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_______________________________
AGREEMENT AND PLAN OF MERGER
______________________________
Among
GEORGIA-PACIFIC CORPORATION,
FENRES ACQUISITION CORP.
and
FORT JAMES CORPORATION
Dated as of July 16, 2000
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions................................................. 1
SECTION 1.02. Other Defined Terms......................................... 4
ARTICLE II
THE OFFER
SECTION 2.01. The Offer................................................... 6
SECTION 2.02. Company Action.............................................. 7
SECTION 2.03. Directors................................................... 8
ARTICLE III
THE MERGER
SECTION 3.01. The Merger.................................................. 10
SECTION 3.02. Articles of Incorporation of the Surviving Corporation...... 10
SECTION 3.03. By-Laws of the Surviving Corporation........................ 10
SECTION 3.04. Directors and Officers of the Surviving Corporation......... 10
SECTION 3.05. Closing..................................................... 10
ARTICLE IV
CONVERSION OF SHARES AND RELATED MATTERS
SECTION 4.01. Conversion of Capital Stock................................. 11
SECTION 4.02. Exchange of Shares.......................................... 12
SECTION 4.03. Exchange of Certificates.................................... 12
SECTION 4.04. Stock Options and Other Stock Plans......................... 15
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TABLE OF CONTENTS (cont'd)
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 5.01. Due Organization, Good Standing and Corporate Power......... 17
SECTION 5.02. Authorization and Validity of Agreement..................... 17
SECTION 5.03. Capitalization.............................................. 18
SECTION 5.04. Consents and Approvals; No Violations....................... 19
SECTION 5.05. Company Reports and Financial Statements.................... 20
SECTION 5.06. Information to Be Supplied.................................. 21
SECTION 5.07. Absence of Certain Events................................... 21
SECTION 5.08. Litigation.................................................. 21
SECTION 5.09. Title to Properties; Encumbrances........................... 22
SECTION 5.10. Compliance with Laws........................................ 22
SECTION 5.11. Company Employee Benefit Plans.............................. 23
SECTION 5.12. Labor/Employment............................................ 24
SECTION 5.13. Taxes....................................................... 24
SECTION 5.14. Intellectual Property....................................... 25
SECTION 5.15. Broker's or Finder's Fee.................................... 26
SECTION 5.16. Environmental Laws and Regulations.......................... 26
SECTION 5.17. State Takeover Statutes..................................... 27
SECTION 5.18. Voting Requirements; Board Approval; Appraisal Rights....... 27
SECTION 5.19. Opinion of Financial Advisor................................ 28
SECTION 5.20. Rights Agreement............................................ 28
SECTION 5.21. Non-competition Agreements.................................. 28
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT
SECTION 6.01. Due Organization, Good Standing and Corporate Power......... 29
SECTION 6.02. Authorization and Validity of Agreement..................... 29
SECTION 6.03. Capitalization.............................................. 30
SECTION 6.04. Consents and Approvals; No Violations....................... 31
SECTION 6.05. Parent Reports and Financial Statements..................... 32
SECTION 6.06. Information to Be Supplied.................................. 32
SECTION 6.07. Absence of Certain Events................................... 33
SECTION 6.08. Litigation.................................................. 33
SECTION 6.09. Compliance with Laws........................................ 34
SECTION 6.10. Parent Employee Benefit Plans............................... 34
SECTION 6.11. Broker's or Finder's Fee.................................... 35
SECTION 6.12. Ownership of Capital Stock.................................. 35
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SECTION 6.13. Vote Required............................................... 35
SECTION 6.14. Financing................................................... 35
ARTICLE VII
TRANSACTIONS PRIOR TO CLOSING DATE
SECTION 7.01. Access to Information Concerning Properties and Records..... 36
SECTION 7.02. Confidentiality............................................. 36
SECTION 7.03. Conduct of the Business of the Company Pending the Closing
Date........................................................ 36
SECTION 7.04. Conduct of the Business of Parent Pending the Closing Date... 40
SECTION 7.05. Company Shareholder Meeting; Preparation of Proxy
Statement/Prospectus........................................ 41
SECTION 7.06. Reasonable Best Efforts...................................... 42
SECTION 7.07. No Solicitation.............................................. 43
SECTION 7.08. Notification of Certain Matters.............................. 45
SECTION 7.09. Antitrust Laws............................................... 45
SECTION 7.10. Directors' and Officers' Insurance........................... 46
SECTION 7.11. Public Announcements......................................... 48
SECTION 7.12. Transfer Tax................................................. 48
SECTION 7.13. NYSE Listing................................................. 48
SECTION 7.14. Affiliates of the Company.................................... 48
SECTION 7.15. Section 16 Matters........................................... 48
SECTION 7.16. Employee Benefits............................................ 49
SECTION 7.17. Voting of Shares............................................. 50
SECTION 7.18. The Company Rights Plan...................................... 50
SECTION 7.19. Fees and Expenses............................................ 50
SECTION 7.20. Merger Sub................................................... 50
ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.01. Conditions to Obligations of Each Party..................... 51
ARTICLE IX
TERMINATION
SECTION 9.01. Termination................................................. 51
SECTION 9.02. Effect of Termination....................................... 53
SECTION 9.03. Payment of Certain Fees..................................... 53
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ARTICLE X
MISCELLANEOUS
SECTION 10.01. Representations and Warranties............................. 55
SECTION 10.02. Extension; Waiver.......................................... 55
SECTION 10.03. Notices.................................................... 55
SECTION 10.04. Entire Agreement........................................... 56
SECTION 10.05. Binding Effect; Benefit; Assignment........................ 56
SECTION 10.06. Amendment and Modification................................. 56
SECTION 10.07. Further Actions............................................ 57
SECTION 10.08. Headings................................................... 57
SECTION 10.09. Enforcement................................................ 57
SECTION 10.10. Counterparts............................................... 57
SECTION 10.11. Applicable Law............................................. 57
SECTION 10.12. Severability............................................... 57
SECTION 10.13. WAIVER OF JURY TRIAL....................................... 58
ANNEX I - Conditions of the Offer
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 16, 2000 (this
"Agreement"), by and among GEORGIA-PACIFIC CORPORATION, a Georgia corporation
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("Parent"), FENRES ACQUISITION CORPORATION, a Virginia corporation and a direct
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wholly owned subsidiary of Parent ("Merger Sub"), and FORT JAMES CORPORATION, a
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Virginia corporation (the "Company").
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WHEREAS, the Boards of Directors of Parent and the Company each have
determined that it is in the best interests of each corporation and their
respective shareholders to effect a business combination between Parent and the
Company and, accordingly, have agreed to effect the merger of Merger Sub with
and into the Company, with the Company as the surviving corporation, upon the
terms and subject to the conditions set forth herein (the "Merger"); and
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WHEREAS, by resolutions duly adopted, the respective Boards of
Directors of the Company, Parent and Merger Sub have approved and adopted this
Agreement and the transactions contemplated hereby.
NOW THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements herein contained, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. When used in this Agreement, the
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following terms shall have the respective meanings specified therefore below
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):
"Affiliate" shall mean, with respect to any specified Person, any
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Person who directly or indirectly controls, is controlled by, or is under common
control with, such specified Person; provided that, for the purposes of this
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definition, "control" (including with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or partnership interests, by
contract or otherwise.
"Average Price" shall mean the average (rounded to the nearest
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1/10,000) of the volume weighted averages (rounded to the nearest 1/10,000) of
the trading prices of Parent Common Stock on the NYSE, as reported by Bloomberg
Financial Markets (or such other source as the parties shall agree in writing),
for the 10 consecutive Trading Days ending on the third Trading Day immediately
preceding the Acceptance Date.
"Business Day" shall mean a day other than a Saturday, a Sunday or a
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day on which banks in New York, New York are permitted or required to close.
"Company Common Stock" shall mean the Company's common stock, par
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value $.10 per share, including the Company Rights associated therewith.
"Company Material Adverse Effect" shall mean any event, change,
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occurrence, effect, fact or circumstance that is materially adverse to (i) the
ability of the Company to perform its obligations under this Agreement or to
consummate the transactions contemplated hereby or (ii) the business, assets,
liabilities, results of operations or financial condition of the Company and its
Subsidiaries, taken as a whole, but shall exclude any effects, consequences or
conditions arising out of (A) any change in (x) U.S. or global economic or
industry conditions, (y) U.S. or global financial markets or conditions or (z)
any generally applicable law, rule or regulation or GAAP or interpretation of
any of the foregoing or (B) the announcement of this Agreement or the
transactions contemplated or required hereby, including any actions required
under this Agreement pursuant to Section 7.09.
"Company Options" shall mean options to purchase shares of the Company
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Common Stock, whether issued pursuant to a Company Employee Benefit Plan or
otherwise.
"Company Rights" shall mean the right associated with each share of
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Company Common Stock to purchase one-one-thousandth of a share of the Company's
Series M Cumulative Participating Preferred Stock, par value $10.00 per share.
"Company Shareholder Approval" shall mean the approval of this
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Agreement at the Company Shareholder Meeting by more than two-thirds of all
votes entitled to be cast at the Company Shareholder Meeting.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
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amended.
"Exchange Ratio" (as the same may be adjusted pursuant to Section
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4.01(d)) shall be equal to (i) .2644, if the Average Price is less than or
equal to $39.33 or (ii) if the Average Price is greater than $39.33, the number
of shares of Parent Common Stock equal to $10.40 divided by the Average Price.
"GAAP" shall mean generally accepted accounting principles of the
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United States of America, as in effect from time to time.
"know" or "knowledge" shall mean, with respect to any party, the
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knowledge of such party's executive officers.
"Merger Sub Common Stock" shall mean Merger Sub's common stock, par
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value $.01 per share.
"NYSE" shall mean the New York Stock Exchange, Inc.
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"Parent Common Stock" shall mean Georgia-Pacific Corporation-Georgia-
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Pacific Group Common Stock, par value $.80 per share, including the Parent
Rights associated therewith.
"Parent Material Adverse Effect" shall mean any event, change,
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occurrence, effect, fact or circumstance that is materially adverse to (i) the
ability of Parent to perform its obligations under this Agreement or to
consummate the transactions contemplated hereby or (ii) the business, assets,
liabilities, results of operations or financial condition of Parent and its
Subsidiaries, taken as a whole, but shall exclude any effects, consequences or
conditions arising out of (A) any change in (x) U.S. or global economic or
industry conditions, (y) U.S. or global financial markets or conditions or (z)
any generally applicable law, rule or regulation, GAAP or interpretation of any
of the foregoing or (B) the announcement of this Agreement or the transactions
contemplated or required hereby, including any actions required under this
Agreement pursuant to Section 7.09.
"Parent Rights" shall mean the rights associated with each share of
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Parent Common Stock to purchase one-one-hundredth of a share of Parent's Series
B Junior Preferred Stock, no par value.
"Per Share Amount" shall mean the sum of (a) $29.60 and (b) the
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product of the Exchange Ratio and the Average Price.
"Person" shall mean and include an individual, a partnership, a joint
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venture, a corporation, a trust, an association, an unincorporated organization,
a limited liability company, a limited partnership, a group, a syndicate, a
person (including, without limitation, a "person" as defined in Section 13(d)(3)
of the Exchange Act) and a government or other department or subdivision or
instrumentality or agency thereof.
"Proxy Statement/Prospectus" shall mean the proxy statement/prospectus
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included in the Merger Registration Statement relating to the Company
Shareholder Meeting.
"SEC" shall mean the U.S. Securities and Exchange Commission.
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"Securities Act" shall mean the Securities Act of 1933, as amended.
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"Significant Subsidiary" shall mean (a) with respect to the Company,
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Fort James Operating Company, Fort James-Pennington, Inc., Harmon Associates
Corporation, Fort James UK Limited, Fort James International Holdings, Ltd.,
Fort James France S.A.S., Fort James France s.c.a., Fort James Canada Inc., Fort
James S.P.R.L.S. Com. p.A. and Fort James Italia S.r.l. and (b) with respect to
Parent, Brunswick Pulp & Paper Company, CeCorr, Inc., G-P Gypsum Corporation,
Georgia-Pacific Resins, Inc., Georgia-Pacific Tissue, LLC, Georgia-Pacific West,
Inc., Great Northern Nekoosa Corporation, North American Timber Corp. and
Unisource Worldwide, Inc.
"Subsidiary" shall mean, with respect to a Person, (x) any partnership
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of which such Person or any of its Subsidiaries is a general partner or (y) any
other entity in which such Person or any of its Subsidiaries owns or has the
power to vote more than 50% of the equity
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interests in such entity having general voting power to participate in the
election of the governing body of such entity.
"Trading Day" shall mean any day on which securities are traded on the
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NYSE.
SECTION 1.02. Other Defined Terms. The following terms used herein
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are defined in the Section of this Agreement specified below:
Terms Section
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"401(k) Plan" Section 7.16(c)
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"Acceptance Date" Section 4.04(a)
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"Acquisition Agreement" Section 7.07(b)
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"Agreement" Preamble
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"Antitrust Authorities" Section 7.09(b)
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"Antitrust Law" Section 7.09(b)
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"Articles Of Merger" Section 3.01(a)
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"Cashout Election" Section 4.04(a)
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"Certificate" Section 4.01(c)
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"Claims" Section 5.16
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"Closing" Section 3.05
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"Closing Date" Section 3.05
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"Code" Section 5.11(a)
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"Company" Preamble
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"Company Disclosure Schedule" Article V
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"Company Employee Benefit Plans" Section 5.11(a)
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"Company Employees" Section 7.16(a)
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"Company Intellectual Property" Section 5.14(a)
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"Company Preferred Stock" Section 5.03(a)
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"Company Property" Section 5.16
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"Company Recommendation" Section 7.05(a)
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"Company SEC Reports" Section 5.05(a)
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"Company Shareholder Meeting" Section 7.05(a)
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"Confidentiality Agreement" Section 7.02
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"Continuing Directors" Section 2.03(a)
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"Consent Decree" Section 7.09(b)
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"Contacts" Section 7.09(a)
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"Contracts" Section 5.04
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"Conversion Election" Section 4.04(a)
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"Designated Directors" Section 2.03(d)
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"Effective Time" Section 3.01(a)
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"Environmental Claims" Section 5.16
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"Environmental Law" Section 5.16
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"ERISA" Section 5.11(a)
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"European Antitrust Laws" Section 5.04
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"Exchange Agent" Section 4.02
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"Exchange Fund" Section 4.03(a)
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Terms Section
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"Fees" Section 9.03(d)
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"Governmental Authority" Section 5.04
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"Hazardous Materials" Section 5.16
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"HSR Act" Section 5.04
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"Indemnified Parties" Section 7.10(b)
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"Issuance Obligation" Section 5.03(a)
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"Junior Preferred Stock" Section 6.03(a)
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"Laws" Section 5.04
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"Liens" Section 6.03(b)
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"Merger" Preamble
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"Merger Registration Statement" Section 6.06(a)
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"Merger Sub" Preamble
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"Minimum Condition" Section 2.01(a)
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"Morgan Stanley" Section 2.02(a)
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"New Plans" Section 7.16(b)
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"Offer" Section 2.01(a)
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"Offer Documents" Section 2.01(b)
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"Offer Registration Statement" Section 2.01(a)
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"Old Plans" Section 7.16(b)
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"Orders" Section 5.04
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"Parent" Preamble
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"Parent Disclosure Schedule" Article VI
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"Parent Employee Benefit Plans" Section 6.10(a)
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"Parent SEC Reports" Section 6.05(a)
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"Permits" Section 5.10(b)
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"Preferred Stock" Section 6.03(a)
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"Proceedings" Section 5.08
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"Release" Section 5.16
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"Representatives" Section 7.07(a)
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"Returns" Section 5.13(a)
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"Reverse Termination Fee" Section 9.03(c)
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"Rights Agreement" Section 5.20
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"Rule 145 Affiliate" Section 7.14
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"Rule 145 Affiliate Agreement" Section 7.14
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"Rule 312.03" Section 2.04
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"Schedule 14D-9" Section 2.02(b)
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"Schedule TO" Section 2.01(b)
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"Substituted Option" Section 4.04(c)
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"Superior Proposal" Section 7.07(a)
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"Surviving Corporation" Section 3.01(b)
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"Takeover Proposal" Section 7.07(a)
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"Taxes" Section 5.13(a)
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"Termination Date" Section 9.01(d)
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"Termination Fee" Section 9.03(a)
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"Third Party Acquisition Event" Section 9.03(b)
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Terms Section
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"Transfer Taxes" Section 7.12
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"Voting Debt" Section 5.03(a)
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"VSCA" Section 2.02(a)
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ARTICLE II
THE OFFER
SECTION 2.01. The Offer. (a) Provided that this Agreement shall not
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have been terminated in accordance with Article IX, unless otherwise agreed by
Parent and the Company, no later than three Business Days following
effectiveness of a Registration Statement on Form S-4 (together with any
amendments or supplements thereto, the "Offer Registration Statement") Parent
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shall cause Merger Sub to commence an offer (the "Offer") to purchase all of the
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outstanding shares of Company Common Stock at a price for each share of Company
Common Stock of (1) $29.60, net to the seller in cash, and (2) a fraction of a
share of Parent Common Stock equal to the Exchange Ratio. The Offer shall be
subject only to (1) the condition that there shall be validly tendered in
accordance with the terms of the Offer, prior to the expiration date of the
Offer and not withdrawn, a number of shares of Company Common Stock that,
together with the shares of Company Common Stock then owned by Parent and/or
Merger Sub, represents at least two-thirds of the shares of Company Common Stock
outstanding on a fully-diluted basis (the "Minimum Condition") and (2) the other
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conditions set forth in Annex I hereto. Merger Sub shall have the right to waive
any of the conditions to the Offer and to make any change in the terms of or
conditions to the Offer; provided that (A) the Minimum Condition may not be
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waived or reduced to less than two-thirds of the shares of Company Common Stock
outstanding on a fully-diluted basis without the prior written consent of the
Company and (B) no change may be made that changes the form of consideration
payable in the Offer, decreases the consideration payable in the Offer, reduces
the maximum number of shares of Company Common Stock to be purchased in the
Offer, imposes conditions to the Offer in addition to those set forth in Annex I
or makes any other change which is adverse to the holders of Company Common
Stock. Notwithstanding the foregoing, without the consent of the Company, Merger
Sub shall have the right to extend the Offer (i) for one or more periods (not in
excess of 10 Business Days each) but in no event ending later than the
Termination Date if, at the scheduled or extended expiration date of the Offer,
any of the conditions to the Offer shall not have been satisfied or waived,
until such conditions are satisfied or waived, (ii) for any period required by
any rule, regulation, interpretation or position of the SEC or the staff thereof
applicable to the Offer or any period required by applicable law or (iii) for an
aggregate period of not more than 10 Business Days beyond the latest applicable
date that would otherwise be permitted under clause (i) or (ii) of this
sentence, if, as of such date, all of the conditions to the Offer have been
satisfied or waived, but the number of shares of Company Common Stock validly
tendered and not withdrawn pursuant to the Offer equals 80% or more, but less
than 90%, of the outstanding shares of Company Common Stock on a fully diluted
basis. In the event that Merger Sub is unable to consummate the Offer on the
initial scheduled expiration date due to the failure of the conditions to the
Offer to be satisfied or waived, Parent shall cause Merger Sub to, unless this
Agreement is terminated pursuant to Article IX, extend the Offer and set a
subsequent scheduled
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expiration date, and shall continue to so extend the Offer and set subsequent
scheduled expiration dates until the Termination Date. Subject to the foregoing
and upon the terms and subject to the conditions of the Offer, Parent shall
cause Merger Sub to, accept for payment and pay for, as promptly as practicable
after the expiration of the Offer, all shares of Company Common Stock validly
tendered and not withdrawn pursuant to the Offer. Parent will announce the
exact Exchange Ratio with respect to each share of Company Common Stock that is
to be exchanged in the Offer by 9:00 a.m., New York City time, on the second
Trading Day immediately preceding the Acceptance Date. Parent will make such
announcement by issuing a press release to the Dow Jones News Service.
