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GAYLORD REACHES AGREEMENT IN PRINCIPLE WITH BONDHOLDERS ON EXCHANGE OFFER TERMS

 GAYLORD REACHES AGREEMENT IN PRINCIPLE WITH BONDHOLDERS ON
 EXCHANGE OFFER TERMS
 DEERFIELD, Ill., Dec. 9 /PRNewswire/ -- Gaylord Container Corporation (AMEX: GCR) today announced it has reached an agreement in principle with a steering committee of its bondholders on revised terms for the company's proposed exchange offer. The steering committee, which represents an unofficial committee holding approximately 50 percent of the company's $582.8 million principal amount of subordinated debt, has also agreed to assist the company in securing acceptance of the exchange offer by the remaining bondholders.
 "Reaching this agreement is an important step forward in completing our financial restructuring," said Chairman and Chief Executive Officer Marvin A. Pomerantz. "Gaylord operations remain very competitive and, upon completion of a financial restructuring, the company will be well positioned for future growth."
 The company intends to revise the terms of its previously announced exchange offer by amending its registration statement filed July 18, 1991, with the Securities and Exchange Commission. The company said that it will file the amended document with the SEC as soon as practicable and commence the exchange offer once SEC clearance is obtained.
 Under the agreement, bondholders would have the option to exchange their securities for either of two new senior subordinated debentures plus shares of Gaylord Class A common stock and warrants to obtain additional shares of Class A common stock. At present, the company intends to offer a cash option up to a maximum of $50 million in aggregate payments, subject to availability of funds on acceptable terms.
 The company noted that it currently has approximately 15.5 million common shares outstanding and that an additional six million shares of Class A common stock would be issued to bondholders participating in the exchange offer. This would result in exchanging bondholders holding 28 percent of the shares outstanding and existing stockholders retaining 72 percent.
 The exchanging bondholders would also receive callable exchangeable warrants for approximately 31.8 million shares of Class A common stock at no cost. One-half of the warrants would become exercisable on July 31, 1995, and the balance on July 31, 1996. The warrants would be callable at the company's option at specified call prices at any time through Dec. 31, 1996. The company could also elect to exchange the warrants for fewer than 31.8 million shares if the company's common stock trades in excess of the call prices.
 Issuance of the six million shares of common stock and exercise of all 31.8 million warrants would result in existing stockholders holding 29 percent of the shares outstanding and bondholders holding the remaining 71 percent. If all or some of the warrants are called or exchanged rather than exercised, then dilution to existing stockholders would be less than the 71 percent maximum amount.
 Under the terms of the agreement, the company said that any Class A common stock issued upon the exercise of stock options would dilute current stockholders and exchanging bondholders receiving common stock and/or warrants pro rata. Further, if less than 100 percent of the old securities are tendered in the exchange offer, the amount of common stock and warrants issued will be reduced pro rata.
 The company said that since it announced development of a restructuring plan in mid-May, it has remained current with its trade creditors, and it intends to continue to pay trade creditors and operating expenses in the ordinary course of business. Company officials noted that Gaylord has a high level of liquidity with approximately $50 million of cash on hand and approximately $40 million of available bank credit, as of Nov. 30, 1991.
 Under the revised terms of the exchange offer, for each $1,000 claim, an exchanging holder may elect to receive either $400 principal amount of 13-1/2 percent senior subordinated debentures due 2003 and equity (Option I) or $1,000 principal amount of 10-1/4 percent senior subordinated debentures due 2001 plus equity (Option II). A claim is measured on the principal amount of the tendered security plus accrued interest through Dec. 31, 1991. Option I and Option II are subject to proration such that 70 percent of the tendered old subordinated debt securities will receive Option I and 30 percent will receive Option II. Interest on the new senior subordinated debentures will accrue beginning Jan. 1, 1992, but will not be payable until the restructuring is complete. Interest on the new 10-1/4 percent senior subordinated debenture is payable in cash at the rate of 3-3/4 percent per annum with the balance payable in cash or in kind based on a formula to be determined.
