As filed with the Securities and Exchange Commission on November 9, 1998
Registration No. 333-
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-----------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------------
JEFFERSON SMURFIT CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
Delaware 2653 43-1531401
<S> <C> <C>
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
Jefferson Smurfit Centre
8182 Maryland Avenue
St. Louis, Missouri 63105
(314) 746-1100
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
-----------------------
Michael E. Tierney
Vice President,
General Counsel & Secretary
Jefferson Smurfit Corporation
Jefferson Smurfit Centre
8182 Maryland Avenue
St. Louis, Missouri 63105
(314) 746-1100
(Name, address, including zip code, and telephone number, including area code, of agent for service)
-----------------------
Copies to:
John R. Ettinger Leslie T. Lederer Frederick C. Lowinger
Davis Polk & Wardwell Stone Container Corporation Sidley & Austin
450 Lexington Avenue 150 North Michigan Avenue One First National Plaza
New York, New York 10017 Chicago, Illinois 60601 Chicago, Illinois 60603
(212) 450-4000 (312) 580-4624 (312) 853-7000
-----------------------
Approximate Date of commencement of
proposed sale to the public: From time to time
after the effective date of this Registration
Statement.
-----------------------
</TABLE>
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earliest effective registration statement for the
same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===============================================================================================================================
Proposed Maximum Amount of
Title of Each Class of Amount to be Aggregate Offering Registration
Securities to be Registered Registered(1) Price(2) Fee(3)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock, par value $.01 per share.............. 4,675,000 shares $ 56,392,188 $ 15,677
===============================================================================================================================
(1) Represents the maximum number of shares of Common Stock, par value
$.01 per share, of the Registrant ("JSC Common Stock") estimated to
be issuable upon the conversion of 4,600,000 shares of Series E
Cumulative Convertible Exchangeable Preferred Stock issued by Stone
Container Corporation ("Stone") and the 6 3/4% Convertible
Subordinated Debentures due 2007 issued by Stone if such conversion
occurs after the consummation of the merger of JSC Acquisition
Corporation ("Sub"), a Delaware corporation and a wholly owned
subsidiary of Jefferson Smurfit Corporation ("JSC"), with and into
Stone.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o).
(3) Computed in accordance with Rule 457(c) under the Securities Act to be
$15,677, which is equal to 0.000278 multiplied by the proposed maximum
aggregate offering price of $56,392,188.
</TABLE>
==============================================================================
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 the 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.
PROSPECTUS
Jefferson Smurfit Corporation
4,675,000 Shares Common Stock
We are offering the 4,675,000 shares of Common Stock only to holders of
Stone Container Corporation's 6 3/4% Convertible Subordinated Debentures due
2007 (of which $45,241,000 is outstanding) who elect to convert their Debentures
and to holders of Stone's 4,600,000 shares of $1.75 Series E Cumulative
Convertible Exchangeable Preferred Stock who elect to convert their Preferred
Stock. We will merge with Stone if our shareholders and Stone's shareholders
approve the merger. Stone shareholders will receive 0.99 of a share of our
common stock for each share of Stone common stock that they own if the merger is
completed. After the merger, holders of Stone Debentures and holders of Stone
Preferred Stock will be able to convert their Debentures or Preferred Stock into
shares of Smurfit-Stone Container Corporation (our name after the merger) Common
Stock at an initial conversion price of $34.28 per share of Common Stock,
subject to certain adjustments. Our Common Stock is currently quoted on The
Nasdaq National Market under the symbol "JJSC". After the merger, Smurfit-Stone
Container Corporation Common Stock will be quoted on The Nasdaq National Market
(the "Nasdaq") under the symbol "SSCC".
Investing in the Common Stock involves certain risks. See "Risk Factors"
Beginning On Page 6.
-----------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
-----------------------
The date of this Prospectus is November 9, 1998.
-----------------------
TABLE OF CONTENTS
-----------------------
Page
----
Where You Can Find More Information.................................... 2
The Company............................................................ 4
The Merger and the Offering............................................ 4
Recent Developments.................................................... 4
Use of Proceeds........................................................ 5
Risk Factors........................................................... 6
Description of SSCC Capital Stock...................................... 12
Delaware General Corporation Law and the Articles and Bylaws........... 14
Comparative Per Share Market Price and Dividend Information............ 21
Certain Federal Income Tax Consequences To U.S. Holders................ 22
Plan of Distribution................................................... 24
Legal Matters.......................................................... 24
Experts................................................................ 24
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any reports, statements or other
information we file at the SEC's public reference rooms in Washington, D.C., New
York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Our SEC filings are also
available to the public from commercial document retrieval services and at the
web site maintained by the SEC at "http://www.sec.gov".
We filed a Registration Statement on Form S-3 to register with the SEC our
Common Stock which may be issued to Stone's Preferred Stockholders and holders
of Stone's Debentures. This Prospectus is a part of that Registration Statement.
As permitted by SEC rules, this Prospectus does not contain all the information
you can find in the Registration Statement or the exhibits to the Registration
Statement.
The SEC allows us to "incorporate by reference" the information we file
with them into this Prospectus, which means that we can disclose important
information to you by referring you to another document filed separately with
the SEC. The information incorporated by reference is an important part of this
Prospectus, and information we file later with the SEC will automatically update
and supersede this information. We incorporate by reference the documents set
forth below that we have previously filed with the SEC. These documents contain
important information about us and our financial performance.
<TABLE>
<CAPTION>
JSC SEC Filings (File No. 0-23896) Period
- ------------------------------------ -------
<S> <C>
Annual Report on Form 10-K Fiscal Year ended December 31, 1997
Quarterly Reports on Form 10-Q Quarters ended March 31, 1998 and June 30, 1998
Current Reports on Form 8-K Filed on May 12, 1998
Description of JSC Common Stock from Filed on April 19, 1994 and amended on April 24, 1994
Registration Statement on Form 8-A
Joint Proxy Statement/Prospectus, with Filed on October 8, 1998
respect to pages 1-94, pages 114-116 and
the section "Additional Information
Regarding Stone --Recent Developments"
on pages 95-96.
</TABLE>
You may request a copy of these filings (other than any exhibits unless we
have specifically incorporated by reference an exhibit in this Prospectus), at
no cost, by writing or telephoning us at the following address:
Jefferson Smurfit Corporation
Jefferson Smurfit Centre
8182 Maryland Avenue
St. Louis, Missouri 63105
Tel: (314) 746-1223
You should rely only on the information contained or incorporated by
reference in this Prospectus. We have not authorized anyone to provide you with
information that is different from what is contained in this Prospectus. This
Prospectus is dated November 9, 1998. You should not assume that the information
contained in this Prospectus is accurate as of any date other than November 9,
1998. We are not making an offer of Common Stock in any state where the offer is
not permitted.
THE COMPANY
We are a focused, integrated producer of paperboard, paper and packaging
products made from recycled paper and renewable forest products, serving leading
U.S. companies. Our paperboard/packaging products segment, which is responsible
for more than 90% of our net sales, is comprised of: (1) containerboard and
corrugated shipping containers, (2) recycled boxboard, solid bleached sulfate
and folding cartons, (3) uncoated recycled boxboard and industrial packaging,
(4) consumer packaging and (5) fiber resources and timber products. We are a
leading manufacturer in each of these areas. Our headquarters are in St. Louis,
Missouri. We operate more than 150 mills and converting facilities in the U.S.
and employ nearly 16,000 people.
Our principal office is located at 8182 Maryland Avenue, St. Louis,
Missouri 63105, and our telephone number is (314) 746-1223.
THE MERGER AND THE OFFERING
We entered into a merger agreement with Stone Container Corporation on May
10, 1998 (the "Merger"). Stone common shareholders will receive 0.99 of a share
of our common stock for each share of Stone common stock that they own if the
Merger is completed. The shareholders of both of our companies need to approve
the Merger at our respective special shareholders meetings currently scheduled
to take place on November 17, 1998. After the Merger, our company name will be
changed to Smurfit-Stone Container Corporation ("SSCC"). As used in this
Prospectus, unless otherwise indicated, when the word "we" or "our" is used or
when we discuss our operations we mean Jefferson Smurfit Corporation ("JSC")
prior to the Merger and SSCC after the Merger. SSCC includes Stone as a
subsidiary.
Prior to the Merger, you can elect to convert your Debentures or your
Preferred Stock into Stone common stock at $33.94 per share of Stone common
stock. After the Merger and upon notification of a conversion, we will make a
capital contribution to Stone of the number of shares of our Common Stock
necessary to effect the conversion for which we received notice. You can elect
to convert your Debentures or your Preferred Stock into shares of SSCC Common
Stock at an initial conversion price of $34.28 per share of SSCC Common Stock
after the Merger, subject to certain adjustments. You will not be entitled to
receive any shares of our Common Stock upon conversion of your Debentures or
your Preferred Stock if the Merger is not completed.
The Debentures and Preferred Stock were previously described in a
prospectus dated February 15, 1992 filed by Stone relating to the offering of
the Debentures and Preferred Stock, which also describes the circumstances in
which the conversion price may be adjusted.