(b) As soon as reasonably practicable on the date of commencement of
the Offer, Parent shall, and Parent shall cause Merger Sub to file with the SEC
a Tender Offer Statement on Schedule TO (together with any amendments or
supplements thereto, the "Schedule TO"). As soon as reasonably practicable
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after the date hereof, Parent shall, and shall cause Merger Sub to, file the
Offer Registration Statement (the Schedule TO, the Offer Registration Statement
and such documents included therein pursuant to which the Offer will be made,
the "Offer Documents"). Parent and the Company agree promptly to correct any
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information provided by it for use in the Offer Documents if and to the extent
that such information shall have become false or misleading in any material
respect. Parent shall, and Parent shall cause Merger Sub to take all steps
necessary to cause the Schedule TO and the Offer Registration Statement as so
corrected to be filed with the SEC and the other Offer Documents as so corrected
to be, at such time as reasonably agreed by Parent and the Company, disseminated
to holders of shares of Company Common Stock, in each case as and to the extent
required by applicable federal securities laws. The Company and its counsel
shall be given an opportunity to review and comment on the Offer Documents prior
to their being filed with the SEC or disseminated to the holders of shares of
Company Common Stock. Parent shall, and Parent shall cause Merger Sub to
provide the Company and its counsel with any comments Parent and Merger Sub or
their counsel may receive from the SEC or its staff with respect to the Offer
Documents promptly after the receipt of such comments and shall provide the
Company and its counsel an opportunity to participate in the response of Parent
or Merger Sub to such comments.
SECTION 2.02. Company Action. (a) The Company hereby approves of and
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consents to the Offer and represents that its Board of Directors, at a meeting
duly called and held, has (i) unanimously determined that this Agreement and the
transactions contemplated hereby, including the Offer and the Merger, are in the
best interests of the Company's shareholders, (ii) unanimously approved and
adopted this Agreement and the transactions contemplated hereby, including the
Offer and the Merger, in accordance with the requirements of the Virginia Stock
Corporation Act (the "VSCA") and (iii) subject to Section 7.07, unanimously
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resolved to recommend acceptance of the Offer and approval of this Agreement by
the Company's shareholders. The Company further represents that Morgan Stanley &
Co. Incorporated ("Morgan Stanley") has delivered to the Company's Board of
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Directors its written opinion as of the date hereof that the consideration to be
received by the holders of shares of Company Common Stock pursuant to the terms
of the Offer and the Merger is fair from a financial point of view to such
holders. The Company will promptly furnish Parent with a list of its
shareholders, mailing labels and any available listing or computer file
containing the names and addresses of all record holders of shares of Company
Common Stock and lists of securities positions of shares of Company Common Stock
held in stock depositories, in each case true and
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correct as of the most recent practicable date, and will provide to Parent such
additional information (including updated lists of shareholders, mailing labels
and lists of securities positions) and such other assistance as Parent may
reasonably request in connection with the Offer.
(b) The Company hereby agrees to file with the SEC contemporaneously
with the commencement of the Offer and disseminate to holders of shares of
Company Common Stock, in each case as and to the extent required by applicable
federal securities laws, a Solicitation/Recommendation Statement on Schedule
14D-9 (together with any amendments or supplements thereto, the "Schedule 14D-
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9") that, subject to Section 7.07, shall reflect the recommendations of the
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Company's Board of Directors referred to in Section 2.02(a) above; provided,
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however, that prior to the Acceptance Date, the Board of Directors of the
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Company may amend, modify, withdraw, condition or qualify such recommendations
or may take any action or make any statement inconsistent with such
recommendations, to the extent that the majority of the Company's Board of
Directors concludes in its good faith judgment, after receiving the advice of
outside legal counsel, that it is necessary to take such action in order to
comply with its fiduciary duties to shareholders under applicable law. The
Company agrees to provide Parent and its counsel with any comments that the
Company or its counsel may receive from the SEC or its staff with respect to the
Schedule 14D-9 promptly after the receipt of such comments and shall provide
Parent and its counsel with an opportunity to participate in the response of the
Company to such comments. The Company and Parent each agree promptly to correct
any information provided by it for use in the Schedule 14D-9 if and to the
extent that it shall have become false or misleading in any material respect.
The Company agrees to take all steps necessary to cause the Schedule 14D-9 as so
corrected to be filed with the SEC and to be disseminated to holders of shares
of Company Common Stock, in each case as and to the extent required by
applicable federal securities laws. Parent and its counsel shall be given an
opportunity to review and comment on the Schedule 14D-9 prior to its being filed
with the SEC or disseminated to holders of shares of Company Common Stock.
SECTION 2.03. Directors. (a) Effective upon the acceptance for
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payment of any shares of Company Common Stock pursuant to the Offer, Parent
shall be entitled to designate the number of directors, rounded up to the next
whole number, on the Company's Board of Directors that equals the product of (i)
the total number of directors on the Company's Board of Directors (giving effect
to the election of any additional directors pursuant to this Section 2.03) and
(ii) the percentage that the number of shares of Company Common Stock
beneficially owned by Parent and/or Merger Sub (including shares of Company
Common Stock accepted for payment) bears to the total number of shares of
Company Common Stock outstanding, and the Company shall take all action
necessary to cause Parent's designees to be elected or appointed to the
Company's Board of Directors, including increasing the number of directors, and
seeking and accepting resignations of incumbent directors. At such time, the
Company will also use its best efforts to cause individuals designated by Parent
to constitute the number of members, rounded up to the next whole number, on (i)
each committee of the Board and (ii) each board of directors of each Subsidiary
of the Company identified by Parent (and each committee thereof) that represents
the same percentage as such individuals represent on the Board of Directors of
the Company, in each case only to the extent permitted by applicable law.
Notwithstanding the provisions of this Section 2.03, the parties hereto shall
use their respective best efforts to ensure that at least two of the members of
the Company's Board of Directors shall,
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at all times prior to the Effective Time, be directors of the Company who were
directors of the Company on the date hereof (the "Continuing Directors");
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provided that if there shall be in office fewer than two Continuing Directors
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for any reason, the Company's Board of Directors shall cause a person designated
by the remaining Continuing Director to fill such vacancy who shall be deemed to
be a Continuing Director for all purposes of this Agreement, or if no Continuing
Directors then remain, the other directors of the Company then in office shall
designate two persons to fill such vacancies who will not be officers or
employees or affiliates of the Company, Parent or Merger Sub or any of their
respective Subsidiaries and such persons shall be deemed to be Continuing
Directors for all purposes of this Agreement.
(b) The Company's obligations to appoint Parent's designees to the
Company's Board of Directors shall be subject to Section 14(f) of the Exchange
Act and Rule 14f-1 promulgated thereunder. The Company shall promptly take all
actions, and shall include in the Schedule 14D-9 such information with respect
to the Company and its officers and directors, as Section 14(f) and Rule 14f-1
require in order to fulfill its obligations under this Section, so long as
Parent shall have provided to the Company on a timely basis in writing and be
solely responsible for any information with respect to itself, Merger Sub and
their respective nominees, officers, directors and Affiliates required by
Section 14(f) and Rule 14f-1.
(c) Following the election or appointment of Parent's designees
pursuant to Section 2.03(a) and until the Effective Time, the approval of a
majority of the Continuing Directors shall be required to authorize any
termination of this Agreement by the Company, any amendment of this Agreement
requiring action by the Company's Board of Directors, any extension of time for
performance of any obligation or action hereunder by Parent or Merger Sub, any
waiver of compliance with any of the agreements or conditions contained herein
for the benefit of the Company, any consent or action by the Board of Directors
of the Company hereunder and any other action of the Company hereunder which
adversely affects the holders of shares of Company Common Stock (other than
Parent or Purchaser).
(d) Parent shall take such action as shall be necessary so that, at
the Effective Time, the number of directors comprising each class of directors
of the Board of Directors of Parent shall be increased from four to five, and
three individuals from among the present directors of the Company (the
"Designated Directors") who shall be agreed upon by Parent and the Company shall
--------------------
be appointed to the Board of Directors of Parent to fill the vacancies created
by such newly created directorships having terms expiring at the Company's
annual meetings of shareholders to be held in 2001, 2002 and 2003. The Company
hereby agrees to provide to Parent as soon as practicable any information in
respect of the Designated Directors as Parent shall reasonably request.
ARTICLE III
THE MERGER
SECTION 3.01. The Merger. (a) Upon the terms and subject to the
------------ ----------
conditions of this Agreement, as soon as practicable after satisfaction or, to
the extent permitted hereby, waiver of all conditions to the Merger set forth
herein, Parent shall cause articles of merger (the
9
"Articles Of Merger") to be duly prepared, executed and acknowledged by Merger
------------------
Sub and the Company in accordance with the VSCA and shall be filed with the
State Corporation Commission of Virginia. The Merger shall become effective upon
the filing of the Articles of Merger (or at such later time reflected in such
Articles of Merger as shall be agreed to by Parent and the Company). The date
and time when the Merger shall become effective is hereinafter referred to as
the "Effective Time."
--------------
(b) At the Effective Time, Merger Sub shall be merged with and into
the Company and the separate corporate existence of Merger Sub shall cease, and
the Company shall continue as the surviving corporation under the laws of the
Commonwealth of Virginia (the "Surviving Corporation").
---------------------
(c) From and after the Effective Time, the Merger shall have the
effects set forth in this Agreement and in Section 13.1-721 of the VSCA.
SECTION 3.02. Articles of Incorporation of the Surviving Corporation.
------------ ------------------------------------------------------
The Articles of Incorporation of the Merger Sub, as in effect immediately prior
to the Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation.
SECTION 3.03. By-Laws of the Surviving Corporation. The By-Laws of
------------ ------------------------------------
the Merger Sub, as in effect immediately prior to the Effective Time, shall be
the By-Laws of the Surviving Corporation.
SECTION 3.04. Directors and Officers of the Surviving Corporation. At
------------ ---------------------------------------------------
the Effective Time, the directors of Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation, each of such
directors to hold office, subject to the applicable provisions of the VSCA and
the Articles of Incorporation and By-Laws of the Surviving Corporation, until
the next annual shareholders' meeting of the Surviving Corporation and until
their respective successors shall be duly elected or appointed and qualified. At
the Effective Time, the officers of the Company immediately prior to the
Effective Time shall, subject to the applicable provisions of the Articles of
Incorporation and By-Laws of the Surviving Corporation, be the officers of the
Surviving Corporation until their respective successors shall be duly elected or
appointed and qualified.
SECTION 3.05. Closing. The closing of the Merger (the "Closing")
------------ -------
shall be held at the offices of Shearman & Sterling, 599 Lexington Avenue, New
York, New York 10022 as soon as practicable, but in any event within three
Business Days after the last of the conditions (excluding conditions that, by
their nature, cannot be satisfied until the Closing Date) set forth in Article
VIII hereof is satisfied or waived or at such other time and date as the parties
hereto shall agree in writing. Such date is herein referred to as the "Closing
-------
Date."
- ----
10
ARTICLE IV
CONVERSION OF SHARES AND RELATED MATTERS
SECTION 4.01. Conversion of Capital Stock. At the Effective Time, by
------------ ---------------------------
virtue of the Merger:
(a) Cancellation of Treasury Stock and Stock Owned by Parent and
------------------------------------------------------------
Merger Sub. All shares of Company Common Stock owned by the Company as treasury
- ----------
stock and any shares of Company Common Stock owned by Parent, Merger Sub or any
Subsidiary of Parent or Merger Sub immediately prior to the Effective Time
shall, by virtue of the Merger, and without any action on the part of the holder
thereof, no longer be outstanding, shall be canceled and retired without payment
of any consideration therefor and shall cease to exist.
(b) Capital Stock of Merger Sub. Each share of Merger Sub Common
---------------------------
Stock outstanding immediately prior to the Effective Time shall be converted
into and become one share of common stock of the Surviving Corporation.
(c) Conversion of Company Common Stock. Except as provided in clause
----------------------------------
(a) of this Section 4.01, each share of Company Common Stock outstanding
immediately prior to the Effective Time shall be converted into and shall be
canceled in exchange for the right to receive from Parent the same amount of
cash and the same number of shares of Parent Common Stock as paid for each share
of Company Common Stock in the Offer. At the Effective Time, all Company Common
Stock shall no longer be outstanding, shall be canceled and retired and shall
cease to exist, and each certificate (a "Certificate") that formerly represented
-----------
such shares of Company Common Stock shall thereafter represent only the right to
receive cash and the number of whole shares of Parent Common Stock into which
the Company Common Stock represented by such Certificate is converted pursuant
to this Section 4.01(c) and the right, if any, to receive pursuant to Section
4.03(e) cash in lieu of a fractional share of Parent Common Stock and any
dividend or distribution pursuant to Section 4.03(c), in each case without
interest.
(d) In the event that, subsequent to the date of this Agreement but
prior to the Effective Time, the Company changes the number of shares of Company
Common Stock, or Parent changes the number of shares of Parent Common Stock,
issued and outstanding as a result of a stock split, stock combination, stock
dividend, recapitalization, redenomination of share capital or other similar
transaction, the Exchange Ratio and other items dependent thereon shall be
appropriately adjusted.
SECTION 4.02. Exchange of Shares. Prior to the Effective Time, Parent
------------ ------------------
shall appoint a bank or trust company reasonably acceptable to the Company as
exchange agent (the "Exchange Agent") for the purposes of exchanging the
Certificates for cash and the whole number of shares of Parent Common Stock into
which the shares of Company Common Stock formerly represented thereby have been
converted and cash in lieu of fractional shares of Parent Common Stock. Promptly
after the Effective Time, Parent will send, or will cause the Exchange Agent to
send, to each holder of record of Company Common Stock as of the Effective Time
a letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title
11
to the Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent and shall be in customary form and have such other customary
provisions as the Surviving Corporation or Parent may reasonably specify)
providing instructions for use in effecting the surrender of Certificates in
exchange for cash and the whole number of shares of Parent Common Stock into
which the shares of Company Common Stock formerly represented thereby have been
converted and cash in lieu of a fractional share of Parent Common Stock.
SECTION 4.03. Exchange of Certificates. (a) Exchange Agent. On
------------ ------------------------ --------------
or prior to the Effective Time, Parent shall deposit with the Exchange Agent (i)
as nominee for the benefit of the holders of Company Common Stock, the aggregate
amount of cash and the aggregate number of shares of Parent Common Stock to be
issued pursuant to Section 4.01(c) and (ii) an amount of cash sufficient to
permit the Exchange Agent to make the necessary payments of cash in lieu of
fractional shares of Parent Common Stock in accordance with Section 4.03(e)
(such cash and shares of Parent Common Stock, together with any dividends or
distributions with respect thereto being hereinafter referred to as the
"Exchange Fund"), to be held for the benefit of and distributed to the holders
of Company Common Stock in accordance with this Section 4.03. The Exchange Agent
shall invest any cash included in the Exchange Fund as directed by the Surviving
-------------
Corporation on a daily basis in direct obligations of the United States,
obligations for which the full faith and credit of the United States is pledged
to provide for the payment of principal and interest, commercial paper rated the
highest quality by Moody's Investors Services, Inc. or Standard & Poor's Ratings
Group or certificates of deposit, bank repurchase agreements or bankers'
acceptances of a commercial bank having at least $100,000,000 in assets, or in
money market funds which are invested in the foregoing; provided that no such
--------
investment or loss thereon shall affect the amounts payable to the Company's
shareholders pursuant to this Article IV. Parent and the Surviving Corporation
shall replace any monies lost through an investment made pursuant to this
Section 4.03. Any interest and other income resulting from such investments
shall promptly be paid to the Surviving Corporation.
(b) Exchange Procedures. Upon surrender of a Certificate for
-------------------
cancellation to the Exchange Agent, together with the letter of transmittal
referred to in Section 4.02 duly executed and completed in accordance with its
terms, and such other documents as may reasonably be required by the Exchange
Agent, the holder of such Certificate shall be entitled to receive in exchange
therefor (i) the amount of cash and a certificate or certificates representing
the whole number of shares of Parent Common Stock into which the shares of
Company Common Stock represented by such Certificate have been converted in
accordance with Section 4.01(c), (ii) the amount of dividends or other
distributions, if any, with a record date on or after the Effective Time which
theretofore became payable with respect to such shares of Parent Common Stock,
and (iii) the cash amount payable in lieu of a fractional share of Parent Common
Stock in accordance with Section 4.03(e), in each case which such holder has the
right to receive pursuant to the provisions of this Article IV, and the
Certificate so surrendered shall forthwith be canceled. In no event shall the
holder of any Certificate be entitled to receive interest on any funds to be
received in the Merger. In the event of a transfer of ownership of shares of
Company Common Stock which is not registered in the transfer records of the
Company, the amount of cash and a certificate or certificates representing that
whole number of shares of Parent Common Stock into which such shares of Company
Common Stock have been converted in accordance with Section 4.01(c), plus the
cash amount payable in lieu of a fractional share of Parent Common Stock in
accordance with Section 4.03(e), may be issued to a
12
transferee if the Certificate representing such Company Common Stock is
presented to the Exchange Agent accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this Section
4.03(b) and subject to Section 4.03(c), each Certificate shall, after the
Effective Time, represent for all purposes only the right to receive the amount
of cash and the whole number of shares of Parent Common Stock into which the
number of shares of Company Common Stock shown thereon has been converted in
accordance with Section 4.01(c), plus the cash amount payable in lieu of a
fractional share of Parent Common Stock in accordance with Section 4.03(e).
Notwithstanding the foregoing, certificates representing Company Common Stock
surrendered for exchange by any Person constituting a "Rule 145 Affiliate" of
the Company for purposes of Section 7.14 shall not be exchanged until Parent has
received a Rule 145 Affiliate Agreement (as defined in Section 7.14) as provided
in Section 7.14.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
------------------------------------------------
other distributions declared, made or paid after the Effective Time with respect
to shares of Parent Common Stock with a record date on or after the Effective
Time shall be paid to the holder of any unsurrendered Certificate with respect
to the shares of Parent Common Stock represented thereby and no cash payment in
lieu of a fractional share of Parent Common Stock shall be paid to any such
holder pursuant to Section 4.03(e) until the holder of record of such
Certificate shall surrender such Certificate in accordance with this Section.
Subject to the effect of applicable laws, following surrender of any such
Certificate, there shall be paid to the record holder of the certificates
representing shares of Parent Common Stock, without interest, (i) at the time of
such surrender, the amount of dividends or other distributions, if any, with a
record date on or after the Effective Time which theretofore became payable, but
which were not paid by reason of the immediately preceding sentence, with
respect to such shares of Parent Common Stock and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
on or after the Effective Time but prior to surrender and a payment date
subsequent to surrender payable with respect to such shares of Parent Common
Stock. Dividends or other distributions with a record date on or after the
Effective Time but prior to surrender of Certificates by holders thereof payable
in respect of shares of Parent Common Stock held by the Exchange Agent shall be
held in trust for the benefit of such holders of Certificates.
(d) No Further Ownership Rights in Company Common Stock. All shares
---------------------------------------------------
of Parent Common Stock issued and all cash paid upon the surrender for exchange
of Certificates in accordance with the terms hereof (including any cash paid
pursuant to Section 4.03(e)) shall be deemed to have been issued at the
Effective Time in full satisfaction of all rights pertaining to the shares of
Company Common Stock represented thereby, subject to the Surviving Corporation's
obligation to pay any dividends which may have been declared by the Company on
the shares of Company Common Stock in accordance with the terms of this
Agreement and which remained unpaid at the Effective Time. From and after the
Effective Time, the stock transfer books of the Company shall be closed and
there shall be no further registration of transfers thereon of the shares of
Company Common Stock which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Section 4.03.
