<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended: September 29, 1996 Commission File Number:
1-13868
- --------------------------------------------------------------------------------
CROWN VANTAGE INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Virginia 54-1752384
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 Lakeside Drive, Oakland, CA 94612-3592
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(510) 874-3400
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address, and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ----
Number of shares of no par value common stock outstanding as of the close of
business on November 12, 1996:
9,109,968 Shares
----------------
<PAGE>
INDEX
CROWN VANTAGE INC.
PART I: Financial Information
Item 1. Financial Statements
- Condensed Consolidated Balance Sheets - September 29, 1996 and
December 31, 1995.
- Condensed Consolidated Statements of Operations - Third quarter and
nine months ended September 29, 1996 and September 24, 1995.
- Condensed Consolidated Statements of Cash Flows - Nine months ended
September 29, 1996 and September 24, 1995.
- Notes to Condensed Consolidated Financial Statements.
- Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
PART II: Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
2
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
CROWN VANTAGE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
ASSETS SEPTEMBER 29, 1996 DECEMBER 31, 1995
------------------ -----------------
(UNAUDITED)
-----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 6,203 $ 5,335
Accounts receivable, net 56,789 106,674
Inventories 96,313 100,422
Prepaid expenses and other current assets 24,666 8,832
Deferred income taxes 14,899 14,899
------------ ----------
Total current assets 198,870 236,162
Property, plant and equipment, net 669,387 668,340
Other assets 44,468 39,952
Unamortized debt issue costs 16,388 16,448
Intangibles, net 30,383 31,226
------------ ----------
Total Assets $959,496 $992,128
------------ ----------
------------ ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 46,087 $ 57,569
Accrued liabilities 77,144 79,959
Current portion of long-term debt 7,308 11,883
------------ ----------
Total current liabilities 130,539 149,411
Long-term debt 543,628 555,352
Accrued postretirement benefits other than pensions 101,609 100,358
Accrued pension 17,030 14,235
Other long-term liabilities 12,840 15,507
Deferred income taxes 114,222 112,039
------------ ----------
Total Liabilities 919,868 946,902
------------ ----------
Shareholder's Equity:
Preferred Stock, no par value;
Authorized - 500,000 shares;
Issued and outstanding - None
Common Stock, no par value;
Authorized - 50,000,000 shares;
Issued and outstanding 9,109,968 and
8,917,661 shares at September 29, 1996
and December 31, 1995, respectively 45,760 44,539
Unearned ESOP shares and other (9,912) (11,152)
Cumulative foreign currency translation adjustment 61 (1,348)
Retained earnings 3,719 13,187
------------ ----------
39,628 45,226
------------ ----------
Total Liabilities and Shareholders' Equity $959,496 $992,128
------------ ----------
------------ ----------
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
CROWN VANTAGE INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Third Quarter (13 weeks) and Nine Months (39 weeks)
Ended September 29, 1996 and September 24, 1995
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
Third Quarter Nine Months
------------------------ -----------------------
1996 1995 1996 1995
----------- ----------- ----------- ----------
(UNAUDITED ) (UNAUDITED)
<S> <C> <C> <C> <C>
Net sales $221,064 $264,779 $704,481 $798,709
Cost of goods sold 210,319 221,016 638,774 689,207
----------- ----------- ----------- ----------
Gross margin 10,745 43,763 65,707 109,502
Selling and administrative expenses 13,792 15,398 38,132 43,497
----------- ----------- ----------- ----------
Operating Income (Loss) (3,047) 28,365 27,575 66,005
Interest expense (15,337) (6,619) (47,167) (7,604)
Other income, net 798 16 2,171 268
----------- ----------- ----------- ----------
Income (loss) before income taxes (17,586) 21,762 (17,421) 58,669
Provision (benefit) for income taxes (8,018) 8,561 (7,953) 23,324
----------- ----------- ----------- ----------
NET INCOME (LOSS) $ (9,568) $ 13,201 $ (9,468) $ 35,345
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
Loss per share $ (1.11) $ (1.10)
--------- ---------
--------- ---------
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
CROWN VANTAGE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months (39 weeks)
Ended September 29, 1996 and September 24, 1995
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Nine Months
-------------------------
1996 1995
------------ -----------
(UNAUDITED)
<S> <C> <C>
Cash Provided by (Used for) Operating Activities:
Net income (loss) $ (9,468) $ 35,345
Items not affecting cash:
Depreciation and cost of timber harvested 57,712 59,244
Amortization of goodwill and other intangibles 844 1,046
Interest on Pay-in-Kind Notes 9,839 1,050
Other, net 5,394 3,472
Changes in current assets and liabilities:
Accounts receivable (includes $40,000 sold in 1996) 49,885 (10,917)
Inventories 4,109 (5,729)
Other current assets (16,296) 423
Accounts payable (11,483) 10,316
Other current liabilities (2,424) 4,195
Other, net 1,565 3,972
------------ -----------
Cash Provided by Operating Activities 89,677 102,417
------------ -----------
Cash Used for Investing Activities:
Expenditures for property, plant and equipment (58,907) (33,309)
Other, net (371) -
------------ -----------
Cash Used for Investing Activities (59,278) (33,309)
------------ -----------
Cash Provided by (Used for) Financing Activities:
Proceeds from draw down of Revolving Credit 171,000 59,000
Repayments of Revolving Credit (163,000) (25,000)
Proceeds from issuance of
Industrial Revenue Bonds less underwriting cost 12,100 -
Proceeds from issuance of
Term Notes - 190,592
Proceeds from issuance of
Subordinated Notes - 242,500
Repayments of Term Loans and other long-term debt (49,631) (720)
James River capital withdrawal - (533,126)
------------ -----------
Cash Used for Financing Activities (29,531) (66,754)
------------ -----------
Increase in cash and cash equivalents 868 2,354
Cash and cash equivalents at beginning of period 5,335 12,435
------------ -----------
Cash and cash equivalents at end of period $6,203 $14,789
------------ -----------
------------ -----------
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE>
CROWN VANTAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- ORGANIZATION
Crown Vantage Inc. and subsidiaries (the "Company") became an independent
company after the Board of Directors of James River Corporation of Virginia
("James River") approved the spin-off of assets, liabilities and operations
which comprised a substantial part of James River's Communication Papers
Business and the paper-based part of its Food and Consumer Packaging Business
("Predecessor Business"). At the close of business on August 25, 1995, James
River distributed to its common shareholders all of the outstanding shares of
the Company (the "Distribution"). The Distribution was made in the form of a
tax-free dividend on the basis of one share of the Company's common stock for
every ten shares of James River common stock. A total of 8,446,362 shares of
the Company's common stock were issued and began trading on NASDAQ on August 28,
1995.
James River transferred to the Company certain assets of the Predecessor
Business and the Company assumed certain related liabilities from James River.
In addition, the Company received $250 million in cash through a public offering
of Senior Subordinated Notes and $253 million from initial borrowings under
credit facilities with certain banks (collectively, the "Financing"). The
proceeds from the Financing after payment of expenses and retention of $1.2
million cash ($485 million) were paid to James River together with $100 million
Senior Pay-in-Kind Notes issued by the Company, as a return of James River's
capital investment. The Distribution, transfer of assets and liabilities,
Financing and return of capital are collectively referred to as the "Spin-Off."
Also in connection with the Spin-Off, the Company entered into a
Contribution Agreement and certain transition agreements with James River. The
Company will rely on such agreements for certain services, and the supply of a
portion of the products used in the Company's manufacturing business, generally
over terms of one to three years, at agreed to prices consistent with market
terms.
NOTE 2 -- BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements include the
consolidated operations, assets and liabilities of Crown Vantage Inc. (the
"Parent"), Crown Paper Co., and Crown Paper Co.'s consolidated subsidiaries for
the three months and nine months ended September 29, 1996 and the combined
historical operations, assets and liabilities of the Predecessor Business while
a part of James River for the three months and nine months ended September 24,
1995. For simplicity of presentation, these financial statements are referred
to as consolidated financial statements herein.
The condensed consolidated financial statements for the quarter and nine
months ended September 24, 1995 have been prepared as if the Company had
operated as an independent stand-alone entity, except the Company generally
did not have significant borrowings, and there was no allocation of James
River's consolidated borrowings, and related interest expense, except for
interest capitalized as a component of properties. During the period ended
September 24, 1995, the Company engaged in various transactions with James
River and its affiliates that are characteristic of a group of companies
under common control. Throughout this period, the Company participated in
James River's centralized cash management system and, as such, its cash
funding requirements were met by James River. The Company was charged by
James River for direct costs and expenses associated with its operations
which have been included in cost of goods sold or selling and administrative
expenses, as appropriate. James River's administrative costs not directly
attributable
6
<PAGE>
to the Company, which historically had not been allocated, have been allocated
to the Company for the quarter and nine months ended September 24, 1995 based on
net sales and are included in selling and administrative expense.
The accompanying condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for annual
financial statements. The condensed consolidated balance sheet as of December
31, 1995 was derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles. In the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three months and nine months ended September 29, 1996 are not
necessarily indicative of the results that may be expected for the year ended
December 29, 1996. For further information, refer to the consolidated financial
statements and footnotes thereto included in Crown Vantage Inc.'s Annual Report
to Shareholders and Form 10-K for the year ended December 31, 1995.
The Company adopted Statement of Financial Accounting Standards No. 121
("Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of") in the first quarter of 1996. Adoption of Statement of
Financial Accounting Standards No. 121 did not have a material effect on the
Company's financial position or results of operations.
NOTE 3 --LOSS PER SHARE
The computation of loss per share for the quarter and nine months ended
September 29, 1996 is based on the weighted average number of shares of common
stock and dilutive common stock equivalents outstanding during the period
(8,623,000 and 8,603,000 for the three and nine months ended September 29, 1996
respectively). The number of shares considered outstanding does not include
255,535 unearned shares held by the Employee Stock Ownership Plan Trust at
September 29, 1996. In accordance with Statement of Position 93-6 ("Employers'
Accounting for Employee Stock Ownership Plans"), shares held by the Trust are
not considered outstanding for purposes of computing earnings per share until
the shares are committed for release from the Trust.
Earnings (loss) per share information is not presented for the quarter or
nine months ended September 24, 1995 since the Company had no separate capital
structure until August 25, 1995. See Note 10 for pro forma earnings (loss) per
share information for the quarter and nine months ended September 24, 1995.
NOTE 4 -- INCOME TAX
The income tax benefits for the quarter and nine months ended September 29,
1996 have been provided at the Company's estimated tax rate of 39.75%. A
substantial portion of the benefit will be realized by recovery of taxes paid in
1995. In addition, the Company recognized a benefit of approximately $1.0
million in the third quarter for reduction of estimated taxes payable for 1995.
Historically the Company has been included in the consolidated federal and
combined/unitary state income tax returns of James River. Income taxes in the
consolidated financial statements for the quarter and nine months ended
September 24, 1995 represent the Company's share of James River's income tax
provision which is intended to approximate the amount which would have been
recognized had the Company filed separate income tax returns.
7
<PAGE>
NOTE 5 -- LONG TERM DEBT
<TABLE>
<CAPTION>
Consolidated long-term debt consists of the following:
September 29 December 31
1996 1995
--------------- --------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
CROWN PAPER CO.
Bank Credit Facility:
Revolving credit, due 2002 $ 18,000 $ 10,000
Term Loan A, due 2002 50,953 97,500
Term Loan B, due 2003 99,250 99,750
---------------- -------------
168,203 207,250
11% Senior Subordinated Notes, due 2005 250,000 250,000
Industrial Revenue Bonds, payable to 2026 34,304 24,182
10% Note, payable in 1996 - 352
---------------- -------------
452,507 481,784
CROWN VANTAGE INC.
11.45% Senior Pay-in-Kind Notes, due 2007
less unamortized discount 98,429 85,451
---------------- -------------
550,936 567,235
Less current portion 7,308 11,883
---------------- -------------
$543,628 $555,352
---------------- -------------
---------------- -------------
</TABLE>
In June 1996, the Company prepaid $40 million on Term Loan A using proceeds
obtained through the sale of certain accounts receivable (Note 8).
In July 1996, the Company completed an $18 million refinancing of certain
industrial revenue bonds issued by the Business Finance Authority of the State
of New Hampshire (the "Refunding Bonds"). The Refunding Bonds were issued to
refinance certain of the Company's pollution control and solid waste disposal
facilities located in the State of New Hampshire. The bonds are due January 1,
2022 and bear interest at 7.75%.
Also in July 1996, the Company finalized an agreement with the Business
Finance Authority of the State of New Hampshire whereby a total of $12.3 million
of bonds were sold (the "Project Bonds") to finance certain sewage and solid
waste disposal facilities to be used by the Company. The proceeds from the sale
of Project Bonds are to be used to finance eligible project costs. An amount
equivalent to 50% of proceeds are to be prepaid to the Term Loans. Upon sale,
$2.6 million, equivalent to 50% of proceeds, was prepaid on Term Loan A and
an additional $4.0 million was deposited in an interest bearing account with a
trustee to be drawn as needed to finance additional project costs. The Project
Bonds bear interest at 7.875% and are due July 1, 2026.
Maturities of long-term debt (after giving effect to the prepayments of
Term Loan A) for the next five fiscal year ends are: 1997 - $7.9 million; 1998
- - $9.3 million; 1999 - $9.3 million; 2000 - $9.6 million; and 2001 - $22.2
million.
