DESCRIPTION OF THE EXCHANGE NOTES
The unregistered notes were, and the exchange notes will be, issued under an Indenture (the “Indenture”), dated February 5, 2010,as of October 3, 2012 among P. H. Glatfelter Company, the Subsidiary Guarantors and HSBCU.S. Bank USA, National Association, as Trustee. The terms of the notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act.
Certain terms used in this description are defined under the subheading “—Certain Definitions.” In this description, the words “Company,” “we” and “our” refer only to P. H. Glatfelter Company and not to any of its subsidiaries.
The following description is only a summary of the material provisions of the Indenture. We urge you to read the Indenture because it, not this description, definesdefine your rights as holders of thethese notes. You may request copies of the Indenture at our address set forth under the heading “Where You Can Find Additional Information.you can find additional information.”
Brief Description of the Notes
These notes:
are unsecured senior obligations of the Company;
are senior in right of payment to any future Subordinated Obligations of the Company;
The notes:
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| | • | are unsecured senior obligations of the Company; |
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| | • | are senior in right of payment to any future Subordinated Obligations of the Company; |
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| • | arepari passu with all existing and future Senior Indebtedness of the Company, including the Existing Notes;Company; and |
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| • | are guaranteed by each Subsidiary Guarantor. |
are guaranteed by each Subsidiary Guarantor.
Principal, Maturity and Interest
The Company will issue the exchange notes with a maximum initial aggregate principal amount of $100.0$250.0 million. The Company will issue the exchange notes in minimum denominations of $2,000 and any greater integral multiple of $1,000. The exchange notes will mature on May 1, 2016.October 15, 2020. Subject to our compliance with the covenant described under the subheading “—Certain Covenants — Covenants—Limitation on Indebtedness,” we are permitted to issue an unlimited additional aggregate principal amount of exchange notes from time to time under the Indenture (the “Additional Notes”“Additional Notes”). The notes and the Additional Notes, if any, are treated as a single class for all purposes of the Indenture, including waivers, amendments, redemptions and offers to purchase. The Additional Notes, however, may not be fungible with the notes for U.S. federal income tax purposes, even if they are treated as part of the same class as the notes for non-tax purposes. Any Additional Notes that are not fungible with the notes for U.S. federal income tax purposes will have a separate CUSIP number. Unless the context otherwise requires, for all purposes of the Indenture and this “Description of the Exchange Notes,” references to the notes include any Additional Notes actually issued.
Interest on thethese notes accrues at the rate of 71/8%5.375% per annum and is payable semiannually in arrears on May 1April 15 and November 1,October 15, commencing on November 1, 2010.April 15, 2013. We will make each interest payment to the holders of record of thethese notes on the immediately preceding April 151 and October 15.1. We will pay interest on overdue principal at 1% per annum in excess of the above rate and will pay interest on overdue installments of interest at such higher rate to the extent lawful.
Interest on the notes accrues from the date of original issuance. Interest is computed on the basis of a360-day year comprised of twelve30-day months.
Except as set forth below, we are not entitled to redeem the notes at our option prior to May 1, 2011.
option.On and after May 1, 2011,October 15, 2016, we will be entitled at our option to redeem from time to time all or a portion of the notes upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed in percentages of principal amount on the redemption date), plus accrued and unpaid interest to the redemption date (subject to the right of Holders
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of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the12-month period commencing on May 1October 15 of the years set forth below:
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Period | | Redemption Price |
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| 2011 | | | 103.563% | |
| 2012 | | | 102.375% | |
| 2013 | | | 101.188% | |
| 2014 and thereafter | | | 100.000% | |
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Year | | Redemption price | |
2016 | | | 102.688 | % |
2017 | | | 101.344 | % |
2018 and thereafter | | | 100.000 | % |
Prior to May 1, 2011,October 15, 2016, we are entitled at our option to redeem, from time to time, all but not less than all,or a portion of the notes at a redemption price equal to 100% of the principal amount of the notes plus the Applicable Premium as of, and accrued and unpaid interest to, the redemption date (subject to the right of Holders on the relevant record date to receive interest due on the relevant interest payment date). Notice of such redemption must be mailed by first-class mail to each Holder’s registered address, not less than 30 nor more than 60 days prior to the redemption date.
“Applicable Premium” means with respect to a noteIn addition, at any redemption date,time and from time to time prior to October 15, 2015, we are entitled at our option on one or more occasions to redeem the greaternotes (which includes Additional Notes, if any) in an aggregate principal amount not to exceed 35% of (1) 1.00% of the aggregate principal amount of such note and (2) the excess of (A) the present valuenotes (which includes Additional Notes, if any) originally issued at such redemption date of (i) thea redemption price of such note on May 1, 2011 (such redemption price being described in the second paragraph in this “— Optional Redemption” section exclusive of any accrued interest) plus (ii) all required remaining scheduled interest payments due on such note through May 1, 2011 (but excluding accrued and unpaid interest to the redemption date), computed using a discount rate equal to the Adjusted Treasury Rate, over (B) the principal amount of such note on such redemption date.
“Adjusted Treasury Rate” means, with respect to any redemption date, (1) the yield, under the heading which represents the average for the immediately preceding week, appearing in the most recently published statistical release designated “H.15(519)” or any successor publication which is published weekly by the Board of Governors of the Federal Reserve System and which establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption “Treasury Constant Maturities,” for the maturity corresponding to the Comparable Treasury Issue (if no maturity is within three months before or after May 1, 2011, yields for the two published maturities most closely corresponding to the Comparable Treasury Issue shall be determined and the Adjusted Treasury Rate shall be interpolated or extrapolated from such yields on a straight line basis, rounding to the nearest month) or (2) if such release (or any successor release) is not published during the week preceding the calculation date or does not contain such yields, the rate per year equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue (expressed as a percentage of its principal amount) equalof 105.375%, plus accrued and unpaid interest, if any, to the Comparable Treasury Price for such redemption date, in each case calculated on the third Business Day immediately preceding the redemption date plus 0.50%.
“Comparable Treasury Issue” means(subject to the United States Treasury security selectedright of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), with the Net Cash Proceeds from one or more Equity Offerings;provided,however, that at least 65% of such aggregate principal amount of notes originally issued (which includes Additional Notes, if any) remains outstanding immediately after the occurrence of each such redemption (other than the notes held, directly or indirectly, by the Quotation Agent as having a maturity comparableCompany or its Subsidiaries);provided further,however, that each such redemption occurs within 90 days after the date on which any such Equity Offering is consummated upon not less than 30 nor more than 60 days’ notice mailed to the remaining termeach Holder of the notes from the redemption date to May 1, 2011, that would be utilized, at the time of selectionbeing redeemed and otherwise in accordance with customary financial practice,the procedures set forth in pricing new issues of corporate debt securities of a maturity most nearly equal to May 1, 2011.
“Comparable Treasury Price” means, with respect to any redemption date, if clause (2) of the definition of Adjusted Treasury Rate is applicable, the average of three, or such lesser number as is obtained by the Trustee, Reference Treasury Dealer Quotations for such redemption date.
“Quotation Agent”means the Reference Treasury Dealer selected by the Trustee after consultation with the Company.
“Reference Treasury Dealer”means Credit Suisse Securities (USA) LLC and its successors and assigns and two other nationally recognized investment banking firms selected by the Company that are primary U.S. Government securities dealers.
“Reference Treasury Dealer Quotations”means with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable
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Treasury Issue, expressed in each case as a percentage of its principal amount, quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third Business Day immediately preceding such redemption date.
Selection and Notice of Redemption
If we are redeeming less than all the notes at any time, the Trustee will select notes on apro ratabasis to the extent practicable.
We will redeem notes of $2,000 or less in whole and not in part. We will cause notices of redemption to be mailed by first-class mail at least 30 but not more than 60 days before the redemption date to each holder of notes to be redeemed at its registered address.
address;provided,however, that notices of redemption may be mailed more than 60 days prior to a redemption date if issued in connection with the satisfaction and discharge of the Indenture as described under “—Satisfaction and Discharge” or the defeasance of the notes as described under “—Defeasance.”If any note is to be redeemed in part only, the notice of redemption that relates to that note will state the portion of the principal amount thereof to be redeemed. We will issue a new note in a principal amount equal to the unredeemed portion of the original note in the name of the holder upon cancellation of the original note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on notes or portions of them called for redemption.
Mandatory Redemption; Offers to Purchase; Open Market Purchases
We are not required to make any mandatory redemption or sinking fund payments with respect to the notes. However, under certain circumstances, we may be required to offer to purchase notes as described under the captions “—Change of Control” and “—Certain Covenants — Covenants—Limitation on Sales of Assets and Subsidiary Stock.” We may at any time and from time to time purchase notes in the open market or otherwise.
The Subsidiary Guarantors will jointly and severally guarantee, on a senior unsecured basis, our obligations under the notes. The obligations of each Subsidiary Guarantor under its Subsidiary Guarantee will be limited as necessary to prevent that Subsidiary Guarantee from constituting a fraudulent conveyance under applicable law. See “Risk Factors — factors—Risks Relating to the Notes and the Offering — Offering—Federal and state statutes allow courts, under specific circumstances, to void guarantees, andwhich may require note holders to return payments received from our subsidiary guarantors.”
Each Subsidiary Guarantor that makes a payment under its Subsidiary Guarantee will be entitled upon payment in full of all guaranteed obligations under the Indenture to a contribution from each other Subsidiary Guarantor in an amount equal to such other Subsidiary Guarantor’spro rataportion of such payment based on the respective net assets of all the Subsidiary Guarantors at the time of such payment determined in accordance with GAAP.
If a Subsidiary Guarantee were rendered voidable, it could be subordinated by a court to all other indebtedness (including guarantees and other contingent liabilities) of the applicable Subsidiary Guarantor, and, depending on the amount of such indebtedness, a Subsidiary Guarantor’s liability on its Subsidiary Guarantee could be reduced to zero. See “Risk Factors — factors—Risks Relating to the Notes and the Offering — Offering—Federal and state statutes allow courts, under specific circumstances, to void guarantees, andwhich may require note holders to return payments received from our subsidiary guarantors.”
Pursuant to the Indenture, (A) a Subsidiary Guarantor may consolidate with, merge with or into, or transfer all or substantially all its assets to any other Person to the extent described below under “—Certain Covenants — Covenants—Merger and Consolidation” and (B) the Capital Stock of a Subsidiary Guarantor may be sold or otherwise disposed of to another Person to the extent described below under “—Certain Covenants — Covenants—Limitation on Sales of Assets and Subsidiary Stock”;provided,however, that in the case of the consolidation, merger or transfer of all or substantially all the assets of such Subsidiary Guarantor, if such other Person is not the Company or a Subsidiary Guarantor, such Subsidiary Guarantor’s obligations under its Subsidiary
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Guarantee must be expressly assumed by such other Person, except that such assumption will not be required in the case of:
(1) the sale or other disposition (including by way of consolidation or merger) of a Subsidiary Guarantor, including the sale or disposition of Capital Stock of a Subsidiary Guarantor following which such Subsidiary Guarantor is no longer a Subsidiary; or
(2) the sale or disposition of all or substantially all the assets of a Subsidiary Guarantor;
in each case other than to the Company or an Affiliate of the Company and as permitted by the Indenture, provided that the Company complies with its obligations under the covenant described under “—Certain Covenants — Covenants—Limitation on Sales of Assets and Subsidiary Stock” in respect of such disposition. Upon any sale or disposition described in clause (1) or (2) immediately above, the obligor on the related Subsidiary Guarantee will be released from its obligations thereunder.
The Subsidiary Guarantee of a Subsidiary Guarantor also will be released:
(1) upon the designation of such Subsidiary Guarantor as an Unrestricted Subsidiary;
(2) at such time as such Subsidiary Guarantor does not have any Indebtedness outstanding that would have required such Subsidiary Guarantor to enter into a Guarantee Agreement pursuant to the covenant described under “— Certain Covenants — Future Subsidiary Guarantors”;
(3)or an Excluded Subsidiary;(2) in connection with any sale or other disposition of all or a majority of the Capital Stock of a Subsidiary Guarantor to a Person that is not the Company or (either before or after giving effect to such transaction) an Affiliate of the Company, if the sale of all such Capital Stock of the Subsidiary Guarantor complies with the covenant described under “—Certain Covenants — Covenants—Limitation on Sales of Assets and Subsidiary Stock”; and
(4)(3) if we exercise our legal defeasance option or our covenant defeasance option as described under “—Defeasance” or if our obligations under the Indenture are discharged in accordance with the terms of the Indenture; and
(4) pursuant to the covenant suspension described below under “—Certain Covenants.”
In certain circumstances, we will be able to designate one or more of our Subsidiaries as an Excluded Subsidiary or an Unrestricted Subsidiary. Our Excluded Subsidiaries and Unrestricted Subsidiaries will not Guarantee the notes. Our Unrestricted Subsidiaries will not be subject to many of the restrictive covenants in the Indenture.
Senior Indebtedness versusVersus Notes
The indebtedness evidenced by the notes and the Subsidiary Guarantees is unsecured and rankspari passuin right of payment to the Senior Indebtedness of the Company and the Subsidiary Guarantors, as the case may be, including the Existing Notes.be. The notes are guaranteed by the Subsidiary Guarantors.
September 30, 2012, after giving effect to the issuance of the unregistered notes, the repurchase and redemption of our 7 1/8% Senior Notes due 2016 and the repayment of amounts outstanding under our credit facility:(1) the Company’s Senior Indebtedness would have been approximately $250.0 million; and
(2) there was approximately $338.0 million and
(2) theno Senior Indebtedness of our Domestic Restricted Subsidiaries was approximately $338.0 million,(all of which, includesother than any Excluded Subsidiaries, are Subsidiary Guarantors of the notes) excluding Senior Indebtedness of the Company under its Credit Agreement guaranteed by one or more Domestic Restricted Subsidiaries.
The notes are unsecured obligations of the Company. Secured debt thatof the Company might incur in the future and all other secured obligations of the Company in effect from time to time will be effectively senior to the notes to the extent of the value of the assets securing such debt or other obligations.
Liabilities of Subsidiaries versusVersus Notes
A portion of our operations are conducted through our subsidiaries. Some of our subsidiaries are not Guaranteeing the notes, and, as described above under “—Guarantees,” Subsidiary Guarantees may be released under certain circumstances. In addition, our future subsidiaries may not be required to Guarantee the notes. Claims of creditors of such non-guarantor subsidiaries, including trade creditors and creditors holding indebtedness or Guarantees issued by such non-guarantor subsidiaries, and claims of preferred stockholders of
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such non-guarantor subsidiaries, generally will have priority with respect to the assets and earnings of such non-guarantor subsidiaries over the claims of our creditors, including holders of the notes. Accordingly, the notes will be effectively subordinated to creditors (including trade creditors) and preferred stockholders, if any, of our non-guarantor subsidiaries.
Our non-guarantor Foreign Subsidiariessubsidiaries had aggregate consolidated liabilities, excluding liabilities owing to the Company or any Subsidiary Guarantor, as of AprilSeptember 30, 2010,2012, of $230.4$133.8 million and revenue for the yearnine-month period ended December 31, 2009September 30, 2012 of $359.2 million and for the three months ended March 31, 2010 of $120.9$515.9 million. Although the Indenture limits the incurrence of Indebtedness and preferred stock by certain of our subsidiaries, such limitations are subject to a number of significant qualifications. Moreover, the Indenture does not impose any limitation on the incurrence by such subsidiaries of liabilities that are not considered Indebtedness under the Indenture. See “—Certain Covenants — Covenants—Limitation on Indebtedness.”
Upon the occurrence of any of the following events (each a “Change“Change of Control”Control”), unless the Company has exercised its right to redeem all of the outstanding notes as described under “—Optional Redemption,” each Holder shall have the right to require that the Company repurchase such Holder’s notes at a purchase price in cash equal to 101% of the principal amount thereof on the date of purchase plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date):
(1) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial owner” (as defined inRules 13d-3 and13d-5 under the Exchange Act, except that for purposes of this clause (1) such person shall be deemed to have “beneficial ownership” of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 35%50% of the total voting power of the Voting Stock of the Company;
(2) individuals who on the Issue Date constituted the Board of Directors (together with any new directors whose election by such Board of Directors or whose nomination for election by the shareholders of the Company was approved by a vote of a majority of the directors of the Company then still in office who were either directors on the Issue Date or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors then in office;
or(3) the adoption of a plan relating to the liquidation or dissolution of the Company; or
(4) the merger or consolidation of the Company with or into another Person or the merger of another Person with or into the Company, or the sale of all or substantially all the assets of the Company (determined on a consolidated basis) to another Person other than a transaction, following which (A) in the case of a merger or consolidation transaction, holders of securities that represented 100% of the Voting Stock of the Company immediately prior to such transaction (or other securities into which such securities are converted as part of such merger or consolidation transaction) own directly or indirectly at least a majority of the voting power of the Voting Stock of the surviving Person in such merger or consolidation transaction immediately after such transaction and in substantially the same proportion as before the transaction, and (B) in the case of a sale of assets transaction, each transferee becomes an obligor in respect of the notes and a Subsidiary of the transferor of such assets.
Within 30 days following any Change of Control, we will mail a notice to each Holder with a copy to the Trustee (the “Change“Change of Control Offer”Offer”) stating:
(1) that a Change of Control has occurred and that such Holder has the right to require us to purchase such Holder’s notes at a purchase price in cash equal to 101% of the principal amount thereof on the date of purchase, plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest on the relevant interest payment date);
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(2) the circumstances and relevant facts regarding such Change of Control (including information with respect topro formahistorical income, cash flow and capitalization, in each case after giving effect to such Change of Control);
Control;(3) the purchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and
(4) the instructions, as determined by us, consistent with the covenant described hereunder, that a Holder must follow in order to have its notes purchased.
We will not be required to make a Change of Control Offer following a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by us and purchases all notes validly tendered and not withdrawn under such Change of Control Offer.
We will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of notes as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the covenant described hereunder, we will comply with the applicable securities laws and regulations and shall not be deemed to have breached our obligations under the covenant described hereunder by virtue of our compliance with such securities laws or regulations.
The Change of Control purchase feature of the notes may in certain circumstances make more difficult or discourage a sale or takeover of the Company and, thus, the removal of incumbent management. The Change of Control purchase feature is a result of negotiations between the Company and the Initial Purchaser.Purchasers. We have no present intention to engage in a transaction involving a Change of Control, although it is possible that we could decide to do so in the future. Subject to the limitations discussed below, we could, in the future, enter into certain
transactions, including acquisitions, refinancings or other recapitalizations, that would not constitute a Change of Control under the Indenture, but that could increase the amount of indebtedness outstanding at such time or otherwise affect our capital structure or credit ratings.
Restrictions on our ability to Incur additional Indebtedness are contained in the covenants described under “—Certain Covenants — Covenants—Limitation on Indebtedness,” “—Limitation on Liens” and “—Limitation on Sale/Leaseback Transactions.” Such restrictions can only be waived with the consent of the holders of a majority in principal amount of the notes then outstanding. Except for the limitations contained in such covenants, however, the Indenture will not contain any covenants or provisions that may afford holders of the notes protection in the event of a highly leveragedhighly-leveraged transaction.
Our Credit Agreement and the indenture governing the Existing Notes contain,contains, and indebtedness that we may incur in the future may contain, prohibitions on the occurrence of certain events that would constitute a Change of Control or require the repurchase of such indebtedness upon a Change of Control. Moreover, the exercise by the holdersHolders of their right to require us to repurchase their notes could cause a default under such indebtedness, even if the Change of Control itself does not, due to the financial effect of such repurchase on us. Finally, our ability to pay cash to the holders of notes following the occurrence of a Change of Control may be limited by our then existing financial resources. There can be no assurance that sufficient funds will be available when necessary to make any required repurchases.
In the event a Change of Control occurs at a time when we are prohibited by our indebtedness from purchasing notes, we may seek the consent of the applicable creditors to the purchase of notes or may attempt to refinance the indebtedness that contains such prohibition. If we do not obtain such a consent or repay such indebtedness, we will remain prohibited from purchasing notes. In such case, our failure to offer to purchase notes would constitute a Default under the Indenture, which would, in turn, constitute a default under our other indebtedness.
The definition of “Change of Control” includes a disposition of all or substantially all of the assets of the Company to any Person. Although there is a limited body of case law interpreting the phrase “substantially all,” there is no precise established definition of the phrase under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve a
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disposition of “all or substantially all” of the assets of the Company. As a result, it may be unclear as to whether a Change of Control has occurred and whether a holder of notes may require the Company to make an offer to repurchase the notes as described above.
Under clause (2) of the definition of Change of Control, a Change of Control will occur when a majority of the Company’s Board of Directors are not those individuals who, on the Issue Date, constituted the Board of Directors (together with any new directors whose election by such Board of Directors or whose nomination for election by the shareholders of the Company was approved by a vote of a majority of the directors of the Company then still in office who were either directors on the Issue Date or whose election or nomination for election was previously so approved). In a recent decision in connection with a proxy contest, the Delaware Court of Chancery held that the occurrence of a change of control under a similar indenture provision may nevertheless be avoided if the existing directors were to approve the slate of new director nominees (who would constitute a majority of the new board) as “continuing directors,”provided the incumbent directors give their approval in the good faith exercise of their fiduciary duties owed to the corporation and its stockholders. Therefore, in certain circumstances involving a significant change in the composition of the Company’s Board of Directors, including in connection with a proxy contest where the Company’s Board of Directors does not endorse a dissident slate of directors but approves them as “continuing directors,” holders of the notes may not be entitled to require the Company to make a Change of Control Offer.
The provisions under the Indenture relative to our obligation to make an offer to repurchase the notes as a result of a Change of Control may be waived or modified with the written consent of the holders of a majority in principal amount of the notes.
The Indenture contains covenants including, among others, those summarized below. Following the first day (the “Suspension Date”“Suspension Date”) that:
(1) the notes have an Investment Grade Rating from both of the Rating Agencies, and
(2) no Default has occurred and is continuing under the Indenture,
the Company and its Restricted Subsidiaries will not be subject to the provisions of the Indenture summarized below under:
(1) “—Limitation on Indebtedness,”
(2) “—Limitation on Restricted Payments,”
(3) “—Limitation on Restrictions on Distributions from Restricted Subsidiaries,”
(4) “—Limitation on Sales of Assets and Subsidiary Stock,”
(5) clause (3) under “—Limitation on Sale/Leaseback Transactions,”
(6) clauses (a)(2) and (a)(3) of the first paragraph under “—Merger and Consolidation,”
(7) “—Limitation on Affiliate Transactions” and
(8) “—Future Subsidiary Guarantors”
(collectively, the “Suspended Covenants”“Suspended Covenants”). In addition, the Subsidiary Guarantees of the Subsidiary Guarantors will also be suspended as of the Suspension Date. In the event that the Company and its Restricted Subsidiaries are not subject to the Suspended Covenants for any period of time as a result of the foregoing, and on any subsequent date (the “Reversion Date”“Reversion Date”) one or both of the Rating Agencies withdraws its Investment Grade Rating or downgrades the rating assigned to the notes below an Investment Grade Rating, then the Company and the Restricted Subsidiaries will thereafter again be subject to the Suspended Covenants with respect to future events and the Subsidiary Guarantees will be reinstated. The period of time between the Suspension Date and the Reversion Date is referred to in this description as the “Suspension Period.“Suspension Period.” Notwithstanding that the Suspended Covenants may be reinstated, no default will be deemed to have occurred as a result of a failure to comply with the Suspended Covenants during the Suspension Period.
On the Reversion Date, all Indebtedness Incurred during the Suspension Period will be classified to have been Incurred pursuant to paragraph (a) of “—Limitation on Indebtedness” or one of the clauses set forth in paragraph (b) of “—Limitation on Indebtedness” (to the extent such Indebtedness would be permitted to be Incurred thereunder as of the Reversion Date and after giving effect to Indebtedness Incurred prior to the Suspension Period and outstanding on the Reversion Date). To the extent such Indebtedness would not be so permitted to be Incurred pursuant to paragraph (a) or (b) of “—Limitation on Indebtedness,” such Indebtedness will be deemed to have been outstanding on the Issue Date, so that it is classified as permitted under clause (4) of paragraph (b) of “—Limitation of Indebtedness.” Calculations made after the Reversion Date of the amount available to be made as Restricted Payments under “—Limitation on Restricted Payments” will be made as though the covenant described under “—Limitation on Restricted Payments” had been in effect since the Issue Date and throughout the Suspension Period. Accordingly, Restricted Payments made during the Suspension Period will reduce the amount available to be made as Restricted Payments under paragraph (a) of “—Limitation on Restricted Payments” and the items specified in subclauses (3)(A) through (3)(D) of paragraph (a) of “—Limitation on Restricted Payments” will increase the amount available to be made under paragraph (a) thereof.
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Limitation on Indebtedness
(a) The Company will not, and will not permit any Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness;provided,however, that the Company and theany Restricted Subsidiary Guarantors will be entitled to Incur Indebtedness if, on the date of such Incurrence and after giving effect thereto on apro formabasis, the Consolidated Coverage Ratio exceeds 2.00 to 1.
