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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Unisource Worldwide, Inc.
(NAME OF SUBJECT COMPANY)
Unisource Worldwide, Inc.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $.001 PER SHARE
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
(TITLE OF CLASS OF SECURITIES)
909208100
(CUSIP NUMBER OF CLASS OF SECURITIES)
THOMAS A. DECKER
SENIOR VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
UNISOURCE WORLDWIDE, INC.
1100 CASSATT ROAD
BERWYN, PA 19312
(610) 296-4470
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICE
AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
COPIES TO:
CAROLE SCHIFFMAN
DAVIS POLK & WARDWELL
450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 450-4000
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Unisource Worldwide, Inc., a Delaware
corporation (the "Company"), and the address of the principal executive
offices of the Company is 1100 Cassatt Road, Berwyn, Pennsylvania 19312. The
class of equity securities to which this Statement relates is the Company's
Common Stock, par value $.001 per share (the "Common Stock"), including the
associated Preferred Share Purchase Rights (the "Rights") issued pursuant to
the Rights Agreement dated as of December 30, 1996 between the Company and
National City Bank, as Rights Agent, as amended by Amendment No. 1 dated as of
February 28, 1999 and Amendment No. 2 dated as of May 25, 1999 (as so amended,
the "Rights Agreement") (the Common Stock and the Rights are collectively
referred to herein as the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER
This statement relates to the tender offer by Atlanta Acquisition Corp.
("Purchaser"), a Delaware corporation and a wholly owned subsidiary of
Georgia-Pacific Corporation, a Georgia corporation ("Parent"), disclosed in a
Tender Offer Statement on Schedule 14D-1, dated May 28, 1999 (the "Schedule
14D-1"), to purchase for cash any and all outstanding Shares at a price of
$12.00 per share of Common Stock, net to the seller in cash, without interest
thereon, upon the terms and subject to the conditions set forth in Purchaser's
Offer to Purchase dated May 28, 1999 (the "Offer to Purchase") and the related
Letter of Transmittal (which, together with the Offer to Purchase, constitute
the "Offer"). As set forth in the Offer to Purchase, each of Purchaser and
Parent has its principal executive offices at 133 Peachtree Street, N.E.,
Atlanta, Georgia 30303.
The Offer is being made pursuant to the Agreement and Plan of Merger dated
as of May 25, 1999 among the Company, Purchaser and Parent (the "Merger
Agreement"). A copy of the Merger Agreement is filed as Exhibit B to this
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9")
and is incorporated herein by reference in its entirety. The Merger Agreement
is summarized in Item 3 of this Schedule 14D-9.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and business address of the Company, which is the person
filing this Schedule 14D-9, are set forth in Item 1 above. Unless the context
otherwise requires, references to the Company in the Schedule14D-9 (other than
in the summary of the Merger Agreement below) are to the Company and its
subsidiaries, viewed as a single entity.
(b) Except as described or incorporated by reference herein, to the
knowledge of the Company, as of the date hereof, there exists no material
contract, agreement, arrangement or understanding and no actual or potential
conflict of interest between the Company or its affiliates and (1) the
Company's executive officers, directors or affiliates or (2) Purchaser, its
executive officers, directors or affiliates.
Certain contracts, agreements, arrangements and understandings between the
Company and certain of its directors and executive officers are described in
the Company's Information Statement (the "Information Statement") filed on May
28, 1999 pursuant to Section 14(f) under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), under the heading "Executive Compensation".
The Information Statement is attached as Schedule I hereto. A copy of the
Information Statement is filed as Exhibit A to this Schedule 14D-9 and is
incorporated herein by reference.
SEVERANCE; LETTER AGREEMENTS WITH KEY EMPLOYEES
In connection with the merger contemplated by the terminated UGI Agreement
(as defined below) and the transactions contemplated by the Merger Agreement,
the Company and six of its executive officers entered into letter agreements
which will remain in effect following the closing of the Offer and the Merger.
Among other things, the letter agreements provide for:
. a lump sum severance benefit based on a specified multiple (either 1.5
or 2.0 times) of current salary and bonus plus the payment of certain
fringe benefits; and
. the acceleration of options granted to such officers
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in the event of a termination of employment by the Company without "cause" as
such term is defined in the letter agreements or resignation by the executive
officer for "good reason" as such term is defined in the letter agreements, in
each case within two years after a "change in control" as such term is defined
in the letter agreements. The closing of the Offer will constitute a change in
control under the letter agreements.
Assuming the following six executive officers of the Company are terminated
without cause after the closing of the Offer on September 30, 1999, the
maximum severance benefit (in addition to certain fringe benefits and
perquisites) which could be payable under the letter agreements to each of the
six executive officers listed in the table below is as follows:
<TABLE>
<CAPTION>
Maximum Aggregate
Individual Severance Benefit
---------- -----------------
<S> <C>
Richard H. Bogan.............................................. $1,050,000
Thomas A. Decker.............................................. 1,050,000
Robert M. McLaughlin.......................................... 367,500
Hugh G. Moulton............................................... 900,000
Ray B. Mundt.................................................. 2,550,000
George D. Timchal............................................. 900,000
</TABLE>
A copy of a form of letter agreement is filed as Exhibit E to this Schedule
14D-9 and is incorporated herein by reference, and the foregoing summary is
qualified in its entirety by reference thereto.
PRIOR RELATIONSHIP WITH PARENT OR PURCHASER
The relationship between the Company and Parent is decades old. Parent is
among the largest suppliers of printing and imaging paper to the Company, and
the Company distributes half of the paper that Parent sells through merchant
distributors. For example, in calendar year 1998, the Company purchased nearly
$400 million in printing and imaging papers from Parent. In addition, the
Company purchased nearly $17 million in towel and tissue products and more
than $4 million in corrugated packaging products from Parent.
MERGER AGREEMENT
The Offer
Terms of the Offer. The Merger Agreement provides that each of the
Company's stockholders who tenders Shares in the Offer will receive $12 for
each Share tendered (the "Per Share Amount"), net to the stockholder in cash,
subject to any applicable withholding of taxes. The Merger Agreement prohibits
Purchaser from amending the terms of the Offer, without the consent of the
Company, to (i) decrease the price to be paid for Shares in the Offer, (ii)
reduce the number of Shares sought in the Offer, (iii) add to the conditions
to the Offer, (iv) change the form of consideration to be paid for Shares in
the Offer or (v) make any other change in the terms of the Offer that is
adverse to holders of Shares.
Mandatory Extensions of the Offer. The Merger Agreement obligates Purchaser
to extend the Offer until all of the conditions to the Offer are satisfied or
waived if, at the scheduled or extended expiration date of the Offer, any of
the conditions of the Offer have not been satisfied or waived by Purchaser,
until such conditions are satisfied or waived. The Merger Agreement also
requires that Purchaser extend the Offer for any period required by any rule,
regulation, interpretation or position of the Securities and Exchange
Commission or any other period required by applicable law. Notwithstanding the
foregoing, in connection with a termination of the Merger Agreement, Purchaser
may terminate the Offer 120 days after its commencement if all of the
conditions to the Offer are not satisfied or waived by Purchaser at such time.
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Optional Extensions of the Offer. The Merger Agreement provides that
Purchaser must accept for payment Shares that have been validly tendered and
not withdrawn pursuant to the Offer at the earliest time that all conditions
of the Offer have been satisfied or waived by Purchaser. However, even if all
conditions of the Offer have been satisfied or waived, the Merger Agreement
permits Purchaser to extend the Offer on one or more occasions for an
aggregate period of not more than 10 business days if, at such time, the
number of Shares tendered (and not withdrawn) pursuant to the Offer, together
with the Shares then owned by Parent and its subsidiaries, represents more
than 80% but less than 90% of the outstanding Shares.
Prompt Payment for Shares after the Closing of the Offer. The Merger
Agreement obligates Purchaser to pay, as promptly as practicable after
expiration of the Offer, for all Shares validly tendered and not withdrawn.
The Merger
The Merger. The Merger Agreement provides that Purchaser will be merged
with and into the Company (the "Merger") as soon as practicable following the
satisfaction or waiver of the conditions set forth in the Merger Agreement.
Under the terms of the Merger Agreement, at the closing of the Merger, each
Share will be converted into the right to receive from the Surviving
Corporation an amount equal to the Per Share Amount in cash (the "Merger
Consideration") payable, without interest, to the holder of such Share.
Notwithstanding the foregoing, the Merger Consideration will not be payable in
respect of (a) Shares held by the Company or by Parent or any of its
subsidiaries, which will be cancelled upon the closing of the Merger, and (b)
Shares as to which appraisal rights have been properly exercised.
Covenants and Representations and Warranties
Reasonable Best Efforts. The Merger Agreement provides that each of Parent,
Purchaser and the Company will use its reasonable best efforts to consummate
the Offer and the Merger and the other transactions contemplated by the Merger
Agreement.
Conduct of Business Pending Merger. The Merger Agreement obligates the
Company, until the closing of the Merger, to conduct its operations in the
ordinary and usual course of business consistent with past practice. The
Merger Agreement expressly restricts the ability of the Company to engage in
certain material transactions, such as purchases and sales of assets or the
sale or redemption of outstanding securities of the Company, without the prior
written consent of Parent, which consent shall not be unreasonably withheld or
delayed.
No Solicitation of Alternative Transactions. The Merger Agreement provides
that, except in the circumstances described below, the Company will not,
directly or indirectly, (i) solicit, initiate or knowingly encourage the
submission of any Acquisition Proposal (as defined below) or (ii) participate
in any discussions or negotiations regarding, or furnish to any person any
information with respect to, or take any other action to facilitate, any
Acquisition Proposal or any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition
Proposal. However, the Merger Agreement does provide that the Board of
Directors of the Company (the "Company Board") may furnish information to, or
enter into discussions or negotiations with, any person that makes an
unsolicited bona fide written Acquisition Proposal if, and only to the extent
that (A) the Offer shall not have closed, (B) the Company Board, after
consultation with and based upon the advice of independent legal counsel,
determines in good faith that such action is necessary for the Company Board
to comply with its fiduciary duties to its stockholders under applicable law,
(C) the Company Board, after consultation with its financial advisor,
determines in good faith that such Acquisition Proposal is reasonably likely
to lead to an Acquisition Proposal that, if accepted, is reasonably likely to
be consummated, taking into account all legal, financial and regulatory
aspects of the proposal and the person making the proposal and would, if
consummated, result in a transaction more favorable to its stockholders from a
financial point of view than the Offer and the Merger (any such more favorable
Acquisition Proposal being referred to in the Merger Agreement as a "Superior
Proposal") and (D) prior to taking such action, the Company (x) provides
reasonable notice to Parent to the effect that it is taking such action and
(y) receives from such person an executed confidentiality/standstill agreement
in reasonably customary form and in any event containing terms at least as
stringent as those contained in the confidentiality agreement between Parent
and the Company.
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"Acquisition Proposal" means an inquiry, offer or proposal regarding any of
the following (other than the transactions contemplated by the Merger
Agreement) involving the Company or any of its subsidiaries: (a) any merger,
consolidation, share exchange, recapitalization, business combination or other
similar transaction; (b) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition of all or substantially all the assets of the Company and
its subsidiaries, taken as a whole, in a single transaction or series of
related transactions; (c) any tender offer or exchange offer for 20 percent or
more of the outstanding Shares or the filing of a registration statement under
the Securities Act of 1933 in connection therewith; or (d) any public
announcement of a proposal, plan or intention to do any of the foregoing or
any agreement to engage in any of the foregoing.
Duty to Recommend the Offer and the Merger. The Merger Agreement prohibits
the Company Board from withdrawing or modifying, or proposing to withdraw or
modify, in a manner adverse to Parent, its approval or recommendation of the
Merger Agreement, the Offer or the Merger unless the Company Board determines
in good faith, taking into account all legal, financial and regulatory
aspects, that the failure to do so would constitute a breach by the Company
Board of its fiduciary duties under applicable law. Notwithstanding the
foregoing, the Merger Agreement provides that the Company Board may not
approve or recommend (and in connection therewith, withdraw or modify its
approval or recommendation of the Merger Agreement, the Offer or the Merger)
an Acquisition Proposal unless such an Acquisition Proposal is a Superior
Proposal and unless the Company Board first consults with outside counsel and
determines that the refusal to do so would constitute a breach by the Company
Board of its fiduciary duties under applicable law.
