-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Uhg+M7HYckwuYsuQWHr7G7nVEGDX8AbgvN5K/4KiG/pjS1C8Evi1fHvFM9s2D47U 750mNj9xawTHrjiucMo1dQ== 0000038195-96-000022.txt : 19961027 0000038195-96-000022.hdr.sgml : 19961027 ACCESSION NUMBER: 0000038195-96-000022 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961024 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FORT HOWARD CORP CENTRAL INDEX KEY: 0000038195 STANDARD INDUSTRIAL CLASSIFICATION: PAPER MILLS [2621] IRS NUMBER: 391090992 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20473 FILM NUMBER: 96647083 BUSINESS ADDRESS: STREET 1: 1919 S BROADWAY CITY: GREEN BAY STATE: WI ZIP: 54304 BUSINESS PHONE: 4144358821 FORMER COMPANY: FORMER CONFORMED NAME: FORT HOWARD PAPER CO/DE DATE OF NAME CHANGE: 19870506 FORMER COMPANY: FORMER CONFORMED NAME: MARYLAND CUP CORP/WI DATE OF NAME CHANGE: 19840612 FORMER COMPANY: FORMER CONFORMED NAME: FORT HOWARD PAPER CO DATE OF NAME CHANGE: 19830926 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 0-20473 FORT HOWARD CORPORATION (Exact name of registrant as specified in its charter) Delaware 39-1090992 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 1919 South Broadway, Green Bay, Wisconsin 54304 (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code: 414/435-8821 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at October 15, 1996 ----- ------------------------------- Voting Common Stock, par value $.01 73,984,928 per share PART I. FINANCIAL INFORMATION FORT HOWARD CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, ------------------ ------------------ 1996 1995 1996 1995 ---- ---- ---- ---- (In thousands, except per share data) Net sales........................... $408,163 $426,116 $1,196,307 $1,205,602 Cost of sales....................... 234,007 299,974 715,863 865,474 -------- -------- ---------- ---------- Gross income........................ 174,156 126,142 480,444 340,128 Selling, general and administrative. 38,857 30,773 106,243 85,893 -------- -------- ---------- ---------- Operating income ................... 135,299 95,369 374,201 254,235 Interest expense.................... 61,867 74,177 198,841 237,258 Other expense (income), net......... 2,545 (1,600) 3,583 (2,537) -------- -------- ---------- ---------- Income before taxes................. 70,887 22,792 171,777 19,514 Income tax expense.................. 27,813 8,292 65,386 6,913 -------- -------- ---------- ---------- Net income before extraordinary item................ 43,074 14,500 106,391 12,601 Extraordinary item -- loss on debt repurchases (net of income taxes of $2,180 in 1996 and $11,986 in 1995).................. -- -- (3,340) (18,748) -------- -------- ---------- ---------- Net income (loss)................... $ 43,074 $ 14,500 $ 103,051 $ (6,147) ======== ======== ========== ========== Net income (loss) per share: Net income before extraordinary item.............. $ 0.58 $ 0.23 $ 1.55 $ 0.22 Extraordinary item................ -- -- (0.05) (0.33) -------- -------- ---------- ---------- Net income (loss)................. $ 0.58 $ 0.23 $ 1.50 $ (0.11) ======== ======== ========== ========== Average shares outstanding.......... 73,970 63,371 68,720 56,495 ======== ======== ========== ==========
The accompanying notes are an integral part of these condensed consolidated financial statements. - 2 - FORT HOWARD CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
September 30, December 31, 1996 1995 ------------- ------------ (In thousands) Assets Current assets: Cash and cash equivalents............... $ 693 $ 946 Receivables, less allowances of $3,304 in 1996 and $2,883 in 1995............ 90,157 97,707 Inventories............................. 136,696 163,076 Deferred income taxes................... 51,000 29,000 Income taxes receivable................. 400 700 ---------- ---------- Total current assets.................. 278,946 291,429 Property, plant and equipment............. 2,009,804 1,971,641 Less: Accumulated depreciation......... 778,953 706,394 ---------- ---------- Net property, plant and equipment..... 1,230,851 1,265,247 Other assets.............................. 77,905 95,761 ---------- ---------- Total assets.......................... $1,587,702 $1,652,437 ========== ========== Liabilities and Shareholders' Deficit Current liabilities: Accounts payable........................ $ 121,179 $ 112,384 Interest payable........................ 23,481 64,375 Income taxes payable.................... 6,145 1,339 Other current liabilities............... 90,530 85,351 Current portion of long-term debt....... 69,865 62,720 ---------- ---------- Total current liabilities............. 311,200 326,169 Long-term debt............................ 2,500,695 2,903,299 Deferred and other long-term income taxes. 270,227 225,043 Other liabilities......................... 34,970 36,355 Shareholders' deficit: Common Stock............................ 740 634 Additional paid-in capital.............. 1,100,884 895,652 Cumulative translation adjustment....... (2,194) (2,844) Retained deficit........................ (2,628,820) (2,731,871) ---------- ---------- Total shareholders' deficit........... (1,529,390) (1,838,429) ---------- ---------- Total liabilities and shareholders' deficit............................. $1,587,702 $1,652,437 ========== ==========
The accompanying notes are an integral part of these condensed consolidated financial statements. - 3 - FORT HOWARD CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, ------------------ 1996 1995 ---- ---- (In thousands) Cash provided from (used for) operations: Net income (loss).............................. $ 103,051 $ (6,147) Depreciation................................... 75,727 73,751 Non-cash interest expense...................... 10,103 9,634 Deferred income tax (credit) expense........... 23,228 (3,967) Pre-tax loss on debt repurchases............... 5,520 30,734 Decrease in receivables........................ 7,550 17,972 (Increase) decrease in inventories............. 26,380 (41,820) Decrease in income taxes receivable............ 300 4,500 Increase in accounts payable................... 8,795 26,623 Decrease in interest payable................... (40,894) (58,538) Increase in income taxes payable............... 4,806 429 All other, net................................. 7,435 (12,228) ---------- --------- Net cash provided from operations............ 232,001 40,943 Cash used for investment activity: Additions to property, plant and equipment..... (40,876) (32,150) Cash provided from (used for) financing activities: Proceeds from long-term borrowings............. -- 1,438,900 Repayment of long-term borrowings.............. (395,227) (1,682,623) Debt issuance costs............................ (1,489) (49,155) Issuance of Common Stock, net of offering costs........................................ 205,338 284,104 ---------- --------- Net cash used for financing activities....... (191,378) (8,774) ---------- --------- Increase (decrease) in cash...................... (253) 19 Cash at beginning of period...................... 946 422 ---------- --------- Cash at end of period.......................... $ 693 $ 441 ========== ========= Supplemental Cash Flow Disclosures: Interest paid.................................. $ 229,561 $ 286,439 Income taxes paid (refunded) - net............. 35,052 (5,705)
The accompanying notes are an integral part of these condensed consolidated financial statements. - 4 - FORT HOWARD CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF PRESENTATION The condensed consolidated financial statements reflect all adjustments (consisting only of normally recurring accruals) which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. Certain reclassifications have been made to conform prior years' data to the current format. These financial statements should be read in conjunction with the Company's annual report on Form 10-K for 1995 and the Company's quarterly reports on Form 10-Q for the quarters ended March 31, 1996 and June 30, 1996. 2. EARNINGS (LOSS) PER SHARE Earnings (loss) per share is computed on the basis of the weighted average number of common shares outstanding during the periods. The weighted average number of common shares outstanding for the three and nine month periods ended September 30, 1996 were 73,969,946 and 68,719,716, respectively. The weighted average number of common shares outstanding for the three and nine month periods ended September 30, 1995 were 63,370,794 and 56,494,512, respectively. The assumed exercise of all outstanding stock options has been excluded from the computation of earnings (loss) per share for the three and nine month periods ended September 30, 1996 and 1995 because the result was not material or was antidilutive. 3. INVENTORIES Inventories consist of: September 30, December 31, 1996 1995 ------------ ------------ (In thousands) Raw materials and supplies $ 67,110 $ 80,134 Finished and partly-finished products 69,586 82,942 -------- -------- $136,696 $163,076 ======== ======== - 5 - 4. COMMON STOCK OFFERING On May 15, 1996, the Company issued 10 million shares of Common Stock at $20.25 per share in a public offering (the "Offering"). Proceeds from the Offering, net of underwriting commissions and other related expenses totaling $9 million, were $194 million. On June 4, 1996, an additional 520,000 shares of Common Stock were issued at $20.25 per share upon the exercise of a portion of the underwriters' over-allotment option granted in connection with the Offering, resulting in additional net proceeds of $10 million after deducting underwriting commissions. 5. LONG-TERM DEBT The Company used the net proceeds of its Common Stock Offering of $204 million to prepay a portion of the outstanding indebtedness under the 1995 Bank Credit Agreement. At September 30, 1996, the available capacity under the 1995 Revolving Credit Facility under the Company's 1995 Bank Credit Agreement was $297 million. 6. INCOME TAXES In 1992, the Internal Revenue Service (the "IRS") disallowed income tax deductions for the 1988 tax year which were claimed by the Company for fees and expenses, other than interest, related to 1988 debt financing and refinancing transactions. The Company deducted the balance of the disallowed fees and expenses related to the 1988 debt instruments during the tax years 1989 through 1995. In disallowing these deductions, the IRS relied on Internal Revenue Code of 1986, as amended (the "Code"), Section 162(k) (which denies deductions for otherwise deductible amounts paid or incurred in connection with stock redemptions). The Company is contesting the disallowance. In August 1994, the U.S. Tax Court issued its opinion in which it essentially adopted the interpretation of Code Section 162(k) advanced by the IRS and disallowed the deductions claimed by the Company. Prior to the entry of a decision in the U.S. Tax Court, Code Section 162(k) was amended in August 1996 to provide that, retroactive to 1986, such Code Section was not applicable to deductions for amounts properly allocable to indebtedness and amortized over the term of such indebtedness. Accordingly, the Company and the IRS filed a joint motion for reconsideration of the Court's opinion requesting a determination that the Company may deduct all disallowed fees and expenses related to the 1988 debt instruments. On October 22nd the Court granted the joint motion and issued its supplemental opinion that the Company may deduct the fees and expenses previously disallowed. The Company anticipates the Court's final decision on this matter in the fourth quarter of 1996. The Company has paid to the IRS tax of approximately $5 million for its 1988 tax year pursuant to the U.S. Tax Court opinion along with $4 million for the interest accrued on such tax. If the opinion of the U.S. Tax Court, which the Company had been planning to appeal, was ultimately sustained, the potential amount of additional taxes due on account of such disallowance for the period 1989 through 1995 would be approximately $38 million exclusive of interest, which amount the Company has fully reserved. - 6 - 7. CONTINGENCIES The Company and its subsidiaries are parties to lawsuits and state and federal administrative proceedings incidental to their businesses. Although the final results in such suits and proceedings cannot be predicted with certainty, the Company currently believes that the ultimate resolution of all such lawsuits and proceedings, after taking into account the liabilities accrued with respect to such matters, will not have a material adverse effect on the Company's financial condition or on its results of operations. - 7 - FORT HOWARD CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Third Quarter and First Nine Months of 1996 Compared to 1995
