thereunder for the
registration of the Notes or the Exchange Notes.
The Exchange Offer is subject to certain conditions set forth in the
Prospectus under the caption "The Exchange Offer -- Conditions." The undersigned
recognizes that as a result of these conditions (which may be waived, in whole
or in part, by the Company), as more particularly set forth in the Prospectus,
the Company may not be required to exchange any of the Notes tendered hereby
and, in such event, the Notes not exchanged will be returned to the undersigned
at the address shown below the signature of the undersigned.
All authority herein conferred or agreed to be conferred shall survive the
death, bankruptcy or incapacity of the undersigned and every obligation of the
undersigned hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned. TENDERED NOTES MAY BE WITHDRAWN AT
ANY TIME PRIOR TO THE EXPIRATION DATE.
<PAGE> 5
Unless otherwise indicated in the box entitled "Special Registration
Instructions" or the box entitled "Special Delivery Instructions" in this Letter
of Transmittal, certificates for all Exchange Notes delivered in exchange for
tendered Notes, and any Notes delivered herewith but not exchanged, will be
registered in the name of the undersigned and shall be delivered to the
undersigned at the address shown below the signature of the undersigned. If an
Exchange Note is to be issued to a person other than the person(s) signing this
Letter of Transmittal, or if the Exchange Note is to be mailed to someone other
than the person(s) signing this Letter of Transmittal or to the person(s)
signing this Letter of Transmittal at an address different than the address
shown on this Letter of Transmittal, the appropriate boxes of this Letter of
Transmittal should be completed. If Notes are surrendered by Holder(s) that have
completed either the box entitled "Special Registration Instructions" or the box
entitled "Special Delivery Instructions" in this Letter of Transmittal,
signature(s) on this Letter of Transmittal must be guaranteed by an Eligible
Institution (as defined in Instruction 2).
<PAGE> 6
SPECIAL REGISTRATION INSTRUCTIONS
Fill in ONLY if Exchange Notes are to be issued in a name OTHER than that the
undersigned.
Name
- ----------------------------------------
(PLEASE PRINT)
Address
- --------------------------------------
------------------------------------------------
(INCLUDE ZIP CODE)
Book Entry Transfer Facility Accounts
- -----
------------------------------------------------
(TAX IDENTIFICATION/SOCIAL SECURITY NUMBER)
SPECIAL DELIVERY INSTRUCTIONS
Fill in ONLY if the Exchange Notes are to be sent to someone other than the
undersigned, or to the undersigned at an address OTHER than that set forth
above.
Deliver certificate(s) and check(s) to:
Name
- ----------------------------------------
(PLEASE PRINT)
Address
- --------------------------------------
------------------------------------------------
(INCLUDE ZIP CODE)
REGISTERED HOLDERS OF NOTES PLEASE SIGN HERE
(IN ADDITION, COMPLETE SUBSTITUTE FORM W-9 BELOW)
DATED:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(SIGNATURE(S) OF REGISTERED HOLDER(S))
(Must be signed by registered holder(s) exactly as the name(s) appear(s) on the
Notes or on a security position listing as the owner of the Notes or by
person(s) authorized to become registered Holder(s) by properly completed bond
powers transmitted herewith. If signing is by attorney-in-fact, trustee,
executor, administrator, guardian, officer of a corporation, attorney-in-fact or
other person acting in a fiduciary or representative capacity, please set forth
full title and enclose proper evidence of authority to so act.)
Area Code and Telephone Number
- ---------------------------------------------------------------------
Tax Identification or Social Security Number
- ----------------------------------------------------------
Please Complete Substitute Form W-9
GUARANTEE OF SIGNATURE(S)
(SIGNATURES MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 3)
Authorized Signature
- --------------------------------------------------------------------------------
Title
- --------------------------------------------------------------------------------
Name of Firm
- --------------------------------------------------------------------------------
Address of Firm
- --------------------------------------------------------------------------------
Dated
- --------------------------------------------------------------------------------
<PAGE> 7
PAYER'S NAME: BUCKEYE TECHNOLOGIES INC.