Employee Benefits. Parent has agreed in the Merger Agreement to cause the
Surviving Corporation to honor the obligations of the Company and its
subsidiaries under the provisions of all collective bargaining, employment,
consulting, termination, severance, change in control and indemnification
agreements between and among the Company or any of its subsidiaries and any
current or former officer, director, consultant or employee of the Company or
any of its subsidiaries. Parent has also agreed in the Merger Agreement that,
for a period of six months following the closing of the Merger, subject to
certain exceptions, it will maintain for the benefit of the employees of the
Company and any of its subsidiaries compensation and benefit plans, programs,
arrangements and policies (other than equity-based compensation plans,
programs, arrangements and policies) as will provide compensation and benefits
which in the aggregate are not materially less favorable than those provided
to such employees as of the date of the Merger Agreement under the Company's
employee benefit plans (other than such equity-based compensation plans,
programs, arrangement and policies).
Unvested Employee Options and Vested Out-of-the-Money Employee Options. The
Merger Agreement provides that at the effective time of the Merger each (A)
unvested option and (B) vested option whose exercise price immediately prior
to the closing of the Merger equals or exceeds $12.00, in each case to
purchase Shares pursuant to the Company's Stock Option Plan for Employees, as
amended and restated as of January 28, 1998 (the "Option Plan"), which is then
outstanding, will be assumed by Parent and converted into an option (an
"Assumed Stock Option") to purchase the number of shares of Georgia-Pacific
Corporation-Georgia-Pacific Group common stock, par value $.80 per share
("Parent Common Stock") (rounded up to the nearest whole share) equal to (x)
the number of Shares subject to such option multiplied by (y) the Merger
Consideration divided by the closing price (as reported in the New York City
edition of the Wall Street Journal, or if not reported therein, another
nationally recognized source) for a share of Parent Common Stock on the date
of the effective time of the Merger, at an exercise price per share of Parent
Common Stock (rounded down to the nearest penny) equal to (A) the former
exercise price per share of Common Stock under such option immediately prior
to the effective time of the Merger divided by (B) the Merger Consideration
divided by the closing price (as reported in the New York City edition of the
Wall Street Journal, or if not reported therein, another nationally recognized
source) for a share of Parent Common Stock on the date of the effective time
of the Merger. The Merger Agreement also provides that, except as provided
above, each Assumed Stock Option will be subject to the same terms and
conditions as were applicable to the converted Company Stock Option
immediately prior to the effective time of the Merger; provided, however, that
if the employment of any holder of an Assumed Stock Option is terminated by
the Company other than for cause after the Effective Time, all Assumed Options
held by such holder will be 100% vested and remain exercisable until the
earlier of (x) 90 days beginning on the date of such termination and (y) the
expiration of the term of the Assumed Option.
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Vested In-the-Money Employee Options and Director Options. The Merger
Agreement provides that at the effective time of the Merger, each vested
option to purchase Shares under the Option Plan whose exercise price
immediately prior to the effective time of the Merger is less than $12.00 and
each option to purchase Shares under the Company's Directors' Stock Option
Plan, as amended and restated as of January 28, 1998, whether vested or
unvested, will be canceled, and Parent shall pay each holder thereof in cash
at the effective time of the Merger for each such option an amount determined
by multiplying (x) the excess, if any, of the Merger Consideration over the
applicable exercise price per Share of such option by (y) the number of Shares
to which such option relates.
Restricted Stock. The Merger Agreement provides that at the effective time
of the Merger, any restricted Shares or share units awarded pursuant to any
plan, arrangement or transaction of the Company, including the Restricted
Stock Plan for Directors, as amended and restated on January 28, 1998, and the
Company's Incentive Compensation Plan, as amended and restated as of January
28, 1998, outstanding immediately prior to the effective time of the Merger
will be cancelled, and Parent will pay to each holder thereof in cash at the
effective time of the Merger for each such restricted Share or share unit an
amount determined by multiplying (x) the Merger Consideration by (y) the
number of such restricted Shares or share units held by such holder.
Indemnification; Directors' and Officers' Insurance. In the Merger Agreement
Parent has agreed, from the effective time of the Merger, to the fullest
extent permitted by applicable law, to indemnify, defend and hold harmless
each person who is now, or has been at any time prior to the date of the
Merger Agreement, or who becomes prior to the effective time of the Merger, a
director, officer or employee of the Company or any of its subsidiaries
against all losses, expenses (including reasonable attorneys' fees and
expenses), claims, damages, liabilities or amounts paid in settlement, arising
out of actions or omissions occurring at or prior to the effective time of the
Merger and whether asserted or claimed prior to, at or after the effective
time of the Merger that are in whole or in part (i) based on or arising out of
the fact that such person is or was a director, officer or employee of such
party or a subsidiary of such party or (ii) based on, arising out of or
pertaining to the transactions contemplated by the Merger Agreement.
Parent has also agreed in the Merger Agreement, for a period of 6 years
after the effective time of the Merger, to maintain in effect the policies of
directors' and officers' liability insurance maintained by the Company for the
benefit of those persons who are covered by such policies at the effective
time of the Merger to the extent that such liability insurance can be
maintained or obtained annually at a cost to Parent not greater than 200
percent of the premium for the current Company directors' and officers'
liability insurance; provided that if such insurance cannot be so maintained
or obtained at such cost, Parent has agreed in the Merger Agreement to
maintain or obtain as much of such insurance as can be so maintained or
obtained at a cost equal to 200 percent of the current annual premiums of the
Company for such insurance.
Representations and Warranties. The Merger Agreement contains customary
representations and warranties of each party for a cash acquisition
transaction.
Conditions of the Offer
Notwithstanding any other provision of the Offer but subject to compliance
with the other provisions of the Merger Agreement, the Merger Agreement
provides that Purchaser is not required to accept for payment or pay for any
Shares tendered pursuant to the Offer, and may terminate or amend the Offer in
accordance with the Merger Agreement and may extend the acceptance for payment
of and payment for Shares tendered, if (i) at least the number of Shares that
when added to the Shares already owned by Parent constitute a majority of the
then outstanding Shares on a fully diluted basis (including, without
limitation, all Shares issuable upon the conversion of any convertible
securities or upon the exercise of any options, warrants or rights) has not
been validly tendered (and not withdrawn) prior to the expiration of the Offer
(the "Minimum Condition"), (ii) any applicable waiting period under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act")
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has not expired or been terminated prior to the expiration of the Offer, or
(iii) at any time on or after the date of the Merger Agreement, and prior to
the acceptance for payment of Shares, any of the following conditions exist
and remain in effect:
(a) there shall have been instituted or be pending by any governmental
entity any action or proceeding before any court or governmental,
administrative or regulatory authority or agency, domestic or foreign, (i)
challenging or seeking to make illegal, materially delay or otherwise directly
or indirectly restrain or prohibit the making of the Offer, the acceptance for
payment of, or payment for, any Shares by Parent, Purchaser or any other
affiliate of Parent, or the consummation of any other transaction contemplated
by the Merger Agreement; (ii) seeking to prohibit or limit materially the
ownership or operation by the Company, Parent or any of their subsidiaries of
all or any material portion of the business or assets of the Company, Parent
or any of their subsidiaries, or to compel the Company, Parent or any of their
subsidiaries to dispose of or hold separate all or any material portion of the
business or assets of the Company, Parent or any of their subsidiaries, as a
result of the transactions contemplated by the Merger Agreement; (iii) seeking
to impose or confirm limitations on the ability of Parent, Purchaser or any
other affiliate of Parent to exercise effectively full rights of ownership of
any Shares, including, without limitation, the right to vote any Shares
acquired by Purchaser pursuant to the Offer or otherwise on all matters
properly presented to the Company's stockholders, including, without
limitation, the approval and adoption of the Merger Agreement and the
transactions contemplated by the Merger Agreement; or (iv) seeking to require
divestiture by Parent, Purchaser or any other affiliate of Parent of any
Shares;
(b) there shall have been any action taken, or any statute, rule,
regulation, legislation, interpretation, judgment, order or injunction
enacted, entered, enforced, promulgated, amended, issued or deemed applicable
to (i) Parent, the Company or any subsidiary or affiliate of Parent or the
Company or (ii) any transaction contemplated by the Merger Agreement, by any
legislative body, court, government or governmental, administrative or
regulatory authority or agency, domestic or foreign, other than the routine
application of the waiting period provisions of the HSR Act to the Offer or
the Merger, which is reasonably likely to result, directly or indirectly, in
any of the consequences referred to in clauses (i) through (iv) of paragraph
(a) above;
(c) there shall have occurred any change, condition, event or development
that has a material adverse effect on (i) the business, results of operations
or financial condition of the Company and its subsidiaries, taken as a whole,
other than any effect arising out of or attributable to the economy, the
securities markets in general or the industries generally in which the Company
and its subsidiaries operate or (ii) the ability of the Company to consummate
the transactions contemplated by the Merger Agreement (a "Material Adverse
Effect");
(d) there shall have occurred (i) any general suspension of, or limitation
on prices for, trading in securities on the New York Stock Exchange, (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, administrative or regulatory
authority or agency, domestic or foreign, on the extension of credit by banks
or other lending institutions in the United States, (iv) a commencement of a
war or armed hostilities or other national or international calamity directly
or indirectly involving the United States (other than any war or armed
hostilities or other calamity in the Balkan States) that is material to the
United States or (v) in the case of any of the foregoing existing on the date
of the Merger Agreement, a material acceleration or worsening thereof;
(e) it shall have been publicly disclosed or Purchaser shall have otherwise
learned that beneficial ownership (determined for the purposes of this
paragraph as set forth in Rule 13d-3 promulgated under the Exchange Act) of
20% or more of the then outstanding Shares has been acquired by any person,
other than Parent or any of its affiliates;
(f) any representation or warranty of the Company in the Merger Agreement
which is qualified as to materiality or Material Adverse Effect shall not be
true and correct in all respects or any such representation or warranty that
is not so qualified shall not be true and correct in any respect that would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect; or
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(g) the Company shall have failed to perform in any material respect any
obligation or to comply in any material respect with any agreement or covenant
of the Company to be performed or complied with by it under the Merger
Agreement, which, in the reasonable, good faith judgment of Purchaser, 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.
Conditions of the Merger
The respective obligations of Parent, Purchaser and the Company to effect
the Merger is subject to the satisfaction or waiver, where permissible, prior
to the closing of the Merger, of the following conditions:
(a) To the extent required by applicable law, the Merger Agreement shall
have been approved and adopted by the Company's stockholders;
(b) Any waiting period applicable to the Merger under the HSR Act shall
have expired or early termination thereof shall have been granted;
(c) There shall not be in effect any law restraining, enjoining or
otherwise preventing consummation of the transactions contemplated by the
Merger Agreement; and
(d) Purchaser shall have purchased all Shares validly tendered and not
withdrawn pursuant to the Offer.
Termination of the Merger Agreement
Termination by Mutual Agreement. The Merger Agreement may be terminated and
the Merger may be abandoned at any time prior to the closing of the Merger by
mutual written consent of the Company and Parent by action of their respective
Boards of Directors.
Termination by either Parent or the Company. The Merger Agreement may be
terminated and the Merger may be abandoned at any time prior to the closing of
the Merger by action of either the Board of Directors of Parent (the "Parent
Board") or the Company Board if (i) the Merger shall not have been consummated
by December 31, 1999; (ii) the Company's stockholders shall have rejected the
Merger and the Merger Agreement; or (iii) any law permanently restraining,
enjoining or otherwise prohibiting consummation of the Merger shall have
become final and non-appealable; provided that the right to terminate the
Merger Agreement pursuant to this paragraph shall not be available to any
party that has breached in any material respect its obligations under the
Merger Agreement in any manner that shall have proximately contributed to the
occurrence of the failure of the Merger to be consummated.