13
(e) No Fractional Shares. No certificate or scrip representing
--------------------
fractional shares of Parent Common Stock will be issued in the Offer or the
Merger upon the surrender for exchange of Certificates, and such fractional
shares of Parent Common Stock will not entitle the owner thereof to vote or to
any rights of a holder of shares of Parent Common Stock. In lieu of any such
fractional shares of Parent Common Stock, each holder of Certificates who would
otherwise have been entitled to a fraction of a share of Parent Common Stock in
exchange for such Certificates (after taking into account all Certificates
delivered by such holder) pursuant to this Section 4.03 shall receive from the
Exchange Agent, as applicable, a cash payment in lieu of such fractional share
of Parent Common Stock, determined by multiplying (i) the Average Price by (ii)
the fraction of a share of Parent Common Stock to which such holder would
otherwise be entitled.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
----------------------------
which remains undistributed to the shareholders of the Company for one year
after the Effective Time shall be delivered to or as directed by Parent, upon
demand, and any holders of Certificates who have not theretofore complied with
this Article IV shall thereafter look only to Parent for payment of their claim
for shares of Parent Common Stock, any cash in lieu of a fractional share of
Parent Common Stock and any dividends or distributions with respect to shares of
Parent Common Stock. Neither Parent nor the Surviving Corporation shall be
liable to any holder of any Certificate for cash or shares of Parent Common
Stock (or dividends or distributions with respect thereto), or cash payable in
respect of a fractional share of Parent Common Stock, delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
Any securities or cash amounts remaining unclaimed by holders of Certificates
five years after the Effective Time (or such earlier date immediately prior to
such time as such amounts would otherwise escheat to or become property of any
governmental entity) shall, to the extent permitted by applicable law, become
the property of the Surviving Corporation free and clear of any claims or
interest of any Person previously entitled thereto.
(g) Lost, Stolen or Destroyed Certificates. If any Certificate shall
--------------------------------------
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming such Certificate to be lost, stolen or destroyed
and, if required by Parent, the posting by such person of a bond in such
reasonable amount as Parent may direct as indemnity against any claim that may
be made against it with respect to such Certificate, the Exchange Agent will
deliver in exchange for such lost, stolen or destroyed Certificate the cash and
the whole number of shares of Parent Common Stock into which the shares of
Company Common Stock formerly represented thereby have been converted, any cash
in lieu of a fractional share of Parent Common Stock, and unpaid dividends and
distributions in respect of or on shares of Parent Common Stock deliverable in
respect thereof, pursuant to this Agreement.
(h) Withholding Rights. Each of the Surviving Corporation and Parent
------------------
shall be entitled to deduct and withhold from the cash and the shares of Parent
Common Stock (and any dividends or distributions thereon) and cash in lieu of a
fractional share of Parent Common Stock otherwise payable hereunder to any
holder of Certificates in respect of the shares of Company Common Stock formerly
represented thereby such amounts as it is required to deduct and withhold with
respect to the making of such payment under any provision of federal, state,
local or foreign income tax law. To the extent that the Surviving Corporation
or Parent so withholds those amounts, such withheld amounts shall be treated for
all purposes of this
14
Agreement as having been paid to the holder of Company Common Stock in respect
of which such deduction and withholding was made by the Surviving Corporation or
Parent, as the case may be.
SECTION 4.04. Stock Options and Other Stock Plans.
------------ -----------------------------------
(a) Company Options. Not less than five Business Days prior to the
---------------
date on which Merger Sub accepts for payment all shares of Company Common Stock
validly tendered and not withdrawn pursuant to the Offer (the "Acceptance Date")
---------------
each holder of a Company Option shall have the right to elect either of the
following alternatives with respect to such Company Options by delivering a
written election to the Company: (i) that their options be cashed out, in whole
or in part, in the manner described below (the "Cashout Election") or (ii) that
----------------
their options be exchanged, in whole or in part, for options to purchase Parent
Common Stock in the manner described below (the "Conversion Election"). In the
-------------------
event that any holder of a Company Option does not make an election as provided
for in this Section 4.04(a), such holder shall be deemed to have made a Cashout
Election with respect to such holder's Company Options.
(b) In the event an optionee elects the Cashout Election, on the
Acceptance Date the Company shall terminate or cancel all Company Options to
which the Cashout Election relates that are outstanding and unexercised as of
such date as set forth in Section 4.04 of the Company Disclosure Schedule. Each
Company Option that is outstanding and unexercised on the Acceptance Date as to
which the holder thereof has made a Cashout Election shall be cancelled on the
Acceptance Date, and the holder thereof shall receive in exchange for the
cancellation of such Company Option, an amount in cash equal to (i) the excess,
if any, of (1) the Per Share Amount over (2) the per share exercise price of
such Company Option, multiplied by (ii) the number of shares of Company Common
Stock subject to such Company Option as of the Acceptance Date. Any such
payment shall be subject to all applicable federal, state and local tax employee
withholding requirements. In the event that an optionee elects the Cashout
Election with respect to a portion of the Company Options held thereby, the
remaining Company Options held by such optionee shall be exchanged for options
of Parent Common Stock pursuant to Section 4.04(c).
(c) In the event an optionee elects the Conversion Election, prior to
the Effective Time Parent and the Company shall take such action as may be
necessary to cause each Company Option to which the Conversion Election relates
to be automatically converted at the Effective Time into an option ("Substituted
-----------
Option") to purchase a number of shares of Parent Common Stock equal to the
- ------
product of (i) the number of shares of Company Common Stock that could have been
purchased (assuming full vesting) under such Company Option immediately prior to
the Effective Time multiplied by (ii) the quotient of (1) the Per Share Amount
divided by (2) the Average Price (rounded up to the nearest whole number of
shares of Parent's Common Stock), at a price per share of Parent's Common Stock
equal to the quotient of (x) the per-share option exercise price specified in
the Company Option divided by (y) (1) the Per Share Amount divided by (2) the
Average Price (rounded down to the nearest whole cent). Except as otherwise
provided in this Agreement, such Substituted Option shall be subject to the same
terms and conditions as such Company Option. Such Substituted Options shall be
subject to any other rights which arise under the Company Employee Benefit
Plans, the option agreements
15
evidencing awards thereunder as a result of the transactions contemplated by
this Agreement or otherwise, including the full vesting of such Company Options
to the extent provided in such plans or agreements. As promptly as reasonably
practicable after the Effective Time, Parent shall issue to each holder of an
outstanding Company Option a document evidencing the foregoing assumption by
Parent. In the event that an optionee elects the Conversion Election with
respect to a portion of the Company Options held thereby, the remaining Company
Options held by such optionee shall be cashed-out pursuant to Section 4.04(b).
(d) In respect of each Substituted Option and the shares of Parent
Common Stock underlying such option, Parent shall file as promptly as
practicable, and in no event later than the second Business Day after the
Closing Date, and keep current, a Form S-8 or other appropriate registration
statement for as long as any Substituted Options remain outstanding. In
connection with the issuance of Substituted Options, Parent shall, by action of
the Board of Directors of Parent, reserve for issuance the number of shares of
Parent Common Stock that will become subject to Substituted Options pursuant to
this Section 4.04.
(e) Prior to the Effective Time, the Company shall take such steps
reasonably necessary, including amendment of the plans and agreements governing
the terms of the Company Options, to accomplish the disposition of the Company
Options pursuant to this Section 4.04, including the Cashout Election and the
Conversion Election. In addition, prior to the Effective Time, the Company
shall amend each outstanding Company Option to provide that in the event the
option holder's employment is involuntarily terminated following the Acceptance
Date other than for cause or in the event that an employee terminates his or her
employment for "good reason" as such term is defined in such employee's
employment agreement, the exercise period for such option shall end on the three
year anniversary of the Acceptance Date or the last day of the original term of
the Company Option, whichever occurs first.
(f) Phantom Share Units and Restricted Stock. On the Acceptance Date,
----------------------------------------
the Company shall terminate or cancel all performance shares and restricted or
performance share units and, to the extent provided for in the award agreement,
all restricted stock, and each holder of such stock or units that are
outstanding, whether or not such stock or units are free of restrictions, shall
be entitled to receive on the Acceptance Date, in exchange for the cancellation
of such stock or units, an amount in cash equal to the product of (1) the mean
of the high and low sales price on the Acceptance Date of Company Common Stock
and (2) the number of shares or units subject to such award. Any such payment
shall be subject to all applicable federal, state and local tax employee
withholding requirements.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed in the Company's disclosure schedule delivered
concurrently with the delivery of this Agreement (the "Company Disclosure
------------------
Schedule"), the Company hereby represents and warrants to Parent as follows:
- --------
16
SECTION 5.01. Due Organization, Good Standing and Corporate Power.
------------ ---------------------------------------------------
The Company and each of its Subsidiaries is a corporation or legal entity duly
organized, validly existing and in good standing (with respect to jurisdictions
which recognize the concept of good standing) under the laws of the jurisdiction
of its incorporation and each such Person has all requisite corporate,
partnership or similar power and authority to own, lease and operate its
properties and to carry on its business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have such power
and authority could not reasonably be expected to, individually or in the
aggregate, have a Company Material Adverse Effect. The Company and each of its
Subsidiaries is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification
necessary, except where the failure to be so qualified or licensed and in good
standing would not reasonably be expected to, individually or in the aggregate,
have a Company Material Adverse Effect. Other than as set forth in Section 5.01
of the Company Disclosure Schedule, the respective Articles of Incorporation and
By-Laws or other organizational documents of the Significant Subsidiaries of the
Company do not contain any provision limiting or otherwise restricting the
ability of the Company to control such Subsidiaries. As soon as practicable
after the date hereof the Company will provide Parent with a list of all
Subsidiaries of the Company and their respective jurisdictions of incorporation
or organization which identifies the Company's (direct or indirect) percentage
of equity ownership therein. The copies of the Company's Articles of
Incorporation and By-Laws that are set forth as exhibits to the Company's Form
10-K for the year ended December 26, 1999 are complete and correct copies
thereof. Such Articles of Incorporation and By-Laws are in full force and effect
on the date hereof, and have not been amended, modified or rescinded.
SECTION 5.02. Authorization and Validity of Agreement. The Company
------------ ----------------------------------------
has all necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and, subject to obtaining the
Company Shareholder Approval, to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement by the
Company, and the consummation by it of the transactions contemplated hereby,
have been duly authorized and approved by its Board of Directors and no other
corporate action on the part of the Company is necessary to authorize the
execution, delivery and performance of this Agreement by the Company and the
consummation of the transactions contemplated hereby, other than obtaining the
Company Shareholder Approval. This Agreement has been duly executed and
delivered by the Company and is a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except to the
extent that its enforceability may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles.
SECTION 5.03. Capitalization. (a) The authorized capital stock of
------------ --------------
the Company consists of 500,000,000 shares of Company Common Stock and 5,000,000
shares of preferred stock, par value $10 per share (the "Company Preferred
-----------------
Stock"), 250,000 shares of which have been designated Series M Cumulative
- -----
Participating Preferred Stock. At the close of business on July 13, 2000: (i)
204,712,356 shares of Company Common Stock were issued and outstanding, (ii)
12,067,171 shares of Company Common Stock were issuable pursuant to outstanding
awards under the Company's stock option and stock benefit plans and arrangements
17
and (iii) no shares of Company Preferred Stock were issued and outstanding. All
issued and outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. Except as
set forth above or in Section 5.03(a) of the Company Disclosure Schedule or as
required by local law and other than the Company Rights, there are no
outstanding or authorized options, warrants, rights, subscriptions, claims of
any character, agreements, obligations, convertible or exchangeable securities,
or other commitments, contingent or otherwise, relating to shares of capital
stock or other equity interests of the Company or any of its Significant
Subsidiaries, pursuant to which the Company or any of its Subsidiaries is or may
become obligated to issue shares of its capital stock or other equity interests
or any securities convertible into, exchangeable for, or evidencing the right to
subscribe for, any shares of the capital stock or other equity interests of the
Company or any of its Significant Subsidiaries (each an "Issuance Obligation").
-------------------
Except as set forth in Section 5.03(a) of the Company Disclosure Schedule, there
are no outstanding obligations of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any outstanding securities of the
Company or any of its Significant Subsidiaries. The Company has no authorized or
outstanding bonds, debentures, notes or other indebtedness the holders of which
have the right to vote (or convertible or exchangeable into or exercisable for
securities the holders of which have the right to vote) with the shareholders of
the Company on any matter ("Voting Debt"). Except as set forth in Section
-----------
5.03(a) of the Company Disclosure Schedule, there are no restrictions of any
kind which prevent or restrict the payment of dividends by the Company or any of
its Significant Subsidiaries and there are no limitations or restrictions on the
right to vote, sell or otherwise dispose of the capital stock or other ownership
interests of the Company or its Significant Subsidiaries.
(b) All of the issued and outstanding shares of capital stock of each
Subsidiary are validly existing, fully paid and non-assessable. Except as set
forth in the Company SEC Reports filed on or before the date hereof or in
Section 5.03(b) of the Company Disclosure Schedule, no Significant Subsidiary of
the Company has outstanding Voting Debt and there are no obligations of the
Company or any of its Significant Subsidiaries to repurchase, redeem or
otherwise acquire any outstanding securities of any of its Significant
Subsidiaries or any capital stock of, or other ownership interests in, any of
its Significant Subsidiaries.
(c) Except for the Company's interest in its Subsidiaries, and as set
forth in Section 5.03(c) of the Company Disclosure Schedule, the Company does
not directly or indirectly own any equity or similar interest in, or any
interest convertible into or exchangeable or exercisable for any equity or
similar interest in, any corporation, partnership, joint venture, limited
liability company or other business association or entity which is material to
the Company and its Subsidiaries, taken as a whole.
SECTION 5.04. Consents and Approvals; No Violations. Assuming (i)
------------ -------------------------------------
the filings required under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), are made and the waiting periods thereunder
-------
(if applicable) have been terminated or expired, (ii) the prior notification and
reporting requirements of antitrust or competition laws of the member states of
the European Union as may be applicable (collectively, the "European Antitrust
------------------
Laws"), if applicable, are satisfied and any antitrust filings/notifications
- ----
which must or may be effected at the national level in countries having
jurisdiction are made and any applicable waiting periods thereunder have been
terminated or expired, (iii) the prior
18
notification and reporting requirements of other antitrust or competition laws
as may be applicable are satisfied and any antitrust filings/notifications which
must or may be effected in countries having jurisdiction are made, (iv) the
applicable requirements of the Securities Act and the Exchange Act are met, (v)
the requirements under any applicable foreign or state securities or blue sky
laws are met, (vi) the filing of the Articles of Merger and other appropriate
merger documents, if any, as required by the VSCA, are made, (vii) in the case
of this Agreement, the Company Shareholder Approval is received, (viii) the
requirements of any applicable state law relating to the transfer of
contaminated property are met and (ix) as otherwise set forth in Section 5.04 to
the Company Disclosure Schedule, the execution and delivery of this Agreement by
the Company and the consummation by the Company of the transactions contemplated
hereby do not and will not: (A) violate or conflict with any provision of the
Company's Articles of Incorporation or the Company's By-Laws or the comparable
governing documents of any of its Significant Subsidiaries; (B) violate or
conflict with any statute, law, ordinance, rule or regulation (collectively,
"Laws") or any order, judgment, decree, writ, permit or license (collectively,
----
"Orders"), of any court, tribunal, arbitrator, authority, agency, commission,
------
official or other instrumentality of the United States, any foreign country or
any domestic or foreign state, county, city or other political subdivision (a
"Governmental Authority") applicable to the Company or any of its Subsidiaries
----------------------
or by which any of their respective properties or assets may be bound; (C)
except as provided above or as set forth in Section 5.04 of the Company
Disclosure Schedule, require any filing with, or permit, consent or approval of,
or the giving of any notice to, any Governmental Authority; or (D) except as set
forth in Section 5.04 of the Company Disclosure Schedule, result in a violation
or breach of, conflict with, constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation,
payment or acceleration) under, or result in the creation of any Lien upon any
of the properties or assets of the Company or any of its Subsidiaries under, or
give rise to any obligation, right of termination, cancellation, acceleration or
increase of any obligation or a loss of a material benefit under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, license,
franchise, permit, agreement, contract, lease, franchise agreement or other
instrument or obligation of any kind (collectively, "Contracts") to which the
---------
Company or any of its Subsidiaries is a party, or by which any such Person or
any of its properties or assets are bound, excluding from the foregoing clauses
(B), (C) and (D), conflicts, violations, breaches, defaults, rights of payment
and reimbursement, terminations, modifications, accelerations and creations and
impositions of Liens which, and filings, permits, consents, approvals or
notices, the failure to have made or received, would not reasonably be expected
to, individually or in the aggregate, have a Company Material Adverse Effect;
provided, however, that for purposes of this Section 5.04, the definition of
- -------- -------
"Company Material Adverse Effect" shall be read so as not to include clause
(ii)(B) thereof.
SECTION 5.05. Company Reports and Financial Statements. (a) Since
------------ ----------------------------------------
December 28, 1997, the Company and, to the extent applicable, its Subsidiaries,
have filed all forms, reports and documents with the SEC required to be filed by
it pursuant to the federal securities laws and the SEC rules and regulations
thereunder, and all forms, reports, schedules, registration statements and other
documents filed with the SEC by the Company and, to the extent applicable, its
Subsidiaries have complied in all material respects with all applicable
requirements of the federal securities laws and the SEC rules and regulations
promulgated thereunder, each as in effect on the date such forms, reports and
documents were filed. The Company has, prior to the date of this Agreement, made
available to Parent true and complete
19
copies of all forms, reports, registration statements and other filings filed by
the Company and its Subsidiaries with the SEC since December 28, 1997 (such
forms, reports, registration statements and other filings, together with any
exhibits, any amendments thereto and information incorporated by reference
therein, are sometimes collectively referred to as the "Company SEC Reports").
-------------------
As of their respective dates, the Company SEC Reports did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and the unaudited consolidated interim
financial statements of the Company included in the Company SEC Reports were
prepared in accordance with GAAP applied on a consistent basis (except as may be
indicated therein or in the notes or schedules thereto) and present fairly, in
all material respects, the consolidated financial position of the Company and
its consolidated Subsidiaries as of the dates thereof and their consolidated
results of operations and changes in financial position for the periods then
ended subject, in the case of the unaudited interim financial statements, to
normal and recurring year-end adjustments. The Company has heretofore provided
Parent with true and correct copies of any material amendments and/or
modifications to any Company SEC Reports which have not yet been filed with the
SEC but that are required to be filed with the SEC in accordance with applicable
federal securities laws and the SEC rules.
(b) Except as set forth or provided in the Company SEC Reports filed
prior to the date of this Agreement or in Section 5.05(b) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries has any
liability or obligation of any nature (whether accrued, absolute, contingent or
otherwise), in each case that is required by GAAP to be set forth on a
consolidated balance sheet of the Company, except for (i) liabilities or
obligations disclosed or provided for in the Company SEC Reports filed prior to
the date of this Agreement; (ii) liabilities or obligations under this Agreement
or incurred in connection with the transactions contemplated hereby and (iii)
liabilities or obligations which would not reasonably be expected to,
individually or in the aggregate, have a Company Material Adverse Effect.
Except as set forth in Section 5.05(b) of the Company Disclosure Schedule, as of
the date hereof, neither the Company nor any of its Subsidiaries is in default
in respect of the material terms and conditions of any indebtedness or other
agreement which would reasonably be expected to, individually or in the
aggregate, have a Company Material Adverse Effect.
SECTION 5.06. Information to Be Supplied. (a) Each of the Schedule
------------ --------------------------
14D-9 and the Proxy Statement/Prospectus and the other documents required to be
filed by the Company with the SEC in connection with the Offer, the Merger and
the other transactions contemplated hereby will comply as to form in all
material respects with the requirements of the Exchange Act and the Securities
Act, as the case may be, and will not, on the date of its filing or, in the case
of the Proxy Statement/Prospectus, on the dates it is mailed to shareholders of
the Company and at the time of the Company Shareholder Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading.
(b) Notwithstanding the foregoing provisions of this Section 5.06, no
representation or warranty is made by the Company with respect to statements
made or incorporated by reference in the Merger Registration Statement, the
Proxy Statement/Prospectus
20
or the Schedule 14D-9 based on information supplied by Parent or Merger Sub for
inclusion or incorporation by reference therein or based on information which is
not made in or incorporated by reference in such documents but which should have
been disclosed pursuant to Section 6.06.
SECTION 5.07. Absence of Certain Events. Except as disclosed in the
------------ ---------------------------
Company SEC Reports filed on or before the date hereof or in Section 5.07 of the
Company Disclosure Schedule or as required or expressly permitted by this
Agreement, since December 26, 1999, the Company and its Subsidiaries have
operated their respective businesses only in the ordinary course and there has
not occurred (i) any event, occurrence, change or development which would
reasonably be expected to, individually or in the aggregate, have a Company
Material Adverse Effect; (ii) any damage, destruction or loss which,
individually or in the aggregate, resulted in or would reasonably be expected to
result in, a Company Material Adverse Effect; or (iii) any increase in the
compensation of, or change of control agreement with, any officer of the Company
or any of its Subsidiaries or, other than in the ordinary course of business,
any general salary or benefits increase to the employees of the Company or any
of its Subsidiaries.