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE Part 1 -- PLEASE PROVIDE YOUR TIN IN THE Social Security Number
FORM W-9 BOX AT RIGHT AND CERTIFY BY SIGNING AND OR -------------------------------
DATING BELOW Employer Identification Number
------------------------------------------------------------------------------
Department of the Treasury Part 2 -- CERTIFICATION -- Under the penalties of perjury, I certify (1) that the
Internal Revenue Service number shown on this card is my correct taxpayer identification number; and (2)
that I am not subject to backup withholding either because I have not been
notified that I am subject to backup withholding as a result of a failure to
report all interest or dividends, or the Internal Revenue Service (IRS) has
notified me that I am no longer subject to backup withholding.
Instruction. You must strike out clause (2) above before signing this card if
you have been notified that you are subject to backup withholding due to notified
payee underreporting, and you have not received a notice from the IRS advising
you that backup withholding has terminated.
SIGNATURE ______________________________ DATE ______________________________
------------------------------------------------------------------------------
PAYER'S REQUEST FOR TAXPAYER Part -- 3 Awaiting TIN [ ] You must complete the following certificate if
IDENTIFICATION NUMBER (TIN) you checked this box.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office,
or (b) I intend to mail or deliver an application in the near future. I
understand that because I have not provided a taxpayer identification
number, 31% of all reportable payments made to me hereafter will be
withheld unless I provide a certified TIN within 60 days.
------------------------------------ --------------------------
Signature Date
<PAGE> 8
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- -----------------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- -----------------------------------------------------------
<S> <C> <C>
1. An individual's account. The individual
2. Two or more individuals (joint The actual owner of
account) the account or, if
combined funds, any
one of the
individuals(1)
3. Husband and wife (joint The actual owner of
account) the account or, if
joint funds, either
person
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the minor
6. Account in the name of The ward, minor, or
guardian or committee for a incompetent person(3)
designated ward, minor, or
incompetent person
7. a. The usual revocable savings The grantor-trustee
trust account (grantor is
also trustee)
b. So-called trust account The actual owner
that is not a legal or valid
trust under State law
8. Sole proprietorship account The owner(4)
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- -----------------------------------------------------------
<C> <S> <C>
9. A valid trust, estate, or The legal entity (Do
pension trust not furnish the
identifying number of
the personal
representative or
trustee unless the
legal entity itself is
not designated in the
account title)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held in The partnership
the name of the business
13. Association, club, or other The organization
tax-exempt organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State
or local government, school
district, or prison) that
receives agricultural program
payments
- -----------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
Note: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 9
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement plan, or a custodial account under Section 403(b)(7).
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
- A real estate investment trust.
- A common trust fund operated a bank under section 584(a).
- A trust exempt from tax under Section 664 or described in Section 4947.
- An entity registered at all times under the Investment Company Act of 1940.
- A foreign central bank of issue.
- A middleman known in the investment community as a nominee or listed in the
most recent publication of the American Society of Corporate Secretaries,
Inc., Nominee List.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments that are not subject to information reporting are also not
subject to backup withholding. For details, see sections 6041, 6041A(a), 6042,
6044, 6045, 6049, 6050(N) and 6050A and the regulations thereunder.
PRIVACY ACT NOTICE -- Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1993, payers must generally
withhold 31% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. -- If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 20% on any portion of an
under-payment attributable to that failure unless there is a preponderance of
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or Imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE.
<PAGE> 10
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES.
All physically delivered Notes or confirmation of any book-entry transfer
to the Exchange Agent's account at a book-entry transfer facility of Notes
tendered by book-entry transfer, as well as a properly completed and duly
executed copy of this Letter of Transmittal or facsimile thereof, and any other
documents required by this Letter of Transmittal, must be received by the
Exchange Agent at any of its addresses set forth herein on or prior to the
Expiration Date. The method of delivery of this Letter of Transmittal, the
tendered Notes and all other required documents is at the election and risk of
the Holder. Instead of delivery by mail, it is recommended that Holders use an
overnight or hand delivery service. Except as otherwise provided below, the
delivery will be deemed made only when actually received by the Exchange Agent.