Termination by the Company. The Merger Agreement may be terminated and the
Merger may be abandoned at any time prior to the closing of the Offer, by
action of the Company Board:
(a) If (i) the Company is not in breach of its obligations specified
above under "No Solicitation of Alternative Transactions" and "Duty to
Recommend the Offer and the Merger", (ii) the closing of the Offer has not
yet occurred, (iii) the Company Board authorizes the Company, subject to
complying with the terms of the Merger Agreement, to enter into a binding
written agreement concerning a transaction that constitutes a Superior
Proposal and the Company notifies Parent in writing that it intends to
enter into such an agreement, attaching the most current version of such
agreement to such notice, (iv) Parent does not make, within five business
days of receipt of the Company's written notification of its intention to
enter into a binding agreement for a Superior Proposal, an offer that the
Company Board determines, in good faith after consultation with its
financial advisors, is at least as favorable, from a financial point of
view, to the stockholders of the Company as the Superior Proposal and (v)
the Company prior to such termination pays to Parent in immediately
available funds the fees described below under "Termination Fees"; or
(b) If Purchaser shall not have accepted for payment any Shares pursuant
to the Offer within 120 days following commencement of the Offer.
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Termination by Parent. The Merger Agreement may be terminated and the Merger
may be abandoned at any time prior to the closing of the Offer, by action of
the Parent Board if:
(a) the Company enters into a binding agreement for a Superior Proposal
or prior to the closing of the Offer the Company Board shall have withdrawn
or adversely modified its approval or recommendation of the Merger
Agreement, the Offer or the Merger; or
(b) if Purchaser shall not have accepted for payment any Shares pursuant
to the Offer within 120 days following commencement of the Offer.
Termination Fees
Termination Fees Payable by the Company to Parent. In the event that the
Merger Agreement is terminated by (A) the Company pursuant to paragraph (a)
under "--Termination by the Company", (B) Parent pursuant to paragraph (a)
under "--Termination by Parent" or (C)(1) Parent pursuant to paragraph (b)
under "--Termination by Parent" as a result of a willful failure or breach by
the Company and (2) at the time of such willful failure or breach there shall
have been an Acquisition Proposal involving the Company (which proposal shall
not have been withdrawn prior to the time of such termination) and (3) within
6 months of such termination, an Acquisition Proposal by a third party, or
within 9 months of such termination, an Acquisition Proposal by the party that
made the Acquisition Proposal referred to in clause (C)(2) of this paragraph
is entered into, agreed to or consummated by the Company, the Company is
obligated to pay Parent a termination fee of $25,000,000.
In the event that (A) the Merger Agreement is terminated by Parent or the
Company pursuant to clause (ii) under "--Termination by either Parent or the
Company" or by Parent pursuant to paragraph (b) under "--Termination by
Parent" as a result of the failure to satisfy the Minimum Condition, (B) at
the time of such termination there shall have been an Acquisition Proposal
involving the Company (which proposal shall not have been withdrawn prior to
the time of such termination) and (C) within 6 months of such termination, an
Acquisition Proposal by a third party, or within 9 months of such termination,
any Acquisition Proposal by the party that made the Acquisition Proposal
referred to above in clause (B) of this paragraph is entered into, agreed to
or consummated by the Company, the Company is obligated to pay Parent a
termination fee of $25,000,000.
Termination Fee Payable by Parent to the Company. In the event that (A) the
Merger Agreement is terminated pursuant to paragraph (b) under "--Termination
by the Company" as a result of a willful failure or breach by Parent or
Purchaser and (B) at the time of such willful failure or breach there shall
have been a Parent Acquisition Proposal (which Parent Acquisition Proposal
shall have been conditioned upon the Offer or the Merger failing to close) and
(C) within 6 months of such termination, a Parent Acquisition Proposal by a
third party, or within 9 months of such termination, a Parent Acquisition
Proposal by the party that made the Parent Acquisition Proposal referred to in
clause (B) of this paragraph is entered into, agreed to or consummated by
Parent, then Parent is obligated to pay the Company a termination fee of
$25,000,000.
Expense Reimbursement
If the Merger Agreement is terminated by Parent pursuant to paragraph (b)
under "--Termination by Parent" as the result of a failure of performance or
breach of the Company, then the Company will pay Parent an amount, not to
exceed $5,000,000, equal to the documented expenses incurred by Parent in
connection with the Merger Agreement.
If the Merger Agreement is terminated by the Company pursuant to paragraph
(b) under "--Termination by the Company" as the result of the failure of
performance or breach of Parent, then Parent will pay the Company an amount,
not to exceed $5,000,000, equal to the documented expenses incurred by the
Company in connection with the Merger Agreement.
Notwithstanding the foregoing, in no circumstances will the amount payable
to Parent or the Company under "Termination Fees" or "Expense Reimbursement"
exceed $25,000,000 in the aggregate.
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UGI Termination Fee
Pursuant to a letter agreement dated May 25, 1999, Parent paid the Company,
immediately prior to the execution of the Merger Agreement, $25,000,000 in
order to reimburse the Company for the termination fee paid by the Company to
UGI Corporation ("UGI") in connection with the termination of the Agreement
and Plan of Merger dated as of February 28, 1999 among the Company, UGI and
Vulcan Acquisition Corp. (the "UGI Agreement").
In the event that the Merger Agreement is terminated by either Parent or the
Company for any reason, other than a termination pursuant to (x) "--
Termination by Mutual Agreement", (y) "--Termination by either Parent or the
Company" where the termination did not result from a failure of performance or
breach by the Company or (z) paragraph (b) under "--Termination by the
Company" or "Termination by Parent" where the termination did not result from
a failure to satisfy the conditions specified under "Conditions of the Offer"
(unless, in the case of paragraphs (a) and (b) under "Conditions of the
Offer", such termination resulted from the actions of any antitrust regulatory
authority or, in the case of paragraph (d) under "Conditions of the Offer",
such termination resulted from the occurrence of an event specified in clause
(iv) thereof), the Company is obligated to reimburse Parent for the payment of
the $25,000,000 fee described in the preceding paragraph.
Amendments
The Merger Agreement may be amended by action taken by the Company, Parent
and Purchaser at any time prior to the closing of the Merger. The Merger
Agreement provides that following the closing of the Offer, any amendment of
the Merger Agreement or the certificate of incorporation or bylaws of the
Company, any termination of the Merger Agreement by the Company, any extension
by the Company of the time for the performance of any of the obligations or
other acts of Parent or Purchaser or waiver of any of the Company's rights
under the Merger Agreement will require the concurrence of a majority of the
directors of the Company then in office who neither were designated by
Purchaser nor are employees of the Company.
Fees and Expenses
The Merger Agreement provides that, whether or not the Offer or the Merger
is consummated, all expenses incurred in connection with the Merger Agreement
and the transactions contemplated by the Merger Agreement shall be paid by the
party incurring such expenses, except (a) expenses incurred in connection with
the filing, printing and mailing of this Schedule 14D-9 and, if necessary, the
proxy statement relating to the special meeting of stockholders called in
connection with the merger, which shall be paid by Parent, and (b) if
applicable, as provided under "Expense Reimbursement", "Termination Fees" and
"UGI Termination Fee".
A copy of the Merger Agreement is filed as Exhibit B to this Schedule 14D-9
and is incorporated herein by reference, and the foregoing summary is
qualified in its entirety by reference thereto.
Confidentiality Agreements
Pursuant to the Confidentiality Agreements dated as of May 13, 1999 between
Parent and the Company (the "Confidentiality Agreements"), the parties agreed
to provide, among other things, for the confidential treatment of their
discussions regarding a possible acquisition of the Company by Parent and the
exchange of certain confidential information concerning the Company.
Copies of the Confidentiality Agreements are filed as Exhibits C and D to
this Schedule 14D-9 and are incorporated herein by reference, and the
foregoing summary is qualified in its entirety by reference thereto.
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ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) The Company has been Parent's largest single customer for a number of
years, purchasing annually $350-400 million of printing and imaging papers
manufactured by Parent.
In July 1998, the Company announced a major restructuring of its operations.
Following that announcement, A.D. Correll, Chairman, Chief Executive Officer
and President of Parent, called Ray B. Mundt, Chairman and Chief Executive
Officer of the Company, and arranged a meeting in Philadelphia on August 18,
1998. At this meeting, Mr. Correll and Mr. Mundt discussed various types of
strategic transactions which the two companies could pursue, and, in
particular, discussed the possibility of Parent making an equity investment in
the Company and the two companies forging a closer customer-supplier strategic
relationship.
At a subsequent meeting in Atlanta, Mr. Correll and Mr. Mundt met with
senior members of their staff and instructed them to begin discussions looking
toward such relationships. In the fall of 1998, discussions between the two
companies concerning a possible equity investment by Parent in the Company
ceased. Discussions between the two companies concerning the possible
customer-supplier strategic relationship, however, continued through the end
of 1998 and into 1999. During that period, Mr. Correll and Mr. Mundt had
several telephone conversations involving the status of the negotiations with
respect to the customer-supplier strategic relationship. The discussions and
conversations did not lead to an agreement.
On February 28, 1999, the Company entered into the UGI Agreement pursuant to
which the Company's stockholders were to receive .566 shares of UGI common
stock for each of their Shares.
In April, 1999, Parent undertook a review of the feasibility of, and
strategic benefits available through, a potential business combination with
the Company. In connection with such review, Parent retained Wasserstein
Perella as its financial adviser.
On May 4, 1999, at a meeting of the Parent Board, Parent's management
reviewed the business, operations and financial condition of the Company and
discussed the strategic advantages and potential synergies of the Merger and
the feasibility of the Merger. At such meeting, the Parent Board authorized
Parent to propose acquiring all of the Shares at a price of $12.00 per Share.
On May 7, 1999, Mr. Mundt received a letter from Mr. Correll in which Mr.
Correll proposed that Parent acquire the Company at a price of $12 per share
in cash. In the letter, Mr. Correll stated that Parent's proposal to acquire
the Company was not subject to a financing condition. Accompanying Parent's
proposal letter was a draft of the Merger Agreement prepared by Parent and its
counsel. As required by the terms of the UGI Agreement, the Company notified
UGI of its receipt of Parent's proposal later that day.
On May 10, 1999, at a special meeting of the Company Board, after hearing
presentations from its financial advisor, Donaldson, Lufkin & Jenrette
("DLJ"), and its legal advisor, the Company Board authorized management to
begin discussions with Parent concerning its proposal after concluding that
Parent's proposal constituted a "Superior Proposal" within the meaning of the
UGI Agreement. After the Company Board meeting had concluded, as required by
the terms of the UGI Agreement, the Company notified UGI of the Company
Board's decision to enter into discussions with Parent concerning its
proposal.
During the morning of May 13, 1999, the Company and Parent executed the
Confidentiality Agreements.
During the afternoon of May 13, 1999, Ray B. Mundt, Chairman of the Board
and Chief Executive Officer of the Company, met with Mr. Correll to discuss
Parent's proposal. At this meeting, Mr. Correll reaffirmed Parent's proposal
to acquire the Company for $12 per Share in cash but refused Mr. Mundt's
request for an increase in the offer.
From May 14, 1999 through May 23, 1999, Parent conducted extensive business
and legal due diligence of the Company and its operations.
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On May 19, 1999, at a regularly scheduled Company Board meeting, Mr. Mundt
updated the directors on the status of the discussions with Parent. After
hearing presentations from its financial and legal advisors, the Company Board
authorized management to continue discussions with Parent concerning its
proposal.
From May 20, 1999 through May 24, 1999, representatives of Parent and the
Company negotiated the terms of the Merger Agreement.
On May 24, 1999, at a special meeting of the Parent Board, the Parent Board
approved the Offer, the Merger and the Merger Agreement.
Later on May 24, 1999, at a special meeting of the Company Board, Mr. Mundt
updated the directors on the status of the discussions with Parent.
Representatives of DLJ then delivered their oral opinion to the Company Board
(subsequently confirmed in writing) that, as of such date, the consideration
proposed to be received by the stockholders of the Company in the Offer and in
the Merger was fair, from a financial point of view, to such holders. After
DLJ delivered its opinion, the Company Board, by the unanimous vote of the
directors present and voting, (i) resolved to terminate the UGI Agreement in
accordance with the terms of the UGI Agreement, (ii) approved the Offer, the
Merger and the Merger Agreement and (iii) determined to recommend that the
Company's stockholders accept the Offer and tender their Shares and approve
the Merger and the Merger Agreement.