1.00;providedfurther, however, that the aggregate amount of such Indebtedness that may be Incurred by Restricted Subsidiaries that are not Subsidiary Guarantors at any one time outstanding may not exceed $25.0 million.(b) Notwithstanding the foregoing paragraph (a), the Company and the Restricted Subsidiaries will be entitled to Incur any or all of the following Indebtedness:
(1) Indebtedness Incurred by the Company or any Restricted Subsidiary pursuant to any Credit Facilities;provided,however, that, immediately after giving effect to any such Incurrence, the aggregate principal amount of all Indebtedness Incurred under this clause (1) and then outstanding does not exceed the greater of (i) $300$450 million, and (ii) the sumBorrowing Base and (iii) EBITDA (with such pro forma adjustments to EBITDA as would be required under the definition of (x) 60%“Consolidated Coverage Ratio” in performing a calculation thereof) during the Four-Quarter Period ending on or prior to the date of the inventorydetermination multiplied by two; provided further, however, that Refinancing Indebtedness in respect of the Company and its Restricted Subsidiaries and (y) 85% of the book value of the accounts receivables of the Company and its Restricted Subsidiaries;
Indebtedness Incurred pursuant to subclause (iii) or this proviso may also be Incurred pursuant to this clause (1);(2) Indebtedness owed to and held by the Company or a Restricted Subsidiary;provided,however, that (A) any subsequent issuance or transfer of any Capital Stock which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of such Indebtedness (other than to the Company or a Restricted Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such Indebtedness by the obligor thereon, (B) if the Company is the obligor on such Indebtedness, such Indebtedness is expressly subordinated to the prior payment in full in cash of all obligations with respect to the notes and (C) if a Subsidiary Guarantor is the obligor on such Indebtedness, such Indebtedness is expressly subordinated to the prior payment in full in cash of all obligations of such Subsidiary Guarantor with respect to its Subsidiary Guarantee;
(3) the unregistered notes and the exchange notes;
notes (other than any Additional Notes);(4) Indebtedness outstanding on the Issue Date (other than Indebtedness described in clause (1), (2) or (3) of this covenant) including the Existing Notes;
;(5) Indebtedness of a Restricted Subsidiary Incurred and outstanding on or prior to the date on which such Subsidiary became a Restricted Subsidiary or was acquired by the Company (other than Indebtedness Incurred in connection with, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Subsidiary became a Restricted Subsidiary or was acquired by the Company);provided,however, that on the date such Subsidiary became a Restricted Subsidiary or was acquired by the Company and after givingpro formaeffect thereto, the Company would have been entitled to Incur at least $1.00 of additional Indebtedness pursuant to paragraph (a) of this covenant;
(6) Refinancing Indebtedness in respect of Indebtedness Incurred pursuant to paragraph (a) or pursuant to clause (3), (4) or (5) or this clause (6);provided,however, that to the extent such Refinancing Indebtedness directly or indirectly Refinances Indebtedness of a Restricted Subsidiary Incurred pursuant to clause (5), such Refinancing Indebtedness shall be Incurred only by such Restricted Subsidiary;
(7) Hedging Obligations incurred in the ordinary course of business with a bona fide intention to limit interest rate risk, exchange rate risk or commodity price risk;
(8) Indebtedness in respect of workers’ compensation claims, self-insurance obligations, bankers’ acceptances, performance bonds, bid bonds, appeal bonds and surety bonds or other similar bonds or obligations, and any Guarantees or letters of credit functioning as or supporting any of the foregoing;
(9) Indebtedness arising from any agreement providing for indemnities, Guarantees, purchase price adjustments, holdbacks, contingency payment obligations based on the performance of the acquired or disposed assets or similar obligations (other than Guarantees of Indebtedness) Incurred by any Person in connection with the acquisition or disposition of assets;
(10) Indebtedness of Foreign Subsidiaries for purposes of financing working capital in an aggregate principal amount at any one time outstanding not to exceed $30.0 million;
54capital;
(11) Indebtedness represented by Capital Lease Obligations, Attributable Debt, mortgage financings or purchase money obligations, in each case, Incurred for the purpose of financing all or any part of the purchase price, cost of construction or improvement or carrying cost of assets used in the business of the Company and its Restricted Subsidiaries and related financing costs, and Refinancing Indebtedness Incurred to Refinance any Indebtedness Incurred pursuant to this clause (11), in an aggregate principal amount at any one time outstanding not to exceed $30.0 million;
(12) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business;provided,however, that such Indebtedness is extinguished within five Business Days of its Incurrence;
(13) the Guarantee by the Company or any of the Restricted Subsidiaries of Indebtedness of the Company or a Restricted Subsidiary that was permitted to be Incurred by another provision of this covenant;
(14) Indebtedness consisting of (i) the Subsidiary Guaranteeaccrual of a Subsidiary Guarantorinterest, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness to the extent such Indebtedness is in the form of additional Indebtedness with the same terms and any Guarantee by a Subsidiary Guarantor(ii) the payment of Indebtedness Incurred pursuant to paragraph (a) or pursuant to clause (1)dividends on Preferred Stock (including Disqualified Stock) in the form of additional shares of the same class of Preferred Stock (including Disqualified Stock);provided,however, (2), (3) or (4) or pursuant to clause (6)in each such case, that the amount thereof is included in the calculation of the Consolidated Interest Expense of the Company as accrued;
(15) Indebtedness to the extent the Refinancing Indebtedness Incurred thereunder directly or indirectly Refinances Indebtedness Incurredproceeds thereof are used to purchase notes pursuant to paragraph (a)a Change of Control Offer or to defease or discharge notes in accordance with the terms of the Indenture;
(16) Indebtedness arising under Cash Management Services;
(17) Indebtedness consisting of (i) the financing of insurance premiums or (ii) take or pay obligations in supply agreements, in each case in the ordinary course of business;
(18) Indebtedness representing the obligation to make payments with respect to the cancellation or repurchase of Capital Stock of officers, employees or directors (or their estates) of the Company or any of its Subsidiaries pursuant to clause (3)the terms of employment, severance or (4);termination agreements, benefit plans or similar documents;
(19) the disposition of accounts receivable in connection with receivables factoring arrangements in the ordinary course of business;
(20) unsecured Indebtedness in respect of obligations of the Company or any of its Restricted Subsidiaries to pay the deferred purchase price of goods or services or progress payments in connection with such goods and
(14) services;provided,however, that such obligations are Incurred in connection with open accounts extended by suppliers on customary trade terms (which require that all such payments be made within 60 days after the Incurrence of the related obligations) in the ordinary course of business;(21) Indebtedness representing deferred compensation to employees of the Company or any of its Restricted Subsidiaries Incurred in the ordinary course of business; and
(22) Indebtedness of the Company or of any Subsidiary Guarantor in an aggregate principal amount which, when taken together with all other Indebtedness of the Company and its Restricted Subsidiaries outstanding on the date of such Incurrence (other than Indebtedness permitted by clauses (1) through (13)(21) above or paragraph (a)), does not exceed the greater of (i) $50 million and (ii) 5% of Consolidated Net Tangible Assets, as determined as of the most recent practical date (as adjusted for any significant dispositions of assets since such date).
(c) Notwithstanding the foregoing, neither the Company nor any Subsidiary Guarantor will incur any Indebtedness pursuant to the foregoing paragraph (b) if the proceeds thereof are used, directly or indirectly, to Refinance any Subordinated Obligations of the Company or any Subsidiary Guarantor unless such Indebtedness shall be subordinated to the notes or the applicable Subsidiary Guarantee to at least the same extent as such Subordinated Obligations.
(d) For purposes of determining compliance with this covenant:
(1) any Indebtedness outstanding under the Credit Agreement on the Issue Date will be treated as Incurred on the Issue Date under clause (1) of paragraph (b) above;
(2) in the event that an item of Indebtedness (or any portion thereof) meets the criteria of more than one of the types of Indebtedness described above, the Company, in its sole discretion, will classify such item of Indebtedness (or any portion thereof) at the time of Incurrence and will only be required to include the amount and type of such Indebtedness in one of the above clauses;
(3) the Company will be entitled to divide and classify an item of Indebtedness in more than one of the types of Indebtedness described above; and
(4) the Company may, at any time, change the classification of an item of Indebtedness or any portion thereof (except for Indebtedness Incurred under clause (1) of paragraph (b) above) to any other clause of paragraph (b) above or to paragraph (a) above;provided,however, that the Company or the applicable Restricted Subsidiary, as the case may be, would be permitted to Incur such item of Indebtedness or portion thereof pursuant to such other clause or paragraph (a), as the case may be, at time of such reclassification.
Notwithstanding any other provision of this covenant, the maximum amount of Indebtedness that may be Incurred pursuant to this covenant will not be deemed to be exceeded with respect to any Indebtedness solely as a result of fluctuations in exchange rates or currency values.
In determining the amount of Indebtedness outstanding at any time, guarantees of, or Obligations in respect of letters of credit relating to, Indebtedness that is otherwise included in the determination of the amount of Indebtedness will not be considered as additional Indebtedness.
Limitation on Restricted Payments
(a) The Company will not, and will not permit any Restricted Subsidiary, directly or indirectly, to make a Restricted Payment if at the time the Company or such Restricted Subsidiary makes such Restricted Payment:
(1) a Default shall have occurred and be continuing (or would result therefrom);
(2) the Company is not entitled to Incur an additional $1.00 of Indebtedness pursuant to paragraph (a) of the covenant described under “—Limitation on Indebtedness”; or
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(3) the aggregate amount of such Restricted Payment and all other Restricted Payments since the Existing Notes Issue Date would exceed the sum (the “Restricted Payments Basket”) of (without duplication):
(A) 50% of the Consolidated Net Income accrued during the period (treated as one accounting period) from the beginning of the fiscal quarter immediately following the fiscal quarter during which the Existing Notes Issue Date occurred to the end of the most recent fiscal quarter ending at least 45 days prior to the date of such Restricted Paymentfor which internal financial statements are available (or, in case such Consolidated Net Income shall be a deficit, minus 100% of such deficit);plus
(B) 100% of the aggregate Net Cash Proceeds, or the fair market value of property other than cash, received by the Company from the issuance or sale of its Qualified Capital Stock (other than Disqualified Stock) subsequent to the Existing Notes Issue Date (other than an issuance or sale to a Subsidiary of the Company and other than an issuance or sale to an employee stock ownership plan or to a trust established by the Company or any of its Subsidiaries for the benefit of their employees) and 100% of any cash, or the fair market value of property other than cash, received as a capital contribution by the Company from its shareholders subsequent to the Existing Notes Issue Date;plus
(C) the amount by which Indebtedness of the Company is reduced on the Company’s balance sheet upon the conversion or exchange subsequent to the Existing Notes Issue Date of any Indebtedness of the Company convertible or exchangeable for Qualified Capital Stock (other than Disqualified Stock) of the Company (less the amount of any cash, or the fair value of any other property, distributed by the Company upon such conversion or exchange);provided,however, that the foregoing amount shall not exceed the Net Cash Proceeds received by the Company or any Restricted Subsidiary from the sale of such Indebtedness (excluding Net Cash Proceeds from sales to a Subsidiary of the Company or to an employee stock ownership plan or to a trust established by the Company or any of its Subsidiaries for the benefit of their employees);plus
(D) an amount equal to the sum of (i) the net reduction in the Investments (other than Permitted Investments) made by the Company or any Restricted Subsidiary in any Person resulting from cash dividends, repayments of loans or advances, other transfers of assets, repurchases, repayments or redemptions of such Investments by such Person, proceeds realized on the sale of such Investment and proceeds representing the return of capital (excluding dividends and distributions), in each case received by the Company or any Restricted Subsidiary subsequent to the Existing Notes Issue Date, and (ii) to the extent such Person is an Unrestricted Subsidiary, the portion (proportionate to the Company’s equity interest in such Subsidiary) of the fair market value of the net assets of such Unrestricted Subsidiary at the time such Unrestricted Subsidiary is designated a Restricted Subsidiary;provided,however, that the foregoing sum shall not exceed, in the case of any such Person or Unrestricted Subsidiary, the amount of Investments (excluding Permitted Investments) made subsequent to the Existing Notes Issue Date (and treated as a Restricted Payment) by the Company or any Restricted Subsidiary in such Person or Unrestricted Subsidiary.
(b) The preceding provisions will not prohibit:
(1) any Restricted Payment made out of the Net Cash Proceeds of the substantially concurrent sale of, or made by exchange for, Qualified Capital Stock of the Company (other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary of the Company or an employee stock ownership plan or to a trust established by the Company or any of its Subsidiaries for the benefit of their employees) or a substantially concurrent cash capital contribution received by the Company from its shareholders;provided,however, that (A) such Restricted Payment shall be excluded in the calculation of the amount of Restricted Payments and (B) the Net Cash Proceeds from such sale or such cash capital contribution (to the extent so used for such Restricted Payment) shall be excluded from the calculation of amounts under clause (3)(B) of paragraph (a) above;
(2) any purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Obligations of the Company or a Subsidiary Guarantor made by exchange for, or out of the proceeds of the substantially concurrent Incurrence of, Indebtedness of such Person which is permitted to
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be Incurred pursuant to the covenant described under “—Limitation on Indebtedness”;provided,however, that such purchase, repurchase, redemption, defeasance or other acquisition or retirement for value shall be excluded in the calculation of the amount of Restricted Payments;
(3) dividends paidthe payment of any dividend, distribution or redemption of any Capital Stock or Subordinated Obligation within 60 days after the date of declaration thereof or call for redemption if, at such date of declaration or call for redemption, such dividend would have complied withpayment or redemption was permitted by the provisions of paragraph (a) of this covenant;provided, however, that at the time of paymentcovenant (the declaration of such dividend, no other Default shallpayment will be deemed a Restricted Payment under paragraph (a) of this covenant as of the date of declaration and the payment itself will be deemed to have occurredbeen paid on such date of declaration and will not also be continuing (or result therefrom)deemed a Restricted Payment under paragraph (a) of this covenant);provided further, ,however, that such dividend, distribution or redemption shall be included in the calculation of the amount of Restricted Payments;
(4) so long as no Default has occurred and is continuing, the purchase, redemption or other acquisition of shares of Capital Stock of the Company or any of its Subsidiaries from employees, former employees, directors or former directors of the Company or any of its Subsidiaries (or permitted transferees of such employees, former employees, directors or former directors), pursuant to the terms of the agreements (including employment agreements) or plans (or amendments thereto) approved by the Board of Directors under which such individuals purchase or sell or are granted the option to purchase or sell, shares of such Capital Stock;provided,however, that the aggregate amount of such Restricted Payments (excluding amounts representing cancellation of Indebtedness) shall not exceed $1.0$2.5 million in any calendar year;year (with unused amounts in any calendar year being permitted to be carried over for the succeeding calendar year subject to
a maximum payment of $5.0 million in any calendar year);provided further,however, that such amount in any calendar year may be increased by an amount not to exceed the cash proceeds of key man life insurance policies received by the Company and the Restricted Subsidiaries after the Issue Date not already applied to make repurchases pursuant to this clause (4); provided further, however, that such purchases, redemptions and other acquisitions shall be excluded in the calculation of the amount of Restricted Payments;
(5) the declaration and payments of dividends on Disqualified Stock issued pursuant to the covenant described under “—Limitation on Indebtedness”;provided however, that at the time of payment of such dividend, no Default shall have occurred and be continuing (or result therefrom);provided further, however, that such dividends shall be excluded in the calculation of the amount of Restricted Payments;
(6) repurchasesthe repurchase of Capital Stock deemed to occur upon the exercise of stock options ifor stock appreciation rights or the lapsing of restrictions on restricted stock, to the extent such Capital Stock represents a portion of the exercise price of those stock options or stock appreciation rights or the withholding taxes payable in connection with such options;stock options, stock appreciation rights or restricted stock;provided,however, that such Restricted Payments shall be excluded in the calculation of the amount of Restricted Payments;
(7) cash payments in lieu of the issuance of fractional shares in connection with the exercise of warrants, options or other securities convertible into or exchangeable for Capital Stock of the Company;provided, however,, that any such cash payment shall not be for the purpose of evading the limitation of the covenant described under this subheading;provided further,however, that such payments shall be excluded in the calculation of the amount of Restricted Payments;
(8) in the event of a Change of Control, and if no Default shall have occurred and be continuing, the payment,any purchase, redemption, repurchase, defeasance or other acquisition or retirement of Subordinated Obligations of the Company or any Subsidiary Guarantor, in each case, at a purchase price not greater than 101% of the principal amount of such Subordinated Obligations, plus any accrued and unpaid interest thereon;provided, however, that prior to such payment, purchase, redemption, defeasance or other acquisition or retirement, the Company (or a third party(x) from Net Available Cash to the extent permitted by the Indenture) has madecovenant described under the caption “—Limitation on Sales of Assets and Subsidiary Stock” or (y) following the occurrence of a Change of Control, Offerbut only if the Company shall have complied with respectthe covenant described under “—Change of Control” and purchased all notes tendered pursuant to the offer to repurchase all the notes as a result ofrequired thereby, prior to purchasing or repaying such Change of Control and has repurchased all notes validly tendered and not withdrawn in connection with such Change of Control Offer;Subordinated Obligations;provided further,however, that such payments, purchases, redemptions, defeasances or other acquisitions or retirements shall be included in the calculation of the amount of Restricted Payments;
(9) payments of intercompany subordinated Indebtedness, the Incurrence of which was permitted under clause (2) of paragraph (b) of the covenant described under “—Limitation on Indebtedness”;provided,however, that no Default has occurred and is continuing or would otherwise result therefrom;provided further,however, that such payments shall be excluded in the calculation of the amount of Restricted Payments;
(10) the repurchase, redemption or other acquisition of Disqualified Stock of the Company or any of its Restricted Subsidiaries in exchange for or out of the proceeds of a substantially concurrent offering of Disqualified Stock of the Companyprovided,however, that such repurchase, redemption or other acquisition shall be excluded in the calculation of the amount of Restricted Payments;
(11) the payment of ordinary quarterly dividends on the common stock of the Company at a rate no greater than $0.09 per share (as adjusted for stock splits and other similar changes to such common stock);Company;provided,however, the aggregate amount of such dividends in any calendar year shall not exceed
57
$17.5 $20.0 million;
provided further,however, that such payments
shall be excluded in the calculation of the amount of Restricted Payments;(12) any Restricted Payment if, at the time of the making of such Restricted Payment, and after giving pro forma effect thereto (including the incurrence of any Indebtedness to finance such payment), the Total Leverage Ratio is less than 2.50 to 1.00;provided,however, that at the time of each such Restricted Payment, no Default shall have occurred and be continuing (or result therefrom);provided further,however, that such Restricted Payment shall be included in the calculation of the amount of Restricted Payments; and
(11)(13) Restricted Payments in an amount which, when taken together with all Restricted Payments made pursuant to this clause (11)(13), does not exceed $35.0$75.0 million;provided,however, that (A) at the time of each such Restricted Payment, no Default shall have occurred and be continuing (or result therefrom) and (B) such Restricted Payments shall be excluded in the calculation of the amount of Restricted Payments.
For purposes of determining compliance with this “Restricted payments” covenant, in the event that a Restricted Payment meets the criteria of more than one of the categories of Restricted Payments described in clauses (1) through (13) above, or is entitled to be incurred pursuant to the first paragraph of this covenant, the Company will be entitled to classify such Restricted Payment (or portion thereof) on the date of its payment in any manner that complies with this covenant.
Limitation on Restrictions on Distributions from Restricted Subsidiaries
The Company will not, and will not permit any Restricted Subsidiary to, create or otherwise cause or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to (a) pay dividends or make any other distributions on its Capital Stock to the Company or a Restricted Subsidiary or pay any Indebtedness owed to the Company, (b) make any loans or advances to the Company or (c) transfer any of its property or assets to the Company, except:
(1) with respect to clauses (a), (b) and (c),
(A) any encumbrance or restriction pursuant to an agreement in effect at or entered intoagreements governing Indebtedness existing on the Issue Date, including Indebtedness under the Credit Agreement, as in effect on the Issue Date and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of those agreements;provided,however, that the amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are not materially more restrictive, taken as a whole, with respect to such encumbrances and other restrictions than those contained in those agreements on the Issue Date;
(B) any encumbrance or restriction contained in the terms of any Indebtedness Incurred pursuant to clause (b)(1) of the covenant described under “—Limitation on Indebtedness” or any agreement pursuant to which such Indebtedness was issued if (i) either (x) the encumbrance or restriction applies only in the event of and during the continuance of a payment default or a default with respect to a financial covenant contained in such Indebtedness or agreement or (y) the Company determines in good faith at the time any such Indebtedness is Incurred (and at the time of any modification of the terms of any such encumbrance or restriction) that any such encumbrance or restriction will not materially affect the Company’s ability to make principal or interest payments on the notes and any other Indebtedness that is an obligation of the Company and (ii) the encumbrance or restriction is not materially more disadvantageous to the holders of the notes than is customary in comparable financings or agreements (as determined by the Company in good faith);
(C) any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement relating to any Indebtedness Incurred by such Restricted Subsidiary on or prior to the date on which such Restricted Subsidiary was acquired by the Company (other than Indebtedness Incurred as consideration in, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was acquired by the Company) and outstanding on such date;
(D) any encumbrance or restriction pursuant to an agreement effecting a Refinancing of Indebtedness Incurred pursuant to an agreement referred to in clause (A) or (B) of clause (1) of this covenant or this clause (D) or contained in any amendment to an agreement referred to in clause (A) or (B) of clause (1) of this covenant or this clause (D);covenant;provided,however, that the encumbrances and restrictions with respect to such Restricted Subsidiary contained in any such refinancing agreement or amendment are nonot materially less favorable to the Holders than encumbrances and restrictions with respect to such Restricted Subsidiary contained in such predecessor agreements;
(E) with respect to any Foreign Subsidiary, any encumbrance or restriction contained in the terms of any Indebtedness, or any agreement pursuant to which such Indebtedness was Incurred;
(F) Liens permitted to be incurred under the provisions of the covenant described under “—Limitation on Liens” that limit the right of the debtor to dispose of the assets subject to such Liens;
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(G) encumbrances or restrictions contained in agreements entered into in connection with Hedging Obligations permitted from time to time under the Indenture;
(H) restrictions on cash or other deposits or net worth requirements imposed by customers or required by insurance, surety or bonding companies, in each case, under contracts entered into in the ordinary course of business;
(I) existing under, by reason of or with respect to applicable law, rule, regulation or order;
(J) any encumbrance or restriction pursuant to the Indenture, the notes, the Subsidiary Guarantees and the exchange notes;
(K) customary non-assignment provisions in leases and licenses entered into in the ordinary course of business;
(L) provisions with respect to the disposition or distribution of assets or property in joint venture agreements, assets sale agreements, stock sale agreements and other similar agreements entered into in the ordinary course of business;
(M) restrictions imposed in connection with a financing transaction involving a sale or other disposition of accounts receivable and related assets (including in connection with a securitization or similar financing) or in connection with a financing involving a subsidiary trust or similar financing vehicle that is permitted by the covenant described under the caption “—Limitation on Indebtedness,”provided,however, that such restrictions do not materially adversely affect the Company’s ability to pay interest and principal on the notes when due;
(N) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business or imposed by governmental agencies or authorities;
(O) encumbrances or restrictions arising or agreed to in the ordinary course of business, not relating to Indebtedness and that do not materially detract from the value of the property or assets of the Company and its Restricted Subsidiaries;
(P) with respect to any Person or the property or assets of a Person acquired by the Company or any of its Restricted Subsidiaries existing at the time of such acquisition, which encumbrance or restriction is not applicable to any Person or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired and any amendments, modifications, restatements, renewals, increases, extensions, supplements, refundings, replacements or refinancings thereof, provided that the encumbrances and restrictions in any such amendments, modifications, restatements, renewals, increases, extensions, supplements, refundings, replacements or refinancings are in the reasonable good faith judgment of the Chief Executive Officer and the Chief Financial Officer of the Company, no more restrictive, taken as a whole, than those in effect on the date of the acquisition; and
(K)(Q) any encumbrance or restriction with respect to a Restricted Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the Capital Stock or assets of such Restricted Subsidiary pending the closing of such sale or disposition; and
(2) with respect to clause (c) only,
(A) any encumbrance or restriction consisting of customary nonassignmentnon-assignment provisions in leases governing leasehold interests to the extent such provisions restrict the transfer of the lease or the property leased thereunder;
(B) any encumbrance or restriction contained in credit agreements, security agreements or mortgages securing Indebtedness of a Restricted Subsidiary to the extent such encumbrance or restriction restricts the transfer of the property subject to such credit agreements, security agreements or mortgages; and
(C) customary restrictions contained in asset sale agreements limiting the transfer of such assets pending the closing of such sale.
Limitation on Sales of Assets and Subsidiary Stock
(a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, consummate any Asset Disposition unless:
(1) the Company or such Restricted Subsidiary receives consideration at the time of such Asset Disposition at least equal to the fair market value (including as to the value of all non-cash consideration), as determined in good faith by the Board of Directors (or, in the case of any sale of timberland pursuant to a Pre-Approved Timberland Sale Initiative, as determined in good faith by an executive officer of the Company),Company, of the shares and assets subject to such Asset Disposition;
and(2) at least 75% of the consideration thereof received by the Company or such Restricted Subsidiary is in the form of (A) cash or cash equivalents or (B) Additional Assets; and
(3) an amount equal to 100% of the Net Available Cash from such Asset Disposition is applied by the Company (or such Restricted Subsidiary, as the case may be)
(A) first, to the extent the Company elects, to acquire Additional Assets within one year from the later of the date of such Asset Disposition or the receipt of such Net Available Cash;
(B) second, to the extent of the balance of such Net Available Cash after application in accordance with clause (A), to the extent the Company elects (or is required by the terms of any Indebtedness), to prepay, repay, redeem or purchase Senior Indebtedness of the Company or Indebtedness (other than any Disqualified Stock) of a Restricted Subsidiary (in each case other than
59
Indebtedness owed to the Company or an Affiliate of the Company) within one year from the later of the date of such Asset Disposition or the receipt of such Net Available Cash; and
(C) third, to the extent of the balance of such Net Available Cash after application in accordance with clauses (A) and (B), to make an offer to the holders of the notes (and to holders of other Senior Indebtedness of the Company designated by the Company) to purchase notes (and such other Senior Indebtedness of the Company) pursuant to and subject to the conditions contained in the Indenture;
provided,however, that in connection with any prepayment, repayment or purchase of Indebtedness pursuant to clause (B) or (C) above (other than with the Net Available Cash from any Asset Disposition of timberland pursuant to a Pre-Approved Timberland Sale Initiative), the Company or such Restricted Subsidiary shall permanently retire such Indebtedness and shall cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased.
Notwithstanding the foregoing provisions of this covenant, the Company and the Restricted Subsidiaries will not be required to apply any Net Available Cash in accordance with this covenant except to the extent that the aggregate Net Available Cash from all Asset Dispositions which is not applied in accordance with this covenant exceeds $25.0 million.
For the purposes of this covenant, the following are deemed to be cash or cash equivalents:
(1)(i) the assumption or discharge of Indebtedness of the Company (other than obligations in respect of Disqualified Stock of the Company) or any Restricted Subsidiary (other than obligations in respect of Disqualified Stock or Preferred Stock of a Subsidiary Guarantor) and the release of the Company or such Restricted Subsidiary from all liability on such Indebtedness in connection with such Asset Disposition; and
(2)(ii) securities received by the Company or any Restricted Subsidiary from the transferee that are promptly converted by the Company or such Restricted Subsidiary into cash, (including, in the case of any installment note received by the Company or any Restricted Subsidiary in respect of any Asset Disposition of timberland pursuant to a Pre-Approved Timberland Sale Initiative, the receipt of cash in respect of any loan secured solely by a pledge of such installment note and, if applicable, the pledge or assignment of a letter of credit or similar instrument provided by such transferee), to the extent of cash received in that conversion.
(b) Inconversion; and(iii) any Designated Non-cash Consideration received by the eventCompany or any of anits Restricted Subsidiaries in such Asset Disposition having an aggregate fair market value, taken together with all other Designated Non-cash Consideration received pursuant to this clause (iii) that requiresis at that time outstanding, not to exceed the purchasegreater of notes (and other$25.0 million and 2.5% of the Consolidated Net Tangible Assets at the time of the receipt of such Designated Non-cash Consideration (with the fair market value of each item of Designated Non-cash Consideration being measured at the time received and without giving effect to subsequent changes in value).
(b) Within 365 days after the Company’s or any Restricted Subsidiary’s receipt of the Net Available Cash of any Asset Disposition (the “Asset Disposition Proceeds Application Period”), the Company or such Restricted Subsidiary, at its option, may apply the Net Available Cash from such Asset Disposition:
(1) to permanently repay:
(w) Indebtedness under any Credit Facility to the extent such Indebtedness was incurred under clause (b) (1) of the covenant described under “—Limitation on Indebtedness”, and to correspondingly reduce any outstanding commitments with respect thereto;
(x) any Senior Secured Indebtedness of the Company) pursuantCompany or a Guarantor, and to clause (a)(3)(C) above,correspondingly reduce any outstanding commitments with respect thereto;
(y) the Company will purchase notes tendered pursuant to an offer by the Company for the Notes (and such other Senior Indebtedness) at a purchase price of 100% of their principal amount (or, in the event suchor any other Senior Indebtedness of the Company was issuedor any Subsidiary Guarantor, (and, in the case of other Senior Indebtedness, to correspondingly reduce any outstanding commitments with significant original issue discount,respect thereto, if applicable);provided,however, that if the Company or any Restricted Subsidiary shall so repay any such other Senior Indebtedness, the Company will equally and ratably reduce Indebtedness under the notes by, at its option, (A) redeeming notes as described under “—Optional Redemption,” (B) making an offer (in accordance with the procedures set forth below for an Asset Disposition Offer) to all Holders to purchase their notes at 100% of the accreted value thereof) without premium,principal amount thereof, plus accrued but unpaid interest, (or,if any, thereon or (C) purchasing notes through open market purchases, at a price equal to or higher than 100% of the principal amount thereof, plus accrued but unpaid interest, if any, thereon, in respecta manner that complies with the Indenture and applicable securities law; or
(z) Indebtedness of a Restricted Subsidiary that is not a Subsidiary Guarantor, other than Indebtedness owed to the Company or another Restricted Subsidiary; or
(2) to an Investment in (a) any one or more businesses;provided,however, that such investment in any business is in the form of the acquisition of Capital Stock and results in the Company or a Restricted Subsidiary, as the case may be, owning an amount of the Capital Stock of such business such that it constitutes a Restricted Subsidiary, (b) capital expenditures, (c) acquisitions of other Senior Indebtednessproperty or assets, in the case of each of (a), (b) and (c), either (i) used in a Related Business or (ii) that replace the businesses, properties and assets that are the subject of such Asset Disposition;provided,however, that a binding commitment to make such an Investment shall be treated as a permitted application of the Net Available Cash pursuant to this clause (2) from the date of such commitment so long as the Company or such lesser price,Restricted Subsidiary enters into such commitment with the good faith expectation that such Net Available Cash will be applied to satisfy such commitment (an “Acceptable Commitment”) and such Net Available Cash is ultimately applied to make such Investment and, in the event any Acceptable Commitment (including any Subsequent Acceptable Commitment) is later canceled or terminated for any reason before such Net Available Cash is so applied, the Company or such Restricted Subsidiary enters into another Acceptable Commitment to make such an Investment by the later of (x) the date that is six months following the date of such cancellation or termination or (y) the last day of the applicable Asset Disposition Proceeds Application Period (such commitment, a “Subsequent Acceptable Commitment”) and such Net Available Cash is ultimately applied to make such Investment; or
(3) any combination of the foregoing.