SECTION 5.08. Litigation. Except as disclosed in Section 5.08 of the
------------ ----------
Company Disclosure Schedule or in the Company SEC Reports filed prior to the
date hereof, there are no investigations, actions, suits or proceedings
("Proceedings") pending against the Company or its Subsidiaries or, to the
-----------
knowledge of the Company, threatened against the Company or its Subsidiaries (or
any of their respective properties, rights or franchises), at law or in equity,
or before or by any federal or state commission, board, bureau, agency,
regulatory or administrative instrumentality or other Governmental Authority or
any arbitrator or arbitration tribunal, that would reasonably be expected to,
individually or in the aggregate, have a Company Material Adverse Effect, and,
to the knowledge of the Company, no development has occurred with respect to any
pending or threatened Proceeding that would reasonably be expected to result in
a Company Material Adverse Effect or would reasonably be expected to prevent,
materially impair or materially delay the consummation of the transactions
contemplated hereby. Except as disclosed in the Company SEC Reports filed prior
to the date hereof, neither the Company nor any of its Subsidiaries is subject
to any Order entered in any proceeding which would reasonably be expected to,
individually or in the aggregate, have a Company Material Adverse Effect. The
foregoing does not apply to any Proceeding or Order arising in connection with
or as a result of the execution of this Agreement or the commencement of the
Offer or the consummation of the other transactions contemplated hereby.
SECTION 5.09. Title to Properties; Encumbrances. Except as disclosed
------------ ---------------------------------
in Section 5.09 of the Company Disclosure Schedule, the Company and each of its
Significant Subsidiaries has good, valid and marketable title to, or, in the
case of leased properties and assets, valid leasehold interests in, all of its
tangible properties and assets except where the failure to have such good, valid
and marketable title would not reasonably be expected to, individually or in the
aggregate, have a Company Material Adverse Effect; in each case subject to no
Liens, except for (a) Liens reflected in the consolidated balance sheet as of
December 26, 1999, (b) Liens consisting of zoning or planning restrictions,
easements, permits and other restrictions or limitations on the use of real
property or irregularities in title thereto which do not materially detract from
the value of, or materially impair the use of, such property by the Company or
any of its Significant Subsidiaries in the operation of its respective business,
21
(c) Liens for current Taxes, assessments or governmental charges or levies on
property not yet due or which are being contested in good faith and (d) Liens
which would not reasonably be expected to, individually or in the aggregate,
have a Company Material Adverse Effect. Except as would not reasonably be
expected to, individually or in the aggregate, have a Company Material Adverse
Effect, (i) the Company and each of its Significant Subsidiaries are in
compliance with the terms of all leases of tangible properties to which they are
a party and under which they are in occupancy, and all such leases are in full
force and effect and (ii) the Company and each of its Significant Subsidiaries
enjoys peaceful and undisturbed possession under all such leases.
SECTION 5.10. Compliance with Laws. Except as disclosed in the
------------ --------------------
Company SEC Reports or Section 5.10 of the Company Disclosure Schedule, (a) the
Company, each of its Significant Subsidiaries, the North American Tissue
division and the Dixie division are in compliance with all applicable Laws and
Orders, except where the failure to so comply would not reasonably be expected
to, individually or in the aggregate, have a material adverse effect upon the
business, operations or financial condition of the Company, any of its
Significant Subsidiaries, the North American Tissue division or the Dixie
division, and (b) the Company, each of its Significant Subsidiaries, the North
American Tissue division and the Dixie division hold, to the extent legally
required, all federal, state, local and foreign permits, approvals, licenses,
authorizations, certificates, rights, exemptions and orders from Governmental
Authorities (the "Permits") that are required for the operation of the
respective businesses of the Company, each of its Significant Subsidiaries, the
North American Tissue division and the Dixie division as now conducted, except
where the failure to hold any such Permit would not reasonably be expected to,
individually or in the aggregate, have a material adverse effect upon the
business, operations or financial condition of the Company, any of its
Significant Subsidiaries, the North American Tissue division or the Dixie
division, and there has not occurred any default under any such Permit, except
to the extent that such default would not reasonably be expected to,
individually or in the aggregate, have a material adverse effect upon the
business, operations or financial condition of the Company, any of its
Significant Subsidiaries, the North American Tissue division or the Dixie
division.
SECTION 5.11. Company Employee Benefit Plans. (a) Except as set
------------ ------------------------------
forth in Section 5.11(a) of the Company Disclosure Schedule, (i) each employee
benefit plan subject to or governed by the laws of any jurisdiction outside of
the United States or any State or Commonwealth of the United States, (ii) each
employee benefit plan, within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended, and the rules and
regulations thereunder ("ERISA"), whether or not subject to ERISA, and (iii)
-----
each foreign or domestic stock option, stock appreciation right, restricted
stock, stock purchase, stock unit, performance share, incentive, bonus, profit-
sharing, savings, deferred compensation, health, medical, dental, life
insurance, disability, accident, supplemental unemployment or retirement,
employment, severance, termination or salary or benefits continuation or fringe
benefit plan, program, arrangement, contract or agreement maintained by the
Company or any Affiliate thereof (including, for this purpose and for the
purpose of all of the representations in this Section 5.11, all employers
(whether or not incorporated) that would be treated together with the Company
and/or any such Affiliate as a single employer within the meaning of Section 414
of the Internal Revenue Code of 1986, as amended, and the rules and regulations
thereunder (the "Code")) or to which the Company or any Affiliate thereof
----
contributes (or has any obligation to
22
contribute), has any liability or is a party (collectively, the "Company
-------
Employee Benefit Plans") is in compliance with all applicable Laws (including,
- ----------------------
without limitation, ERISA and the Code) and has been administered and operated
in accordance with its terms, in each case except as would not, in the
aggregate, have a Company Material Adverse Effect.
(b) Set forth in Section 5.11(b) of the Company Disclosure Schedule is
an accurate and complete list of (i) each material Company Employee Benefit
Plan, (ii) each plan covered by Title IV of ERISA that has been terminated or
for which a trustee has been appointed under Title IV of ERISA to administer
such plan or for which proceedings have been instituted with respect to either
of the foregoing, and (iii) any material claim, action, litigation, audit,
examination, investigation or administrative proceeding that has been made or
commenced or, to the best knowledge of the Company, threatened with respect to
any material Company Employee Benefit Plan (other than routine claims for
benefits in the ordinary course).
(c) The Company has made available or will make available to Parent or
its counsel true and complete copies of each plan document related to each
Company Employee Benefit Plan and any related trust agreement or funding
vehicle, together with all amendments thereto, and such other documentation with
respect to any Company Employee Benefit Plan as reasonably requested by Parent.
SECTION 5.12. Labor/Employment. Section 5.12 of the Company
------------ ----------------
Disclosure Schedule sets forth a list of all material employment, labor and
collective bargaining agreements to which the Company or any Subsidiary of the
Company is a party. The Company has heretofore made available or will make
available to Parent true and complete copies of the employment, labor and
collective bargaining agreements listed on Section 5.12 of the Company
Disclosure Schedule, together with all material amendments, modifications and
supplements affecting the duties, rights and obligations of any party
thereunder. Except as would not reasonably be expected to, individually or in
the aggregate, have a Company Material Adverse Effect or as set forth in Section
5.12 of the Company Disclosure Schedule, (i) to the Company's knowledge, there
are no organizational campaigns, written demands or proceedings pending or, to
the Company's knowledge, threatened by any labor organization or group of
employees seeking recognition or certification as collective bargaining
representative of any group of employees of the Company or any of its
Subsidiaries; (ii) there are no strikes, or material labor disputes ongoing or,
to the Company's knowledge, threatened involving the Company or any of its
Significant Subsidiaries, and the Company and its Significant Subsidiaries has
not experienced any such strike, or material labor dispute within the past two
years; and (iii) no collective bargaining agreement is currently being
negotiated by the Company or any of its Significant Subsidiaries.
SECTION 5.13. Taxes. Except as set forth in Section 5.13 of the
------------ -------
Company Disclosure Schedule or as would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect:
(a) The Company and each of its Subsidiaries has timely filed or
caused to be timely filed with the appropriate Taxing authorities all Federal
income and all other returns, statements, forms and reports for Taxes
("Returns") that are required to be filed by, or with respect to, the Company
-------
and such Subsidiaries on or prior to the Closing Date. The Returns as
23
filed were correct and complete in all respects. "Taxes" shall mean all taxes,
-----
assessments, charges, duties, fees, levies or other governmental charges
including, without limitation, all Federal, state, local, foreign and other
income, franchise, profits, capital gains, capital stock, transfer, sales, use,
occupation, property, excise, severance, windfall profits, stamp, license,
payroll, withholding and other taxes, assessments, charges, duties, fees, levies
or other governmental charges of any kind whatsoever (whether payable directly
or by withholding and whether or not requiring the filing of a Return), all
estimated taxes, deficiency assessments, additions to tax, penalties and
interest and shall include any liability for such amounts as a result of being a
member of a combined, consolidated, unitary or affiliated group.
(b) All Taxes and Tax liabilities of the Company and its Subsidiaries
that have become due and payable have been timely paid or fully provided for as
a liability on the financial statements of the Company and its Subsidiaries in
accordance with GAAP.
(c) Neither the Company nor any of its Subsidiaries is the subject of
an audit, other examination, matter in controversy, proposed adjustment, refund
litigation or other proceeding with respect to Taxes by the Tax authorities of
any nation, state or locality which could reasonably be expected to result in a
Tax liability, nor has the Company or any of its Subsidiaries received any
notices from any Tax authority relating to any issue which could reasonably be
expected to result in a Tax liability.
(d) All Taxes which the Company or any of its Subsidiaries is (or was)
required by law to withhold or collect have been duly withheld or collected, and
have been timely paid over to the proper authorities to the extent due and
payable.
(e) There are no Tax sharing, allocation, indemnification or similar
agreements (in writing) in effect as between the Company, any of its
Subsidiaries, or any predecessor or Affiliate of any of them and any other party
under which the Company (or any of its Subsidiaries) could be liable for any
Taxes of any party other than the Company or any Subsidiary of the Company.
(f) No election under Section 341(f) of the Code has been made or
shall be made prior to the Closing Date to treat the Company or any of its
Subsidiaries as a consenting corporation, as defined in Section 341 of the Code.
(g) There are no outstanding rulings of, or requests for rulings with,
any Tax Authority addressed to the Company or any of its Subsidiaries that are,
or if issued would be, binding on the Company or any of its Subsidiaries.
(h) There have been no distributions intended to qualify as tax-free
under Section 355 of the Code, involving the Company as either the distributing
or distributed corporation within the past two years.
SECTION 5.14. Intellectual Property. Except as would not,
------------ ---------------------
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect:
(a) The Company or one of its Subsidiaries exclusively owns, without
restrictions, or is licensed to use, the rights to all patents, trademarks,
trade names, service marks,
24
copyrights together with any registrations and applications therefor, Internet
domain names, net lists, schematics, inventories, technology, trade secrets,
source codes, know-how, computer software programs or applications including,
without limitation, all object and source codes and tangible or intangible
proprietary information or material that are used in the business of the Company
and any of its Subsidiaries as currently conducted (the "Company Intellectual
--------------------
Property"). Neither the Company nor any of its Subsidiaries is, or as a result
- --------
of the execution, delivery or performance of the Company's obligations hereunder
will be, in violation of, or lose any rights pursuant to, any Company
Intellectual Property.
(b) Except as set forth in Section 5.14(b) of the Company Disclosure
Schedule, no claims with respect to the Company Intellectual Property have been
asserted or, to the knowledge of the Company, are threatened by any Person nor
does the Company or any of its Subsidiaries know of any valid grounds for any
bona fide claims against the use by the Company or any of its Subsidiaries of
any Company Intellectual Property, or challenging the ownership, validity,
enforceability or effectiveness of any of the Company Intellectual Property.
All granted and issued patents and all registered trademarks and service marks
and all copyrights held by the Company or any of its Subsidiaries are valid,
enforceable and subsisting. To the Company's knowledge, there has not been and
there is not any unauthorized use, infringement or misappropriation of any of
the Company Intellectual Property by any third Person, including, without
limitation, any employee or former employee.
(c) Except as set forth in Section 5.14(c) of the Company Disclosure
Schedule, no owned Company Intellectual Property is subject to any outstanding
Order, or agreement restricting in any manner the licensing thereof by the
Company or any of its Subsidiaries.
SECTION 5.15. Broker's or Finder's Fee. Except for the fees of
------------ --------------------------
Morgan Stanley (whose fees and expenses will be paid by the Company in
accordance with the Company's agreement with such firm, a true and correct copy
of which has been previously delivered to Parent by the Company), no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission or expense reimbursement from the Company or from any of its
Subsidiaries or any of its controlled Affiliates in connection with the
transactions contemplated by this Agreement based upon arrangements made by and
on behalf of the Company, any of its Subsidiaries or any of its Affiliates.
SECTION 5.16. Environmental Laws and Regulations. Except as would
------------ ----------------------------------
not reasonably be expected to, individually
or in the aggregate, have a Company Material Adverse Effect and except as set
forth in Section 5.16 of the Company Disclosure Schedule or in the Company SEC
Reports filed prior to the date hereof, (i) Hazardous Materials have not been
generated, used, treated or stored on, transported to or from or Released or
disposed of on, any Company Property, (ii) the Company and each of its
Subsidiaries are in compliance with all applicable Environmental Laws and the
requirements of any permits issued under such Environmental Laws with respect to
any Company Property, (iii) there are no past, pending or, to the Company's
knowledge, threatened Environmental Claims against the Company or any of its
Subsidiaries or any Company Property and (iv) there are no facts or
circumstances, conditions or occurrences regarding the business, assets or
operations of the Company or any Company
25
Property that could reasonably be anticipated to form the basis of an
Environmental Claim against the Company or any of its Subsidiaries or any
Company Property.
For purposes of this Agreement, (i) "Company Property" means any real
----------------
property and improvements owned, leased or operated by the Company or any of its
Subsidiaries; (ii) "Hazardous Materials" means (A) any petroleum or petroleum
-------------------
products, radioactive materials, asbestos in any form that is or could become
friable, transformers or other equipment that contain dielectric fluid
containing levels of polychlorinated biphenyls, and radon gas; (B) any
chemicals, materials or substances defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "extremely hazardous substances," "restricted hazardous
wastes," "toxic substances," "toxic pollutants," or words of similar import,
under any applicable Environmental Law; and (C) any other chemical, material or
substance, exposure to which is prohibited, limited or regulated by any
Governmental Authority; (iii) "Environmental Law" means any federal, state,
-----------------
foreign or local statute, law, rule, regulation, ordinance, code or rule of
common law and any judicial or administrative interpretation thereof binding on
the Company or its operations or property as of the date hereof and Closing
Date, including any judicial or administrative order, consent decree or
judgment, relating to the environment, health or Hazardous Materials, including,
without limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, 42 U.S.C. sec. 9601 et seq.; the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. sec. 6901 et seq.; the
Federal Water Pollution Control Act, as amended, 33 U.S.C. sec. 1251 et seq.;
the Toxic Substances Control Act, 15 U.S.C. sec. 2601 et seq.; the Clean Air
Act, 42 U.S.C. sec. 7401 et seq.; Oil Pollution Act of 1990, 33 U.S.C. sec. 2701
et seq.; the Safe Drinking Water Act, 42 U.S.C. sec. 300f et seq.; and their
state and local counterparts and equivalents; (iv) "Environmental Claims" means
--------------------
any and all administrative, regulatory or judicial actions, suits, demands,
demand letters, claims, liens, notices of noncompliance or violation,
investigations or proceedings under any Environmental Law or any permit issued
under any such Environmental Law (for purposes of this subclause (iv),
"Claims"), including, without limitation, (A) any and all Claims by Governmental
------
Authorities for enforcement, cleanup, removal, response, remedial or other
actions or damages pursuant to any applicable Environmental Law and (B) any and
all Claims by any third party seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief resulting from Hazardous
Materials or arising from alleged injury or threat of injury to health, safety
or the environment; and (v) "Release" means disposing, discharging, injecting,
-------
spilling, leaking, leaching, dumping, emitting, escaping, emptying or seeping
into or upon any land or water or air, or otherwise entering into the
environment.
SECTION 5.17. State Takeover Statutes. The Board of Directors of
------------ -----------------------
the Company has approved the Offer, the Merger and this Agreement and such
approval is sufficient to render inapplicable to the Offer, the Merger, this
Agreement and the other transactions contemplated hereby the provisions of
Section 13.1-725.1 et seq. of the VSCA. The Company has taken all actions
necessary to cause 13.1-728.1 et seq. to be inapplicable to the Company. Except
for Section 13.1-725.1 et seq. and Sections 13.1-728.1 et seq. of the VSCA
(which have been rendered inapplicable), to the Company's knowledge, no other
takeover statute or similar statute or regulation of any state is applicable to
the Offer, the Merger, this Agreement and the other transactions contemplated
hereby.
26
SECTION 5.18. Voting Requirements; Board Approval; Appraisal Rights
------------ -----------------------------------------------------
(a) The affirmative vote of the holders of more than two-thirds of the
outstanding shares of the Company Common Stock (voting as one class, with each
share of the Company Common Stock having one vote) entitled to be cast approving
this Agreement is the only vote of the holders of any class or series of the
Company's capital stock necessary to approve this Agreement, and the
transactions contemplated hereby.
(b) The Board of Directors of the Company has, as of the date of this
Agreement, (i) determined that the Offer and the Merger are in the best
interests of the Company and its shareholders, (ii) approved this Agreement and
the transactions contemplated hereby and (iii) resolved to recommend that the
shareholders of the Company accept the Offer and approve this Agreement.
(c) No holder of Company Common Stock will have appraisal rights under
Section 13.1-730 of the VSCA as a result of, or in connection with, the Offer or
the Merger.
SECTION 5.19. Opinion of Financial Advisor. The Company has
------------ ----------------------------
received the opinion of Morgan Stanley that, as of the date of this Agreement,
the consideration to be received by the holders of the Company Common Stock
pursuant to the terms of the Offer and the Merger is fair from a financial point
of view to such holders, and a copy of such opinion has been, or promptly upon
receipt thereof will be, delivered to Parent; it being understood and
acknowledged by Parent that such opinion has been rendered for the benefit of
the Board of Directors of the Company, and is not intended to, and may not, be
relied upon by Parent, its Affiliates or their respective shareholders.
SECTION 5.20. Rights Agreement. The copy of the Rights Agreement,
------------ ----------------
dated as of February 26,1999, between the Company and Norwest Bank Minnesota,
N.A., as Rights Agent (the "Rights Agreement"), including all amendments and
----------------
exhibits thereto, that is set forth as an exhibit to the Company's Form 8-A,
dated as of February 26, 1999, is a complete and correct copy thereof. The
Company has taken all necessary action to amend the Rights Agreement, a copy of
which amendment will be promptly provided to Parent, so that neither the
execution of this Agreement nor the consummation of the Merger will (a) cause
the Rights issued pursuant to the Rights Agreement to become exercisable, (b)
cause Parent or Merger Sub to become an Acquiring Person (as such term is
defined in the Rights Agreement) or (c) give rise to a Distribution Date (as
such term is defined in the Rights Agreement).
SECTION 5.21. Non-competition Agreements. Except as set forth in
------------ --------------------------
Section 5.21 of the Company
Disclosure Schedule, neither the Company nor any Subsidiary of the Company is a
party to any contract or agreement that has or will have a material adverse
effect upon the ability of (a) the Company or the Surviving Company to, in all
respects, conduct its business and operations as currently conducted or (b)
Parent to, in all respects, conduct its business and operations as currently
conducted.
27
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT
Except as disclosed in Parent's disclosure schedule delivered
concurrently with the delivery of this Agreement (the "Parent Disclosure
-----------------
Schedule"), Parent hereby represents and warrants to the Company as follows:
- --------
SECTION 6.01. Due Organization, Good Standing and Corporate Power.