RECENT DEVELOPMENTS
On October 20, 1998, two of Stone's Preferred Stockholders filed a
complaint against Stone in Delaware Chancery Court. The plaintiffs allege that
Stone is violating its certificate of incorporation by failing to call a meeting
of Preferred Stockholders for the purpose of electing two directors by those
Stockholders. The plaintiffs also allege that, in connection with its pending
merger with JSC, Stone is seeking to change the Preferred Stockholders' rights
without a two-thirds class vote of the Preferred Stockholders and that such
Stockholders should be entitled to vote with respect to the Merger. Among other
things, the plaintiffs are seeking injunctive relief with respect to the Merger.
On November 4, 1998, Stone reported a net loss of $275.5 million for the
third quarter ended September 30, 1998, or $2.66 per share of Stone common
stock, which does not include any tax benefit on losses incurred by its U.S.
operations. Stone's net loss for the third quarter ended September 30, 1997 was
$98.7 million, or $1.01 per share of Stone common stock, and its net loss for
the second quarter ended June 30, 1998 was $156.6 million, or $1.59 per share of
Stone common stock. Stone's revenue for the third quarter ended September 30,
1998 was $1.22 billion, compared to $1.18 billion for the third quarter ended
September 30, 1997, and $1.27 billion for the second quarter ended June 30,
1998.
Stone's net loss for the third quarter of 1998 included a non-recurring
charge for asset write-downs, and losses related to downtime at its paper mills
to balance inventories. Additionally, the results included foreign exchange
losses incurred by a Canadian affiliate. Pursuant to accounting standards,
Stone's net loss for the third quarter of 1998 also included the impact of
establishing reserves against deferred tax assets on net operating loss
carryforwards, which may not be realizable in the future.
USE OF PROCEEDS
We will not receive any proceeds from the offering of Common Stock.
RISK FACTORS
You should carefully consider the following factors and other information
in this Prospectus before deciding to convert your Preferred Stock or
Debentures.
Risks Relating to Integration of Operations; Realization of Synergies
The Merger involves the integration of two companies that have previously
operated independently. Stone and JSC expect to realize significant cost savings
and other synergies from the Merger, but cannot be certain as to when or the
extent to which these will be achieved. There are numerous systems that must be
integrated, including management information, purchasing, accounting and
finance, sales, billing, payroll and regulatory compliance. Stone has maintained
separate systems at the entities it has acquired in recent years, which will
make integration more difficult. JSC and Stone do not expect to have completed
their systems integration before the end of 1999. In addition, customer
retention may be more difficult after the Merger.
Risks Relating to Realization of Proceeds from Proposed Divestitures; Ability to
Reduce Debt
JSC and Stone have announced a divestiture program to narrow our product
focus. We intend to sell certain noncore businesses and assets and use the net
proceeds to reduce debt. Since the assets we intend to sell are in cyclical
industries, an industry downturn would reduce the value of those assets. If we
are unable to sell the assets or unable to sell them at the prices we
anticipate, we would be more highly leveraged than we expected to be. This means
that we would not be able to reduce our interest expense to the levels we
currently anticipate. In addition, it also means that we would continue to own
and operate non-core businesses and assets.
Substantial Leverage
JSC has a highly leveraged capital structure, including approximately $2.1
billion outstanding debt as of June 30, 1998. Stone also has a highly leveraged
capital structure, including approximately $4.5 billion of outstanding debt as
of June 30, 1998. We intend to incur additional debt in connection with the
Merger as described in "--Ability to Service Debt; Liquidity" below. Our level
of debt could have important consequences for us and our stockholders. We may be
required to seek additional sources of capital, including additional borrowings
under JSC's and Stone's existing credit agreements. We may seek other private or
public debt or equity financings to service or refinance our debt. These sources
of capital may not be available on favorable terms. A substantial portion of our
cash flow from operations will be necessary to pay principal and interest on our
debt and our other obligations, instead of being available to be used in our
business. Our level of debt could make us more vulnerable to economic downturns
and may reduce our operational and business flexibility in responding to
changing business and economic conditions. We will be more highly leveraged than
some of our competitors, which may place us at a competitive disadvantage. In
addition, borrowings under JSC's and Stone's existing credit agreements will be
at variable rates of interest, which will expose us to the risk of increased
interest rates.
Ability to Service Debt; Liquidity
Stone's income (loss) before interest expense and income taxes was not
sufficient to cover its interest expense for the six months ended June 30, 1998
by $296.8 million and for the year ended December 31, 1997 by $618.5 million.
It is expected to continue to be insufficient through at least the remainder of
1998. As of September 30, 1998, JSC has scheduled principal payments for
existing debt of approximately $2 million in the fourth quarter of 1998,
approximately $36 million in 1999, approximately $62 million in 2000, and
approximately $2 billion thereafter. As of September 30, 1998, Stone has
scheduled principal payments for existing debt (exclusive of non-recourse
debt of its affiliates) of approximately $247 million in the fourth quarter of
1998, approximately $747 million in 1999, approximately $472 million in 2000,
and approximately $3.1 billion thereafter.
In connection with the Merger, we have signed a commitment letter with two
banks to amend our existing credit agreement to borrow $550 million. We will
provide $300 million of our new borrowings to Stone. The amendment to our credit
agreement is subject to the parties signing definitive documentation and the
satisfaction of other conditions. The conditions include the absence of any
material adverse change at our company and our subsidiaries and Stone and its
subsidiaries, and the absence of any material adverse change or condition in the
loan or other financial markets that would have a material adverse effect on the
syndication of the amended credit agreement. If we are not able to borrow the
$550 million under our amended credit agreement, there may not be any
alternative financings available to us, or available at satisfactory terms. We
expect that the combination of the $300 million we provide to Stone, proceeds
from any divestitures and funds generated from operations will satisfy Stone's
short term liquidity needs, including scheduled payments of principal and
interest and anticipated capital expenditure and working capital requirements.
Stone does not expect such sources of funds to be sufficient to satisfy its long
term liquidity needs and will need to obtain additional debt or equity
financing.
Our ability to meet our obligations and to comply with the financial
covenants that are in our debt instruments will be largely dependent upon our
future performance. Our results will be subject to financial, business and other
factors. Many of these factors will be beyond our control, such as the state of
the economy, the financial markets, demand for and selling prices of our
products, costs of our raw materials and legislation and other factors relating
to the containerboard industry generally or to specific competitors.
If proceeds from borrowings or other financing sources and from any
divestitures and operating cash flows do not provide sufficient liquidity for us
to meet our operating and debt service requirements, we will be required to
pursue other alternatives to repay debt and improve liquidity. We may be forced
to sell other assets, reduce costs, defer certain discretionary capital
expenditures and seek amendments or waivers to our debt instruments. If we are
not able to generate sufficient cash flow or otherwise obtain the necessary
funds to make our required debt payments, or if we fail to comply with the
covenants in our debt instruments, we would be in default. In a default
situation, debtholders can accelerate the maturity of the debt we owe, which
could cause defaults under our other debt.
We, along with Stone, will need to obtain amendments and waivers under our
respective credit agreements in order to waive change-of-control events of
default which would otherwise occur upon the consummation of the Merger. If a
change-of-control event of default occurred, the debt under the credit
agreements would be accelerated so that it would become due and payable
immediately. Both of us are currently seeking such amendments and waivers from
our respective bank lenders and believe that such amendments and waivers will be
available prior to the Merger. Furthermore, Stone intends to obtain amendments
under its credit agreement in order to extend the maturity of the revolving
portion of its credit agreement (the aggregate commitment amount of $560
million) beyond its currently scheduled maturity of May 1999 and the scheduled
repayment of a portion of its term loan facility (the aggregate amount of $190
million) beyond its currently scheduled repayment date of October 1999. We may
not be permitted to borrow the $550 million described above unless Stone obtains
some or all of the amendments. Stone is actively seeking the amendments. If
Stone does not obtain these amendments, the relevant portion of Stone's debt
will mature or repayments will become due as currently scheduled. Stone will
then not have sufficient funds to satisfy its short-term liquidity needs and
will need to obtain additional debt or equity financing.