Three Months Ended Nine Months Ended September 30, September 30, ------------------ ----------------- 1996 1995 1996 1995 ---- ---- ---- ---- (In thousands, except percentages) Net sales: Domestic tissue............ $346,752 $348,058 $1,017,234 $ 965,551 International operations... 44,825 43,041 131,178 120,394 Harmon..................... 16,586 35,017 47,895 119,657 -------- -------- ---------- ---------- Consolidated............... $408,163 $426,116 $1,196,307 $1,205,602 ======== ======== ========== ========== Operating income: Domestic tissue............ $127,679 $ 88,982 $ 351,561 $ 238,457 International operations... 6,744 4,995 20,026 11,354 Harmon..................... 876 1,392 2,614 4,424 -------- -------- ---------- ---------- Consolidated............... $135,299 $ 95,369 $ 374,201 $ 254,235 ======== ======== ========== ========== Consolidated net income (loss)..................... $ 43,074 $ 14,500 $ 103,051 $ (6,147) ======== ======== ========== ========== Operating income as a percent of net sales....... 33.1% 22.4% 31.3% 21.1%
Net sales. Net sales in the Company's domestic tissue operations increased 5.4% for the first nine months of 1996 compared to the first nine months of 1995. The increase was due to a 2.1% increase in converted products volume and a 3.2% increase in net selling prices for the first nine months of 1996 compared to the first nine months of 1995. Domestic tissue operations' net sales for the third quarter of 1996 decreased 0.4% compared to the third quarter of 1995. The decrease was due to lower net selling prices offset by volume increases. Because of significantly lower selling prices in the Company's wastepaper brokerage subsidiary, consolidated net sales decreased 4.2% for the third quarter of 1996 and 0.8% for the first nine months of 1996 compared to the respective periods in 1995. From the second quarter of 1996 to the third quarter of 1996, overall domestic tissue net selling prices decreased 1.5% as a result of price decreases in the consumer market which took effect in April and June 1996 on certain product lines. Commercial pricing was unchanged from the second quarter of 1996 to the third quarter of 1996. For the third quarter and first nine months of 1996 compared to the respective periods in 1995, domestic volume was stronger in the consumer market than in the commercial market. - 8 - Net sales of the Company's international operations increased 4.1% and 9.0% for the third quarter and first nine months of 1996 compared to 1995, respectively. For the third quarter of 1996 compared to the third quarter of 1995, the Company's U.K. facilities experienced volume increases partially offset by lower net selling prices. For the first nine months of 1996 compared to 1995, the Company's U.K. facilities experienced both increased volume and increased net selling prices. Net sales of the Company's wastepaper brokerage subsidiary, Harmon Assoc. Corp. ("Harmon"), decreased 52.6% and 60.0% for the third quarter and first nine months of 1996 compared to 1995, respectively, due to significantly lower selling prices on slightly higher volume. Gross Income. Consolidated gross income for the third quarter of 1996 increased 38.1% over the third quarter of 1995 due to significantly lower raw material costs and sales volume increases in the consumer business offset by lower consumer selling prices. For the first nine months of 1996 compared to the same period in 1995, consolidated gross income increased 41.3% due to lower raw material costs, selling price increases and increases in consumer volume. Consolidated gross margins increased to 42.7% and 40.2% for the third quarter and first nine months of 1996 from 29.6% and 28.2% for the third quarter and first nine months of 1995, respectively. Domestic tissue gross margins increased for the third quarter and first nine months of 1996 compared to the third quarter and first nine months of 1995 primarily due to significantly lower wastepaper prices. Gross margins of international operations increased in both the third quarter and first nine months of 1996 compared to 1995. In addition, consolidated gross margins were positively affected for both the third quarter and first nine months of 1996 compared to 1995 because net sales by Harmon (which typically has very low margins compared to either domestic or international tissue operations) were a smaller proportion of total net sales. Selling, General and Administrative Expenses. Selling, general and administrative expenses, as a percent of net sales, increased to 9.5% and 8.9% for the third quarter and first nine months of 1996, compared to 7.2% and 7.1% for the third quarter and first nine months of 1995, respectively. The increase was principally due to the impact of the Company's strong earnings performance on employee compensation plans, higher selling expenses resulting from greater consumer product sales and lower net sales by Harmon. Operating Income. Operating income increased to $135 million and $374 million for the third quarter and first nine months of 1996 from $95 million and $254 million for the third quarter and first nine months of 1995, respectively. Operating income as a percent of net sales increased to 33.1% and 31.3% in the third quarter and first nine months of 1996 compared to 22.4% and 21.1% in the third quarter and first nine months of 1995, respectively. Domestic tissue operating income as a percent of net sales increased to 36.8% and 34.6% in the third quarter and first nine months of 1996 from 25.6% and 24.7% in the third quarter and first nine months of 1995, respectively. In addition, consolidated operating income increased as a percent of net sales because net sales by Harmon (which typically has very low operating income margins compared to either domestic or international tissue operations) were a smaller proportion of total net sales. - 9 - Extraordinary Loss. The Company's net income in the first nine months of 1996 was decreased by an extraordinary loss of $3 million (net of income taxes of $2 million) representing the write-offs of deferred loan costs associated with the prepayment of a portion of the outstanding indebtedness under the 1995 Bank Credit Agreement. The Company's net loss in the first nine months of 1995 was increased by an extraordinary loss of $19 million (net of income taxes of $12 million) from debt repurchases. Net Income (Loss). For the third quarter of 1996, net income was $43 million compared to net income of $15 million for the third quarter of 1995. For the first nine months of 1996, net income was $103 million compared to a net loss of $6 million for the first nine months of 1995. FINANCIAL CONDITION For the first nine months of 1996, cash decreased $253,000. Capital additions of $41 million and debt repayments of $395 million were funded principally by net proceeds of $205 million from the sale of Common Stock and $232 million of cash from operations provided by strong operating results. During the first nine months of 1996, receivables decreased $7.6 million due principally to lower net selling prices in the domestic tissue and international operations in the third quarter of 1996 compared to the fourth quarter of 1995. Inventories decreased by $26.4 million principally due to lower raw material costs. Accounts payable increased $8.8 million due to higher selling expenses and the timing of payments to vendors. The liability for interest payable decreased $40.9 million due to lower debt balances as a result of the Offering and cash provided from operations and also as a result of the timing of the quarter end relative to semi-annual interest payment dates. Other current liabilities increased $5.2 million primarily resulting from the timing of compensation payments. As a result of all these changes and the prepayment of a portion of the indebtedness due within one year under the 1995 Bank Credit Agreement from the net proceeds of the Offering, net working capital deficit decreased to $32 million at September 30, 1996, from a deficit of $35 million at December 31, 1995. In September 1996, the Company's Board of Directors authorized the installation of a new tissue paper machine and associated facilities at one of its U.S. mills. The expansion is planned for completion in 1999 at an estimated cost of $160 million. The Company's 1995 Revolving Credit Facility, which may be used for general corporate purposes, has a final maturity of March 16, 2002. At September 30, 1996, the Company had $297 million in available capacity under the 1995 Revolving Credit Facility. - 10 - PART II. OTHER INFORMATION 1. LEGAL PROCEEDINGS In July 1992, the United States Environmental Protection Agency issued a Finding of Violation to the Company concerning the No. 8 boiler at its Green Bay mill. The Finding alleged violation of regulations issued by the U.S. EPA under the Clean Air Act relating to New Source Performance Standards for Fossil Fuel Steam Generators. In June of 1996, the Company paid $350,000 and entered into a consent decree to settle this matter without admitting any wrongdoing. During September 1996, the Company completed certain modifications to its No. 8 boiler provided for in the consent decree which do not affect its utility. In 1992, the IRS disallowed income tax deductions for the 1988 tax year which were claimed by the Company for fees and expenses, other than interest, related to 1988 debt financing and refinancing transactions. The Company deducted the balance of the disallowed fees and expenses related to the 1988 debt instruments during the tax years 1989 through 1995. In disallowing these deductions, the IRS relied on Code Section 162(k) (which denies deductions for otherwise deductible amounts paid or incurred in connection with stock redemptions). The Company is contesting the disallowance. In August 1994, the U.S. Tax Court issued its opinion in which it essentially adopted the interpretation of Code Section 162(k) advanced by the IRS and disallowed the deductions claimed by the Company. Prior to the entry of a decision in the U.S. Tax Court, Code Section 162(k) was amended in August 1996 to provide that, retroactive to 1986, such Code Section was not applicable to deductions for amounts properly allocable to indebtedness and amortized over the term of such indebtedness. Accordingly, the Company and the IRS filed a joint motion for reconsideration of the Court's opinion requesting a determination that the Company may deduct all disallowed fees and expenses related to the 1988 debt instruments. On October 22nd the Court granted the joint motion and issued its supplemental opinion that the Company may deduct the fees and expenses previously disallowed. The Company anticipates the Court's final decision on this matter in the fourth quarter of 1996. The Company has paid to the IRS tax of approximately $5 million for its 1988 tax year pursuant to the U.S. Tax Court opinion along with $4 million for the interest accrued on such tax. If the opinion of the U.S. Tax Court, which the Company had been planning to appeal, was ultimately sustained, the potential amount of additional taxes due on account of such disallowance for the period 1989 through 1995 would be approximately $38 million exclusive of interest, which amount the Company has fully reserved. As previously reported, the Company responded during the first and second quarters of 1995 to a Civil Investigative Demand issued by the U.S. Department of Justice concerning a civil antitrust investigation into possible agreements in restraint of trade in connection with the sales of commercial sanitary paper products. On May 20, 1996, the Company received a subpoena to provide certain documents to a federal grand jury in Cleveland that is investigating possible antitrust violations in the sale of commercial sanitary paper products. The Company has responded to the subpoena and is continuing to cooperate in the investigation. - 11 - 2. CHANGES IN SECURITIES None 3. DEFAULTS UPON SENIOR SECURITIES None 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None 5. OTHER INFORMATION None 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: Exhibit No. Description 3 Amended and Restated By-Laws 10 Stock Award Agreement dated September 10, 1996 27 Financial Data Schedule for the nine months ended September 30, 1996. 