On May 25, 1999, after UGI declined to revise its offer to match Parent's
proposal, the Company terminated the UGI Agreement and the Company, Parent and
Purchaser then executed the Merger Agreement. Prior to and as a condition of
the termination of the UGI Agreement, the Company paid to UGI the $25,000,000
termination fee required by the UGI Agreement with funds advanced from Parent.
On May 28, 1999, Purchaser commenced the Offer.
(b) In reaching its conclusions and recommendation described in section (a)
above, the Company Board considered a number of factors, including the
following:
(i) The Company's businesses, financial condition, results of operations,
assets, liabilities, business strategy and prospects, as well as various
uncertainties associated with those prospects.
(ii) The oral opinion (subsequently confirmed in writing) of DLJ, the
Company's financial advisor, that, as of the date thereof and based upon
and subject to various considerations and assumptions set forth therein,
the consideration to be paid to the Company's stockholders pursuant to the
Offer and the Merger is fair, from a financial point of view, to such
stockholders. A copy of the opinion rendered by DLJ to the Company Board,
setting forth the procedures followed, the matters considered, the scope of
the review undertaken and the assumptions made by DLJ in arriving at its
opinion, is attached hereto as Annex A and is incorporated herein by
reference. Stockholders are urged to read such opinion in its entirety.
(iii) The fact that the Offer would not be subject to a financing
condition.
(iv) The alternatives to the Merger available to the Company, including,
without limitation, (A) closing the proposed merger with UGI pursuant to
the UGI Agreement and (B) continuing to maintain the Company as an
independent company and not engaging in any extraordinary transaction,
which the Company Board deemed less attractive in light of the
uncertainties associated with each of these alternatives and the timing and
possible values that might be realized by stockholders pursuant to such
alternatives.
(v) The fact that the $12.00 per Share price to be received by the
Company's stockholders in both the Offer and the Merger represents a
premium of (x) 49.6% over the average closing prices for the Shares for the
30-trading day period preceding February 28, 1999, the date of public
announcement of the proposed transaction between the Company and UGI, (y)
51.7% over the average closing prices for the Shares for the 30-trading day
period preceding May 10, 1999, the date of public announcement of Parent"s
proposal to acquire the Company, and (z) 38.1% over the average closing
prices for the Shares for the one-year period preceding May 24, 1999, the
date on which the Company Board approved the Offer and the Merger.
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(vi) The fact that the consideration to be received by the Company's
stockholders in the Offer and the Merger would be payable in cash, thus
eliminating any uncertainties in valuing the consideration to be received
by the Company's stockholders.
(vii) The financial and other terms and conditions of the Offer, the
Merger and the Merger Agreement including, without limitation, the fact
that the terms of the Merger Agreement will not unduly discourage other
third parties from making proposals subsequent to execution of the Merger
Agreement, will not prevent the Company Board from determining, in the
exercise of its fiduciary duties in accordance with the Merger Agreement,
to provide information to and engage in negotiations with such third
parties and will permit the Company, subject to payment to Parent of a
$25,000,000 termination fee and also subject to payment to Parent of the
$25,000,000 advanced by Parent to the Company in connection with the
termination of the UGI Agreement, to enter into a transaction with a party
that makes a proposal that would offer the Company's stockholders greater
value than the Offer and the Merger.
(viii) The structure of the transaction which is designed, among other
things, to result in receipt by the holders of Shares at the earliest
practicable time of the consideration to be paid in the Offer and the fact
that the consideration to be paid in the Offer and the Merger is the same.
(ix) The likelihood that the Offer and the Merger would be consummated.
(x) The substantial possibility that the transaction with UGI
contemplated by the UGI Agreement would not be approved by UGI
stockholders.
The foregoing discussion of the information and factors considered and given
weight by the Company Board is not intended to be exhaustive. In view of the
variety of factors considered in connection with its evaluation of the Offer
and the Merger, the Company Board did not find it practicable to, and did not,
quantify or otherwise assign relative weights to the specific factors
considered in reaching its determination. In addition, individual members of
the Company Board may have given different weights to different factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The Company has retained DLJ as its exclusive financial advisor in
connection with the Offer and the Merger. Under the terms of an engagement
letter agreement dated February 12, 1999 between the Company and DLJ (the
"Engagement Letter"), the Company will pay DLJ a fee equal to .4%, or 40 basis
points, of the aggregate value of the outstanding Shares (treating any Shares
issuable upon exercise of options, warrants or other rights of conversion as
outstanding), plus the amount of any debt of the Company being assumed by
Parent or any of its subsidiaries in connection with the Merger. The
Engagement Letter provides that this fee, which will be payable by the Company
to DLJ upon the closing of the Offer, will not be less than $4,500,000 nor
more than $7,000,000. The Company has also agreed in the Engagement Letter to
reimburse DLJ for all reasonable out-of-pocket expenses, including, without
limitation, the fees and expenses of counsel, and to indemnify DLJ and certain
related persons against certain liabilities, including certain liabilities
under the federal securities laws, relating to or arising out of its
engagement.
Except as set forth above, neither the Company nor any person acting on its
behalf has employed, retained or agreed to compensate any person to make
solicitations or recommendations to stockholders of the Company concerning the
Offer and the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) During the past sixty days no transaction in the Shares has been
effected by the Company or, to the best knowledge of the Company, by any
executive officer, director, affiliate or subsidiary of the Company (other
than in the ordinary course of business in connection with the Company's
employee benefit plans).
(b) To the best knowledge of the Company, all of the Company's directors and
executive officers currently intend to tender pursuant to the Offer all Shares
held of record or beneficially owned by them (other than Shares issuable upon
exercise of options and Shares, if any, which if tendered could cause such
persons to incur liability under the provisions of Section 16(b) of the
Securities Exchange Act of 1934).
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ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) No negotiation is being undertaken or is underway by the Company in
response to the Offer which relates to or would result in an extraordinary
transaction, such as a merger or reorganization, involving the Company or any
subsidiary of the Company or any subsidiary of the Company, a purchase, sale
or transfer of a material amount of assets by the Company, a tender offer for
or other acquisition of securities by or of the Company or any material change
in the present capitalization or dividend policy of the Company.
(b) Except as described under Item 3(b), there are no transactions, board
resolutions, agreements in principle or signed contracts in response to the
Offer which relate to or would result in one or more of the matters referred
to in paragraph (a) of this Item 7. Subject to the terms of the Merger
Agreement described in Item 3(b) under "Merger Agreement", the Company may
engage in discussions or negotiations with respect to transactions or
proposals of the type referred to above in this Item 7. At its meeting held on
May 24, 1999, the Company Board determined that public disclosure with respect
to negotiations undertaken in response to the Offer, which negotiations would
result in an agreement in principle relating to any transaction contemplated
by Item 7(a) might jeopardize their continuation and adopted a resolution that
management need not make any such public disclosure unless and until an
agreement in principle is reached relating thereto.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
(a) Section 203. As a Delaware corporation, the Company is subject to
Section 203 ("Section 203") of the Delaware General Corporation Law. Section
203 prohibits a corporation which has voting stock traded on a national
securities exchange, designated on The NASDAQ Stock Market or held of record
by more than 2,000 stockholders from engaging in certain business
combinations, including a merger, sale of substantial assets, loan or
substantial issuance of stock, with an interested stockholder (defined as the
owner of 15% or more of the corporation's voting stock), or an interested
stockholder's affiliates or associates, for a three-year period beginning on
the date the interested stockholder acquires 15% or more of the outstanding
voting stock of the corporation. The restrictions on business combinations do
not apply if (i) prior to such date, the board of directors gives prior
approval to the business combination or the transaction in which the 15%
ownership level is exceeded, (ii) the interested stockholder acquires, in the
transaction pursuant to which the interested stockholder becomes the owner of
15% or more of the outstanding stock, 85% of the corporation's stock
(excluding those shares owned by persons who are directors and also officers
as well as employee stock plans in which employees do not have a confidential
right to determine whether shares held subject to the plan will be tendered in
a tender or exchange offer) or (iii) the business combination is approved by
the board of directors and authorized at a meeting of stockholders by the
holders of at least two-thirds of the outstanding voting stock, excluding
shares owned by the interested stockholder. In accordance with the provisions
of the Company's certificate of incorporation and Section 203, the Company
Board has approved the Merger Agreement and Purchaser's acquisition of Shares
pursuant to the Offer and the Merger and the transactions contemplated by the
Merger Agreement and, therefore, the restrictions of Section 203 are
inapplicable to the Offer, the Merger and the related transactions.
(b) Antitrust. Under the HSR Act, and the rules that have been promulgated
thereunder by the Federal Trade Commission (the "FTC"), certain acquisition
transactions may not be consummated unless certain information has been
furnished to the Antitrust Division of the United States Department of Justice
(the "Antitrust Division") and the FTC and certain waiting period requirements
have been satisfied. The acquisition of Shares by Purchaser pursuant to the
Offer is subject to such requirements.
On May 26, 1999, Parent and the Company filed the Notification and Report
Forms (the "Forms") required to be filed by the HSR Act with respect to the
Offer and the Merger with the Antitrust Division and the FTC. The statutory
waiting period applicable to the purchase of Shares pursuant to the Offer will
expire at 11:59 P.M., New York City time, on June 10, 1999, the fifteenth
calendar day after Purchaser filed its Form. However, prior to such date, the
Antitrust Division or the FTC may extend the waiting period by requesting
additional information or documentary material relevant to the acquisition. If
such a request is made, the waiting period
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will be extended until 11:59 P.M., New York City time, on the tenth calendar
day after substantial compliance by Parent and the Company with such request.
Thereafter, such waiting period can be extended only by court order.
A request is being made pursuant to the HSR Act for early termination of the
waiting period applicable to the Offer. There can be no assurance, however,
that the 15-calendar day HSR Act waiting period will be terminated early.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the acquisition of Shares by
Purchaser pursuant to the Offer. At any time before or after the consummation
of any such transactions, the Antitrust Division or the FTC could take such
action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the purchase of Shares pursuant
to the Offer or seeking divestiture of the Shares so acquired or divestiture
of substantial assets of Parent or the Company. Private parties (including
individual states) may also bring legal actions under the antitrust laws. The
Company does not believe that the consummation of the Offer will result in a
violation of any applicable antitrust laws. However, there can be no assurance
that a challenge to the Offer on antitrust grounds will not be made, or if
such a challenge is made, what the result will be.
Under Part IX of the Canadian Competition Act, the Offer and the Merger may
not be consummated until notification has been given to the Director of
Investigation and Research (the "Director"), certain information has been
furnished to the Director and the applicable waiting period has expired or
been terminated. The waiting period may be either seven or 21 days from the
time a complete notification is provided to the Director, depending upon the
type of information required by the Director.
If the Director concludes that the Offer and the Merger would likely lessen
or prevent competition substantially in any market in Canada, he may apply to
the Competition Tribunal, a special purpose quasi-judicial tribunal, for an
order to, among other things, enjoin or unwind the merger. It is not expected
that the Director will conclude that the Offer and the Merger will
substantially lessen or prevent competition in any relevant market.
Nevertheless, there can be no assurance that a challenge to the Offer and the
Merger before the Competition Tribunal will not be made or, if such a
challenge is made, of the result thereof.
The Director may issue an advance ruling certificate under Section 102 of
the Canadian Competition Act in respect of a proposed tender offer and merger
where he is satisfied that he would not have sufficient grounds on which to
apply to the Competition Tribunal for an order with regard to that tender
offer and merger. The effect of an advance ruling certificate is that (a) the
tender offer and merger is exempt from the notification and waiting period
provisions described above and (b) the Director may not apply to the
Competition Tribunal for an order in respect of the tender offer and merger
solely on the basis of information that is the same or substantially the same
as the information on which the decision to issue the advance ruling
certificate was based, provided the transaction is substantially completed
within one year after the issuance of the advance ruling certificate. Parent
intends to apply to the Director for an advance ruling certificate. If, for
any reason, the Director declines to issue, or if Parent decides not to apply
for, an advance ruling certificate, Parent and the Company intend to file with
the Director a notification under Part IX of the Canadian Competition Act.