In all cases, sufficient time should be allowed to assure timely delivery to the
Exchange Agent before the Expiration Date.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering Holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the Notes for exchange.
Delivery to an address other than as set forth herein, or instructions via
a facsimile number other than the ones set forth herein, will not constitute a
valid delivery.
2. GUARANTEED DELIVERY PROCEDURES.
Holders who wish to tender their Notes, and (i) whose Notes are not
immediately available, or (ii) who cannot deliver their Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent (or comply
with the procedures for book-entry transfer) prior to the Expiration Date, may
effect a tender if:
a. the tender is made through a member firm of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., a commercial bank or trust company having an office or correspondent
in the United States or an "eligible guarantor institution" within the
meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution");
b. prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder of the Notes, the
certificate or registration number(s) of such Notes and the principal
amount of Notes tendered, stating that the tender is being made thereby and
guaranteeing that, within five (5) business days after the Expiration Date,
the Letter of Transmittal (or facsimile thereof), together with the
certificate(s) representing the Notes to be tendered in proper form for
transfer (or a confirmation of book-entry transfer of such Notes into the
Exchange Agent's account at the Depository) and any other documents
required by the Letter of Transmittal, will be deposited by the Eligible
Institution with the Exchange Agent; and
c. such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as all tendered Notes in proper form for
transfer (or a confirmation of book-entry transfer of such Notes into the
Exchange Agent's account at the Depository) and all other documents
required by the Letter of Transmittal, are received by the Exchange Agent
Within five business days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their Notes according to the guaranteed
delivery procedures set forth above. Any Holder who wishes to tender Notes
pursuant to the guaranteed delivery procedures described above must ensure that
the Exchange Agent receives the Notice of Guaranteed Delivery relating to such
Notes prior to the Expiration Date. Failure to complete the guaranteed delivery
procedures outlined above will not, of itself, affect the
<PAGE> 11
validity or effect a revocation of any Letter of Transmittal form properly
completed and executed by a Holder who attempted to use the guaranteed delivery
procedures.
3. PARTIAL TENDERS; WITHDRAWALS.
If less than the entire principal amount of Notes evidenced by a submitted
certificate is tendered, the tendering Holder should fill in the principal
amount tendered in the column entitled "Principal Amount Tendered" of the box
entitled "Description of Senior Subordinated Notes Tendered Hereby." A newly
issued Note for the principal amount of Notes submitted but not tendered will be
sent to such Holder as soon as practicable after the Expiration Date. All Notes
delivered to the Exchange Agent will be deemed to have been tendered in full
unless otherwise indicated.
Any Notes tendered pursuant to the Exchange Offer may be withdrawn at any
time prior to the Expiration Date, after which tenders of Notes are irrevocable.
To withdraw a tender of Notes in the Exchange Offer, a written or facsimile
transmission notice of withdrawal must be received by the Exchange Agent by 5:00
p.m., New York City time, on the Expiration Date. Any such notice of withdrawal
must (i) specify the name of the person having deposited the Notes to be
withdrawn (the "Depositor"), (ii) identify the Notes to be withdrawn (including
the certificate or registration number(s) and principal amount of such Notes,
or, in the case of Notes transferred by book-entry transfer, the name and number
of the account at the DTC to be credited), (iii) be signed by the Depositor in
the same manner as the original signature on this Letter of Transmittal
(including any required signature guarantees) or be accompanied by documents of
transfer sufficient to have the Trustee with respect to the Notes register the
transfer of such Notes into the name of the Depositor withdrawing the tender,
(iv) specify the name in which such Notes are to be registered, if different
from that of the Depositor and (v) include a statement that such Holder is
withdrawing his election to have such Notes exchanged. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by the Company, whose determination shall be final and binding on
all parties. Any Notes so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offer, and no Exchange Notes will be
issued with respect thereto unless the Notes so withdrawn are validly
retendered. Any Notes which have been tendered but which are not accepted for
exchange, will be returned to the Holder thereof without cost to such Holder as
soon as practicable after withdrawal, rejection of tender or termination of
Exchange Offer.
4. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES.
If this Letter of Transmittal is signed by the registered Holder(s) of the
Notes tendered hereby, the signature must correspond with the name(s) as written
on the face of the certificates without alteration or enlargement or any change
whatsoever. If this Letter of Transmittal is signed by a participant in the
Depository, the signature must correspond with the name as it appears on the
security position listing as the owner of the Notes.
If any of the Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If a number of Notes registered in different names are tendered, it will be
necessary to complete, sign and submit as many separate copies of this Letter of
Transmittal as there are different registrations of Notes.
Signatures on this Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution unless the Notes
tendered hereby are tendered (i) by a registered Holder who has not completed
the box entitled "Special Registration Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution.
If this Letter of Transmittal is signed by the registered Holder or Holders
of Notes (which term, for the purposes described herein, shall include a
participant in the Depository whose name appears on a security listing as the
owner of the Notes) listed and tendered hereby, no endorsements of the tendered
Notes or separate written instruments of transfer or exchange are required. In
any other case, the registered Holder (or
<PAGE> 12
acting Holder) must either properly endorse the Notes or transmit properly
completed bond powers with this Letter of Transmittal (in either case, executed
exactly as the name(s) of the registered Holder(s) appear(s) on the Notes, and,
with respect to a participant in the Depository whose name appears on a security
position listing as the owner of Notes, exactly as the name of the participant
appears on such security position listing), with the signature on the Notes or
bond power guaranteed by an Eligible Institution (except where the Notes are
tendered for the account of an Eligible Institution).
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority so to act must be submitted.
5. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS.
Tendering Holders should indicate, in the applicable box, the name and
address (or account at the Depository) in which the Exchange Notes or substitute
Notes for principal amounts not tendered or not accepted for exchange are to be
issued (or deposited), if different from the names and addresses or accounts of
the person signing this Letter of Transmittal. In the case of issuance in a
different name, the employer identification number or social security number of
the person named must also be indicated, and the tendering Holder should
complete the applicable box.
If no instructions are given, the Exchange Notes (and any Notes not
tendered or not accepted) will be issued in the name of and sent to the acting
Holder of the Notes or deposited at such Holder's account at the Depository.
6. TRANSFER TAXES.
The Company shall pay all transfer taxes, if any, applicable to the
exchange of Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes or Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered Holder of the Notes
tendered, or if tendered Notes are registered in the name of any person other
than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of Notes pursuant to the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered Holder or any other person) will be payable by the tendering Holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted herewith, the amount of such transfer taxes will be billed directly to
such tendering Holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer stamps to be affixed to the Notes listed in the Letter of Transmittal.
7. WAIVER OF CONDITIONS.
The Company reserves the right, in its reasonable judgment, to waive, in
whole or in part, any of the conditions to the Exchange Offer set forth in the
Prospectus.
8. MUTILATED, LOST, STOLEN OR DESTROYED NOTES.
Any Holder whose Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above for further
instructions.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter of Transmittal may be
directed to the Exchange Agent at the address and telephone number set forth
above. In addition, all questions relating to the Exchange Offer, as well as
Requests for assistance or additional copies of the Prospectus and this Letter
of Transmittal, may be directed to Sheila
<PAGE> 13
Jordan Cunningham, Buckeye Technologies Inc., 1001 Tillman Street, Memphis,
Tennessee 38112; telephone (901) 320-8100.
10. VALIDITY AND FORM.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Notes and withdrawal of tendered Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and all
Notes not properly tendered or any Notes the Company's acceptance of which
would, in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right to waive any irregularities or conditions of tender as to
particular Notes. The Company's interpretation of the terms and conditions of
the Exchange Offer (including the instructions in this Letter of Transmittal)
will be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Notes must be cured within such
time as the Company shall determine. Neither the Company, the Exchange Agent nor
any other person shall be under any duty to give notification of defects or
irregularities with respect to tenders of Notes, nor shall any of them incur any
liability for failure to give such notification. Tenders of Notes will not be
deemed to have been made until such irregularities have been cured or waived.