99 News release containing financial results for the quarter ended September 30, 1996. b) No reports on Form 8-K were filed by the Company for the quarter for which this report is filed. - 12 - FORT HOWARD CORPORATION SIGNATURES Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FORT HOWARD CORPORATION Registrant October 23, 1996 /s/ Kathleen J. Hempel --------------------------------------- Kathleen J. Hempel, Vice Chairman and Chief Financial Officer and Principal Accounting Officer October 23, 1996 /s/ James W. Nellen II --------------------------------------- James W. Nellen II, Vice President and Secretary - 13 - INDEX TO EXHIBITS Exhibit No. Description 3 Amended and Restated By-Laws 10 Stock Award Agreement dated September 10, 1996 27 Financial Data Schedule for the nine months ended September 30, 1996. 99 News release containing financial results for the quarter ended September 30, 1996. -14- EX-3 2 EXHIBIT 3 AMENDED AND RESTATED BY-LAWS OF FORT HOWARD CORPORATION ARTICLE I OFFICES SECTION 1. Registered Office in Delaware. The address of the registered office of Fort Howard Corporation (hereinafter called the "Corporation") in the State of Delaware shall be 32 Lookerman Square Suite L- 100, in the City of Dover, County of Kent, Delaware 19901, and the registered agent in charge thereof shall be The Prentice-Hall Corporation System, Inc. SECTION 2. Other Offices. The Corporation may have an office or offices at any other place or places within or without the State of Delaware. ARTICLE II MEETINGS OF STOCKHOLDERS SECTION 1. Annual Meeting. The annual meeting of stockholders for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held at such place within or without the State of Delaware, and at such date and hour, as shall be designated by the Board of Directors of the Corporation (the "Board") and set forth in the notice or in a duly executed waiver of notice thereof. SECTION 2. Special Meetings. A special meeting of the stockholders for any purpose or purposes may be called at any time by a majority of the members of the Board or the Chief Executive Officer of the Corporation. A special meeting of stockholders of the Corporation may not be called by any other person or persons. Any such meeting shall be held at such place within or without the State of Delaware, and at such date and hour, as shall be designated in the notice or in a duly executed waiver of notice of such meeting. Only such business as is stated in the written notice of a special meeting may be acted upon thereat. SECTION 3. Notice of Meetings. Except as otherwise provided by law, written notice of each annual or special meeting of stockholders stating the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is held, shall be given personally or by first class mail to each stockholder entitled to vote at such meeting, not less than 10 nor more than 60 calendar days before the date of the meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder's address as it appears on the records of the Corporation. If, prior to the time of mailing, the Secretary shall have received from any stockholder entitled to vote a written request that notices intended for such stockholder are to be mailed to an address other than the address that appears on the records of the Corporation, notices intended for such stockholder shall be mailed to the address designated in such request. Notice of a special meeting may be given by the person or persons calling the meeting, or, upon the written request of such person or persons, by the Secretary of the Corporation on behalf of such person or persons. If the person or persons calling a special meeting of stockholders give notice thereof, such person or persons shall forward a copy thereof to the Secretary. Every request to the Secretary for the giving of notice of a special meeting of stockholders shall state the purpose or purposes of such meeting. SECTION 4. Waiver of Notice. Notice of any annual or special meeting of stockholders need not be given to any stockholder entitled to vote at such meeting who files a written waiver of notice with the Secretary, duly executed by the person entitled to notice, whether before or after the meeting. Neither the business to be transacted at, nor the purpose of, any meeting of stockholders need be specified in any written waiver of notice. Attendance of a stockholder at a meeting, in person or by proxy, shall constitute a waiver of notice of such meeting, except as provided by law. SECTION 5. Adjournments. When a meeting is adjourned to another date, hour or place, notice need not be given of the adjourned meeting if the date, hour and place thereof are announced at the meeting at which the adjournment is taken. If the adjournment is for more than 30 calendar days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the adjourned meeting. At the adjourned meeting any business may be transacted which might have been transacted at the original meeting. When any meeting is convened the presiding officer, if directed by the Board, may adjourn the meeting if (a) no quorum is present for the transaction of business, or (b) the Board determines that adjournment is necessary or appropriate to enable the stockholders (i) to consider fully information which the Board determines has not been made sufficiently or timely available to stockholders or (ii) otherwise to exercise effectively their voting rights. SECTION 6. Quorum. Except as otherwise provided by law or the Restated Certificate of Incorporation of the Corporation (the "Restated Certificate of Incorporation"), whenever a class of stock of the Corporation is entitled to vote as a separate class, or whenever classes of stock of the Corporation are entitled to vote together as a single class, on any matter brought before any meeting of the stockholders, whether annual or special, holders of shares entitled to cast a majority of the votes entitled to be cast by all the holders of the shares of stock of such class voting as a separate class, or classes voting together as a single class, as the case may be, outstanding and entitled to vote thereat, present in person or by proxy, shall constitute a quorum at any such meeting of the stockholders. If, however, such quorum shall not be present or represented at any such meeting of the stockholders, the stockholders entitled to vote thereat may adjourn the meeting from time to time in accordance with Section 5 of this Article II until a quorum shall be present or represented. SECTION 7. Voting. Unless otherwise provided in the Restated Certificate of Incorporation, each stockholder represented at a meeting of stockholders shall be entitled to cast one vote for each share of capital stock entitled to vote thereat held by such stockholder. Except as otherwise provided by law or the Restated Certificate of Incorporation or these Restated By-Laws, when a quorum is present with respect to any matter brought before any meeting of the stockholders, the vote of the holders of shares entitled to cast a majority of the votes entitled to be cast by all the holders of the shares constituting such quorum shall decide any such matter. Votes need not be by written ballot, unless the Board, in its discretion, or the officer of the Corporation presiding at a meeting of stockholders, in his discretion, requires any vote or votes cast at such meeting to be cast by written ballot. SECTION 8. Proxies. Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy. Such proxy shall be filed with the Secretary before such meeting of stockholders at such time as the Board may require. No proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. SECTION 9. Advance Notice of Business to Be Transacted at Annual Meetings. To be properly brought before the annual meeting of stockholders, business must be either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board (or any duly authorized committee thereof), (b) otherwise properly brought before the meeting by or at the direction of the Board (or any duly authorized committee thereof) or (c) otherwise properly brought before the meeting by any stockholder of the Corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 9 and on the record date for the determination of stockholders entitled to vote at such meeting and (ii) who complies with the notice procedures set forth in this Section 9. In addition to any other applicable requirements, including but not limited to the requirements of Rule 14a-8 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), for business to be properly brought before an annual meeting by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a stockholder's notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the Corporation, not less than 60 days nor more than 90 days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within 30 days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the annual meeting is mailed or such public disclosure of the date of the annual meeting is made, whichever first occurs. To be in proper written form, a stockholder's notice to the Secretary must set forth as to each matter such stockholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (b) the name and record address of such stockholder, (c) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such stockholder, together with evidence reasonably satisfactory to the Secretary of such beneficial ownership, (d) a description of all arrangements or understandings between such stockholder and any other person or persons (including their names) in connection with the proposal of such business by such stockholder and any material interest of such stockholder in such business and (e) a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting. Notwithstanding anything in these Restated By-laws to the contrary, no business shall be conducted at the annual meeting of stockholders except business brought before such meeting in accordance with the procedures set forth in this Section 9; provided, however, that, once business has been properly brought before such meeting in accordance with such procedures, nothing in this Section 9 shall be deemed to preclude discussion by any stockholder of any such business. If the chairman of such meeting determines that business was not properly brought before the meeting in accordance with the foregoing procedures, the chairman shall declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted. ARTICLE III BOARD OF DIRECTORS SECTION 1. General Powers. The property, business and affairs of the Corporation shall be managed by the Board, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by law or by the Restated Certificate of Incorporation directed or required to be exercised or done by the stockholders. SECTION 2. Number and Term of Holding Office. Subject to the rights, if any, of holders of preferred stock of the Corporation, the number of directors which shall constitute the whole Board shall consist of not less than three (3) nor more than fifteen (15) members, the exact number of which shall be fixed by the Board from time to time. The Board shall, by resolution passed by a majority of the Board, designate the directors to serve as initial Class I, Class II and Class III directors upon filing of the Restated Certificate of Incorporation with the Secretary of State of the State of Delaware. Except as provided in Section 5 of this Article III, directors shall be elected by a plurality of the votes cast at annual meetings of stockholders, and each director so elected shall hold office as provided by Article VIII of the Restated Certificate of Incorporation. None of the directors need be stockholders of the Corporation. SECTION 3. Nomination of Directors and Advance Notice Thereof. Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation, except as may be otherwise provided in the Restated Certificate of Incorporation with respect to the right of holders of preferred stock of the Corporation to nominate and elect a specified number of directors in certain circumstances. Nominations of persons for election to the Board may be made at any annual meeting of stockholders, or at any special meeting of stockholders called for the purpose of electing directors, (a) by or at the direction of the Board (or any duly authorized committee thereof) or (b) by any stockholder of the Corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 3 and on the record date for the determination of stockholders entitled to vote at such meeting and (ii) who complies with the notice procedures set forth in this Section 3. In addition to any other applicable requirements, for a nomination to be made by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a stockholder's notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the Corporation (a) in the case of an annual meeting, not less than 60 days nor more than 90 days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within 30 days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the annual meeting is mailed or such public disclosure of the date of the annual meeting is made, whichever first occurs, or (b) in the case of a special meeting of stockholders called for the purpose of electing directors, not later than the close of business on the tenth day following the day on which notice of the date of the special meeting is mailed or public disclosure of the date of the special meeting is made, whichever first occurs. To be in proper written form, a stockholder's notice to the Secretary must set forth (a) as to each person whom the stockholder proposes to nominate for election as a director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by the person and (iv) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder; and (b) as to the stockholder giving the notice, (i) the name and record address of such stockholder, (ii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such stockholder, together with evidence reasonably satisfactory to the Secretary of such beneficial ownership, (iii) a description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder, (iv) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice and (v) any other information relating to such stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section l4 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 3. If the chairman of the meeting determines that a nomination was not made in accordance with the foregoing procedures, the chairman of the meeting shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded. SECTION 4. Resignation. Any director may resign at any time by giving written notice to the Board, the Chief Executive Officer or the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, then it shall take effect when accepted by action of the Board. Except as aforesaid, acceptance of such resignation shall not be necessary to make it effective. SECTION 5. Vacancies. Subject to the rights of the holders of any series of Preferred Stock or any other class of capital stock of the Corporation (other than the Common Stock) then outstanding, any vacancy in the Board, arising from death, resignation, removal, an increase in the number of directors or any other cause, may be filled either by a majority vote of the remaining directors, although less than a quorum, or by the sole remaining director. Any director elected to fill a vacancy shall hold office for a term that shall coincide with the term of the class to which such director shall have been elected. SECTION 6. Meetings. (a) Annual Meetings. As soon as practicable after each annual election of directors, the Board shall meet for the purpose of organization and the transaction of other business, unless it shall have transacted all such business by written consent pursuant to Section 7 of this Article III. (b) Other Meetings. Other meetings of the Board shall be held at such times as the Board shall from time to time determine or upon call by the Chief Executive Officer of the Corporation or any two directors. (c) Notice of Meetings. Regular meetings of the Board may be held without notice. The Secretary of the Corporation shall give notice to each director of each special meeting, including the time and place of such special meeting. Notice of each such meeting shall be given to each director either by mail, at least two days before the day on which such meeting is to be held, or by telephone, telegram, facsimile, telex or cable not later than the day before the day on which such meeting is to be held or on such shorter notice as the person or persons calling such meeting may deem necessary or appropriate in the circumstances. Notice of any meeting shall not be required to be given to any director who shall attend such meeting. A waiver of notice by the person entitled thereto, whether before or after the time of any such meeting, shall be deemed equivalent to adequate notice. (d) Place of Meetings. The Board may hold its meetings at such place or places within or without the State of Delaware as the Board may from time to time by resolution determine or as shall be designated in the respective notices or waivers of notice thereof. (e) Quorum and Manner of Acting. Except as otherwise provided by law, the Restated Certificate of Incorporation or these Restated By-Laws, a majority of the total number of directors then in office shall be necessary at any meeting of the Board in order to constitute a quorum for the transaction of business at such meeting, and the affirmative vote of a majority of those directors present at any such meeting at which a quorum is present shall be necessary for the passage of any resolution or act of the Board. In the absence of a quorum for any such meeting, a majority of the directors present thereat may adjourn such meeting from time to time until a quorum shall be present thereat. Notice of any adjourned meeting need not be given. (f) Organization and Order of Business. The Chief Executive Officer shall act as chairman of each meeting of the Board and preside thereat, or, in the absence of the Chief Executive Officer at any meeting of the Board, the Vice Chairman shall act as chairman of such meeting and preside thereat, or, in the absence of both the Chief Executive Officer and the Vice Chairman at any meeting of the Board, any other director chosen by a majority of the directors present thereat shall act as chairman of the meeting and preside thereat. The Secretary of the Corporation or, in the case of his absence, any person whom the chairman of the meeting shall appoint, shall act as secretary of such meeting and keep the minutes thereof. SECTION 7. Action by Consent. Any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting if a written consent thereto is signed by all members of the Board or such committee, as the case may be, and such written consent or consents are filed with the minutes of the proceedings of the Board or such committee. SECTION 8. Meetings by Conference Telephone, etc. Any one or more members of the Board, or of any committee thereof, may participate in a meeting of the Board, or of such committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting. SECTION 9. Compensation. Each director, in consideration of his serving as such, shall be entitled to receive from the Corporation such amount per annum, if any, or such fees, if any, for attendance at meetings of the Board or of any committee thereof, or both, as the Board shall from time to time determine. The Board may likewise provide that the Corporation shall reimburse each director or member of a committee for any expenses incurred by him on account of his attendance at any such meeting. Nothing contained in this Section 9 shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. ARTICLE IV COMMITTEES The Board, by resolution passed by a majority of the whole Board, may designate members of the Board to constitute one or more committees which shall in each case consist of such number of directors, not fewer than two, and, to the extent permitted by law and provided in the resolution establishing such committee, shall have and exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified members at any meeting of any such committee. In the absence or disqualification of a member of a committee, and in the absence of a designation by the Board of an alternate member to replace the absent or disqualified member, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any absent or disqualified member. A majority of all the members of any such committee may fix its rules of procedure, determine its action and fix the time and place, whether within or without the State of Delaware, of its meetings and specify what notice thereof, if any, shall be given, unless the Board shall otherwise by resolution provide. The Board shall have power to change the members of any such committee at any time, to fill vacancies therein and to discharge any such committee, either with or without cause, at any time. Any committee, to the extent allowed by law and provided in the resolution establishing such committee, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation. Each committee shall keep regular minutes and report to the Board when required. ARTICLE V OFFICERS SECTION 1. Officers. The officers of the Corporation shall be a Chairman of the Board, a President and Chief Executive Officer, a Vice Chairman, one or more Executive Vice Presidents and one or more Vice Presidents, a Treasurer, a Chief Financial Officer, a Secretary and a Controller. Each such officer shall be elected or appointed by the Board at its annual meeting and shall hold office for such term as may be determined by the Board. Each such officer shall hold office until the next succeeding annual meeting of the Board and until his successor is elected or until his earlier death or resignation or removal in the manner hereinafter provided. Any two or more offices may be held by the same person. The Board or the President and Chief Executive Officer may elect or appoint such other officers of the Corporation (including one or more Assistant Vice Presidents, Assistant Treasurers and Assistant Secretaries) as it or he deems necessary who shall have such authority and shall perform such duties as the Board or he may prescribe. If additional officers are elected or appointed, each of them shall hold office until his successor is elected or appointed or until his earlier death or resignation or removal in the manner hereinafter provided. SECTION 2. Authority and Duties. All officers, as between themselves and the Corporation, shall have such authority and perform such duties in the management of the Corporation as may be provided in these Restated By-Laws or, to the extent not so provided, by resolution of the Board. SECTION 3. Resignation and Removal. (a) Any officer may resign at any time by giving written notice to the Board, the Chief Executive Officer or the Secretary of the Corporation, and such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, when accepted by action of the Board. Except as aforesaid, the acceptance of such resignation shall not be necessary to make it effective. (b) All officers and agents elected or appointed by the Board shall be subject to removal at any time by the Board and all officers and agents appointed by the Chief Executive Officer shall be subject to removal at any time by the Chief Executive Officer, in each case, with or without cause. SECTION 4. Vacancies. Any vacancy in any office may be filled for the unexpired portion of the term in the same manner as provided for election and appointment to such office. SECTION 5. Chairman of the Board. The Chairman of the Board shall preside at all meetings of the Board and at all meetings of the stockholders and shall have and exercise such further powers and duties as may from time to time be conferred upon or assigned to him by the Board. SECTION 6. President and Chief Executive Officer. The President and Chief Executive Officer of the Corporation, subject to the direction of the Board, shall have general charge of the business and affairs of the Corporation, shall have the direction of all other officers, agents and employees of the Corporation and may assign such duties to the other officers of the Corporation as he deems appropriate. At the request of the Chairman of the Board, or in the case of the absence or inability to act of the Chairman of the Board, the President and Chief Executive Officer, until otherwise determined, and subject to any limitations imposed by the Board, shall assume the duties of the Chairman of the Board, and when so acting, but subject to the foregoing, shall have all of