The Mexican Federal Antitrust Law requires that Parent and the Company
notify the Mexican Antitrust Commission of the Offer and the Merger and
provide certain information to the Mexican Antitrust Commission in connection
with the Offer and the Merger. Although there can be no assurance that the
Mexican Antitrust Commission will not oppose the Offer and the Merger, Parent
and the Company do not expect that it will do so and intend to consummate the
Offer and the Merger as soon as practicable.
(c) Rights Plan Amendment. Prior to the execution of the Merger Agreement,
the Company and the Rights Agent executed an amendment to the Rights
Agreement, which renders the Rights Agreement inapplicable to the Offer and
the Merger by providing that (w) the approval, execution, delivery and
performance of the
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Merger Agreement by the parties thereto, (x) the consummation by Parent of the
tender offer contemplated by the Merger Agreement, (y) the approval of the
Merger Agreement by the Company's stockholders and (z) the consummation of any
of the other transactions contemplated by the Merger Agreement will not cause
the rights issued pursuant to the Rights Agreement to become exercisable to
purchase any securities of the Company or any other securities.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
The following Exhibits are filed herewith:
A. The Company's Information Statement dated May 28, 1999 (attached as
Schedule I hereto).*
B. Agreement and Plan of Merger dated as of May 25, 1999 among the Company,
Purchaser and Parent.
C. Confidentiality Agreement dated as of May 13, 1999 between Parent and the
Company.
D. Confidentiality Agreement dated as of May 13, 1999 between Parent and the
Company.
E. Form of Letter Agreement between the Company and the executive officers
referred to in Item 3(b) of this Schedule 14D-9.
F. Letter to the Company's stockholders dated May 28, 1999.*
G. Opinion of Donaldson, Lufkin & Jenrette dated May 24, 1999 (attached as
Annex A hereto).*
H. Press Release of the Company dated May 25, 1999.
- --------
* Included in copies mailed to stockholders.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
Date: May 28, 1999
UNISOURCE WORLDWIDE, INC.
/s/ Thomas A. Decker
By: _________________________________
Name: Thomas A. Decker
Title: Senior Vice President,
Secretary and General Counsel
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ANNEX A
[DLJ LETTERHEAD]
May 24, 1999
Board of Directors
Unisource Worldwide, Inc.
1100 Cassatt Road
Berwyn, PA 19312
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of
view to the stockholders of Unisource Worldwide, Inc. (the "Company") of the
consideration to be received by such stockholders pursuant to the terms of the
Agreement and Plan of Merger, to be dated as of May 25, 1999 (the
"Agreement"), among the Company, Georgia-Pacific Corporation ("Georgia-
Pacific") and Atlanta Acquisition Corp., a Delaware corporation and wholly
owned subsidiary of Georgia-Pacific ("Purchaser").
Pursuant to the Agreement, Purchaser will commence a cash tender offer (the
"Tender Offer") for all of the issued and outstanding shares of common stock,
par value $.001 per share, of the Company ("Company Common Stock") (shares of
Company Common Stock being hereinafter collectively referred to as the
"Shares") at a price of $12.00 per share (the "Offer Price"). Following
consummation of the Tender Offer, subject to certain exceptions, each share of
Company Common Stock not previously tendered and accepted for payment in the
Tender Offer will, by virtue of a merger of Purchaser with and into the
Company (the "Merger" and together with the Tender Offer, the "Transaction"),
be converted into the right to receive the Offer Price.
In arriving at our opinion, we have reviewed the draft dated May 19, 1999 of
the Agreement. We also have reviewed financial and other information that was
publicly available or furnished to us by the Company including information
provided during discussions with the Company's management. Included in the
information provided during discussions with management were certain financial
projections of the Company for the period beginning September 30, 1999 and
ending September 30, 2003 prepared by the management of the Company (including
a base case and an adjusted case). In addition, we have compared certain
financial and securities data of the Company with various other companies
whose securities are traded in public markets, reviewed the historical stock
price and trading volume of the Company Common Stock, reviewed prices and
premiums paid in certain other business combinations and conducted such other
financial studies, analyses and investigations as we deemed appropriate for
purposes of this opinion.
In rendering our opinion, we have relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available
to us from public sources, that was provided to us by the Company and or its
respective representatives, or that was otherwise reviewed by us. With respect
to the financial projections supplied to us, we have assumed that they have
been reasonably prepared on the basis reflecting the best currently available
estimates and judgments of the management of the Company as to the future
operating and financial performance of the Company under the various scenarios
presented. We have not assumed any responsibility for making an independent
evaluation of any assets or liabilities or for making any independent
verification of any of the information reviewed by us. We have relied as to
certain legal matters on advice of counsel to the Company.
<PAGE>
Board of Directors
Unisource Worldwide, Inc.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as
of, the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. Our opinion does not address the relative
merits of the Transaction and the other business strategies being considered
by the Company's Board of Directors, nor does it address the Board's decision
to proceed with the Transaction. Our opinion does not constitute a
recommendation as to whether the stockholders of the Company should tender
shares in the Tender Offer or as to how such stockholders should vote on the
Merger.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of
businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes. DLJ has
performed investment banking and other services for the Company in the past
and has been compensated for such services. In February 1999, DLJ was retained
by the Company to act as its exclusive financial advisor with respect to the
sale, merger, consolidation or any other business combination, in one or a
series of transactions, involving all or a substantial amount of the business,
securities or assets of the Company. As part of this engagement, DLJ advised
the Company with respect to the previously announced merger between the
Company and UGI Corporation, for which it received usual and customary
compensation. In October 1998, DLJ was retained by the Company to assist in
the valuation and sale of the Company's Mexican operations, for which it
received usual and customary compensation.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the consideration to be received by the stockholders of
the Company in the Transaction is fair to such stockholders from a financial
point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
/s/ Michael A. Wildish
By: ______________________
Michael A. Wildish
Managing Director
<PAGE>
SCHEDULE I
Unisource Worldwide, Inc.
1100 Cassatt Road
Berwyn, PA 19312
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14f-1 THEREUNDER
General
This Information Statement is being mailed on or about May 28, 1999 as part
of the Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9") to holders of the Common Stock, par value $.001 per share (the "Common
Stock"), of Unisource Worldwide, Inc. (the "Company"), including the
associated Preferred Share Purchase Rights (the "Rights") issued pursuant to
the Rights Agreement dated as of December 30, 1996 between the Company and
National City Bank, as Rights Agent, as amended by Amendment No.1 dated as of
February 28, 1999 and Amendment No. 2 dated as of May 25, 1999 (the Common
Stock and the Rights being collectively referred to herein as the "Shares").
You are receiving this Information Statement in connection with the possible
election of persons designated by Georgia-Pacific Corporation ("Parent") to a
majority of the seats on the Board of Directors of the Company (the "Company
Board") pursuant to the Agreement and Plan of Merger dated as of May 25, 1999
among the Company, Atlanta Acquisition Corp. ("Purchaser") and Parent (the
"Merger Agreement"). Capitalized terms used and not otherwise defined herein
shall have the meaning set forth in the Schedule 14D-9.
Pursuant to the Merger Agreement, Purchaser is offering to purchase all
outstanding Shares at a price of $12.00 per Share. The Offer was commenced by
Purchaser on May 28, 1999 and is scheduled to expire at 12:00 midnight (New
York time) on Friday, June 25, 1999, unless extended. The Merger Agreement and
Offer are more fully described under Item 3(b) of the Schedule 14D-9, to which
this Information Statement is attached as Schedule I.
The information contained in this Information Statement (including
information incorporated by reference) concerning Parent and Purchaser and the
Purchaser's Designees (as defined below) has been furnished to the Company by
Parent and Purchaser and the Company assumes no responsibility for the
accuracy or completeness of such information.
PURCHASER'S DESIGNEES
The Merger Agreement provides that after the closing of the Offer, Parent
will be entitled to designate up to such number of directors, rounded up to
the next whole number, on the Company Board ("Purchaser Designees") as will
give Parent representation on the Company Board equal to the product of the
total number of directors on the Company Board multiplied by the percentage
that the aggregate number of Shares beneficially owned by Purchaser following
the closing of the Offer bears to the total number of Shares then outstanding.
The Company has agreed in the Merger Agreement to take all action necessary to
cause the Purchaser Designees to be elected as directors of the Company,
including, in connection therewith, increasing the size of the Company Board
or securing the resignations of incumbent directors or both. Notwithstanding
the foregoing, until the closing of the Merger, the Company is obligated under
the terms of the Merger Agreement to use its best efforts to ensure that at
least two members of the Company Board who were directors of the Company as of
the date of the Merger Agreement and who are not employees of the Company
remain members of the Company Board.
S-1
<PAGE>
Parent has informed the Company that it will choose the Purchaser Designees
from the directors and executive officers of Parent listed in Schedule I of
the Purchaser's Offer to Purchase, a copy of which is being mailed to the
Company's stockholders together with the Schedule 14D-9. Parent has informed
the Company that each of the directors and executive officers of Parent listed
in Schedule I to the Offer to Purchase has consented to act as a director of
the Company, if so designated. The information on such Schedule I is
incorporated herein by reference. The business address of each such person is
c/o Georgia-Pacific Corporation, 133 Peachtree Street, N.E., Atlanta, Georgia
30303.
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended, and Rule 14f-1 thereunder. You are urged to
read this Information Statement carefully. You are not, however, required to
take any action.
GENERAL INFORMATION REGARDING THE COMPANY
The Shares constitute the only class of voting securities of the Company.
The holders of Common Stock are entitled to one vote per Share. As of May 21,
1999, there were 70,218,397 shares of Common Stock outstanding. Currently, the
Company Board consists of eight members. The Company Board is divided into
three classes and each director serves a term of three years and until his
successor is duly elected and qualified or until his earlier death,
resignation or removal.
S-2
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Directors of the Company
The names of the current directors, their ages as of September 30, 1998 and
certain other information about them are set forth below. As indicated above,
some of the current directors may resign effective immediately following the
purchase of Shares by Purchaser pursuant to the Offer.
<TABLE>
<CAPTION>
Principal Occupation or Employment for Past Five
Name Age Years
---- --- ------------------------------------------------
<S> <C> <C>
CLASS I DIRECTORS:
James J. Forese............ 62 President and Chief Executive Officer, IKON
Office Solutions, Inc. (f/k/a Alco Standard
Corporation, hereafter "IKON" or "Alco") (July,
1998-present); Executive Vice President and
President, International Operations, IKON (1997-
June, 1998); Executive Vice President and Chief
Operating Officer, Alco (1996-1997); General
Manager, IBM Customer Financing, and Chairman,
IBM Credit Corporation (1993-1995); IBM Vice
President, Finance (1990-1993). Also serves as a
director of IKON Office Solutions, Inc.,
American Management Systems,Inc. and NUI
Corporation.
James P. Kelly............. 55 Chairman and Chief Executive Officer (1997-
Present), Vice Chairman (1996-1997), Senior Vice
President and Chief Operating Officer (1992-
1996), and Senior Vice President and National
Relations Group Manager (1988-1992), United
Parcel Service (UPS). Also serves as a director
of UPS.
Rogelio G. Sada............ 63 Member, Mexican National Congress (1997-
Present); Private investor; Mayor, San Pedro,
N.L., Mexico (1992-1994); President and Chief
Executive Officer, VITRO, a glass and glass-
related products manufacturer in Mexico (1972-
1985).
CLASS II DIRECTORS:
Gary L. Countryman......... 59 Chairman of the Board, Liberty Mutual Insurance
and Liberty Mutual Fire Insurance Company (1998-
Present); Chairman and Chief Executive Officer,
Liberty Mutual Insurance Company and Liberty
Mutual Fire Insurance Company (1992-1998);
Chairman of the Board, President and Chief
Executive Officer, Liberty Mutual Insurance
Company and Liberty Mutual Fire Insurance
Company (1991-1992). Also serves as a director
of Bank Boston Corporation, Boston Edison and
Harcourt General, Inc.