(c) To the extent of the balance of any Net Available Cash not applied as permitted by paragraph (b) above (any such Net Available Cash, whether from one or more Asset Dispositions, “Excess Proceeds”), the Company shall, on or prior to the expiration of the Asset Disposition Proceeds Application Period, make an offer to all Holders of the notes, and, if any, as may be provided forrequired by the terms of any Indebtedness that is pari passu with the notes (“Pari Passu Indebtedness”), to the holders of such Senior Indebtedness)Pari Passu Indebtedness (an “Asset Disposition Offer”), to purchase the maximum principal amount of notes and such Pari Passu Indebtedness, in denominations of $2,000 initial principal amount and multiples of $1,000 thereafter, that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof, or, in the case of Pari Passu Indebtedness sold at a discount, the amount of the accreted value thereof at such time, plus in each case accrued and unpaid interest, if any, to the date fixed for the closing of such offer, in accordance with the procedures (including prorating in the event of oversubscription) set forth in the Indenture. IfIndenture;provided,however, that the aggregate purchase price of the securities tendered exceeds the Net Available Cash allotted to their purchase, the Company will select the securities to be purchased on apro rata basis but in round denominations, which in the case of the notes will be denominations of $1,000 principal amount or multiples thereof. The Company shall not be required to make such an offerAsset Disposition Offer if the aggregate Excess Proceeds from all Asset Dispositions that have not been offered to purchase notes (and other Senior IndebtednessHolders of the Company) pursuant to this covenant if the Net Available Cash available therefornotes through an Asset Disposition Offer is less than $10.0$25.0 million (which lesser amount shall be carried forward for purposes of determining whether such an offer is required with respect to the Net Available Cash from any subsequent Asset Disposition). Upon completion of such an offer to purchase,any Asset Disposition Offer, Net Available Cash will be deemed to be reduced by the aggregate amount of such offer.
(c)Asset Disposition Offer. In the event that the Company or a Restricted Subsidiary prepays anypari passu Indebtedness that is outstanding under a revolving credit or other committed loan facility pursuant to an Asset Disposition Offer, the Company or such Restricted Subsidiary shall cause the related loan commitment to be reduced in an amount equal to the principal amount so prepaid.(d) The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of notes pursuant to this covenant. To the extent that the provisions of any securities laws or regulations conflict with provisions of this covenant, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this covenant by virtue of its compliance with such securities laws or regulations.
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Limitation on Affiliate Transactions
(a) The Company will not, and will not permit any Restricted Subsidiary to, enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property, employee compensation arrangements or the rendering of any service) with, or for the benefit of, any Affiliate of the Company involving aggregate payments in excess of $2.5 million (an “Affiliate Transaction”“Affiliate Transaction”) unless:
(1) the terms of the Affiliate Transaction are no less favorable to the Company or such Restricted Subsidiary than those that could be obtained at the time of the Affiliate Transaction in arm’s-length dealings with a Person who is not an Affiliate;
(2) if such Affiliate Transaction involves an amount in excess of $15.0 million, the terms of the Affiliate Transaction are set forth in writing and a majority of the non-employee directors of the Company disinterested with respect to such Affiliate Transaction have determined in good faith that the criteria set forth in clause (1) are satisfied and have approved the relevant Affiliate Transaction as evidenced by a resolution of the Board of Directors; and
(3) if such Affiliate Transaction involves an amount in excess of $30.0$40.0 million, the Board of Directors shall also have received a written opinion from an Independent Qualified Party to the effect that such Affiliate Transaction is fair, from a financial standpoint, to the Company and its Restricted Subsidiaries or is not less favorable to the Company and its Restricted Subsidiaries than could reasonably be expected to be obtained at the time in an arm’s-length transaction with a Person who was not an Affiliate.
(b) The provisions of the preceding paragraph (a) will not prohibit:
(1) any Investment (other than a Permitted Investment)Investment or other Restricted Payment in each case permitted to be made pursuant to (but only to the extent included in the calculation of the amount of Restricted Payments made pursuant to paragraph (a)(3) of) the covenant described under “— Limitation on Restricted Payments”;
Indenture;(2) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans approved by the Board of Directors;
(3) loans or advances to employees in the ordinary course of business in accordance with the past practices of the Company or its Restricted Subsidiaries, but in any event not to exceed $5.0 million in the aggregate outstanding at any one time;
(4) the payment of fees to directors of the Company and its Restricted Subsidiaries who are not employees of the Company or its Restricted Subsidiaries;
(5) any transaction withbetween or among the Company and a Restricted Subsidiary or between and among Restricted Subsidiaries or any transaction with a joint venture or similar entity which would constitute an Affiliate Transaction solely because the Company or a Restricted Subsidiary owns an equity interest in or otherwise controls such Restricted Subsidiary, joint venture or similar entity;
(6) the issuance or sale of any Capital Stock (other than Disqualified Stock) of the Company;
(7) directors’ fees, indemnification and similar arrangements, consulting fees, employee salaries, bonuses or employment agreements, compensation, retirement, disability, severance or employee benefit arrangements and incentive arrangements with, and loans and advances to, any officer, director or employee in the ordinary course of business;
(8) transactions in connection with a financing transaction involving a sale or other disposition of accounts receivable and related assets (including in connection with a securitization or similar financing) or in connection with a financing involving a subsidiary trust or similar financing vehicle that is permitted by the covenant described above under the caption “—Limitation on Indebtedness”;
(9) pledges of Capital Stock of Unrestricted Subsidiaries for the benefit of lenders of Unrestricted Subsidiaries; and
(8)(10) any agreement as in effect on the Issue Date and described in the Offering Memorandum or any renewals or extensions of any such agreement (so long as such renewals or extensions are not less favorable to the Company or the Restricted Subsidiaries) and the transactions evidenced thereby.
The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, Incur or permit to exist any Lien (the “Initial Lien”“Initial Lien”) of any nature whatsoever on any of its properties (including Capital Stock of a Restricted Subsidiary), whether owned at the Issue Date or thereafter acquired, securing any
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Indebtedness, other than Permitted Liens, without effectively providing that the notes shall be secured equally and ratably with (or prior to) the obligationsIndebtedness so secured for so long as such obligations areIndebtedness is so secured;provided,however, that the Company and the Restricted Subsidiaries will be entitled to Incur other Liens to secure Indebtedness as long as the amount of outstanding Indebtedness secured by Liens pursuant to this proviso (including any Attributable Debt) does not exceed at the time of such incurrence 5%15% of Consolidated Net Tangible Assets, as determined as of the most recent practical date (adjusted for any significant dispositions of assets since such date)Assets) (and any such Liens Incurred pursuant to this proviso may be permitted to exist).
Any Lien created for the benefit of the Holders of the notes pursuant to the preceding sentence shall provide by its terms that such Lien shall be automatically and unconditionally released and discharged upon the release and discharge of the Initial Lien.
Limitation on Sale/Leaseback Transactions
The Company will not, and will not permit any Restricted Subsidiary to, enter into any Sale/Leaseback Transaction with respect to any property unless:
(1) the Company or such Restricted Subsidiary would be entitled to (A) Incur Indebtedness in an amount equal to the Attributable Debt with respect to such Sale/Leaseback Transaction pursuant to the covenant described under “—Limitation on Indebtedness” and (B) create a Lien on such property securing such Attributable Debt without equally and ratably securing the Notesnotes pursuant to the covenant described under “—Limitation on Liens”;
(2) the net proceeds received by the Company or any Restricted Subsidiary in connection with such Sale/Leaseback Transaction are at least equal to the fair market value (as determined by the Board of Directors) of such property; and
(3) the Company applies the proceeds of such transaction in compliance with the covenant described under “—Limitation on Sale of Assets and Subsidiary Stock.”
(a) The Company will not consolidate with or merge with or into, or convey, transfer or lease, in one transaction or a series of transactions, directly or indirectly, all or substantially all its assets to, any Person, unless:
(1) the resulting, surviving or transferee Person (the “Successor Company”“Successor Company”) shall be a Person organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and the Successor Company (if not the Company) shall expressly assume, by an indenture supplemental thereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the notes and the Indenture;
(2) immediately after givingpro formaeffect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Company or any Subsidiary as a result of such transaction as having been Incurred by such Successor Company or such Subsidiary at the time of such transaction), no Default shall have occurred and be continuing;
(3) immediately after givingpro formaeffect to such transaction, the Successor Company would either (a) be able to Incur an additional $1.00 of Indebtedness pursuant to paragraph (a) of the covenant described under “—Limitation on Indebtedness”; or (b) have a Consolidated Coverage Ratio that is no worse than the Consolidated Coverage Ratio without giving effect to such transaction; and
(4) the Company shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with the Indenture.
provided,however, that clauseclauses (2) and (3) will not be applicable to (A) a Restricted Subsidiary consolidating with, merging into or transferring all or part of its properties and assets to the Company (so long as no Capital
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Stock of the Company is distributed to any Person) or (B) the Company merging with an Affiliate of the Company solely for the purpose and with the sole effect of reincorporating the Company in another jurisdiction.
For purposes of this covenant, the sale, lease, conveyance, assignment, transfer or other disposition of all or substantially all of the properties and assets of one or more Subsidiaries of the Company, which properties and assets, if held by the Company instead of such Subsidiaries, would constitute all or substantially all of the properties and assets of the Company on a consolidated basis, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company.
The Successor Company will be the successor to the Company and shall succeed to, and be substituted for, and may exercise every right and power of, the Company under the Indenture, and the predecessor Company, except in the case of a lease, shall be released from the obligation to pay the principal of and interest on the notes.
(b) TheSubject to the fourth and fifth paragraphs under “Guarantees,” the Company will not permit any Subsidiary Guarantor to consolidate with or merge with or into, or convey, transfer or lease, in one transaction or a series of transactions, all or substantially all of its assets to any Person unless:
(1) except in the case of a Subsidiary Guarantor (x) that has been disposed of in its entirety to another Person (other than to the Company or an Affiliate of the Company), whether through a merger, consolidation or sale of Capital Stock or assets or (y) that, as a result of the disposition of all or a portion of its Capital Stock, ceases to be a Subsidiary, in both cases, if in connection therewith the Company (A) complies with its obligations under the covenant described under “—Limitation on Sales of Assets and Subsidiary Stock” in respect of such disposition, (B) the resulting, surviving or transferee Person (if not such Subsidiary) shall be a Person organized and existing under the laws of the jurisdiction under which such Subsidiary was organized or under the laws of the United States of America, or any State thereof or the District of Columbia, and (C) such Person shall expressly assume, by a Guarantee Agreement, in a form satisfactory to the Trustee, all the obligations of such Subsidiary, if any, under its Subsidiary Guarantee;
and(2) immediately after giving effect to such transaction or transactions on apro forma basis (and treating any Indebtedness which becomes an obligation of the resulting, surviving or transferee Person as a result of such transaction as having been issued by such Person at the time of such transaction), no Default shall have occurred and be continuing; and
(3)continuing.Future Subsidiary Guarantors
If the Company delivers toor any of its Restricted Subsidiaries acquires or creates another Domestic Restricted Subsidiary (other than an Excluded Subsidiary) after the Trustee an Officers’ CertificateIssue Date, then that newly acquired or created Domestic Restricted Subsidiary will become a Guarantor and execute a supplemental indenture and deliver an Opinion of Counsel each stating that such consolidation, merger or transfer and such Guarantee Agreement, if any, complies withsatisfactory to the Indenture.
Future Subsidiary Guarantors
The Company will not permit any Domestic Restricted Subsidiary, directly or indirectly, to Incur any Indebtedness unless:
(1) such Indebtedness is Incurred by such Restricted Subsidiary pursuant to clause (2), (4), (5), (6) (with respect to Refinancing Indebtedness of Indebtedness initially Incurred under clause (4) or (5) only), (7), (8), (9), (11) or (12) of paragraph (b)Trustee as promptly as possible after the end of the covenant described under “— Limitation on Indebtedness”;
(2) such Restricted Subsidiaryfiscal quarter in which it was acquired or created.SEC Reports
Whether or not the Company is a Subsidiary Guarantor;subject to the reporting requirements of Section 13 or
(3) such Restricted Subsidiary simultaneously executes and delivers a Subsidiary Guarantee and becomes a Subsidiary Guarantor.
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SEC Reports
The 15(d) of the Exchange Act, the Company will file with the SEC (subject to the next sentence) and provide the Trustee and Noteholders with such annual and other reports as are specified in Sections 13 and 15(d) of the Exchange Act and applicable to a U.S. corporation subject to such Sections, such reports to be so filed and provided at the times specified for the filings of such reports under such Sections and containing all the information, audit reports and exhibits required for such reports. If at any time, the Company is not subject to the periodic reporting requirements of the Exchange Act for any reason, the Company will nevertheless continue filing the reports specified in the preceding sentence with the SEC within the time periods required unless the SEC will not accept such a filing. The Company agrees that it will not take any action for the purpose of causing the SEC not to accept any such filings. If, notwithstanding the foregoing, the SEC will not accept such filings for any reason, the Company will post the reports specified in the preceding sentence on its website within the time periods that would apply if the Company were required to file those reports with the SEC.
At any time that any of the Company’s Subsidiaries are Unrestricted Subsidiaries and (i) the aggregate amount of total assets of such Unrestricted Subsidiaries, determined on a consolidated basis in accordance with GAAP, would represent 5% or more of the aggregate amount of total assets of the Company and the Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP, as of the latest quarterly financial statements or (ii) the aggregate EBITDA of such Unrestricted Subsidiaries would represent 5% or more of the aggregate EBITDA of the Company and the Restricted Subsidiaries as of the latest quarterly financial statements, then the quarterly and annual financial information required by the preceding paragraph will include a reasonably detailed presentation, either on the face of the financial statements or in the footnotes thereto, and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,”Operations” of the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of the Company.
Each of the following is an Event of Default:
(1) a default in the payment of interest on the notes when due, continued for 30 days;
(2) a default in the payment of principal of any note when due at its Stated Maturity, upon optional redemption, upon required purchase, upon declaration of acceleration or otherwise;
(3) the failure by the Company to comply with its obligations in paragraph (a) of the covenant described above under “—Certain Covenants — Covenants—Merger and Consolidation”;
(4) the failure by the Company to comply for 30 days after notice with any of its obligations in the covenants described above under “Change of Control” (other than a failure to purchase notes) or under “— Certain Covenants” under “— Limitation on Indebtedness,” “— Limitation on Restricted Payments,” “— Limitation on Restrictions on Distributions from Restricted Subsidiaries,” “— Limitation on Sales of Assets and Subsidiary Stock” (other than a failure to purchase Notes), “— Limitation on Affiliate Transactions,” “— Limitation on Liens,” “— Limitation on Sale/Leaseback Transactions,” “— Certain Covenants — Merger and Consolidation” (other than a failure to comply with paragraph (a) thereof), “— Future Subsidiary Guarantors” or “— SEC Reports”;
(5) the failure by the Company or any Subsidiary Guarantor to comply for 60 days after notice with its other agreements contained in the Indenture;
(6)(5) Indebtedness of the Company, any Subsidiary Guarantor or any Significant Subsidiary is not paid within any applicable grace period after final maturity or is accelerated by the holders thereof because of a default and the total amount of such Indebtedness unpaid or accelerated exceeds $15.0$25.0 million (the “cross“cross acceleration provision”provision”);
(7)(6) certain events of bankruptcy, insolvency or reorganization of the Company a Subsidiary Guarantor or any Significant Subsidiary (the “bankruptcy provisions”“bankruptcy provisions”);
(8)(7) any judgment or decree for the payment of money in excess of $15.0$25.0 million (net of amounts which are covered by insurance contracts with solvent reputable insurance carriers but only if the insurer has not disputed coverage) is entered against the Company, a Subsidiary Guarantor or any Significant Subsidiary, remains outstanding for a period of 60 consecutive days following such judgment and is not discharged, waived or stayed (the “judgment“judgment default provision”provision”); or
(9)(8) a Subsidiary Guarantee of a Significant Subsidiary ceases to be in full force and effect (other than in accordance with the terms of the Indenture or such Subsidiary Guarantee) or a Subsidiary Guarantor which is a Significant Subsidiary denies or disaffirms its obligations under its Subsidiary Guarantee.
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However, a default under clausesclause (4) and (5) will not constitute an Event of Default until the Trustee or the Holders of 25% in principal amount of the outstanding notes notify the Company of the default and the Company does not cure such default within the time specified after receipt of such notice.
If an Event of Default under clause (5) above shall have occurred, such Event of Default and all consequences thereof shall be annulled, waived and rescinded, automatically and without any action by the Trustee or the Holders if within 20 days after such Event of Default arose (a) the Indebtedness that is the basis for such Event of Default has been discharged, (b) in the case of the acceleration of such Indebtedness, the holders of such Indebtedness have rescinded or waived the acceleration giving rise to such Event of Default or (c) if the default that is the basis for such Event of Default has been cured.If an Event of Default occurs and is continuing, the Trustee or the holders of at least 25% in principal amount of the outstanding notes may declare the principal of and accrued but unpaid interest on all the notes to be due and payable. Upon such a declaration, such principal and interest shall be due and payable immediately. If an Event of Default relating to certain events of bankruptcy, insolvency or reorganization of the Company occurs and is continuing, the principal of and interest on all the Notesnotes willipso factobecome and be immediately due and payable without any declaration or other act on the part of the Trustee or any holders of the notes. Under certain circumstances, the Holdersholders of a majority in principal amount of the outstanding notes may rescind any such acceleration with respect to the notes and its consequences.
Subject to the provisions of the Indenture relating to the duties of the Trustee, in case an Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of any of the holders of the notes unless such Holdersholders have offered to the Trustee reasonable indemnity or security against any loss, liability or expense. Except to enforce the right to receive payment of principal, premium (if any) or interest when due, no Holderholder of a note may pursue any remedy with respect to the Indenture or the notes unless:
(1) such Holderholder has previously given the Trustee notice that an Event of Default is continuing;
(2) Holdersholders of at least 25% in principal amount of the outstanding notes have requested the Trustee to pursue the remedy;
(3) such Holdersholders have offered the Trustee reasonable security or indemnity against any loss, liability or expense;
(4) the Trustee has not complied with such request within 60 days after the receipt thereof and the offer of security or indemnity; and
(5) holders of a majority in principal amount of the outstanding notes have not given the Trustee a direction inconsistent with such request within such60-day period.
Subject to certain restrictions, the Holdersholders of a majority in principal amount of the outstanding notes are given the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or the Indenture or that the Trustee determines is unduly prejudicial to the rights of any other Holderholder of a note or that would involve the Trustee in personal liability.
If a Default occurs, is continuing and is known to the Trustee, the Trustee must mail to each Holderholder of the notes notice of the Default within 90 days after it occurs. Except in the case of a Default in the payment of principal of or interest on any note, the Trustee may withhold notice if and so long as a committee of its Trust Officers in good faith determines that withholding notice is not opposed to the interest of the holders of the notes. In addition, we are required to deliver to the Trustee, within 120 days after the end of each fiscal year, a certificate indicating whether the signers thereof know of any Default that occurred during the previous year. We are required to deliver to the Trustee, within 30 days after the occurrence thereof, written notice of any event which would constitute certain Defaults, their status and what action we are taking or propose to take in respect thereof.
Subject to certain exceptions, the Indenture may be amended with the consent of the Holdersholders of a majority in principal amount of the notes then outstanding (including consents obtained in connection with a tender offer or exchange for the notes) and any past default or compliance with any provisions may also be waived with the consent of the Holdersholders of a majority in principal amount of the notes then outstanding.
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However, without the consent of each holder of an outstanding note affected thereby, an amendment or waiver may not, among other things:
(1) reduce the amount of notes whose Holdersholders must consent to an amendment;
(2) reduce the rate of or extend the time for payment of interest on any note;
(3) reduce the principal of or change the Stated Maturity of any note;
(4) reduce the amount payable upon the redemption of any note or change the time at which any note may be redeemed as described under “—Optional Redemption” above;
redemption” above (except for changes to any notice provisions for any redemptions which may be amended with the consent of the Holders of a majority of the principal amount of notes then outstanding);(5) make any note payable in money other than that stated in the note;
(6) impair the right of any Holderholder of the notes to receive payment of principal of and interest on such holder’s notes on or after the due dates therefortherefore or to institute suit for the enforcement of any payment on or with respect to such Holder’sholder’s notes;
(7) make any change in, the amendment provisions which require each Holder’sholder’s consent or in the waiver provisions;
(8) make any change in the ranking or priorityof right of payment of any note that would adversely affect the Noteholders; or
(9) other than in accordance with the Indenture, make any change in or release any Subsidiary Guarantee that would adversely affect the Noteholders.
Notwithstanding the preceding, without the consent of any Holderholder of the notes, the Company, the Subsidiary Guarantors and Trustee may amend the Indenture:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to provide for the assumption by a successor corporation of the obligations of the Company, or any Subsidiary Guarantor under the Indenture;
(3) to provide for uncertificated notes in addition to or in place of certificated notes (provided that the uncertificated notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated notes are described in Section 163(f)(2)(B) of the Code);
(4) to add Guarantees with respect to the notes, including any Subsidiary Guarantees, or to secure the notes;
(5) to add to the covenants of the Company or a Subsidiary Guarantor for the benefit of the holders of the notes or to surrender any right or power conferred upon the Company or a Subsidiary Guarantor;
(6) to make any change that does not adversely affect the rights of any Holderholder of the notes;
(7) to comply with any requirement of the SEC in connection with the qualification of the Indenture under the Trust Indenture Act; or
(8) to make any amendment to the provisions of the Indenture relating to the transfer and legending of notes;provided,however, that (a) compliance with the Indenture as so amended would not result in notes being transferred in violation of the Securities Act or any other applicable securities law and (b) such amendment does not materially and adversely affect the rights of Holders to transfer notes.
notes;(9) to evidence and provide the acceptance of the appointment of a successor Trustee under the Indenture;
(10) to release a Guarantor from its Subsidiary Guarantee pursuant to the terms of the Indenture when permitted or required pursuant to the terms of the Indenture; or
(11) to conform the text of the Indenture, the notes or the Subsidiary Guarantees to any provision of the “Description of Notes” contained in the Offering Memorandum to the extent that such provision in the Description of Notes was intended to be a verbatim recitation of a provision of the Indenture, the notes or the Subsidiary Guarantees.
The consent of the holders of the notes is not necessary under the Indenture to approve the particular form of any proposed amendment. It is sufficient if such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, we are required to mail to holders of the notes a notice briefly describing such amendment. However, the failure to give such notice to all Holdersholders of the notes, or any defect therein, will not impair or affect the validity of the amendment.
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Neither the Company nor any Affiliate of the Company may, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the Indenture or the notes unless such consideration is offered to all Holders and is paid to all Holders that so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement.
The notes will be issued in registered form and will be transferable only upon the surrender of the notes being transferred for registration of transfer. We may require payment of a sum sufficient to cover any tax, assessment or other governmental charge payable in connection with certain transfers and exchanges.
Satisfaction and Discharge
When we (1) deliver to the Trustee all outstanding notes for cancellation or (2) all outstanding notes have become due and payable or will become due and payable within one year, whether at maturity or on a redemption date as a result of the mailing of notice of redemption, and, in the case of clause (2), we irrevocably deposit with the Trustee funds sufficient to pay at maturity or upon redemption all outstanding notes, including interest thereon to maturity or such redemption date, and if in either case we pay all other sums payable under the Indenture by us, then the Indenture shall, subject to certain exceptions, cease to be of further effect.
At any time, we may terminate all of our obligations under the notes and the Indenture (“legal defeasance”defeasance”), except for certain obligations, including those respecting the defeasance trust and obligations to register the transfer or exchange of the notes, to replace mutilated, destroyed, lost or stolen Notesnotes and to maintain a registrar and paying agent in respect of the notes.
In addition, at any time we may terminate our obligations under “—Change of Control” and under the covenants described under “—Certain Covenants” (other than the covenant described under “—Merger and Consolidation”), the operation of the cross acceleration provision, the bankruptcy provisions with respect to Subsidiary Guarantors and Significant Subsidiaries and the judgment default provision described under “—Defaults” above and the limitations contained in clause (3) of the first paragraph under “—Certain Covenants — Covenants—Merger and Consolidation” above (“covenant defeasance”defeasance”).
We may exercise our legal defeasance option notwithstanding our prior exercise of our covenant defeasance option. If we exercise our legal defeasance option, payment of the notes may not be accelerated because of an Event of Default with respect thereto. If we exercise our covenant defeasance option, payment of the notes may not be accelerated because of an Event of Default specified in clause (4), (5) or (6), (7) (with respect only to Significant Subsidiaries and Subsidiary Guarantors) or (8) under “—Defaults” above or because of the failure of the Company to comply with clause (3) of the first paragraph under “—Certain Covenants — Covenants—Merger and Consolidation” above. If we exercise our legal defeasance option or our covenant defeasance option, each Subsidiary Guarantor will be released from all of its obligations with respect to its Subsidiary Guarantee.
In order to exercise either of our defeasance options, we must irrevocably deposit in trust (the “defeasance trust”“defeasance trust”) with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the notes to redemption or maturity, as the case may be, and must comply with certain other conditions, including delivery to the Trustee of an Opinion of Counsel to the effect that holders of the notes will not recognize income, gain or loss for Federalfederal income tax purposes as a result of such deposit and defeasance and will be subject to Federalfederal income tax on the same amounts and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred (and, in the case of legal defeasance only, such Opinion of Counsel must be based on a ruling of the Internal Revenue Service or other change in applicable Federalfederal income tax law).
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Concerning the Trustee
HSBCU.S. Bank USA, National Association is the Trustee under the Indenture. We have appointed U.S. Bank National Association (as successor to SunTrust Bank) as Registrar and Paying Agent with regard to the notes.
The Indenture contains certain limitations on the rights of the Trustee, should it become a creditor of the Company, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions;provided,however, if it acquires any conflicting interest it must either eliminate such conflict within 90 days, apply to the SEC for permission to continue or resign.
The Holders of a majority in principal amount of the outstanding notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. If an Event of Default occurs (and is not cured), the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any Holder of notes, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense and then only to the extent required by the terms of the Indenture.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of the Company or any Subsidiary Guarantor will have any liability for any obligations of the Company or any Subsidiary Guarantor under the notes, any Subsidiary Guarantee or the Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation. Each Holder of the notes by accepting a note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the notes. Such waiver and release may not be effective to waive liabilities under the U.S. Federalfederal securities laws, and it is the view of the SEC that such a waiver is against public policy.
The Indenture and the notes will be governed by, and construed in accordance with, the laws of the State of New York.
““Additional Assets”Assets” means:
(1) any property, plant or equipment used in a Related Business;
(2) the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary; or
(3) Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary;
provided,however, that any such Restricted Subsidiary described in clause (2) or (3) above is primarily engaged in a Related Business.
““Affiliate”Affiliate” of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, “control” when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.
“Applicable Premium” means, in connection with any optional redemption of any note, the greater of (1) 1.0% of the principal amount of such note and (2) the excess, if any, of (A) the aggregate present value as of the date of such redemption of the redemption price of such note on October 15, 2016 (as set forth in the table in the second paragraph under “—Optional Redemption”) and the amount of interest (exclusive of interest accrued to the redemption date) that would have been payable in respect of such note through October 15, 2016 if such redemption had not been made, determined by discounting, on a semiannual basis (assuming a 360-day year comprised of twelve 30-day months), such redemption price and interest at the Treasury Rate (determined on the Business Day preceding the date of such redemption) plus 0.5%, from the respective dates on which such redemption price and interest would have been payable if such redemption had not been made, over (B) the principal amount of the note being redeemed.