the power of, and be subject to all the restrictions upon, the Chairman of the Board. SECTION 7. Vice Chairman. The Vice Chairman, subject to the direction of the President and Chief Executive Officer, shall assist the President and Chief Executive Officer in carrying out the orders and resolutions of the Board and shall perform such other duties as the President and Chief Executive Officer or the Board shall from time to time assign. SECTION 8. Executive Vice Presidents and Vice Presidents. Each Executive Vice President and Vice President of the Corporation shall have such powers and perform such duties as the Chief Executive Officer or the Board may from time to time prescribe and shall perform such other duties as may be prescribed by these By-laws. SECTION 9. Chief Financial Officer. The Chief Financial Officer shall, subject to the direction of the Chief Executive Officer, have overall charge of all of the financial affairs of the Corporation. SECTION 10. Treasurer. The Treasurer of the Corporation shall have charge and custody of and be responsible for all funds and securities of the Corporation. SECTION 11. Secretary. The Secretary of the Corporation shall keep the records of all meetings of the stockholders and the Board. He shall affix the seal of the Corporation to all deeds, contracts, bonds or other instruments requiring the corporate seal when the same shall have been signed on behalf of the Corporation by a duly authorized officer and shall be the custodian of all contracts, deeds, documents and all other indicia of title to properties owned by the Corporation and of its other corporate records. SECTION 12. Controller. The Controller of the Corporation shall have charge and custody of and be responsible for the Corporation's books of account. ARTICLE VI CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC. SECTION 1. Execution of Documents. Any officer, employee or agent of the Corporation designated by the Board (or any duly authorized committee of the Board to the extent permitted by law) shall have power to execute and deliver deeds, contracts, mortgages, bonds, debentures, checks, drafts and other orders for the payment of money and other documents for and in the name of the Corporation, and the Board (or such a committee) may authorize any such officer, employee or agent to delegate such power (including authority to redelegate) by written instrument to other officers, employees or agents of the Corporation. SECTION 2. Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation or otherwise as the Board or the Chief Executive Officer or any other officer of the Corporation to whom power in that respect shall have been delegated by the Board shall select. SECTION 3. Proxies in Respect of Stock or Other Securities of Other Corporations. The Board or the Chief Executive Officer shall designate the officers of the Corporation who shall have authority from time to time to appoint an agent or agents of the Corporation to exercise in the name and on behalf of the Corporation the powers and rights that the Corporation may have as the holder of stock or other securities in any other corporation, and to vote or consent in respect of such stock or securities. Such designated officers may instruct the person or persons so appointed as to the manner of exercising such powers and rights, and such designated officers may execute or cause to be executed in the name and on behalf of the Corporation and under its corporate seal, or otherwise, such written proxies, powers of attorney or other instruments as they may deem necessary or proper in order that the Corporation may exercise such powers and rights. ARTICLE VII SHARES AND TRANSFER OF SHARES SECTION 1. Certificates of Stock. Every owner of shares of stock of the Corporation shall be entitled to have a certificate evidencing the number of shares of stock of the Corporation owned by him or it and designating the class of stock to which such shares belong, which shall otherwise be in such form as the Board shall prescribe. Each such certificate shall bear the signature (or a facsimile thereof) of the Chief Executive Officer or the Vice Chairman or the President or an Executive Vice President or a Vice President and the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Corporation. SECTION 2. Record. A record shall be kept of the name of the person, firm or corporation owning the stock represented by each certificate evidencing stock of the Corporation issued, the number of shares represented by each such certificate, and the date thereof, and, in the case of cancellation, the date of cancellation. Except as otherwise expressly required by law, the person in whose name shares of stock stand on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation. SECTION 3. Transfer of Stock. (a) The transfer of shares of stock and the certificates evidencing such shares of stock of the Corporation shall be governed by Article 8 of Subtitle I of Title 6 of the Delaware Code (the Uniform Commercial Code), as amended from time to time. (b) Registration of transfers of shares of stock of the Corporation shall be made only on the books of the Corporation upon request of the registered holder thereof, or of his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the Corporation, and upon the surrender of the certificate or certificates evidencing such shares properly endorsed or accompanied by a stock power duly executed. SECTION 4. Addresses of Stockholders. Each stockholder shall designate to the Secretary of the Corporation an address at which notices of meetings and all other corporate notices may be served or mailed to him, and, if any stockholder shall fail to so designate such an address, corporate notices may be served upon him by mail directed to him at his post office address, if any, as the same appears on the share record books of the Corporation or at his last known post office address. SECTION 5. Lost, Destroyed or Mutilated Certificates. A holder of any shares of stock of the Corporation shall promptly notify the Corporation of any loss, destruction or mutilation of any certificate or certificates evidencing all or any such shares of stock. The Board may, in its discretion, cause the Corporation to issue a new certificate in place of any certificate theretofore issued by it and alleged to have been mutilated, lost, stolen or destroyed, upon the surrender of the mutilated certificate or, in the case of loss, theft or destruction of the certificate, upon satisfactory proof of such loss, theft or destruction, and the Board may, in its discretion, require the owner of the lost, stolen or destroyed certificate or his legal representative to give the Corporation a bond sufficient to indemnify the Corporation against any claim made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. SECTION 6. Facsimile Signatures. Any or all of the signatures on a certificate evidencing shares of stock of the Corporation may be facsimiles. SECTION 7. Regulations. The Board may make such rules and regulations as it may deem expedient, not inconsistent with the Restated Certificate of Incorporation or these Restated By-Laws, concerning the issue, transfer and registration of certificates evidencing stock of the Corporation. It may appoint, or authorize any principal officer or officers to appoint, one or more transfer agents and one or more registrars, and may require all certificates of stock to bear the signature or signatures (or a facsimile or facsimiles thereof) of any of them. The Board may at any time terminate the employment of any transfer agent or any registrar of transfers. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall cease to be such officer, transfer agent or registrar, whether because of death, resignation, removal or otherwise, before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who signed or whose facsimile signature has been placed upon such certificate or certificates had not ceased to be such officer, transfer agent or registrar. SECTION 8. Record Date. In order that the Corporation may determine the stockholders entitled to notice of, or to vote at, any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other such action. A determination of stockholders entitled to notice of, or to vote at, any meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting. SECTION 9. Registered Stockholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its records as the owner of shares of stock to receive dividends and to vote as such owner, shall be entitled to hold liable for calls and assessments a person registered on its records as the owner of shares of stock, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares of stock on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Delaware. SECTION 10. Stockholder Agreements. Shares of stock of the Corporation may be subject to one or more agreements abridging, limiting or restricting the rights of any one or more stockholders to sell, assign, transfer, mortgage, pledge or hypothecate any or all of the stock of the Corporation held by them, or providing for preemptive rights, or may be subject to one or more agreements providing a purchase option with respect to any shares of stock of the Corporation. If such agreements exist, all certificates evidencing shares of stock subject to such abridgements, limitations, restrictions or options shall have reference thereto endorsed on such certificate and such stock shall not thereafter be transferred on the books of the Corporation except in accordance with the terms and conditions of such agreement or agreements. Copies of such agreement or agreements shall be maintained at the offices of the Corporation. ARTICLE VIII BOOKS AND RECORDS The books and records of the Corporation may be kept at such place or places within or without the State of Delaware as the Board may from time to time determine. ARTICLE IX SEAL The Board shall provide a corporate seal which shall bear the full name of the Corporation. ARTICLE X FISCAL YEAR The fiscal year of the Corporation shall be fixed, and shall be subject to change from time to time, by the Board. ARTICLE XI INDEMNIFICATION SECTION 1. General. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, to the full extent authorized or permitted by law, as now or hereafter in effect, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. SECTION 2. Derivative Actions. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, to the full extent authorized or permitted by law, as now or hereafter in effect, against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation; provided, however, that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. SECTION 3. Successful Defense. To the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in sections 1 and 2 above, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. SECTION 4. Proceedings Initiated by any Person. Notwithstanding anything to the contrary contained in sections 1 or 2 above, except for proceedings to enforce rights to indemnification, the Corporation shall not be obligated to indemnify any person in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized in advance, or unanimously consented to, by the Board of Directors. SECTION 5. Procedure. Any indemnification under sections 1 and 2 above (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in sections 1 and 2 above. Such determination shall be made (i) by a majority vote of the directors who are not parties to such action, suit or proceeding even though less than a quorum, or (ii) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (iii) by the stockholders. SECTION 6. Advancement of Expenses. Expenses (including attorneys' fees) incurred by an officer or director in defending any civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation pursuant to this Article XI or as otherwise authorized by law. Such expenses (including attorneys' fees) incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board of Directors deems appropriate. SECTION 7. Rights Not Exclusive. The indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of this Article XI shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. SECTION 8. Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of the DGCL. SECTION 9. Definition of "Corporation". For purposes of this Article XI, references to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article XI with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. SECTION 10. Certain Other Definitions. For purposes of this Article XI, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves service by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation", as referred to in this Article XI. SECTION 11. Continuation of Rights. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article XI shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. SECTION 12. Repeal or Modification. Any repeal or modification of this Article XI by the stockholders of the Corporation shall not adversely affect any rights to indemnification and to advancement of expenses that any person may have at the time of such repeal or modification with respect to any acts or omissions occurring prior to such repeal or modification. ARTICLE XII AMENDMENTS These Restated By-Laws, or any of them, may be altered, amended or repealed, or new by-laws may be made, but only to the extent any such alteration, amendment, repeal or new by-law is not inconsistent with any provision of the Restated Certificate of Incorporation, either by a majority of the whole Board or by the stockholders of the Corporation upon the affirmative vote of the holders of 80% of the outstanding shares of capital stock of the Corporation entitled to vote thereon. EX-10 3 Exhibit 10 AWARD AGREEMENT dated as of September 10, 1996 (the "AWARD AGREEMENT") between FORT HOWARD CORPORATION, a Delaware corporation (the "COMPANY"), and the other party signatory hereto (the "PARTICIPANT"). WHEREAS, the Participant is currently an officer or key employee of the Company or one of its Subsidiaries and, pursuant to the Company's 1995 Stock Incentive Plan (the "PLAN") and upon the terms and subject to the conditions hereinafter set forth, the Company desires to provide the Participant with an additional incentive to remain in its employ or the employ of one of its Subsidiaries and to increase his or her interest in the success of the Company by granting to the Participant (i) a Restricted Stock Award consisting of restricted shares (the "RESTRICTED SHARES") of Common Stock, par value $.01 per share, of the Company (the "COMMON STOCK") and (ii) a Stock Equivalent Award consisting of units relating to shares of Common Stock (the "STOCK EQUIVALENTS"); NOW, THEREFORE, in consideration of the covenants and agreements herein contained, the parties hereto agree as follows: 1. DEFINITIONS; INCORPORATION OF PLAN TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Plan, a copy of which is attached hereto. This Award Agreement, the Restricted Shares and the Stock Equivalents shall be subject to the Plan, the terms of which are hereby incorporated herein by reference, and in the event of any conflict or inconsistency between the Plan and this Award Agreement, the Plan shall govern. The date of grant with respect to the Restricted Shares and the Stock Equivalents (the "DATE OF GRANT") shall be the date specified at the foot of the signature page hereof. 2. GRANT OF RESTRICTED SHARES. Subject to the terms and conditions contained herein and in the Plan, the Company hereby grants to the Participant, effective as of the Date of Grant, the number of Restricted Shares specified at the foot of the signature page hereof. 3. TERMS AND CONDITIONS OF RESTRICTED SHARES. The Restricted Shares evidenced hereby are subject to the following terms and conditions: (a) RESTRICTION PERIOD. Subject to the terms and conditions contained herein and in the Plan, none of the Restricted Shares may be sold, assigned, transferred, pledged, encumbered or otherwise disposed of prior to the Vesting Date (as defined below) applicable to such Restricted Shares. (b) LAPSE OF RESTRICTIONS. (i) Unless previously vested or forfeited in accordance with the terms of the Plan or this Award Agreement, 20% of the Participant's Restricted Shares shall vest and the restrictions thereon shall lapse as of each of the first five anniversaries of the Date of Grant (each, a "VESTING DATE") so long as the Participant has remained in the continuous employment of the Company or any of its Subsidiaries through the applicable Vesting Date; PROVIDED, HOWEVER, that in the event of the death or Disability of the Participant, or a termination of the Participant's employment by the Company or any of its Subsidiaries without Cause (as such term is defined in Section 6), 100% of the Participant's Restricted Shares shall vest and the restrictions thereon shall lapse as of the date of death, Disability or termination; PROVIDED FURTHER, HOWEVER, that under no circumstances shall any of the Restricted Shares vest, or the restrictions thereon lapse, during the first six months after the Date of Grant. In the event of a Change in Control and except as the Committee (as constituted immediately prior to such Change in Control) may otherwise determine in its sole discretion, all of the Participant's Restricted Shares, whether or not vested (other than any Restricted Shares granted within six months of such Change in Control), shall become fully vested and all restrictions thereon shall lapse as of the date of the Change in Control. (ii) Upon termination of the Participant's employment with the Company or any of its Subsidiaries for any reason, any Restricted Shares which have not theretofore vested (and which do not vest by reason of such termination of employment) shall be forfeited without any consideration being paid therefor. Notwithstanding any other provision in this Award Agreement, in the event that the Participant's employment with the Company or any of its Subsidiaries terminates for any reason within six months of the Date of Grant, the Participant's Restricted Shares shall be forfeited as of the date of such termination without any consideration being paid therefor. (c) ISSUANCE OF CERTIFICATE. A certificate or certificates in respect of the Participant's Restricted Shares shall be registered in the Participant's name as of the Date of Grant but shall be held in custody by the Company until the restrictions thereon shall have lapsed, and, as a condition of the Restricted Stock Award, the Participant shall have delivered a stock power, endorsed in blank, relating to the Common Stock covered by such Award. Each such certificate shall be registered in the name of such Participant, and shall bear a legend in substantially the following form as determined by the Committee: THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED PURSUANT TO THE FORT HOWARD CORPORATION 1995 STOCK INCENTIVE PLAN AND ARE SUBJECT TO THE TERMS AND CONDITIONS THEREOF AND OF AN AWARD AGREEMENT BETWEEN FORT HOWARD CORPORATION AND THE BENEFICIAL OWNER HEREOF, INCLUDING RESTRICTIONS ON SALE, TRANSFER AND ENCUMBRANCE. THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933. UNLESS FORT HOWARD CORPORATION DETERMINES OTHERWISE, NO TRANSFER OF SUCH SECURITIES MAY BE MADE WITHOUT AN OPINION OF COUNSEL, SATISFACTORY TO FORT HOWARD CORPORATION, THAT SUCH TRANSFER MAY PROPERLY BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933 OR THAT SUCH SECURITIES HAVE BEEN SO REGISTERED UNDER A REGISTRATION STATEMENT WHICH IS IN EFFECT AT THE DATE OF SUCH TRANSFER. COPIES OF THE 1995 STOCK INCENTIVE PLAN AND THE AWARD AGREEMENT ARE ON FILE AT THE OFFICE OF THE SECRETARY AND MAY BE INSPECTED DURING NORMAL BUSINESS HOURS. (d) RIGHTS AS SHAREHOLDER. The Participant shall have, with respect to the Restricted Shares, all of the rights of a shareholder of the Company, including the right to vote the shares and the right to receive any cash dividends. Stock dividends issued with respect to the Restricted Shares shall be treated as additional shares under the Participant's Restricted Stock Award and shall be subject to the same restrictions and other terms and conditions that apply to the Restricted Shares with respect to which such dividends are issued. 4. GRANT OF STOCK EQUIVALENTS. Subject to the terms and conditions contained herein and in the Plan, the Company hereby grants to the Participant, effective as of the Date of Grant, the number of Stock Equivalents specified at the foot of the signature page hereof. 5. TERMS AND CONDITIONS OF STOCK EQUIVALENTS. The Stock Equivalents evidenced hereby are subject to the following terms and conditions: (a) GENERAL. Subject to the terms and conditions contained herein and in the Plan, each Stock Equivalent shall represent the unfunded and unsecured promise of the Company to pay an amount in cash equal to the Fair Market Value of a share of Common Stock. The Participant, as a holder of such Stock Equivalents, has only the rights of a general unsecured creditor of the Company. (b) VESTING (i) Unless previously vested or forfeited in accordance with the terms of the Plan or this Award Agreement, 20% of the Participant's Stock Equivalents shall vest as of each Vesting Date so long as the Participant has remained in the continuous employment of the Company or any of its Subsidiaries through the applicable Vesting Date; PROVIDED, HOWEVER, that in the event of the death or Disability of the Participant, or a termination of the Participant's employment by the Company or any of its Subsidiaries without Cause, 100% of the Participant's Stock Equivalents shall vest as of the date of death, Disability or termination; PROVIDED FURTHER, HOWEVER, that no Stock Equivalent shall under any circumstances vest during the first six months after the Date of Grant. In the event of a Change in Control and except as the Committee (as constituted immediately prior to such Change in Control) may otherwise determine in its sole discretion, all of the Participant's Stock Equivalents, whether or not vested (other than any Stock Equivalent granted within six months of such Change in Control), shall become fully vested as of the date of the Change in Control. (ii) Upon termination of the Participant's employment with the Company or any of its Subsidiaries for any reason, any Stock Equivalents which have not theretofore vested (and which do not vest by reason of such termination of employment) shall terminate and be cancelled without any consideration being paid therefor. Notwithstanding any other provision in this Award Agreement, in the event that the Participant's employment with the Company or any of its Subsidiaries terminates for any reason within six months of the Date of Grant, the Participant's Stock Equivalents shall terminate and be cancelled as of the date of such termination without any consideration being paid therefor. (c) PAYMENT. Subject to the terms and conditions contained herein and in the Plan, the Company shall settle the Participant's Stock Equivalents as promptly as practicable after the applicable Vesting Date (or such earlier date upon which such Stock Equivalents vest pursuant to Section 5(b)(i)) by payment to the Participant of an amount in cash equal to (i) the Fair Market Value of a share of Common Stock as of the applicable Vesting Date (or such earlier date upon which such Stock Equivalents vest pursuant to Section 5(b)(i)) multiplied by (ii) the number of Stock Equivalents that became vested as of such Vesting Date (or such earlier date upon which such Stock Equivalents vest pursuant to Section 5(b)(i)). (d) CERTAIN RESTRICTIONS. None of the Stock Equivalents or any rights or interests therein may be sold, transferred, assigned, pledged, or otherwise encumbered or disposed of, except by will or the laws of descent and distribution or pursuant to a "qualified domestic relations order" as defined in the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations thereunder. During the Participant's lifetime, payment in settlement of a Stock Equivalent shall be made only to the Participant (or an "alternate payee" under a "qualified domestic relations order" as defined in the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations thereunder). Each transferee of a Stock Equivalent pursuant to a qualified domestic relations order shall, as a condition to the transfer thereof, execute an agreement pursuant to which it shall become a party to this Award Agreement. (e) NO RIGHTS AS A SHAREHOLDER. The Participant shall have no rights as a shareholder with respect to any Stock Equivalent. 