------------ ---------------------------------------------------
Parent and each of its Subsidiaries is a corporation or legal entity duly
organized, validly existing and in good standing (with respect to jurisdictions
which recognize the concept of good standing) under the laws of the jurisdiction
of its incorporation and each such Person has all requisite corporate,
partnership or similar power and authority to own, lease and operate its
properties and to carry on its business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have such power
and authority could not reasonably be expected to, individually or in the
aggregate, have a Parent Material Adverse Effect. Parent and each of its
Subsidiaries is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification
necessary, except where the failure to be so qualified or licensed and in good
standing would not reasonably be expected to, individually or in the aggregate,
have a Parent Material Adverse Effect. Other than as set forth in Section 6.01
of the Parent Disclosure Schedule, the respective Articles of Incorporation and
By-Laws or other organizational documents of the Subsidiaries of Parent do not
contain any provision limiting or otherwise restricting the ability of Parent to
control such Subsidiaries. As soon as practicable after the date hereof Parent
will provide the Company with a list of all Subsidiaries of Parent and their
respective jurisdictions of incorporation or organization which identifies
Parent's (direct or indirect) percentage of equity ownership therein. The copies
of Parent's Articles of Incorporation and By-Laws that are set forth as exhibits
to Parent's Form 10-K for the year ended January 1, 2000 are complete and
correct copies thereof. Such Articles of Incorporation and By-Laws are in full
force and effect on the date hereof, and have not been amended, modified or
rescinded.
SECTION 6.02. Authorization and Validity of Agreement. Parent and,
------------ ---------------------------------------
upon execution of the Agreement, Merger Sub will, have all necessary corporate
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Agreement by Parent and, upon
execution of the Agreement, Merger Sub, and the consummation by each such party
of the transactions contemplated hereby, have been or upon execution by Merger
Sub, will be, duly authorized and unanimously approved by the Board of Directors
of Parent and Merger Sub and no other corporate action on the part of either of
Parent or Merger Sub is or will be necessary to authorize the execution,
delivery and performance of this Agreement by each of Parent and Merger Sub and
the consummation of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by Parent and (in the case of Merger Sub, will
be), and is a valid and binding obligation of each of Parent and Merger Sub (or,
in the case of Merger Sub, will be) enforceable against Parent and Merger Sub in
accordance with its terms, except to the extent that its enforceability may be
subject to
28
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles.
SECTION 6.03. Capitalization. (a) The authorized capital stock of
------------ --------------
Parent consists of 650,000,000 shares of common stock, 400,000,000 of which are
Parent Common Stock and 250,000,000 of which have been designated Georgia-
Pacific Corporation-Timber Group Common Stock ("Timber Stock"), par value $.80
------------
per share, and 35,000,000 shares of preferred stock, 25,000,000 of which have
been designated Junior Preferred Stock (the "Junior Preferred Stock"), no par
----------------------
value per share, and 10,000,000 have been designated Preferred Stock, no par
value per share (the "Preferred Stock"). At the close of business on July 11,
----------------
2000: (i) 170,563,964 and 79,615,682 shares of Parent Common Stock and Timber
Stock, respectively, were issued and outstanding, (ii) 25,200,000 and 8,400,000
shares of Parent Common Stock and Timber Stock, respectively, were reserved for
issuance under Parent's stock option and stock benefit plans and arrangements,
(iii) no shares of Junior Preferred Stock or shares of Preferred Stock were
issued and outstanding and (iv) 21,501,300 and 14,387,850 shares of Parent
Common Stock and Timber Stock, respectively, were held by Parent in its
treasury. All issued and outstanding shares of capital stock of Parent are, and
all shares of Parent Common Stock to be issued hereunder will be, upon issuance,
duly authorized, validly issued, fully paid and nonassessable. Except as set
forth above or in Section 6.03(a) of the Parent Disclosure Schedule or as
required by local law and other that the Parent Rights, (i) Parent is not bound
by, obligated under, or party to an Issuance Obligation with respect to any
security of Parent or any Significant Subsidiary of Parent and (ii) there is no
outstanding Voting Debt of Parent. Except as set forth in Section 6.03(a) of the
Parent Disclosure Schedule, there are no outstanding obligations of Parent or
any of its Significant Subsidiaries to repurchase, redeem or otherwise acquire
any outstanding securities of Parent. Except as set forth in Section 6.03(a) of
the Parent Disclosure Schedule, there are no restrictions of any kind which
prevent or restrict the payment of dividends by Parent or any of its Significant
Subsidiaries and there are no limitations or restrictions on the right to vote,
sell or otherwise dispose of the capital stock of Parent or other ownership
interests.
(b) The authorized capital stock of Merger Sub will consist of 1,000
shares of common stock, par value $.01 per share, all of which are validly
issued and outstanding, fully paid and nonassessable and are owned by Parent
free and clear of all security interests, liens, claims, pledges, options,
rights of first refusal, agreements, charges or other encumbrances of any nature
or any other limitation or restriction (including any restriction on the right
to vote or sell the same, except as may be provided under applicable Federal or
state securities laws) (collectively, "Liens").
-----
(c) All of the issued and outstanding shares of capital stock of each
Subsidiary are validly existing, fully paid and non-assessable. Except as set
forth in the Parent SEC Reports filed on or before the date hereof or in Section
6.03(c) of the Parent Disclosure Schedule, no Significant Subsidiary of Parent
has outstanding Voting Debt and there are no obligations of Parent or any of its
Significant Subsidiaries to repurchase, redeem or otherwise acquire any
outstanding securities of any of its Significant Subsidiaries or any capital
stock of, or other ownership interests in, any of its Significant Subsidiaries.
(d) Except for Parent's interest in its Subsidiaries, and as set forth
in Section 6.03(d) of the Parent Disclosure Schedule, Parent does not directly
or indirectly own any
29
equity or similar interest in, or any interest convertible into or exchangeable
or exercisable for any equity or similar interest in, any corporation,
partnership, joint venture, limited liability company or other business
association or entity which is material to Parent and its Subsidiaries, taken as
a whole.
SECTION 6.04. Consents and Approvals; No Violations. Assuming (i)
------------- -------------------------------------
the filings required under the HSR Act are made and the waiting periods
thereunder have been terminated or expired, (ii) the prior notification and
reporting requirements of the European Antitrust Laws, if applicable, are
satisfied and any antitrust filings/notifications which must or may be effected
at the national level in countries having jurisdiction are made and any
applicable waiting periods thereunder have been terminated or expired, (iii) the
prior notification and reporting requirements of other antitrust or competition
laws as may be applicable are satisfied and any antitrust filings/notifications
which must be or may be effected in countries having jurisdiction are made, (iv)
the applicable requirements of the Securities Act and the Exchange Act are met,
(v) the requirements under any applicable foreign or state securities or blue
sky laws are met, (vi) the requirements of the NYSE in respect of the listing of
the shares of Parent Common Stock to be issued hereunder are met, (vii) the
filing of the Articles of Merger and other appropriate merger documents, if any,
as required by the VSCA, are made, (viii) the requirements of any applicable
state law relating to the transfer of contaminated property are met and (ix) as
otherwise set forth in Section 6.04 of the Parent Disclosure Schedule, the
execution and delivery of this Agreement by Parent and Merger Sub and the
consummation by Parent and Merger Sub of the transactions contemplated hereby do
not and will not: (A) violate or conflict with any provision of Parent's
Articles of Incorporation or Parent's By-Laws or the comparable governing
documents of any of its Significant Subsidiaries; (B) violate or conflict with
any Laws or Orders of any Governmental Authority applicable to Parent or any of
its Subsidiaries or by which any of their respective properties or assets may be
bound; (C) except as provided above or as set forth in Section 6.04 of the
Parent Disclosure Schedule, require any filing with, or permit, consent or
approval of, or the giving of any notice to, any Governmental Authority; or (D)
except as set forth in Section 6.04 of the Parent Disclosure Schedule, result in
a violation or breach of, conflict with, give rise to any right of termination,
cancellation, payment or acceleration) under, or result in the creation of any
Lien upon any of the properties or assets of Parent or any of its Subsidiaries
under, or give rise to any obligation, right of termination, cancellation,
acceleration or increase of any obligation or a loss of a material benefit
under, any of the terms, conditions or provisions of any Contracts to which
Parent or any of its Subsidiaries is a party, or by which any such Person or any
of its properties or assets are bound, excluding from the foregoing clauses (B),
(C) and (D) conflicts, violations, breaches, defaults, rights of payment and
reimbursement, terminations, modifications, accelerations and creations and
impositions of Liens which, and filings, permits, consents, approvals or
notices, the failure to have made or received, would not reasonably be expected
to, individually or in the aggregate, have a Parent Material Adverse Effect;
provided, however, that for purposes of this Section 6.04, the definition of
- -------- -------
"Parent Material Adverse Effect" shall be read so as not to include clause
(ii)(B) thereof.
SECTION 6.05. Parent Reports and Financial Statements. (a) Since
------------ ---------------------------------------
December 31, 1997, Parent and, to the extent applicable, its Subsidiaries have
filed all forms, reports and documents with the SEC required to be filed by it
pursuant to the federal securities laws and the SEC rules and regulations
thereunder, and all forms, reports, schedules, registration
30
statements and other documents filed with the SEC by Parent and, to the extent
applicable, its Subsidiaries have complied in all material respects with all
applicable requirements of the federal securities laws and the SEC rules and
regulations promulgated thereunder, each as in effect on the date such forms,
reports and documents were filed. Parent has, prior to the date of this
Agreement, made available to the Company true and complete copies of all forms,
reports, registration statements and other filings filed by Parent and its
Significant Subsidiaries with the SEC since December 31, 1997 (such forms,
reports, registration statements and other filings, together with any exhibits,
any amendments thereto and information incorporated by reference therein, are
sometimes collectively referred to as the "Parent SEC Reports"). As of their
------------------
respective dates, the Parent SEC Reports did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited consolidated financial
statements and the unaudited consolidated interim financial statements of Parent
included in the Parent SEC Reports were prepared in accordance with GAAP applied
on a consistent basis (except as may be indicated therein or in the notes or
schedules thereto) and present fairly, in all material respects, the
consolidated financial position of Parent and its consolidated Subsidiaries as
of the dates thereof and their consolidated results of operations and changes in
financial position for the periods then ended subject, in the case of the
unaudited interim financial statements, to normal and recurring year-end
adjustments. Parent has heretofore provided to the Company with true and correct
copies of any material amendments and/or modifications to any Parent SEC Reports
which have not yet been filed with the SEC but that are required to be filed
with the SEC in accordance with applicable federal securities laws and the SEC
rules.
(b) Except as set forth or provided in the Parent SEC Reports filed
prior to the date of this Agreement or in Section 6.05(b) of the Parent
Disclosure Schedule, neither Parent nor any of its Subsidiaries has any
liability or obligation of any nature (whether accrued, absolute, contingent or
otherwise), in each case that is required by GAAP to be set forth on a
consolidated balance sheet of Parent, except for (i) liabilities or obligations
disclosed or provided for in the Parent SEC Reports filed prior to the date of
this Agreement; (ii) liabilities or obligations under this Agreement or incurred
in connection with the transactions contemplated hereby; and (iii) liabilities
or obligations which would not reasonably be expected to, individually or in the
aggregate, have a Parent Material Adverse Effect. Except as set forth in
Section 6.05(b) of the Parent Disclosure Schedule, neither Parent nor any of its
Subsidiaries is in default in respect of the material terms and conditions of
any indebtedness or other agreement which would reasonably be expected to,
individually or in the aggregate, have a Parent Material Adverse Effect.
SECTION 6.06. Information to Be Supplied. (a) Each of the
------------ --------------------------
Registration Statement on Form S-4 to be filed with the SEC by Parent in
connection with the issuance of Parent Common Stock in the Merger, as amended or
supplemented from time to time (as so amended and supplemented, the "Merger
------
Registration Statement"), the Offer Documents and the other documents required
- ----------------------
to be filed by Parent with the SEC in connection with the Offer, the Merger and
the other transactions contemplated hereby will comply as to form, in all
material respects, with the requirements of the Exchange Act and the Securities
Act, as the case may be, and will not, on the date of its filing or at the time
they become effective under the Securities Act or, in the case of the Offer
Registration Statement, on the dates the Offer Registration Statement
31
is mailed to shareholders of the Company and on the Acceptance Date and, in the
case of the Merger Registration Statement, on the dates the Proxy
Statement/Prospectus is mailed to shareholders of the Company and at the time of
the Company Shareholder Meeting, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading.
(b) Notwithstanding the foregoing provisions of this Section 6.06, no
representation or warranty is made by Parent with respect to statements made or
incorporated by reference in the Merger Registration Statement or the Offer
Documents based on information supplied by the Company expressly for inclusion
or incorporation by reference therein or based on information which is not made
in or incorporated by reference in such documents but which should have been
disclosed pursuant to Section 5.06.
SECTION 6.07. Absence of Certain Events. Except as disclosed in the
------------ -------------------------
Parent SEC Reports filed on or before the date hereof or in Section 6.07 of the
Parent Disclosure Schedule or as required or expressly permitted by this
Agreement, since January 1, 2000, Parent and its Subsidiaries have operated
their respective businesses only in the ordinary course and there has not
occurred (i) any event, occurrence, change or developments which would
reasonably be expected to, individually or in the aggregate, have a Parent
Material Adverse Effect or (ii) any damage, destruction or loss which,
individually or in the aggregate, resulted in or would reasonably be expected to
result in, a Parent Material Adverse Effect.
SECTION 6.08. Litigation. Except as disclosed in Section 6.08 of
------------ ----------
Parent Disclosure Schedule or in the Parent SEC Reports filed prior to the date
hereof, there are no Proceedings pending against Parent or its Subsidiaries or,
to the knowledge of Parent, threatened against Parent or its Subsidiaries (or
any of their respective properties, rights or franchises), at law or in equity,
or before or by any federal or state commission, board, bureau, agency,
regulatory or administrative instrumentality or other Governmental Authority or
any arbitrator or arbitration tribunal, that would reasonably be expected to,
individually or in the aggregate, have a Parent Material Adverse Effect, and, to
the knowledge of Parent, no development has occurred with respect to any pending
or threatened Proceeding that would reasonably be expected to result in a Parent
Material Adverse Effect or would reasonably be expected to prevent, materially
impair or materially delay the consummation of the transactions contemplated
hereby. Except as disclosed in the Parent SEC Reports filed prior to the date
hereof, neither Parent nor any of its Subsidiaries is subject to any Order
entered in any proceeding which would reasonably be expected to, individually or
in the aggregate, have a Parent Material Adverse Effect. The foregoing does not
apply to any Proceeding or Order arising in connection with or as a result of
the execution of this Agreement or the commencement of the Offer or the
consummation of the other transactions contemplated hereby.
SECTION 6.09. Compliance with Laws. Except as disclosed in
------------ --------------------
Section 6.09 of the Parent Disclosure Schedule: (a) Parent and its Subsidiaries
are in compliance with all applicable federal, state, local and foreign
statutes, laws, regulations, orders, judgments and decrees except where the
failure to so comply could not reasonably be expected to, individually or in the
aggregate, have a Parent Material Adverse Effect and (b) Parent and its
Subsidiaries hold, to the extent legally required, all Permits that are required
for the operation of the
32
respective businesses of Parent and/or its Subsidiaries as now conducted, except
where the failure to hold any such Permit could not reasonably be expected to,
individually or in the aggregate, have a Parent Material Adverse Effect, and
there has not occurred any default under any such Permit, except to the extent
that such default could not reasonably be expected to, individually or in the
aggregate, have a Parent Material Adverse Effect.
SECTION 6.10. Parent Employee Benefit Plans. (a) Except as set
------------ -----------------------------
forth in Section 6.10(a) of the Parent Disclosure Schedule, (i) each employee
benefit plan subject to or governed by the laws of any jurisdiction outside of
the United States or any State or Commonwealth of the United States, (ii) each
employee benefit plan, within the meaning of Section 3(3) of ERISA, whether or
not subject to ERISA, and (iii) each foreign or domestic stock option, stock
appreciation right, restricted stock, stock purchase, stock unit, performance
share, incentive, bonus, profit-sharing, savings, deferred compensation, health,
medical, dental, life insurance, disability, accident, supplemental unemployment
or retirement, employment, severance, termination or salary or benefits
continuation or fringe benefit plan, program, arrangement, contract or agreement
maintained by Parent or any Affiliate thereof (including, for this purpose and
for the purpose of all of the representations in this Section 6.10, all
employers (whether or not incorporated) that would be treated together with
Parent and/or any such Affiliate as a single employer within the meaning of
Section 414 of the Code) or to which Parent or any Affiliate thereof contributes
(or has any obligation to contribute), has any liability or is a party
(collectively, the "Parent Employee Benefit Plans") is in compliance with all
-----------------------------
applicable foreign and domestic laws (including, without limitation, ERISA and
the Code) and has been administered and operated in accordance with its terms,
in each case except as would not, in the aggregate, have a Parent Material
Adverse Effect.
(b) Set forth in Section 6.10(b) of the Parent Disclosure Schedule is
an accurate and complete list of (i) each material Parent Employee Benefit Plan,
(ii) each plan covered by Title IV of ERISA that has been terminated or for
which a trustee has been appointed under Title IV of ERISA to administer such
plan or for which proceedings have been instituted with respect to either of the
foregoing and (iii) any material claim, action, litigation, audit, examination,
investigation or administrative proceeding that has been made or commenced or,
to the best knowledge of the Parent, threatened with respect to any material
Parent Employee Benefit Plan (other than routine claims for benefits in the
ordinary course).
(c) Parent has made available or will make available to the Company or
its counsel true and complete copies of each plan document related to each
material Parent Employee Benefit Plan and any related trust agreement or funding
vehicle, together with all amendments thereto, and such other documentation with
respect to any material Parent Employee Benefit Plan as reasonably requested by
Company.
SECTION 6.11. Broker's or Finder's Fee.
------------ ------------------------
Except for Merrill Lynch, Pierce, Fenner & Smith Incorporated and Banc
of America Securities LLC (whose fees and expenses will be paid by Parent in
accordance with their agreements with such firms), no broker, finder or
investment banker is entitled to any brokerage, finders or other fee or
commission or expense reimbursement from Parent or from any of its Subsidiaries
or any of its controlled Affiliates in connection with the transactions
33
contemplated by this Agreement based upon arrangements made by and on behalf of
Parent, any of its Subsidiaries or any of its Affiliates.
SECTION 6.12. Ownership of Capital Stock. Except as set forth in
------------ --------------------------
Section 6.12 of the Parent Disclosure Schedule, neither Parent nor any of its
Subsidiaries beneficially owns, directly or indirectly, any capital stock of the
Company or is a party to any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any capital stock of the
Company, other than as contemplated by this Agreement.
SECTION 6.13. Vote Required. Subject to Section 6.13 of the
------------ -------------
Parent Disclosure Schedule, no vote of the holders of any class or series of
capital stock of Parent is necessary to approve any of the transactions
contemplated hereby.
SECTION 6.14. Financing. Parent has, or will have prior to the
------------ ---------
expiration of the Offer and the Merger, sufficient cash, available lines of
credit or other sources of immediately available funds to enable it to purchase
all of the shares of Company Common Stock outstanding on a fully-diluted basis
and to pay all related fees and expenses in connection therewith. Parent has
provided the Company true and complete copies of all commitment letters that
Parent and Merger Sub have received with respect to their financing of the
Offer, the Merger and the other transactions contemplated hereby.
ARTICLE VII
TRANSACTIONS PRIOR TO CLOSING DATE
SECTION 7.01. Access to Information Concerning Properties and
------------ -----------------------------------------------
Records. Except as otherwise prohibited by applicable Law, during the period
- -------
commencing on the date hereof and ending on the earlier of (a) the Closing Date
and (b) the date on which this Agreement is terminated pursuant to Section 9.01
hereof, each of the Company and Parent shall, and each shall cause each of its
Subsidiaries to, upon reasonable notice, afford the other party, and its
respective counsel, accountants, consultants and other authorized
representatives, reasonable access during normal business hours to its and its
Subsidiaries' employees, properties, books and records in order that they may
have the opportunity to make such investigations as they shall reasonably
require; provided, however, that such investigation shall not affect the
-------- -------
representations and warranties made by the Company or Parent in this Agreement.