“Asset Disposition”Disposition” means any sale, lease, transfer or other disposition (or series of related sales, leases, transfers or dispositions) by the Company or any Restricted Subsidiary, including any disposition by means of
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a merger, consolidation or similar transaction (each referred to for the purposes of this definition as a “disposition”), of:
(1) any shares of Capital Stock of a Restricted Subsidiary (other than directors’ qualifying shares or shares required by applicable law to be held by a Person other than the Company or a Restricted Subsidiary),
(2) all or substantially all the assets of any division or line of business of the Company or any Restricted Subsidiary, or
(3) any other assets of the Company or any Restricted Subsidiary outside of the ordinary course of business of the Company or such Restricted Subsidiary;
provided,however, that the following shall not constitute an Asset Disposition:
(A) a disposition by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Restricted Subsidiary;
(B) for purposes of the covenant described under “—Certain Covenants — Covenants—Limitation on Sales of Assets and Subsidiary Stock” only, (i) a disposition that constitutes a Restricted Payment (or would constitute a Restricted Payment but for the exclusions from the definition thereof) and that is not prohibited by the covenant described under “— Certain Covenants — Limitation on Restricted Payments” and (ii) a disposition of all or substantially all the assets of the Company in accordance with the covenant described under “—Certain Covenants — Covenants—Merger and Consolidation”;
(C) for purposes of the covenant described under “—Certain Covenants—Limitation on Sales of Assets and Subsidiary Stock” only, a Restricted Payment or Permitted Investment that is permitted by the Indenture;
(D) a disposition of assets with a fair market value of less than $2.5$5.0 million;
(D)(E) a disposition of cash or Temporary Cash Investments;
(E)(F) dispositions (including without limitation surrenders and waivers) of accounts receivable or other contract rights in connection with the compromise, settlement or collection thereof;
(F)(G) any sale or disposition of any property or equipment that has become damaged, worn out or obsolete or pursuant to a program for the maintenance or upgrading of such property or equipment;
(G)(H) the sale, lease, assignment, sublease or other disposition of equipment, inventory, accounts receivable or other assets in the ordinary course of business;
(I) a sale or other disposition of accounts receivable and related assets in connection with a financing transaction involving such assets (including in connection with a securitization or similar financing);
(J) for purposes of the covenant described under “—Certain Covenants—Limitation on Sales of Assets and Subsidiary Stock” only, any Asset Swap;
(K) any loans or other transfers of equipment to customers of the Company or any Restricted Subsidiary in the ordinary course of business for use with the products or services of the Company or any Restricted Subsidiary;
(L) the sale or issuance of a minimal amount of Capital Stock in a Foreign Subsidiary to a foreign national to the extent required by local law;
(M) the discount or forgiveness of accounts receivable in the ordinary course of business in connection with the collection or compromise thereof;
(N) licenses and sublicenses by the Company or any of its Restricted Subsidiaries of software or intellectual property in the ordinary course of business and consistent with past practice;
(O) the sale, transfer or other disposition of Hedging Obligations incurred pursuant to the covenant described above under the caption “—Certain Covenants—Limitation on Indebtedness”;
(P) sales of assets received by the Company or any of its Restricted Subsidiaries upon the foreclosure on a Lien;
(Q) any “fee in lieu” or other disposition of assets to any governmental authority or agency that continue in use by the Company or any Restricted Subsidiary, so long as the Company or any Restricted Subsidiary may obtain title to such assets upon reasonable notice by paying a nominal fee;
(R) any disposition arising from foreclosure, condemnation or similar action by a government body with respect to any property or other assets or any exercise of termination rights under any lease, license, concession or other similar agreement;
(S) any disposition of Capital Stock, Indebtedness or other securities of an Unrestricted Subsidiary;
(T) the creation of a Lien (but not the sale or other disposition of the property subject to such Lien); and
(H)(U) any disposition of assets that constitutes a Change of Control to the extent the Company has complied with the provisions under “Change of Control.”
“Asset Swap” means an exchange by the Company or any Restricted Subsidiary of property or assets for property or assets of another Person;provided,however, that (i) the Company or the applicable Restricted Subsidiary, as the case may be, receives consideration at the time of such exchange at least equal to the fair market value of the assets or other property sold, issued or otherwise disposed of (as evidenced by a resolution of the Company’s Board of Directors), and (ii) at least 75% of the consideration received in such exchange constitutes assets or other property of a kind usable by the Company and its Restricted Subsidiaries in a Related Business;provided further,however, that any cash and cash equivalents received by the Company or any of its Restricted Subsidiaries in connection with such an exchange shall constitute Net Available Cash subject to the provisions under “Certain covenants—Limitation on Sales of Assets and Subsidiary Stock.”
“Attributable Debt”Debt” in respect of a Sale/Leaseback Transaction means, as at the time of determination, the present value (discounted at the interest rate borne by the notes, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended);provided,however, that if such Sale/Leaseback Transaction results in a Capital Lease Obligation, the amount of Indebtedness represented thereby will be determined in accordance with the definition of “Capital Lease Obligation.”
““Average Life”Life” means, as of the date of determination, with respect to any Indebtedness, the quotient obtained by dividing:
(1) the sum of the products of the numbers of years from the date of determination to the dates of each successive scheduled principal payment of or redemption or similar payment with respect to such Indebtedness multiplied by the amount of such payment by
(2) the sum of all such payments.
““Board of Directors”Directors” means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of such Board.
“Borrowing Base” means, as of the fiscal quarter most recently ended, an amount equal to:
(1) 85% of the book value of the accounts receivable of the Company and its Restricted Subsidiaries on a consolidated basis, plus
(2) 75% of the book value of the inventory of the Company and its Restricted Subsidiaries on a consolidated basis,
in each case on apro forma basis giving effect to (x) any property or assets of the type described above acquired or disposed of since the end of such fiscal quarter and (y) any property or assets of the type described above being acquired or disposed of in connection with the transaction giving rise to a calculation of the Borrowing Base.
“Business Day”Day” means each day which is not a Legal Holiday.
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““Capital Lease Obligation”Obligation” means an obligation that is required to be classified and accounted for as a capital lease for financial reporting purposes in accordance with GAAP, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP; and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. For purposes of the covenant described under “—Certain Covenants — Covenants—Limitation on Liens,” a Capital Lease Obligation will be deemed to be secured by a Lien on the property being leased.
““Capital Stock”Stock” of any Person means any and all shares, interests (including partnership interests), rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity.
““Chillicothe Acquisition”Cash Management Services” means the Company’s acquisition of certain assets located in Ohio from NewPage Corporation pursuantany agreement or arrangement to the terms of an Asset Purchase Agreement dated February 21, 2006.
provide cash management services, including treasury, depository, overdraft, credit card processing, credit, debit or purchase card services, electronic funds transfer and other similar cash management arrangements.““Code”Code” means the Internal Revenue Code of 1986, as amended.
““Commodity Agreement”Agreement” means any commodity forward contract, commodities futures contract, commodity swaps, commodity option or other similar agreement or arrangement.
“Consolidated Amortization Expense” for any period means the amortization expense of the Company and the Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP and including amortization expense with respect to discontinued operations.
“Consolidated Coverage Ratio”Ratio” as of any date of determination means the ratio of (a) the aggregate amount of EBITDA for the period ofduring the most recent four consecutive full fiscal quarters for which internal financial statements are available (the “Four-Quarter Period”) ending at least 45 dayson or prior to the date of such determinationthe transaction giving rise to the need to calculate the Consolidated Coverage Ratio (the “Transaction Date”) to (b) Consolidated Interest Expense for such four fiscal quarters;the Four-Quarter Period. For purposes of this definition, EBITDA and Consolidated Interest Expense shall be calculated on aprovidedpro forma,however, that:
basis for the period as follows:(1) if the Company or any Restricted Subsidiary has Incurred any Indebtedness since the beginning of such periodFour-Quarter Period that remains outstanding or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on aproformabasis to such Indebtedness and the use of proceeds therefrom as if such Indebtedness had been Incurred on the first day of such period;
(2) if the Company or any Restricted Subsidiary has repaid, repurchased, defeased or otherwise discharged any Indebtedness since the beginning of such periodFour-Quarter Period or if any Indebtedness is to be repaid, repurchased, defeased or otherwise discharged (in each case other than Indebtedness Incurred under any revolving credit facility unless such Indebtedness has been permanently repaid and has not been replaced) on the date of the transaction giving rise to the need to calculate the Consolidated Coverage Ratio, EBITDA and Consolidated Interest Expense for such period shall be calculated on apro formabasis as if such discharge had occurred on the first day of such period and as if the Company or such Restricted Subsidiary had not earned the interest income actually earned during such period in respect of cash or Temporary Cash Investments used to repay, repurchase, defease or otherwise discharge such Indebtedness;
(3) if since the beginning of such period the Company or any Restricted Subsidiary shall have made any Asset Disposition, EBITDA for such period shall be reduced by an amount equal to EBITDA (if positive) directly attributable to the assets which are the subject of such Asset Disposition for such period, or increased by an amount equal to EBITDA (if negative), directly attributable thereto for such period and Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Asset Disposition for such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense for such period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale);
(4) if since the beginning of such period the Company or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary) or an acquisition of assets, including any acquisition of assets occurring in connection with a transaction requiring a calculation to be made hereunder, which constitutes all or
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substantially all of an operating unit of a business, EBITDA and Consolidated Interest Expense for such period shall be calculated after givingpro formaeffect thereto (including the Incurrence of any Indebtedness) as if such Investment or acquisition had occurred on the first day of such period; and
(5) if since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period) shall have made any Asset Disposition, any Investment or acquisition of assets that would have required an adjustment pursuant to clause (3) or (4) above if made by the Company or a Restricted Subsidiary during such period, EBITDA and Consolidated Interest Expense for such period shall be calculated after givingpro formaeffect thereto as if such Asset Disposition, Investment or acquisition had occurred on the first day of such period.
For purposes of this definition, wheneverpro formaeffect is to be given to an acquisition of assets, the amount of EBITDA, income or earnings relating thereto and the amount of Consolidated Interest Expense associated with any Indebtedness Incurred in connection therewith, thepro forma calculations shall be determined in good faith by a responsible financial or accounting Officer of the Company. If any Indebtedness bears a floating rate of interest and is being givenpro formaeffect, the interest on such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term in excess of 12 months).
If any Indebtedness is incurredIncurred under a revolving credit facility and is being givenpro formaeffect, the interest on such Indebtedness shall be calculated based on the average daily balance of such Indebtedness for the four fiscal quarters subject to thepro formacalculation calculation. If cost savings and other operating expense reductions and improvements have been realized with respect to an acquisition or disposition of assets being givenpro forma effect or are reasonably expected to be realized within 12 months following such acquisition or disposition, such savings, reductions and improvements may be included in thepro forma calculations;provided,however, that any suchpro forma adjustments made pursuant to this sentence shall be set forth in a certificate signed by the Chief Financial Officer of the Company and delivered to the extent that such Indebtedness was incurred solely for working capital purposes.
Trustee.““Consolidated Current Liabilities”Liabilities” as of the date of determination means the aggregate amount of liabilities of the Company and its consolidated Restricted Subsidiaries which may properly be classified as current liabilities (including taxes accrued as estimated), on a consolidated basis, after eliminating:
(1) all intercompany items between the Company and any Restricted Subsidiary; and
(2) all current maturities of long-term Indebtedness, all as determined in accordance with GAAP consistently applied.
““Consolidated Interest Expense”Depreciation Expense means,” for any period means the depreciation expense of the Company and the Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP and including depreciation expense with respect to discontinued operations.
“Consolidated Income Tax Expense” for any period means the provision for taxes of the Company and the Restricted Subsidiaries or any penalty or interest related thereto, determined on a consolidated basis in accordance with GAAP and including provision for taxes with respect to discontinued operations.
“Consolidated Interest Expense” for any period means the sum, without duplication, of the total interest expense of the Company and its consolidatedthe Restricted Subsidiaries plus, to the extent not includedfor such period, determined on a consolidated basis in such totalaccordance with GAAP and including, without duplication:
(1) imputed interest expense, and to the extent incurred by the Company or its Restricted Subsidiaries, without duplication:
(1) interest expense attributable toon Capital Lease Obligations;
(2) amortization of debt discountObligations and debt issuance cost;
(3) capitalized interest;
(4) non-cash interest expense;
(5)Attributable Debt;(2) commissions, discounts and other fees and charges owed with respect to letters of credit andsecuring financial obligations, bankers’ acceptance financing;
financing and receivables financings;(3) the net costs associated with Hedging Obligations related to interest rates;
(4) amortization of debt issuance costs, debt discount or premium and other financing fees and expenses (other than debt issuance costs and other financing fees and expenses incurred in connection with the Transactions);
(5) the interest portion of any deferred payment obligations;
(6) netnon-cash interest expense;
(7) capitalized interest;
(8) all dividend payments pursuant to Hedging Obligations;
(7) dividends accrued in respecton any series of
all Disqualified Stock of the Company
and allor any Preferred Stock of any Restricted Subsidiary
in each case(other than any such Disqualified Stock or any Preferred Stock held by
Persons other than the Company or a Wholly Owned Subsidiary
(other than dividendsor to the extent paid in Qualified Capital Stock);(9) all interest payable solely in Capital Stock (other than Disqualified Stock) of the Company);provided,however, that such dividends will be multiplied by a fraction the numerator of which is one and the denominator of which is one minus the effective combined tax rate of the issuer of such Preferred Stock (expressed as a decimal) for such period (as estimated by the chief financial officer of the Company in good faith);
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(8) interest incurred in connection with Investments inrespect to discontinued operations;
(9) and(10) interest accruing on any Indebtedness of any other Person to the extent such Indebtedness is Guaranteed by (or secured by the assets of) the Company or any Restricted Subsidiary; and
(10) the cash contributions to any employee stock ownership plan or similar trust to the extent such contributions are used by such plan or trust to pay interest or fees to any Person (other than the Company) in connection with Indebtedness Incurred by such plan or trust.
Subsidiary.““Consolidated Net Income”Income means,” for any period means the net income (or loss) of the Company and itsthe Restricted Subsidiaries for such period determined on a consolidated Subsidiaries;basis in accordance with GAAP;provided,however, that there shall not be included inexcluded from such Consolidated Net Income:
(1) any net income of any Person (other than the Company) if such Person is not a Restricted Subsidiary, except that:
(A) subject(or loss) to the
exclusion contained in clause (4) below,extent otherwise included therein, without duplication, but net of the
Company’s equity inGAAP tax effects, if any, of the
net income of any such Person for such period shall be included in such Consolidated Net Income up tofollowing:(1) the aggregate amount of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to a Restricted Subsidiary, to the limitations contained in clause (3) below); and
(B) the Company’s equity in a net loss of any such Person for such period shall be included in determining such Consolidated Net Income;
(2) any net income (or loss) of any Person
(other than a Restricted Subsidiary) in which any Person other than the Company and the Restricted Subsidiaries has an ownership interest (including any Person whose results are consolidated with the Company or any Restricted Subsidiary that is not a Subsidiary of the Company), except to the extent that cash in an amount equal to any such income has actually been received by the Company or any of its Restricted Subsidiaries during such period;(2) the net income (or loss) of any Person that accrued prior to the date that (a) such Person becomes a Restricted Subsidiary or is merged into or consolidated with the Company or any Restricted Subsidiary or (b) the assets of such Person are acquired by the Company or a Subsidiary in a pooling of interests transaction (or any transaction accounted for in a manner similar to a pooling of interests) for any period prior to the date of such acquisition;
(3) any net income of any Restricted Subsidiary if such Restricted Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to the Company, except that:
(A) subject to the exclusion contained in clause (4) below, the Company’s equity inSubsidiary;(3) the net income of any such Restricted Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Restricted Subsidiary during such period to the Companyextent that the declaration or anotherpayment of dividends or similar distributions by such Restricted Subsidiary as a dividendof that income is not permitted by operation of the terms of its charter or other distribution (subject, in the case of a dividendany agreement, instrument, judgment, decree, order, statute, rule or other distribution paidgovernmental regulation applicable to another Restrictedthat Subsidiary to the limitation contained in this clause); and
(B)during such period (other than such restrictions that have been waived or otherwise released), except that the Company’s equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining such Consolidated Net Income;
(4) solely for the purposes of calculating the Restricted Payments Basket, in the case of a successor to the Company by consolidation, merger or transfer of its assets, any income (or loss) of the successor prior to such merger, consolidation or transfer of assets;
(5) any gain (or loss) realized by the Company or any Restricted Subsidiary upon (a) the sale or other dispositionacquisition of any assetssecurities, or the extinguishment of any Indebtedness, of the Company its consolidated Subsidiaries or any other Person (including pursuantRestricted Subsidiary or (b) any Asset Disposition (without regard to any sale-and-leaseback arrangement) which is not sold or otherwise disposed ofthe dollar limitation in the ordinary course of businessdefinition thereof) by the Company or any Restricted Subsidiary;
(6) gains and any gain (or loss) realized upon the sale or other disposition of any Capital Stock of any Person;
(5) extraordinarylosses due solely to fluctuations in currency;(7) unrealized gains or losses; and
(6) losses with respect to Hedging Obligations;(8) the cumulative effect of aany change in accounting principles,
principles;(9) non-cash compensation charges recorded from grants of stock options, restricted stock, stock appreciation rights and other equity equivalents to officers, directors and employees;
(10) non-cash pension income and non-cash pension expenses;
(11) all deferred financing costs written off and premiums paid in connection with any early extinguishment of Indebtedness;
(12) any expenses with respect to liability or casualty events or business interruption to the extent covered by insurance with third-party carriers and (i) actually reimbursed to the Company or any Restricted Subsidiary or (ii) with respect to which an Officer has reasonably determined in good faith that there exists reasonable evidence that such amount will in fact be reimbursed to the Company or any Restricted Subsidiary by the insurer;provided,however, that in the case of this clause (ii), any such expenses that have been excluded from Consolidated Net Income in accordance with the foregoing shall reduce Consolidated Net Income in any later period in which (x) the claim in respect thereof is denied by the applicable insurer in writing or (y) 270 days from the date of the claim for insurance have elapsed without collection of such insurance payments;
(13) litigation and investigation settlement costs and related expenses, realized by the Company or any Restricted Subsidiary; and
(14) any extraordinary, unusual or nonrecurring gain, charge, expense or loss, including (a) restructuring charges, reserves or other related expenses, (b) fees, expenses or charges relating to facility shutdowns and discontinued operations, (c) acquisition integration costs, (d) severance or other employee termination or relocation costs, expenses or charges and (e) all transaction costs and expenses incurred by the Company and its Restricted Subsidiaries in connection with any capital markets transaction (including the issuance of the notes and the Exchange Notes), any issuance of Qualified Capital Stock, any merger or acquisition transaction, any Asset Disposition or any incurrence of Indebtedness, in each case, forwhether or not such period. Notwithstandingtransaction is ultimately consummated.
In addition, any return of capital with respect to an Investment that increased the foregoing, for the purposes of the covenant describedRestricted Payments Basket pursuant to clause (a) (3) (D) (i) under “— Certain Covenants — Limitation on Restricted Payments” only, thereor decreased the amount of Investments outstanding pursuant to clause (7) of the definition of “Permitted Investments” shall be excluded from Consolidated Net Income any repurchases, repayments or redemptionsfor purposes of Investments, proceeds realized oncalculating the sale of Investments or return of capital to the Company or a Restricted Subsidiary to the extent such repurchases, repayments, redemptions, proceeds or returns increase the amount of Restricted Payments permitted under such covenant pursuant to clause (a)(3)(D) thereof.
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““Consolidated Net Tangible Assets”Assets” as of any date of determination, means the total amount of assets (less accumulated depreciation and amortization, allowances for doubtful receivables, other applicable reserves and other properly deductible items) which would appear on a consolidated balance sheet of the Company and its consolidated Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP, and after giving effect to purchase accounting and after deducting therefrom Consolidated Current Liabilities and, to the extent otherwise included, the amounts of:
(1) minority interests in consolidated Subsidiaries held by Persons other than the Company or a Restricted Subsidiary;
(2) excess of cost over fair value of assets of businesses acquired, as determined in good faith by the Board of Directors;
(3) any revaluation or otherwrite-up in book value of assets subsequent to the Issue Date as a result of a change in the method of valuation in accordance with GAAP consistently applied;
(4) unamortized debt discount and expenses and other unamortized deferred charges, goodwill, patents, trademarks, service marks, trade names, copyrights, licenses, organization or developmental expenses and other intangible items;
(6)(5) cash set apart and held in a sinking or other analogous fund established for the purpose of redemption or other retirement of Capital Stock to the extent such obligation is not reflected in Consolidated Current Liabilities; and
(7)(6) Investments in and assets of Unrestricted Subsidiaries.
Subsidiaries;provided,however, that Consolidated Net Tangible Assets shall be calculated on apro forma basis giving effect to any applicable transactions since the most recent balance sheet date for which internal financial statements are available, including the transaction giving rise to the calculation of this definition.
“Credit Agreement”Agreement” means the Amended and Restated Credit Agreement dated as of April 3, 2006, as amended,November 21, 2011 entered into by and among the Company, certain of its Subsidiaries, the lenders from time to time a party thereto, PNC Bank, National Association, as Administrative Agent, and Credit SuissePNC Capital Markets LLC, J.P. Morgan Securities (USA) LLC and RBS Citizens, N.A., as Syndication Agent,joint lead arrangers and joint bookrunners, together with the related documents thereto (including the term loans and revolving loans thereunder, any guarantees and security documents), as amended, extended, renewed, restated, supplemented, refunded, replaced, refinanced or otherwise modified (in whole or in part, and without limitation as to amount, terms, conditions, covenants and other provisions) from time to time by one or more credit facilities, and any agreement (and related document) entered into in substitution for any credit agreement, in which case, the credit agreement or similar agreement together with all other documents and instruments related thereto shall constitute the “Credit Agreement,” whether with the same or any other agent, lender or group of lenders.
““Credit Facilities”Facilities” means one or more debt facilities (including the Credit Agreement (and any hedging arrangements with the lenders thereunder or Affiliates of such lenders, secured by the collateral securing the Company’s Obligations under the Credit Agreement, if any)), commercial paper facilities, fiscal agency agreements or indentures, in each case with banks or other institutional lenders or a trustee, providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables), letters of credit or issuance of notes, bonds, debentures or other evidences of Indebtedness, in each case as amended, extended, renewed, restated, supplemented, refunded, replaced, refinanced or otherwise modified (in whole or in part, and without limitation as to amount, terms, conditions, covenants and other provisions) from time to time by one or more of such facilities or forms of Indebtedness.
““Currency Agreement”Agreement” means in any foreign exchange contract, currency swap agreement or other similar agreement with respect to currency values.
““Default”Default” means any event which is, or after notice or passage of time or both would be, an Event of Default.
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“Designated Non-cash Consideration” means any non-cash consideration received by the Company or one of its Restricted Subsidiaries in connection with an Asset Disposition that is designated as Designated Non-cash Consideration pursuant to an Officers’ Certificate executed by the principal financial officer and any of the other executive officers of the Company or such Restricted Subsidiary at the time of such Asset Disposition. Any particular item of Designated Non-cash Consideration will cease to be considered to be outstanding once it has been sold for cash or Temporary Cash Investments.““Disqualified Stock”Stock” means, with respect to any Person, any Capital Stock which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder) or upon the happening of any event:
(1) matures or is mandatorily redeemable (other than redeemable only for Capital Stock of such Person which is not itself Disqualified Stock) pursuant to a sinking fund obligation or otherwise;
(2) is convertible or exchangeable at the option of the holder for Indebtedness or Disqualified Stock; or
(3) is mandatorily redeemable or must be purchased upon the occurrence of certain events or otherwise, in whole or in part;
in each case on or prior to the first anniversary of91st day after the Stated Maturity of the notes;provided,however, that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to purchase or redeem such Capital Stock upon the occurrence of an “asset sale” or “change of control” occurring prior to the first anniversary of91st day after the Stated Maturity of the notes shall not constitute Disqualified Stock if:
(i) the “asset sale” or “change of control” provisions applicable to such Capital Stock are not more favorable to the holders of such Capital Stock than the terms applicable to the notes and described under “—Certain Covenants — Covenants—Limitation on Sales of Assets and Subsidiary Stock” and “— Certain Covenants — Change of Control”; and
(ii) any such requirement only becomes operative after compliance with such terms applicable to the notes, including the purchase of any notes tendered pursuant thereto.
The amount of any Disqualified Stock that does not have a fixed redemption, repayment or repurchase price will be calculated in accordance with the terms of such Disqualified Stock as if such Disqualified Stock were redeemed, repaid or repurchased on any date on which the amount of such Disqualified Stock is to be determined pursuant to the Indenture;provided,however, that if such Disqualified Stock could not be required to be redeemed, repaid or repurchased at the time of such determination, the redemption, repayment or repurchase price will be the book value of such Disqualified Stock as reflected in the most recent financial statements of such Person.
““Domestic Restricted Subsidiary”Subsidiary” means any Restricted Subsidiary that is not a Foreign Subsidiary.
““EBITDA”EBITDA” for any period means, without duplication, the sum of the amounts for such period of:
(1) Consolidated Net Income,Income; plus the following to the extent deducted in calculating such Consolidated Net Income:
(1) all income tax expense of the Company and its consolidated Restricted Subsidiaries;
(2) Consolidated Interest Expense;
(3) depreciation and amortization expense of the Company and its consolidated Restricted Subsidiaries (excluding amortization expense attributable to a prepaid item that was paid in cash in a prior period); and
(4) all other non-cash charges of the Company and its consolidated Restricted Subsidiaries (excluding any such non-cash charge to the extent that it represents an accrual of or reserve for cash expenditures in any future period) less all non-cash items of income of the Company and its consolidated Restricted Subsidiaries (other than accruals of revenue by the Company and its consolidated Restricted Subsidiaries in the ordinary course of business);
in each case for such period. Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation and amortization and non-cash charges of, a Restricted Subsidiary shall be added to Consolidated Net Income to compute EBITDA only to the extent (and in the same proportion, including by reason of minority interests) that the net income or loss of such Restricted Subsidiary was includedproportion) deducted in calculatingdetermining Consolidated Net Income and with respect to the portion of Consolidated Net Income attributable to any Restricted Subsidiary only if a corresponding amount would be permitted at the date of determination to be dividendeddistributed to the Company by such Restricted Subsidiary, without prior
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approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to such Restricted Subsidiary or its stockholders.
shareholders,(A) Consolidated Income Tax Expense,
(B) Consolidated Amortization Expense (but only to the extent not included in Consolidated Interest Expense),
(C) Consolidated Depreciation Expense,
(D) Consolidated Interest Expense and all other costs and expenses arising from or related to the issuance of the notes to the extent such other costs and expenses were deducted in computing Consolidated Net Income, and
(E) all other non-cash items, charges, debits, expenses or losses reducing the Consolidated Net Income (excluding any non-cash items that results in an accrual of a reserve for cash charges in any future period) in each case for such period and determined on a consolidated basis in accordance with GAAP;minus
(3) the aggregate amount of all non-cash items, determined on a consolidated basis, to the extent such items increased Consolidated Net Income for such period (other than the accrual of revenue and other non-cash items to the extent they represent a reversal of an accrual of a cash reserve for anticipated changes made in any prior period or which will result in the receipt of cash in a future period).
“Equity Offering”Offering” means any public or private sale after the Issue Date of common stock of the Company, other than (1) public offerings with respect to the Company’s common stock registered onForm S-8.S-4 or S-8 or (2) any sale to any Subsidiary of the Company.
““Exchange Act”Act” means the U.S. Securities Exchange Act of 1934, as amended.
““Exchange Notes”Notes” means the debt securities of the Company issued pursuant to the Indenture in exchange for, and in an aggregate principal amount equal to, the notes, in compliance with the terms of the Registration Rights Agreement.
““Existing Notes”Excluded Subsidiaries” means (i) any Domestic Restricted Subsidiary that is not a Wholly Owned Subsidiary, (ii) any Foreign Subsidiary and (iii) any other Domestic Restricted Subsidiary designated by the outstanding 71/8% Senior Notes due 2016Company as a Domestic Restricted Subsidiary that will not be a Subsidiary Guarantor;provided,however, that in no event will the Excluded Subsidiaries that are Domestic Restricted Subsidiaries, either individually or collectively, hold more than 5.0% of the consolidated assets of the Company issued under an Indenture dated April 28, 2006,and its Domestic Restricted Subsidiaries as supplemented, amongof the end of the most recent fiscal quarter or account for more than 5.0% of the consolidated revenue of the Company Suntrust Bank,and its Domestic Restricted Subsidiaries during the most recent four-quarter period (in each case determined as Trustee, andof the most recent fiscal quarter for which the Company has internal financial statements available);provided further,however, that any Restricted Subsidiary that guarantees other Indebtedness of the Company or any Subsidiary Guarantor may not become or continue to be an Excluded Subsidiary. In the event any Subsidiaries previously treated as Excluded Subsidiaries, either individually or collectively, cease to meet the requirements of the previous sentence, the Company will promptly cause one or more of such Subsidiaries to become Subsidiary Guarantors (as defined therein).