8
<PAGE>
NOTE 6 -- INVENTORIES
<TABLE>
<CAPTION>
September 29, 1996 December 31, 1995
------------------ -----------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Raw material $ 25,993 $ 37,238
Work in process 5,709 5,856
Finished goods 42,228 40,745
Stores and supplies 34,722 35,141
----------- ------------
108,652 118,980
Reduction to state inventories at last-in, first-out cost (12,339) (18,558)
----------- ------------
$ 96,313 $ 100,422
----------- ------------
----------- ------------
</TABLE>
NOTE 7 -- LITIGATION AND ENVIRONMENTAL MATTERS
The Company is a party to various legal proceedings generally incidental to
its business and is subject to a variety of environmental protection statutes
and regulations. As is the case with other companies in similar industries, the
Company faces exposure from actual or potential claims and legal proceedings
involving environmental matters. Although the ultimate disposition of legal
proceedings cannot be predicted with certainty, it is the present opinion of the
Company's management that the outcome of any claim which is pending or
threatened, either individually or on a combined basis, will not have a
materially adverse effect on the consolidated financial position of the Company
but could materially affect consolidated results of operations in a given
period.
In addition, the Company has been identified as a potentially responsible
party, along with others, under the Comprehensive Environmental Response,
Compensation and Liability Act or similar federal and state laws regarding the
past disposal of wastes at approximately 20 sites in the United States. It is
the Company's policy to accrue remediation costs when it is probable that such
costs will be incurred and when they can be reasonably estimated. Estimates of
future response costs are necessarily imprecise due to, among other things, the
possible identification of presently unknown sites and the allocation of costs
among potentially responsible parties with respect to any such sites. However,
based upon its previous experience with respect to the cleanup of hazardous
substances as well as the regular detailed review of its known hazardous waste
sites and estimated costs to remediate certain sites, the Company has accrued
$10.9 million and $11.0 million at September 29, 1996 and December 31, 1995
respectively. The liabilities can change substantially due to such factors as
the solvency of other potentially responsible parties, additional information on
the nature or extent of contamination, methods of remediation required, and
other actions by governmental agencies or private parties. Although the Company
has accrued cleanup and remediation liabilities currently, expenditures
generally are paid over an extended period of time, in some cases as long as 30
years. While it is not feasible to predict the outcome of all environmental
liabilities, based on the most recent review by management of these matters,
management is of the opinion that its share of the costs of investigation and
remediation of the sites of which it is currently aware will not have a material
adverse effect upon the consolidated financial position of the Company.
9
<PAGE>
However, because of uncertainties associated with remediation
activities, regulations, technologies, and the allocation of costs among
various other parties, actual costs to be incurred at identified sites may
vary from estimates. Therefore, management is unable to determine if the
ultimate disposition of all known environmental liabilities will have a
material adverse effect on the Company's consolidated results of operations
in a given year. The accruals recorded by the Company are periodically
reviewed for their adequacy, and the Company will continue to review the
status of all significant existing or potential environmental issues and
adjust its accruals as necessary. The accruals do not reflect any possible
future insurance recoveries. In addition, as is the case with most
manufacturing and many other entities, there can be no assurance that the
Company will not be named as a potentially responsible party at additional
sites in the future or that the costs associated with such additional sites
would not be material.
In December 1993, the EPA published draft rules which contain proposed
regulations affecting pulp and paper industry discharges of wastewater and
gaseous emissions ("Cluster Rules"). The final Cluster Rules were scheduled to
be issued in late 1995; however, their issuance is now anticipated to occur no
earlier than the fourth quarter of 1996 with compliance required three years
later. These Cluster Rules may require significant changes in the pulping,
bleaching and/or wastewater treatment processes presently used in some U.S. pulp
and paper mills, including some of the Company's mills. Although it is
reasonably possible that the implementation of the Cluster Rules could
materially impact the Company's expenditures between 1997 and 2000, it is not
currently possible to estimate such amounts.
NOTE 8 -- SALE OF ACCOUNTS RECEIVABLE
In June 1996, the Company entered into a five year agreement which provides
for the sale of an undivided interest in a $40 million revolving pool of trade
accounts receivable. As collections reduce accounts receivable included in the
pool, the Company sells undivided interests in new receivables in order to bring
the amount sold up to $40 million. The agreement provides for a maximum
allowable amount of accounts receivable that can be sold of $60 million.
Proceeds from the sale, which are reported as operating cash flows in the
condensed consolidated statement of cash flows, were used to prepay $40 million
of long-term debt. The proceeds from the initial and subsequent sales are less
than the face amount of the undivided interests in accounts receivable sold.
The discount from the face amount, which totaled $923,000 through September
1996, is included in selling and administrative expenses in the condensed
consolidated statement of operations.
NOTE 9 -- NEW ACCOUNTING PRONOUNCEMENT
In June 1996, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 125 ("Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities"). Statement of
Financial Accounting Standards No. 125 ("SFAS No. 125") provides accounting and
reporting standards for transfers and servicing of financial assets and
extinguishments of liabilities. SFAS No. 125 is effective for transactions
occurring after December 31, 1996. The Company does not believe that adoption
of SFAS No. 125 will have a material adverse effect on its financial position
or results of operations.
10
<PAGE>
NOTE 10 -- SUPPLEMENTAL UNAUDITED PRO FORMA CONDENSED STATEMENT
OF OPERATIONS
The following supplemental unaudited pro forma condensed statements of
operations are presented for informational purposes to present the results of
operations assuming that the Spin-Off of the Predecessor Business had occurred
as of December 26, 1994 and that the issuance of debt discussed in Note 1 had
occurred as of December 26, 1994. This information may not necessarily be
indicative of the future results of operations of the Company or what the
results of operations would have been had the Company operated as a separate
independent Company during the entire periods presented.
<TABLE>
<CAPTION>
Nine Months Ended
September 24, 1995
-----------------------------------------------
Pro forma
Historical Adjustments Pro forma
------------ ----------- ----------
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE)
<S> <C> <C> <C>
Net sales $ 798,709 $ (750)(a) $ 797,959
Less:
Cost of goods sold 689,207 1,393(b) 690,600
------------ ----------- ----------
Gross margin 109,502 (2,143) 107,359
Selling and administrative expenses 43,497 43,497
------------ ----------- ----------
Operating Income 66,005 (2,143) 63,862
Interest expense (7,604) (41,109)(c) (48,713)
Other income 268 268
------------ ----------- ----------
Income before income taxes 58,669 (43,252) 15,417
Provision for income taxes 23,324 16,825(d) 6,499
------------ ----------- ----------
NET INCOME $ 35,345 $(26,427) $ 8,918
------------ ----------- ----------
------------ ----------- ----------
Pro forma earnings per share $ 1.04(e)
----------
----------
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
September 24, 1995
---------------------------------------------
Pro forma
Historical Adjustments Pro forma
----------- ------------- ----------
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE)
<S> <C> <C> <C>
Net sales $ 264,779 $ (250)(a) $ 264,529
Less:
Cost of goods sold 221,016 464(b) 221,480
----------- ------------- ----------
Gross margin 43,763 (714) 43,049
Selling and administrative expenses 15,398 15,398
----------- ------------- ----------
Operating Income 28,365 (714) 27,651
Interest expense (6,619) (10,154)(c) (16,773)
Other income 16 16
----------- ------------- ----------
Income before income taxes 21,762 (10,868) 10,894
Provision for income taxes 8,561 4,228(d) 4,333
----------- ------------- ----------
NET INCOME $ 13,201 $ (6,640) $ 6,561
----------- ------------- ----------
----------- ------------- ----------
Pro forma earnings per share $ .76(e)
----------
----------
</TABLE>
11
<PAGE>
a) Historically, the Company has produced approximately 38,000 tons of creped
paper for converting to toweling for sale to James River's Consumer
Products Business at the Company's cost to produce. In connection with the
Spin-Off, the Company has entered into a product supply agreement whereby
the Company will supply to James River creped paper for converting to
toweling amounting to up to 20,000 tons annually at an agreed upon price.
The financial effect of this agreement would have decreased each of net
sales and income before income taxes by approximately $750,000 for the nine
months of 1995 and $250,000 for the three months of 1995. The Company
will utilize the remaining 18,000 tons of capacity as it deems appropriate.
No adjustment has been made in the pro forma statements with respect to the
Company's utilization of this remaining capacity.
b) Historically, when the Company has purchased pulp from facilities within
James River, the purchase price of the pulp was reflected at existing
published prices less a discount ranging from 0% to 9% based upon a
combination of prevailing market prices and volumes purchased. Beginning
August 28, 1995, based upon a three year Pulp Purchase Agreement entered
into by the Company and James River, the price of such pulp purchases will
be at existing published prices less a discount ranging from 0% to 6%
based upon a combination of prevailing market prices and volumes purchased.
The effect of this agreement, if it was consummated at the beginning of the
periods presented, would have increased cost of goods sold by approximately
$1,393,000 for the nine months of 1995 and $464,000 for the three months of
1995.
c) Reflects pro forma increases in the Company's interest expense assuming
that amounts outstanding in 1996 with respect to the Senior Subordinated
Notes, Senior Pay-in-Kind Notes, and borrowings under the Bank Credit
Facility were outstanding during the corresponding period in 1995. Pro
forma interest expense also includes line of credit fees, guaranty fees for
IRB's and commitment fees on the unused portion of the Revolver for the
periods presented. Included in pro forma interest expense is the
amortization of the pro rata portion of debt issue costs related to the
Financings which will be amortized over the lives of the related
indebtedness. Variable rate debt of the Company is subject to ongoing
interest rate fluctuations. The effect of a 1% increase in the interest
rate on these borrowings would have the impact of increasing interest
expense by approximately $1.3 million for the nine months of 1995 and $.7
million for the three months of 1995.
d) Reflects the effects of the pro forma adjustments on income tax expense
using an estimated marginal tax rate of 38.9% for the periods presented.
e) Pro forma earnings per share is computed based upon 8,623,000 and 8,603,000
assumed weighted average shares outstanding for the three month and nine
month periods, respectively. The number of shares considered outstanding
does not include 255,535 shares held be the Employee Stock Ownership Plan
Trust. In accordance with generally accepted accounting principles, shares
held by the Trust are not considered outstanding for earnings per share
calculations until the shares are committed for release from the Trust.
12
<PAGE>
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Crown Vantage Inc. and subsidiaries (the "Company") became an independent
company after the Board of Directors of James River Corporation of Virginia
("James River") approved the spin-off of assets, liabilities and operations
which comprised a substantial part of James River's Communication Papers
Business and the paper-based part of its Food and Consumer Packaging Business
("Predecessor Business"). At the close of business on August 25, 1995, James
River distributed to its common shareholders all of the outstanding shares of
the Company (the "Distribution"). The Distribution was made in the form of a
tax-free dividend on the basis of one share of the Company's common stock for
every ten shares of James River common stock. A total of 8,446,362 shares of
the Company's common stock were issued and began trading on NASDAQ on August 28,
1995.
The following management's discussion and analysis of certain significant
factors affecting the Company's results of operations during the periods
included in the accompanying condensed consolidated statements of operations and
changes in the Company's financial condition since December 31, 1995 is made on
a historical basis. Historical results of Crown Vantage Inc. include the actual
operations of the Company for the three months and nine months ended September
29, 1996, and the combined historical operations of the Predecessor Business
while a part of James River for the three months and nine months ended September
24, 1995. James River provided certain corporate general and administrative
services to the Company prior to the Spin-Off. These overhead costs for the
quarter and nine months ended September 24, 1995 have been allocated to the
Company based upon net sales and are included in selling and administrative
expenses.
The Company is a major producer of value-added paper products for a diverse
array of end-uses. The Company's two business sectors and corresponding
principal product categories are (i) printing and publishing papers, for
applications such as special interest magazines, books, custom business forms
and corporate communications and promotions (e.g., annual reports and
stationery); and (ii) specialty papers, principally for food and retail
packaging applications and conversion into such items as coffee filters, cups
and plates.
The Company operates 11 facilities using 33 diverse paper machines. The
Company's two largest facilities are integrated operations located in St.
Francisville, Louisiana and Berlin and Gorham, New Hampshire. St. Francisville
produces coated groundwood papers for magazines and catalogs and uncoated
specialty converting papers. Berlin-Gorham primarily produces uncoated printing
and publishing papers as well as market pulp. The Company also produces
uncoated printing and publishing papers at its non-integrated facilities in
Adams, Massachusetts; Newark, Delaware; Ypsilanti, Michigan; and Dalmore and
Guardbridge, Scotland. The Company's food and retail packaging papers are
produced primarily at non-integrated facilities in Port Huron and Parchment,
Michigan and Milford, New Jersey. In addition to its primary paper-making
operations, the Company operates a cast-coating facility in Richmond, Virginia.