 Based on the aggregate principal amount of the company's subordinated debt plus accrued and unpaid interest through Dec. 31, 1991, the total amount of claims represented in the exchange offer is approximately $650 million. Assuming all subordinated debt is tendered pursuant to the exchange offer, and the new senior subordinated debentures are issued based on the 70/30 proration described above, the company's subordinated debt obligations would be reduced by approximately $275 million, and interest payments would be reduced by approximately $38 million per year.
 Among the conditions to completing the exchange offer is the requirement that it be accepted by holders of at least 95 percent of each issue of the subordinated debt. If that level of acceptance cannot be reached, the company said that it would likely pursue a "prepackaged" plan of reorganization to finalize the restructuring. If the company should pursue this option, the bondholders' steering committee has indicated its support for such a reorganization plan.
 In addition to the 95 percent acceptance level, implementation of the restructuring plan is subject to a number of conditions including completion of an amendment and restatement of the company's bank credit agreement that would permit the exchange offer, consolidate and extend the maturity of certain of the company's bank facilities into a new term loan, and create a new revolving credit facility. Other conditions include receipt of consents to amendments to the indentures for the existing subordinated debt securities, negotiation of the indentures for the senior subordinated debt to be issued in the exchange, and stockholder approval of the issuance of common stock and warrants pursuant to the exchange offer.
 Gaylord's financial advisor for this transaction, BT Securities Corporation, has also been retained to act as dealer manager for the exchange offer. Donaldson, Lufkin & Jenrette Securities Corporation is acting as financial advisor to the unofficial bondholders committee.
 Gaylord Container Corporation is a major national manufacturer and distributor of corrugated containers, containerboard, unbleached kraft paper, multiwall bags, and grocery bags and sacks.
 GAYLORD CONTAINER CORPORATION
 Outline of Terms for Proposed Restructuring of
 13-1/2 Percent Subordinated Notes due 1996
 13-1/2 Percent Subordinated Notes Due 1998
 13-3/4 Percent Subordinated Debentures Due 2001
 16-1/2 Percent Discount Subordinated Notes Due 1998
 The following sets forth the principal terms of an "Exchange Offer" with respect to Gaylord's subordinated debentures (the "old bonds") agreed upon by Gaylord Container Corporation, a Delaware corporation ("Gaylord"), and the steering committee of the Gaylord unofficial committee of subordinated bondholders (the "Steering Committee").
 1. Exchange Options. Each holder of old bonds will be entitled to exchange each $1,000 of its claims for one of the following options selected by the holder, subject to proration as described below. The amount of a holder's claim will be measured by the principal amount of old bonds which it tenders, plus accrued interest thereon through Dec. 31, 1991.
 Option I
 $400 principal amount of new 13.5 percent senior subordinated debentures due Dec. 31, 2003, callable at par at any time, plus equity as described below.
 Option II
 $1,000 principal amount of new 10.25 percent senior subordinated debentures due Dec. 31, 2001, plus equity as described below. 3.75 percent of the debenture interest is payable in the form of a fixed cash coupon and 6.5 percent is payable in cash or in kind based upon a formula to be determined. These debentures will be callable at par at any time.
 Option III
 An appropriate offer in cash to the extent Gaylord has excess cash on hand or is able to raise additional cash from existing bondholders, its banks or other third party sources without equity, subject to a maximum of $50 million in aggregate cash payments.
 1A. Other Terms of Exchange Options. The Exchange Options will include the following additional terms:
 (i) Equity. Gaylord will issue to the exchanging bondholders an aggregate of 6 million shares of Class A Common and callable exchangeable warrants (the "Warrants") exercisable into a maximum of 31.845 million shares of Class A Common to be allocated between Options I and II, collectively representing 71 percent of Gaylord's common stock based on 15.458 million currently outstanding shares. The number of shares of Class A Common and Warrants will be reduced pro rata to the extent less than 100 percent of the old bonds are exchanged.