“Existing Notes Issue Date” means April 28, 2006,so that the date on whichrequirements of the Existing Notes were originally issued.
previous sentence are complied with.““Foreign Subsidiary”Subsidiary” means any Restricted Subsidiary of the Company that is not organized under the laws of the United States of America or any State thereof or the District of Columbia.
““GAAP”GAAP” means generally accepted accounting principles in the United States of America as in effect from time to time,as of the Issue Date, including those set forth in:
(1) the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants;
(2) statements and pronouncements of the Financial Accounting Standards Board;
(3) such other statements by such other entity as approved by a significant segment of the accounting profession;Board’s FASB Accounting Standards Codification; and
(4)(2) the rules and regulations of the SEC with respect to generally accepted accounting principles, including those governing the inclusion of financial statements (includingpro formafinancial statements) in periodic reports required to be filed pursuant to Section 13 of the Exchange Act, including opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of the SEC.
SEC,except, with respect to any reports or financial information required to be delivered pursuant to the covenant described under the caption “—Certain Covenants—SEC Reports,” which shall be prepared in accordance with GAAP as in effect on the date thereof.
Further, the term “consolidated” with respect to any Person means such Person consolidated with its Restricted Subsidiaries but does not include any Unrestricted Subsidiary.
““Guarantee”Guarantee” means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any Person and any obligation, direct or indirect, contingent or otherwise, of such Person:
(1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise); or
(2) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part);
provided,however, that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business. The term “Guarantee” used as a verb has a corresponding meaning.
““Guarantee Agreement”Agreement” means a supplemental indenture, in a form reasonably satisfactory to the Trustee, pursuant to which a Subsidiary Guarantor guarantees the Company’s obligations with respect to the notes on the terms provided for in the Indenture.
““Hedging Obligations”Obligations” of any Person means the obligations of such Person pursuant to any Interest Rate Agreement, Currency Agreement or Commodity Agreement.
“Holder” or “Holder”Noteholder or“Noteholder”” means the Person in whose name a note is registered on the Registrar’s books.
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““Incur”Incur” means issue, assume, Guarantee, incur or otherwise become liable for;provided,however, that any Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Person at the time it becomes a Restricted Subsidiary. The term “Incurrence” when used as a noun shall have a correlative meaning. Solely for purposes of determining compliance with “—Certain Covenants — Covenants—Limitation on Indebtedness”:
(1) amortization of debt discount or the accretion of principal with respect to a non-interest bearing or other discount security;
(2) the payment of regularly scheduled interest in the form of additional Indebtedness of the same instrument or the payment of regularly scheduled dividends on Capital Stock in the form of additional Capital Stock of the same class and with the same terms; and
(3) the obligation to pay a premium in respect of Indebtedness arising in connection with the issuance of a notice of redemption or making of a mandatory offer to purchase such Indebtedness
will not be deemed to be the Incurrence of Indebtedness.
““Indebtedness”Indebtedness” means, with respect to any Person on any date of determination (without duplication):
(1) the principal in respect of (A) indebtedness of such Person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable, including, in each case, any premium on such indebtedness to the extent such premium has become due and payable;
(2) all Capital Lease Obligations of such Person and all Attributable Debt in respect of Sale/Leaseback Transactions entered into by such Person;
(3) all obligations of such Person issued or assumed as the deferred purchase price of property all conditional sale obligations of such Person and all obligations of such Person under any title retention agreement (but excluding any accounts payable or other liability to trade creditors arising in the ordinary course of business);
(4) all obligations of such Person for the reimbursement of any obligor on any letter of credit, bankers’ acceptance or similar credit transaction (other than obligations with respect to letters of credit securing obligations (other than obligations described in clauses (1) through (3) above) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the tenth Business Day following payment on the letter of credit);
(5) the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock of such Person or, with respect to any Preferred Stock of any Subsidiary of such Person, the principal amount of such Preferred Stock to be determined in accordance with the Indenture (but excluding, in each case, any accrued dividends);
(6) all obligations of the type referred to in clauses (1) through (5) of other Persons and all dividends of other Persons for the payment of which, in either case, such Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including by means of any Guarantee;
(7) all obligations of the type referred to in clauses (1) through (6) of other Persons secured by any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person), the amount of such obligation being deemed to be the lesser of the fair market value of such property or assets and the amount of the obligation so secured; and
(8) to the extent not otherwise included in this definition, Hedging Obligations of such Person.
Notwithstanding the foregoing, in connection with the purchase by the Company or any Restricted Subsidiary of any business, the term “Indebtedness” will exclude post-closing payment adjustments to which the seller may become entitled to the extent such payment is determined by a final closing balance sheet or such
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payment depends on the performance of such business after the closing;provided,,however, that, at the time of closing, the amount of any such payment is not determinable and, to the extent such payment thereafter becomes fixed and determined, the amount is paid within 30 days thereafter.
The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all obligations as described above;provided,however, that in the case of Indebtedness sold at a discount, the amount of such Indebtedness at any time will be the accreted value thereof at such time.
““Independent Qualified Party”Party” means an investment banking firm, accounting firm or appraisal firm of national standing;provided,however, that such firm is not an Affiliate of the Company.
““Initial Purchaser”Purchasers” means Credit SuisseJ.P. Morgan Securities LLC, HSBC Securities (USA) LLC.
Inc., PNC Capital Markets LLC and RBS Securities Inc.““Interest Rate Agreement”Agreement” means any interest rate swap agreement, interest rate cap agreement or other financial agreement or arrangement with respect to exposure to interest rates.
““Investment”Investment” in any Person means any direct or indirect advance, loan (other than advances to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of the lender) or other extensions of credit (including by way of Guarantee or similar arrangement) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by such Person. If the Company or any Restricted Subsidiary issues, sells or otherwise disposes of any Capital Stock of a Person that is a Restricted Subsidiary such that, after giving effect thereto, such Person is no longer a Restricted Subsidiary, any Investment by the Company or any Restricted Subsidiary in such Person remaining after giving effect thereto will be deemed to be a new Investment at such time. The acquisition by the Company or any Restricted Subsidiary of a Person that holds an Investment in a third Person will be deemed to be an Investment by the Company or such Restricted Subsidiary in such third Person at such time. Except as otherwise provided for herein, the amount of an Investment shall be its fair market value at the time the Investment is made and without giving effect to subsequent changes in value.
For purposes of the definition of “Unrestricted Subsidiary,” the definition of “Restricted Payment” and the covenant described under “—Certain Covenants — Covenants—Limitation on Restricted Payments”:
(1) “Investment” shall include the portion (proportionate to the Company’s equity interest in such Subsidiary) of the fair market value of the net assets of any Subsidiary of the Company at the time that such Subsidiary is designated an Unrestricted Subsidiary;provided,however, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue to have a permanent “Investment” in an Unrestricted Subsidiary equal to an amount (if positive) equal to (A) the Company’s “Investment” in such Subsidiary at the time of such redesignation less (B) the portion (proportionate to the Company’s equity interest in such Subsidiary) of the fair market value of the net assets of such Subsidiary at the time of such redesignation; and
(2) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, in each case as determined in good faith by the Board of Directors.
““Investment Grade Rating”Rating” means a rating equal to or higher than Baa3 (or equivalent) by Moody’s and BBB–BBB- (or the equivalent) by Standard and Poor’s, or an equivalent rating by any other Rating Agency.
““Issue Date”Date” means the date on which the unregistered notes were originally issued.
““Legal Holiday”Holiday” means a Saturday, a Sunday or a day on which banking institutions are not required to be open in the State of New York.
““Lien”Lien” means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof).
““Moody’s”Moody’s” means Moody’s Investors Service, Inc. and any successor to its rating agency business.
““Net Available Cash”Cash” from an Asset Disposition means cash payments received therefrom (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable
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or otherwise and proceeds from the sale or other disposition of any securities received as consideration, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to such properties or assets or received in any other non-cash form), in each case net of:
(1) all legal, title and recording tax expenses, commissions and other fees and expenses incurred, and all Federal,federal, state, provincial, foreign and local taxes required to be accrued as a liability under GAAP, as a consequence of such Asset Disposition;
(2) all payments made on any Indebtedness which is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon or other security agreement of any kind with respect to such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Disposition, or by applicable law, be repaid out of the proceeds from such Asset Disposition;
(3) all distributions and other payments required to be made to minority interest holders in Restricted Subsidiaries as a result of such Asset Disposition;
(4) the deduction of appropriate amounts provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the property or other assets disposed in such Asset Disposition and retained by the Company or any Restricted Subsidiary after such Asset Disposition; and
(5) any portion of the purchase price from an Asset Disposition placed in escrow, whether as a reserve for adjustment of the purchase price, for satisfaction of indemnities in respect of such Asset Disposition or otherwise in connection with that Asset Disposition;provided,however, that upon the termination of that escrow, Net Available Cash will be increased by any portion of funds in the escrow that are released to the Company or any Restricted Subsidiary.
““Net Cash Proceeds,” with respect to any issuance or sale of Capital Stock or Indebtedness, means the cash proceeds of such issuance or sale net of attorneys’ fees, accountants’ fees, underwriters’ or placement agents’ fees, discounts or commissions and brokerage, consultant and other fees actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof.
““Obligations”Obligations” means, with respect to any Indebtedness, all obligations for principal, premium, interest, penalties, fees, indemnifications, reimbursements, and other amounts payable pursuant to the documentation governing such Indebtedness.
“Offering Memorandum” means the offering memorandum dated September 21, 2012, pursuant to which the unregistered notes were offered to investors.
“Officer”Officer” means the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Treasurer or the Secretary of the Company.
““Officers’ Certificate”Certificate” means a certificate signed by two Officers.
““Opinion of Counsel”Counsel” means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee.
““Permitted Investment”Investment” means anany Investment by the Companyin, or any Restricted Subsidiary in:
constituting:(1) the Company, a Restricted Subsidiary or a Person that will, upon the making of such Investment, become a Restricted Subsidiary;provided,however, that the primary business of such Restricted Subsidiary is a Related Business;
(2) another Person if, as a result of such Investment, such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Restricted Subsidiary;provided,however, that such Person’s primary business is a Related Business;
(3) cash and Temporary Cash Investments;
(4) receivables owing to the Company or any Restricted Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms;provided,however, that such trade terms may include such concessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances;
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(5) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business;
(6) loans or advances to employees made in the ordinary course of business consistent with past practices of the Company or such Restricted Subsidiary;
(7) stock, obligations, securities or securitiesother similar instruments or Investments received in settlement of debts created in the ordinary course of business and owing to the Company or any Restricted Subsidiary or in satisfaction of judgments;
(8) any Person to the extent such Investment represents the non-cash portion of the consideration received for (A) an Asset Disposition as permitted pursuant to the covenant described under “—Certain Covenants — Covenants—Limitation on Sales of Assets and Subsidiary Stock” or (B) a disposition of assets not constituting an Asset Disposition;
(9) any Person where such Investment was acquired by the Company or any of its Restricted Subsidiaries (A) in exchange for any other Investment or accounts receivable held by the Company or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such other Investment or accounts receivable or (B) as a result of a foreclosure by the Company or any of its Restricted Subsidiaries with respect to any secured Investment or other transfer of title with respect to any secured Investment in default;
(10) any Person to the extent such Investments consist of prepaid expenses, negotiable instruments held for collection and lease, utility and workers’ compensation, performance and other similar deposits made in the ordinary course of business by the Company or any Restricted Subsidiary;
(11) any Person to the extent such Investments consist of Hedging Obligations otherwise permitted under the covenant described under “—Certain Covenants — Covenants—Limitation on Indebtedness”;
(12) any Person to the extent such Investment existed on the Existing Notes Issue Date (or pursuant to a binding commitment existing on the Issue Date), and any extension, modification or renewal of any such Investments existing on the Existing Notes Issue Date, but only to the extent not involving additional advances, contributions or other Investments of cash or other assets or other increases thereof (other than as a result of the accrual or accretion of interest or original issue discount or the issuance ofpay-in-kind securities, in each case, pursuant to the terms of such Investment as in effect on the Existing Notes Issue Date;
(13) Investments in Permitted Joint Ventures, when taken together with all other Investments made pursuant to this clause (13), do not exceed $35.0$50.0 million;
(14) obligations of one or more officers, directors or employees of the Company or any of its Restricted Subsidiaries in connection with such individual’s acquisition of shares of Capital Stock of the Company (and refinancings of the principal thereof and accrued interest thereon) so long as no net cash or other assets of the Company and its Restricted Subsidiaries are paid by the Company or any of its Restricted Subsidiaries to such individuals in connection with the acquisition of any such obligations;
(15) Investments deemed to have been made as a result of the acquisition of a Person that at the time of such acquisition held instruments constituting Investments that were not made in contemplation of the acquisition of such Person and only to the extent that the aggregate fair market value of such Investments does not exceed 25% of the fair market value of the total consideration paid to acquire such Person;
(16) Investments made within 90 days after the date of the commitment to make the Investment, that when such commitment was made would have complied with the terms of the Indenture;
(17) Guarantees Incurred in accordance with the covenant described above under the caption “—Certain Covenants—Limitation on Indebtedness”;
(18) Investments in prepaid expenses, negotiable instruments held for collection or deposit and lease, utility and workers compensation, performance and similar deposits entered into as a result of the operations of the business in the ordinary course of business;
(19) Investments by any qualified or nonqualified benefit plan established by the Company or its Restricted Subsidiaries made in accordance with the terms of such plan, or any Investments made by the Company or any Restricted Subsidiary in connection with the funding thereof; and
(16)(20) Persons to the extent such Investments, when taken together with all other Investments made pursuant to this clause (16)(20) and outstanding on the date such Investment is made, do not exceed the greater of (i) $35$50.0 million and (ii) 3.0%5.0% of Consolidated Net Tangible Assets.
““Permitted Joint Venture”Venture” means any joint venture in which the Company or any Subsidiary thereof holds an equity interest and that is engaged in a Related Business.
““Permitted Liens”Liens” means, with respect to any Person:
(1) pledges or depositsLiens Incurred by such Person under worker’s compensation laws, unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than
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for the payment of Indebtedness) or leases to which such Person is a party, or deposits to secure public or statutory obligations of such Person or deposits of cash or United States government bonds to secure surety or appeal bonds to which such Person is a party, or deposits as security for contested taxes or import duties or for the payment of rent, in each case Incurred in the ordinary course of business;
(2) Liens imposed by law, such as carriers’, warehousemen’s and mechanics’ Liens, in each case for sums not yet due or being contested in good faith by appropriate proceedings or other Liens arising out of judgments or awards against such Person with respect to which such Person shall then be proceeding with an appeal or other proceedings for review and Liens arising solely by virtue of any statutory or common law provision relating to banker’s Liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution;provided,however, that (A) such deposit account is not a dedicated cash collateral account and is not subject to restrictions against access by the Company in excess of those set forth by regulations promulgated by the Federal Reserve Board and (B) such deposit account is not intended by the Company or any Restricted Subsidiary to provide collateral to the depository institution;
(3) Liens for taxes, assessments or governmental charges not yet delinquent or subject to penalties for non-paymentnonpayment or which are being contested in good faith by appropriate proceedings;
(4) Liens in favor of issuers of surety bonds or letters of credit issued pursuant to the request of and for the account of such Person in the ordinary course of its business;provided,however, that such letters of credit do not constitute Indebtedness;
(5) (x) minor survey exceptions, minor encumbrances, easements or reservations of, or rights of others for, licenses,rights-of-way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real property or Liens incidental to the conduct of the business of such Person or to the ownership of its properties which were not Incurred in connection with Indebtedness and which do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of such Person;
Person, (y) mortgages, liens, securityinterests, restrictions, encumbrances or any other matters of record that have been placed by any developer, landlord or other third party on property over which the Company or any Restricted Subsidiary has easement rights or on any leased property and subordination or similar agreements relating thereto and (z) any condemnation or eminent domain proceedings affecting any real property;
(6) Liens securing Indebtedness Incurred to finance the construction, purchase or lease of, or repairs, improvements or additions to, property, plant or equipment of such Person;provided,however, that the Lien may not extend to any other property owned by such Person or any of its Restricted Subsidiaries at the time the Lien is Incurred (other than assets and property affixed or appurtenant thereto), and the Indebtedness (other than any interest thereon) secured by the Lien may not be Incurred more than 180 days after the later of the acquisition, completion of construction, repair, improvement, addition or commencement of full operation of the property subject to the Lien;
(7) Liens to secure Indebtedness permitted underIncurred pursuant to the provisions described in clause (b)(1) under “—Certain Covenants — Covenants—Limitation on Indebtedness” (including, during any Suspension Period, Indebtedness of the type and in the amounts specified under such clause);
(8) Liens existing on the Existing Notes Issue Date;
(9) Liens on property or shares of Capital Stock of another Person at the time such other Person becomes a Subsidiary of such Person;provided,however, that the Liens may not extend to any other property owned by such Person or any of its Restricted Subsidiaries (other than assets and property affixed or appurtenant thereto);
(10) Liens on property at the time such Person or any of its Subsidiaries acquires the property, including any acquisition by means of a merger or consolidation with or into such Person or a Subsidiary of such Person;provided,however, that the Liens may not extend to any other property owned by such Person or any of its Restricted Subsidiaries (other than assets and property affixed or appurtenant thereto);
(11) Liens securing Indebtedness or other obligations of a Subsidiary of such Person owing to such Person or a Restricted Subsidiary of such Person;
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(12)(11) Liens securing Hedging Obligations so long as such Hedging Obligations are permitted to be Incurred under the Indenture;
(13)(12) Liens to secure Indebtedness permitted under the provisions described in clauseclauses (b)(11), (16) and (19) under “—Certain Covenants — Covenants—Limitation on Indebtedness” (including, during any Suspension Period, Indebtedness of the type and in the amounts specified under such clause);provided,however, such Liens are limited to the assets that are the subject of such Indebtedness and the proceeds thereof;
(13) judgment Liens not giving rise to an Event of Default, so long as any appropriate legal proceedings which may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such proceedings may be initiated shall not have expired;
(14) leases or subleases granted to others in the ordinary course of business not interfering with the ordinary conduct of the business of the Company or any of the Restricted Subsidiaries;
(15) bankers’ Liens with respect to the right of set-off arising in the ordinary course of business against amounts maintained in bank accounts or certificates of deposit in the name of the Company or any Restricted Subsidiary;
(16) any Lien consisting of a right of first refusal or option to purchase an ownership interest in any Restricted Subsidiary or to purchase assets of the Company or any Restricted Subsidiary, which right of first refusal or option is entered into in the ordinary course of business;
(17) licenses and sublicenses of intellectual property granted to third parties in the ordinary course of business;
(18) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person’s Obligations in respect of bankers’ acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;
(19) Liens securing Indebtedness of any Restricted Subsidiary that is not a Subsidiary Guarantor;provided,however, that any such Lien covers only the assets of such Restricted Subsidiary;
(20) Liens securing Indebtedness of Foreign Subsidiaries;provided,however, that any such Lien covers only the assets of such Foreign Subsidiaries;
(21) Liens in favor of the Company or any Subsidiary Guarantor;
(22) any Lien granted to the Trustee pursuant to the terms of the Indenture and
(15) any similar type of Lien granted to the trustees under indentures for other debt securities of the Company; and(23) Liens to secure any Refinancing (or successive Refinancings) as a whole, or in part, of any Indebtedness secured by any Lien referred to in the foregoing clause (6), (8), (9), (10) or (13)clauses (1) through (22);provided,however, that:
(A) such new Lien shall be limited to all or part of the same property and assets that secured or, under the written agreements pursuant to which the original Lien arose, could secure the original Lien (plus improvements and accessions to, such property or proceeds or distributions thereof); and
(B) the Indebtedness secured by such Lien at such time is not increased to any amount greater than the sum of (i) the outstanding principal amount or, if greater, committed amount of the Indebtedness described under the applicable clause (6), (8), (9),(10) or (13) at the time the original Lien became a Permitted Lien and (ii) an amount necessary to pay any fees and expenses, including premiums, related to such refinancing, refunding, extension, renewal or replacement.
Notwithstanding the foregoing, “Permitted Liens” will not include any Lien described in clause (6) or (10) above to the extent such Lien applies to any Additional Assets acquired directly or indirectly from Net Available Cash pursuant to the covenant described under “— Certain Covenants — Limitation on Sale of Assets and Subsidiary Stock.” For purposes of this definition, the term “Indebtedness” shall be deemed to include interest on such Indebtedness.
““Person”Person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.
““Pre-Approved Timberland Sale Initiative” means any initiative approved by the Board of Directors pursuant to which the Company has identified timberland to be sold, transferred or otherwise disposed and pursuant to which the Board of Directors has authorized management of the Company to effect the sale, transfer or disposal of such timberland.
“Preferred Stock,” as applied to the Capital Stock of any Person, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends or distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such Person.
““principal”principal” of a note means the principal of the note plus the premium, if any, payable on the note which is due or overdue or is to become due at the relevant time.
“Qualified Capital Stock” of a Person means Capital Stock of such Person other than Disqualified Capital Stock;provided,however, that such Capital Stock shall not be deemed Qualified Capital Stock to the extent sold to a Subsidiary of such Person or financed, directly or indirectly, using funds (1) borrowed from such Person or any Subsidiary of such Person or (2) contributed, extended, guaranteed or advanced by such Person or any Subsidiary of such Person (including, in respect of any employee stock ownership or benefit plan). Unless otherwise specified, Qualified Capital Stock refers to Qualified Capital Stock of the Company.
“Rating Agencies”Agencies” means Moody’s and S&P or, if Moody’s or S&P or both shall not make a rating on the Notesnotes publicly available, a nationally recognized statistical rating agency or agencies, as the case may be, selected by the Board of Directors, which shall be substituted for Moody’s or S&P or both, as the case may be.
““Refinance”Refinance” means, in respect of any Indebtedness, to refinance, extend, renew, refund, repay, prepay, purchase, redeem, defease or retire, or to issue other Indebtedness in exchange or replacement for, such Indebtedness. “Refinanced” and “Refinancing” shall have correlative meanings.
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““Refinancing Indebtedness”Indebtedness” means Indebtedness that Refinances any Indebtedness of the Company or any Restricted Subsidiary existing on the Issue Date or Incurred in compliance with the Indenture, including Indebtedness that Refinances Refinancing Indebtedness;provided,however, that:
(1) such Refinancing Indebtedness has a Stated Maturity no earlier than either (i) the Stated Maturity of the Indebtedness being Refinanced;
Refinanced or (ii) the 91st day after the Stated Maturity of the notes;(2) such Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life of the Indebtedness being Refinanced;
(3) such Refinancing Indebtedness has an aggregate principal amount (or if Incurred with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount (or if Incurred with original issue discount, the aggregate accreted value) then outstanding (plus fees and expenses, including any premium and defeasance costs) under the Indebtedness being Refinanced; and
(4) if the Indebtedness being Refinanced is subordinated in right of payment to the notes, such Refinancing Indebtedness is subordinated in right of payment to the notes at least to the same extent as the Indebtedness being Refinanced;
provided further,however, that Refinancing Indebtedness shall not include (A) Indebtedness of a Restricted Subsidiary that is not a Subsidiary Guarantor that Refinances Indebtedness of the Company or a Subsidiary Guarantor or (B) Indebtedness of the Company or a Restricted Subsidiary that Refinances Indebtedness of an Unrestricted Subsidiary.
““Registration Rights Agreement”Agreement” means the Registration Rights Agreement to be dated February 5, 2010,as of the Issue Date among the Company, the Subsidiary Guarantors and J.P. Morgan Securities LLC, on behalf of itself and as representative of the Initial Purchaser.
Purchasers.““Related Business”Business” means any business in which the Company or any of the Restricted Subsidiaries was engaged on the Issue Date and any business related, ancillary or complementary to such business.
““Restricted Payment”Payment” with respect to any Person means:
(1) the declaration or payment of any dividends or any other distributions of any sort in respect of its Capital Stock (including any payment in connection with any merger or consolidation involving such Person) or similar payment to the direct or indirect holders of its Capital Stock (other than (A) dividends or distributions payable solely in its Capital Stock (other than Disqualified Stock), (B) dividends or distributions payable solely to the Company or a Restricted Subsidiary and (C)pro ratadividends or other distributions made by a Subsidiary that is not a Wholly Owned Subsidiary to minority stockholders (or owners of an equivalent interest in the case of a Subsidiary that is an entity other than a corporation));
(2) the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of any Capital Stock of the Company held by any Person (other than by a Restricted Subsidiary) or of any Capital Stock of a Restricted Subsidiary held by any Affiliate of the Company (other than by a Restricted Subsidiary), including in connection with any merger or consolidation and including the exercise of any option to exchange any Capital Stock (other than into Capital Stock of the Company that is not Disqualified Stock);
consolidation;(3) the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment of any Subordinated Obligations of the Company or any Subsidiary Guarantor (other than (A) from the Company or a Restricted Subsidiary or (B) the purchase, repurchase, redemption, defeasance or other acquisition or retirement of Subordinated Obligations purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of such purchase, repurchase, redemption, defeasance or other acquisition or retirement); or
(4) the making of any Investment (other than a Permitted Investment) in any Person.
““Restricted Subsidiary”Subsidiary” means any Subsidiary of the Company that is not an Unrestricted Subsidiary.
““Sale/Leaseback Transaction”Transaction” means an arrangement relating to property owned by the Company or a Restricted Subsidiary on the Issue Date or thereafter acquired by the Company or a Restricted Subsidiary
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whereby the Company or a Restricted Subsidiary transfers such property to a Person and the Company or a Restricted Subsidiary leases it from such Person.
““SEC”SEC” means the U.S. Securities and Exchange Commission.
““Securities Act”Act” means the U.S. Securities Act of 1933, as amended.
““Senior Indebtedness”Indebtedness” means with respect to any Person:
(1) Indebtedness of such Person, whether outstanding on the Issue Date or thereafter Incurred; and
(2) all other Obligations of such Person (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to such Person whether or not post-filing interest is allowed in such proceeding) in respect of Indebtedness described in clause (1) above
unless, in the case of clauses (1) and (2), in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such Indebtedness or other Obligations are subordinate in right of payment to the notes or the Subsidiary Guarantee of such Person, as the case may be;provided,however, that Senior Indebtedness shall not include:
(i) any obligation of such Person to the Company or any Subsidiary of the Company;
(ii) any liability for Federal,federal, state, local or other taxes owed or owing by such Person;
(iii) any accounts payable or other liability to trade creditors arising in the ordinary course of business;
(iv) any Indebtedness or other Obligation of such Person which is subordinate or junior in any respect to any other Indebtedness or other Obligation of such Person; or
(v) that portion of any Indebtedness which at the time of Incurrence is Incurred in violation of the Indenture.
“Senior Secured Indebtedness” of a Person means any Senior Indebtedness of such Person secured by a Lien on any assets of such Person or any of its Subsidiaries.
“Significant Subsidiary”Subsidiary” means any Restricted Subsidiary that would be a “Significant Subsidiary” of the Company within the meaning ofRule 1-02 underRegulation S-X promulgated by the SEC.
““Standard & Poor’s”Poor’s” means Standard & Poor’s, a division of The McGraw-Hill Companies, Inc., and any successor to its rating agency business.
““Stated Maturity”Maturity” means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency unless such contingency has occurred).
““Subordinated Obligation”Obligation” means, with respect to a Person, any Indebtedness of such Person (whether outstanding on the Issue Date or thereafter Incurred) which is subordinate or junior in right of payment to the notes or a Subsidiary Guarantee of such Person, as the case may be, pursuant to a written agreement to that effect.
““Subsidiary”Subsidiary” means, with respect to any Person, any corporation, association, partnership or other business entity of which more than 50% of the total voting power of shares of Voting Stock is at the time owned or controlled, directly or indirectly, by:
(2) such Person and one or more Subsidiaries of such Person; or
(3) one or more Subsidiaries of such Person.