Except as otherwise prohibited by applicable law, the Company shall furnish
promptly to Parent and Parent shall, and shall cause Merger Sub to, furnish
promptly to the Company (x) a copy of each material form, report, schedule,
statement, registration statement and other document filed by it or its
Significant Subsidiaries during such period pursuant to the requirements of
Federal, state or foreign securities laws and (y) all other information
concerning its or its Subsidiaries' business, properties and personnel as Parent
or the Company may reasonably request. Except as otherwise prohibited by
applicable law, each of the Company and Parent agrees to cause its officers and
employees to furnish such additional financial and operating data and other
information and respond to such inquiries as the other party shall from time to
time reasonably request.
34
SECTION 7.02. Confidentiality . Prior to the Effective Time and
------------ ---------------
after any termination of this Agreement, each of Parent and the Company will
comply with all of their respective obligations under the confidentiality
Agreement, dated May 12, 2000 (the "Confidentiality Agreement") among Parent and
the Company with respect to the information disclosed pursuant to Section 7.01
hereof or otherwise.
SECTION 7.03. Conduct of the Business of the Company Pending the
------------ --------------------------------------
Closing Date. The Company agrees that, except as permitted,required or
- ------------
specifically contemplated by, or otherwise described in, this Agreement or
otherwise consented to or approved in writing by Parent (which consent or
approval shall not be unreasonably withheld or delayed) during the period
commencing on the date hereof until the Effective Time:
(a) The Company and each of its Subsidiaries shall conduct their
respective operations in all material respects only according to their
ordinary and usual course of business consistent with past practice and
shall use their reasonable best efforts to preserve intact their respective
business organization, keep available the services of their officers and
employees and maintain satisfactory relationships with licensors,
suppliers, distributors, clients, joint venture partners and others having
significant business relationships with them; and
(b) Except as set forth in Section 7.03(b) of the Company Disclosure
Schedule or as expressly contemplated by this Agreement, neither the
Company nor any of its Subsidiaries shall:
(i) make any change in or amendment to its Articles of
Incorporation or its By-Laws or other organizational documents;
(ii) issue or sell, or authorize to issue or sell, any shares of
its capital stock or any other securities, or issue or sell, or
authorize to issue or sell, any securities convertible into, or
options, warrants or rights to purchase or subscribe for, or enter
into any arrangement or contract with respect to the issuance or sale
of, any shares of its capital stock or any other securities, or make
any other changes in its capital structure, other than (A) the
issuance of Company Common Stock upon the exercise of Company Options
outstanding on the date hereof, (B) issuances by a wholly owned
Subsidiary of the Company of capital stock to such Subsidiary's
parent, the Company or another wholly owned Subsidiary of the Company,
(C) issuances of Company Common Stock upon the conversion of
convertible securities of the Company outstanding as of the date of
this Agreement, (D) issuances or sales of Company Common Stock
pursuant to participant-directed transactions or the matching of
contributions by the Company made in accordance with the terms and
conditions of the Company 401(k) Plan or (E) participant-directed
transactions under the Company's Canadian stock purchase plan in
accordance with terms and conditions of such plan;
(iii) declare, pay or set aside any dividend or other
distribution or payment with respect to, or split, combine, redeem or
reclassify, or purchase or otherwise acquire, any shares of its
capital stock or its other securities, other than
35
(A) dividends payable by a Subsidiary of the Company to the Company or
another Subsidiary of the Company or (B) the payment of regular
quarterly dividends not to exceed $0.15 per share of Company Common
Stock during the quarter ended September 30, 2000 and December 31,
2000;
(iv) other than in connection with transactions permitted by
Section 7.03(b)(v), incur any capital expenditures or any obligations
or liabilities in respect thereof, except for those (A) contemplated
by the capital expenditure budgets for the Company and its
Subsidiaries made available to Parent, (B) incurred in the ordinary
course of business of the Company and its Subsidiaries or (C) not
otherwise described in clauses (A) and (B) which, in the aggregate, do
not exceed $25 million;
(v) other than as set forth in Section 7.03(b)(v) of the
Company Disclosure Schedule and acquisitions by the Company or a
wholly owned Subsidiary of the Company of the assets of, or equity
interests in, a wholly owned Subsidiary of the Company, acquire
(whether pursuant to merger, stock or asset purchase or otherwise) in
one transaction or series of related transactions (A) any assets
(including any equity interests) having a fair market value in excess
of $25 million, or (B) all or substantially all of the equity
interests of any Person or any business or division of any Person in
the aggregate having a fair market value in excess of $25 million;
(vi) except to the extent required under existing employee and
director benefit plans, agreements or arrangements as in effect on the
date of this Agreement or by applicable law, or as contemplated by
this Agreement or permitted by Section 7.03(b)(ii) hereof, increase
the compensation or fringe benefits of any of its directors or
officers or of employees (except for normal increases in the ordinary
course of business consistent with past practice for non-director and
non-officer employees) or enter into any severance, termination or
change of control or similar arrangements not currently in effect or
make any severance payments (except as required to be paid under
existing severance plans, and except in the ordinary course of
business consistent with past practice for non-director and non-
officer employees) or enter into any employment, consulting or
severance agreement or arrangement with any present or former
director, officer or other employee of the Company or any of its
Subsidiaries, or establish, adopt, enter into or amend in any material
respect or terminate any collective bargaining, bonus, profit sharing,
thrift, compensation, stock option, restricted stock, phantom stock,
performance shares, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust,
fund, policy or arrangement or grant any additional awards under such
plans, except to the extent required by such plans, for the benefit of
any directors, officers or employees;
(vii) transfer, lease, license, guarantee, sell, mortgage,
pledge, dispose of, encumber or subject to any Lien, any material
assets, other than in the ordinary course of business;
36
(viii) except as required by applicable law or GAAP, make any
material change in its method of accounting;
(ix) adopt or enter into a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of the Company or any of its
Subsidiaries (other than the Merger or any such transaction involving
the Company and a wholly owned Subsidiary of the Company or two wholly
owned Subsidiaries of the Company) or any agreement relating to a
Takeover Proposal, except as permitted by Sections 7.07 and
9.01(c)(ii);
(x) (A) incur any material indebtedness for borrowed money or
guarantee any such indebtedness of another Person, other than
indebtedness owing to or guarantees of indebtedness owing to the
Company or any direct or indirect wholly owned Subsidiary of the
Company or (B) make any loans or advances to any other Person, other
than to the Company or to any direct or indirect wholly owned
Subsidiary of the Company, except, in the case of clause (A), for
borrowings in the ordinary course of business consistent with past
practice, including without limitation borrowings under existing
credit facilities described in the Company SEC Reports in the ordinary
course of business consistent with past practice for working capital
purposes;
(xi) except to the extent required under existing employee and
director benefit plans, agreements or arrangements, applicable Law or
as contemplated by this Agreement or Section 7.16 of the Company
Disclosure Schedule accelerate or otherwise modify the payment, right
to payment, vesting or exercise rights of any bonus, severance, profit
sharing, retirement, deferred compensation, stock option, insurance or
other compensation or benefits;
(xii) pay, discharge or satisfy any material claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent
or otherwise), other than the payment, discharge or satisfaction (A)
of any such claims, liabilities or obligations in the ordinary course
of business and consistent with past practice, (B) of claims,
liabilities or obligations reflected or reserved against in, or
contemplated by, the consolidated financial statements (or the notes
thereto) contained in the Company SEC Reports or (C) other claims not
to exceed $5 million in the aggregate;
(xiii) enter into any agreement, understanding or commitment
that materially, limits or impedes the Company's, any of its
Significant Subsidiaries', the North American Tissue division's or the
Dixie division's ability to compete with or conduct any business or
line of business, including, but not limited to, geographic
limitations on the Company's or any of its Significant Subsidiaries',
the North American Tissue division's or the Dixie division's
activities;
(xiv) plan, announce, implement or effect any material reduction
in labor force, lay-off, early retirement program, severance program
or other
37
program or effort concerning the termination of employment of
employees of the Company or its Subsidiaries; provided, however, that
-------- -------
routine employee terminations for cause or following performance
reviews shall not be considered subject to this clause (xiv);
(xv) take any action including, without limitation, the
adoption of any shareholder rights plan or amendments to its Articles
of Incorporation or By-Laws (or comparable governing documents), which
would, directly or indirectly, restrict or impair the ability of
Parent to vote, or otherwise to exercise the rights and receive the
benefits of a shareholder with respect to, securities of the Company
acquired or controlled by Parent or Merger Sub;
(xvi) materially modify, amend or terminate any material
contract to which it is a party or waive any of its material rights or
claims except in each case in the ordinary course of business;
(xvii) other than in the ordinary course of business consistent
with past practice, make any tax election or enter into any settlement
or compromise of any tax liability that in either case is material to
the business of the Company and its Subsidiaries as a whole;
(xviii) amend or modify, or propose to amend or modify, the
Rights Agreement, as amended as of the date hereof, except as
contemplated in this Agreement;
(xix) agree, in writing or otherwise, to take any of the
foregoing actions.
SECTION 7.04. Conduct of the Business of Parent Pending the Closing
------------ -----------------------------------------------------
Date. Parent agrees that, except as permitted, required or specifically
- ----
contemplated by, or otherwise described in, this Agreement or otherwise
consented to or approved in writing by the Company (which consent or approval
shall not be reasonably withheld or delayed), during the period commencing on
the date hereof until the Effective Time:
(a) Except as set forth in Section 7.04 of the Parent Disclosure
Schedule, Parent and each of its Subsidiaries shall conduct their respective
operations in all material respects only according to their ordinary and usual
course of business consistent with past practice and shall use their reasonable
best efforts to preserve intact their respective business organization, keep
available the services of their officers and employees and maintain satisfactory
relationships with licensors, suppliers, distributors, clients, joint venture
partners and others having significant business relationships with them; and
(b) Except as set forth in Section 7.04(b) of the Parent Disclosure
Schedule or as expressly contemplated by this Agreement, neither Parent nor any
of its Subsidiaries shall:
(i) make any change in or amendment to Parent's Articles of
Incorporation that changes any material term or provision of the
Parent Common Stock;
38
(ii) make any material change in or amendment to Merger Sub's
Articles of Incorporation or Bylaws in any manner adverse to the
Company or its shareholders;
(iii) engage in any repurchase at a premium, recapitalization,
restructuring or reorganization with respect to Parent's capital
stock, including, without limitation, by way of any extraordinary
dividend on, or other extraordinary distributions with respect to,
Parent's capital stock;
(iv) acquire by merging or consolidating with, or by purchasing
a substantial portion of the assets of or equity in, or by any other
manner, any Person or any business or division thereof, or otherwise
acquire any assets, unless such acquisition or the entering into of a
definitive agreement relating to or the consummation of such
transaction would not (A) impose any delay in the obtaining of, or
increase the risk of not obtaining, any authorizations, consents,
orders, declarations or approvals of any Antitrust Authority necessary
to consummate the Merger or the expiration or termination of any
applicable waiting period, (B) increase the risk of any Governmental
Authority entering an order prohibiting the consummation of the Merger
or (C) increase the risk of not being able to remove any such order on
appeal or otherwise;
(v) subject to Section 7.09, take or omit to take any action
which would have the consequences set forth in clauses (A) through (C)
of clause (iv) above;
(vi) not take any action which would cause the Parent Common
Stock to cease to be listed on the NYSE; or
(vii) agree, resolve or otherwise commit to do any of the
foregoing.
SECTION 7.05. Company Shareholder Meeting; Preparation of Proxy
------------ -------------------------------------------------
Statement/Prospectus. (a) Company Shareholder Meeting. If required by
- --------------------
applicable law, the Company, acting through its Board of Directors, shall, in
accordance with applicable law, duly call, convene and hold a special meeting of
the holders of the Company Common Stock (the "Company Shareholder Meeting") as
---------------------------
soon as reasonably practicable after the acceptance for payment of shares of
Company Common Stock pursuant to the Offer for the purpose of voting upon this
Agreement and the Merger and the Company agrees that this Agreement shall be
submitted at such meeting. The Company shall take all action necessary to secure
the vote of shareholders required by applicable law and the Company's Article of
Incorporation or By-Laws to obtain the approval for this Agreement. Unless the
Board of Directors of the Company otherwise determines (based upon a majority
vote of the Board of Directors in its good faith judgment that such other action
is necessary to comply with its fiduciary duty to shareholders under applicable
law after receiving advice from outside legal counsel) prior to the approval by
the shareholders of the Company, (i) the Company's Board of Directors shall
recommend approval by its shareholders of this Agreement (the "Company
-------
Recommendation"), (ii) neither the Company's Board of Directors nor any
- --------------
committee thereof shall amend, modify, withdraw, condition or qualify the
Company Recommendation in a manner adverse to Parent or take any
39
action or make any statement inconsistent with the Company Recommendation and
(iii) the Company shall take all lawful action to secure the Company Shareholder
Approval.
(b) Preparation of Merger Registration Statement and Proxy
------------------------------------------------------
Statement/Prospectus. If required by applicable law, promptly after the
- --------------------
acceptance for payment of shares of Company Common Stock pursuant to the Offer,
Parent and the Company shall prepare, and Parent shall file with the SEC, the
Merger Registration Statement, in which the Proxy Statement/Prospectus will be
included as Parent's prospectus. Each of the Company and Parent shall use all
reasonable efforts to have the Merger Registration Statement declared effective
under the Securities Act as promptly as practicable after the acceptance for
payment of shares of Company Common Stock pursuant to the Offer and to keep the
Merger Registration Statement effective as long as is necessary to consummate
the Merger. The Company shall mail the Proxy Statement/Prospectus to its
shareholders as promptly as practicable after the Merger Registration Statement
is declared effective under the Securities Act and, if necessary, after the
Proxy Statement/Prospectus shall have been so mailed, promptly circulate
amended, supplemental or supplemented proxy material, and, if required in
connection therewith, resolicit proxies. Parent shall take any action required
to be taken under any applicable state securities or blue sky laws in connection
with the issuance of Parent Common Stock in the Merger. No amendment or
supplement to the Proxy Statement/Prospectus will be made by the Company or
Parent without the approval of the other party, which will not be unreasonably
withheld or delayed. Each party will advise the other party, promptly after it
receives notice thereof, of the time when the Merger Registration Statement has
become effective or any supplement or amendment has been filed, the issuance of
any stop order, the suspension of the qualification of Parent Common Stock
issuable in connection with the Merger for offering or sale in any jurisdiction,
or any request by the SEC for amendment of the Proxy Statement/ Prospectus or
comments thereon and responses thereto or requests by the SEC for additional
information. If at any time prior to the Effective Time, the Company or Parent
discovers any information relating to either party, or any of their respective
Affiliates, officers or directors, that should be set forth in an amendment or
supplement to the Proxy Statement/Prospectus, so that such document would not
include any misstatement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, the party that discovers such information
shall promptly notify the other party and an appropriate amendment or supplement
describing such information shall be promptly filed with the SEC and, to the
extent required by law or regulation, disseminated to the shareholders of the
Company.
(c) Short-Form Merger. Notwithstanding the foregoing, if Parent or
-----------------
Merger Sub shall acquire at least 90% of the outstanding shares of Company
Common Stock pursuant to the Offer or otherwise, the parties hereto agree,
subject to the satisfaction or (to the extent permitted hereunder) waiver of all
conditions to the Merger, to take, or cause to be taken, all necessary and
appropriate action to cause the Merger to be effective as soon as practicable
after the acceptance for payment and purchase of shares of Company Common Stock
pursuant to the Offer without the Company Shareholder Meeting.
SECTION 7.06. Reasonable Best Efforts. Subject to Section 7.09 and
------------ -----------------------
the terms and conditions provided
herein, each of the Company and Parent shall, and shall cause each of its
Subsidiaries to, cooperate and use their reasonable best efforts to take, or
cause to be taken, all
40
appropriate action, and to make, or cause to be made, all filings necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement including, without
limitation, the Company's and Parent's reasonable best efforts to obtain, prior
to the Closing Date, all licenses, permits, consents, approvals, authorizations,
qualifications and orders of Governmental Authorities (other than with respect
to any licenses, permits, consents, approvals, authorizations, qualifications
and orders of any Antitrust Authority which the Company and Parent shall use
their best efforts to obtain) and parties to contracts with the Company or
Parent, as the case may be, and their respective Subsidiaries as are necessary
for consummation of the transactions contemplated by this Agreement and in order
to comply with applicable Laws; provided however, that except as otherwise
-------- -------
contemplated by this Agreement, no material loan agreement or contract for
borrowed money shall be repaid except as currently required by its terms, in
whole or in part, and no contract shall be amended to materially increase the
amount payable thereunder or otherwise to be more burdensome to the Company or
any of its Subsidiaries in order to obtain any such consent, approval or
authorization without first obtaining the written approval of Parent.
SECTION 7.07. No Solicitation. (a) The Company shall, and shall use
------------ ---------------
its reasonable best efforts to cause its Subsidiaries, and its and their,
officers, directors, employees, financial advisors, attorneys and other
advisors, representatives and agents (collectively, "Representatives") to,
---------------
immediately cease any discussions or negotiations with third parties with
respect to any Takeover Proposal. The Company shall not, nor shall it authorize
or permit any of its Representatives, to (i) directly or indirectly solicit,
facilitate, initiate or encourage the making or submission of, any Takeover
Proposal, (ii) enter into any agreement, arrangement or understanding with
respect to any Takeover Proposal or enter into any agreement, arrangement or
understanding requiring it to abandon, terminate or fail to consummate the
Merger or any other transaction contemplated by this Agreement, (iii) initiate
or participate in any way in any discussions or negotiations regarding, or
furnish or disclose to any Person (other than a party to this Agreement) any
information with respect to, or take any other action to facilitate or in
furtherance of any inquiries or the making of any proposal that constitutes, or
could reasonably be expected to lead to, any Takeover Proposal or (iv) grant any
waiver or release under any standstill or similar agreement with respect to any
class of the Company's equity securities; provided that prior to the acceptance
--------
for payment of shares of Company Common Stock pursuant to the Offer, in response
to an unsolicited Takeover Proposal that did not result from the breach of this
Section 7.07 and following delivery to Parent of notice of the Takeover Proposal
in compliance with its obligations under Section 7.07(d) hereof, the Company may
participate in discussions or negotiations with or furnish information (pursuant
to a confidentiality agreement with customary terms) to any third party which
makes a bona fide written Takeover Proposal if (A) a majority of the Company's
Board of Directors reasonably determines in good faith (after consultation with
its financial advisors) that taking such action would be reasonably likely to
lead to the delivery to the Company of a Superior Proposal and (B) a majority of
the Company's Board of Directors determines in good faith (after receiving the
advice of outside legal counsel) that it is necessary to take such actions(s) in
order to comply with its fiduciary duties under applicable law.
For purposes of this Agreement, "Takeover Proposal" means any inquiry,
-----------------
proposal or offer from any Person or group relating to (i) any direct or
indirect acquisition or purchase of 20% or more of the assets of the Company or
any of its Subsidiaries or 20% or more
41
of any class of equity securities of the Company or any of its Subsidiaries,
(ii) any tender offer or exchange offer that, if consummated, would result in
any Person beneficially owning all or any portion of any class of equity
securities of the Company or any of its Subsidiaries or (iii) any merger,
consolidation, business combination, sale of all or any substantial portion of
the assets, recapitalization, liquidation or a dissolution of, or similar
transaction involving the Company or any of its Subsidiaries other than the
Offer or the Merger; and "Superior Proposal" means a bona fide written Takeover
-----------------
Proposal made by a third party to purchase at least two-thirds of the
outstanding equity securities of the Company pursuant to a tender offer or
exchange offer or any merger, consolidation, business combination or sale of all
or substantially all of the assets, recapitalization or similar transaction
involving the Company (i) on terms which a majority of the Company's Board of
Directors determines in good faith (after consultation with its financial
advisors) to be superior to the Company and its shareholders (in their capacity
as shareholders) from a financial point of view (taking into account, among
other things, all legal, financial, regulatory and other aspects of the proposal
and identity of the offeror) as compared to the transactions contemplated hereby
and any alternative proposed by Parent or Merger Sub in accordance with Section
9.01(c) and (ii) which is reasonably capable of being consummated.