6. CAUSE. For purposes of this Award Agreement, "CAUSE" (i) has the meaning specified in an employment agreement applicable to the Participant, or (ii) in the event the Participant does not have an employment agreement that defines "Cause", means the occurrence of any of the following circumstances: (A) the wilful and continued failure by the Participant to substantially perform his or her duties with the Company in his or her established position on a full-time basis (other than any such failure resulting from Disability) after a written demand for substantial performance is delivered to the Participant by the Board, which demand specifically identifies the manner in which the Board believes that he or she has not substantially performed such duties; (B) the wilful engaging by the Participant in conduct which is significantly injurious to the Company, monetarily or otherwise, after a written demand for cessation of such conduct is delivered to the Participant by the Board, which demand specifically identifies the manner in which the Board believes that the Participant has engaged in such conduct and the injury to the Company; (C) the conviction of the Participant of a crime involving moral turpitude; or (D) the Participant's abuse of illegal drugs or other controlled substances or habitual intoxication. For purposes of the foregoing definition of "Cause", no act, or failure to act, on the part of the Participant shall be deemed wilful unless knowingly done, or omitted to be done, by the Participant not in good faith and without reasonable belief that such action or omission was in the best interests of the Company. 7. REPRESENTATIONS AND WARRANTIES. The Participant is aware of and familiar with the restrictions imposed on the transfer of any Restricted Shares or Stock Equivalents, including, without limitation, those imposed by the Securities Act of 1933, as amended, and any applicable state "blue sky" laws. The Participant represents that this Award Agreement has been duly executed and delivered by the Participant and constitutes a legal, valid and binding agreement of the Participant, enforceable against the Participant in accordance with its terms, except as limited by any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors' rights generally and by general principles of equity. 8. ENGAGING IN COMPETITION WITH THE COMPANY. (i) For a period of two years from the date of termination of the employment of the Participant with the Company or any direct or indirect Subsidiary of the Company, the Participant shall not become an employee, owner (except for passive investments of not more than three percent of the outstanding shares of, or any other equity interest in any company or entity listed or traded on a national securities exchange or in an over-the-counter securities market), officer, agent or director of any firm or Person which either directly competes with a line or lines of business of the Company or any Subsidiary accounting for ten percent (10%) or more of the Company's or such Subsidiary's gross sales, revenues or earnings before taxes or derives ten percent (10%) or more of such firm's or Person's gross sales, revenues or earnings before taxes from a line or lines of business which directly competes with the Company or any Subsidiary. In the event of a breach by the Participant of the non- compete provisions set forth in the first sentence of this Section 8(i) (or the provisions of Section 8(ii) below), the Committee, in its sole discretion, may require that the Participant promptly pay to the Company, in the case of any Restricted Shares that vest within six (6) months of such termination of employment, an amount in cash equal to the Fair Market Value of a share of Common Stock on the date of vesting of such Restricted Shares multiplied by the number of Restricted Shares that so vested. If, in any judicial proceeding, a court shall refuse to enforce all of the separate covenants deemed included in the first sentence of this Section 8(i), the Company and the Participant intend that those of such covenants which, if eliminated, would permit the remaining separate covenants to be enforced in such proceedings shall, for the purpose of such proceedings, be deemed eliminated from such provisions. (ii) The Participant agrees to observe the terms of any confidentiality, secrecy or other non-competition agreement that he or she has previously entered into with the Company (the terms of which shall be incorporated by reference into this Award Agreement) and agrees that, in the event of any breach of any such agreement by the Participant, he or she shall be subject to the provisions of the second sentence of Section 8(i) above. 9. MISCELLANEOUS. (a) NO RIGHTS TO GRANTS OR CONTINUED EMPLOYMENT. The Participant shall not have any claim or right to receive grants of Restricted Shares, Stock Equivalents or other Awards under the Plan. Nothing in the Plan or in any Award or in this Award Agreement shall confer upon the Participant any right to continued employment with the Company or any Subsidiary, as the case may be, or interfere in any way with the right of the Company or a Subsidiary to terminate the employment of the Participant at any time, with or without cause. (b) TAX WITHHOLDING. It shall be a condition to the obligation of the Company to deliver any certificates evidencing Common Stock pursuant to the vesting of any Restricted Shares that the Participant pay to the Company such amount as may be required by the Company for the purpose of satisfying any federal, state, or local tax withholding requirements. The Company shall also have the right to deduct from all cash payments made pursuant to, or in connection with, any Stock Equivalents any federal, state or local taxes required to be withheld with respect to such payments. (c) NO RESTRICTION ON RIGHT OF COMPANY TO EFFECT CORPORATE CHANGES. Neither the Plan nor this Award Agreement shall affect or restrict in any way the right or power of the Company or its shareholders to make or authorize any adjustment, recapitalization, reorganization or other change in the capital structure or business of the Company, or any merger or consolidation of the Company, or any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior to or affect the Common Stock or the rights thereof or which are convertible into or exchangeable for Common Stock, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of the assets or business of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. (d) EXCHANGE ACT. Notwithstanding anything contained in the Plan or this Award Agreement to the contrary, if the consummation of any transaction under the Plan or this Award Agreement would result in the possible imposition of liability on the Participant pursuant to Section 16(b) of the Exchange Act, the Committee shall have the right, in its sole discretion, but shall not be obligated, to defer such transaction to the extent necessary to avoid such liability, but in no event for a period in excess of 180 days. 10. SURVIVAL; ASSIGNMENT. (a) All agreements, representations and warranties made herein and in any certificates delivered pursuant hereto shall survive the issuance to the Participant of the Restricted Shares, the Stock Equivalents and any shares of Common Stock and, notwithstanding any investigation heretofore or hereafter made by the Participant or the Company or on the Participant's or the Company's behalf, shall continue in full force and effect. Except as expressly provided in the Plan or this Award Agreement, the Participant may not assign any of his rights hereunder. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the heirs and permitted successors and assigns of such party; and all agreements herein by or on behalf of the Company, or by or on behalf of the Participant, shall bind and inure to the benefit of the heirs and permitted successors and assigns of such parties hereto. (b) The Company shall have the right to assign to any of its affiliates any of its rights, or to delegate to any of its affiliates any of its obligations, under this Award Agreement. 11. CERTAIN REMEDIES. Without intending to limit the remedies available to the Company, the Participant agrees that damages at law will be an insufficient remedy in the event the Participant violates the terms of this Award Agreement. The Participant agrees that the Company may apply for and have injunctive or other equitable relief in any court of competent jurisdiction to restrain the breach or threatened breach of, or otherwise specifically to enforce, any of the provisions hereof. 12. ARBITRATION. Any dispute or controversy arising under or in connection with this Award Agreement shall be settled exclusively by arbitration in a location mutually agreed to by the Company and the Participant before one arbitrator of exemplary qualifications and stature who shall be jointly selected by the Company and the Participant, or if the Company and the Participant cannot agree on the selection of the arbitrator, such arbitrator shall be selected by the American Arbitration Association. The parties agree to use their best efforts to cause (i) the arbitrator to be appointed within 30 days of the date that either party hereto notifies the other party that a dispute or controversy exists that necessitates the appointment of an arbitrator, and (ii) any arbitration hearing to be held within 30 days of the date of selection of the arbitrator and, as a condition to his or her selection, such arbitrator must consent to be available for a hearing at such time. Judgment may be entered on the arbitrator's award in any court having jurisdiction. The parties hereto also agree that the arbitrator shall be empowered to enter an equitable decree mandating specific enforcement of the terms of this Award Agreement. The Company shall bear all expenses of the arbitrator incurred in any arbitration hereunder, PROVIDED that in the event that the Participant seeks arbitration and the arbitrator determines that such claims are frivolous in nature or were not brought or pursued in good faith, the Participant will promptly reimburse the Company for all amounts paid by the Company for such expenses. Each party hereto will pay its own legal fees in connection with any such arbitration. 13. NOTICES. All notices and other communications provided for herein shall be in writing and shall be delivered by hand or sent by certified or registered mail, return receipt requested, postage prepaid, addressed, if to the Participant, to his attention at the mailing address set forth at the foot of this Award Agreement (or to such other address as the Participant shall have specified to the Company in writing) and, if to the Company, to it at 1919 South Broadway, Green Bay, Wisconsin 54304, Attention: Secretary. All such notices shall be conclusively deemed to be received and shall be effective, if sent by hand delivery, upon receipt, or if sent by registered or certified mail, on the fifth day after the day on which such notice is mailed. 14. WAIVER. The waiver by either party of compliance with any provision of this Award Agreement by the other party shall not operate or be construed as a waiver of any other provision of this Award Agreement, or of any subsequent breach by such party of a provision of this Award Agreement. 15. ENTIRE AGREEMENT; GOVERNING LAW. This Award Agreement and the Plan set forth the entire agreement and understanding between the parties hereto and supersede all prior agreements and understandings relating to the subject matter hereof. This Award Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same agreement. The headings of sections and subsections herein are included solely for convenience of reference and shall not affect the meaning of any of the provisions of this Award Agreement. This Award Agreement shall be governed by, and construed in accordance with, the laws of the State of Wisconsin without giving effect to conflicts of law principles. IN WITNESS WHEREOF, the Company has caused this Award Agreement to be executed by its duly authorized officer and the Participant has executed this Award Agreement, both as of the day and year first above written. FORT HOWARD CORPORATION By: /s/ James W. Nellen II ------------------------------------------ Name: James W. Nellen II Title: Vice President and Secretary PARTICIPANT /s/ Michael T. Riordan ------------------------------------------ Name: Michael T. Riordan Address: Number of Restricted Shares: 12,000 ------ Number of Stock Equivalents: 8,000 ------ Date of Grant: September 10, 1996 EX-27 4