The Merger will constitute a "Change of Control" under Stone's $1.85
billion outstanding senior notes and $639 million outstanding subordinated
notes. As a result, Stone will be required to offer to repurchase the
subordinated notes at a price equal to 101% of the principal amount (together
with accrued but unpaid interest), subject to the condition precedent that Stone
has first either repaid its outstanding bank debt or obtained the consent of its
bank lenders to make such repurchase. In the case of the senior notes, Stone
will be required to make a similar offer to repurchase the senior notes at a
price equal to 101% of the principal amount (together with accrued but unpaid
interest) unless such a repurchase would constitute an event of default under
Stone's outstanding bank debt and Stone has neither repaid its bank debt nor
obtained the consent of its bank lenders to such repurchase. A repurchase of the
senior notes or of the subordinated notes will not be permitted by Stone's bank
debt. Although the senior notes refer to an obligation to repay the bank debt or
obtain the consent of the bank lenders to such repurchase, the notes do not
specify a deadline, if any, following the Merger for repayment of bank debt or
obtaining such consent. Stone intends to actively seek commercially acceptable
sources of financing to repay such bank debt or alternative financing
arrangements which would cause the bank lenders to consent to the repurchase of
the senior or the subordinated notes. We cannot predict whether Stone will be
successful in obtaining such financing or consents or the terms of any such
financing or consents. If Stone is unsuccessful in repaying its bank debt or
obtaining the requisite consents from the lenders, the holders of its notes may
assert that its failure to do so after some period of time constitutes a
default. Certain of the notes have recently been trading at a price below 101%
of the principal amount, and may continue to trade at a price below 101% at the
consummation of the Merger.
Industry Conditions; Cyclicality
Our operating results reflect the general cyclical pattern of the industry.
The vast majority of our products are commodities, resulting in extreme price
competition. Our primary industry has had substantial over-capacity for several
years. Our industry is capital intensive, which leads to high fixed costs and
generally results in continued production as long as prices are sufficient to
cover marginal costs. This has caused substantial price competition and
volatility and caused Stone to generate net losses for most of this decade. In
the event of a recession, demand and prices are likely to drop substantially.
Our sales and profitability have historically been more sensitive to price
changes than changes in volume. If prices for our products decrease in the
future, our operating results would be negatively affected. These factors,
coupled with our highly leveraged financial position, may adversely impact our
ability to respond to competition and to other market conditions or to otherwise
take advantage of business opportunities.
Restrictive Covenants; Limited Ability to Incur Debt
Our ability to incur additional debt, and in certain cases, refinance
outstanding debt, is significantly limited or restricted under our debt
instruments, in particular our indentures and credit agreements. Our indentures
and credit agreements contain covenants that restrict, among other things, our
ability to incur debt, pay dividends, repurchase or redeem capital stock, engage
in transactions with stockholders and affiliates, issue capital stock, create
liens, sell assets, engage in mergers and consolidations and make investments in
unrestricted subsidiaries. In addition, we will be limited in our ability to
move capital freely among our holding company and our subsidiaries. The
limitations in these agreements, together with our highly leveraged capital
structure, could limit our ability to effect future debt or equity financings.
It may also restrict our corporate activities, including our ability to avoid
defaults, to provide for capital expenditures, to take advantage of business
opportunities or to respond to advantageous market conditions.
At September 30, 1998, Stone had borrowing availability under its revolving
credit facilities of approximately $117 million. Except for 1995, Stone has
recorded net losses annually since 1992. Stone has recorded net losses of $225.7
million, $417.7 million, $126.2 million, $204.6 million, $358.7 million and
$269.4 million for the first half of 1998, and for the years 1997, 1996, 1994,
1993 and 1992, respectively. Unless Stone achieves significant price increases
and sustains such levels in the future, Stone will continue to incur net losses
and a deficit in net cash provided by operating activities. Without additional
cash generated by operations or funds from other parts of our company, Stone may
exhaust all or substantially all of its cash resources and borrowing
availability under its revolving credit facilities. On March 26, June 5 and July
31, 1998, Stone sought and obtained amendments to certain debt ratio and
interest coverage ratio requirements under its credit agreement, which Stone
anticipated it might fail to comply with. Stone may need to obtain similar
amendments or waivers in the future, although in the future its lenders may not
be willing to grant relief for its failure to comply with the ratios or other
covenants in its credit agreement.
In addition, Stone was unable to maintain the minimum subordinated capital
base required under $1.85 billion of its outstanding senior notes. Accordingly,
in April 1998 Stone offered to repurchase 10% of each series of the senior notes
with the consent of the lenders under its credit agreement. If Stone continues
to be unable to maintain the minimum subordinated capital base required, and the
lenders in the future do not permit such offer to repurchase to be made, the
interest rate on its senior notes would increase by 50 basis points per quarter
up to a maximum of 200 basis points until it attains the minimum subordinated
capital base. Beginning on the first interest payment date after July 1, 1998,
the interest rates on each series of its approximately $594 million aggregate
outstanding senior subordinated notes has increased by 50 basis points due to
its inability to maintain a certain net worth. The interest rates will continue
to increase by 50 basis points on each succeeding interest payment date up to a
maximum of 200 basis points until Stone is able to obtain the required net
worth.
Influence of Significant Stockholder
After the Merger, Smurfit International B.V. ("SIBV"), a wholly owned
subsidiary of Jefferson Smurfit Group ("JSG"), will have a significant effect on
the outcome of all matters submitted to a vote to our shareholders due to its
substantial ownership of our common stock. SIBV's presence as a significant
stockholder may deter a potential acquirer from making a tender offer or
otherwise attempting to obtain control of us, even if such events might be
favorable to us or our stockholders.
Effect of Asian Economic Weakness
Recently, several countries in Asia have experienced a severe economic
crisis, which includes a significant devaluation of their currencies and general
financial difficulties. This crisis is affecting and will continue to negatively
affect the demand for our products and the prices of our products. In
particular, Asian demand for paper and pulp products has declined as a result of
weak economic conditions and financial market turmoil. This has led to downward
pricing pressures and a decreased consumption in the region. In addition,
producers for the Asian markets have redirected their production to other
markets, creating a downward pressure on prices elsewhere.
Weak market conditions in Asia may continue to have an adverse effect on
the level of worldwide demand for our products since producers for the Asian
markets may continue to redirect its tonnage to other regions. Significant
future weakness in Asian markets could further erode world-wide pricing for our
products, thereby adversely affecting our results of operations. In addition,
Asian producers may use their depreciated currencies to increase exports. Any
significant destabilization of one or more major Asian trading currencies could
further erode prices for our commodity grade products.
Competition
The paperboard and packaging products industries are highly competitive. No
company has a dominant position in the industry. Our competitors include large,
vertically integrated paperboard and packaging products companies and numerous
smaller companies. Because our products are globally traded commodities, the
industries we compete in are particularly sensitive to price fluctuations.
Competition is also based on innovation, price, design, quality and service,
with different emphasis on these factors depending on the product line. If one
or more of our competitors become more successful on any key competitive factor,
our business could be materially, adversely affected. The market for newsprint,
folding cartons and market pulp are also highly competitive. Many of our
competitors are less leveraged and have greater financial and other resources
and are able to better withstand the adverse nature of the business cycle.
In addition, we may not be able to maintain all or a substantial majority
of the sales volume to our customers if they decide to diversify their
suppliers.
Raw Materials
Wood fiber and recycled fiber, the principal raw materials used in the
manufacture of our products, are purchased in highly competitive, price
sensitive markets. These raw materials have historically exhibited price and
demand cyclicality. The supply and price of wood fiber in particular is
dependent upon a variety of factors over which we have no control, including
environmental and conservation regulations, natural disasters, such as forest
fires and hurricanes, and weather. A decrease in the supply of wood fiber has
caused, and will likely continue to cause, higher wood fiber costs in some of
the regions in which we procure wood. The increase in demand of products
manufactured from recycled fiber has sometimes caused a tightness in supply of
recycled fiber. At those times there is a significant increase in the cost of
such fiber used in the manufacture of recycled containerboard and related
products. Such costs are likely to continue to fluctuate based upon
demand/supply characteristics. We have not experienced any significant
difficulty in obtaining wood fiber and recycled fiber in economic proximity to
our mills, but may experience such difficulty in the future.
Environmental Matters
Our business is subject to federal, state, foreign and local environmental
requirements, particularly relating to air and water quality. We have faced
environmental liability for the costs of remediating soil or groundwater that we
have contaminated at various sites, and expect to face similar liability in the
future. There may also be similar liability at sites where we may be a
potentially responsible party and which are the subject of cleanup activity
under the Comprehensive Environmental Response, Compensation and Liability Act,
analogous state laws and other laws concerning hazardous substance
contamination. We have incurred civil and criminal fines and penalties relating
to environmental matters and costs relating to the damage of natural resources,
lost property values and toxic tort claims, and expect to incur similar fines
and penalties in the future. We have spent significant amounts of money in the
past to comply with environmental regulations and expect that we will have to
spend money in the future. We have taken reserves based on current information
to address environmental liabilities. Additional significant expenditures could
be required if the law changes or new information is discovered, and those
expenditures could have a material adverse effect on our financial condition. In
addition, both of our companies have been required to make significant
environmental capital expenditures every year, and we expect those expenditures
to increase significantly in the next several years. The United States
Environmental Protection Agency has finalized parts of a comprehensive rule
governing our industry (the "Cluster Rule"). We estimate that it may require
approximately $140 million over the next three to five years and Stone estimates
that it may require approximately $180 million during the period 1998 through
2005 to meet the Cluster Rule requirements that have been finalized. We cannot
predict the ultimate cost of complying until further engineering studies are
completed, and non-final regulations are finalized.