13
<PAGE>
RESULTS OF OPERATIONS
The Company's net sales for each business sector as well as pulp and
miscellaneous, are as follows:
<TABLE>
<CAPTION>
Net Sales and Tonnage by Sector
for the Nine Months Ended
September 29, 1996 September 24, 1995
----------------------------- ----------------------------
Tons Sales Tons Sales
------------- ------------ ------------- ------------
(thousands) (millions) (thousands) (millions)
<S> <C> <C> <C>
Printing and Publishing Papers
Coated groundwood 193.4 $ 170.6 208.7 $ 185.6
Uncoated 181.9 181.1 180.1 202.0
Specialty Papers
Food and retail packaging 176.9 229.7 189.2 264.6
Converting 125.3 112.5 122.4 116.7
Pulp and Miscellaneous 28.7 10.6 34.9 29.8
------------- ------------ ------------- ------------
706.2 $ 704.5 735.3 $ 798.7
------------- ------------ ------------- ------------
------------- ------------ ------------- ------------
</TABLE>
<TABLE>
<CAPTION>
Net Sales and Tonnage by Sector
for the Quarter Ended
September 29, 1996 September 24, 1995
--------------------------- ---------------------------
Tons Sales Tons Sales
------------ ----------- ------------- ----------
(thousands) (millions) (thousands) (millions)
<S> <C> <C> <C> <C>
Printing and Publishing Papers
Coated groundwood 69.4 $ 53.2 69.7 $ 68.1
Uncoated 60.1 56.6 57.7 65.7
Specialty Papers
Food and retail packaging 57.7 69.7 57.9 84.1
Converting 44.6 37.4 36.3 37.3
Pulp and Miscellaneous 11.6 4.2 12.2 9.6
------------ ----------- ------------- ----------
243.4 $221.1 233.8 $264.8
------------ ----------- ------------- ----------
------------ ----------- ------------- ----------
</TABLE>
14
<PAGE>
NET SALES
The Company's net sales decreased 11.8% to $704.5 million for the nine
months ended September 29, 1996 as compared to $798.7 million for the same
period in 1995. Net sales decreased 16.5% to $221.1 million for the three
months ended September 29, 1996 as compared to $ 264.8 million for the same
period in 1995. The decrease for the nine month period of 1996 resulted
primarily from a 8.2% decline in average selling price per ton for the nine
months in 1996 as compared to 1995. The decrease in sales for the quarter ended
September 29, 1996 as compared to the quarter ended September 24, 1995 was also
attributable to a decline in average selling price per ton which totalled
19.8%, partially offset by a 4.1% increase in sales volume.
Net sales of coated groundwood paper (which is used principally in the
production of magazines and catalogs) for the nine month period ended September
29, 1996 were $170.6 million, a 8.1% decline as compared to the same period in
1995. Sales volume decreased 15,300 tons for the first nine months of 1996
compared to 1995, while the average price per ton decreased only slightly from
$889 in 1995 to $882 in 1996. Net sales of coated groundwood papers decreased
$15.0 million in the third quarter of 1996 as compared to the third quarter of
1995, a 21.9% decline. While demand remained strong in the third quarter of
1996, the average price per ton decreased by 21.5% to $767 as compared to the
third quarter of 1995 average price per ton of $977. A continued overhang of
coated groundwood paper inventory at the customer level suppressed prices in the
third quarter of 1996 despite improvements in demand from earlier in the year.
Net sales of uncoated printing and publishing papers decreased from $202.0
million for the first nine months of 1995 to $181.1 million for the first nine
months of 1996, a 10.4% decline. Average selling price per ton for the first
nine months of 1996 declined by $126 or 11.2% as compared to the same period in
1995, while 1996 sales volume was slightly improved over 1995. Net sales of
uncoated printing and publishing papers in the third quarter of 1996 were $56.6
million, down $9.1 million from the third quarter of 1995. The decrease in net
sales is primarily due to a 17.2% decline in average selling price per ton in
the third quarter of 1996 as compared to the third quarter of 1995, partially
offset by a 4.1% increase in tons sold.
Food and retail packaging paper net sales totaled $229.7 million during
the first nine months of 1996, a $34.9 million decline from the same period
in 1995. The 13.2% decrease in net sales is the result of a l2,300 ton
decrease in sales volume, coupled with a $99 per ton (7.1%) decline in
average selling price per ton during the nine month period ended September
29, 1996 compared to the same period in 1995. For the third quarter of 1996,
net sales were $69.7 million, down $14.4 million from third quarter 1995.
Average selling price per ton in the third quarter of 1996 was $1,207, down
16.9% from the average selling price per ton of $1,453 in the third quarter
of 1995. Demand for food and retail packaging papers was virtually unchanged
quarter to quarter with sales volume of 57,700 tons in the third quarter of
1996 as compared to 57,900 tons in the third quarter of 1995.
Net sales of specialty converting papers during the first nine months of
1996 were $112.5 million, a 3.6% decrease compared to the first nine months
of 1995. The decrease is the result of a 5.8% decrease in average selling
price per ton, partially offset by a 2.4% increase in tons sold . Net sales
of specialty converting papers in the third quarter of 1996 totaled $37.4
million, as compared to net sales of $37.3 million in the third quarter of
1995. Tons sold in the third quarter of 1996 were 44,600, a 22.9% increase
over the same period in 1995. However, average selling price per ton in the
third quarter of 1996 declined $189 to $838 as compared to $1,027 in the
third quarter of 1995.
15
<PAGE>
Net sales of pulp and miscellaneous products decreased to $10.6 million
for the nine months ended September 29, 1996 as compared to $29.8 million in
the same period in 1995. Tons sold in the nine month period of 1996
decreased to 28,700 tons compared to 34,900 tons in the same period of 1995.
This decrease was due primarily to the increased internal use of pulp
produced by the Company. The average sales price per ton in the first nine
months of 1996 was $368, a 57.0% decrease from the same period in 1995. In
the third quarter, net sales of pulp and miscellaneous products decreased
from $9.6 million in 1995 to $4.2 million in 1996. Tons sold decreased to
11,600 in the third quarter of 1996 from 12,200 in the third quarter of 1995.
During the third quarter of 1996, the average sales price per ton decreased
54.5% to $357 as compared to $783 in the third quarter of 1995.
OPERATING INCOME
<TABLE>
<CAPTION>
Operating Income by Sector Operating Income by Sector
for the Quarter Ended for the Nine Months Ended
------------------------------ ---------------------------------
Sept. 29, 1996 Sept. 24, 1995 Sept. 29, 1996 Sept. 24, 1995
-------------- -------------- -------------- ---------------
(Millions) (Millions)
<S> <C> <C> <C> <C>
Printing and Publishing Papers $ (1.5) $ 22.5 $ 20.6 $ 48.6
Food and retail packaging (1.3) (5.9) 3.9 (8.7)
Converting 1.2 6.6 10.7 15.3
Pulp and Miscellaneous (1.4) 5.2 (7.6) 10.8
-------- -------- -------- --------
$ (3.0) $ 28.4 $ 27.6 $ 66.0
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
The Company had operating income of $27.6 million for the nine month period
in 1996 compared to operating income of $66.0 million for the same period in
1995. In the third quarter of 1996, the Company had an operating loss of $3.0
million, as compared to operating income of $28.4 million in the third quarter
of 1995.
Operating income for printing and publishing papers decreased to $20.6
million in the nine months of 1996 compared to $48.6 million for 1995. The
decrease in operating income resulted primarily from the 11.2% decrease in
uncoated paper prices discussed above as well as the 15,300 ton decrease in
coated groundwood sales during the first nine months of 1996 as compared to
1995. The operating loss for printing and publishing papers was $1.5 million
in the third quarter of 1996 as compared to $22.5 million of operating income in
the third quarter of 1995. The decrease in operating income was primarily
because of the 21.5% decline in average selling price per ton for coated
groundwood papers discussed above.
Food and retail packaging operating income increased from a loss of $8.7
million for the first nine months of 1995 to a profit of $ 3.9 million in the
first nine months of 1996. The increase in operating profits is attributable to
a 30% decrease in pulp costs and cost reduction initiatives implemented in
1996. The Company's packaging mills are non-integrated and, as a result,
operating results generally improve during periods of declining pulp costs.
Operating results improved from a loss of $ 5.9 million in the third quarter of
1995 to a loss of $1.3 million in the third quarter of 1996. Third quarter 1996
operating results improved as a result of the lower pulp costs and cost
reduction initiatives.
16
<PAGE>
Operating income for converting papers decreased to $10.7 million in the
nine months of 1996 as compared to $15.3 million in the first nine months of
1995. The decrease in operating profits is attributable to a 1l.7% decrease
in average selling price per ton at the Company's specialty converting
facility. This decrease was partially offset by a 6,400 ton increase in tons
sold at the Company's cast coating facility which generally produces higher
margin products. Operating profits for the third quarter of 1996 were $1.2
million, as compared to operating profits of $6.6 million in the third
quarter of 1995. The decrease in average selling price per ton discussed
above resulted in the $5.4 million decrease in operating profits.
Selling and administrative expenses decreased $5.4 million for the nine
month period of 1996 compared to the same period in 1995 as a result of certain
cost reduction initiatives underway. For the third quarter, selling and
administrative expenses were down $1.6 million in 1996 compared to 1995 for the
same reasons.
INTEREST EXPENSE
Interest expense increased $39.6 million and $8.7 million for the nine
month and three month periods of 1996 compared to the same periods in 1995 as a
result of the borrowings incurred in connection with the Spin-Off (see
Liquidity and Sources of Capital).
LIQUIDITY AND SOURCES OF CAPITAL
Prior to the Spin-Off, the assets of the Company comprised a substantial
part of the Communications Paper Business and the paper-based part of the Food
and Consumer Packaging Business of James River. For the periods presented for
1995, the Company participated in James River's centralized cash management
system and, as such, its cash funding requirements, if any, were met by James
River. Since consummation of the Spin-Off, the Company no longer has any such
financial arrangements with James River and now relies on internally generated
funds and its ability to access funds from the equity and debt markets.
In connection with the Spin-Off, the Company obtained $250 million in
financing through a public offering of Senior Subordinated Notes and $253
million initial borrowing under a $350 million credit facility from a group of
banks (collectively, the "Financing"). The net proceeds from the Financing were
paid to James River together with $100 million Senior Pay-in-Kind Notes as a
return of James River's capital investment.
Under the bank credit facility the revolving credit available is in the
aggregate amount of $150 million with a $75 million sublimit for letters of
credit (of which $42 million has been used at September 29, 1996) and can be
used for general corporate purposes, working capital needs, letters of credit
and permitted investments. At September 29, 1996, $18.0 million of the
revolving credit was outstanding and $90 million of the aggregate line was
available if needed.
17
<PAGE>
Principal amounts on the Term Loan A and Term Loan B are due in quarterly
installments together with accrued interest. In addition to scheduled
repayments, the Company is obligated to make prepayments upon the occurrence of
certain events. During June 1996, the Company prepaid $40 million on Term Loan A
using proceeds from the sale of certain trade accounts receivable. Term Loan A
was further prepaid by $2.6 million, an amount equivalent to 50% of proceeds
from the issuance of bonds (see below). The Company anticipates that cash flows
provided by operating activities will be sufficient to pay its operating
expenses and satisfy its debt repayments for the remainder of 1996.
Cash flows provided by operating activities were $89.7 million for the nine
months ended September 29, 1996 compared to $102.4 million in the first nine
months of 1995. Operating cash flows increased by $40 million as a result of
the sale of certain trade accounts receivable in June 1996 (see Note 8).
Earnings before interest, taxes, depreciation and amortization (EBITDA) were
$88.3 million for the first nine months of 1996, as compared to $126.6 million
in 1995.
The Company's capital expenditures for the nine months ended September 29,
1996 were $58.9 million compared to $33.3 million in the same period in 1995.
A fully-integrated pulp and paper mill generally consists of an extensive
network of buildings, machines and equipment, which require continual upgrade,
replacement, modernization and improvement to remain competitive and meet
changing customer preferences and regulatory requirements. The Company's
strategic capital plans involve aggregate capital expenditure for the remainder
of 1996 of approximately $24 million. These capital expenditures will be
financed primarily by cash flows from operations.
In July 1996, the Company completed an $18 million refinancing of certain
industrial revenue bonds issued by the Business Finance Authority of the State
of New Hampshire (the "Refunding Bonds"). The Refunding Bonds were issued to
refinance certain of the Company's pollution control and solid waste disposal
facilities located in the State of New Hampshire. The bonds are due January 1,
2022 and bear interest at 7.75%.
Also in July 1996, the Company finalized an agreement with the Business
Finance Authority of the State of New Hampshire whereby a total of $12.3
million of bonds were sold (the "Project Bonds") to finance certain sewage
and solid waste disposal facilities to be used by the Company. The proceeds
from the sale of Project Bonds are to be used to finance eligible project
costs. An amount equivalent to 50% of proceeds are to be prepaid to the Term
Loans. Upon sale, $2.6 million, equivalent to 50% of proceeds, was prepaid
on Term Loan A and an additional $4.0 million was deposited in an interest
bearing account with a trustee to be drawn as needed to finance additional
project costs. The Project Bonds bear interest at 7.875% and are due July 1,
2026.
18
<PAGE>
PART II -- OTHER INFORMATION
ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Ex. 3(ii) Restated Bylaws of Crown Vantage Inc. (as amended July 31,
1996) (Electronic Filing Only)
Ex. 11 Statement re: Computation of Per Share Earnings
Ex. 27 Financial Data Schedule (Electronic Filing Only)
Ex. 99(i) Crown Vantage Inc. 1995 Incentive Stock Plan (as amended
March 21, 1996 and May 7, 1996)(Electronic Filing Only)
(b) Reports on Form 8-K --
None
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CROWN VANTAGE INC.