““Subsidiary Guarantor”Guarantor” means each Subsidiary of the Company that executes the Indenture as a guarantor on the Issue Date and each other Subsidiary of the Company that thereafter guarantees the notes pursuant to the terms of the Indenture.
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““Subsidiary Guarantee”Guarantee” means a Guarantee by a Subsidiary Guarantor of the Company’s obligations with respect to the notes.
““Temporary Cash Investments”Investments” means any of the following:
(1) any investment in direct obligations of the United States of America or any agency thereof or obligations guaranteed by the United States of America or any agency thereof;
(2) investments in demand and time deposit accounts, certificates of deposit and money market deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America, any State thereof or any foreign country recognized by the United States of America, and which bank or trust company has capital, surplus and undivided profits aggregating in excess of $50.0 million (or the foreign currency equivalent thereof) and has outstanding debt which is rated “A” (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) or any money-market fund sponsored by a registered broker dealer or mutual fund distributor;
(3) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (1) above entered into with a bank meeting the qualifications described in clause (2) above;
(4) investments in commercial paper, maturing not more than 90 days after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of “P-1” (or higher) according to Moody’s or“A-1” “A-1” (or higher) according to Standard &and Poor’s;
(5) investments in securities with maturities of six months or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least “A” by Standard & Poor’s or “A” by Moody’s; and
(6) investments in money market funds that invest substantially all their assets in securities of the types described in clauses (1) through (5) above.
““Trustee”Total Leverage Ratio” means, as of any date of determination, the ratio of (a) consolidated Indebtedness of the Company and the Restricted Subsidiaries at such date to (b) EBITDA for the Four-Quarter Period ending on or prior to such date, with such Indebtedness and EBITDA determined on apro forma basis in the same manner as would be required under the definition of “Consolidated Coverage Ratio” and after giving effect to the transaction giving rise to the need to calculate the Total Leverage Ratio.
“Transactions” means HSBCthe offering and sale of the notes as described in the Offering Memorandum, the related tender offer for the Company’s outstanding 71/8% Senior Notes due 2016 and the repayment of all amounts outstanding under the Company’s revolving credit facility due November 2016.
“Treasury Rate” means, at any date of determination, the yield to maturity as of such date (as compiled by and published in the most recent Federal Reserve Statistical Release H. 15(519), which has become publicly available at least two Business Days prior to the date of the redemption notice for which such computation is being made (or if
such Statistical Release is no longer published, as reported in any publicly available source of similar market data)), of United States Treasury securities with a constant maturity most nearly equal to the period from the relevant redemption date to October 15, 2016;provided,however, that, if such period is not equal to the constant maturity of the United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if such period is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used.
“Trustee” means U.S. Bank USA, National Association until a successor replaces it and, thereafter, means the successor.
““Trust Indenture Act”Act” means the Trust Indenture Act of 1939(15 (15 U.S.C. §§ 77aaa-77bbbb) as in effect on the Issue Date.
““Trust Officer”Officer” means the Chairman of the Board, the President or any other officer or assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters.
““Unrestricted Subsidiary”Subsidiary” means:
(1) GPW Virginia Timberlands LLC
(2) any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below; and
(3)(2) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of, or holds any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated;provided,however, that either (A) the Subsidiary to be so designated has total assets of $1,000 or less or (B) if such Subsidiary has assets greater than $1,000, such designation would be permitted under the covenant described under “—Certain Covenants — Covenants—Limitation on Restricted Payments.”
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The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary;provided,however, that immediately after giving effect to such designation (A) the Company could Incur $1.00 of additional Indebtedness under paragraph (a) of the covenant described under “—Certain Covenants — Covenants—Limitation on Indebtedness” and (B) no Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution of the Board of Directors giving effect to such designation and an Officers’ Certificate certifying that such designation complied with the foregoing provisions.
““U.S. Government Obligations”Obligations” means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable at the issuer’s option.
““Voting Stock”Stock” of a Person means all classes of Capital Stock of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof.
““Wholly Owned Subsidiary”Subsidiary” means a Restricted Subsidiary all the Capital Stock of which (other than directors’ qualifying shares) is owned by the Company or one or more other Wholly Owned Subsidiaries.
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CERTAINMATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes certain of the material U.S. federal income tax consequences of an exchange of unregistered notes for exchange notes pursuant to this exchange offer. This discussion is based upon the provisions of the Internal Revenue Code of 1986, as amended, the Treasury Regulations promulgated thereunder, judicial authority and administrative interpretations, all as of the date hereof and all of which are subject to change, possibly with retroactive effect, or different interpretations. This discussion does not address all of the tax considerations that may be relevant to a particular holder in light of the holder’s circumstances, or to certain categories of holders that may be subject to special rules. This summary does not consider any tax consequences arising under U.S. alternative minimum tax law, U.S. federal gift and estate tax law or under the laws of any foreign, state, local or other jurisdiction.Each holder should consult its own independent tax advisor regarding its particular situation and the federal, state, local and foreign tax consequences of exchanging the unregistered notes for exchange notes and purchasing, holding and disposing of the exchange notes, including the consequences of any proposed change in applicable laws.
The exchange of unregistered notes for exchange notes in the exchange offer will not constitute a taxable event for U.S. federal income tax purposes. Consequently, for such purposes a holder will not recognize gain upon receipt of an exchange note in exchange for unregistered notes in the exchange offer, the holder’s adjusted tax basis (and adjusted issue price) in the exchange note received in the exchange offer will be the same as its adjusted tax basis (and adjusted issue price) in the corresponding unregistered note immediately before the exchange, and the holder’s holding period in the exchange note will include its holding period in the unregistered note.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for unregistered notes where such unregistered notes were acquired as a result of market-making activities or other trading activities. We have agreed that, for a period of 180 days after the consummation of the exchange offer, we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until 180 days after the date of this prospectus, all dealers effecting transactions in the exchange notes may be required to deliver a prospectus.
We will not receive any proceeds from any sale of exchange notes by broker-dealers. Exchange notes received by broker-dealers for their own account pursuant to the exchange offer may be sold from time to time in one or more transactions in theover-the-counter market, in negotiated transactions, through the writing of options on the exchange notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers that may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such exchange notes. Any broker-dealer that resells exchange notes that were received by it for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of such exchange notes may be deemed to be an “underwriter” within the meaning of the Securities Act and any profit on any such resale of exchange notes and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.
For a period of 180 days after the date of this prospectus, we will promptly send additional copies of this prospectus to any broker-dealer that requests such documents in the letter of transmittal. We have agreed to pay all expenses incident to the exchange offer (including the expenses of one counsel for the holders of the notes) other than commissions or concessions of any brokers or dealers and will indemnify the holders of the notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act.
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LEGAL MATTERS
Certain legal matters in connection with the notes offered hereby will be passed upon for us by Shearman & Sterling LLP, New York, New York and Ballard Spahr Andrews & Ingersoll LLP, Philadelphia, Pennsylvania.
EXPERTS
The financial statements, and the related financial statement schedule, incorporated in this Prospectus by reference from the Company’s Annual Report onForm 10-K for the year ended December 31, 2009,2011, and the effectiveness of P. H. Glatfelter Company and subsidiaries’ internal control over financial reporting have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their reports, which are incorporated herein by reference. Such financial statements and financial statement schedule have been so incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.
The audited consolidated financial statements of Concert Industries Corp. as of December 31, 2009 and 2008, and for the years ended December 31, 2009 and 2008, included in this prospectus have been audited by KPMG LLP, Licensed Public Accountants, as stated in their report appearing therein, and have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We file annual, quarterly and other reports, proxy statements and other information with the SEC. You may read and copy any reports, statements or other information we file with the SEC at its public reference rooms at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at1-800-SEC-0330 for further information on the public reference rooms. Our filings are also available to the public on the Internet, through a database maintained by the SEC at http://www.sec.gov. In addition, you can inspect and copy our reports, proxy statements and other information at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
Our subsidiary guarantors do not file separate financial statements with the SEC and do not independently publish their financial statements. Instead, our subsidiary guarantors’ financial condition, results of operations and cash flows are consolidated into our financial statements. Condensed consolidating financial information illustrating our subsidiary guarantors’ financial condition, results of operations and cash flows, on a combined basis, is disclosed in the notes to our consolidated financial statements.
The SEC allows us to incorporate by reference into this document the information we filed with it. This means that we can disclose important business, financial and other information to you by referring you to other documents separately filed with the SEC. All information incorporated by reference is part of this document, unless and until that information is updated and superseded by the information contained in this document or any information incorporated later.
We incorporate by reference the documents listed below, except that we are not incorporating any information included in a current report onForm 8-K that has been furnished (and not filed) with the SEC, unless such information is expressly incorporated herein by a reference in a furnished current report onForm 8-K or other furnished document.
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| | 1. | Our current reports onForm 8-K, filed January 5, 2010 (excluding Item 7.01), February 5, 2010, February 12, 2010,20, 2012, May 9, 2012, May 29, 2012, September 24, 2012, October 3, 20102012, and May 6, 2010, and our current reports onForm 8-K/A filed January 6, 2010 (excluding Item 7.01) and April 1, 2010;October 19, 2012; |
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| | 2. | Our quarterly report on Form10-Q for the quarterly periodperiods ended March 31, 2010;2012, June 30, 2012 and September 30, 2012; |
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| | 3. | Our annual report onForm 10-K for the fiscal year ended December 31, 2009.2011. |
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Our filings with the SEC, including our annual report onForm 10-K, quarterly reports onForm 10-Q, current reports onForm 8-K and amendments to those reports, are available free of charge on our website as soon as reasonably practicable after they are filed with, or furnished to, the SEC. Our Internet website is located at www.glatfelter.com. The contents of the website are not incorporated by reference into this prospectus. You also may request a copy of these filings, at no cost, by contacting us at: P. H. Glatfelter Company, 96 South George Street, Suite 500,520, York, Pennsylvania 17401 (telephone number (717) 225-4711), Attention: Investor Relations.
We also incorporate by reference all future filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities and Exchange Act of 1934 prior to the termination of the offering made hereby.
You should rely only on the information contained or incorporated by reference in this prospectus. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information you should not rely on it. We are not making an offer to sell these securities in any jurisdiction where the offer and sale is not permitted. You should assume that the information appearing in this prospectus and information incorporated by reference into this prospectus, is accurate only as of the date of the documents containing the information. Our business, financial condition, results of operation and prospects may have changed since that date.
Any request for documents should be made by , 20102013 to ensure timely delivery of the documents prior to the expiration of the exchange offer.
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INDEX TO FINANCIAL STATEMENTS
Audited Consolidated Financial Statements of Concert Industries Corp.
F-1
AUDITORS’ REPORT
To the Board of Directors of Concert Industries Corp.
We have audited the accompanying consolidated balance sheets of Concert Industries Corp. (“the Company”) and subsidiaries as at December 31, 2009 and 2008, and the related consolidated statements of operations, retained earnings and accumulated other comprehensive income (loss) and cash flows for each of the years in the two-year period ended December 31, 2009. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards and United States generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company and subsidiaries as of December 31, 2009 and 2008 and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2009 in accordance with Canadian generally accepted accounting principles.
Canadian generally accepted accounting principles vary in certain significant respects from U.S. generally accepted accounting principles. Information relating to the nature and effect of such differences is presented in Note 19 to the consolidated financial statements.
/s/ KPMG LLP
Chartered Accountants, Licensed Public Accountants
Ottawa, Canada
May 4, 2010
F-2
CONCERT INDUSTRIES CORP.
December 31, 2009, with comparative figures for 2008
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| | | 2009 | | | 2008 | |
| | | (Expressed in thousands of Canadian dollars) | |
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ASSETS |
| Current assets: | | | | | | | | |
| Cash and cash equivalents | | $ | 18,931 | | | $ | 10,263 | |
| Accounts receivable | | | 27,527 | | | | 30,660 | |
| Inventory (note 4) | | | 29,603 | | | | 37,151 | |
| Prepaids and deposits | | | 2,327 | | | | 2,697 | |
| Future income taxes (note 13) | | | 4,584 | | | | 4,905 | |
| | | | | | | | | |
| | | | 82,972 | | | | 85,676 | |
| Derivative related asset | | | 2,771 | | | | — | |
| Property, plant and equipment (note 5) | | | 105,859 | | | | 92,094 | |
| Future income taxes (note 13) | | | 9,714 | | | | 10,465 | |
| | | | | | | | | |
| | | $ | 201,316 | | | $ | 188,235 | |
| | | | | | | | | |
| |
LIABILITIES AND SHAREHOLDERS’ EQUITY |
| Current liabilities: | | | | | | | | |
| Short-term indebtedness (note 6) | | $ | 13,066 | | | $ | 14,700 | |
| Accounts payable and accrued liabilities | | | 23,320 | | | | 19,475 | |
| Current portion of long-term debt (note 8) | | | 11,735 | | | | 8,978 | |
| Derivative related liabilities | | | 593 | | | | 900 | |
| Income taxes payable | | | 604 | | | | 1,514 | |
| Shareholder loan (note 7) | | | 4,474 | | | | 4,474 | |
| | | | | | | | | |
| | | | 53,792 | | | | 50,041 | |
| Derivative related liabilities | | | 1,663 | | | | 1,529 | |
| Long-term debt (note 8) | | | 46,977 | | | | 46,973 | |
| | | | | | | | | |
| | | | 102,432 | | | | 98,543 | |
| Shareholders’ equity: | | | | | | | | |
| Share capital (note 9) | | | 44,132 | | | | 44,132 | |
| Retained earnings | | | 56,200 | | | | 40,650 | |
| Accumulated other comprehensive income (loss) | | | (1,448 | ) | | | 4,910 | |
| | | | | | | | | |
| | | | 98,884 | | | | 89,692 | |
| Commitments (note 14) | | | | | | | | |
| Subsequent events (notes 6, 8, 12, 16 and 20) | | | | | | | | |
| | | | | | | | | |
| | | $ | 201,316 | | | $ | 188,235 | |
| | | | | | | | | |
Approved on behalf of the Board:
Director
Director
See accompanying notes to consolidated financial statements.
F-3
CONCERT INDUSTRIES CORP.
Year ended December 31, 2009, with comparative figures for 2008
| | | | | | | | | |
| | | 2009 | | | 2008 | |
| | | (Expressed in thousands of Canadian dollars) | |
| |
| Revenue | | $ | 230,711 | | | $ | 227,037 | |
| Cost of sales | | | 182,163 | | | | 172,558 | |
| | | | | | | | | |
| | | | 48,548 | | | | 54,479 | |
| Expenses: | | | | | | | | |
| Administration | | | 12,529 | | | | 11,379 | |
| Amortization | | | 4,692 | | | | 3,113 | |
| Fixed manufacturing, product development and overhead | | | 10,248 | | | | 9,494 | |
| Selling and marketing | | | 2,832 | | | | 2,466 | |
| | | | | | | | | |
| | | | 30,301 | | | | 26,452 | |
| | | | | | | | | |
| Earnings before the undernoted | | | 18,247 | | | | 28,027 | |
| Interest expense | | | 3,904 | | | | 3,000 | |
| (Gain) loss on derivative instruments | | | (2,973 | ) | | | 2,149 | |
| | | | | | | | | |
| Earnings before income taxes | | | 17,316 | | | | 22,878 | |
| Income taxes (reduction) (note 13): | | | | | | | | |
| Current | | | 1,138 | | | | 2,386 | |
| Future | | | 628 | | | | (2,348 | ) |
| | | | | | | | | |
| | | | 1,766 | | | | 38 | |
| | | | | | | | | |
| Net earnings | | | 15,550 | | | | 22,840 | |
| Other comprehensive income (loss), net of taxes: | | | | | | | | |
| Unrealized (loss) gain on translating financial statements of self-sustaining foreign operation | | | (6,337 | ) | | | 7,218 | |
| Change in fair value of cash flow hedging derivative instruments | | | (21 | ) | | | (204 | ) |
| Reclassification to net earnings upon settlement of cash flow hedging derivatives | | | — | | | | (246 | ) |
| | | | | | | | | |
| Other comprehensive (loss) income | | | (6,358 | ) | | | 6,768 | |
| | | | | | | | | |
| Comprehensive income | | $ | 9,192 | | | $ | 29,608 | |
| | | | | | | | | |
See accompanying notes to consolidated financial statements.
F-4
CONCERT INDUSTRIES CORP.
Year ended December 31, 2009, with comparative figures for 2008
| | | | | | | | | |
| | | 2009 | | | 2008 | |
| | | (Expressed in thousands of
| |
| | | Canadian dollars) | |
| |
| Retained earnings, beginning of year | | $ | 40,650 | | | $ | 17,810 | |
| Net earnings | | | 15,550 | | | | 22,840 | |
| | | | | | | | | |
| Retained earnings, end of year | | $ | 56,200 | | | $ | 40,650 | |
| | | | | | | | | |
| Accumulated other comprehensive income (loss), beginning of year | | $ | 4,910 | | | $ | (1,858 | ) |
| Cumulative translation adjustment | | | (6,337 | ) | | | 7,218 | |
| Accumulated net change in fair value of cash flow hedging derivative instruments | | | (21 | ) | | | (204 | ) |
| Accumulated net change in reclassification of net earnings upon settlement of cash flow hedging derivatives | | | — | | | | (246 | ) |
| | | | | | | | | |
| | | | (6,358 | ) | | | 6,768 | |
| | | | | | | | | |
| Accumulated other comprehensive income (loss), end of year | | $ | (1,448 | ) | | $ | 4,910 | |
| | | | | | | | | |
See accompanying notes to consolidated financial statements.
F-5
| | | | | | | | | |
| | | 2009 | | | 2008 | |
| | | (Expressed in thousands of Canadian dollars) | |
| |
| Cash provided by (used in): | | | | | | | | |
| Operations: | | | | | | | | |
| Net earnings | | $ | 15,550 | | | $ | 22,840 | |
| Adjustment for non-cash items: | | | | | | | | |
| Amortization | | | 4,692 | | | | 3,113 | |
| Unrealized foreign exchange (gain) loss | | | (1,592 | ) | | | 2,162 | |
| Future income taxes (reduction) | | | 628 | | | | (2,348 | ) |
| Stock-based compensation | | | 2,395 | | | | 200 | |
| (Gain) loss on derivative instruments | | | (2,973 | ) | | | 2,149 | |
| | | | | | | | | |
| | | | 18,700 | | | | 28,116 | |
| Changes in non-cash operating working capital: | | | | | | | | |
| Decrease (increase) in accounts receivable | | | 990 | | | | (116 | ) |
| Decrease (increase) in inventory | | | 4,960 | | | | (4,553 | ) |
| Decrease (increase) in prepaids and deposits | | | 280 | | | | (769 | ) |
| Increase (decrease) in accounts payable and accrued liabilities | | | 2,036 | | | | (5,546 | ) |
| | | | | | | | | |
| | | | 26,966 | | | | 17,132 | |
| Investments: | | | | | | | | |
| Purchase of property, plant and equipment | | | (28,452 | ) | | | (38,987 | ) |
| Financing: | | | | | | | | |
| Proceeds from short-term indebtedness | | | 349 | | | | 2,818 | |
| Proceeds from long-term debt | | | 18,827 | | | | 51,927 | |
| Repayment of long-term debt | | | (8,249 | ) | | | (27,361 | ) |
| | | | | | | | | |
| | | | 10,927 | | | | 27,384 | |
| Foreign exchange gain (loss) on cash held in foreign currency | | | (773 | ) | | | 639 | |
| | | | | | | | | |
| Increase in cash and cash equivalents | | | 8,668 | | | | 6,168 | |
| Cash and cash equivalents, beginning of year | | | 10,263 | | | | 4,095 | |
| | | | | | | | | |
| Cash and cash equivalents, end of year (note 2(b)) | | $ | 18,931 | | | $ | 10,263 | |
| | | | | | | | | |
| Supplementary cash flow information (note 18) | | | | | | | | |
See accompanying notes to consolidated financial statements.
F-6
Concert Industries Corp. (the “Company”) is incorporated under the Canadian Business Corporations Act and its principal business activity is the manufacture and sale of thermal, latex and multi-bonded airlaid fabrics.
| |
2. | Significant accounting policies: |
| |
(a) | Basis of presentation: |
The consolidated balance sheet of the Company as at December 31, 2009 includes the accounts of its wholly owned subsidiaries including its significant operating subsidiaries Concert GmbH, AA-Tech Systems Advanced Airlaid Technology GmbH and Concert Airlaid Ltée. The Company is a wholly-owned subsidiary of Tricap Management Limited (“Tricap”), an entity controlled by Brookfield Asset Management. All intercompany balances and transactions have been eliminated.
On February 12, 2010, Tricap completed the sale of all of the outstanding shares of the Company to P.H. Glatfelter Company (note 20).
| |
(b) | Cash and cash equivalents: |
The Company considers cash and cash equivalents to be highly liquid investments with original maturities of three months or less.
Raw materials are valued at the lower of cost and net realizable value. Finished goods are valued at the lower of cost and net realizable value. Cost is determined using thefirst-in first-out method.
| |
(d) | Property, plant and equipment: |
Property, plant and equipment are recorded at cost. Amortization is determined as follows:
| | |
Asset
| | |
|
Airlaid plants and equipment | | Straight-line over 15 years |
Buildings | | Straight-line over 25 years |
Leasehold improvements | | Straight-line over the life of the lease |
Furniture and equipment | | Straight-line over 5 years |
Any government grants received by the Company are applied to reduce the capital cost of the Company’s Airlaid plant and equipment.
| |
(f) | Impairment of long-lived assets: |
The Company assesses impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying value of the asset to future net undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset exceeds its fair value.
F-7
CONCERT INDUSTRIES CORP.
Notes to Consolidated Financial Statements — (Continued)
| |
(g) | Foreign currency translation: |
The functional currency of the Company is the Canadian dollar and that of its foreign subsidiaries is the local currency. The foreign subsidiaries are self-sustaining. Accordingly, the financial statements of the Company’s foreign subsidiaries have been translated into Canadian dollars using the current rate method whereby assets and liabilities are translated at the exchange rate in effect on the balance sheet date and revenue and expense items are translated at the average rate of exchange prevailing during the period. Gains and losses on translation are deferred and included as the cumulative translation adjustment in accumulated other comprehensive income, a component of shareholders’ equity.
In addition, the Company enters into transactions denominated in foreign currencies that have been translated into Canadian dollars as follows:
(i) monetary assets and liabilities at year-end rate;
(ii) all other assets and liabilities at rate in effect on the transaction date; and
(iii) revenue and expense items at the average rate of exchange prevailing during the period.
Exchange gains and losses arising from these transactions are reflected in results from operations.
Exchange rates for Euros to Canadian dollars for December 31, 2009: the spot rate was 1.5000 (2008 — 1.7046) and the average rate for the year ended December 31, 2009 was 1.5912 (2008 — 1.5564).
The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Areas requiring significant estimates include provision for sales returns and customer rebates, valuation of accounts receivable, inventory, future income tax assets, and property, plant and equipment, income tax expense and stock-based compensation.
| |
(i) | Research and development expenses: |
Research costs net of related investment tax credits and other amounts recoverable are expensed in the year in which they are incurred. Development costs are expensed in the year incurred unless such costs meet the criteria under generally accepted accounting principles for deferral and amortization.
The Company recognizes revenue when the risk of ownership and title to the product passes to the customer, which is when goods are shipped, and collectibility of amounts due from customers is probable. A reserve for sales returns and customer rebates are recognized based on historical experience and contractual obligations at the time revenue is recognized. Customer volume rebates are provided for over the term of the contract based on estimated sales volumes and the corresponding rebates payable.
| |
(k) | Stock-based compensation: |
The Company has a stock-based compensation plan, which is described in note 12. The Company accounts for all employee awards that are direct awards of stock, call for settlement in cash or other assets, or are stock appreciation rights that call for settlement by the issuance of equity instruments, using the fair value based method.
F-8
CONCERT INDUSTRIES CORP.
Notes to Consolidated Financial Statements — (Continued)
Under the fair value based method, compensation cost attributable to awards to employees that are direct awards of stock, appreciation rights that call for settlement by the issuance of equity instruments, is measured at fair value at the grant date and recognized over the vesting period. Compensation cost attributable to awards to employees that call for settlement in cash or other assets is measured at intrinsic value and recognized over the vesting period. Changes in intrinsic value between the grant date and the measurement date results in a change in the measure of compensation cost. For awards that vest at the end of the vesting period, compensation cost is recognized on a straight-line basis; for awards that vest on a graded basis, compensation cost is recognized on a pro-rata basis over the vesting period.
The Company uses the asset and liability method of accounting for income taxes. Under this method future tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Future tax assets and liabilities are measured using enacted or substantively enacted tax rates expected to apply when the tax assets and liabilities are recovered or settled. The effect on future tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the substantive enactment date. Future tax assets are recognized to the extent that they are considered “more likely than not” to be realized.
| |
(m) | Financial instruments: |
The Company’s cash and cash equivalents are classified as held for trading with changes in fair value recorded in the consolidated statement of operations. Accounts receivable are classified as loans and receivables. Short-term indebtedness, accounts payable and accrued liabilities and long-term debt are classified as other financial liabilities. Forward foreign currency contracts and interest rate swap contracts are classified as held for trading unless they are accounted for as a hedge.
Derivatives are classified as held for trading unless designated as hedging instruments. All derivatives, including embedded derivatives, are measured at fair value. For derivatives that hedge variability in cash flows, the effective portion of changes in the derivatives’ fair value is initially recognized in other comprehensive income, and will subsequently be reclassified to net income in the periods affected by the variability in the cash flows of the hedged item.
The Company uses derivative instruments, such as forward currency contracts and interest rate swap contracts to manage the Company’s exposure to fluctuations in cash flows resulting from foreign exchange risk and interest rate risk related to fixed priceand/or foreign denominated sales and purchases, including anticipated transactions. The Company’s policy is not to enter into derivative instruments for speculative purposes.
Certain derivative instruments that are held for economic hedging purposes, and do not meet the requirements of Section 3865, are classified as held for trading with the changes in fair value being recorded in the consolidated statement of operations in the (gain) loss on derivative instruments.
When derivative instruments are used, the Company determines whether hedge accounting can be applied. Where hedge accounting is appropriate, the Company designates the hedged relationship as a cash flow hedge. All designated hedges are formally documented at inception, detailing the particular risk management objective and the strategy for undertaking the hedge transaction. The documentation identifies the specific asset or liability being hedged, the risk that is being hedged, the type of derivative used and how effectiveness will be assessed. The Company assesses whether the derivatives are highly effective in accomplishing the objective of offsetting changes in forecasted cash flows attributable to the risk being hedged both at inception and over the life of the hedge. Furthermore, accumulated ineffectiveness is measured over
F-9
CONCERT INDUSTRIES CORP.
Notes to Consolidated Financial Statements — (Continued)
the life of the hedge. The effective portion of the hedge is recorded in accumulated other comprehensive income, while the ineffective portion is recognized in the statement of operations in the change in fair value of derivative instruments.
Transaction costs related to long-term debt are deducted from the initial carrying amount of the long-term debt and are amortized using the effective interest rate method.
| |
3. | New accounting standards: |
| |
(a) | Goodwill and intangible assets: |
On January 1, 2008, the Company adopted CICA Handbook Section 3064,Goodwill and Intangible Assets. Section 3064, which replaces Section 3062,Goodwill and Other Intangible Assets, and Section 3450,Research and Development Costs, establishes standards for the recognition, measurement and disclosure of goodwill and intangible assets. The provisions relating to the definition and initial recognition of intangible assets, including internally generated intangible assets, are equivalent to the corresponding provisions of International Financial Reporting Standards (IFRS) IAS 38,Intangible Assets. The initial adoption of this standard did not impact the Company’s financial statements.
| |
(b) | Credit risk and the fair value of financial assets and financial liabilities: |
On January 20, 2009, the Emerging Issues Committee issued Abstract 173 (EIC-173),Credit Risk and the Fair value of Financial Assets and Financial Liabilities. EIC-173 stipulates that an entity’s own credit risk and the credit risk of the counterparty should be taken into account in determining the fair value of financial assets and financial liabilities, including derivative financial instruments. EIC-173 applies to the Company effective January 1, 2009 and must be applied retrospectively without restatement of prior periods. In accordance with EIC-173, certain financial assets and financial liabilities, including derivative financial instruments, had to be remeasured as at January 1, 2009. Any adjustment to the fair value must be recorded as an adjustment to the balance of retained earnings as at that date, except certain adjustments related to derivative financial instruments in a hedging relationship. In certain specific cases, any resulting difference would be recorded either inOther comprehensive incomeor as an adjustment to the carrying value of the hedged item. The initial adoption of this standard did not impact the Company’s consolidated financial statements.
| |
(c) | Financial instrument disclosures: |
In June 2009, the CICA amended Handbook Section 3862,Financial Instruments — Disclosures, to enhance disclosures about fair value measurements and the liquidity risk of financial instruments.