Foreign Currency/Exchange Rate Fluctuation Risks
We do not currently engage in and do not anticipate engaging in, hedging or
other transactions intended to manage foreign currency exchange risks. In the
past, Stone has reported foreign exchange transaction losses. We have no
material foreign operations, but do have export sales that are denominated
principally in U.S. dollars.
Stone has significant foreign operations and had export sales of
approximately $548 million in 1997, denominated principally in U.S. dollars. The
functional currency for the majority of its foreign operations is the applicable
local currency, other than for foreign operations in highly inflationary
economies where the functional currency is the U.S. dollar. These factors
substantially mitigate any potential foreign currency exchange risk. Stone
translates foreign operations conducted in local currencies into U.S. dollars
for financial reporting purposes of assets and liabilities. Gains or losses from
foreign operations conducted in U.S. dollars directly affect our stockholders'
equity. In addition, Stone consolidates (under equity accounting) its
proportionate share of the foreign currency transaction gains or losses of
Abitibi-Consolidated Inc. ("Abitibi"). Abitibi is a Canadian corporation which
does have substantial sales in U.S. dollars and significant exposure under
foreign exchange forward contracts hedging Abitibi's future U.S. dollar
revenues. We both also compete with foreign producers, particularly in Northern
Europe. Any revaluation of the U.S. dollar relative to Northern European
currencies or the European common currency would cause our products to be less
cost competitive.
Year 2000
Year 2000 issues are the result of computer programs that were written
using two digits rather than four to define the applicable year. Any of our
computer programs that use two digits rather than four digits to specify the
year will be unable to interpret dates beyond the year 1999. This problem could
result in a system failure or miscalculations causing disruptions of operations.
The three major areas that could be critically affected are financial and
information system applications, manufacturing operations and third-party
relationships with vendors and with customers. We have developed plans to
address this exposure. Financial and operational systems and manufacturing
equipment have been assessed. We have developed detailed plans and begun
conversion efforts. We believe that our internal systems are Year 2000 compliant
or will be upgraded or replaced in connection with previously planned changes to
information systems prior to the need to comply with Year 2000 requirements. We
are also communicating with critical suppliers to determine whether they are
addressing potential Year 2000 issues. The failure of suppliers (including raw
material suppliers, freight and transportation companies and utilities) or
customers to achieve Year 2000 compliance could materially and adversely affect
our results of operations.
Forward-Looking Statements May Prove Inaccurate
Some of the statements in this Prospectus are forward-looking. The words
"anticipates," "believes," "expects," "intends," and similar expression used in
this Prospectus are intended to identify forward-looking statements. These
forward-looking statements are subject to numerous risks and uncertainties.
Although we believe that our expectations are based on reasonable assumptions,
our statements may be influenced by factors that could cause actual outcomes and
results to be materially different from what we have projected. Certain of those
factors are beyond our control, including: the impact of general economic
conditions in the U.S. and Canada and in other countries in which both of our
companies currently do business (including Asia, Europe and Latin and South
America); industry conditions, including competition and product and raw
material prices; fluctuations in exchange rates and currency values; capital
expenditures requirements; legislative or regulatory requirements, particularly
concerning environmental matters; interest rates; access to capital markets; the
timing of and value received in connection with asset divestitures; and
obtaining required approvals of debtholders. Our actual results, performance or
achievement could be materially different from our forward-looking statements
for various reasons, including the reasons discussed under "Risk Factors".
DESCRIPTION OF SSCC CAPITAL STOCK
General
Unless indicated otherwise, this section is a discussion of SSCC after the
time that a certificate of Merger is filed with the Delaware Secretary of State
(the "Effective Time").
Authorized Capital Stock
Our authorized capital stock is 400,000,000 shares of common stock, par
value $0.01 per share, and 25,000,000 shares of preferred stock, par value $0.01
per share.
Common Stock
Dividends
Our common stockholders will be entitled to receive dividends when
dividends are declared by our Board at any regular or special meeting. Dividends
may be paid in cash, stock or other form. In certain cases, common stockholders
may not receive dividends until we have satisfied our obligations to any
preferred stockholders. In addition, payment of dividends to common stockholders
may be restricted under certain of our financing agreements.
Fully Paid
All outstanding shares of our common stock are fully paid and
non-assessable.
Voting Rights
Each share of our common stock is entitled to one vote in the election of
directors and other matters. Common stockholders are not entitled to preemptive
or cumulative voting rights, except for SIBV. SIBV has the right to maintain its
percentage ownership of our common stock if there are public or private
issuances of our common stock. SIBV agreed to waive its rights with respect to
the common stock to be issued in connection with the Merger and upon the
conversion of Stone debt or equity securities outstanding as of May 10, 1998,
including the Stone Preferred Stock and Debentures.
Other Rights
We will notify our common stockholders of any shareholders' meetings
according to applicable law. If we liquidate, dissolve or wind-up our business,
either voluntarily or not, our common stockholders will share equally in the
assets remaining after we pay our creditors and preferred stockholders.
Listing
Our common stock is quoted on Nasdaq.
Transfer Agents and Registrars
Chase Mellon Shareholder Services is the transfer agent and registrar. You
may contact Chase Mellon located in Overpeck Centre, 85 Challenger Road,
Ridgefield Park, New Jersey 07660. Their telephone number is (800) 777-3694.
Preferred Stock
We have not issued any preferred stock. The following description of the
terms of the preferred stock sets forth certain general terms and provisions of
our authorized preferred stock. If we offer preferred stock, the specific
designations and rights will be described in a prospectus or other offering
document.
Our Board can, without approval of our stockholders, issue one or more
series of preferred stock. The Board can also determine the number of shares of
each series and the rights, preferences and limitations of each series including
the dividend rights, voting rights, conversion rights, redemption rights and any
liquidation preferences of any wholly unissued series of preferred stock, the
number of shares constituting each series and the terms and conditions of issue.
In some cases, the issuance of preferred stock could delay a change in control
of our company and make it harder to remove present management. Under certain
circumstances, preferred stock could also restrict dividend payments to holders
of our common stock.
DELAWARE GENERAL CORPORATION LAW AND THE ARTICLES AND BYLAWS
General
Unless indicated otherwise, this section is a discussion of SSCC after
the Effective Time.
We are a Delaware corporation subject to the Delaware General Corporation
Law (the "Delaware Law"). Provisions of the Delaware Law, in addition to the
restated certificate of incorporation and bylaws which are amended and restated
at the Effective Time, address corporate governance issues, including the rights
of shareholders. Some of these provisions could hinder management changes while
others could have an anti-takeover effect. This anti-takeover effect may, in
some circumstances, reduce the control premium that might otherwise be reflected
in the value of our common stock.
We have summarized the key provisions below. The descriptions are not
complete. You should read the actual provisions of our Charter and Bylaws and
the Delaware Law that relate to your individual investment strategy.
Number of Directors
Our Charter and Bylaws provide for our Board to consist of 12 members.
Until Mr. Roger Stone ceases to be Chief Executive Officer or until February 16,
2001, whichever occurs earlier (the "Termination Date"), the total authorized
number of directors comprising our entire Board may not be increased or
decreased without the affirmative vote of stockholders holding at least 75% of
the voting power of our then outstanding capital stock. Mr. Stone's term as CEO
is scheduled to expire on the first annual meeting of stockholders to take place
after February 16, 2001, unless changed by a vote of at least 75% of the members
of our Board.
Term of Directors
Our Charter requires all directors of our Board to be elected at each
annual meeting for a term of one year.
Our Bylaws provide that, until the Termination Date, each director must
retire no later than the date of the first annual meeting to be held following
that director's 72nd birthday.
Composition of the Board/Nomination of Directors
Under our Bylaws, following the Termination Date, nominations of persons
for election to our Board may be made at any annual meeting or special meeting
of stockholders. The nominations may be by or at the direction of our Board or
by any stockholder who is entitled to vote in the election of directors. The
procedures are set forth in our Bylaws.
Our Bylaws provide for the establishment of the following three board
committees for nominating persons for election as directors and filling director
vacancies: the Stone Committee, the JSC Committee and the Morgan Stanley
Leveraged Equity Fund II, Inc. ("MSLEF") Committee (each, a "Nominating
Committee"). The Stone Committee and the JSC Committee will function until the
Termination Date. The MSLEF Committee will function until MSLEF beneficially
owns less than the at least 1,000,000 shares of common stock, as it may be
adjusted (the "MSLEF Threshold Amount of Shares"). Before each stockholders'
meeting where our directors are to be elected:
(x) the Stone Committee will have the authority to designate four persons
as nominees for election as directors and, in addition, one person as
nominee both for election as a director and for appointment as CEO;
(y) the JSC Committee will have the authority to designate four persons as
nominees for election as directors and, in addition, one person as
nominee both for election as a director and for appointment as
Chairman of the Board and one person as nominee both for election as a
director and for appointment as Executive Vice President - Deputy
Chief Executive Officer ("EVP"); and
(z) the MSLEF Committee will have the authority to designate one person as
nominee for election as a director.