Any Notes received by the Exchange Agent that are not properly tendered and as
to which the defects or irregularities have not been cured or waived will be
returned without cost to such holder by the Exchange Agent to the tendering
Holders of Notes, unless otherwise provided herein, as soon as practicable
following the Expiration Date.
IMPORTANT TAX INFORMATION
Under federal income tax law, a Holder tendering Notes is required to
provide the Exchange Agent with such Holder's correct TIN on Substitute Form W-9
above. If such Holder is an individual, the TIN is the Holder's social security
number. The Certificate of Awaiting Taxpayer Identification Number should be
completed if the tendering Holder has not been issued a TIN and has applied for
a number or intends to apply for a number in the near future. If the Exchange
Agent is not provided with the correct TIN, the Holder may be subject to a $50
penalty imposed by the Internal Revenue Service. In addition, payments that are
made to such Holder with respect to tendered Notes may be subject to backup
withholding.
Certain Holders (including, among others, all domestic corporations and
certain foreign individuals and foreign entities) are not subject to these
backup withholding and reporting requirements. Such a Holder, who satisfies one
or more of the conditions set forth in Part 2 of the Substitute Form W-9, should
execute the certification following such Part 2. In order for a foreign Holder
to qualify as an exempt recipient, that Holder must submit to the Exchange Agent
a properly completed Internal Revenue Service Form W-8, signed under penalties
of perjury, attesting to that Holder's exempt status. Such forms can be obtained
from the Exchange Agent.
If backup withholding applies, the Exchange Agent is required to withhold
31% of any amounts otherwise payable to the Holder. Backup withholding is not an
additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a Holder with
respect to the Exchange Notes, the Holder is required to notify the Exchange
Agent of his or her correct TIN by completing the form herein certifying that
the TIN provided on Substitute Form W-9 is correct (or that such Holder is
awaiting a TIN) and that (i) such Holder is exempt, (ii) such Holder has not
been notified by the Internal Revenue Service that he or she is subject to
backup withholding as a result of failure to report all interest or dividends or
(iii) the Internal Revenue Service has notified such Holder that he or she is no
longer subject to backup withholding.
<PAGE> 14
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
Each Holder is required to give the Exchange Agent the social security
number or employer identification number of the record Holder(s) of the Notes.
If Notes are in more than one name or are not in the name of the actual Holder,
consult the instructions on Internal Revenue Service Form W-9, which may be
obtained from the Exchange Agent, for additional guidance on which number to
report.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
If the tendering Holder has not been issued a TIN and has applied for a
number or intends to apply for a number in the near future, write "Applied For"
in the space for the TIN on Substitute Form W-9, sign and date the form and the
Certificate of Awaiting Taxpayer Identification Number and return them to the
Exchange Agent. If such certificate is completed and the Exchange Agent is not
provided with the TIN within 60 days, the Exchange Agent will withhold 31% of
all payments made thereafter until a TIN is provided to the Exchange Agent.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER WITH
NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS)
OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR
PRIOR TO THE EXPIRATION DATE.
<PAGE> 15
FORM OF NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
8% SENIOR SUBORDINATED NOTES DUE 2010
(INCLUDING THOSE IN BOOK-ENTRY FORM)
OF
BUCKEYE TECHNOLOGIES INC.