All financial instruments recognized at fair value on the Consolidated Balance Sheet must be classified in three fair value hierarchy levels, which are as follows:
| | |
| • | Level 1 —valuation based on quoted prices (unadjusted) observed in active markets for identical assets or liabilities; |
|
| • | Level 2 —valuation techniques based on inputs that are quoted prices of similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; inputs other than quoted prices used in a valuation model that are observable for that instrument; and inputs that are derived principally from or corroborated by observable market data by correlation or other means; and |
|
| • | Level 3 —valuation techniques with significant unobservable market inputs. |
This information is presented in note 16.
F-10
CONCERT INDUSTRIES CORP.
Notes to Consolidated Financial Statements — (Continued)
| | | | | | | | | |
| | | 2009 | | | 2008 | |
| |
| Raw materials | | $ | 12,957 | | | $ | 13,292 | |
| Work-in-process | | | 3,215 | | | | 3,629 | |
| Finished goods | | | 13,431 | | | | 20,230 | |
| | | | | | | | | |
| | | $ | 29,603 | | | $ | 37,151 | |
| | | | | | | | | |
| |
5. | Property, plant and equipment: |
| | | | | | | | | | | | | |
| | | | | | Accumulated
| | | Net Book
| |
2009 | | Cost | | | Amortization | | | Value | |
| |
| Airlaid plants and equipment | | $ | 74,459 | | | $ | 11,275 | | | $ | 63,184 | |
| Buildings and leasehold improvements | | | 39,338 | | | | 4,590 | | | | 34,748 | |
| Furniture and equipment | | | 6,774 | | | | 1,958 | | | | 4,816 | |
| Land | | | 1,835 | | | | — | | | | 1,835 | |
| Land improvement | | | 109 | | | | 2 | | | | 107 | |
| Construction in progress | | | 1,169 | | | | — | | | | 1,169 | |
| | | | | | | | | | | | | |
| | | $ | 123,684 | | | $ | 17,825 | | | $ | 105,859 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | Accumulated
| | | Net Book
| |
2008 | | Cost | | | Amortization | | | Value | |
| |
| Airlaid plants and equipment | | $ | 39,079 | | | $ | 8,935 | | | $ | 30,144 | |
| Buildings and leasehold improvements | | | 24,785 | | | | 3,572 | | | | 21,213 | |
| Furniture and equipment | | | 4,543 | | | | 1,323 | | | | 3,220 | |
| Land | | | 1,934 | | | | — | | | | 1,934 | |
| Land improvement | | | 110 | | | | — | | | | 110 | |
| Construction in progress | | | 35,473 | | | | — | | | | 35,473 | |
| | | | | | | | | | | | | |
| | | $ | 105,924 | | | $ | 13,830 | | | $ | 92,094 | |
| | | | | | | | | | | | | |
During the year ended December 31, 2009, $14,227 of capital expenditure grants were received (2008 — $3,869). Grants received from the German and Canadian governments are netted against property, plant and equipment, primarily in Airlaid plants and equipment.
The Company will be eligible to apply for additional tax related German government grants of up to Euro 5,550. These grants may be received if certain eligibility, application and audit criteria are fulfilled.
| |
6. | Short-term indebtedness: |
The Company has available an unsecured non-interest bearing credit facility in Canada in an aggregate amount not to exceed US $13,305 established with Tricap. Amounts drawn on the facility are repayable on demand. At December 31, 2009, $10,022 (2008 — $11,614) has been drawn under this credit facility.
The Company also has a line of credit in Germany for a maximum of $9,000 (Euro 6,000). At December 31, 2009 $3,044 (Euro 2,030) (2008 — $3,086), was outstanding under this line of credit. This line of credit bears interest at 8% and is unsecured.
The Company has a $10,000, 364 days term operating facility that expires on July 13, 2010. This credit facility is available in Canadian or US dollars. Interest is at Canadian Prime Rate or US Base Rate. Security is
F-11
CONCERT INDUSTRIES CORP.
Notes to Consolidated Financial Statements — (Continued)
a first ranking hypothec on accounts receivable and inventory. At December 31, 2009, $Nil (2008 — $Nil) was outstanding under this credit facility.
On February 11, 2010, as part of the sale of the Company’s shares (note 20), both the US $13,305 unsecured credit facility and the $10,000 364 days term operating facility were repaid, converted or discharged.
The shareholder loan is payable to the parent company is denominated in Canadian dollars and is secured by a first charge on the assets of the Company and its subsidiaries and bears interest at 0.1%. The shareholder loan is repayable on demand.
In February 2010, as part of the sale of the Company’s shares (note 20), the shareholder loan was repaid.
| | | | | | | | | |
| | | 2009 | | | 2008 | |
| |
| Deutsche Bank syndicate loan of Euro 62,500 secured by mortgage of Concert GmbH land of Euro 47,700, machinery equipment and blanket assignment of all trade receivables and inventory of Concert GmbH. Joint and several liability of Concert GmbH, Concert Europe GmbH, AA-Tech Systems Advanced Airlaid Technology GmbH. Denominated in Euro, with a credit facility of Euro 56,500 of long-term debt and a Euro 6,000 line of credit. The long-term debt is in 3 tranches A, B, and C. Tranche A is a Euro 14,700 facility and was fully drawn in June 2008. Euro 639 quarterly repayments commenced in June 2008. Tranche A will mature in December 2013. Tranche B is a Euro 27,000 facility and has had Euro 9,500 drawn in 2008 and Euro 11,500 drawn in 2009. Quarterly repayments of Euro 1,227 commenced in September 2009 and will mature in December 2014. Tranche A and B bear interest at EURIBOR 3 month variable rate plus an interest margin based on interest coverage, leverage and net worth calculations. Tranche C is a Euro 14,800 facility and is undrawn at September 30, 2009 and will bear interest at EURIBOR plus 1.50% | | $ | 43,159 | | | $ | 37,985 | |
Deutsche Bank promissory note payable of Euro 8,000 fully drawn in 2008, bearing interest at 7.48% payable quarterly, principal is repayable by a lump sum payment in June 2015. Joint and several liability of Concert GmbH, Concert Europe GmbH,AA-Tech Systems Advanced Airlaid Technology GmbH. This promissory note is also secured by the mortgage of Concert GmbH land of Euro 47,700, machinery equipment and blanket assignment of all trade receivables and inventory of Concert GmbH | | | 12,000 | | | | 13,637 | |
| Canada Economic Development loan, interest free, quarterly principal repayments of $38 commencing January 2010, due September 2016 | | | 1,063 | | | | 1,063 | |
Government of Germany Loan denominated in Euro, initial advance of Euro 2,556, repayable in annual payments of Euro 251 over a10-year period commencing in 2007 and bearing interest at 6.6%, payable semi-annually | | | 2,490 | | | | 3,266 | |
| | | | | | | | | |
| | | | 58,712 | | | | 55,951 | |
| Current portion | | | 11,735 | | | | 8,978 | |
| | | | | | | | | |
| | | $ | 46,977 | | | $ | 46,973 | |
| | | | | | | | | |
F-12
CONCERT INDUSTRIES CORP.
Notes to Consolidated Financial Statements — (Continued)
The Company is obligated to make the following principal payments at December 31, 2009:
| | | | | |
| |
| 2010 | | $ | 11,735 | |
| 2011 | | | 11,735 | |
| 2012 | | | 11,735 | |
| 2013 | | | 10,096 | |
| 2014 | | | 13,411 | |
| | | | | |
| | | $ | 58,712 | |
| | | | | |
As part of the sale of the Company’s shares (note 20), the Canada Economic Development loan was fully repaid on February 3, 2010. The Deutsche Bank Syndicate loan, Deutsche Bank promissory note and Government of Germany loan were fully repaid on February 12, 2010 (note 20).
The Company has two outstanding interest rate swaps with Deutsche Bank at December 31, 2009. The first interest rate swap commenced on October 10, 2008 and exchanges variable interest for a fixed interest of 3.83% on a notional amount of Euro 5,432. The second interest rate swap commences on September 30, 2009 and exchanges variable interest for a fixed interest of 4.19% on a notional amount of Euro 25,773. The fair value of the interest rate swaps at December 31, 2009 is $2,256 and is recorded in derivative related liabilities.
As part of the sale of the Company’s shares (note 20), the interest rate swaps were settled by cash payment on February 12, 2010.
| | | | | | | | | |
| | | 2009 | | | 2008 | |
| |
| Authorized: | | | | | | | | |
| Unlimited number of common shares with no par value | | | | | | | | |
| Unlimited number of restricted-voting common shares | | | | | | | | |
| Issued: | | | | | | | | |
| 32,723,351 common shares | | $ | 31,739 | | | $ | 31,739 | |
| 12,776,649 restricted-voting common shares | | | 12,393 | | | | 12,393 | |
| | | | | | | | | |
| | | $ | 44,132 | | | $ | 44,132 | |
| | | | | | | | | |
| |
10. | Accumulated other comprehensive income: |
| | | | | | | | | |
| | | 2009 | | | 2008 | |
| |
| Accumulated cumulative translation adjustment | | $ | (1,223 | ) | | $ | 5,114 | |
| Accumulated net change in reclassification of net earnings upon settlement of cash flow hedging derivatives | | | (225 | ) | | | (204 | ) |
| | | | | | | | | |
| | | $ | (1,448 | ) | | $ | 4,910 | |
| | | | | | | | | |
F-13
CONCERT INDUSTRIES CORP.
Notes to Consolidated Financial Statements — (Continued)
| |
11. | Related party transactions: |
| |
(a) | Short-term indebtedness, as described in note 6. |
| |
(b) | Shareholder loan payable, as described in note 7. |
These transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related party.
| |
12. | Stock-based compensation: |
Under the Company’s stock option plan, the Company may grant options to Employees, Executives and Consultants to purchase common shares. The terms and number of Common Shares covered by each option is to be determined by the Board of Directors upon issuance. The plan currently contemplates that a maximum of 10,000,000 common shares may be granted under the stock option plan. The exercise price for each share covered by an option shall be the fair market value of common shares as established by the Board of Directors, subject to the terms of the plan. Options granted may be exercised over a period not exceeding ten years.
A summary of the status of the plan is as follows:
| | | | | | | | | | | | | | | | | |
| | | | | | 2009
| | | | | | 2008
| |
| | | | | | Weighted
| | | | | | Weighted
| |
| | | | | | Average
| | | | | | Average
| |
| | | | | | Exercise
| | | | | | Exercise
| |
| | | Options | | | Price | | | Options | | | Price | |
| |
| Outstanding, beginning of year | | | 3,055,000 | | | $ | 1.95 | | | | 3,055,000 | | | $ | 1.95 | |
| Exercised | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | |
| Options outstanding, end of year | | | 3,055,000 | | | $ | 1.95 | | | | 3,055,000 | | | $ | 1.95 | |
| | | | | | | | | | | | | | | | | |
| Options exercisable, end of year | | | — | | | $ | — | | | | — | | | $ | — | |
| | | | | | | | | | | | | | | | | |
The following table summarizes information about stock options outstanding at December 31, 2009:
| | | | | | | | | | | | | |
| | | Options Outstanding | |
| | | | | | | | | Average
| |
| | | | | | | | | Remaining
| |
| | | Exercise
| | | Number of
| | | Contractual
| |
| | | Price | | | Options | | | Life of Options | |
| |
| | | $ | 1.95 | | | | 3,055,000 | | | | 6.66 | |
| | | | | | | | | | | | | |
All outstanding stock options are classified as liabilities and are carried at their intrinsic value as adjusted for vesting. The intrinsic value ismarked-to-market each period and is amortized to expense over the period in which the related services are rendered. The stock options vest to the optionee after eight years. Upon an acquisition of the Company’s shares, the Board of Directors of the Company may decide to accelerate the vesting and the exercise date of the outstanding options.
Stock compensation expense for the year is $2,395 (2008 — $200).
On February 11, 2010, as part of the sale of the Company’s shares (note 20), the Company’s Board of Directors approved the immediate vesting of all outstanding stock options. These options were settled for $7,198 in cash on February 11, 2010.
F-14
CONCERT INDUSTRIES CORP.
Notes to Consolidated Financial Statements — (Continued)
Income tax expense attributable to earnings from continuing operations differs from the amounts computed by applying the combined Canadian federal and provincial income tax rate of 30.9% (2008 — 30.9%) to earnings from continuing operations before income taxes and non-controlling interest as follows:
| | | | | | | | | |
| | | 2009 | | | 2008 | |
| |
| Earnings from continuing operations before income taxes | | $ | 17,316 | | | $ | 22,878 | |
| | | | | | | | | |
| Expected income tax | | $ | 5,351 | | | $ | 6,927 | |
| Tax effect of: | | | | | | | | |
| Results from foreign operations taxed at higher (lower) rates | | | (559 | ) | | | (902 | ) |
| Change in valuation allowance — realization of losses carried forward | | | (3,345 | ) | | | (9,010 | ) |
| Change in substantively-enacted tax rates | | | — | | | | 1,291 | |
| Other | | | 319 | | | | 1,732 | |
| | | | | | | | | |
| | | | (3,585 | ) | | | (6,889 | ) |
| | | | | | | | | |
| | | $ | 1,766 | | | $ | 38 | |
| | | | | | | | | |
The tax effects of temporary differences that give rise to significant portions of future income tax assets and liabilities are presented below:
| | | | | | | | | |
| | | 2009 | | | 2008 | |
| |
| Future income tax assets: | | | | | | | | |
| Property, plant and equipment | | $ | 4,995 | | | $ | 5,958 | |
| Non-capital loss carry forwards | | | 42,217 | | | | 45,582 | |
| Net capital loss carry forwards | | | 819 | | | | 819 | |
| Research and development tax deduction carry forwards | | | 2,522 | | | | 2,215 | |
| Other | | | 613 | | | | 415 | |
| | | | | | | | | |
| Total gross future income tax assets | | | 51,166 | | | | 54,989 | |
| Valuation allowance | | | (35,950 | ) | | | (39,295 | ) |
| | | | | | | | | |
| Net future income tax assets | | | 15,216 | | | | 15,694 | |
| Future income tax liabilities: | | | | | | | | |
| Financing costs | | | 228 | | | | 324 | |
| Derivative instruments | | | 690 | | | | — | |
| | | | | | | | | |
| Total gross future income tax liabilities | | | 918 | | | | 324 | |
| | | | | | | | | |
| Net future income tax assets | | $ | 14,298 | | | $ | 15,370 | |
| | | | | | | | | |
In making an assessment of whether future income tax assets are more likely than not to be realized, management prepares information regarding the expected use of such assets by reference to its internal income forecasts. The ultimate realization of future income tax assets is dependent upon the generation of future taxable income during the years in which the temporary differences are deductible and the available non-capital loss carry forwards can be utilized. Management considers the scheduled reversals of future income tax liabilities, the character of future income tax assets and available tax planning strategies in making this assessment.
No valuation allowance has been recorded in relation to future income tax assets related to deductible temporary differences of the European operations.
F-15
CONCERT INDUSTRIES CORP.
Notes to Consolidated Financial Statements — (Continued)
Based on management’s best estimates of the expected realization of future income tax assets, during 2008 and 2009 the Company reduced the valuation allowance relating to its North American operations to reflect that it is more likely than not that certain future income tax assets will be realized.
The Company and its Canadian subsidiary have non-capital loss carry forwards in Canada for federal income tax purposes of approximately $144,000 which can be used to offset future Canadian taxable income. These losses expire as follows:
| | | | | |
| 2014 | | $ | 138,000 | |
| 2015 | | | 6,000 | |
| | | | | |
| | | $ | 144,000 | |
| | | | | |
(a) The Company has committed to the following operating lease payments for premises and equipment in the next two years:
(b) The Company has property, plant and equipment related commitments of $2,354 at December 31, 2009.
| |
15. | Capital risk management: |
The Company manages its capital to maintain its ability to continue as a going concern and to provide returns to shareholders and benefits to other stakeholders. The capital structure of the Company consists of cash and cash equivalents, short-term indebtedness and equity comprising of issued capital, retained earnings and accumulated other comprehensive income.
The Company manages its capital structure and makes adjustments to it in light of economic conditions. The Company, upon approval from its board of directors, will balance its overall capital structure through new share issues, share repurchases, the payment of dividends, the issue of debt or by undertaking other activities as deemed appropriate under the specific circumstances.
The Company is not subject to externally imposed capital requirements and the Company’s overall strategy with respect to capital risk management remains unchanged from the year ended December 31, 2008.
F-16
CONCERT INDUSTRIES CORP.
Notes to Consolidated Financial Statements — (Continued)
| |
16. | Financial risk management and financial instruments: |
| |
(a) | Classification and fair values of financial instruments: |
| |
(i) | At December 31, the classification of the Company’s financial instruments, as well as their carrying amounts are as follows: |
| | | | | | | | | | | |
| | | | | 2009 | | 2008 |
| | | | | Carrying
| | Carrying
|
Financial Assets and Liabilities | | Classification | | Amount | | Amount |
| |
| Cash and cash equivalents | | Held for trading | | $ | 18,931 | | | $ | 10,263 | |
| Accounts receivable | | Loans and receivables | | | 27,527 | | | | 30,660 | |
| Derivative related asset | | Held for trading | | | 2,771 | | | | — | |
| Short-term indebtedness | | Other liabilities | | | 13,066 | | | | 14,700 | |
| Accounts payable and accrued liabilities | | Other liabilities | | | 23,320 | | | | 19,475 | |
| Derivative related liabilities — current | | Held for trading | | | 593 | | | | 900 | |
| Shareholder loan | | Other liabilities | | | 4,474 | | | | 4,474 | |
| Current portion of long-term debt | | Other liabilities | | | 11,735 | | | | 8,978 | |
| Derivative related liabilities — non-current | | Held for trading | | | 1,663 | | | | 1,529 | |
| Long-term debt | | Other liabilities | | | 46,977 | | | | 46,973 | |
| | | | | | | | | | | |
The Company had neither available for sale, nor held to maturity financial instruments during the years ended December 31, 2009 or 2008.
The Company has determined the fair values of its financial instruments as follows:
| | |
| • | Cash and cash equivalents, accounts receivable, short-term indebtedness, accounts payable and accrued liabilities and shareholder loan carrying amounts approximate their fair values as a result of the relatively short-term nature of these financial instruments. |
|
| • | The fair value of long-term debt has been estimated based on a discounted cash flow approach using current market rates. The fair value of long-term debt at December 31, 2009 is $57,712 (2008 — $54,438). |
|
| • | The fair values of the Company’s forward foreign currency contracts and interest rate swap contracts and other derivative instruments are based on market prices. |
|
| • | All financial instruments recognized at fair value on the consolidated balance sheet have been classified as Level 1 financial instruments. There were no changes in classification levels during the year. |
| |
(ii) | Interest income and expense: |
The Company has recorded net investment income in relation to the following financial instruments:
| | | | | | | | | |
| | | 2009 | | | 2008 | |
| |
| Financial assets held for trading: | | | | | | | | |
| Interest income earned on: | | | | | | | | |
| Cash and cash equivalents | | $ | 52 | | | $ | 157 | |
| | | | | | | | | |
| Financial liabilities: | | | | | | | | |
| Interest expense on short-term indebtedness, shareholder loan and long-term debt | | $ | (3,904 | ) | | $ | (3,000 | ) |
| | | | | | | | | |
F-17
CONCERT INDUSTRIES CORP.
Notes to Consolidated Financial Statements — (Continued)
| |
(iii) | Accounts receivable: |
The Company’s accounts receivable are comprised of following:
| | | | | | | | | |
| | | 2009 | | | 2008 | |
| |
| Trade receivables | | $ | 22,237 | | | $ | 23,132 | |
| Allowance for doubtful accounts | | | (512 | ) | | | (556 | ) |
| Other | | | 5,802 | | | | 8,084 | |
| | | | | | | | | |
| | | $ | 27,527 | | | $ | 30,660 | |
| | | | | | | | | |
The Company has exposure to credit risk, liquidity risk and market risk. The Company’s board of directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The board reviews the Company’s risk management policies on an annual basis.
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s accounts receivable, cash and cash equivalents and derivative instruments. The carrying amount of financial assets represents the maximum credit exposure.
The Company has adopted a credit policy under which each new customer is analyzed individually for creditworthiness before the Company’s standard payment terms and conditions are offered.
When available, the Company reviews credit bureau ratings, bank accounts and financial information for each new customer. Customers that fail to meet the Company’s established credit policy are required to provide cash in advance or meet other terms that mitigate risk to appropriate customer levels.
Cash and cash equivalents
The Company’s excess cash is deposited in large financial institutions or it is invested with the objective of maintaining safety of principal and providing adequate liquidity to meet all current payment obligations and future planned capital expenditures and with the secondary objective of maximizing the overall yield of the portfolio. Short-term investments must be rated at least investment grade by the recognized rating agencies. The Company does not expect any counterparties to these short-term investments to fail to meet their obligations.
Accounts receivable
The Company’s exposure to credit risk is subject to the concentration of its key customers. The Company’s five largest customers represent 77% of consolidated accounts receivable at December 31, 2009. These five customers are consumer product manufacturers and have been transacting with the Company for many years without any significant occurrence of losses to the Company. The Company believes that, despite the concentration of credit, credit risk is limited due to the financial stability of its largest customers and the long-standing relationships the Company has with these customers.
F-18
CONCERT INDUSTRIES CORP.
Notes to Consolidated Financial Statements — (Continued)
The maximum exposure to credit risk for trade accounts receivable by geographic region are as follows:
| | | | | |
| | | Carrying Amounts
|
| | | December 31, 2009 |
| |
| United States | | $ | 8,357 | |
| Canada | | | 65 | |
| Europe | | | 13,815 | |
| | | | | |
The Company establishes an allowance for doubtful accounts that represents its estimate of incurred losses in respect of trade receivables. The main component of this allowance is a specific loss component that relates to individual significant exposures. As at December 31, 2009, the Company had an allowance for doubtful accounts of $512 (2008 — $556). At December 31, 2009 and December 31, 2008, the Company had no material past due trade accounts receivable.
Derivatives
Credit risk relating to forward foreign currency contracts and interest rate swap contracts and other derivative instruments arises from the possibility that the counterparties to the agreements may default on their respective obligations under the agreements in instances where these agreements have positive fair value for the Company. These counterparties are the Company’s ultimate parent or large international financial institutions and to date, no such counterparty has failed to meet its financial obligation to the Company.
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.
The Company manages its liquidity risk by continuously monitoring forecast and actual gross profit and cash flows from operations, and compares it to forecasted cash requirements for capital expenditures and debt obligations.
The following table presents the contractual terms to maturity of the financial liabilities, reflecting undiscounted disbursements, owed by the Company as at December 31, 2009:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Carrying
| | | | Contractual
| | | Less Than
| | | 1 to 2
| | | 2 to 5
| | | More Than
| |
| | | Amount | | | | Cash Flows | | | 1 Year | | | Years | | | Years | | | 5 Years | |
| Non-derivative financial liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | |
| Accounts payable and accrued liabilities | | $ | 23,320 | | | | $ | 23,320 | | | $ | 23,320 | | | $ | — | | | $ | — | | | $ | — | |
| Short-term indebtedness | | | 13,066 | | | | | 13,066 | | | | 13,066 | | | | — | | | | — | | | | — | |
| Shareholder loan | | | 4,474 | | | | | 4,474 | | | | 4,474 | | | | — | | | | — | | | | — | |
| Long-term debt | | | 58,712 | | | | | 58,712 | | | | 11,735 | | | | 11,735 | | | | 11,735 | | | | 23,507 | |
| Interest on shareholder loan and long-term debt | | | | | | | | 8,019 | | | | 2,615 | | | | 2,034 | | | | 3,017 | | | | 353 | |
| Derivative financial liabilities | | | 2,256 | | | | | 5,977 | | | | 1,809 | | | | 1,501 | | | | 2,528 | | | | 139 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
The contractual cash flows shown in the table above for derivative financial liabilities represent the gross cash flows of the derivative arrangements.
F-19
CONCERT INDUSTRIES CORP.
Notes to Consolidated Financial Statements — (Continued)
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company’s income or the value of its financial instruments. The Company uses derivative instruments, such as forward foreign currency contracts and interest rate swap contracts to manage the Company’s exposure to fluctuations in cash flows resulting from foreign exchange risk and interest rate risk related to fixed priceand/or foreign denominated sales and purchases, including anticipated transactions. The Company buys and sells derivatives in the ordinary course of business and all such transactions are carried out within the guidelines set out in established policies. The Company’s policy is not to enter into derivative instruments for trading or speculative purposes
| |
(i) | Foreign exchange risk: |
The Company markets its products primarily in North America and Europe and substantially all of the Company’s financial assets and liabilities originate in Canadian dollars, US dollars and Euros.
The Company is exposed to currency risk for sales and purchases that are denominated in US dollars and Euros. The Company manages this currency risk through the sale of US dollars in the spot market and by US dollar foreign currency contract sales with notional amounts at December 31, 2009 of US $27,000 (2008 — US $48,000).
Current asset US dollar foreign exchange exposure is mitigated through denominating short-term indebtedness in US dollars.
The Company is subject to interest rate risk on its cash and cash equivalents, short-term indebtedness, shareholder loan and long-term debt.
Financial assets and financial liabilities with variable interest rates expose the Company to cash flow interest rate risk. Interest rate risk related to cash and cash equivalents and short-term indebtedness is not significant at December 31, 2009 due to the short term, highly liquid nature of these instruments. The Company believes that interest rate risk is low on cash and cash equivalents as interest rates range from 0.5% to 3.0%. The Company’s variable rate debt instruments described in note 9 exposes the Company to cash flow interest rate risk. The Company has hedged 50% of Tranche A of the Deutsche Bank syndicate loan exposure to fluctuations in interest rates related to this instrument by entering into a pay-fixed, receive floating interest rate swap agreement designated as a hedging instrument under the cash flow hedge accounting model. The Company has also economically hedged 100% of Tranche B of the Deutsche Bank syndicate loan exposure, subsequent to September 30, 2009, to fluctuations in interest rates related to this instrument by entering into a pay-fixed, receive floating interest rate swap agreement not designated as a hedging instrument.
Financial assets and financial liabilities that bear interest at fixed rates are subject to fair value interest rate risk. The Company does not account for its fixed rate debt instruments as held for trading; therefore, a change in interest rates at the reporting date would not affect net income with respect to these fixed rate instruments. The Company’s interest rate swap agreements expose the Company to fair value interest rate risk.
| |
(iii) | Forward foreign currency contracts and interest rate swaps: |
At December 31, 2009, the notional and fair values of the interest rate swaps designated as hedges are $8,148 and ($309) respectively. The maturity of the interest rate swaps is December 31, 2013.
F-20
CONCERT INDUSTRIES CORP.
Notes to Consolidated Financial Statements — (Continued)
At December 31, the notional and fair values of the derivative instruments not designated as hedges are as follows:
| | | | | | | | | | | | | | | | | | | |
| | | | | 2009 | | 2008 |
| | | | | | | Fair Value
| | | | Fair Value
|
| | | Maturities | | Notional | | (Canadian $) | | Notional | | (Canadian $) |
| |
| Liabilities | | | | | | | | | | | | | | | | | | |
| Forward foreign currency contracts | | January 2010 — December 2010 | | US$ | 27,000 | | | $ | 2,771 | | | US$ | 48,000 | | | $ | (900 | ) |
| Interest rate swaps | | December 31, 2013 | | Euro | 25,772 | | | | (1,947 | ) | | Euro | 25,773 | | | | (1,249 | ) |
As part of the sale of the Company’s shares (note 20), the forward foreign currency contracts were settled for $2,148 in cash in January 2010.
| |
17. | Segmented information: |
The Company has two operating segments. Management defines these segments by the domicile of the subsidiaries and from where they primarily derive their revenue.