Our Bylaws provide that at each stockholders' meeting where directors are
to be elected, the officer presiding at such meeting will nominate, on behalf of
the Nominating Committees (if such committees exist), the persons designated for
nomination by the Nominating Committees. At the meeting, our Board or any Board
committee will not be permitted to nominate or direct the nomination as a
director any person who was not designated by one of the Nominating Committees.
As of the Effective Time, our Board will, by resolution, designate certain
of our directors (including the CEO) as "Stone Directors", certain of our
directors (including the Chairman and the EVP) as "JSC Directors" and one of our
directors as the "MSLEF Director". Each director nominated or appointed to our
Board (i) by the Stone Committee, is considered a "Stone Director", (ii) by the
JSC Committee, is considered a "JSC Director", (iii) by the MSLEF Committee, is
considered the "MSLEF Director" and (iv) by the entire Board (and not by any of
the Nominating Committees), is considered an "Unaffiliated Director". In
addition, if at that time there is no MSLEF Director and MSLEF owns more than
the MSLEF Threshold Amount of Shares, holders of at least a majority of the
voting power of our then outstanding capital stock may designate up to one
director to serve as the MSLEF Director. The Stone Committee is comprised
exclusively of each of the Stone Directors; the JSC Committee is comprised
exclusively of each of the JSC Directors; and the MSLEF Committee is comprised
exclusively of the MSLEF Director. Any person elected to our Board who was not
nominated by any of the Nominating Committees is considered an "Unaffiliated
Director" and will not sit on any of the Nominating Committees, unless such
director was designated as the MSLEF Director by at least a majority of the
voting power of our then outstanding capital stock.
Mr. Stone, MSLEF and SIBV are parties to a voting agreement (the "Voting
Agreement"). Each has agreed to vote or cause to be voted all of its shares of
common stock in favor of the persons designated for nomination to our Board by
the Nominating Committees and Mr. Stone (if he has not been designated for
nomination by any of the Nominating Committees). The parties' obligation to vote
for Mr. Stone as a director terminates if Mr. Stone is removed as CEO for Cause
or when he reaches the age of 72.
Removal of Directors
Our Charter and Bylaws provide that until the Termination Date, our Board
will not request that a special meeting of stockholders be called for the
purpose of removing a director from office, unless the affirmative vote of at
least 75% of the members of our entire Board has first determined that there
exists Cause to remove such director. This 75% voting requirement will not apply
to our Board calling a special meeting for the removal of the MSLEF Director if
MSLEF beneficially owns less than the MSLEF Threshold Amount of Shares. Our
Charter and Bylaws provide that a special meeting of stockholders may be called,
for any purpose, at the written request of stockholders holding at least 25% of
the voting power of our then outstanding capital stock entitled to vote.
If at any time MSLEF owns less than the MSLEF Threshold Amount of Shares,
each of MSLEF, SIBV and Mr. Stone has agreed that, at the request of either of
the other parties, it will vote or cause to be voted all of its shares of common
stock in favor of calling a special meeting of stockholders for the purpose of
removing the MSLEF Director and removing the MSLEF Director at the special
meeting. Each of SIBV, MSLEF and Mr. Stone has agreed not to vote or cause to be
voted any of its shares of common stock in favor of the removal of any director
nominated or appointed to our Board by any Nominating Committee other than for
Cause.
Removal of Officers
Our Bylaws provide that after the Termination Date, officers may be removed
at any time by the affirmative vote of a majority of the directors. Our Bylaws
provide that until the Termination Date, the Chairman, the CEO and the EVP (in
his or her capacity as an officer) will be subject to removal only for Cause as
determined by at least 75% of the members of our entire Board.
Filling of Vacancies
Under our Bylaws after the Termination Date, vacancies on our Board
resulting from the removal from office, resignation, retirement, death or other
unavailability of any of our directors may be filled only by the affirmative
vote of a majority of our directors then in office or by our stockholders at a
special meeting called for this purpose.
Until the Termination Date, our Bylaws provide that if any director (other
than an Unaffiliated Director) is removed from our Board, resigns, retires, dies
or otherwise cannot continue to serve as a member of our Board, if that director
is (i) a Stone Director, then the Stone Committee will have the exclusive
authority to appoint a person to fill such vacancy, (ii) a JSC Director, then
the JSC Committee will have the exclusive authority to appoint a person to fill
such vacancy or (iii) a MSLEF Director, then a majority of the members of our
entire Board will have the exclusive authority to appoint a person to fill such
vacancy (in which case, that newly appointed director will be considered an
Unaffiliated Director). Our Bylaws also provide that (i) if a director who
is removed from our Board, resigns, retires, dies or otherwise cannot
continue to serve as a member of our Board is also the Chairman or the EVP
and (ii) if JSG and its subsidiaries beneficially own less than 15% of the
then outstanding shares of our common stock, then a majority of the members
of our entire Board will have the exclusive right to appoint a person to
fill that vacancy (in which case that newly appointed director will be
considered an Unaffiliated Director). Our Bylaws further provide that if
(i) a MSLEF Director tenders his or her resignation from our Board
effective as of a future date, (ii) the MSLEF Committee designates a person
to replace the resigning MSLEF Director prior to that future date and (iii)
at such future date, MSLEF beneficially owns at least the MSLEF Threshold
Amount of Shares, then the person designated by the MSLEF Committee is
appointed to fill the vacancy effective as of such future date and is
considered the MSLEF Director.
Each of the parties to the Voting Agreement has agreed that, so long as
MSLEF owns the MSLEF Threshold Amount of Shares, if at any time there is no
MSLEF Director (due to the MSLEF Director's resignation, retirement, death or
otherwise), it will vote or cause to be voted all shares of common stock
beneficially owned by it in favor of calling a special meeting of our
stockholders for the purpose of removing an Unaffiliated Director (if any) and
replacing the Unaffiliated Director (or filling the vacancy left by the MSLEF
Director) with a person designated by MSLEF and at the special meeting, removing
such Unaffiliated Director, electing the designee of MSLEF to our Board and
designating that person as the "MSLEF Director" on our Board.
Our Bylaws provide that, if an Unaffiliated Director is removed from our
Board or resigns, retires, dies or otherwise cannot continue to serve as a
member of our Board, then a majority of the members of our entire Board will
have the authority to appoint a person to fill such vacancy.
Our Bylaws provide that the Stone Committee will use its best efforts to
ensure that at all times at least two of its designees for nomination or
appointees to our Board are Independent Directors (as defined in our Bylaws),
and also provide that the JSC Committee will use its best efforts to ensure that
at all times at least two of its designees for nomination or appointees to our
Board are Independent Directors.
Special Meetings of Stockholders
Our Charter and Bylaws permit special meetings of our stockholders to be
called by the Chairman, the President, the Secretary or any Vice President or at
the request of a majority of our Board (except as described above under
"--Removal of Directors"). In addition, under our Charter and Bylaws,
stockholders holding at least 25% of the voting power of our then outstanding
capital stock entitled to vote will have the right to call a special meeting of
stockholders. This will permit SIBV, currently our largest stockholder, to call
a special meeting of stockholders without the consent of any of our other
stockholders. Our Charter and Bylaws further provide that in order for a
stockholder to nominate a person to be elected at a special meeting to serve as
a director on our Board, the stockholder must comply with certain advance notice
requirements in our Bylaws. The parties to the Voting Agreement have agreed with
respect to voting to call and voting at special meetings of our stockholders.
Amendment of Charter
Delaware Law generally requires the approval of the board of directors and
a majority of the outstanding stock entitled to vote to amend a company's
certificate of incorporation.
The amendment of the following provisions of our Charter require the
affirmative vote of stockholders holding at least 75% of the voting power of our
then outstanding capital stock entitled to vote: provisions requiring a 75%
stockholder vote to amend certain Bylaw provisions and provisions which repeat
certain Article 5 provisions of our Bylaws where, pursuant to the our Bylaws,
stockholder amendment of such Article 5 provisions requires a 75% stockholder
vote. In addition, our Bylaws require the approval of at least 75% of the
members of our entire Board in order to make certain recommendations to the
stockholders. See "--Approval of Certain Actions."
Each of the parties to the Voting Agreement has agreed not to vote in favor
of any resolution by any stockholder that seeks to amend, repeal, or adopt any
provision inconsistent with Article 5 or our Charter provisions requiring, in
the case of stockholder amendment or repeal of certain Bylaw provisions, the
vote of holders of at least 75% of the voting power of our then outstanding
capital stock.
Amendment of Bylaws
Our Charter and Bylaws provide that, until the Termination Date, amendment
of Article 5 requires the approval of at least 75% of our entire Board or the
affirmative vote of the holders of at least 75% of the voting power of our then
outstanding capital stock entitled to vote. From and after the Termination Date,
our Bylaws provide that it may not be amended except by a majority of our entire
Board or by the affirmative vote of the stockholders as required by Delaware
Law.