(b) The Company agrees that, except as set forth in Section 7.07(c),
neither its Board of Directors nor any committee thereof shall (i) approve or
recommend, or propose to approve or recommend, any Takeover Proposal or (ii)
approve, recommend or cause it to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement (each, an
"Acquisition Agreement") related to any Takeover Proposal.
---------------------
(c) The Company and Parent agree that, notwithstanding anything to the
contrary herein, prior to the acceptance for payment of shares of Company Common
Stock pursuant to the Offer, the Company and/or its Board of Directors may take
the actions otherwise prohibited by Section 7.07(b) if (i) a third party makes a
Superior Proposal, (ii) the Company complies with its obligations under Section
7.07(d), (iii) all of the conditions to the Company's right to terminate this
Agreement in accordance with Section 9.01(c) hereof have been satisfied
(including the expiration of the six Business Day period described therein and
the payment of all amounts required pursuant to Section 9.03 hereof) and (iv)
simultaneously therewith, this Agreement is terminated in accordance with
Section 9.01(c) hereof.
(d) The Company agrees that in addition to the obligations of the
Company set forth in paragraphs (a), (b) and (c) of this Section 7.07, promptly
on the date of receipt thereof, the Company shall advise Parent in writing of
any request for information or any Takeover Proposal, or any inquiry,
discussions or negotiations with respect to any Takeover Proposal and the terms
and conditions of such request, Takeover Proposal, inquiry, discussions or
negotiations and the Company shall promptly provide to Parent copies of any
written materials received by the Company in connection with any of the
foregoing, and the identity of the Person or group making any such request,
Takeover Proposal or inquiry or with whom any discussions or negotiations are
taking place. The Company agrees that it shall keep Parent fully informed of
the status and details (including amendments or proposed amendments) of any such
request, Takeover Proposal or inquiry and keep Parent fully informed as to the
material details of any information requested of or provided by the Company and
as to the details of all discussions or negotiations with respect to any such
request, Takeover Proposal or inquiry. The Company agrees that it shall
simultaneously provide to Parent any non-public information concerning the
42
Company provided to any other Person or group in connection with any Takeover
Proposal which was not previously provided to Parent.
(e) Parent agrees that nothing contained in this Section 7.07 shall
prohibit the Company from taking and disclosing to its shareholders a position
contemplated by Rule 14d-9 and Rule 14e-2 promulgated under the Exchange Act
with respect to any tender offer.
(f) The Company agrees that immediately following the execution of
this Agreement, (i) it shall request each Person which has heretofore executed a
confidentiality agreement in connection with such Person's consideration of
acquiring the Company to return or destroy (which destruction shall be certified
in writing by an executive officer of the Company) all confidential information
heretofore furnished to such Person by or on its behalf and (ii) the Company
shall cease and cause to be terminated immediately all existing discussions or
negotiations with any Person conducted heretofore with respect to, or that could
reasonably be expected to lead to, any Takeover Proposal.
SECTION 7.08. Notification of Certain Matters. The Company shall
------------ -------------------------------
give prompt notice to Parent, and Parent shall, and shall cause Merger Sub to,
give prompt notice to the Company, of the occurrence, or failure to occur, of
any event, which occurrence or failure to occur would be likely to cause any
representation or warranty contained in this Agreement to be untrue in any
material respect at any time from the date of this Agreement to the Effective
Time. Each of the Company and Parent shall give prompt notice to the other party
of any notice or other communication from any third party alleging that the
consent of such third party is or may be required in connection with the
transactions contemplated by this Agreement.
SECTION 7.09. Antitrust Laws. (a) Parent and the Company shall
------------ --------------
together discuss and formulate the approach to be taken with respect to
Antitrust Authorities; provided, however, that Parent shall have the right to
-------- -------
determine the overall strategy with respect to any filings, submissions of
information or documentary materials to, proceedings or negotiations with, or
any other discussions, meetings, consultations, conversations or interactions
with (collectively, "Contacts"), any Antitrust Authority. Without limiting the
--------
generality of the foregoing, but subject to the immediately succeeding sentence,
prior to any Contacts with any Antitrust Authority by Parent or any of its
Subsidiaries or by the Company or any of its Subsidiaries, Parent and the
Company shall each have the right to (i) in the case of filings, submissions of
information or documentary materials, review such Contacts prepared by the other
party and comment with respect thereto and the other party shall be required to
incorporate into such Contacts all reasonable comments of Parent or the Company,
as the case may be, and (ii) discuss prior to any Contacts the appropriate
approach to be taken with respect thereto. As part of its overall strategy,
Parent shall determine the timing of any Contacts with any Antitrust Authority
and Parent shall be entitled to act as the spokesperson in connection therewith;
provided that, to the extent permitted by such Governmental Authority, Parent
- --------
shall afford the Company a reasonable opportunity to participate in any such
Contacts; provided further, that the Company shall not initiate any material
-------- -------
Contacts with any Antitrust Authority or any other Governmental Authority
regarding any of the transactions contemplated hereby without Parent's prior
consent, it being understood that the Company may respond to any such Contacts
or requests for Contacts which are initiated by any Antitrust Authority or any
Governmental Authority, or as otherwise required by applicable Law. The parties
hereto agree to provide to
43
each other copies of all correspondence between it (or its advisors) and any
Antitrust Authority relating to this Agreement or any of the matters described
in this Section 7.09.
(b) Each party hereto shall use its best efforts to resolve such
objections, if any, as may be asserted with respect to the transactions
contemplated by this Agreement under any Antitrust Law. Without limiting the
generality of the foregoing, "best efforts" shall include, without limitation:
(i) in the case of each of Parent and the Company:
(1) promptly filing with the appropriate Antitrust Authorities a
Notification and Report Form or other applicable notification with
respect to the transactions contemplated by this Agreement;
(2) if Parent or the Company receives a formal request for
information and documents from an Antitrust Authority, substantially
complying with such formal request at the earliest practicable date
following the date of its receipt thereof; and
(3) opposing vigorously any litigation relating to the Offer, the
Merger or the other transactions contemplated hereby, including,
without limitation, promptly appealing any adverse court Order.
(ii) in the case of Parent only, negotiating with respect to, and
accepting at such time as permits consummation of the Offer no later than
the Termination Date, a consent decree with an Antitrust Authority
requiring any of Parent, Merger Sub or the Company to agree or commit to
divest, hold separate or offer for sale any assets (tangible or intangible)
or any business interest of it or any of its Subsidiaries (including,
without limitation, the Surviving Corporation after consummation of the
Merger) as are necessary to permit Parent and Merger Sub to otherwise fully
consummate the Offer and the Merger (a "Consent Decree"); provided, that
-------------- --------
nothing in this Agreement shall require Parent or any of its Subsidiaries
to comply with or accept any Consent Decree which, if complied with, would,
in Parent's reasonable judgment, be expected to have a material adverse
effect on the business, results of operations or financial condition of
Parent, the Company and their Subsidiaries, taken as a whole, after giving
effect to the Offer and the Merger.
For purposes of this Agreement, (i) "Antitrust Authorities" means the
---------------------
Federal Trade Commission, the Antitrust Division of the Department of Justice,
the attorneys general of the several states of the United States and any other
Governmental Authority having jurisdiction with respect to the transactions
contemplated hereby pursuant to applicable Antitrust Laws and (ii) "Antitrust
---------
Law" means the Sherman Act, as amended, the Clayton Act, as amended, the HSR
- ---
Act, the Federal Trade Commission Act, as amended, and all other federal, state
and foreign statutes, rules, regulations, orders, decrees, administrative and
judicial doctrines, and other laws that are designed or intended to prohibit,
restrict or regulate actions having the purpose or effect of monopolization or
restraint of trade.
SECTION 7.10. Directors' and Officers' Insurance. (a) The
------------- ----------------------------------
Articles of Incorporation and the By-Laws of the Surviving Corporation shall
contain the provisions with
44
respect to indemnification and exculpation from liability substantially as set
forth in the Company's Articles of Incorporation and By-Laws on the date of this
Agreement, which provisions shall not be amended, repealed or otherwise modified
for a period of six years from the Effective Time in any manner that would
adversely affect the rights thereunder of individuals who on or prior to the
Effective Time were directors, officers, employees or agents of the Company,
unless such modification is required by law.
(b) For a period of six years from the Effective Time, the Surviving
Corporation shall either (i) maintain in effect the Company's current directors'
and officers' liability insurance covering those Persons who are currently
covered on the date of this Agreement by the Company's directors' and officers'
liability insurance policy (a copy of which has been heretofore delivered to
Parent) (the "Indemnified Parties"); provided, however, that in no event shall
------------------- -------- -------
Parent be required to expend in any one year an amount in excess of 200% of the
annual premiums currently paid by the Company for such insurance; provided
--------
further that if the annual premiums of such insurance coverage exceed such
amount, the Surviving Corporation shall be obligated to obtain a policy with the
greatest coverage available for a cost not exceeding such amount; provided
--------
further that the Surviving Corporation may substitute for the Company policy
policies with at least the same coverage containing terms and conditions which
are no less advantageous and provided that said substitution does not result in
any gaps or lapses in coverage with respect to matters occurring prior to the
Effective Time or (ii) if such insurance coverage is not otherwise available,
cause Parent's directors' and officers' liability insurance then in effect to
cover those Persons who are covered on the date of this Agreement by the
Company's directors' and officers' liability insurance policy with respect to
those matters covered by the Company's directors' and officers' liability
policy.
(c) The Surviving Corporation shall indemnify all Indemnified Parties
to the fullest extent permitted by applicable law with respect to all acts and
omissions arising out of such individuals' services as officers, directors,
employees or agents of the Company or any of its Subsidiaries or as trustees or
fiduciaries of any plan for the benefit of employees of the Company or any of
its Subsidiaries occurring prior to the Effective Time, including, without
limitation, the transactions contemplated by this Agreement. Without limitation
of the foregoing, in the event any such Indemnified Party is or becomes involved
in any capacity in any action, proceeding or investigation in connection with
any matter, including, without limitation, the transactions contemplated by this
Agreement, occurring prior to, and including, the Effective Time, the Surviving
Corporation, from and after the Effective Time, shall pay, as incurred, such
Indemnified Party's reasonable legal and other expenses (including the cost of
any investigation and preparation) incurred in connection therewith; provided,
--------
that any Indemnified Party to whom expenses are advanced shall, prior to
receiving any such advance, if required by applicable law, provide Parent with
an undertaking to repay such advance, in full, as promptly as reasonably
practicable after it is ultimately determined that such Indemnified Party is not
entitled to indemnification hereunder. Subject to Section 7.10(d) below, the
Surviving Corporation shall pay all reasonable expenses, including attorneys'
fees, that may be incurred by any Indemnified Party in enforcing this Section
7.10 or any action which is indemnifiable hereunder.
(d) Any Indemnified Party wishing to claim indemnification under
paragraph (a) or (c) of this Section 7.10, upon learning of any such claim,
action, suit, proceeding or investigation, shall promptly notify the Surviving
Corporation thereof. In the
45
event of any such claim, action, suit, proceeding or investigation (whether
arising before or after the Effective Time), (i) the Surviving Corporation shall
have the right, from and after the Effective Time, to assume the defense thereof
(with counsel engaged by the Surviving Corporation to be reasonably acceptable
to the relevant Indemnified Party) and the Surviving Corporation shall not be
liable to such Indemnified Party for any legal expenses of other counsel or any
other expenses subsequently incurred by such Indemnified Party in connection
with the defense thereof, (ii) such Indemnified Party will cooperate in the
defense of any such matter and (iii) the Surviving Corporation shall not be
liable for any settlement effected without its prior written consent; provided
--------
that the Surviving Corporation shall not have any obligation hereunder to any
Indemnified Party when and if a court of competent jurisdiction shall ultimately
determine, and such determination shall have become final, that the
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable law.
SECTION 7.11. Public Announcements. Parent and the Company shall
------------ --------------------
consult with each other before issuing any press release or otherwise making any
public statements with respect to the transactions contemplated by this
Agreement and shall not issue any such press release or make any such public
statement prior to such consultation and review by the other party of such
release or statement, except as may be required by law, court process or by
obligations pursuant to any listing agreement with a national securities
exchange.
SECTION 7.12. Transfer Tax. The Company and Parent shall
------------ ------------
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications or other documents regarding any real property
transfer or gains, sales, use, transfer, value added, stock transfer and stamp
taxes, any transfer, recording, registration and other fees and any similar
taxes which become payable in connection with the transactions contemplated by
this Agreement (together with any related interest, penalties or additions to
tax, "Transfer Taxes"). All Transfer Taxes shall be paid by the Company and
--------------
expressly shall not be a liability of any holder of the Company Common Stock.
SECTION 7.13. NYSE Listing. Parent shall use its best efforts
------------ ------------
to cause the Parent Common Stock to be issued in connection with the Offer and
the Merger to be listed on the NYSE, subject to official notice of issuance.
SECTION 7.14. Affiliates of the Company. Not less than 15 days
------------ -------------------------
prior to the Effective Time, the Company shall deliver to Parent a letter
identifying all Persons who, to the Company's knowledge, at the Effective Time,
may be deemed to be "affiliates" of the Company for purposes of Rule 145 under
the Securities Act or who may otherwise be deemed to be Affiliates of the
Company (the "Rule 145 Affiliate"). The Company shall use its reasonable best
------------------
efforts to cause each Person who is identified as a Rule 145 Affiliate in such
list to deliver to Parent prior to the Effective Time, a written agreement, in
customary form (a "Rule 145 Affiliate Agreement").
----------------------------
SECTION 7.15. Section 16 Matters. Prior to the Effective Time,
------------ ------------------
Parent and the Company shall take all such steps as may be required to cause the
transactions contemplated by this Agreement, including any dispositions of
Company Common Stock (including derivative securities with respect to the
Company Common Stock) and acquisitions of Parent Common Stock (including
derivative securities with respect to Parent Common Stock) by each individual
46
who is or will be subject to the reporting requirements of Section 16(a) of the
Exchange Act with respect to the Company or Parent, as the case may be, to be
exempt under Rule 16b-3 promulgated under the Exchange Act.
SECTION 7.16. Employee Benefits. (a) From and after the
------------ -----------------
Effective Time, Parent and the Surviving Corporation shall honor all Company
Employee Benefit Plans and compensation arrangements and agreements in
accordance with their terms as in effect immediately before the Effective Time,
subject to any amendment or termination thereof that may be permitted by such
terms. For a period of not less than one year following the Effective Time,
Parent shall provide, or cause to be provided, to current and former employees
of the Company and its Subsidiaries who are not collectively bargained employees
(the "Company Employees") compensation and employees benefits that are, in the
-----------------
aggregate for all Company taken as a whole (and not on an individual basis) not
less favorable than those provided to Company Employees under the material
Company Employee Benefit Plans immediately before the Effective Time. The
foregoing shall not be construed to prevent the termination of employment of any
Company Employee or the amendment or termination of any particular Company
Employee Benefit Plan or compensation arrangement to the extent permitted by its
terms as in effect immediately before the Effective Time, nor shall it be
construed to require the provision or continuation of any compensation or
benefit to any Company Employee not otherwise entitled by virtue of his
employment status or terms of a relevant Company Benefit Plan. From and after
the Acceptance Date, Parent will cause the Company to comply with this covenant.
(b) For all purposes under the employee benefit plans of Parent and
its Affiliates providing benefits to any Company Employees after the Effective
Time (the "New Plans"), each Company Employee shall be credited with his or her
---------
years of service with the Company and its Affiliates before the Effective Time,
to the same extent as such Company Employee was entitled, before the Effective
Time, to credit for such service under any similar Company Employee Benefit
Plans, provided, that the foregoing shall not apply to the extent that is
application would result in a duplication of benefits or for newly established
plans and programs for which prior service of Parent employees is not taken into
account. In addition, and without limiting the generality of the foregoing:
(i) each Company Employee shall be immediately eligible to participate, without
any waiting time, in any and all New Plans to the extent coverage under such New
Plan replaces coverage under a comparable Company employee benefit plan or
compensation arrangement or agreements in which such Company Employee
participated immediately before the transfer to the New Plan (such plans,
collectively, the "Old Plans"); and (ii) for purposes of each New Plan providing
---------
medical, dental, pharmaceutical and/or vision benefits to any Company Employee,
Parent shall cause all pre-existing condition exclusions and actively-at-work
requirements of such New Plan to be waived for each employee who, at the time of
transfer to such New Plan, is participating in an Old Plan providing such
benefit and his or her covered dependents, and Parent shall cause any eligible
expenses incurred by such employee and his or her covered dependents during the
portion of the plan year of the Old Plan ending on the date such employee's
participation in the corresponding New Plan begins to be taken into account
under such New Plan for purposes for satisfying all deductible, coinsurance and
maximum out-of-pocket requirements applicable to such employee and his or her
covered dependents for the applicable plan year as if such amounts had been paid
in accordance with such New Plan.
47
(c) For so long after the Effective Time as the Company maintains the
cash or deferred arrangement under Section 401(k) of the Code in which Company
Employees participate immediately prior to the Effective Time, (the "401(k)
------
Plan"), and Parent maintains a 401(k) plan with a loan feature for similarly
- ----
situated employees, Parent shall cause the 401(k) Plan to retain the loan
feature of such plan.
(d) For a period of at least one year following the Effective Time,
Parent shall maintain a severance plan which provides substantially similar
benefits as the Company's Salary Continuation Plan (as in effect at the
Effective Time), but which allows the payment of severance benefits in a lump
sum at Parent's discretion, and allows the payment by Parent of COBRA premiums
for the salary continuation period in lieu of continued participation in any
active medical plan.
(e) In addition, Parent acknowledges that the other actions described
in Section 7.16 of the Company Disclosure Schedule have been or shall be taken.
SECTION 7.17. Voting of Shares. Parent agrees to vote all shares of
------------ ----------------
Company Common Stock beneficially owned by it or any of its Subsidiaries in
favor of adoption of this Agreement at the Company Shareholder Meeting.
SECTION 7.18. The Company Rights Plan. Prior to the Effective Time,
------------ -----------------------
the Company shall take all necessary action to (i) amend the Rights Agreement so
as to accelerate the Final Expiration Date (as such term is used in the Rights
Agreement) to a date which is immediately prior to the Effective Time, and (ii)
ensure that after such acceleration (A) none of the Company, Parent or Merger
Sub shall have any obligations under the Company Rights or Rights Agreement and
(B) none of the holders of the Rights shall have any rights under the Rights or
Rights Agreement.
SECTION 7.19. Fees and Expenses. Whether or not the Offer or the
------------ -----------------
Merger is consummated, all expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such expenses, except expenses incurred in connection with the filing, printing
and mailing of the Offer Documents, the Schedule 14D-9 and the Proxy Statement,
which shall be shared equally by Parent and the Company.
SECTION 7.20. Merger Sub. (a) As soon as practicable after the
------------ ----------
date hereof, Parent shall form, or cause to be formed, Merger Sub and shall
cause Merger Sub to execute this Agreement.
(b) Merger Sub will be formed solely for the purpose of engaging in
the transactions contemplated by this Agreement and will have no Subsidiaries
and will undertake no business or activities other than in connection with this
Agreement and engaging in the transactions contemplated hereby.
(c) Parent will take all action necessary to cause Merger Sub to take
all actions required of it under this Agreement and to consummate the Offer and
the Merger on the terms and conditions set forth in this Agreement.
48
ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.01. Conditions to Obligations of Each Party. The
------------ ----------------------------------------
obligations of the Company, Parent and Merger Sub to consummate the Merger are
subject to the satisfaction or, if permitted by applicable Law, waiver, of the
following conditions:
(a) to the extent required by applicable law, this Agreement shall
have been approved by the shareholders of the Company in accordance with the
VSCA;
(b) no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the Merger;
(c) Parent Common Stock to be issued in the Merger shall have been
authorized for listing on the NYSE, subject to official notice of issuance;
(d) if required, the Merger Registration Statement shall have become
effective in accordance with the provisions of the Securities Act, no stop order
suspending the effectiveness of the Merger Registration Statement shall have
been issued by the SEC and no proceedings for that purpose shall have been
initiated by the SEC and not concluded or withdrawn; and
(e) Merger Sub shall have purchased shares of Company Common Stock
pursuant to the Offer.