(Registrant)
/s/ Charles H. Shreve
- ---------------------
Charles H. Shreve
Senior Vice President,
Chief Accounting Officer
(Duly Authorized Officer and
Chief Accounting Officer)
November 12, 1996
21
<PAGE>
RESTATED BYLAWS OF
CROWN VANTAGE INC.
(as amended July 31, 1996)
ARTICLE I - MEETINGS OF STOCKHOLDERS
Section 1.1 CLOSING OF TRANSFER BOOKS AND FIXING OF RECORD DATE. For
the purpose of determining stockholders entitled to notice of, or to vote at,
any meeting of stockholders or any adjournment thereof, or entitled to receive
payment of any dividend, or in order to make a determination of stockholders for
any other proper purpose, the Board of Directors or the Executive Committee
shall fix in advance a date as the record date for any such determination of
stockholders, such date to be not more than 70 days before the meeting or
action. When a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this article, such determination shall
apply to any adjournment thereof, except as is otherwise provided by law.
Section 1.2 PLACE AND TIME OF MEETINGS. Meetings of stockholders shall
be held at such place, either within or without the Commonwealth of Virginia,
and at such time, as may be provided in the notice of the meeting.
Section 1.3 ORGANIZATION AND ORDER OF BUSINESS. The Chairman, President
and Chief Executive Officer (the "Chairman") shall serve as chairman at all
meetings of the stockholders. In his or her absence if he or she declines to
serve, a majority of the shares entitled to vote at such meeting may appoint any
person to act as chairman. The Secretary of the Corporation or, in his absence,
an Assistant Secretary, shall act as secretary at all meetings of the
stockholders. In the event that neither the Secretary nor any Assistant
Secretary is present, the chairman of the meeting may appoint any person to act
as secretary of the meeting.
The Chairman shall have the authority to make such rules and regulations,
to establish such procedures and to take such steps as
<PAGE>
he or she may deem necessary or desirable for the proper conduct of each meeting
of the stockholders, including, without limitation, the authority to make the
agenda and to establish procedures for (i) the dismissal of business not
properly presented, (ii) the maintenance of order and safety, (iii) placing
limitations on the time allotted to questions or comments on the affairs of the
Corporation, (iv) placing restrictions on attendance at a meeting by persons or
classes of persons who are not stockholders or their proxies, (v) restricting
entry to a meeting after the time prescribed for the commencement thereof and
(vi) the commencement, conduct and close of voting on any matter.
Section 1.4 ANNUAL MEETING. The annual meeting of stockholders shall be
held on the third or second Thursday in April of each year as set by the Board
of Directors or on such other dates as shall be approved by the Board of
Directors.
At each annual meeting of stockholders, only such business shall be
conducted as is proper to consider and has been brought before the meeting (i)
by or at the direction of the Board of Directors or (ii) by a stockholder of the
Corporation who is a stockholder of record of a class of shares entitled to vote
on such business at the time of the giving of the notice hereinafter described
in this Section 1.4 and who complies with the notice procedures set forth in
this Section 1.4. In order to bring business before an annual meeting of
stockholders, a stockholder, in addition to complying with any other applicable
requirements, must have given timely written notice of his intention to bring
such business before the meeting to the Secretary of the Corporation. To be
timely, a stockholder's notice must be given, either by personal delivery or by
United States certified mail, postage prepaid, addressed to the Secretary of the
Corporation at the principal office of the Corporation and received (i) on or
after January 1st of the year in which the meeting will be held and before
February 1st of the year in which the meeting will be held or (ii) not less than
60 days before the date of the annual meeting if the date of such meeting, as
prescribed in these Bylaws, has been changed by more than 30 days.
Each such stockholder's notice shall set forth as to each matter the
stockholder proposes to bring before the annual meeting (i) the name and
address, as they appear on the Corporation's stock transfer books, of the
stockholder proposing such business, (ii)
2
<PAGE>
the class and number of shares of stock of the Corporation beneficially owned by
such stockholder, (iii) a representation that such stockholder is a stockholder
of record and intends to appear in person or by proxy at such meeting to bring
before the meeting the business specified in the notice, (iv) a brief
description of the business desired to be brought before the meeting, including
the complete text of any resolutions to be presented at the meeting and the
reasons for wanting to conduct such business, and (v) any material interest
which the stockholder has in such business.
The Secretary of the Corporation shall deliver each such stockholder's
notice that has been timely received to the Chairman or a committee designated
by the Board of Directors for review.
Notwithstanding the foregoing provisions of this Section 1.4, a stockholder
seeking to have a proposal included in the Corporation's proxy statement for an
annual meeting of stockholders shall comply with the requirements of Regulation
14A under the Securities Exchange Act of 1934, as amended from time to time, or
with any successor regulation.
Section 1.5 SPECIAL MEETINGS. Special meetings of the stockholders may
be called by the Chairman or the Board of Directors. Only business within the
purpose or purposes described in the notice for a special meeting of
stockholders may be conducted at the meeting.
Section 1.6 NOTICE OF MEETINGS. Written notice stating the place, day
and hour of each meeting of stockholders and, in the case of a special meeting,
the purpose or purposes for which the meeting is called, shall be given by mail
not less than ten nor more than 60 days before the date of the meeting (except
when a different time is required in these Bylaws or by law) to each stockholder
of record entitled to vote at such meeting and to such nonvoting stockholders as
may be required by law. Such notice shall be deemed to be effective when
deposited in the United States mail with postage thereon prepaid, addressed to
the stockholder at his address as it appears on the stock transfer books of the
Corporation.
Notice of a stockholders' meeting to act on (i) an amendment of the
Articles of Incorporation; (ii) a plan of merger or share exchange; (iii) the
sale, lease, exchange or other disposition of
3
<PAGE>
all or substantially all the property of the Corporation otherwise than in the
usual and regular course of business, or (iv) the dissolution of the
Corporation, shall be given, in the manner provided above, not less than 25 nor
more than 60 days before the date of the meeting. Any notice given pursuant to
this paragraph shall state that the purpose, or one of the purposes, of the
meeting is to consider such action and shall be accompanied by (x) a copy of the
proposed amendment, (y) a copy of the proposed plan of merger or share exchange,
or (z) a summary of the agreement pursuant to which the proposed transaction
will be effected. If only a summary of the agreement is sent to the
stockholders, the Corporation shall also send a copy of the agreement to any
stockholder who requests it.
If a meeting is adjourned to a different date, time or place, notice need
not be given if the new date, time or place is announced at the meeting before
adjournment. However, if a new record date for an adjourned meeting is fixed
(which shall be done if the meeting is adjourned to a date more than 120 days
after the date fixed for the original meeting), notice of such date shall be
given to those persons entitled to notice who are stockholders as of the new
record date, unless a court provides otherwise.
Section 1.7 QUORUM AND VOTING REQUIREMENTS. Each outstanding share of
common stock shall be entitled to one vote on each matter submitted to a vote at
a meeting of stockholders. Shares of other classes and series shall be entitled
to such vote as may be provided in the Articles of Incorporation.
Shares entitled to vote as a separate voting group may take action on a
matter at a meeting only if a quorum of those shares exists with respect to that
matter. Unless otherwise required by law, a majority of the votes entitled to
be cast on a matter by a voting group constitutes a quorum of that voting group
for action on that matter. Once a share is represented for any purpose at a
meeting, it is deemed present for quorum purposes for the remainder of the
meeting and for any adjournment of that meeting unless a new record date is or
shall be set for that adjourned meeting. If a quorum exists, action on a
matter, other than the election of directors, by a voting group is approved if
the votes cast within the voting group favoring the action exceed the votes cast
opposing the action, unless a greater number of affirmative votes is required by
law or by the Articles of Incorporation. Directors
4
<PAGE>
shall be elected by a plurality of the votes cast by the shares entitled to vote
in the election at a meeting at which a quorum is present unless a different
vote in required by the Articles of Incorporation. Less than a quorum may
adjourn a meeting.
Section 1.8 PROXIES. A stockholder may vote his shares in person or by
proxy. A stockholder may appoint a proxy to vote or otherwise act for him or
her by signing an appointment form, either personally or by his attorney-in-
fact. An appointment of a proxy is effective when received by the Secretary or
other officer or agent authorized to tabulate votes and is valid for 11 months
unless a longer period is expressly provided in the appointment form. An
appointment of a proxy is revocable by the stockholder unless the appointment
form conspicuously states that it is irrevocable and the appointment is coupled
with an interest.
The death or incapacity of the stockholder appointing a proxy does not
affect the right of the Corporation to accept the proxy's authority unless
notice of the death or incapacity is received by the Secretary or other officer
or agent authorized to tabulate votes before the proxy exercises his authority
under the appointment. An irrevocable appointment is revoked when the interest
with which it is coupled is extinguished. A transferee for value of shares
subject to an irrevocable appointment may revoke the appointment if he or she
did not know of its existence when he or she acquired the shares and the
existence of the irrevocable appointment was not noted conspicuously on the
certificate representing the shares. Subject to any legal limitations on the
right of the Corporation to accept the vote or other action of a proxy and to
any express limitation on the proxy's authority appearing on the face of the
appointment form, the Corporation is entitled to accept the proxy's vote or
other action as that of the stockholder making the appointment. Any fiduciary
entitled to vote any shares may vote such shares by proxy.
Section 1.9 WAIVER OF NOTICE; ATTENDANCE AT MEETING. A stockholder may
waive any notice required by law, the Articles of Incorporation or these Bylaws
before or after the date and time of the meeting that is the subject of such
notice. The waiver shall be in writing, be signed by the stockholder entitled
to the notice, and be delivered to the Secretary of the Corporation for
inclusion in the minutes or filing with the corporate records.
5
<PAGE>
A stockholder's attendance at a meeting (i) waives objection to lack of
notice or defective notice of the meeting, unless the stockholder at the
beginning of the meeting objects to holding the meeting or transacting business
at the meeting, and (ii) waives objection to consideration of a particular
matter at the meeting that is not within the purpose or purposes described in
the meeting notice, unless the stockholder objects to considering the matter
when it is presented.
Section 1.10 ACTION WITHOUT MEETING. Action required or permitted to be
taken at a stockholders' meeting may be taken without a meeting and without
action by the Board of Directors if the action is taken by all the stockholders
entitled to vote on the action. The action shall be evidenced by one or more
written consents describing the action taken, signed by all the stockholders
entitled to vote on the action, and delivered to the Secretary of the
Corporation for inclusion in the minutes or filing with the corporate records.
Action taken under this section shall be effective according to its terms when
all consents are in the possession of the Corporation. A stockholder may
withdraw a consent only by delivering a written notice of withdrawal to the
Corporation prior to the time that all consents are in the possession of the
Corporation.
If not otherwise fixed pursuant to the provisions of Section 1.1, the
record date for determining stockholders entitled to take action without a
meeting is the date the first stockholder signs the consent described in the
preceding paragraph.
If notice of proposed action is required to be given to nonvoting
stockholders and the action is to be taken by unanimous consent of the voting
stockholders, the Corporation shall give its nonvoting stockholders written
notice of the proposed action at least ten days before the action is taken. The
notice shall contain or be accompanied by the same material that would have been
required by law to be sent to nonvoting stockholders in a notice of a meeting at
which the proposed action would have been submitted to the stockholders for
action.
Section 1.11 VOTING LIST. The officer or agent having charge of the
stock transfer books of the Corporation shall make, at least ten days before
each meeting of stockholders, a complete list of the stockholders entitled to
vote at such meeting or any
6
<PAGE>
adjournment thereof, with the address of and the number of shares held by each.
The list shall be arranged by voting group and within each voting group by class
or series of shares. Such list shall be kept on file at the registered office
of the Corporation, or at its principal office or at the office of its transfer
agent or registrar, for a period of ten days prior to such meeting and shall be
subject to the inspection of any stockholder at any time during usual business
hours. Such list shall also be produced and kept open at the time and place of
the meeting and shall be subject to the inspection of any stockholder during the
whole time of the meeting for the purposes thereof. The original stock transfer
books shall be prima facia evidence as to who are the stockholders entitled to
examine such list or transfer books or to vote at any meeting of the
stockholders. The right of a stockholder to inspect such list at any other time
shall be subject to the limitations established by law.
If the requirements of this section have not been substantially complied
with, the meeting shall, on the demand of any stockholder in person or by proxy,
be adjourned until such requirements are met. Refusal or failure to prepare or
make available the stockholders' list does not affect the validity of action
taken at the meeting prior to the making of any such demand, but any action
taken by the stockholders after the making of any such demand shall be invalid
and of no effect.
ARTICLE II - DIRECTORS
Section 2.1 GENERAL POWERS. The Corporation shall have a Board of
Directors. All corporate powers shall be exercised by or under the authority
of, and the business and affairs of the Corporation managed under the direction
of, its Board of Directors, subject to any limitation set forth in the Articles
of Incorporation.
Section 2.2 NUMBER AND TERM. The number of directors of the Corporation
shall be eight. This number may be changed from time to time by amendment to
these Bylaws to increase or decrease by 30 percent or less the number of
directors last elected by the stockholders, but only the stockholders may
increase or decrease the number by more than 30 percent. No decrease in number
shall have the effect of shortening the term of any incumbent director.
7
<PAGE>
Each director shall hold office until his death, resignation or removal or until
his successor is elected.
Section 2.3 NOMINATION OF CANDIDATES. No person shall be eligible for
election as a director unless nominated (i) by the Board of Directors upon
recommendation of the Nominating Committee or otherwise or (ii) by a stockholder
entitled to vote on the election of directors pursuant to the procedures set
forth in this Section 2.3.