In addition, our Charter and Bylaws provide that so long as MSLEF
beneficially owns more than the MSLEF Threshold Amount of Shares, the amendment
of any provision of our Bylaws relating to (i) the authority and membership of
the MSLEF Committee and the Compensation Committee, (ii) the inclusion of the
MSLEF Director on the Independent Committee and the JSG Supervisory Committee
(if such committees exist) or (iii) the designee for nomination, removal or
replacement of the MSLEF Director, will require the unanimous vote of each
member of our Board or the affirmative vote of the holders of at least 75% of
the voting power of our then outstanding capital stock entitled to vote.
Approval of Certain Actions
Our Bylaws provide that, until the Termination Date, approval of at least
75% of our entire Board will be required for (i) any recommendation to our
stockholders to change the number of directors constituting our Board, (ii) any
change in the tenure of Mr. Stone as CEO or any removal of the CEO other than
for Cause, (iii) any change in the title or any material diminution in the
responsibilities of the Chairman, the CEO or the EVP, (iv) any stock repurchase
that would result in the aggregate beneficial ownership by JSG and its
subsidiaries of our capital stock representing more than 40% of the voting power
represented by all of our outstanding capital stock (or, if such ownership is
already greater than 40%, increasing such beneficial ownership), or (v) any
change in the scope or composition of any of the committees of our Board
(including any change of the chairman of the Compensation Committee) or the two
management committees (including any change of the chairman of the Cost
Reduction/Divestiture Committee) described in our Bylaws. In addition, our
Bylaws confer on various Committees certain powers and authority of our Board.
See "--Board Committees."
Board Committees
In addition to the Nominating Committees, our Bylaws provide for the
establishment of six committees of our Board. The Compensation Committee will
determine compensation payable to all Executive Officers (as defined in our
Bylaws) and approve the adoption of, amendment to and make all decisions with
respect to, all bonus, incentive and other employee benefit plans and will make
all decisions with respect to grants or awards made. The Audit Committee will
perform functions customary for the audit committee of a public company. The
Independent Committee will have the responsibilities described below. The JSG
Supervisory Committee will seek to ensure the enforcement against JSG of the
standstill agreement dated as of May 10, 1998 among JSG, MSLEF and JSC (the
"Standstill Agreement"). The MSLEF Supervisory Committee (together with
the JSG Supervisory Committee, the "Supervisory Committees") will seek to
ensure the enforcement against MSLEF of the Standstill Agreement. The
Officer Appointment Committee will have the responsibilities described
below.
Our Bylaws provide that the Compensation Committee will be comprised
exclusively of (i) one Independent Director designated by the Stone Committee
(until the Termination Date), (ii) one Independent Director designated by the
JSC Committee (until the Termination Date) and (iii) one director, who will be
chairman of the committee, designated by the MSLEF Committee (so long as there
is a MSLEF Committee and the MSLEF Committee has not waived its right). If there
is no MSLEF Committee (or if the MSLEF Committee has waived its right to
designate a director on the Compensation Committee), the Compensation Committee
will include a third director designated by a majority of the members of our
Board and will be chaired by one of the directors on the committee designated by
at least 75% of the members of our Board.
Our Bylaws require that, until the Termination Date, the Independent
Committee be comprised exclusively of (i) two Independent Directors designated
by the Stone Committee (until the Termination Date), (ii) two Independent
Directors designated by the JSC Committee (until the Termination Date) and (iii)
the MSLEF Director (so long as there is a MSLEF Director).
From and after the Termination Date and until five years after the
Effective Time (the "Fifth Anniversary"), our Bylaws require the Independent
Committee to consist exclusively of Independent Directors designated by at least
a majority of the members of our entire Board. For the purposes of this
requirement, any MSLEF Director will be considered an Independent Director so
long as he or she is not an officer or employee or a director, officer or
employee of any beneficial owner of 15% or more of our capital stock.
Until the Fifth Anniversary, our Bylaws generally prohibit our Board from
authorizing or approving any commercial or other transactions (including, any
squeeze-out of other stockholders effected by merger, reverse stock split or
otherwise) or agreements between us and our subsidiaries, on the one hand, and
JSG and its subsidiaries (other than us and our subsidiaries), on the other
hand, unless such actions have first been recommended by at least a majority of
the members of the entire Independent Committee. This requirement is subject to
certain exceptions, including exceptions for (x) transactions based on
agreements in effect on the date of the merger agreement or entered into in
connection with the merger agreement or replacement agreements, (y) any sale of
assets below specified levels, and (z) product sales in the ordinary course of
business effected on arm's length equivalent terms and which do not otherwise
require Board approval.
The JSG Supervisory Committee is comprised exclusively of the MSLEF
Director and each director who is both Independent of JSG and not a JSC
Director. The MSLEF Supervisory Committee is comprised exclusively of each
director, other than the MSLEF Director (if any), who is Independent of MSLEF.
The Officer Appointment Committee has the exclusive authority to appoint or
terminate the employment of Executive Officers other than the CEO, the EVP and
CFO. They also have the authority to create additional Executive Officer
positions. The Officer Appointment Committee is comprised of the Chairman and
the CEO so long as he or she is a director. The Officer Appointment Committee is
permitted to exercise its authority only in accordance with the recommendations
of the CEO, subject to the unanimous approval of the Officer Appointment
Committee. If the Officer Appointment Committee and the CEO disagrees on any
decision of the Officer Appointment Committee, then our Bylaws provide that the
Independent Committee (instead of the Officer Appointment Committee) will have
the exclusive authority to decide the subject of the disagreement.
Management Committees
Our Bylaws establish two management committees which will report to our
Board: the Cost Reduction/Divestiture Committee and the Management Operating
Committee.
Until the Termination Date, the Cost Reduction/Divestiture Committee will
have responsibility for the development and implementation of a plan that is
designed to achieve asset divestitures and the development of a program of cost
reductions and other synergies, with the approval of our Board. Until the
Termination Date, the Cost Reduction/Divestiture Committee will be comprised of
the Chairman, the CEO, the EVP (who will be chairman of the Committee) and the
CFO.
Until the Termination Date, the Management Operating Committee will be
responsible for setting and implementing policies and objectives and reviewing
performance and the achievement of such policies and objectives, with the
approval of our Board. Until the Termination Date, the committee will be
comprised of the Chairman, the CEO, the EVP, the CFO and certain other officers
as are designated by the CEO, subject to review and approval by the Officer
Appointment Committee. There will be no chairman of the Management Operating
Committee.
Officers
Until the Termination Date, (i) the JSC Committee will have the authority
to appoint one of the directors to serve as Chairman and a person to serve as
EVP, (ii) the Stone Committee will have the authority to appoint a person to
serve as CEO, and (iii) the termination of employment of either the CEO or the
EVP will be permissible only for Cause to be determined by at least 75% of the
members of our entire Board.
Until the Termination Date, the CEO will be the officer principally
responsible for our day-to-day operations and will report directly to the Board.
The Chairman and the CEO together will have general supervisory responsibilities
with respect to the business affairs and officers. Our Bylaws also provide that
the EVP will have the authority of a Vice President and, in his or her capacity
as chairman of the Cost Reduction/Divestiture Committee, will be the officer
principally responsible for the development of our asset divestiture program and
cost reduction program, implementation of the asset divestiture program and, in
consultation with the CEO, implementation of the cost reduction program. The
implementation of the asset divestiture program and the cost reduction program
are subject to Board approval. In addition to the normal responsibilities of the
EVP, the EVP will also have the operating responsibilities of the CEO (in the
absence of the CEO) and other operating responsibilities as may be determined by
our Board that are not inconsistent with the responsibilities of the CEO as
provided in our Bylaws.
Until the Termination Date, termination of the employment or any material
diminution in the responsibilities of the CFO will require the approval of at
least a majority of the members of our entire Board.
Indemnification
We indemnify our officers and directors to the fullest extent permitted
under Delaware Law against all liabilities incurred in connection with their
service to us.
Limitations on Directors' Liability
Our Charter provides that our directors will not be personally liable to us
or our stockholders for monetary damages for any breach of their fiduciary duty
as directors, unless they violated their duty of loyalty to us or our
stockholders, acted in bad fath, knowingly or intentionally violated the law,
authorized illegal dividends or redemptions or derived an improper personal
benefit from their action as directors. The effect of these provisions will be
to eliminate our rights and our stockholders's rights to recover monetary
damages against a director for breach of his or her fiduciary duty as a
director, except for the situations just described, including a breach by a
director resulting from grossly negligent behavior. These provisions apply only
to claims against directors arising out of their role as directors and not in
any other capacity (such as an officer or employee). Directors remain liable for
violations of the federal securities laws and we retain the right to pursue
legal remedies other than monetary damages, such as an injunction or
rescission, for breach of the director's duty of care.