Segmented information of the Company for the year ended December 31, 2009 and for the year ended December 31, 2008 are as follows:
| | | | | | | | | | | | | |
| | | North America | | | Europe | | | Total | |
| |
| Revenue from external customers | | $ | 97,777 | | | $ | 132,934 | | | $ | 230,711 | |
| | | | | | | | | | | | | |
| Earnings from operations before the undernoted | | $ | 5,938 | | | $ | 12,309 | | | $ | 18,247 | |
| Interest expense | | | 161 | | | | 3,743 | | | | 3,904 | |
| Change in fair value of derivative instruments | | | (3,671 | ) | | | 698 | | | | (2,973 | ) |
| | | | | | | | | | | | | |
| Earnings before income taxes | | $ | 9,448 | | | | 7,868 | | | $ | 17,316 | |
| | | | | | | | | | | | | |
| Capital expenditures, net of grants | | $ | 3,927 | | | $ | 24,525 | | | $ | 28,452 | |
| | | | | | | | | | | | | |
| Total assets, December 31, 2009 | | $ | 78,891 | | | $ | 122,425 | | | $ | 201,316 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
2008 | | North America | | | Europe | | | Total | |
| |
| Revenue from external customers | | $ | 95,117 | | | $ | 131,920 | | | $ | 227,037 | |
| | | | | | | | | | | | | |
| Earnings from operations before the undernoted | | $ | 9,000 | | | $ | 19,027 | | | $ | 28,027 | |
| Interest expense | | | 447 | | | | 2,553 | | | | 3,000 | |
| Change in fair value of derivative instruments | | | 900 | | | | 1,249 | | | | 2,149 | |
| | | | | | | | | | | | | |
| Earnings before income taxes | | $ | 7,653 | | | $ | 15,225 | | | $ | 22,878 | |
| | | | | | | | | | | | | |
| Capital expenditures, net of grants | | $ | 5,514 | | | $ | 33,512 | | | $ | 39,026 | |
| | | | | | | | | | | | | |
| Total assets, December 31, 2008 | | $ | 71,263 | | | $ | 116,972 | | | $ | 188,235 | |
| | | | | | | | | | | | | |
F-21
CONCERT INDUSTRIES CORP.
Notes to Consolidated Financial Statements — (Continued)
| |
(b) | Geographic information: |
Geographic information regarding sales and property, plant and equipment are as follows:
| | | | | | | | | | | | | |
| | | North America | | | Europe | | | Total | |
| |
| Revenue from external customers: | | | | | | | | | | | | |
| 2009 | | $ | 97,777 | | | $ | 132,934 | | | $ | 230,711 | |
| 2008 | | | 95,117 | | | | 131,920 | | | | 227,037 | |
| Property, plant and equipment: | | | | | | | | | | | | |
| 2009 | | $ | 26,563 | | | $ | 79,296 | | | $ | 105,859 | |
| 2008 | | | 24,410 | | | | 67,684 | | | | 92,094 | |
| | | | | | | | | | | | | |
Revenue and property, plant and equipment are attributable to geographic areas based on the domicile of the subsidiary generating the related revenue.
Two customers from the North American operations and two customers from the European operations represent approximately 72% (2008 — 72%) of total revenue.
| |
18. | Supplementary cash flow information: |
| | | | | | | | | |
| | | 2009 | | | 2008 | |
| |
| Interest paid | | $ | 4,249 | | | $ | 3,001 | |
| Income taxes paid | | | 2,813 | | | | 2,386 | |
| | | | | | | | | |
| |
19. | Reconciliation to United States Generally Accepted Accounting Principles: |
These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in Canada (“Canadian GAAP”) which, in many respects, conforms to accounting principles generally accepted in the United States of America (“US GAAP”). The significant differences in those principles, as they apply to the Company’s net earnings, comprehensive income/loss and shareholders’ equity, are described below.
Reconciliation of net earnings under Canadian GAAP to US GAAP:
| | | | | | | | | |
| | | 2009 | | | 2008 | |
| |
| Net earnings for the year based on Canadian GAAP | | $ | 15,550 | | | $ | 22,840 | |
| Adjustments: | | | | | | | | |
| Stock-based compensation(a) | | | 398 | | | | (963 | ) |
| Hedging(b) | | | (29 | ) | | | (668 | ) |
| Capitalization of interest, net(c) | | | 2,606 | | | | 697 | |
| Income taxes(a)(b)(c) | | | (722 | ) | | | 23 | |
| | | | | | | | | |
| Net earnings for the year based on US GAAP | | $ | 17,803 | | | $ | 21,929 | |
| | | | | | | | | |
F-22
CONCERT INDUSTRIES CORP.
Notes to Consolidated Financial Statements — (Continued)
Reconciliation of other comprehensive income (loss) under Canadian GAAP to US GAAP:
| | | | | | | | | |
| | | 2009 | | | 2008 | |
| |
| Other comprehensive income (loss) for the year based on Canadian GAAP | | $ | (6,358 | ) | | $ | 6,768 | |
| Adjustments Hedging(b) | | | 29 | | | | 668 | |
| Income taxes(a)(b)(c) | | | (8 | ) | | | (218 | ) |
| | | | | | | | | |
| Other comprehensive income (loss) for the year based on US GAAP | | $ | (6,337 | ) | | $ | 7,218 | |
| | | | | | | | | |
| Comprehensive income for the year based on US GAAP | | $ | 11,466 | | | $ | 29,147 | |
| | | | | | | | | |
Reconciliation of consolidated shareholders’ equity under Canadian GAAP to US GAAP:
| | | | | | | | | |
| | | 2009 | | | 2008 | |
| |
| Shareholders’ equity at year end based on Canadian GAAP | | $ | 98,884 | | | $ | 89,692 | |
| Adjustments | | | | | | | | |
| Stock-based compensation(a) | | | (1,112 | ) | | | (1,510 | ) |
| Capitalization of interest, net(c) | | | 3,514 | | | | 908 | |
| Income taxes(a)(b)(c) | | | (984 | ) | | | (254 | ) |
| | | | | | | | | |
| Shareholders’ equity at year end based on US GAAP | | $ | 100,302 | | | $ | 88,836 | |
| | | | | | | | | |
| |
(a) | Stock-based compensation: |
Under Canadian GAAP the liability for the Company’s stock option plan is recorded using the intrinsic value method. Under US GAAP, FASB Accounting Standards Codification Topic 718 “Compensation — stock compensation”, the Company measures the stock option obligation using the fair value method as at each reporting date. At December 31, 2009 and 2008 this resulted in an increase in the recorded liability and reduction in shareholders’ equity of $1,112 and $1,510, respectively. This also resulted in a decrease in the related compensation expense recognized and an increase in net earnings of $398 for the year ended December 31, 2009 and an increase in the related compensation expense recognized and a decrease in net earnings of $963 for the year ended December 31, 2008.
Under Canadian GAAP, the Company designated certain interest rate swaps as cash flow hedges for accounting purposes. The change in fair value related to these designated cash flow hedges was recorded in other comprehensive income (loss). The Company has not designated these interest rate swaps as accounting hedges under US GAAP and as a result, the change in fair value of these interest rate swaps for each period presented is recorded in earnings and no amounts relating to these interest rate swaps are recorded in other comprehensive income (loss) for US GAAP purposes. There is no effect on shareholders’ equity at each period end since there is an offsetting effect on retained earnings and accumulated other comprehensive income (loss).
As a result of this difference, for US GAAP purposes, earnings for the year ended December 31, 2009 and 2008 has been decreased by $21 (net of tax of $8) and $450 (net of tax of $218), respectively.
| |
(c) | Capitalization of interest: |
US GAAP requires that interest related to construction for qualifying assets be capitalized when the Company has incurred interest charges. During the years ended December 31, 2009, 2008, 2007 and 2005, the Company constructed certain plant and equipment and buildings for which interest would have been
F-23
CONCERT INDUSTRIES CORP.
Notes to Consolidated Financial Statements — (Continued)
capitalized under US GAAP. Consequently, the Company is capitalizing interest costs which were charged to earnings under Canadian GAAP, with an offsetting increase in amortization charged relating to the interest capitalized.
As a result of this difference, for US GAAP purposes, earnings for the year ended December 31, 2009 and 2008 has been increased by $1,876 (net of tax of $730) and $502 (net of tax of $195), respectively. Shareholders’ equity at December 31, 2009 and 2008 has been increased by $2,530 (net of tax of $984) and $654 (net of tax of $254), respectively.
On January 4, 2010, Tricap signed an agreement to sell all outstanding shares of the Company to P.H. Glatfelter Company. The sale was completed on February 12, 2010. Subsequent to this sale transaction, the Company was amalgamated into Glatfelter Canada Ltd.
F-24
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
| |
| Item 20. | Indemnification of Directors and Officers |
Sections 1741 through 1750 of the Pennsylvania Business Corporation Law of 1988, as amended, or the PBCL, permits, and in some cases requires, the indemnification of officers, directors and employees of the Company. Section 3.1 of our bylaws provides that we shall indemnify any director or officer of the Company who is or was a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, including actions or suits by or in the right of the Company, its shareholders or otherwise, by reason of the fact that he or she is or was a director or officer of the Company or is or was serving at the request of the Company as a director, officer, partner, fiduciary or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise to the fullest extent permitted by law, including, without limitation, against expenses (including legal fees), damages, punitive damages, judgments, penalties, fines and amounts paid in settlement, actually and reasonably incurred by him or her in connection with such proceedings unless the act or failure to act giving rise to the claim is finally determined by a court to have constituted willful misconduct or recklessness. Section 3.1 also provides that, if an authorized representative is not entitled to indemnification for a portion of liabilities to which he or she may be subject, the Company will indemnify the person to the maximum extent permitted for the remaining portion of the liabilities.
Section 3.2 of our bylaws provides that we will pay the expenses (including attorneys’ fees and disbursements) actually and reasonably incurred in defending a proceeding on behalf of any officer or director entitled to indemnification in advance of the final disposition of such proceeding upon receipt of an undertaking by or on behalf of such officer or director to repay such amount if it shall ultimately be determined that such officer or director is not entitled to be indemnified by us as authorized. The financial ability of such officer or director to make such repayment shall not be prerequisite to the making of an advance.
As permitted by Section 1713 of the PBCL, Section 2.11 of our bylaws eliminates the personal liability of our directors for monetary damages for any action taken, or any failure to take any action, except where a director has breached or failed to perform the duties of his or her office and the breach or failure to perform constitutes self-dealing, willful misconduct or recklessness. However, pursuant to Section 1713 of the PBCL, this provision of our bylaws does not apply to the responsibility or liability of a director pursuant to any criminal statute, or to the liability of a director for the payment of taxes pursuant to local, Pennsylvania or Federal law.
We have insurance coverage for losses by past, present or future directors or officers of Glatfelter arising from claims against that person for any wrongful act (subject to certain exceptions) in his or her capacity as a director or officer of Glatfelter. The policy also provides for reimbursement to Glatfelter for indemnification given by Glatfelter, pursuant to common or statutory law or its articles of incorporation or bylaws to any such person arising from any such claim.
See the index to exhibits that appears immediately following the signature pages to this registration statement.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to the registration statement;
II-1
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
II-1
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post- effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change in such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at the time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(5) To respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in the documents filed subsequent to the effective date of the registration statement through the date of responding to the request.
(6) To supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.
(b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
II-2
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of York, Commonwealth of Pennsylvania, on June 1, 2010.
P. H. GLATFELTER COMPANY
| | |
| By: | /s/ GeorgeP. H. Glatfelter IIGLATFELTER COMPANY |
Name: George H. Glatfelter II
| | |
| By: | | /s/ Dante C. Parrini |
| | Name: Dante C. Parrini Title: | Chairman of the Board and Chief Executive Officer |
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Each individual whose signature appears below constitutes and appoints John P. Jacunski and Thomas G. Jackson,David C. Elder, and each of them singly, his or her true and lawful attorneys-in-fact and agents with full power of substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign this registration statement and any and all amendments thereto, including post-effective amendments, and to file the same, with all exhibits thereto, any related registration filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all the said attorneys-in-fact and agents or any of them or their or his or her substitutes, may lawfully do or cause to be done by virtue hereof.
| | | | |
Signature | | Title | | Date |
| | |
/s/ Dante C. Parrini Dante C. Parrini | | |
Signature
| | Title
| | Date
|
|
| | | | |
/s/ George H. Glatfelter II
George H. Glatfelter II | | Chairman of the Board and Chief Executive Officer and Director
(Principal Executive Officer) | | June 1, 2010November 16, 2012 |
| | | | |
John P. Jacunski | | Senior Vice President and Chief Financial Officer
(Principal Financial Officer) | | June 1, 2010November 16, 2012 |
| | | | |
David C. Elder | | Vice President, and Corporate Controller
Finance (Principal Accounting Officer) | | June 1, 2010November 16, 2012 |
| | | | |
Kathleen A. Dahlberg | | Director | | June 1, 2010November 16, 2012 |
| | | | |
/s/ Nicholas DeBenedictis
Nicholas DeBenedictis | | Director | | June 1, 2010November 16, 2012 |
| | |
/s/ Kevin M. Fogarty Kevin M. Fogarty | | Director | | November 16, 2012 |
| | |
/s/ J. Robert Hall
J. Robert Hall | | Director | | June 1, 2010November 16, 2012 |
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| | | | |
Signature | | Title | | Date |
| | |
/s/ Richard C. Ill
Richard C. Ill | | Director | | June 1, 2010November 16, 2012 |
II-3
| | |
Ronald J. Naples | | Director | | |
| | |
Richard L. Smoot | | |
Signature
Director | | Title
| | Date
|
| | |
| | | | |
/s/ Ronald J. Naples
Ronald J. Naples | | Director | | June 1, 2010 |
| | | | |
/s/ Richard L. Smoot
Richard L. Smoot | | Director | | June 1, 2010 |
| | | | |
Lee C. Stewart | | Director | | June 1, 2010November 16, 2012 |
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of York, Commonwealth of Pennsylvania, on June 1, 2010.
PHG TEA LEAVES, INC.
| | |
| By: | /s/ Thomas G. JacksonPHG TEA LEAVES, INC. |
Name: Thomas G. Jackson
| | |
| By: | | /s/ George B. Amoss, Jr. |
| | Name: George B. Amoss, Jr. Title: | President and SecretaryDirector |
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates as indicated.
Each individual whose signature appears below constitutes and appoints John P. Jacunski and Thomas G. Jackson,David C. Elder, and each of them singly, his or her true and lawful attorneys-in-fact and agents with full power of substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign this registration statement and any and all amendments thereto, including post-effective amendments, and to file the same, with all exhibits thereto, any related registration filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all the said attorneys-in-fact and agents or any of them or their or his or her substitutes, may lawfully do or cause to be done by virtue hereof.
| | | | |
Signature | | Title | | | | Date |
Signature
| | Title
| | Date
|
|
| | | | |
/s/ Thomas G. Jackson
Thomas G. Jackson | | President, Secretary and Director
(Principal Executive Officer) | | June 1, 2010 |
| | | | |
/s/ Donald R. Gross
Donald R. Gross | | Treasurer and Director
(Principal Financial Officer,
Principal Accounting Officer) | | June 1, 2010 |
| | | | |
George B. Amoss, Jr. | | President and Director (Principal Executive Officer) | | November 16, 2012 |
| | |
/s/ Donald R. Gross Donald R. Gross | | Treasurer and Director (Principal Financial Officer, Principal Accounting Officer) | | November 16, 2012 |
| | |
/s/ R. Scott Corcoran R. Scott Corcoran | | Vice President and Director | | June 1, 2010November 16, 2012 |
| | |
/s/ Linda M. Levans Linda M. Levans | | Secretary and Director | | November 16, 2012 |
| | |
/s/ Nina A. Corey
Nina A. Corey | | Assistant Secretary and Director | | June 1, 2010November 16, 2012 |
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of York, Commonwealth of Pennsylvania, on June 1, 2010.
GLATFELTER PULP WOOD COMPANY
| | |
| By: | /s/ George H. Glatfelter IITHE GLATFELTER PULP WOOD COMPANY |
Name: George H. Glatfelter II
| | |
| By: | | /s/ Thomas V. Bosley |
| | Name: Thomas V. Bosley Title: | Chairman of the Board, President and PresidentGeneral Manager |
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates as indicated.
Each individual whose signature appears below constitutes and appoints John P. Jacunski and Thomas G. Jackson,David C. Elder, and each of them singly, his or her true and lawful attorneys-in-fact and agents with full power of substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign this registration statement and any and all amendments thereto, including post-effective amendments, and to file the same, with all exhibits thereto, any related registration filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all the said attorneys-in-fact and agents or any of them or their or his or her substitutes, may lawfully do or cause to be done by virtue hereof.
| | | | |
Signature | | Title | | | | Date |
Signature
| | Title
| | Date
|
|
| | | | |
/s/ George H. Glatfelter II
George H. Glatfelter II | | Chairman, President and Director
(Principal Executive Officer) | | June 1, 2010 |
| | | | |
/s/ David C. Elder
David C. Elder | | Treasurer
(Principal Financial Officer,
Principal Accounting Officer) | | June 1, 2010 |
| | | | |
Thomas V. Bosley | | ViceChairman of the Board, President and General Manager and Director (Principal Executive Officer) | | June 1, 2010November 16, 2012 |
| | |
/s/ George B. Amoss, Jr. George B. Amoss, Jr. | | Treasurer and Director (Principal Financial Officer, Principal Accounting Officer) | | November 16, 2012 |
| | |
/s/ Charles A. Brown
Charles A. BrownTimothy R. HessTimothy R. Hess | | Director | | June 1, 2010November 16, 2012 |
| | |
/s/ Debabrata Mukherjee Debabrata Mukherjee | | Director | | November 16, 2012 |
| | |
/s/ Robert L. Inners II
Robert L. Inners IIAmy R. WannemacherAmy R. Wannemacher | | Director | | June 1, 2010November 16, 2012 |
II-6
| | | | | | |
Signature
| | Title
| | Date
|
|
| | | | |
/s/ James B. Koykendall
James B. Koykendall | | Director | | June 1, 2010 |
| | | | |
/s/ David A. Nelson
David A. Nelson | | Director | | June 1, 2010 |
| | | | |
/s/ Thomas R. Wieland
Thomas R. Wieland | | Director | | June 1, 2010 |
| | | | |
/s/ Jeffrey C. Fisher
Jeffrey C. Fisher | | Director | | June 1, 2010 |
II-7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of York, Commonwealth of Pennsylvania, on June 1, 2010.
MOLLANVICK, INC.
| | |
| MOLLANVICK, INC. |
| |
| By: | | /s/ George B. Amoss, Jr. |
Name: George B. Amoss Jr.
| | |
| Name: George B. Amoss, Jr. Title: | President |
Pursuant to the requirements of the Securities Act of 1933, this registration statementstatements has been signed by the following persons in the capacities and on the dates as indicated.
Each individual whose signature appears below constitutes and appoints John P. Jacunski and Thomas G. Jackson,David C. Elder, and each of them singly, his or her true and lawful attorneys-in-fact and agents with full power of substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign this registration statement and any and all amendments thereto, including post-effective amendments, and to file the same, with all exhibits thereto, any related registration filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all the said attorneys-in-fact and agents or any of them or their or his or her substitutes, may lawfully do or cause to be done by virtue hereof.
| | | | |
Signature | | Title | | Date |
| | |
/s/ George H. Amoss, Jr. George H. Amoss, Jr. | | |
Signature
| | Title
| | Date
|
|
| | | | |
/s/ George B. Amoss Jr.
George B. Amoss Jr. | | President and Director
(Principal Executive Officer) | | June 1, 2010November 16, 2012 |
| | | | |
Donald R. Gross | | Vice President, Treasurer and Director
(Principal Financial Officer,
Principal Accounting Officer) | | June 1, 2010November 16, 2012 |
| | | | |
Nina A. Corey | | Assistant Secretary and Director | | June 1, 2010November 16, 2012 |
II-8
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SIGNATURE
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of York, Commonwealth of Pennsylvania, on June 1, 2010.
November 16, 2012.GLATFELTER HOLDINGS, LLC
| | |
| GLATFELTER HOLDINGS, LLC |
| |
| By: | | /s/ Thomas V. Bosley |
Name: Thomas V. Bosley
| | |
| Name: Thomas V. Bosley Title: | President and Chief Executive OfficerGeneral Manager |
Pursuant to the requirements of the Securities Act of 1933, this registration statementstatements has been signed by the following persons in the capacities and on the dates as indicated.
Each individual whose signature appears below constitutes and appoints John P. Jacunski and Thomas G. Jackson,David C. Elder, and each of them singly, his or her true and lawful attorneys-in-fact and agents with full power of substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign this registration statement and any and all amendments thereto, including post-effective amendments, and to file the same, with all exhibits thereto, any related registration filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all the said attorneys-in-fact and agents or any of them or their or his or her substitutes, may lawfully do or cause to be done by virtue hereof.
| | | | |
Signature | | Title | | | | Date |
Signature
| | Title
| | Date
|
|
| | | | |
Thomas V. Bosley | | President Chief Executive
Officer and General Manager
(Principal Executive Officer) | | June 1, 2010November 16, 2012 |
| | | | |
Donald R. Gross | | Treasurer and Manager
(Principal Financial Officer,
Principal Accounting Officer) | | June 1, 2010November 16, 2012 |
| | |
/s/ Linda M. Levans Linda M. Levans | | Secretary and Manager | | |
/s/ Thomas G. Jackson
Thomas G. Jackson | | Secretary and Manager | | June 1, 2010November 16, 2012 |
II-9
II-8
EXHIBIT INDEX
| | | | | |
Exhibit
| | |
Number | | Description of Exhibits |
| |
| | 2 | .1 | | Share Purchase Agreement, dated January 4, 2010, among Brookfield Special Situations Management Limited, P. H. Glatfelter Company and Glatfelter Canada, Inc., (the schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K and will be provided to the Securities and Exchange Commission upon request) (incorporated by reference to Exhibit 2(a) to the Company’sForm 10-K for the year ended December 31, 2009). |
| | 2 | .2 | | Amendment to the Share Purchase Agreement, dated February 12, 2010 (incorporated by reference to Exhibit 2(a) to the Company’sForm 10-K for the year ended December 31, 2009). |
| | 2 | .3 | | Asset Purchase Agreement, dated February 21, 2006, among NewPage Corporation, Chillicothe Paper Inc. and P. H. Glatfelter Company (incorporated by reference to Exhibit 2.1 to the Current Report onForm 8-K filed by the Company on February 21, 2006). |
| | 2 | .4 | | Agreement for Sale of Assets (Lydney), dated March 8, 2006, by and among J R Crompton Limited, Nicholas James Dargan and Willian Kenneth Dawson, as administrators and Glatfelter-UK Limited and the Company (incorporated by reference to Exhibit 10 to the Quarterly Report onForm 10-Q filed by the Company for the quarter ended March 31, 2006). |
| | 2 | .5 | | Agreement, dated as of November 30, 2007, between Metallised Products Limited (“MPL”) and Glatfelter Lydney Limited, a wholly-owned indirect subsidiary of P. H. Glatfelter Company to acquire MPL, (the schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K and will be provided to the Securities and Exchange Commission upon request) (incorporated by reference to Exhibit 2(c) to the Company’sForm 10-K for the year ended December 31, 2007). |
| | 4 | .1 | | Indenture, dated as of February 5, 2010 by and between the Company, the Subsidiary Guarantors and HSBC Bank USA, National Association, as trustee relating to 71/8 Notes due 2016 (incorporated by reference to Exhibit 4.1 to the Current Report onForm 8-K filed by the Company on February 5, 2010). |
| | 4 | .2 | | Indenture, dated as of April 28, 2006, by and between the Company and SunTrust Bank, as trustee relating to 71/8 Notes due 2016 (incorporated by reference to Exhibit 2.1 to the Current Report onForm 8-K filed by the Company on May 3, 2006). |
| | 4 | .3 | | First Supplemental Indenture, dated as of September 22, 2006, among Glatfelter Holdings, LLC, Glatfelter Holdings II, LLC, the Existing Subsidiary Guarantors named therein and SunTrust Bank relating to 71/8 Notes due 2016 (incorporated by reference to Exhibit 4.3 to the Registration Statement onForm S-4/A filed by the Company on September 22, 2006). |
| | 4 | .4 | | Registration Rights Agreement, dated February 5, 2010, among the Company, the Guarantors named therein and the Initial Purchaser (incorporated by reference to Exhibit 4.2 to the Current Report onForm 8-K filed by the Company on February 5, 2010). |
| | 5 | .1 | | Opinion of Shearman & Sterling LLP as to the validity of the securities being offered.* |
| | 5 | .2 | | Opinion of Ballard Spahr LLP as to the validity of the securities being offered.* |
| | 12 | .1 | | Statement re computation of ratios.* |
| | 21 | .1 | | Subsidiaries of the Company (incorporated by reference to Exhibit 21 to the Company’sForm 10-K for the year ended December 31, 2009). |
| | 23 | .1 | | Consent of Deloitte & Touche LLP.* |
| | 23 | .2 | | Consent of KPMG LLP.* |
| | 23 | .3 | | Consent of Shearman & Sterling LLP (included in Exhibit 5.1).* |
| | 23 | .4 | | Consent of Ballard Spahr LLP (included in Exhibit 5.2).* |
| | 24 | .1 | | Power of Attorney of P. H. Glatfelter Company (included on signature page).* |
| | 25 | .1 | | Statement of eligibility of trustee onForm T-1 for the 71/8% Notes due 2016.* |
| | 99 | .1 | | Form of Letter of Transmittal* |
| | 99 | .2 | | Form of Notice of Guaranteed Delivery* |
| | 99 | .3 | | Form of Letter to Clients* |
II-10
| | | | | |
Exhibit
| | |
Number | | Description of Exhibits |
| |
| | 99 | .4 | | Form of Letter to Registered Holders* |
| | 99 | .5 | | Form of Letter from Beneficial Owner* |
| | |
Exhibit
Number | | Description of Exhibits |
| |
| 2.1 | | Share Purchase Agreement, dated January 4, 2010, among Brookfield Special Situations Management Limited, P. H. Glatfelter Company and Glatfelter Canada, Inc., (the schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K and will be provided to the Securities and Exchange Commission upon request) (incorporated by reference to Exhibit 2(a) to the Company’s Form 10-K for the year ended December 31, 2009). |
| |
| 2.2 | | Amendment to the Share Purchase Agreement, dated February 12, 2010 (incorporated by reference to Exhibit 2(a) to the Company’s Form 10-K for the year ended December 31, 2009). |
| |
| 4.1 | | Indenture, dated as of October 3, 2012, by and among P. H. Glatfelter Company, the Guarantors named therein and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed by the Company on October 3, 2012). |
| |
| 4.2 | | Second Supplemental Indenture, dated as of October 3, 2012, to the Indenture dated as of April 28, 2006, as amended, by and among P. H. Glatfelter Company, the Guarantors named therein and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed by the Company on October 3, 2012). |
| |
| 5.1 | | Opinion of Shearman & Sterling LLP as to the validity of the securities being offered.* |
| |
| 5.2 | | Opinion of Ballard Spahr LLP as to the validity of the securities being offered.* |
| |
| 10.1 | | Registration Rights Agreement, dated as of October 3, 2010, by and among P. H. Glatfelter Company, the Guarantors named therein and J.P. Morgan Securities LLC, as representative of the initial purchasers listed therein (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Company on October 3, 2012). |
| |
| 12.1 | | Computation of Ratio of Earnings to Fixed Charges.* |
| |
| 23.1 | | Consent of Deloitte & Touche LLP.* |
| |
| 23.2 | | Consent of Shearman & Sterling LLP (included in Exhibit 5.1).* |
| |
| 23.3 | | Consent of Ballard Spahr LLP (included in Exhibit 5.2).* |
| |
| 24.1 | | Power of Attorney of P. H. Glatfelter Company (included on signature page).* |
| |
| 25.1 | | Statement of eligibility of trustee on Form T-1 for the 5.375% Notes due 2020.* |
| |
| 99.1 | | Form of Letter of Transmittal* |
| |
| 99.2 | | Form of Notice of Guaranteed Delivery* |
| |
| 99.3 | | Form of Letter to Clients* |
| |
| 99.4 | | Form of Letter to Registered Holders* |
| |
| 99.5 | | Form of Letter from Beneficial Owner* |
II-11