Nominations, other than those made by the Board of Directors, may be made
only by a stockholder who is a stockholder of record of a class of shares
entitled to vote for the election directors at the time of the giving of the
notice hereinafter described in this Section 2.3 and only if written notice of
the stockholder's intent to nominate one or more persons for election as
directors at a meeting of stockholders has been given, either by personal
delivery or by United States certified mail, postage prepaid, addressed to the
Secretary of the Corporation at the principal office of the Corporation and
received (i) on or after January 1st of the year in which the meeting will be
held and before February 1st of the year in which the meeting will be held, if
the meeting is to be an annual meeting and clause (ii) is not applicable, or
(ii) not less than 60 days before an annual meeting, if the date of the
applicable annual meeting, as prescribed in these Bylaws, has been changed by
more than 30 days, or (iii) not later than the close of business on the tenth
day following the day on which notice of a special meeting of stockholders
called for the purpose of electing directors is first given to stockholders.
Each such stockholder's notice shall set forth the following: (i) as to
the stockholder giving the notice (a) the name and address of such stockholder
as they appear on the Corporation's stock transfer books, (b) the class and
number of shares of stock of the Corporation beneficially owned by such
stockholder, (c) a representation that such stockholder is a stockholder of
record and intends to appear in person or by proxy at such meeting to nominate
the person or persons specified in the notice, and (d) a description of all
arrangements or understandings, if any, between such stockholder and each
nominee and any other person or persons (naming such person or persons) pursuant
to which the nomination or nominations are to be made; and (ii) as to each
person whom the stockholder wishes to nominate for election as a director (a)
the
8
<PAGE>
name, age, business address and, if known, residence address of such person, (b)
the principal occupation or employment of such person, (c) the class and number
of shares of the Corporation which are beneficially owned by such person, and
(d) all other information that is required to be disclosed about nominees for
election as directors in solicitations of proxies for the election of directors
under the Securities Exchange Act of 1934, as amended, or otherwise by the rules
and regulations of the Securities and Exchange Commission. In addition, each
such notice shall be accompanied by the written consent of each proposed nominee
to serve as a director if elected. Each such consent shall also contain a
statement from the proposed nominee to the effect that the information about him
or her contained in the notice is correct.
Section 2.4 ELECTION. Except as provided in Section 2.5 of this Article
and in the Articles of Incorporation, the directors shall be elected by the
common stockholders and preferred stockholders entitled to vote with the common
stockholders at the annual meeting of stockholders, and those nominees who
receive the greatest number of votes shall be deemed elected even though they do
not receive a majority of the votes cast. No individual shall be named or
elected as a director without his prior consent.
Section 2.5 REMOVAL; VACANCIES. The stockholders may remove one or more
directors for cause. If a director is elected by a voting group, only the
stockholders of that voting group may vote to remove him or her. Unless the
Articles of Incorporation require a greater vote, a director may be removed if
the number of votes cast to remove him or her constitutes a majority of the
votes entitled to be cast at an election of directors of the voting group or
voting groups by which such director was elected. A director may be removed by
the stockholders only at a meeting called for the purpose of removing him or her
and the notice of the meeting must state that the purpose, or one of the
purposes of the meeting, is removal of the director.
A vacancy on the Board of Directors, including a vacancy resulting from the
removal of a director or an increase in the number of directors, may be filled
by (i) the stockholders, (ii) the Board of Directors or (iii) the affirmative
vote of a majority of the remaining directors though less than a quorum of the
Board of Directors, and may, in the case of a resignation that will
9
<PAGE>
become effective at a specified later date, be filled before the vacancy occurs
but the new director may not take office until the vacancy occurs.
Section 2.6 COMPENSATION. The Board of Directors may fix the
compensation of directors for their services and may provide for the payment of
all expenses incurred by directors in attending regular and special meetings of
the Board of Directors.
ARTICLE III - DIRECTORS' MEETINGS
Section 3.1 ANNUAL AND REGULAR MEETINGS. An annual meeting of the Board
of Directors, which shall be considered a regular meeting, shall be held
immediately following each annual meeting of stockholders, for the purpose of
electing officers and carrying on such other business as may properly come
before the meeting. The Board of Directors may also adopt a schedule of
additional meetings which shall be considered regular meetings. Regular
meetings shall be held at such times and at such places, within or without the
Commonwealth of Virginia, as the Chairman shall designate. If no place is
designated, regular meetings shall be held at the principal office of the
Corporation.
Section 3.2 SPECIAL MEETINGS. Special meetings of the Board of
Directors shall be held on the call of the Chairman or any three members of the
Board of Directors at the principal office of the Corporation or at such other
place as the Chairman, or in his absence, the President, shall designate.
Section 3.3 TELEPHONE MEETINGS. The Board of Directors may permit any
or all directors to participate in a regular or special meeting by, or conduct
the meeting through the use of, any means of communication by which all
directors participating may simultaneously hear each other during the meeting.
A director participating in a meeting by this means is deemed to be present in
person at the meeting.
Section 3.4 NOTICE OF MEETINGS. No notice need be given of regular
meetings of the Board of Directors.
Notice of special meetings of the Board of Directors shall be given to each
director in person or delivered to his residence or
10
<PAGE>
business address, or such other place as he or she may have directed in writing,
not less than 24 hours before the meeting by mail, messenger, telecopy,
telegraph, or other means of written communication or by telephoning such notice
to him or her. Any such notice shall set forth the time and place of the
meeting and state the purpose for which it is called.
Section 3.5 QUORUM; VOTING. A majority of the number of directors fixed
in these Bylaws shall constitute a quorum for the transaction of business at a
meeting of the Board of Directors. If a quorum is present when a vote is taken,
the affirmative vote of a majority of the directors present is the act of the
Board of Directors unless the act of a greater number is required by law, the
Articles of Incorporation or these Bylaws. A director who is present at a
meeting of the Board of Directors when corporate action is taken is deemed to
have assented to the action taken unless (i) he or she objects at the beginning
of the meeting, or promptly upon his arrival, to holding it or transacting
specified business at the meeting; or (ii) he or she votes against, or abstains
from, the action taken.
Section 3.6 WAIVER OF NOTICE; ATTENDANCE AT MEETING. A director may
waive any notice required by law, the Articles of Incorporation, or these Bylaws
before or after the date and time stated in the notice, and such waiver shall be
equivalent to the giving of such notice. Except as provided in the next
paragraph of this section, the waiver shall be in writing, signed by the
director entitled to the notice and filed with the minutes or corporate records.
A director's attendance at or participation in a meeting waives any
required notice to him or her of the meeting unless the director at the
beginning of the meeting or promptly upon his arrival objects to holding the
meeting or transacting business at the meeting and does not thereafter vote for
or assent to action taken at the meeting.
Section 3.7 ACTION WITHOUT MEETING. Action required or permitted to be
taken at a Board of Directors' meeting may be taken without a meeting if the
action is taken by all members of the Board. The action shall be evidenced by
one or more written consents describing the action taken, signed by each
director either before or after the action taken, and included in the
11
<PAGE>
minutes or filed with the corporate records reflecting the action taken. Action
taken under this section shall be effective when the last director signs the
consent unless the consent specifies a different effective date in which event
the action taken is effective as of the date specified therein, provided the
consent states the date of execution by each director.
ARTICLE IV - COMMITTEE OF DIRECTORS
Section 4.1 COMMITTEES. The Board of Directors may create one or more
committees and appoint members of the Board of Directors to serve on them.
Unless otherwise provided herein, each committee shall have two or more members
who serve at the pleasure of the Board of Directors. The creation of a
committee and appointment of members to it shall be approved by the number of
directors required to take action under Section 3.5 of these Bylaws.
Section 4.2 AUTHORITY OF COMMITTEES. To the extent specified by the
Board of Directors, each committee may exercise the authority of the Board of
Directors, except that a committee may not (i) approve or recommend to
stockholders action that is required by law to be approved by stockholders; (ii)
fill vacancies on the Board of Directors or any of its committees; (iii) amend
the Articles of Incorporation without stockholder approval; (iv) adopt, amend,
or repeal these Bylaws; (v) approve a plan of merger not requiring stockholder
approval; (vi) authorize or approve a distribution, except according to a
general formula or method prescribed by the Board of Directors; or (vii)
authorize or approve the issuance, or sale or contract for sale, of stock or
determine the designation and relative rights, preferences, and limitations of a
class or series of stock, except that the Board of Directors may authorize a
committee, or a senior executive officer of the Corporation, to do so within
limits specifically prescribed by the Board of Directors.
Section 4.3 EXECUTIVE COMMITTEE. The Board of Directors shall appoint
an Executive Committee consisting of two or more directors, which committee
shall have all of the authority of the Board of Directors except to the extent
such authority is limited by the provisions of Section 4.2.
12
<PAGE>
Section 4.4 AUDIT COMMITTEE. The Board of Directors shall appoint an
Audit Committee consisting of not less than three directors, none of whom shall
be officers, which committee shall regularly review the adequacy of the
Corporation's internal financial controls, review with the Corporation's
independent public accountants the annual audit and other financial statements,
and recommend the selection of the Corporation's independent public accountants.
Section 4.5 NOMINATING COMMITTEE. The Board of Directors shall appoint
a Nominating Committee consisting of not less than three directors, a majority
of whom shall not be officers or employees, which committee shall recommend to
the Board of Directors the names of persons to be nominated for election as
directors of the Corporation.
Section 4.6 COMPENSATION COMMITTEE. The Board of Directors shall
appoint a Compensation Committee consisting of not less than three directors,
none of whom shall be officers, which committee shall recommend to the Board of
Directors the compensation of directors and executive officers of the
Corporation, make awards under the Corporation's discretionary employee benefit
plans, and make recommendations from time to time to the Board of Directors
regarding the Corporation's compensation program.
Section 4.7 COMMITTEE MEETINGS; MISCELLANEOUS. The provisions of these
Bylaws which govern meetings, action without meetings, notice and waiver of
notice, and quorum and voting requirements of the Board of Directors shall also
apply to committees of directors and their members.
ARTICLE V - OFFICERS
Section 5.1 OFFICERS. The officers of the Corporation shall be a
Chairman, President and Chief Executive Officer; a Secretary; a Chief Financial
Officer; and such additional officers, including Vice Presidents and other
officers, as the Board of Directors may deem necessary or advisable to conduct
the business of the Corporation. The Chairman shall be a member of the Board of
Directors. The Board of Directors shall also designate those officers who are
deemed to be "Executive Officers." Any two
13
<PAGE>
offices may be combined except the offices of President and Secretary.
Section 5.2 ELECTION, TERM. Officers shall be elected at each annual
meeting of the Board of Directors and shall hold office, unless removed, until
the next annual meeting of the Board of Directors or until their successors are
elected. Any officer may resign at any time upon written notice to the Board of
Directors.
Section 5.3 REMOVAL OF OFFICERS. Officers may be removed, with or
without cause, at any time by the Board of Directors.
Section 5.4 DUTIES OF THE CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE
OFFICER. The Chairman shall have general charge of, and be charged with, the
duty of supervision of the business of the Corporation. In addition, he or she
shall perform such duties, from time to time, as may be assigned to him or her
by the Board of Directors.
Unless he or she declines to serve, the Chairman shall preside at all
meetings of the stockholders and the Board of Directors and perform such duties,
from time to time, as may be assigned to him or her by the Board of Directors.
Section 5.5 DUTIES OF THE SECRETARY. The Secretary shall have the duty
to see that a record of the proceedings of each meeting of the stockholders and
the Board of Directors, and any committee of the Board of Directors, is properly
recorded and that notices of all such meetings are duly given in accordance with
the provisions of these Bylaws or as required by law; he or she may affix the
corporate seal to any document the execution of which is duly authorized, and
when so affixed may attest the same; and, in general, he or she shall perform
all duties incident to the office of secretary of a corporation, and such other
duties as, from time to time, may be assigned to him or her by the Chairman or
the Board of Directors, or as may be required by law.
Section 5.6 DUTIES OF THE CHIEF FINANCIAL OFFICER. The Chief Financial
Officer shall have charge of and be responsible for all securities, funds,
receipts and disbursements of the Corporation, and shall deposit or cause to be
deposited, in the name of the Corporation, all monies or valuable effects in
such
14
<PAGE>
banks, trust companies or other depositories as shall, from time to time, be
selected by or under authority granted by the Board of Directors; he or she
shall be custodian of the financial records of the Corporation; he or she shall
keep or cause to be kept full and accurate records of all receipts and
disbursements of the Corporation and shall render to the Chairman and the Board
of Directors, whenever requested, an account of the financial condition of the
Corporation; and shall perform such duties as may be assigned to him or her by
the Chief Executive Officer or the Board of Directors.
Section 5.7 DUTIES OF OTHER OFFICERS. The other officers of the
Corporation shall have such authority and perform such duties as shall be
prescribed by the Board of Directors or by officers authorized to appoint them
to their respective offices. To the extent that such duties are not so stated,
such officers shall have such authority and perform the duties which generally
pertain to their respective offices, subject to the control of the Chief
Executive Officer or the Board of Directors.
Section 5.8 VOTING SECURITIES OF OTHER CORPORATIONS. Any one of the
Chairman or the Chief Financial Officer shall have power to act for and vote on
behalf of the Corporation at all meetings of the stockholders of any corporation
in which this Corporation holds stock, or in connection with any consent of
stockholders in lieu of any such meeting.