Paul J. Darling, II........ 60 Chairman, President and Chief Executive Officer,
Corey Steel Company (1984-Present). Also serves
as a director of Liberty Mutual Insurance
Company, Liberty Mutual Fire Insurance Company
and Liberty Financial Companies, Inc.
</TABLE>
S-3
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation or Employment for Past Five
Name Age Years
---- --- ------------------------------------------------
<S> <C> <C>
Dana G. Mead............... 62 Chairman and Chief Executive Officer (1994-
Present), President and Chief Operating Officer
(1992-1994), and director (1992-Present),
Tenneco, Inc.; Executive Vice President (1989-
1992), Senior Vice President (1986-1989),
International Paper Company. Also serves as a
director of Zurich Allied, Zurich Insurance
Company, Pfizer, Inc., Newport News
Shipbuilding, Inc., and Textron, Inc.
CLASS III DIRECTORS:
Ray B. Mundt............... 70 Chairman and Chief Executive Officer (1996-
Present), Unisource; Director (1971-1996),
Chairman (1986-1995), Chief Executive Officer
(1980-1993) and President (1974-1988), Alco.
Also serves as a director of Liberty Mutual
Insurance Company, Liberty Mutual Fire Insurance
Company and Liberty Financial Companies, Inc.
James W. Stratton.......... 61 President, Stratton Management Company (1972-
Present); Chairman and director (1993-Present),
Stratton Small-Cap Yield Fund; Chairman (1993-
Present) and director (1981-1993), Stratton
Monthly Dividend REIT Shares; Chairman and
director (1972-Present), Stratton Growth Fund;
and Chairman and director (1997-Present),
Stratton Special Value Fund. Also serves as a
director of UGI Corporation, Amerigas Propane
and Teleflex.
</TABLE>
COMMITTEES OF THE COMPANY BOARD; MEETINGS
During fiscal 1998, there were three standing committees of the Company
Board: the Audit Committee, the Human Resources Committee, and the Investment
Committee. The Company Board does not currently have a separate Nominating
Committee because such functions are performed by the Human Resources
Committee.
The Audit Committee (Messrs. Darling (Chairman), Countryman and Forese) met
four times during the fiscal year ended September 30, 1998. The Audit
Committee approves the selection of independent accountants; reviews auditing
and financial accounting and reporting matters, the adequacy of internal
accounting controls and asset security, audit fees and expenses; counsels
regarding auditing, financial, accounting and reporting matters; and oversees
conflicts of interest policy matters.
The Human Resources Committee (Messrs. Mead (Chairman), Kelly, Sada and
Stratton) met four times during the fiscal year ended September 30, 1998. The
Human Resources Committee reviews and recommends compensation of officers and
directors; administers incentive compensation and stock option plans; and
counsels regarding compensation of other key employees, management development
and succession, and major personnel matters.
The Investment Committee (Messrs. Stratton (Chairman) and Forese) met three
times during the fiscal year ended September 30, 1998. The Investment
Committee reviews and establishes the investment policy for the trust funds
under the Company's defined benefit plans; selects and monitors the
performance of the investment managers for such trust funds; and oversees the
investment and performance of all other funds under the Company's Retirement
Savings Plan, all of the Company's other defined contribution plans, and all
other plans or funds maintained by the Company from time to time, such as the
Company's Long-term Disability Plan.
During the fiscal year, the Company Board met nine times. Each director
attended at least 75% of the total number of the meetings of the Company Board
which were held while he was a member of the Company Board. Each director
attended at least 75% of the total number of meetings of all committees on
which he served, except Mr. Forese, who attended two of the three meetings of
the Investment Committee.
S-4
<PAGE>
SECURITY OWNERSHIP OF COMMON STOCK BY CERTAIN BENEFICIAL OWNERS, DIRECTORS AND
EXECUTIVE OFFICERS OF THE COMPANY
The table below sets forth the shares of Common Stock that were
beneficially owned (as determined by the rules of the Securities and Exchange
Commission) by: (i) each director of the Company; (ii) each executive officer
named in the summary compensation table set forth herein (a "Named Executive
Officer"); and (iii) the directors and executive officers of the Company, as a
group. There are no persons known to the Company to own beneficially more than
five percent of the outstanding shares of Common Stock. The ownership
information presented below with respect to all persons is based on the record
ownership of Common Stock at November 16, 1998.
<TABLE>
<CAPTION>
Number of
Number of Shares
Shares Acquirable Percentage of
Beneficially Within 60 Outstanding
Owned(1) Days(2) Common Stock
------------ ---------- -------------
<S> <C> <C> <C>
Directors and Executive Officers:
Richard H. Bogan....................... 63,527 10,050 *
Gary L. Countryman..................... 414 1,500 *
Paul J. Darling, II.................... 6,703 11,260 *
Thomas A. Decker....................... 62,906(3) 10,050 *
James J. Forese........................ 41,153 10,685 *
James P. Kelly......................... 1,675 5,606 *
Dana G. Mead........................... 22,831 11,260 *
Hugh G. Moulton........................ 204,633(4) 82,608 *
Ray B. Mundt........................... 255,116(5) 44,218 *
Rogelio G. Sada........................ 15,992 109,711 *
James W. Stratton...................... 10,189 41,784 *
Charles F. White....................... 160,988 95,969 *
All directors and executive officers as
a group (16 persons).................. 932,161(6) 454,010 *
</TABLE>
- --------
* Less than one percent.
(1) Includes securities (or equivalents thereof) held under the Unisource
Retirement Savings Plan, securities awarded under the Unisource Incentive
Compensation Plan (which are subject to performance-based vesting
conditions), securities purchased with matching contributions under the
Partners' Stock Purchase Plan (which are subject to certain service-based
vesting requirements), securities awarded under the Restricted Stock Plan
for Directors, and where applicable, securities owned by spouses and minor
children of the persons identified herein.
(2) Includes shares which may be acquired within sixty days of November 16,
1998 through the exercise of stock options.
(3) Includes 8,000 shares owned by family members, the beneficial ownership of
which Mr. Decker disclaims.
(4) Includes 6,400 shares owned by family members, the beneficial ownership of
which Mr. Moulton disclaims.
(5) Includes 39,257 shares owned by family members, the beneficial ownership
of which Mr. Mundt disclaims.
(6) Includes 53,657 shares owned by family members of directors and executive
officers, the beneficial ownership of which is disclaimed.
As of September 30, 1998, the Company's employees, through direct ownership
or employee benefit plans, owned approximately 10.15% of the outstanding
shares of Common Stock.
S-5
<PAGE>
EXECUTIVE COMPENSATION
Summary of Executive Compensation
The following table shows, for the fiscal years indicated, the compensation
awarded to, earned by or paid to the Chief Executive Officer of the Company
and the four most highly compensated executive officers of the Company other
than the Chief Executive Officer who were serving at September 30, 1998.
During the periods listed below, except as noted in the table footnotes, all
cash compensation was paid by the Company.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
----------------------- ------------------------------------
Awards Payouts
--------------------- --------------
Restricted Securities
Stock Underlying Cancellations/ All Other
Name and Principal Fiscal Salary Bonus Awards Options Payouts Compensation
Position(1) Year ($)(2) ($)(3) ($)(4) ($)(5) ($)(6) ($)(7)
- ------------------ ------ -------- ------- ---------- ---------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ray B. Mundt............ 1998 $850,000 -- -- -- -- $57,502
Chairman and Chief 1997 850,000 -- -- 205,818 -- 64,252
Executive Officer 1996 141,667 -- -- -- -- --
Charles F. White........ 1998 500,000 396,875 1,000 -- 203,978
President and Chief 1997 400,000 -- 636,875 154,448 (169,688) 37,588
Operating Officer 1996 254,175 -- -- -- 155,760 59,076
Richard H. Bogan
Senior Vice President... 1998 300,000 150,000 158,750 100,250 -- 216,927
and Chief Financial
Officer 1997 30,769 -- 186,875 50,000 -- --
1996 -- -- -- -- -- --
Thomas A. Decker........ 1998 300,000 -- 158,750 100,250 -- 18,605
Senior Vice President, 1997 183,333 91,667 356,563 50,000 (169,688) 5,988
General Counsel and
Secretary 1996 -- -- -- -- -- --
Hugh G. Moulton......... 1998 250,000 -- 158,750 -- -- 27,608
Executive Vice President 1997 250,000 -- 356,563 192,763 (169,688) 73,748
and Chief Administrative
Officer 1996 250,000 250,000 -- -- 453,414 98,211
</TABLE>
- --------
(1) At all times during fiscal 1998, Mr. White was President. He has resigned
as President, but has agreed to remain with the Company through December
31, 1998. At all times during fiscal 1998, Mr. Bogan was the Senior Vice
President and Chief Financial Officer. Effective November 1, 1998, Mr.
Bogan was appointed President and Chief Financial Officer. At all times
during fiscal 1996, Mr. Moulton served as Executive Vice President of
Alco, and continued in that capacity until January 1, 1997, at which time
he assumed the position shown above. Mr. Moulton's cash compensation prior
to January 1, 1997 was paid by Alco.
(2) For Mr. Mundt, the amount reflected for 1996 is salary paid during fiscal
1996. Mr. Mundt assumed his current responsibilities as Chairman and Chief
Executive Officer of the Company on August 1, 1996. For Mr. Bogan, the
amount reflected for 1997 is salary paid to Mr. Bogan during fiscal 1997,
beginning August 1, 1997, the date on which Mr. Bogan's employment with
the Company commenced. For Mr. Decker, the amount reflected for 1997 is
salary paid to Mr. Decker during fiscal 1997, beginning January 30, 1997,
the date on which Mr. Decker's employment with the Company commenced.
(3) Mr. Bogan's bonus for 1998 was based upon the terms of his employment
under which he became entitled to a minimum bonus of 50% of salary paid in
fiscal 1998. Mr. Decker's bonus for 1997 was based upon the terms of his
employment under which he became entitled to a minimum bonus of 50% of
salary paid in fiscal 1997.
(4) Represents the aggregate value as of the date of grant of outstanding
shares awarded under the Company's Incentive Compensation Plan, which
awards are subject to certain employment and performance-based vesting
conditions. The awards granted in fiscal 1998 are subject to conditions
based upon the Company's
S-6
<PAGE>
performance during the three fiscal year period of 1998-2000. The awards
granted in 1997 are subject to conditions based upon the Company's
performance in fiscal years 1997, 1998, and 1999. For the awards made in
1997, threshold performance for the fiscal years ended September 30, 1997
and September 30, 1998 was not achieved and the shares previously awarded
for these plan periods were canceled. The value as of September 30, 1998 of
the remaining awards granted in fiscal 1997 for the Named Executive Officers
is as follows: $165,625 for Mr. White and $66,250 for each of Messrs. Bogan,
Decker and Moulton.
(5) Prior to December 31, 1996, the Company was a wholly-owned subsidiary of
Alco. Effective December 31, 1996, one share of Common Stock was
distributed to holders of Alco common stock for every two shares of Alco
common stock owned at the established record date (the "Spin-off"). As a
result of the Spin-off, the Company became a separate public company. For
Messrs. Mundt, White, and Moulton for 1997, amounts include the following
options granted in exchange for Alco options in connection with the Spin-
off: Mr. Mundt, 3,818 shares; Mr. White, 143,948 shares; and Mr. Moulton,
167,763 shares. Messrs. Bogan and Decker were not employed by the Company
prior to the Spin-off and therefore did not participate in the option
exchange program.
(6) The amounts for 1997 represent the aggregate value as of the date of grant
of the restricted stock awards previously granted in fiscal 1997 (as set
forth in the "Restricted Stock Award" column) which were canceled because
the performance-based vesting conditions were not met. The amounts for
Messrs. White and Moulton for 1996 represent LTIP payouts based upon
Alco's performance for the 1994-1996 plan period that were paid by Alco in
October 1996, in the form of Alco common stock based on fair market value
on September 30, 1996, the last day of the plan period.
(7) Amounts reflected for 1998 and 1997 include the Company's matching
contributions under the Unisource Retirement Savings Plan and Partners'
Stock Purchase Plan, a portion of which may be subject to certain vesting
requirements, and dividends paid on unvested Partners' Stock Purchase Plan
shares. The amount for Mr. White for 1998 also includes relocation
expenses of $165,868 paid to Mr. White under the terms of his employment.