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORT HOWARD CORPORATION'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000038195 FORT HOWARD CORPORATION 1,000 U.S. DOLLARS 9-MOS DEC-31-1996 SEP-30-1996 1 693 0 93,461 3,304 136,696 278,946 2,009,804 778,953 1,587,702 311,200 2,500,695 740 0 0 (1,530,130) 1,587,702 1,196,307 1,196,307 715,863 715,863 0 0 198,841 171,777 65,386 106,391 0 (3,340) 0 103,051 1.50 1.50
EX-99 5 Exhibit 99 NEWS For further information contact: (FORT HOWARD LOGO here) Media: Cliff Bowers, Ext. 4087 Financial: Mike Lempke, Ext. 2492 P. O. Box 19130 Green Bay, WI 54307-9130 414/435-8821 FOR RELEASE: IMMEDIATELY FORT HOWARD EPS MORE THAN DOUBLES TO $0.58 FOR 3RD QUARTER, OPERATING INCOME RISES 42% GREEN BAY, WI - October 23, 1996 - Fort Howard Corporation today reported its seventh consecutive year-over-year quarterly increase in operating income. Net income per share reached $0.58 for the third quarter ending September 30, 1996, compared to net income per share of $0.23 in the same period of 1995. "Our strong market positions, supported by Fort Howard's unique operating efficiencies, have propelled our positive performance for this quarter as they have for the past several," said Fort Howard President and Chief Executive Officer, Michael T. Riordan. "Very strong order flow for our at-home products, stable pricing in our away-from-home business and low recovered fiber costs were key factors." Fort Howard's operating income rose 42% in the third quarter of 1996 compared to the third quarter of 1995. Its operating income margin for the quarter was 33% compared to 22% for the third quarter of 1995 and 31% for the second quarter of 1996. -- More -- -- Ad One -- According to Riordan, the growing demand for the company's at-home branded and private label tissue products, combined with its plans for continued product enhancements, led to its capacity-expansion announcement last month. Fort Howard will add a state-of-the-art, 270-inch paper machine at either its Rincon, GA, operation near Savannah, or its Muskogee, OK, facility. Start-up is expected in 1999. NET SALES PERFORMANCE Although volume increased in the 3rd quarter, domestic tissue revenues declined slightly from the same quarter of 1995 due primarily to lower selling prices for Fort Howard's at-home products. Net sales of the company's international operations increased 4% for the third quarter of 1996 compared to third quarter 1995 due to higher volume at the company's U.K. facilities, offset by lower selling prices. For the third quarter, Fort Howard's consolidated net sales decreased to $408,163,000 compared to third quarter 1995 net sales of $426,116,000. This is principally due to lower sales from the company's recovered fiber brokerage operations that experienced significantly lower prices for commodity wastepaper. Domestic tissue sales increased 5% for the first nine months of 1996 compared to 1995. Net sales of the company's international operations increased 9% for the first nine months of 1996 compared to 1995 due to an increase in both net selling prices and volume at the company's United Kingdom facilities. Offsetting sales increases at domestic and international tissue operations were lower sales from the company's recovered fiber brokerage operations resulting from lower prices. First nine months 1996 consolidated net sales were $1,196,307,000, a decrease of 0.8% from 1995 net sales of $1,205,602,000 for the same period. -- Ad Two -- OPERATING INCOME INCREASES Operating income increased 42% to $135,299,000 for the third quarter compared to $95,369,000 for the third quarter of 1995. Operating income increased 47% to $374,201,000 in the first nine months of 1996 compared to $254,235,000 for the first nine months of 1995. The year-to-date increase was primarily due to higher volume and selling prices and lower recovered fiber costs in both the company's domestic and international operations. NET INCOME NEARLY TRIPLES For the third quarter of 1996, net income was $43,074,000 resulting in net income for the first nine months of 1996 of $103,051,000 compared to net income of $14,500,000 and net loss of $6,147,000 (after extraordinary item) for the same periods in 1995, respectively. The net income per share was $0.58 for the third quarter of 1996 compared to $0.23 for the third quarter of 1995. Net income per share before extraordinary items were $1.55 and $0.22 for the first nine months of 1996 and 1995, respectively. For the first nine months of 1996, net income per share after extraordinary item was $1.50 compared to a net loss per share after extraordinary item of $0.11 for the first nine months of 1995. In April 1995, the company completed a recapitalization, including an IPO of 25 million shares of common stock. Had the recapitalization been completed on January 1, 1995, net income per share for the first nine months of 1995 would have been $0.36 per share on a pro forma basis based on 63,371,000 shares outstanding. Extraordinary losses related to debt repurchases in 1996 and 1995 (see Notes to Financial Information) impacted the company's financial performance during the first nine months of 1996 and 1995. Fort Howard is a leading manufacturer and marketer of consumer tissue products for both the away-from-home and at-home markets in the United States and United Kingdom. -- More -- -- Ad Three -- In the domestic at-home market, its principal consumer brands include Mardi Gras printed napkins (which holds the leading domestic market position) and paper towels, Soft 'N Gentle bath and facial tissue, So-Dri paper towels, and Green Forest, the leading domestic line of environmentally positioned recycled tissue paper products. Prominent away-from-home market brands include the Preference Ultra line of premium products, Preference near-premium products, and the Envision line of environmentally positioned products. (FINANCIAL INFORMATION AND NOTES FOLLOW ON SEPARATE PAGES. THE NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.) # # # # # FORT HOWARD CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, -------------------- ------------------ 1996 1995 1996 1995 ---- ---- ---- ---- (In thousands, except per share amounts) Net sales $408,163 $426,116 $1,196,307 $1,205,602 Cost of sales 234,007 299,974 715,863 865,474 -------- -------- ---------- ---------- Gross income 174,156 126,142 480,444 340,128 Selling, general and administrative 38,857 30,773 106,243 85,893 -------- -------- ---------- ---------- Operating income 135,299 95,369 374,201 254,235 Interest expense 61,867 74,177 198,841 237,258 Other expense (income), net 2,545 (1,600) 3,583 (2,537) -------- -------- ---------- ---------- Income before taxes 70,887 22,792 171,777 19,514 Income tax expense 27,813 8,292 65,386 6,913 -------- -------- ---------- ---------- Net income before extraordinary item 43,074 14,500 106,391 12,601 Extraordinary item - loss on debt repurchases, net -- -- (3,340) (18,748) -------- -------- ---------- ---------- Net income (loss) $ 43,074 $ 14,500 $ 103,051 $ (6,147) ======== ======== ========== ========== Net income (loss) per share: Before extraordinary item $ 0.58 $ 0.23 $ 1.55 $ 0.22 Extraordinary item -- -- (0.05) (0.33) -------- -------- ---------- ---------- Net income (loss) $ 0.58 $ 0.23 $ 1.50 $ (0.11) ======== ======== ========== ==========
FORT HOWARD CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited)
September 30, December 31, 1996 1995 ------------ ------------ (In thousands) Assets Current assets: Cash and cash equivalents $ 693 $ 946 Receivables, less allowances of $3,304 in 1996 and $2,883 in 1995 90,157 97,707 Inventories 136,696 163,076 Deferred income taxes 51,000 29,000 Income taxes receivable 400 700 ---------- ---------- Total current assets 278,946 291,429 Property, plant and equipment 2,009,804 1,971,641 Less: Accumulated depreciation 778,953 706,394 ---------- ---------- Net property, plant and equipment 1,230,851 1,265,247 Other assets 77,905 95,761 ---------- ---------- Total assets $1,587,702 $1,652,437 ========== ========== Liabilities and Shareholders' Deficit Current liabilities: Accounts payable $ 121,179 $ 112,384 Interest payable 23,481 64,375 Income taxes payable 6,145 1,339 Other current liabilities 90,530 85,351 Current portion of long-term debt 69,865 62,720 ---------- ---------- Total current liabilities 311,200 326,169 Long-term debt 2,500,695 2,903,299 Deferred and other long-term income taxes 270,227 225,043 Other liabilities 34,970 36,355 Shareholders' deficit: Common Stock 740 634 Additional paid-in capital 1,100,884 895,652 Cumulative translation adjustment (2,194) (2,844) Retained deficit (2,628,820) (2,731,871) ---------- ---------- Total shareholders' deficit (1,529,390) (1,838,429) ---------- ---------- Total liabilities and shareholders' deficit $1,587,702 $1,652,437 ========== ==========
FORT HOWARD CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, -------------------- 1996 1995 ---- ---- (In thousands) Cash provided from (used for) operations: Net income (loss) $ 103,051 $ (6,147) Depreciation 75,727 73,751 Non-cash interest expense 10,103 9,634 Deferred income tax (credit) expense 23,228 (3,967) Pre-tax loss on debt repurchases 5,520 30,734 Decrease in receivables 7,550 17,972 (Increase) decrease in inventories 26,380 (41,820) Decrease in income taxes receivable 300 4,500 Increase in accounts payable 8,795 26,623 Decrease in interest payable (40,894) (58,538) Increase in income taxes payable 4,806 429 All other, net 7,435 (12,228) --------- --------- Net cash provided from operations 232,001 40,943 Cash used for investment activity: Additions to property, plant and equipment (40,876) (32,150) Cash provided from (used for) financing activities: Proceeds from long-term borrowings -- 1,438,900 Repayment of long-term borrowings (395,227) (1,682,623) Debt issuance costs (1,489) (49,155) Issuance of Common Stock, net of offering costs 205,338 284,104 --------- --------- Net cash (used for)financing activities (191,378) (8,774) --------- --------- Increase (decrease) in cash (253) 19 Cash at beginning of period 946 422 --------- --------- Cash at end of period $ 693 $ 441 ========= =========
***** FORT HOWARD CORPORATION NOTES TO FINANCIAL INFORMATION (Unaudited) 1. In May and June 1996 the company sold 10.52 million primary shares of common stock in a registered public offering. The net proceeds of the offering were used to reduce outstanding bank debt. Also included in the offering were 6.52 million secondary shares of common stock sold by certain shareholders of Fort Howard. The company did not receive any of the proceeds from the sale of shares by the selling shareholders. In connection with the offering in the second quarter of 1996, the company reported an extraordinary loss of $3 million (net of income taxes of $2 million) representing write-offs of deferred loan costs associated with the prepayment of indebtedness outstanding under the company's 1995 Bank Credit Agreement on May 15, 1996. 2. The company completed a recapitalization, including an IPO of 25 million shares of common stock, in April 1995. A. In connection with the April 1995 recapitalization, the company reported an extraordinary loss of $19 million (net of income taxes of $12 million) representing the redemption premiums on the repurchases of all the company's outstanding 12 5/8% Subordinated Debentures at the redemption price of 102.5% of the principal amount thereof and write-offs of deferred loan costs associated with the prepayment or repurchases of all indebtedness outstanding under the company's 1988 Bank Credit Agreement, the 1993 Term Loan and the Senior Secured Floating Rate Notes on March 16, 1995, and the repurchase of all outstanding 12 5/8% Subordinated Debentures and 14 1/8% Junior Subordinated Discount Debentures on April 15, 1995. B. Assuming that all components of the recapitalization had been consummated as of January 1, 1995, for the first nine months of 1995, pro forma interest expense would have decreased $16 million from $237 million to $221 million. After adjusting the income tax (credit) for the decrease in interest expense at an effective rate of 38.5%, the pro forma net income (loss) before extraordinary item and pro forma net income (loss) per share before extraordinary item (assuming that 63,371,000 weighted average shares were outstanding for the period) would have been $22.6 million and $0.36 per share for the first nine months of 1995, respectively. # # # # # -----END PRIVACY-ENHANCED MESSAGE-----