Business Combinations
Section 203 of the Delaware Law prohibits certain transactions between a
Delaware corporation and an "interested stockholder". An Interested Stockholder
is a person who beneficially owns 15% or more of a Delaware corporations's
outstanding voting shares. This provision prohibits certain business
combinations between an Interested Stockholder and a corporation for three years
after the date the Interested Stockholder acquired its stock unless (i) the
business combination is approved by the corporation's board of directors prior
to the date the Interested Stockholder acquired shares; (ii) the Interested
Stockholder acquired at least 85% of the voting stock of the corporation when it
became an Interest Stockholder; or (iii) the business combination is approved by
a majority of the board of directors and by the affirmative vote of two-thirds
of the outstanding voting stock owned by disinterested stockholders at an annual
or special meeting. A business combination is defined broadly to include
mergers, consolidations, sales or other dispositions of assets having an
aggregate value of 10% or more of the corporation's consolidated assets, and
certain transactions that would increase the Interested Stockholder's
proportionate share ownership in the corporation. The Delaware Law permits
corporations to opt out of this provision. We have not opted out.
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
Our common stock is quoted on the Nasdaq under the symbol JJSC. Stone
common stock is listed on the NYSE under the symbol STO.
The table below sets forth the high and low sale prices of our common stock
as quoted on the Nasdaq and Stone common stock as reported on the NYSE Composite
Transaction Tape. The prices are based on published financial sources. We did
not declare any cash dividends on our common stock for the calendar quarters
indicated.
<TABLE>
<CAPTION>
JSC Common Stock Stone Common Stock
----------------- -------------------------------
Market Price Market Price Cash
----------------- ------------------ Dividends
High Low High Low Declared
------ ------ ------ ------ ---------
1995
<S> <C> <C> <C> <C> <C>
First Quarter............................... 20.38 14.38 24.38 17.00 --
Second Quarter.............................. 16.50 11.88 23.38 16.50 --
Third Quarter............................... 16.75 13.00 24.38 19.00 0.15
Fourth Quarter.............................. 15.63 9.00 18.88 12.50 0.15
1996
First Quarter............................... 12.38 9.38 15.38 12.38 0.15
Second Quarter.............................. 14.13 10.25 17.25 13.50 0.15
Third Quarter............................... 12.25 10.50 15.50 12.50 0.15
Fourth Quarter.............................. 16.13 11.88 16.00 13.88 0.15
1997
First Quarter............................... 16.38 11.88 16.63 11.13 --
Second Quarter.............................. 18.63 11.88 14.63 9.63 --
Third Quarter............................... 21.63 15.50 17.75 14.25 --
Fourth Quarter.............................. 20.50 13.25 15.88 10.25 --
1998
First Quarter............................... 17.75 13.00 13.03 10.19 --
Second Quarter.............................. 22.00 15.00 21.13 11.94 --
Third Quarter............................... 16.75 9.75 16.13 6.69 --
Fourth Quarter (through October 30)......... 13.50 10.00 11.81 8.06 --
</TABLE>
On May 8, 1998, the last full trading day before the Merger was publicly
announced, the closing price of our common stock quoted on the Nasdaq was $20.50
per share and the closing price of Stone common stock reported on the NYSE
Composite Transaction Tape was $18.00 per share. On October 30, 1998, the
closing price of our common stock on the Nasdaq was $11.44 per share and the
closing price of Stone common stock reported on the NYSE Composite Transaction
Tape was $9.56 per share.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal United States federal income
tax consequences relating to the conversion of the Debentures and Preferred
Stock into shares of SSCC Common Stock. This summary is based on the Internal
Revenue Code of 1986, as amended to the date hereof (the "Code"), administrative
pronouncements, judicial decisions and Treasury Regulations, changes to any of
which subsequent to the date hereof may affect the tax consequences described
herein. This summary discusses only Debentures and Preferred Stock which are
held as capital assets within the meaning of Section 1221 of the Code. It does
not discuss all of the tax consequences that may be relevant to a holder in
light of its particular circumstances or to holders subject to special rules.
Holders are urged to consult their tax advisors with respect to the federal and
other tax consequences of the conversion of Debentures or Preferred Stock into
shares of SSCC Common Stock.
Federal Income Tax Considerations for U.S. Holders
As used herein, the term "U.S. Holder" means an owner of a Debenture or a
share of Preferred Stock that, for United States federal income tax purposes is
(i) a citizen or resident of the United States, (ii) a corporation, partnership
or other entity created or organized in or under the laws of the United States
or of any political subdivision thereof, (iii) an estate the income of which is
subject to United States federal income taxation regardless of its source, or
(iv) a trust (A) the administration over which a United States court can
exercise primary supervision and (B) all of the substantial decisions of which
one or more United States persons have the authority to control.
Conversion of Debentures into SSCC Common Stock
The conversion of Debentures into SSCC Common Stock will be a taxable
transaction for United States federal income tax purposes. A U.S. Holder will
recognize gain or loss in an amount equal to the difference between the fair
market value of the SSCC Common Stock received and its adjusted tax basis in the
converted Debentures. A U.S. Holder's adjusted tax basis in the Debentures
generally equals the cost of the Debentures to such Holder, increased by the
amount of market discount, if any, previously included in income by the U.S.
Holder with respect to such Debentures and decreased by the amount of
amortizable bond premium, if any, previously deducted from income by the U.S.
Holder with respect to such Debentures. Such gain or loss will generally be
capital gain or loss; however, any gain realized by a U.S. Holder on the
conversion of Debentures having market discount will be treated as ordinary
income to the extent of the market discount that has accrued while such
Debentures were held by the U.S. Holder unless the U.S. Holder has included such
market discount in income currently as it accrued. In general, market discount
is the excess, if any, of the stated redemption price at maturity of a Debenture
over the U.S. Holder's tax basis therein immediately after its acquisition
(unless the amount of such excess is less than a specified de minimis amount, in
which case market discount is considered to be zero).
Conversion of Preferred Stock into SSCC Common Stock
The conversion of Preferred Stock into SSCC Common Stock will be a taxable
transaction for United States federal income tax purposes. A U.S. Holder will
recognize gain or loss in an amount equal to the difference between the fair
market value of the SSCC common stock received and its adjusted tax basis in the
converted shares of Preferred Stock. A U.S. Holder's adjusted tax basis in the
Preferred Stock generally equals the cost of the Preferred Stock to such Holder.
Such gain or loss will generally be capital gain or loss.
Federal Income Tax Considerations for Non U.S. Holders
As used herein, the term "Non U.S. Holder" means an owner of a Debenture or
a share of Preferred Stock that, for United States federal income tax
consequences, is not a U.S. Holder, as defined above.
Conversion of Debentures or Preferred Stock into SSCC Common Stock
Gain realized by a Non U.S. Holder on the conversion of Debentures or
Preferred Stock into SSCC Common Stock will not be subject to United States
federal income tax, provided (i) such gain is not effectively connected with the
conduct of a trade or business within the United States, and (ii) in the case of
a Non U.S. Holder who is an individual, such individual is not present in the
United States for a period or periods aggregating 183 days or more during the
taxable year in which such gain is realized, is not a former citizen of the
United States whose loss of citizenship had as one of its principal purposes the
avoidance of United States tax, and has not elected to be treated as a resident
of the United States for tax purposes.
Certain FIRPTA Considerations
The discussion above assumes that during the shorter of (i) the period
during which the holder held the Debentures or Preferred Stock or (ii) the five
year period ending on the date of conversion, SSCC was not a United States real
property holding corporation within the meaning of Section 897(c) of the Code.
If SSCC becomes, during the applicable time period, a United States real
property holding corporation, then upon conversion of a Debenture or a share of
Preferred Stock, SSCC may withhold 10% of the fair market value of the shares of
SSCC Common Stock that would otherwise be received by a U.S. Holder of such
Debenture or Preferred Stock, unless the holder submits certification of
non-foreign status in accordance with applicable Treasury Regulations. In
addition, Non U.S. Holders of Debentures or Preferred Stock may (i) be subject
to this withholding tax, (ii) be subject to United States income tax on gain
realized with respect to the conversion of the Debentures or Preferred Stock
into SSCC Common Stock (which tax will be reduced by the amount withheld), and
(iii) be required to file a U.S. federal income tax return. A Non U.S. Holder is
urged to consult its own tax advisors as to the application of these rules.
PLAN OF DISTRIBUTION
We are offering the Common Stock only to holders of Stone Debentures and
Stone Preferred Stock who elect to convert their Debentures and Preferred Stock
into SSCC common stock after the Merger. We will not be offering or selling the
Common Stock in any other manner, and will not use the services of any
underwriters or agents.
LEGAL MATTERS
Davis Polk & Wardwell will issue an opinion about the legality of the
Common Stock for us.
EXPERTS
The consolidated financial statements and schedule of JSC and JSCE, Inc.
appearing in their Annual Reports on Form 10-K for the year ended December 31,
1997 have been audited by Ernst & Young LLP, independent auditors, as set
forth in their reports thereon, and are incorporated by reference in this
Prospectus. We are incorporating such consolidated financial statements
and schedule by reference in this Prospectus in reliance upon such reports
given upon the authority of Ernst & Young LLP as experts in accounting and
auditing.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The estimated expenses payable in connection with the offering described in
this Registration Statement are set forth below. All amounts shown are
estimates, except the SEC registration fee.