Section 5.9 BONDS. The Board of Directors may require that any or all
officers, employees and agents of the Corporation give bond to the Corporation,
with sufficient sureties, conditioned upon the faithful performance of the
duties of their respective offices or positions.
ARTICLE VI - CERTIFICATES OF STOCK
Section 6.1 FORM. Stock of the Corporation shall, when fully paid, be
evidenced by certificates containing such information as is required by law and
approved by the Board of Directors. Certificates shall be signed by the
Chairman, the Chief Financial Officer, or any Vice President and the Secretary
or an Assistant Secretary or the Treasurer or an Assistant Treasurer and may
(but need not) be sealed with the seal of the Corporation. The
15
<PAGE>
seal of the Corporation and any or all of the signatures on such certificates
may be a facsimile, engraved or printed. In case any such officer or any
transfer agent or registrar who has signed or whose facsimile signature has been
placed upon any such certificate shall have ceased to hold office before such
certificate is issued, the certificate shall, nevertheless, be valid.
Section 6.2 LOST, STOLEN OR DESTROYED STOCK CERTIFICATES. The
Corporation may issue a new stock certificate in the place of any certificate
theretofore issued which is alleged to have been lost, stolen or destroyed and
may require the owner of such certificate, or his legal representative, to give
the Corporation a bond, sufficient to indemnify it against any claim that may be
made against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of any such new certificate.
Section 6.3 TRANSFER. The Board of Directors may make such rules and
regulations concerning the issue, registration and transfer of certificates
representing the stock of the Corporation as it deems necessary or proper and
may appoint transfer agents and registrars. Unless otherwise provided,
transfers of stock and of the certificates representing such stock shall be made
upon the books of the Corporation by surrender of the certificates for the stock
transferred, accompanied by written assignments given by the owners or their
attorneys-in-fact.
ARTICLE VII - MISCELLANEOUS PROVISIONS
Section 7.1 CORPORATE SEAL. The corporate seal of the Corporation shall
be circular and shall have inscribed thereon, within and around the
circumference, "CROWN VANTAGE INC." In the center shall be the word "SEAL".
Section 7.2 FISCAL YEAR. The fiscal year of the Corporation shall be
determined in the discretion of the Board of Directors, but in the absence of
any such determination it shall be a fiscal year of either 52 or 53 weeks ending
on the last Sunday in December.
Section 7.3 AMENDMENTS. These Bylaws may be amended or repealed, and
new Bylaws may be made, at any regular or special
16
<PAGE>
meeting of the Board of Directors by a majority of the Board. Bylaws made by
the Board of Directors may be repealed or changed and new Bylaws may be made by
the stockholders, and the stockholders may prescribe that any Bylaw made by them
shall not be altered, amended or repealed by the Board of Directors.
ARTICLE VIII - VIRGINIA CONTROL
SHARE ACQUISITION STATUTE
The provisions of Article 14.1 of the Virginia Stock Corporation Act
(Section 13.1-728.1 et seq.) in effect on the 14th day of August, 1995, shall
not apply to the acquisition of shares of this Corporation.
17
<PAGE>
EXHIBIT 11 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(in thousands, except per share earnings)
<TABLE>
<CAPTION>
Nine Months Ended September 29, 1996
------------------------------------
Primary Fully Diluted
-------------- -------------------
<S> <C> <C>
Average shares outstanding 8,603 8,569
Effect of dilutive stock options - due to the
Company's net loss, assumed conversion of
stock options is anti-dilutive
0 0
-------------- -------------------
Totals 8,603 8,569
-------------- -------------------
-------------- -------------------
Net loss $(9,468) $(9,468)
-------------- -------------------
-------------- -------------------
Loss per share $ (1.10) $ (1.10)
-------------- -------------------
-------------- -------------------
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended September 29, 1996
-------------------------------------
Primary Fully Diluted
-------------- -------------------
<S> <C> <C>
Average shares outstanding 8,623 8,622
Effect of dilutive stock options - due to the
Company's net loss, assumed conversion of
stock options would be anti-dilutive 0 0
-------------- -------------------
Totals 8,623 8,622
-------------- -------------------
-------------- -------------------
Net loss $(9,568) $(9,568)
-------------- -------------------
-------------- -------------------
Loss per share $(1.11) $(1.11)
-------------- -------------------
-------------- -------------------
</TABLE>
No earnings per share amounts are presented for the quarter or nine months ended
September 24, 1995 since the Company had no separate capital structure until
August 25, 1995.
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-29-1996
<CASH> 6,203
<SECURITIES> 0
<RECEIVABLES> 57,494
<ALLOWANCES> 705
<INVENTORY> 96,313
<CURRENT-ASSETS> 198,870
<PP&E> 1,214,687
<DEPRECIATION> 545,300
<TOTAL-ASSETS> 959,496
<CURRENT-LIABILITIES> 130,539
<BONDS> 0
0
0
<COMMON> 45,760
<OTHER-SE> (6,132)
<TOTAL-LIABILITY-AND-EQUITY> 959,496
<SALES> 704,481
<TOTAL-REVENUES> 704,481
<CGS> 638,774
<TOTAL-COSTS> 638,774
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 929
<INTEREST-EXPENSE> 47,167
<INCOME-PRETAX> (17,421)
<INCOME-TAX> (7,953)
<INCOME-CONTINUING> (9,468)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,468)
<EPS-PRIMARY> (1.10)
<EPS-DILUTED> (1.10)
</TABLE>
<PAGE>
CROWN VANTAGE INC.
1995 INCENTIVE STOCK PLAN
(as amended March 21 and May 7, 1996)
CROWN VANTAGE INC. (the "Company") hereby adopts this Crown Vantage Inc. 1995
Incentive Stock Plan.
1. PURPOSE. The purpose of the Crown Vantage Inc. 1995 Incentive Stock Plan
(the "Plan") is to further the long term stability and financial success of the
Company by attracting and retaining key employees of the Company and its
Subsidiaries through the use of stock incentives. It is believed that ownership
of Company Stock will stimulate the efforts of those employees of the Company
upon whose judgment and interest the Company is and will be largely dependent
for the successful conduct of its business. It is also believed that awards
granted to such employees under this Plan will strengthen their desire to remain
with the Company and will further the identification of those employees'
interests with those of the Company's shareholders.
The Plan has been adopted by the Board of Directors of the Company and
approved by James River Corporation of Virginia ("James River"), the Company's
sole shareholder. This Plan shall become effective as of the record date of the
distribution of shares of Company Stock by James River to its shareholders. The
Plan is intended to conform to the provisions of Securities and Exchange
Commission Rule 16b-3 ("Rule 16b-3").
2. DEFINITIONS. As used in the Plan, the following terms have the meanings
indicated:
(a) "Act" means the Securities Exchange Act of 1934, as amended.
(b) "Applicable Withholding Taxes" means the aggregate amount of federal,
state and local income and payroll taxes that the Company is required to
withhold in
-1-
<PAGE>
connection with any exercise of an Option or the award, lapse of restrictions or
payment with respect to Restricted Stock, Incentive Stock or Deferred Stock.
(c) "Award" means the award of an Option, Restricted Stock, Incentive Stock
or Deferred Stock under the Plan.
(d) "Board" means the Board of Directors of the Company.
(e) "Change of Control" means:
(i) The acquisition by any unrelated person of beneficial ownership
(as that term is used for purposes of the Act) of 20% or more of the
then outstanding shares of common stock of the Company or the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors. The term
"unrelated person" means any person other than (x) the Company and its
Subsidiaries, (y) an employee benefit plan or trust of the Company or
its Subsidiaries, and (z) a person who acquires stock of the Company
pursuant to an agreement with the Company that is approved by the
Board in advance of the acquisition, unless the acquisition results in
a Change of Control pursuant to subsection (ii) below. For purposes
of this subsection, a "person" means an individual, entity or group,
as that term is used for purposes of the Act.
(ii) As a result of, or in connection with, any tender or exchange
offer, merger or other business combination, sale of assets or
contested election, or any combination of the foregoing transactions,
the persons who were directors of the Company before such transactions
shall cease to constitute a majority of the Board of Directors of the
Company or any successor to the Company.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(g) "Committee" means the committee appointed to administer the Plan as
provided in Section 17.
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<PAGE>
(h) "Company" means Crown Vantage Inc.
(i) "Company Stock" means common stock of the Company. In the event of a
change in the capital structure of the Company (as provided in Section 16),
the shares resulting from such a change shall be deemed to be Company Stock
within the meaning of the Plan.
(j) "Corporate Change" means a consolidation, merger, dissolution or
liquidation of the Company or a Subsidiary, or a sale or distribution of
assets or stock (other than in the ordinary course of business) of the
Company or a Subsidiary; provided that, unless the Committee determines
otherwise, a Corporate Change shall only be considered to have occurred
with respect to Participants whose business unit is affected by the
Corporate Change.
(k) "Date of Grant" means the date as of which an Award is made by the
Committee.
(l) "Deferred Stock" means hypothetical shares of Company Stock granted
pursuant to Section 9.
(m) "Fair Market Value" means if the Company Stock is traded on an
exchange, the mean of the highest and lowest registered sales prices of the
Company Stock on the exchange on which the Company Stock generally has the
greatest trading volume, if the Company Stock is traded in the over-the-
counter market, the mean between the closing bid and asked prices as
reported by Nasdaq, or if the Committee determines that another method
of determining the fair market value of Company Stock is appropriate,
the Fair Market Value shall be determined by the Committee in its
discretion. Fair Market Value shall be determined as of the applicable
date specified in the Plan or, if there if are no trades on such date, the
value shall be determined as of the last preceding day on which the Company
Stock is traded.
-3-
<PAGE>
(n) "Incentive Stock" means Company Stock awarded when performance goals
are achieved pursuant to an incentive plan established by the Committee as
provided in Section 8.
(o) "Incentive Stock Option" means an Option intended to meet the
requirements of, and qualify for favorable Federal income tax treatment
under, Code section 422.
(p) "Insider" means a person subject to Section 16(b) of the Act.
(q) "James River" means James River Corporation of Virginia.
(r) "Nonstatutory Stock Option" means an Option that does not meet the
requirements of Code section 422, or that is otherwise not intended to be
an Incentive Stock Option and is so designated.
(s) "Option" means a right to purchase Company Stock granted under the
Plan, at a price determined in accordance with the Plan.
(t) "Participant" means any employee who receives an Award under the Plan.
(u) "Reload Feature" means a feature of an Option, as described in the
Participant's stock option agreement, that provides for the automatic grant
of a Reload Option in accordance with the provisions of Section 10(b).
(v) "Reload Option" means an Option granted to a Participant equal to the
number of shares of already owned Company Stock that are delivered by the
Participant to exercise an Option, as described in Section 10(b).
(w) "Restricted Stock" means Company Stock awarded upon the terms and
subject to the restrictions set forth in Section 7.
(x) "Rule 16b-3" means Rule 16b-3 of the Act. A reference in the Plan to
Rule 16b-3 shall include a reference to any corresponding subsequent rule
or any amendments to Rule 16b-3 enacted after the effective date of the
Plan.
-4-
<PAGE>
(y) "Subsidiary" means an entity of which the Company owns 50% or more of
the total combined voting power of all classes of stock.
(z) "Shareholder" means a person who owns, directly or indirectly, stock
possessing more than 10% of the total combined voting power of all classes
of stock of the Company or any parent or Subsidiary of the Company.
Indirect ownership of stock shall be determined in accordance with Code
section 424(d).
3. GENERAL. The following types of Awards may be granted under the Plan:
Options, Restricted Stock, Incentive Stock and Deferred Stock. Options granted
under the Plan may be Incentive Stock Options or Nonstatutory Stock Options.
4. STOCK. Subject to Section 16 of the Plan, there shall be reserved for
issuance under the Plan an aggregate of 1,400,000 shares of Company Stock, which
shall be authorized, but unissued, shares. Shares granted under Options that
expire or otherwise terminate unexercised and shares that are forfeited pursuant
to restrictions on Restricted Stock, Incentive Stock or Deferred Stock may again
be subjected to an Award under the Plan. For purposes of determining the number
of shares that are available for Awards under the Plan, such number shall, if
permissible under Rule 16b-3, include the number of shares surrendered by a
Participant or retained by the Company in payment of Applicable Withholding
Taxes.
5. ELIGIBILITY.
(a) Any employee of the Company or a Subsidiary who, in the judgment of
the Committee, has contributed or can be expected to contribute to the
profits or growth of the Company shall be eligible to receive Awards under
the Plan. Directors of the Company who are employees and are not members
of the Committee are eligible to participate in the Plan. Awards of
Deferred Stock may only be granted to employees who are management or
highly compensated employees of the Company, a parent or a Subsidiary. The
Committee shall have the power and complete discretion, as provided in
Section 17, to select eligible employees to receive Awards and to determine
for each
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employee the terms, conditions and nature of the Award and the number of
shares to be allocated to each employee as part of the Award. The
Committee is expressly authorized to make an Award to a Participant
conditioned upon the surrender for cancellation of an existing Award.
(b) The grant of an Award shall not obligate the Company or any Subsidiary
to pay an employee any particular amount of remuneration, to continue the
employment of the employee after the grant or to make further grants to the
employee at any time thereafter.