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of Buckeye Technologies Inc. (the "Company") made pursuant to the
Prospectus, dated July , 1998 (the "Prospectus"), if certificates for the
outstanding 8% Senior Subordinated Notes Due 2010 of the Company (the "Notes")
are not immediately available or if the procedure for book-entry transfer cannot
be completed on a timely basis or time will not permit all required documents to
reach the Exchange Agent prior to 5:00 p.m., New York time, on the Expiration
Date. Such form may be delivered or transmitted by telegram, telex, facsimile
transmission, mail or hand delivery to IBJ Schroder Bank & Trust Company (the
"Exchange Agent") as set forth below. In addition, in order to utilize the
guaranteed delivery procedure to tender Notes pursuant to the Exchange Offer, a
completed, signed and dated Letter of Transmittal (or facsimile thereof) must
also be received by the Exchange Agent prior to 5:00 p.m., New York City time,
on the Expiration Date. Capitalized terms not defined herein are defined in the
Prospectus.
IBJ SCHRODER BANK & TRUST COMPANY, EXCHANGE AGENT
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------
By Mail (registered or By Facsimile Transmission (for By Hand or Overnight Courier:
certified mail recommended): Eligible Institutions only):
- ---------------------------------------------------------------------------------------------------
IBJ Schroder Bank & Trust (212) 858-2611 IBJ Schroder Bank & Trust
Company Company
P.O. Box 84 One State Street
Bowling Green Station New York, New York 10004
New York, New York 10274-0084 Attn: Securities Processing
Attn: Reorganization Window, Subcellar One, (SC-1)
Operations
Department
- ---------------------------------------------------------------------------------------------------
Confirm Receipt of Facsimile Transmission by Telephone:
(212) 858-2103
- ---------------------------------------------------------------------------------------------------
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
<PAGE> 16
LADIES AND GENTLEMEN:
Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the
Company the principal amount of Notes set forth below, pursuant to the
guaranteed delivery procedure described in "The Exchange Offer -- Guaranteed
Delivery Procedures" section of the Prospectus.
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------
PLEASE SIGN AND COMPLETE
- ---------------------------------------------------------------------------------------------
Signature of Registered Holder(s) or
Authorized
Signatory:
-------------------------------------------
- --------------------------------------------
- --------------------------------------------
- ---------------------------------------------------------------------------------------------
Name(s) of Registered Holder(s): Area Code and Telephone No.:
---------------- -------------------
-------------------------------------------- ---------------------------------------------
--------------------------------------------
- ---------------------------------------------------------------------------------------------
Principal amount of Notes Tendered: If Notes will be delivered by book-entry
-------------------------------------------- transfer, check trust company below:
------ The Depository Trust Company
------ Midwest Securities Trust Company
------ Philadelphia Depository Trust Company
- ---------------------------------------------------------------------------------------------
Certificate No.(s) of Notes (if available): Depository Account No.:
-------------------------------------------- --------------------------
- ---------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 17
Must be signed by the Holder(s) of Notes as their name(s) appear(s) on
certificates for Notes or on a security position listing, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or other
person acting in a fiduciary or representative capacity, such person must set
forth his or her full title below. If Notes will be delivered by book-entry
transfer to The Depository Trust Company, provide account number.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Capacity:
- --------------------------------------------------------------------------------
Address(es):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Account Number:
- --------------------------------------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a financial institution (including most banks, savings and
loan associations and brokerage houses) that is a participant in the Securities
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Program or the Stock Exchanges Medallion Program, hereby guarantees
that the undersigned will deliver to the Exchange Agent the certificates
representing the Notes being tendered hereby or confirmation of book-entry
transfer of such Notes into the Exchange Agent's account at The Depository Trust
Company, in proper form for transfer, together with any other documents required
by the Letter of Transmittal within three New York Stock Exchange trading days
after the Expiration Date.
Name of Firm:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
Area Code and Telephone No.:
- --------------------------------------------------------------------------------
Authorized Signature:
- --------------------------------------------------------------------------------
Name:
- --------------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Title:
- --------------------------------------------------------------------------------
Dated:
- --------------------------------------------------------------------------------
NOTE: DO NOT SEND CERTIFICATES OF NOTES WITH THIS FORM. CERTIFICATES OF NOTES
SHOULD BE SENT ONLY WITH A COPY OF THE PREVIOUSLY EXECUTED LETTER OF
TRANSMITTAL.