ARTICLE IX
TERMINATION
SECTION 9.01. Termination. This Agreement may be terminated at any
------------ -----------
time prior to the Effective Time, whether before or after the Company
Shareholder Approval:
(a) by mutual written consent of Parent and the Company; or
(b) by Parent:
(i) if at any time prior to the acceptance for payment of shares
of Company Common Stock pursuant to the Offer, the Company has
breached in any material respect any representation, warranty,
covenant or other agreement contained in this Agreement, which (A)
would give rise to the failure of a condition set forth in clause (f)
of Annex I, (B) cannot be or has not been cured prior to the earlier
of (x) 30 days following receipt by the Company of written notice from
Parent of such breach or failure to perform and (y) the Termination
Date and (C) has not been waived by Parent pursuant to the provisions
hereof;
49
(ii) if at any time after the date hereof and prior to the
acceptance for payment of shares of Company Common Stock pursuant to
the Offer, (A) the Company, or its Board of Directors, as the case may
be, shall have (1) entered into any agreement with respect to any
Takeover Proposal other than the Offer or the Merger and other than a
confidentiality agreement contemplated by Section 7.07, (2) amended,
conditioned, qualified, withdrawn or modified, or proposed or resolved
to do so, in a manner adverse to Parent or Merger Sub, its approval
and recommendation of the Offer, the Merger and this Agreement, or (3)
approved or recommended, or proposed to approve or recommend, any
Takeover Proposal other than the Offer or the Merger, or (B) the
Company or the Company's Board of Directors or any committee thereof
shall have resolved to do any of the foregoing; or
(iii) if at any time prior to the Acceptance Date the Company
breaches any of its obligations under Section 7.07 or Section 9.01(c)
hereof;
(c) by the Company:
(i) if at any time prior to the Acceptance Date, Parent has
breached or failed to perform in any material respect any
representation, warranty, covenant or other agreement contained in
this Agreement, which (A) cannot be or has not been cured prior to the
earlier of (x) 30 days following receipt by Parent of written notice
from the Company of such breach or failure to perform and (y) the
Termination Date and (B) has not been waived by the Company;
(ii) if at any time prior to the Acceptance Date a Superior
Proposal is received by the Company and the Board of Directors of the
Company reasonably determines in good faith (after receiving the
advice of outside legal counsel) that it is necessary to terminate
this Agreement and enter into an agreement to effect the Superior
Proposal to comply with its fiduciary duties under applicable law;
provided that the Company may not terminate this Agreement pursuant to
--------
this Section 9.01(c) unless and until (i) six Business Days have
elapsed following delivery to Parent of a written notice of such
determination by the Board of Directors of the Company and during such
six Business Day period the Company has fully cooperated with Parent,
including, without limitation, informing Parent of the terms and
conditions of such Superior Proposal, and the identity of the Person
making such Superior Proposal, with the intent of enabling the parties
hereto to agree to a modification of the terms and conditions of this
Agreement so that the transactions contemplated hereby may be
effected; (ii) at the end of such six Business Day period the Takeover
Proposal continues in the judgment of the Board of Directors of the
Company to constitute a Superior Proposal and the Board of Directors
of the Company confirms its determination (after receiving the advice
of outside legal counsel) that it is necessary to terminate this
Agreement and enter into an agreement to effect the Superior Proposal
to comply with its fiduciary duties under applicable law; and (iii)
(x) at or prior to such termination, Parent has received all amounts
due under Section 9.03 hereof by wire transfer in same day funds and
(y) immediately following such termination the Company
50
enters into a definitive acquisition, merger or similar agreement to
effect the Superior Proposal;
(d) by either Parent or the Company:
(i) if the Offer has not been consummated on or before
February 28, 2001 (the "Termination Date"); provided that the right
---------------- --------
to terminate this Agreement pursuant to this clause shall not be
available to any party whose failure to fulfill any material
obligation of this Agreement or other material breach of this
Agreement has been the cause of, or resulted in, the failure of the
Offer to have been consummated on or prior to the aforesaid date; or
(ii) if any court of competent jurisdiction or any Governmental
Authority shall have issued an order, decree or ruling or taken any
other action permanently restricting, enjoining, restraining or
otherwise prohibiting acceptance for payment of, and payment for,
shares of Company Common Stock pursuant to the Offer or consummation
of the Merger and such order, decree, ruling or other action shall
have become final and nonappealable.
SECTION 9.02. Effect of Termination. In the event of termination of
------------ ---------------------
this Agreement by Parent or the Company, as provided in Section 9.01, this
Agreement shall forthwith become void and there shall be no liability hereunder
on the part of the Company, Parent or Merger Sub or their respective officers or
directors (except that Section 7.02, Section 7.19, this Section 9.02 and
Sections 9.03, 10.03, 10.04, 10.05, 10.11 and 10.13, which shall survive the
termination); provided, however, that nothing contained in this Section 9.02 or
-------- -------
in Section 9.03 (except Section 9.03(c)) shall relieve any party hereto from any
liability for any breach of this Agreement.
SECTION 9.03. Payment of Certain Fees. (a) If this Agreement is
--------------------------------------
terminated by Parent in accordance with Section 9.01(b)(ii)(A)(1), Section
9.01(b)(ii)(A)(2), or Section 9.01(b)(ii)(A)(3), or by the Company in accordance
with Section 9.01(c)(ii), then the Company shall pay to Parent in immediately
available funds, a termination fee in an amount equal to $125 million (the
"Termination Fee").
---------------
(b) If this Agreement is terminated by Parent or the Company pursuant
to Section 9.01(b)(ii)(B), Section 9.01(b)(iii) or Section 9.01(d)(i) hereof and
a Takeover Proposal has been made and publicly announced or communicated to the
Company's shareholders after the date of this Agreement and prior to the
Termination Date, and concurrently with or within twelve months of the date of
such termination a Third Party Acquisition Event occurs, then the Company shall
within 15 Business Days of the occurrence of such Third Party Acquisition Event
pay to Parent the Termination Fee.
"Third Party Acquisition Event" shall mean earlier of (i) the
-----------------------------
consummation of a Takeover Proposal involving the purchase of a majority of
either the equity securities of the Company or of the consolidated assets of the
Company and its Subsidiaries, taken as a whole, or any such transaction that, if
it had been proposed prior to the termination of this Agreement
51
would have constituted a Takeover Proposal or (ii) the entering into by the
Company or any of its Subsidiaries of a definitive agreement with respect to any
such transaction.
(c) The Company and Parent agree that, if (1) this Agreement is
terminated by Parent or the Company pursuant to Section 9.01(d)(i) or
9.01(d)(ii) and (2) at the time of such termination, (I) any of the events or
circumstances under clauses (ii), (iii)(a) or (iii)(b) of Annex I occur or exist
and continue and (II) no events or circumstances under clauses (iii)(c),
(iii)(e), (iii)(f), or (iii)(h) of Annex I shall occur or exist, then Parent
shall pay to the Company a fee of $125 million (the "Reverse Termination Fee"
-----------------------
and, together with the Termination Fee, the "Fees"). The Reverse Termination
----
Fee shall be the exclusive remedy of the Company with respect to such
termination; provided, however, that nothing herein shall relieve any party from
-------- -------
liability for the willful breach of any of its representations and warranties or
the breach of any of its covenants or agreements set forth in this Agreement.
(d) Any payment of Fees pursuant to this Section 9.03 shall be made
within five Business Days after termination of this Agreement (or as otherwise
expressly set forth in this Agreement) by wire transfer of immediately available
funds. If either party fails to pay or reimburse the other party for any Fees
due hereunder, such party shall pay the costs and expenses (including legal fees
and expenses) in connection with any action, including the filing of any
lawsuits or other legal action, taken to collect payment, together with interest
on the amount of any unpaid and unreimbursed Fees at the publicly announced
prime rate of Citibank, N.A. from the date such payment or reimbursement was
required to be made to the date that it is made.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Representations and Warranties. The respective
------------- ------------------------------
representations and warranties of the Company, on the one hand, and Parent, on
the other hand, contained herein or in any certificates or other documents
delivered prior to or at the Closing, shall not be deemed waived or otherwise
affected by any investigation made by any party. Each and every such
representation and warranty shall expire on, and be terminated and extinguished
at, the Effective Time and thereafter neither the Company nor Parent shall be
under any liability whatsoever with respect to any such representation or
warranty. This Section 10.01 shall have no effect upon any other obligation,
covenant or agreement of the parties hereto, which shall survive in accordance
with their terms.
SECTION 10.02. Extension; Waiver. At any time prior to the Effective
------------- -----------------
Time, the parties hereto, by action taken by or on behalf of the respective
Boards of Directors of the Company or Parent, may (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein by any other applicable party or in any document, certificate or writing
delivered pursuant hereto by any other applicable party or (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of any party to
52
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
SECTION 10.03. Notices. All notices, requests, demands, waivers
------------- -------
and other communications required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given if delivered in
person or mailed, certified or registered mail with postage prepaid, or sent by
telex, telegram or telecopier, as follows:
(a) if to the Company, to it at:
Fort James Corporation
1650 Lake Cook Road
Deerfield, IL 60015
Telecopy: (847) 317-5481
Attention: Clifford A. Cutchins, Esq.
with a copy (which shall not constitute notice) to:
Watchell, Lipton, Rosen & Katz
51 West 52/nd/ Street
New York, New York 10019
Telecopy: 212-403-2000
Attention: Patricia A. Vlahakis, Esq.
(b) if to Parent, to it at:
Georgia-Pacific Corporation
133 Peachtree Street, N.E.
Atlanta, GA 30303
Telecopy: (404) 230-7543
Attention: James F. Kelley, Esq.
with a copy (which shall not constitute notice) to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Telecopy: 212-848-7179
Attention: Creighton O. Condon, Esq.
or to such other Person or address as any party shall specify by notice in
writing to each of the other parties. All such notices, requests, demands,
waivers and communications shall be deemed to have been received on the date of
delivery unless if mailed, in which case on the third Business Day after the
mailing thereof except for a notice of a change of address, which shall be
effective only upon receipt thereof.
SECTION 10.04. Entire Agreement. This Agreement and the schedules
------------- ----------------
and other documents referred
to herein or delivered pursuant hereto or simultaneously herewith and
53
the Confidentiality Agreement, collectively contain the entire understanding of
the parties hereto with respect to the subject matter contained herein and
supersede all prior agreements and understandings, oral and written, with
respect thereto.
SECTION 10.05. Binding Effect; Benefit; Assignment. This Agreement
------------- -----------------------------------
shall inure to the benefit of and be binding upon the parties hereto and, with
respect to the provisions of Sections 7.10 and 7.15 hereof, shall inure to the
benefit of the Persons or entities benefiting from the provisions thereof
pursuant to Sections 7.10 and 7.15, who are intended to be third-party
beneficiaries thereof, and their respective successors and permitted assigns,
but neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto without the prior
written consent of the other parties, except that Merger Sub may assign and
transfer its right and obligations hereunder to any of its Affiliates. Except as
provided in the immediately preceding sentence, nothing in this Agreement,
expressed or implied, is intended to confer on any Person other than the parties
hereto or their respective successors and permitted assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
SECTION 10.06. Amendment and Modification. Subject to applicable
------------- --------------------------
law, this Agreement may be amended, modified and supplemented in writing by the
parties hereto in any and all respects before the Acceptance Date
(notwithstanding the Company Shareholder Approval), by action taken by the
respective Boards of Directors of Parent and the Company or by the respective
officers authorized by such Boards of Directors or otherwise, as the case may
be; provided, however, that after the Company Shareholder Approval, no amendment
-------- -------
shall be made which by law requires further approval by the shareholders of the
Company without such further approval.
SECTION 10.07. Further Actions. Each of the parties hereto agrees
------------- ---------------
that, except as otherwise provided in this Agreement and subject to its legal
obligations, it will use its reasonable best efforts to fulfill all conditions
precedent specified herein, to the extent that such conditions are within its
control, and to do all things reasonably necessary to consummate the
transactions contemplated hereby.
SECTION 10.08. Headings. The descriptive headings of the several
------------- --------
Articles and Sections of this Agreement are inserted for convenience only, do
not constitute a part of this Agreement and shall not affect in any way the
meaning or interpretation of this Agreement.
SECTION 10.09. Enforcement. The parties agree that irreparable
------------- -----------
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms. It is accordingly
agreed that the parties shall be entitled to specific performance of the terms
hereof, this being in addition to any other remedy to which they are entitled at
law or in equity.
SECTION 10.10. Counterparts. This Agreement may be executed in
------------- ------------
several counterparts, each of which shall be deemed to be an original, and all
of which together shall be deemed to be one and the same instrument.
54
SECTION 10.11. Applicable Law. Except as mandatorily required under
------------- --------------
the laws of the State of Georgia or the Commonwealth of Virginia, this Agreement
and the legal relations between the parties hereto shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the conflict of laws rules thereof.
SECTION 10.12. Severability. If any term, provision, covenant or
------------- -------------
restriction contained in this Agreement is held by a court of competent
jurisdiction or other authority to be invalid, void, unenforceable or against
its regulatory policy, the remainder of the terms, provisions, covenants and
restrictions contained in this Agreement shall remain in full force and effect
and shall in no way be affected, impaired or invalidated.
SECTION 10.13. WAIVER OF JURY TRIAL. EACH OF THE PARTIES TO THIS
------------- --------------------
AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
[SIGNATURE PAGE FOLLOWS]
55
IN WITNESS WHEREOF, each of Parent, Merger Sub and the Company has
caused this Agreement to be executed by its officers thereunto duly authorized,
all as of the date first above written.
GEORGIA-PACIFIC CORPORATION
By: /s/ A.D. Correll
---------------------------------
Name: A.D. Correll
Title: Chairman, CEO & President
FENRES ACQUISITION CORP.
By: /s/ A.D. Correll
---------------------------------
Name: A.D. Correll
Title: Chairman, CEO & President
FORT JAMES CORPORATION
By: /s/ Miles L. Marsh
---------------------------------
Name: Miles L. Marsh
Title: Chairman & CEO
ANNEX I
-------
Conditions of the Offer
-----------------------
Notwithstanding any other provision of the Offer, but subject to
compliance with Section 2.01(a) of the Agreement and Plan of Merger dated as of
July 16, 2000 among Parent, Merger Sub and the Company (the "Merger Agreement")
----------------
(each defined term used herein shall have the meaning assigned to such term in
the Merger Agreement), Merger Sub shall not be required to accept for payment or
pay for any shares of Company Common Stock tendered pursuant to the Offer, and
may extend or amend the Offer in accordance with the Merger Agreement, if (i)
the Minimum Condition shall not have been satisfied; (ii) the applicable waiting
period under the HSR Act or any material European antitrust filing shall not
have expired or been terminated; or (iii) on or after the date of the Merger
Agreement and at or prior to the Acceptance Date, any of the following events or
circumstances occurs or exists and is continuing:
(a) there shall have been instituted or pending any litigation, suit,
claim, action or proceeding before any federal or state court of the United
States of America (other than (i) any such action in which a motion for a
temporary restraining order, a preliminary injunction or a permanent injunction
shall have been denied or shall have expired, or a judicial order granting any
such temporary restraining order, preliminary injunction or permanent injunction
shall have been reversed on appeal and not reinstated, (ii) any such action or
proceeding in which the United States Department of Justice, or the Federal
Trade Commission or any applicable state authority does not file within 10
Business Days after commencement of such action a motion seeking injunctive
relief of the type referred to in clauses (1) through (3) of this paragraph (a),
or (iii) an action filed with consent of Merger Sub) by any United States
federal government or governmental authority or agency or any of the several
states of the United States or any attorney general thereof (1) challenging or
seeking to make illegal, materially delay, or otherwise, directly or indirectly,
restrain or prohibit or make materially more costly (in each case, under
Antitrust Laws) , the making of the Offer, the acceptance for payment of any
shares of Company Common Stock by Parent, Merger Sub or any other Affiliate of
Parent, or the consummation of any other transaction contemplated by the Merger
Agreement; (2) seeking an order of divestiture that, if complied with, would, in
Parent's reasonable judgment, be expected to have a material adverse effect on
the business, results of operations or financial condition of Parent, the
Company and their Subsidiaries, taken as a whole, after giving effect to the
Offer and the Merger; or (3) seeking (under Antitrust Laws) to impose or confirm
any limitation on the ability of Parent, Merger Sub or any other Subsidiary of
Parent to exercise effectively full rights of ownership of any shares of Company
Common Stock on all matters properly presented to the Company's shareholders,
including, without limitation, the approval and adoption of the Merger Agreement
and the transactions contemplated by the Merger Agreement; provided, however,
-------- -------
that no such litigation or proceeding shall constitute a condition to Merger
Sub's obligations under the Offer to the extent that Parent or Merger Sub is in
breach of its obligations under Section 7.09 thereof;
(b) there shall have been (1) any Law enacted, promulgated, amended,
issued or deemed applicable to (i) Parent, the Company or any of their
respective Subsidiaries or (ii) any transaction contemplated by the Merger
Agreement or (2) entered, promulgated or
enforced by any court or Governmental Authority, any Order of any kind which
prohibits, restrains, restricts or enjoins the consummation of the Offer or has
effect of making the Offer illegal, in each case, by any United States
legislative body or Governmental Authority or non-U.S. Governmental Authority
that would result, directly or indirectly, in any of the consequences referred
to in clauses (1) through (3) of paragraph (a) above; provided, however, that no
-------- -------
such Law or Order shall constitute a condition to Merger Sub's obligations under
the Offer to the extent Parent or Merger Sub is in breach of its obligations
under Section 7.09 thereof;
(c) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on the NYSE (other than a shortening
of trading hours or any coordinated trading halt triggered solely as a result of
a specified increase or decrease in a market index), (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States, (iii) any material limitation (whether or not mandatory) by any
government or Governmental Authority, on the extension of credit by banks or
other lending institutions, (iv) a commencement of a war or armed hostilities or
other national or international calamity directly or indirectly involving the
United States or (v) in the case of any of the foregoing existing on the date
hereof, a material acceleration or worsening thereof;
(d) Parent Common Stock to be issued in the Offer shall not have been
authorized for listing on the NYSE, subject to official notice of issuance;
(e) other than with respect to any Order that is the subject of
paragraph (a) or (b) above, there shall have been enacted, entered, promulgated
or enforced by any court or Governmental Authority any Order which prohibits,
restrains, restricts or enjoins the consummation of the Offer or has the effect
of making the Offer illegal;
(f) the Company shall have breached or failed to perform in any
material respect (i) its obligations under the Merger Agreement, (ii) the
representations and warranties of the Company contained in the Merger Agreement
that are qualified by reference to a Company Material Adverse Effect shall not
have been true when made or at any time prior to the consummation of the Offer
as if made at or at and as of such time (other than representations and
warranties which by their terms address matters only as of another specified
date, which shall be true and correct only as of such date), or (iii) the
representations and warranties of the Company contained in the Merger Agreement
that are not so qualified shall not have been true when made or at any time
prior to the consummation of the offer as if made at and as of such time (other
than representations and warranties which by their terms address matters only as
of another specified date, which shall be true and correct only as of such
date), except, in the case of clause (iii) only, for such inaccuracies as are
not reasonably likely to, individually or in the aggregate, result in a Company
Material Adverse Effect; and
(g) the Merger Agreement shall have been terminated in accordance
with its terms;
(h) a stop order suspending the effectiveness of the Offer
Registration Statement shall have been issued by the SEC or any proceedings for
that purpose shall have been initiated by the SEC and not concluded or
withdrawn;
2
which, in the reasonable judgment of Parent in any such case, and
regardless of the circumstances giving rise to any such condition, makes it
inadvisable to proceed with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Merger Sub and
Parent and may be asserted by Merger Sub or Parent regardless of the
circumstances giving rise to any such condition or may be waived by Merger Sub
or Parent in whole or in part at any time and from time to time in their sole
discretion. The failure by Parent or Merger Sub at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right; the waiver
of any such right with respect to particular facts and other circumstances shall
not be deemed a waiver with respect to any other facts and circumstances; and
each such right shall be deemed an ongoing right that may be asserted at any
time and from time to time.
3