6. STOCK OPTIONS.
(a) Whenever the Committee deems it appropriate to grant Options, notice
shall be given to the eligible employee stating the number of shares for
which Options are granted, the Option price per share, whether the Options
are Incentive Stock Options or Nonstatutory Stock Options, and the
conditions to which the grant and exercise of the Options are subject.
This notice, when duly accepted in writing by the Participant, shall become
a stock option agreement between the Company and the Participant.
(b) The Committee shall establish the exercise price of Options. The
exercise price of a Nonstatutory Stock Option shall be not less than 85% of
the Fair Market Value of the shares of Company Stock covered by the Option
on the Date of Grant. The exercise price of an Incentive Stock Option
shall be not less than 100% of the Fair Market Value of such shares on the
Date of Grant; provided that if the Participant is a 10% Shareholder, the
exercise price of an Incentive Stock Option shall be not less than 110% of
the Fair Market Value of such shares on the Date of Grant.
(c) An employee may not receive awards of Options under the Plan with
respect to more than 200,000 shares of Company Stock during any 12-month
period.
(d) Options may be exercised in whole or in part at such times as may be
specified by the Committee in the Participant's stock option agreement.
The Committee may impose such vesting conditions and other requirements as
the Committee deems
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appropriate, and the Committee may include such provisions regarding a
Change of Control or Corporate Change as the Committee deems appropriate.
(e) The Committee shall establish the term of each Option in the
Participant's stock option agreement. The term of an Incentive Stock
Option shall not be longer than ten years from the Date of Grant, except
that an Incentive Stock Option granted to a 10% Shareholder may not have a
term in excess of five years. No Option may be exercised after the
expiration of its term or, except as set forth in the Participant's stock
option agreement, after the termination of the Participant's employment.
The Committee shall set forth in the Participant's stock option agreement
when, and under what circumstances, an Option may be exercised after
termination of the Participant's employment.
(f) An Incentive Stock Option, by its terms, shall be exercisable in any
calendar year only to the extent that the aggregate Fair Market Value
(determined at the Date of Grant) of the Company Stock with respect to
which Incentive Stock Options are exercisable by the Participant for the
first time during the calendar year does not exceed $100,000 (the
"Limitation Amount"). Incentive Stock Options granted after 1986 under the
Plan and all other plans of the Company and any parent or Subsidiary of the
Company shall be aggregated for purposes of determining whether the
Limitation Amount has been exceeded. The Board may impose such conditions
as it deems appropriate on an Incentive Stock Option to ensure that the
foregoing requirement is met. If Incentive Stock Options that first become
exercisable in a calendar year exceed the Limitation Amount, the excess
Options will be treated as Nonstatutory Stock Options to the extent
permitted by law.
(g)If a Participant dies and if the Participant's stock option agreement
provides that part or all of the Option may be exercised after the
Participant's death, then such portion may be exercised by the personal
representative of the Participant's estate during the time period specified
in the stock option agreement.
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(h) The Committee may, in its discretion, grant Options containing a
Reload Feature as described in Section 10(b) and may amend previously
granted Nonstatutory Stock Options to provide such a Reload Feature.
7. RESTRICTED STOCK AWARDS.
(a) Whenever the Committee deems it appropriate to grant a Restricted
Stock Award, notice shall be given to the Participant stating the number of
shares of Restricted Stock for which the Award is granted and the terms and
conditions to which the Award is subject. This notice, when accepted in
writing by the Participant, shall become an Award agreement between the
Company and the Participant. Certificates representing the shares shall be
issued in the name of the Participant, subject to the restrictions imposed
by the Plan and the Committee. A Restricted Stock Award may be made by the
Committee in its discretion without cash consideration.
(b) The Committee may place such restrictions on the transferability and
vesting of Restricted Stock as the Committee deems appropriate, including
restrictions relating to continued employment and financial performance
goals. Without limiting the foregoing, the Committee may provide
performance acceleration parameters under which all, or a portion, of the
Restricted Stock will vest on the Company's achievement of established
performance objectives. Restricted Stock may not be sold, assigned,
transferred, disposed of, pledged, hypothecated or otherwise encumbered
until the restrictions on such shares shall have lapsed or shall have been
removed pursuant to subsection (c) below.
(c) The Committee may provide in a Restricted Stock Award, or
subsequently, that the restrictions will lapse if a Change of Control or
Corporate Change occurs. The Committee may at any time, in its sole
discretion, accelerate the time at which any or all restrictions will lapse
or may remove restrictions on Restricted Stock as it deems appropriate.
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(d) A Participant shall hold shares of Restricted Stock subject to the
restrictions set forth in the Award agreement and in the Plan. In other
respects, the Participant shall have all the rights of a shareholder with
respect to the shares of Restricted Stock, including, but not limited to,
the right to vote such shares and the right to receive all cash dividends
and other distributions paid thereon. Certificates representing Restricted
Stock shall bear a legend referring to the restrictions set forth in the
Plan and the Participant's Award agreement. If stock dividends are
declared on Restricted Stock, such stock dividends or other distributions
shall be subject to the same restrictions as the underlying shares of
Restricted Stock.
8. INCENTIVE STOCK AWARDS.
(a) Incentive Stock may be issued pursuant to the Plan in connection with
incentive programs established from time to time by the Committee. The
Committee shall establish such performance criteria as it deems appropriate
as a prerequisite for the issuance of Incentive Stock. A Participant who
is eligible to receive Incentive Stock will have no rights as a shareholder
before receipt of the Incentive Stock certificates. Incentive Stock may be
issued without cash consideration. A Participant's interest in an
incentive program may not be sold, assigned, transferred, pledged,
hypothecated, or otherwise encumbered.
(b) The Committee may provide in the incentive program, or subsequently,
that Incentive Stock will be issued if a Change of Control or Corporate
Change occurs, even though the performance goals set by the Committee have
not been met.
9. DEFERRED STOCK AWARDS.
(a) The Committee may make Deferred Stock Awards as the Committee deems
appropriate. The value of a Deferred Stock Award shall be converted as of
the Date of Grant into hypothetical shares of Company Stock valued at the
Fair Market Value of the Company Stock as of the Date of Grant. The
Company shall establish a book account on its records for the Participant
and shall credit to the Participant's book
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account the number of hypothetical shares of Company Stock granted pursuant
to the Award. No actual shares of Company Stock or other certificates
shall be issued when an Award is granted. Deferred Stock may be issued
without cash consideration. A Participant's interest in Deferred Stock may
not be sold, assigned, transferred, pledged, hypothecated, or otherwise
encumbered.
(b) Each Participant's book account shall be adjusted to take into account
cash dividends that are declared on Company Stock. The Committee shall
determine the amount of cash dividends that are declared as of each record
date with respect to shares of Company Stock equal to the number of
hypothetical shares of Company Stock that are credited to the Participant's
book account as of the record date. The total dividends shall then be
converted into hypothetical shares of Company Stock by dividing the amount
of the dividends by the Fair Market Value of the Company Stock as of the
record date, and the nearest number of hypothetical shares of Company Stock
so determined shall be credited to the Participant's book account. Each
Participant's book account shall be adjusted to take into account any stock
dividends or other non-cash distributions pursuant to Section 16.
(c) The Committee shall establish such vesting provisions and other
conditions with respect to Deferred Stock Awards as the Committee deems
appropriate.
(d) When the Committee determines that a Deferred Stock Award is to be
made, the Committee shall give the Participant an opportunity to elect,
from the forms of payment described below, the form in which the amount
credited to his book account is to be paid. The Participant must make
the election in writing when he is first notified that he will be granted
a Deferred Stock Award. The election shall be irrevocable and may not be
modified by the Participant. The forms of payment are as follows:
(i) The Participant may elect the pre-retirement form of payment,
under which the amount credited to his book account will be paid to
him in increments as it becomes vested.
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(ii) The Participant may elect the post-retirement form of payment,
under which the amount credited to his book account will be paid to
him in substantially equal annual installments after his retirement
from the Company and its Subsidiaries at or after age 65. At the time
the Participant makes the election, the Participant shall designate
the period over which the installment payments will be made. The
Committee will have discretion to modify the form of installment
payment designated by the Participant, if the Committee deems such a
modification to be appropriate. If a Participant elects the
post-retirement form of payment and dies after the installment
payments begin, the remaining installments will be paid to the
Participant's beneficiary.
All elections under this subsection shall be made subject to the provisions of
Section 11.
(e) If a Participant dies or otherwise terminates employment, any portion
of the Participant's vested interest in his book account that has not
previously been distributed shall be paid to the Participant (or, in the
case of his death, to his beneficiary) as follows:
(i) Unless the Committee determines otherwise, if (x) the
Participant's termination of employment occurs because he retires at
or after age 50, dies or becomes disabled and (y) the Participant
elected the post-retirement form of payment, the Participant's vested
interest in his book account shall be paid in the manner selected by
the Participant pursuant to subsection (d) above, commencing at a date
determined by the Committee (which may be earlier than the
Participant's 65th birthday).
(ii) In all other cases, the vested amount shall be paid in a lump sum
payment or in installments, as the Committee deems appropriate.
(f) If a Participant retires from employment with the Company and its
Subsidiaries at or after age 65 or on account of early retirement, as
determined by the Committee, or if a Participant dies while he is employed
by the Company or a Subsidiary, the
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Participant's interest in his book account shall be fully vested. The
Committee may specify in a Participant's Deferred Stock Agreement other
circumstances that will cause a Participant's interest in the book account
to become fully vested. Except as provided above or in the Participant's
Deferred Stock Award agreement, a Participant's nonvested interest in his
book account shall be forfeited if his employment terminates for any reason
before early retirement, as specified by the Committee.
(g) When payment of a Deferred Stock benefit is to be made, the Committee
shall determine whether payment shall be made in whole shares of Company
Stock equal to the number of hypothetical whole shares of Company Stock to
be distributed or in a combination of whole shares of Company Stock and
cash, in such proportions as the Committee deems appropriate. When a
payment is made partly in cash, the hypothetical shares of Company Stock
then credited to the Participant's book account shall be valued, for
purposes of the payment, at the Fair Market Value of Company Stock at the
time the payment is made. The Committee shall have sole discretion to
determine the form of payment. Applicable Withholding Taxes shall
automatically be withheld from all payments.
10. METHOD OF EXERCISE OF OPTIONS.
(a) Options may be exercised by giving written notice of the exercise to
the Company, stating the number of shares the Participant has elected to
purchase under the Option. Such notice shall be effective only if
accompanied by the exercise price in full in cash; provided that, if the
terms of an Option so permit, the Participant may deliver Company Stock
that the Participant has owned for at least six months (valued at Fair
Market Value on the date of exercise), or cause shares of Company Stock
(valued at their Fair Market Value on the date of exercise) to be withheld
in satisfaction of all or any part of the exercise price, deliver a
properly executed exercise notice together with irrevocable instructions to
a broker to deliver promptly to the Company, from the sale or loan proceeds
with respect to the sale of Company Stock or a loan secured by Company
Stock, the amount necessary to pay the exercise price and, if required by
the
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Committee, Applicable Withholding Taxes, or deliver an interest bearing
promissory note, payable to the Company, in payment of all or part of the
exercise price, together with such collateral and subject to such terms as
may be required by the Committee at the time of exercise. The interest
rate under any such promissory note shall be equal to the minimum interest
rate required at the time to avoid imputed interest to the Participant
under the Code.
(b) If a Participant exercises an Option that has a Reload Feature by
delivering already owned shares of Company Stock, the Participant shall
automatically be granted a Reload Option. The Reload Option shall be
subject to the following provisions:
(i) The Reload Option shall cover the number of shares of Company
Stock delivered by the Participant to exercise the Option;
(ii) The Reload Option will not have a Reload Feature;
(iii)The exercise price of shares of Company Stock covered by a Reload
Option shall be not less than 100% of the Fair Market Value of such
shares on the date the Participant delivers shares of Company Stock to
exercise the Option; and
(iv) The Reload Option shall be subject to the same restrictions on
exercisability as those imposed on the underlying Option and such
other restrictions as the Committee deems appropriate.
(c) Notwithstanding anything herein to the contrary, Awards shall always
be granted and exercised in such a manner as to conform to the provisions
of Rule 16b-3.
11. DEFERRAL OF PAYMENT.
(a) The Committee may provide in an Award agreement that payment of a
Participant's benefit under the Plan shall be deferred if and to the extent
that the sum of the Participant's Plan benefit, plus all other
compensation paid or payable to the
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Participant for the fiscal year in which the Plan benefit would otherwise
be paid exceeds the maximum amount of compensation that the Company may
deduct under Code section 162(m) with respect to the Participant for the
year. The Committee may provide in an Award agreement that a benefit
deferred pursuant to this Section shall be paid in the first fiscal year of
the Company in which the sum of the Participant's Plan benefit and all
other compensation paid or payable to the Participant does not exceed the
maximum amount of compensation deductible by the Company under Code section
162(m). This Section shall only apply to Participants and Plan benefits
covered by Code section 162(m).
(b) The Committee may defer payment of part or all of a Plan benefit with
respect to a Participant who is an Insider, to the extent necessary or
appropriate to comply with Rule 16b-3.
(c) The Committee shall have sole discretion to determine whether and to
what extent Plan benefits are to be deferred pursuant to this Section, how
such deferred amounts are to be calculated and when deferred amounts shall
be paid. The Committee's determination shall be final and binding.