 (ii) Interest. The old bonds will accrue interest through Dec. 31, 1991. The new bonds will accrue interest beginning Jan. 1, 1992, payable on the scheduled interest payment dates following the date of issuance.
 (iii) Prorations. Elections of Options I and II will be pro rated such that 70 percent of all exchanged old bonds (excluding any old bonds exchanged for Option III) will be exchanged for Option I and the remaining 30 percent will be exchanged for Option II. Elections in excess of the amount available to fund cash exchanges pursuant to Option III will be pro rated into Option I, subject to further proration as described above.
 2. Dilution for Management Options. All management options will dilute all current shareholders and exchanging bondholders receiving Class A Common and/or Warrants pro rata. The Steering Committee will cooperate with management to develop a new management option plan.
 3. Warrants. The Warrants will be divided equally into Series 1995 and Series 1996 Warrants. The Series 1995 Warrants will be exercisable on or after July 31, 1995, the Series 1996 Warrants will be exercisable on or after July 31, 1996, and the two Series will be identical in all other respects. Each Warrant will be exercisable into one share of Class A Common at an exercise price of zero.
 A. Warrant Exchange Option by Gaylord. Each Warrant will be exchangeable for one share of Class A Common at any time at Gaylord's option. In addition, Gaylord may elect to exchange each unexercised Warrant for a fraction of one share of Class A Common to the extent the "Average Closing Price" exceeds the applicable "Exchange Price" at any time.
 Calendar Year Exchange Price
 1992 $ 8.00
 1993 9.40
 1994 11.40
 1995 13.65
 1996 16.65
 In such event, the fraction will be determined by dividing the applicable Exchange Price by the Average Closing Price. For example, if Gaylord announces its election to exchange a portion of the Warrants in 1993 and the Average Closing Price following such announcement is $18.80, each Warrant to be exchanged would be exchangeable into 1/2 share of Class A Common ($9.40 + 18.80 equals 0.5). Gaylord will be entitled to unlimited exchange elections prior to Dec. 31, 1996, provided no more than 10.615 million Warrants may be exchanged pursuant to any one election. "Average closing price" means the Class A Common average reported Closing Price for 20 consecutive trading days commencing on the fifth trading day after any Gaylord announcement of its election to exchange Warrants.
 B. Warrant Call Option. Gaylord will have the option to call any or all of the unexercised Warrants at any time for cash at the applicable Exchange Price.
 4. AB Shares. The AB Common structure will remain intact through July 31, 1995, but will continue thereafter only if Gaylord's Class A Common has traded at or above $15.25 on or prior to July 31, 1995, for an agreed number of trading days.
 5. Board of Directors. The Steering Committee will have the ability as a group to nominate three Class A directors reasonably acceptable to Gaylord. Gaylord's board will be expanded to 11 directors.
 6. Minimum Acceptance. Closing of the Exchange Offer is conditioned upon Gaylord's receipt of tenders representing at least 95 percent of the principal amount of each issue of the old bonds. However, each member of the Steering Committee will (i) tender in the Exchange Offer at least 95 percent of each issue of old bonds then owned or controlled by it, (ii) vote 100 percent of old bonds then owned or controlled by it in favor of a Plan of Reorganization (the "Plan") proposed by Gaylord under Chapter 11 of the U.S. Bankruptcy Code containing the terms set forth herein, (iii) use reasonable efforts to support the Exchange Offer and the Plan, and (iv) permit Gaylord to publicly announce each Steering Committee member's recommendation of the Exchange Offer and the Plan.
 -0- 12/9/91
 /CONTACT: Kathryn J. Chieger of Gaylord, 708-405-5645/
 (GCR) CO: Gaylord Container Corporation ST: Illinois IN: PAP SU:


GK-TO -- NY007 -- 0523 12/09/91 11:52 EST
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