The amount for Mr. Bogan for 1998 also includes a relocation allowance of
$200,000 paid to Mr. Bogan under the terms of his employment. The amounts
reflected for Messrs. White and Moulton for 1997 also include above-market
interest earned on deferred compensation in the amounts of $4,700 and
$1,917, respectively. The amount reflected for 1996 with respect to Mr.
Mundt includes retirement income paid pursuant to Alco's pension plans
($315,618), consulting income ($200,000) and certain compensation
described in the next sentence. For Messrs. Mundt, White and Moulton
amounts for 1996 include the value of shares of Alco common stock
purchased with matching contributions under Alco's stock purchase plans,
calculated as of the date of purchase, as follows: $24,298, $54,343 and
$71,727; the remaining amounts for Messrs. White and Moulton for 1996
represent above-market interest earned on deferred compensation.
S-7
<PAGE>
Option Grants
The following table shows option grants to the Named Executive Officers
during the 1998 fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
Options
Securities Granted to
Underlying Employees
Options in Fiscal Expiration Present
Granted(#) Year(%) Base Price(s) Date Value($)
---------- ---------- ------------- ---------- --------
<S> <C> <C> <C> <C> <C>
Charles F. White.... 1,000 .07 $15.875 11/07/07 $ 3,180(2)
Richard H. Bogan.... 250 .02 15.75 11/21/07 788(2)
100,000(3) 6.76 9.25 7/31/08 310,000(3)
Thomas A. Decker.... 250 .02 15.75 11/21/07 788(2)
100,000(3) 6.76 9.25 7/31/08 310,000(3)
</TABLE>
- --------
(1) All stock options were granted at an exercise price equal to the fair
market value of Common Stock on the date of grant and become exercisable
at the rate of 20% per year from the date of grant.
(2) The option grant present value was calculated using Black-Scholes option
valuation methodology, based on the following assumptions: (a) options
remain outstanding for an average of 5.4 years and become exercisable in
accordance with the relevant option vesting period; (b) 5.9% expected
risk-free rate of return relative to the exercise price; (c) .24 expected
volatility; and (d) 4.18% expected dividend yield.
(3) These options may not be exercised unless the average daily closing price
of Common Stock on the New York Stock Exchange during any twenty
consecutive trading day period within five years from the grant date
equals or exceeds twenty dollars per share, except that the options may
become exercisable prior to such time upon the occurrence of certain
change of control events. The option grant present value was calculated
using Black-Scholes option valuation methodology, based on the following
assumptions: (a) options remain outstanding for an average of 6 years and
become exercisable in accordance with the relevant option vesting period;
(b) 4.26% expected risk-free rate of return relative to the exercise
price; (c) .406 expected volatility; and (d) 2.99% expected dividend
yield.
OPTION EXERCISES
The following table shows the Company's stock option exercises during fiscal
1998 and the aggregate year-end value of options for the Named Executive
Officers:
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Value of
Number of Securities Unexercised Value of
Securities Underlying In-the- Unexercised
Underlying Unexercised money In-the-money
Unexercised Options at Options at Options at
Shares Options at Fy-end Fy-end Fy-end
Acquired on Value Fy-end Unexercisable Exercisable Unexercisable
Name Exercise(#) Realized($) Exercisable(#) (#) ($)(1) ($)(1)
- ---- ----------- ----------- -------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ray B. Mundt............ -- -- 44,218 161,600 -- --
Charles F. White........ 1,588 16,956 94,709 59,151 53,900 --
Richard H. Bogan........ -- -- 10,000 140,250 -- --
Thomas A. Decker........ -- -- 10,000 140,250 -- --
Hugh G. Moulton......... 40,584 338,614 80,844 25,292 -- --
</TABLE>
(1) Value of options equals fair market value of Common Stock as of September
30, 1998 ($6.625), less the exercise price, multiplied by the number of
shares underlying the stock options.
S-8
<PAGE>
Long-term Incentive Compensation Plan Awards
The following table shows the maximum number of shares in long-term
incentive compensation awards granted to Named Executive Officers under the
Company's Incentive Compensation Plan during fiscal 1998 and the estimated
maximum number of shares which will become payable under such plan at the end
of the performance period upon attainment of specified threshold, target and
maximum performance levels:
LONG-TERM INCENTIVE COMPENSATION PLANS--AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Performance or
Other Period Estimated Future Payouts
Numbers Until (in number of shares)
of Maturation or ------------------------
Name Shares Payout Threshold Target Maximum
---- ------- --------------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
Charles F. White 25,000(1) 10/1/97-9/30/00 -- -- --
Richard H. Bogan............. 10,000 10/1/97-9/30/00 0 5,000 10,000
Thomas A. Decker............. 10,000 10/1/97-9/30/00 0 5,000 10,000
Hugh G. Moulton.............. 10,000 10/1/97-9/30/00 0 5,000 10,000
</TABLE>
- --------
(1) These shares will be canceled upon the termination of Mr. White's
employment on December 31, 1998. See note (1) to the Summary Compensation
Table.
Pension Plan and Supplemental Retirement Plan
The following table shows estimated annual retirement benefits that would be
payable to participants under the Company's Pension Plan and, if applicable,
the Supplemental Executive Retirement Plan ("SERP"), upon normal retirement at
age 65 under various assumptions as to final average annual compensation and
years of credited service and on the assumption that benefits will be paid in
the form of a single life annuity. The benefits are not subject to any
reduction for Social Security benefits.
ESTIMATED ANNUAL RETIREMENT BENEFITS
<TABLE>
<CAPTION>
Years of Credited Service
------------------------------------------
Final Average Compensation 5 10 20 30 35
- -------------------------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$200,000............................ $10,000 $20,000 $ 40,000 $ 60,000 $ 70,000
250,000............................. 12,500 25,000 50,000 75,000 87,500
300,000............................. 15,000 30,000 60,000 90,000 105,000
400,000............................. 20,000 40,000 80,000 120,000 140,000
500,000 or above.................... 25,000 50,000 100,000 150,000 175,000
</TABLE>
Covered compensation under the Pension Plan and SERP of each of the Named
Executive Officers includes salary and bonus as set forth in the Summary
Compensation Table. The years of credited service as of September 30, 1998 for
the Named Executive Officers is as follows: Mr. Mundt--26.7 years; Mr. White--
33.3 years; Mr. Moulton--27.9 years; Mr. Bogan--1.2 years and Mr. Decker--11.7
years, including 10 years of credited service under the SERP in accordance
with the terms of his employment agreement.
S-9
<PAGE>
Employment and Termination Arrangements
The Named Executive Officers have the following arrangements concerning
their employment with the Company and the termination of such employment. In
order to benefit from the continued services of Messrs. Mundt and Moulton
following their anticipated retirement after the end of fiscal 1999, the
Company has entered into agreements with Messrs. Mundt and Moulton under which
they will provide consulting services to the Company following their
retirement. Mr. Mundt has agreed to provide consulting services for six years,
and in consideration of such consulting services, the Company will pay Mr.
Mundt the sum of $250,000 per year and provide continued medical coverage
under the Company's medical plans. Mr. Moulton has agreed to provide
consulting services for five years, and in consideration of such consulting
services, the Company will pay him the sum of $50,000 per year and will
provide continued medical coverage under the Company's medical plans. In order
to induce Messrs. Bogan and Decker to remain with the Company during the
implementation of the restructuring plan and the appointment of a new chief
executive officer following Mr. Mundt's retirement, the Company has provided
them with certain incentives. The terms of these incentives provide for a one-
time payment of $600,000 to each of Messrs. Bogan and Decker, the payment of
which is contingent upon continued employment with the Company through
December 31, 1999. These incentives also provide that upon a termination of
employment without cause the Company will continue making payments of salary
for twenty-four months at the annual rate of $350,000. In connection with his
separation from the Company, Mr. White has entered into an arrangement with
the Company, pursuant to which Mr. White will provide consulting services to
the Company from December 31, 1998 through December 31, 2001 and pursuant to
which Mr. White has agreed to be bound by certain covenants restricting his
ability to compete against the Company through January 1, 2001. In
consideration of such consulting services and his non-competition covenants,
the Company will make certain salary and lump sum payments to him during the
period January 1, 1999 through December 31, 2001 in the aggregate amount of
$2,000,000. In addition, the Company has agreed to accelerate the vesting of
stock options granted to Mr. White prior to January 4, 1999 and to accelerate
the vesting of other benefits under certain other Company plans in which Mr.
White participates. The Company also has agreed to continue Mr. White's
participation in certain employee benefit plans through December 31, 2001 and
has agreed to reimburse Mr. White for his moving expenses and any loss on the
resale of his home if he moves prior to December 31, 2000.
Director Compensation
Each independent director is entitled to receive fees of $30,000 per year
for service on the Company Board and committees, and Committee Chairs also
receive $5,000 per committee per year (collectively, "Annual Retainer").
The Company's Directors' Stock Option Plan (the "Directors' Option Plan")
enables directors of the Company to receive all or a portion of their Annual
Retainer in the form of options to purchase Common Stock at exercise prices
equal to 25% to 75% (as determined by the Company Board) of the fair market
value on the date such options are granted. The options are exercisable for
twenty years and will not terminate upon the director's termination as a
director (except in the case of death), but generally may not be exercised
prior to the twelve-month anniversary of the date of grant. An option which is
outstanding on the date of a director's death may be exercised by such
director's legal representative for a twelve-month period following the date
of death.
In addition to the foregoing, each independent director receives an annual
award of 800 shares of restricted stock under the Restricted Stock Plan for
Directors and an annual grant of an option to purchase 3,000 shares of Common
Stock pursuant to the Directors' Option Plan. Such options are granted as of
the date of the annual stockholders meeting at exercise prices equal to the
fair market value of Common Stock on such date.
S-10
<PAGE>
Loan Program
The Company adopted a loan program in order to encourage employees
designated as "partners" to purchase and retain Common Stock. Such loans
require that the loan be secured by the borrower's pledge of Common Stock
having a value at the time of the loan of not less than twice the amount of
the loan. Such loans are payable upon demand and bear interest at an annual
rate of 6%. The loan program was terminated as of September 30, 1998 and all
participants under the program have been granted a reasonable period in which
to repay their loans. As of September 30, 1998, loans were outstanding to 10
of the Company's employees in an aggregate amount of approximately $605,500.
From October 1, 1997 to September 30, 1998, the indebtedness under the
Company's loan program for the Named Executive Officers who participated in
this program and the specified group was as follows:
<TABLE>
<CAPTION>
Largest Amount
Outstanding Amount Outstanding at
Name or Group During Period($) September 30, 1998($)
------------- ---------------- ---------------------
<S> <C> <C>
Hugh G. Moulton......................... $300,000 $ 0
All executive officers as a group....... 450,000 67,000
</TABLE>
Section 16(a) Beneficial Ownership Reporting Compliance
For the fiscal year ended September 30, 1998, all reports required to be
filed by Section 16(a) of the Securities Exchange Act of 1934 on behalf of the
Company's directors and officers with respect to initial ownership of, and
changes in beneficial ownership of, the Company's securities, were timely
filed, except that Mr. White's purchase of 5,000 shares of Common Stock on
March 16, 1998 was not reported until Mr. White filed an amended Form 4 on
April 16, 1998.
S-11
<PAGE>
EXHIBIT B
===============================================================================
AGREEMENT AND PLAN OF MERGER
dated as of May 25, 1999
among
UNISOURCE WORLDWIDE, INC.,
GEORGIA-PACIFIC CORPORATION
and
ATLANTA ACQUISITION CORP.