12. APPLICABLE WITHHOLDING TAXES. Each Participant shall agree, as a condition
of receiving an Award, to pay to the Company, or make arrangements satisfactory
to the Company regarding the payment of, all Applicable Withholding Taxes with
respect to the Award. Until the Applicable Withholding Taxes have been paid or
arrangements satisfactory to the Company have been made, no stock certificates
(or, in the case of Restricted Stock, no stock certificates free of a
restrictive legend) shall be issued to the Participant. As an alternative to
making a cash payment to the Company to satisfy Applicable Withholding Tax
obligations, the Committee may establish procedures permitting the Participant
to elect to deliver shares of already owned Company Stock or have the Company
retain that number of shares of Company Stock that would satisfy all or a
specified portion of the Applicable Withholding Taxes. Any such election shall
be made
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only in accordance with procedures established by the Committee and, in the case
of an Insider, in accordance with Rule 16b-3.
13. NONTRANSFERABILITY OF AWARDS.
(a) Awards, by their terms, shall not be transferable by the Participant
except by will or by the laws of descent and distribution or except as
described below. Options shall be exercisable, during the Participant's
lifetime, only by the Participant or by his guardian or legal
representative.
(b) The Committee may grant Nonstatutory Stock Options that permit a
Participant to transfer the Options to one or more immediate family
members, to a trust for the benefit of immediate family members or to a
partnership whose only partners are immediate family members.
Consideration may not be paid for the transfer of Options. The transferee
of an Option shall be subject to all conditions applicable to the Option
prior to its transfer. The agreement granting the Option shall set forth
the transfer conditions and restrictions. The Committee may impose on any
transferable Option and on stock issued upon the exercise of an Option such
limitations and conditions as the Committee deems appropriate. Except to
the extent otherwise permitted by Rule 16b-3, Options that are intended to
be exempt from Section 16(b) of the Act pursuant to Rule 16b-3 may not be
transferable except by will or by the laws of descent and distribution.
14. EFFECTIVE DATE OF THE PLAN. This Plan shall be effective as of the record
date of the distribution of shares of Company Stock by James River to its
shareholders.
15. TERMINATION, MODIFICATION, CHANGE. If not sooner terminated by the Board,
this Plan shall terminate at the close of business on August 1, 2005. No Awards
shall be made under the Plan after its termination. The Board may terminate the
Plan or may amend the Plan in such respects as it shall deem advisable;
provided, that, if and to the extent required by Rule 16b-3, no change shall be
made that increases the total number of shares of Company Stock reserved for
issuance pursuant to Awards granted under the Plan (except pursuant to
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Section 16), expands the class of persons eligible to receive Awards, or
materially increases the benefits accruing to Participants under the Plan,
unless such change is authorized by the shareholders of the Company.
Notwithstanding the foregoing, the Board may unilaterally amend the Plan and
Awards as it deems appropriate to ensure compliance with Rule 16b-3 and to cause
Incentive Stock Options to meet the requirements of the Code and regulations
thereunder. Except as provided in the preceding sentence, a termination or
amendment of the Plan shall not, without the consent of the Participant,
adversely affect a Participant's rights under an Award previously granted to
him.
CHANGE IN CAPITAL STRUCTURE.
(a) In the event of a stock dividend, stock split or combination of
shares, spin-off, reclassification, recapitalization, merger or other
change in the Company's capital stock (including, but not limited to, the
creation or issuance to shareholders generally of rights, options or
warrants for the purchase of common stock or preferred stock of the
Company), the number and kind of shares of stock or securities of the
Company to be issued under the Plan (under outstanding Awards and Awards to
be granted in the future), the exercise price of Options, and other
relevant provisions shall be appropriately adjusted by the Committee, whose
determination shall be binding on all persons. If the adjustment would
produce fractional shares with respect to any Award, the Committee may
adjust appropriately the number of shares covered by the Award so as to
eliminate the fractional shares.
(b) In the event the Company distributes to its shareholders a dividend, or
sells or causes to be sold to a person other than the Company or a
Subsidiary or affiliate shares of stock in any corporation (a "Spinoff
Company") which, immediately before the distribution or sale, was a
majority owned Subsidiary of the Company, the Committee shall have the
power, in its sole discretion, to make such adjustments as the Committee
deems appropriate. The Committee may make adjustments in the number and
kind of shares or other securities to be issued under the Plan (under
outstanding Awards and Awards to be granted in the future), the exercise
price of Options, and other relevant
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provisions, and, without limiting the foregoing, may substitute securities
of a Spinoff Company for securities of the Company. The Committee shall
make such adjustments as it determines to be appropriate, considering the
economic effect of the distribution or sale on the interests of the
Company's shareholders and the Participants in the businesses operated by
the Spinoff Company. The Committee's determination shall be binding on all
persons. If the adjustment would produce fractional shares with respect to
any Award, the Committee may adjust appropriately the number of shares
covered by the Award so as to eliminate the fractional shares.
(c) If a Change of Control or Corporate Change occurs, the Committee may
take such actions with respect to outstanding Awards as the Committee deems
appropriate. These actions may include, but shall not be limited to,
accelerating the vesting and payment of Awards, releasing restrictions on
Awards, and accelerating the expiration dates of Options. The
effectiveness of such acceleration or release of restrictions shall be
conditioned upon the consummation of the applicable Change of Control or
Corporate Change.
(d) Notwithstanding anything in the Plan to the contrary, the Committee
may take the foregoing actions without the consent of any Participant, and
the Committee's determination shall be conclusive and binding on all
persons for all purposes. The Committee shall make its determinations
consistent with Rule 16b-3 and the applicable provisions of the Code.
17. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by a Committee consisting of two or
more outside directors of the Company, who shall be appointed by the Board.
The Board may designate the Compensation Committee of the Board, or a
subcommittee of the Compensation Committee, to be the Committee for
purposes of the Plan. If and to the extent required by Rule 16b-3, all
members of the Committee shall be "disinterested persons" as that term is
defined in Rule 16b-3, and the Committee shall be comprised solely of two
or more "outside directors" as that term is defined for purposes of Code
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section 162(m). If any member of the Committee fails to qualify an
"outside director" or (to the extent required by Rule 16b-3) a
"disinterested person," such person shall immediately cease to be a member
of the Committee and shall not take part in future Committee deliberations.
The Committee from time to time may appoint members of the Committee and
may fill vacancies, however caused, in the Committee.
(b) The Committee shall have the authority to impose such limitations or
conditions upon an Award as the Committee deems appropriate to achieve the
objectives of the Award and the Plan. Without limiting the foregoing and
in addition to the powers set forth elsewhere in the Plan, the Committee
shall have the power and complete discretion to determine which eligible
employees shall receive an Award and the nature of the Award, the number
of shares of Company Stock to be covered by each Award, whether Options
shall be Incentive Stock Options or Nonstatutory Stock Options, whether to
include a Reload Feature in an Option and the conditions of any Reload
Feature, the Fair Market Value of Company Stock, the time or times when
an Award shall be granted, whether an Award shall become vested over a
period of time, according to a performance-based vesting schedule or
otherwise, and when it shall be fully vested, the terms and conditions
under which restrictions imposed upon an Award shall lapse, whether a
Change of Control or Corporate Change exists, the terms of incentive
programs, performance criteria and other factors relevant to the issuance
of Incentive Stock or the lapse of restrictions on Restricted Stock,
Deferred Stock or Options, when Options may be exercised, whether to
approve a Participant's election with respect to Applicable Withholding
Taxes, conditions relating to the length of time before disposition of
Company Stock received in connection with an Award is permitted, notice
provisions relating to the sale of Company Stock acquired under the Plan,
and any additional requirements relating to Awards that the Committee
deems appropriate. Notwithstanding the foregoing, no "tandem stock
options" (where two stock options are issued together and the exercise of
one option affects the right to exercise the other option) may be issued in
connection with Incentive Stock Options.
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(c) When granting Awards to employees of a foreign Subsidiary, the
Committee shall have complete discretion and authority to grant such Awards
in accordance with all present and future applicable laws.
(d) The Committee shall have the power to amend the terms of previously
granted Awards so long as the terms as amended are consistent with the
terms of the Plan and, where applicable, consistent with the qualification
of an Option as an Incentive Stock Option. The consent of the Participant
must be obtained with respect to any amendment that would adversely affect
the Participant's rights under the Award, except that such consent shall
not be required if such amendment is for the purpose of complying with Rule
16b-3 or any requirement of the Code applicable to the Award.
(e) The Committee may adopt rules and regulations for carrying out the
Plan. The Committee shall have the express discretionary authority to
construe and interpret the Plan and the Award agreements, to resolve any
ambiguities, to define any terms, and to make any other determinations
required by the Plan or an Award agreement. The interpretation and
construction of any provisions of the Plan or an Award agreement by the
Committee shall be final and conclusive. The Committee may consult with
counsel, who may be counsel to the Company, and shall not incur any
liability for any action taken in good faith in reliance upon the advice of
counsel.
(f) A majority of the members of the Committee shall constitute a quorum,
and all actions of the Committee shall be taken by a majority of the
members present. Any action may be taken by a written instrument signed by
all of the members, and any action so taken shall be fully effective as if
it had been taken at a meeting.
18. ISSUANCE OF COMPANY STOCK. The Company shall not be required to issue or
deliver any certificate for shares of Company Stock before (i) the admission of
such shares to listing on any stock exchange on which the Company Stock may then
be listed, or listing of such shares for trading on the Nasdaq National Market
System, (ii) receipt of any required registration or other qualification of such
shares under any state or federal law or regulation that the Company's counsel
shall determine is necessary or advisable, and (iii)
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the Company shall have been advised by counsel that all applicable legal
requirements have been complied with. The Company may place on a certificate
representing Company Stock any legend required to reflect restrictions pursuant
to the Plan, and any legend deemed necessary by the Company's counsel to comply
with federal or state securities laws. The Company may require a customary
written indication of a Participant's investment intent. Until a Participant
has been issued a certificate for the shares of Company Stock acquired, the
Participant shall possess no shareholder rights with respect to the shares.
19. CLAIMS PROCEDURE.
(a) Each Participant shall be entitled to file with the Committee a
written claim for benefits under the Plan. The Committee will review the
claim. If the claim is denied, in whole or in part, the Committee will
furnish the claimant, within 90 days after the Committee's receipt of the
claim (or within 180 days after such receipt, if special circumstances
require an extension of time), a written notice of denial of the claim
containing specific reasons for the denial, specific reference to the
pertinent provisions on which the denial is based, a description of any
additional material or information necessary for the claimant to perfect
the claim, and an explanation of why the material or information is
necessary, and an explanation of the claims review procedure.
(b) The claimant may request a review of the claim denial by an appeals
committee appointed by the Board. The review may be requested in writing
at any time within 90 days after the claimant receives written notice of
the denial of the claim. The appeals committee shall afford the claimant a
full and fair review of the decision denying the claim and, if so
requested, shall permit the claimant to review any documents that are
pertinent to the claim, permit the claimant to submit to the committee
issues and comments in writing, and afford the claimant an opportunity to
meet with a quorum of the committee as part of the review procedure. The
committee's decision on review shall be made in writing and shall be issued
within 60 days following receipt of the
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request for review. The period for a decision may be extended to a date
not later than 120 days after such receipt if the committee determines that
special circumstances require an extension. The decision on review shall
include specific reasons for the decision and specific references to the
Plan provisions on which the decision of the committee is based.
20. RIGHTS UNDER THE PLAN. Title to and beneficial ownership of all benefits
described in the Plan shall at all times remain with the Company. Participation
in the Plan and the right to receive payments under the Plan shall not give a
Participant any proprietary interest in the Company or any Subsidiary or any of
their assets. No trust fund shall be created in connection with the Plan, and
there shall be no required funding of amounts that may become payable under the
Plan. A Participant shall, for all purposes, be a general creditor of the
Company. The interest of a Participant in the Plan cannot be assigned,
anticipated, sold, encumbered or pledged and shall not be subject to the claims
of his creditors.
21. BENEFICIARY. A Participant may designate, on a form provided by the
Committee, one or more beneficiaries to receive any payments under Awards of
Restricted Stock, Deferred Stock or Incentive Stock after the Participant's
death. If a Participant makes no valid designation, or if the designated
beneficiary fails to survive the Participant or otherwise fails to receive the
benefits, the Participant's beneficiary shall be the first of the following
persons who survives the Participant: the Participant's surviving spouse, the
Participant's surviving descendants, PER STIRPES, or the personal
representative of the Participant's estate.
22. NOTICE. All notices and other communications required or permitted to be
given under this Plan shall be in writing and shall be deemed to have been duly
given if delivered personally or mailed first class, postage prepaid, as follows
(a) if to the Company - at its principal business address to the attention of
the Secretary; (b) if to any Participant - at the last address of the
Participant known to the sender at the time the notice or other communication is
sent.
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23. INTERPRETATION. The terms of this Plan are subject to all present and
future regulations and rulings of the Secretary of the Treasury or his delegate
relating to the qualification of Incentive Stock Options under the Code, to the
extent applicable, and they are subject to all present and future rulings of the
Securities Exchange Commission with respect to Rule 16b-3. If any provision of
the Plan conflicts with any such regulation or ruling, to the extent applicable,
that provision of the Plan shall be void and of no effect.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed this 20th
day of June, 1996.
CROWN VANTAGE INC.
By /CHRISTOPHER M. MCLAIN/
-----------------------
Christopher M. McLain
Senior Vice President
and General Counsel,
Corporate Secretary
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