SEC registration fee................................................ $15,677
Printing and engraving expenses..................................... $20,000
Accounting fees and expenses........................................ None
Legal fees and expenses............................................. $50,000
Miscellaneous....................................................... None
TOTAL.......................................................... $85,677
Item 15. Indemnification of Directors and Officers.
Exculpation. Section 102(b)(7) of the Delaware Law permits a corporation to
include in its certificate of incorporation a provision eliminating or limiting
the personal liability of a director to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, provided that such
provision may not eliminate or limit the liability of a director for any breach
of the director's duty of loyalty to the corporation or its stockholders, for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, for the payment of unlawful dividends or unlawful
stock repurchases, or for any transaction from which the director derived an
improper personal benefit.
The SSCC Charter incorporates the exculpation provisions permitted by
Section 102(b)(7) described above.
Indemnification. Section 145 of the Delaware Law permits a corporation to
indemnify any of its directors, officers, employees or agents who was or is a
party, or is threatened to be made a party, to any third party proceeding by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation, for expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding, if such person acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reason to believe that such person's
conduct was unlawful. In a derivative action, i.e., one by or in the right of a
corporation, the corporation is permitted to indemnify directors, officers,
employees or agents against expenses (including attorneys' fees) actually and
reasonably incurred by them in connection with the defense or settlement of an
action or suit if they acted in good faith and in a manner that they reasonably
believed to be in or not opposed to the best interests of the corporation,
except that no indemnification shall be made if such person shall have been
adjudged liable to the corporation, unless and only to the extent that the court
in which the action or suit was brought shall determine upon application that
such person is fairly and reasonably entitled to indemnity for such expenses
despite such adjudication of liability.
The SSSC Bylaws make mandatory the indemnification permitted by Section 145
described above.
Insurance. The directors and officers of JSC are insured under a policy of
directors' and officers' liability insurance.
Stone Directors and Officers. The merger agreement to effect the Merger
(the "Merger Agreement") provides that SSCC will (or will cause Stone to)
indemnify and hold harmless, to the same extent provided for in the Stone
Charter and Stone Bylaws, current or former directors or officers of Stone for
damages and liabilities (including reasonable attorneys' fees) arising out of or
pertaining to any action or inaction in their capacity as an officer or director
occurring before the Effective Time (including transactions contemplated by the
Merger Agreement). The Merger Agreement further provides that the
indemnification obligations set forth in the Stone Charter and Stone Bylaws as
of the date thereof, will survive the Merger and will not be amended, repealed
or otherwise modified for a period of six years after the Effective Time in a
manner that would adversely affect the rights of individuals who were directors,
officers, employees or agents of Stone or its subsidiaries on or prior to the
Effective Time.
The Merger Agreement also provides that for a period of six years after the
Effective Time, SSCC will provide to Stone's current directors and officers
liability insurance protection substantially equivalent in kind and scope to
that provided by Stone's current directors' and officers' liability insurance
policies in effect the date thereof; provided however, SSCC will not be required
to expend in any one year an amount in excess of 300% of the annual premiums
currently paid by Stone for such insurance (such amount, the "Maximum Premium");
provided, further, that if during such period the annual premiums for comparable
insurance coverage exceed the Maximum Premium, SSCC shall be obligated to
provide a policy that, in the reasonable judgment of SSCC, provides the best
coverage available for a cost not exceeding the Maximum Premium.
Item 16. Exhibits.
5.1* Opinion of Davis Polk & Wardwell
23.1* Consent of Ernst & Young LLP
23.2 Consent of Davis Polk & Wardwell (included in the opinion filed
as Exhibit 5.1)
24.1 Powers of Attorney (included on the signature page hereto)
- ------------
* Filed herewith.
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement:
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) above do not apply
if the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by JSC (or SSCC after
the Merger) pursuant to section 13 or section 15(d) of the Securities Exchange
Act of 1934 (the "Exchange Act") that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, 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.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act 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 Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the County of St. Louis, State of Missouri, on October 30, 1998.
JEFFERSON SMURFIT CORPORATION
(Registrant)
By /s/ Richard W. Graham
-----------------------------------
Richard W.Graham
President, Chief Executive Officer
and Director
-----------------------
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Patrick J. Moore and Michael E. Tierney, and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
and supplements to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, and hereby grants to such attorneys-in-fact
and agents, 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 any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Richard W. Graham President, Chief Executive Officer and October 30, 1998
- --------------------------------- Director (Principal-Executive-Officer)
(Richard W. Graham)
/s/ Patrick J. Moore Vice President and Chief Financial Officer October 30, 1998
- --------------------------------- (Principal Financial and Accounting-Officer)
(Patrick J. Moore)
/s/ Leigh J. Abramson Director October 30, 1998
- ---------------------------------
(Leigh J. Abramson)
/s/ Alan E. Goldberg Director October 30, 1998
- ---------------------------------
(Alan E. Goldberg)
/s/ Michael C. Hoffman Director October 30, 1998
- ---------------------------------
(Michael C. Hoffman)
/s/ Michael M. Janson Director October 30, 1998
- ---------------------------------
(Michael M. Janson)
/s/ Thomas A. Reynolds Director October 30, 1998
- ---------------------------------
(Thomas A. Reynolds, III)
/s/ James E. Terrill Director October 30, 1998
- ---------------------------------
(James E. Terrill)
</TABLE>
EXHIBIT INDEX
5.1 - Opinion of Davis Polk & Wardwell
23.1 - Consent of Ernst & Young LLP
23.2 - Consent of Davis Polk & Wardwell (included in the opinion filed as
Exhibit 5.1)
24.1 - Powers of Attorney (included on the signature page hereto)
Exihibit 5.1
November 9, 1998
Jefferson Smurfit Corporation
Jefferson Smurfit Centre
8182 Maryland Avenue
St. Louis, Missouri 63105
Ladies and Gentlemen:
We have acted as your counsel in connection with Jefferson Smurfit
Corporation's ("JSC") Registration Statement on Form S-3 (the
"Registration Statement") filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act"),
relating to the registration by JSC of shares (the "Shares") of common
stock, par value $.01 per share, of JSC to be issued in connection with the
conversion of Stone Container Corporation's ("Stone") 6 3/4% Convertible
Subordinated Debentures due 2007 and Stone's $1.75 Series E Cumulative
Convertible Exchangeable Preferred Stock. JSC Acquisition Corporation
("Merger Subsidiary"), a wholly-owned subsidiary of JSC, will merge with
and into Stone pursuant to the terms of the Agreement and Plan of Merger
dated as of May 10, 1998, as amended, among JSC, Stone and Merger
Subsidiary (the "Merger Agreement").
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates and other instruments, and have conducted such other
investigations of fact and law, as we have deemed necessary or advisable
for the purposes of this opinion.
In rendering this opinion we have assumed that, prior to the
issuance of any of the Shares, (i) the Registration Statement, as then
amended, will have become effective under the Securities Act, (ii) the
stockholders of JSC will have approved the issuance of shares of JSC in
connection with the Merger and the amendments to the JSC restated
certificate of incorporation as contemplated by the Merger Agreement, (iii)
the stockholders of Stone will have approved and adopted the Merger
Agreement and approved amendments to the Stone restated certificate of
incorporation as contemplated by the Merger Agreement and (iv) the
transactions contemplated by the Merger Agreement will have been
consummated.
On the basis of the foregoing and assuming the due execution and
delivery of certificates representing the Shares, we are of the opinion
that the Shares have been duly authorized and the Shares, when issued and
delivered in accordance with the terms and conditions of the Merger
Agreement, will be validly issued, fully paid and non-assessable.
We are members of the Bar of the State of New York and the
foregoing opinion is limited to the laws of the State of New York, the
federal laws of the United States of America and the General Corporation
Law of the State of Delaware.
We hereby consent to the filing of this opinion as an exhibit to
the Registration Statement and to the reference to us under the caption
"Experts" in the prospectus constituting a part of the Registration
Statement.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by or furnished to any other person without our prior written
consent.
Very truly yours,
/s/ Davis Polk & Wardwell
Exhibit 23.1
Consent of Independent Accountants
We consent to the reference to our firm under the caption
"Experts" in the Registration Statement (Form S-3 No. 333-XXXXX) and
related Prospectus of Jefferson Smurfit Corporation (JSC) for the
registration of 4,675,000 shares of its common stock to holders of Stone
Container Corporation 6 3/4% Convertible Subordinated Debentures due 2007
and shares of Series E Cumulative Convertible Exchangeable Preferred Stock
and to the incorporation by reference therein of our reports dated January
22, 1998, with respect to the consolidated financial statements and
schedule of JSC included in JSC's Annual Report on Form 10-K for the year
ended December 31, 1997 and JSCE, Inc. (JSCE) included in JSCE's Annual
Report on Form 10-K for the year ended December 31, 1997, filed with the
Securities and Exchange Commission.
Ernst & Young LLP
St. Louis, Missouri
November 9, 1998