===============================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE 1
The Offer
Section 1.01. The Offer.................................................... 2
Section 1.02. Company Action............................................... 3
ARTICLE 2
The Merger
Section 2.01. The Merger................................................... 5
Section 2.02. Effective Time............................................... 5
Section 2.03. Closing of the Merger........................................ 5
Section 2.04. Effects of the Merger........................................ 5
Section 2.05. Certificate of Incorporation and Bylaws...................... 5
Section 2.06. Directors.................................................... 6
Section 2.07. Officers..................................................... 6
Section 2.08. Conversion of Shares......................................... 6
Section 2.09. Stock Options; Restricted Stock.............................. 6
Section 2.10. Payment Fund................................................. 8
Section 2.11. Payment Procedures........................................... 9
Section 2.12. No Further Ownership Rights in Company Common Stock.......... 9
Section 2.13. Dissenting Shares............................................ 9
Section 2.14. Termination of Payment Fund.................................. 10
Section 2.15. No Liability................................................. 10
Section 2.16. Investment of the Payment Fund............................... 10
Section 2.17. Lost Certificates............................................ 10
Section 2.18. Withholding Rights........................................... 11
Section 2.19. Stock Transfer Books......................................... 11
ARTICLE 3
Representations and Warranties of the Company
Section 3.01. Organization and Qualification; Subsidiaries................. 11
Section 3.02. Capitalization of the Company and its Subsidiaries........... 12
Section 3.03. Authority Relative to this Agreement......................... 13
Section 3.04. SEC Reports; Financial Statements............................ 14
Section 3.05. No Undisclosed Liabilities................................... 14
Section 3.06. Absence of Changes........................................... 15
Section 3.07. Information Supplied......................................... 17
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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<S> <C>
Section 3.08. Consents and Approvals; No Violations........................ 17
Section 3.09. No Default................................................... 18
Section 3.10. Litigation................................................... 18
Section 3.11. Compliance with Applicable Law............................... 19
Section 3.12. Employee Plans............................................... 19
Section 3.13. Labor Matters................................................ 20
Section 3.14. Environmental Matters........................................ 22
Section 3.15. Taxes........................................................ 24
Section 3.16. Material Contracts........................................... 26
Section 3.17. Insurance.................................................... 27
Section 3.18. Real Property................................................ 27
Section 3.19. Intellectual Property........................................ 27
Section 3.20. Year 2000.................................................... 28
Section 3.21. Opinion of Financial Advisor................................. 29
Section 3.22. Brokers...................................................... 29
Section 3.23. Takeover Statute............................................. 29
Section 3.24. Amendment to Rights Agreement................................ 29
Section 3.25. Break-up Fee................................................. 30
ARTICLE 4
Representations and Warranties of Parent and Purchaser
Section 4.01. Organization and Qualification; Subsidiaries................. 30
Section 4.02. Authority Relative to this Agreement......................... 31
Section 4.03. SEC Reports; Financial Statements............................ 31
Section 4.04. No Undisclosed Liabilities................................... 32
Section 4.05. Absence of Changes........................................... 32
Section 4.06. Information Supplied......................................... 32
Section 4.07. Consents and Approvals; No Violations........................ 33
Section 4.08. No Default................................................... 33
Section 4.09. Litigation................................................... 34
Section 4.10. Compliance With Applicable Law............................... 34
Section 4.11. Year 2000.................................................... 34
Section 4.12. No Prior Activities.......................................... 35
Section 4.13. Vote Required................................................ 35
Section 4.14. Sufficient Funds............................................. 35
Section 4.15. Funded Break-up Fee.......................................... 35
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE 5
Covenants Related to Conduct of Business
Section 5.01. Conduct of Business of the Company......................... 36
Section 5.02. Access to Information...................................... 39
ARTICLE 6
Additional Agreements
Section 6.01. Preparation of the Proxy Statement......................... 39
Section 6.02. Meetings................................................... 40
Section 6.03. Reasonable Best Efforts.................................... 40
Section 6.04. Acquisition Proposals...................................... 42
Section 6.05. Public Announcements....................................... 43
Section 6.06. Indemnification; Directors' and Officers' Insurance........ 44
Section 6.07. Notification of Certain Matters............................ 45
Section 6.08. Employee Matters........................................... 46
Section 6.09. Post-Merger Board of Directors............................. 47
Section 6.10. Fees and Expenses.......................................... 48
Section 6.11. Obligations of Purchaser................................... 48
Section 6.12. Antitakeover Statutes...................................... 48
Section 6.13. The Unisource Foundation................................... 48
ARTICLE 7
Conditions to Consummation of the Merger
Section 7.01. Conditions to Each Party's Obligations to Effect
the Merger................................................. 49
ARTICLE 8
Termination; Amendment; Waiver
Section 8.01. Termination by Mutual Agreement............................. 49
Section 8.02. Termination by Either Parent or the Company................. 49
Section 8.03. Termination by the Company.................................. 50
Section 8.04. Termination by Parent....................................... 51
Section 8.05. Effect of Termination and Abandonment....................... 51
Section 8.06. Amendment................................................... 54
Section 8.07. Extension; Waiver........................................... 54
</TABLE>
iii
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<TABLE>
<CAPTION>
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<S> <C>
ARTICLE 9
Miscellaneous
Section 9.01. Nonsurvival of Representations and Warranties............... 54
Section 9.02. Entire Agreement; Assignment................................ 55
Section 9.03. Notices..................................................... 55
Section 9.04. Governing Law; Waiver of Jury Trial......................... 56
Section 9.05. Descriptive Headings........................................ 56
Section 9.06. Parties in Interest......................................... 57
Section 9.07. Severability................................................ 57
Section 9.08. Specific Performance........................................ 57
Section 9.09. Brokers..................................................... 57
Section 9.10. Counterparts................................................ 58
Section 9.11. Interpretation.............................................. 58
Section 9.12. Definitions................................................. 58
</TABLE>
iv
<PAGE>
Glossary of Defined Terms
<TABLE>
<CAPTION>
Defined Terms Defined On Page
- ------------- ---------------
<S> <C>
Acquisition Proposal....................................................... 58
Antitrust Law.............................................................. 41
Assumed Stock Option....................................................... 7
beneficial ownership or beneficially own................................... 59
business day............................................................... 59
Cause...................................................................... 59
CERCLA..................................................................... 22
Certificate of Merger...................................................... 5
Certificates............................................................... 9
Closing.................................................................... 5
Closing Date............................................................... 5
Code....................................................................... 7
Company.................................................................... 1
Company Board.............................................................. 1
Company Common Stock....................................................... 1
Company Disclosure Schedule................................................ 11
Company Employee Benefit Plan.............................................. 19
Company Employee Benefit Plans............................................. 19
Company Permits........................................................... 19
Company Real Property Leases............................................... 27
Company Requisite Vote..................................................... 14
Company Rights............................................................. 29
Company SEC Reports........................................................ 14
Company Securities......................................................... 12
Company Stock Option....................................................... 7
Company Stockholder Meeting................................................ 40
Company Title IV Plans..................................................... 20
Computer Programs.......................................................... 28
Confidentiality Agreement.................................................. 39
Covered Transactions....................................................... 29
DGCL....................................................................... 1
Directors Restricted Stock Plan............................................ 8
Directors' Option Plan..................................................... 8
Dissenting Shares.......................................................... 9
DLJ........................................................................ 3
DOJ........................................................................ 41
Effective Time............................................................. 5
Environmental Costs and Liabilities........................................ 22
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Defined Terms Defined On Page
- ------------- ---------------
<S> <C>
Environmental Law.......................................................... 22
ERISA Affiliate............................................................ 20
Exchange Act............................................................... 4
Expenses................................................................... 48
FTC........................................................................ 41
Funded Break-up Fee........................................................ 35
GAAP....................................................................... 14
Good Reason................................................................ 59
Governmental Entity........................................................ 17
Hazardous Material......................................................... 22
HSR Act.................................................................... 17
ICP........................................................................ 8
Indemnified Parties........................................................ 44
Indemnified Party.......................................................... 44
Intellectual Property...................................................... 28
know or knowledge.......................................................... 60
Law........................................................................ 18
Lien....................................................................... 13
Material Adverse Effect.................................................... 60
Merger..................................................................... 1
Merger Consideration....................................................... 6
Minimum Condition.......................................................... 2
Multiemployer Plan......................................................... 19
Offer...................................................................... 1
Offer Documents............................................................ 3
Offer to Purchase.......................................................... 3
Option Plan................................................................ 6
OSHA....................................................................... 22
Parent..................................................................... 1
Parent Acquisition Proposal................................................ 60
Parent Common Stock........................................................ 7
Parent Disclosure Schedule................................................. 30
Parent Permits............................................................. 34
Parent SEC Reports......................................................... 31
Paying Agent............................................................... 8
Payment Fund............................................................... 8
Per Share Amount........................................................... 1
person..................................................................... 60
Proxy Statement............................................................ 17
Release.................................................................... 22
Remedial Action............................................................ 23
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Defined Terms Defined On Page
- ------------- ---------------
<S> <C>
Rights Agreement........................................................... 29
RSP........................................................................ 46
Schedule 14D-1............................................................. 3
Schedule 14D-9............................................................. 4
SEC........................................................................ 3
Shares..................................................................... 1
Significant Subsidiary..................................................... 12
subsidiary................................................................. 60
Superior Proposal.......................................................... 42
Surviving Corporation...................................................... 5
Takeover Statutes.......................................................... 29
Tax Returns................................................................ 26
Taxes...................................................................... 26
Termination Date........................................................... 50
UGI Merger Agreement....................................................... 30
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of May 25, 1999, is among
UNISOURCE WORLDWIDE, INC., a Delaware corporation (the "Company"), GEORGIA-
PACIFIC CORPORATION, a Georgia corporation ("Parent"), and ATLANTA ACQUISITION
CORP., a Delaware corporation and a wholly owned subsidiary of Parent
("Purchaser").
WHEREAS, the Boards of Directors of Parent, Purchaser and the Company have
each determined that it is in the best interests of their respective
stockholders for Parent to acquire the Company upon the terms and subject to the
conditions set forth herein; and
WHEREAS, in furtherance of such acquisition, it is proposed that Purchaser
will make a cash tender offer (the "Offer") to acquire all of the issued and
outstanding shares of Common Stock, par value $.001 per share, of the Company
("Company Common Stock") (shares of Company Common Stock being hereinafter
collectively referred to as the "Shares") for $12.00 per Share (such amount, or
any greater amount per Share paid pursuant to the Offer, being hereinafter
referred to as the "Per Share Amount"), net to the seller in cash, upon the
terms and subject to the conditions of this Agreement and the Offer; and
WHEREAS, the Board of Directors of the Company (the "Company Board") has by
the unanimous vote of all directors present and voting approved the making of
the Offer and resolved and agreed to recommend that holders of Shares tender
their Shares pursuant to the Offer; and
WHEREAS, also in furtherance of such acquisition, the Boards of Directors
of Purchaser and the Company have each approved the merger (the "Merger") of
Purchaser with and into the Company in accordance with the General Corporation
Law of the State of Delaware ("DGCL") following the consummation of the Offer
and upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained, and intending to be
legally bound hereby, the Company, Parent and Purchaser hereby agree as follows:
<PAGE>
ARTICLE 1
The Offer
Section 1.01. The Offer. (a) Provided that this Agreement shall not have
been terminated in accordance with Section 8.01, 8.02, 8.03 or 8.04 and none of
the events set forth in Annex A hereto shall have occurred or be existing,
Purchaser shall commence the Offer as promptly as reasonably practicable after
the date hereof, but in no event later than five business days after the initial
public announcement of Purchaser's intention to commence the Offer. The
obligation of Purchaser to accept for payment and pay for Shares tendered
pursuant to the Offer shall be subject to the satisfaction of (i) the condition
(the "Minimum Condition") that at least the number of Shares that when added to
the Shares already owned by Parent shall constitute a majority of the then
outstanding Shares on a fully diluted basis (including, without limitation, all
Shares issuable upon the conversion of any convertible securities or upon the
exercise of any options, warrants or rights) shall have been validly tendered
and not withdrawn prior to the expiration of the Offer and (ii) the other
conditions set forth in Annex A hereto. Purchaser expressly reserves the right
to waive any such condition, to increase the Per Share Amount and to make any
other changes in the terms and conditions of the Offer; provided, however, that,
the Purchaser will not (i) decrease the Per Share Amount, (ii) reduce the number
of Shares sought in the Offer, (iii) add to the conditions to the Offer set
forth in Annex A hereto, (iv) change the form of consideration to be paid in the
Offer or (v) make any other change in the terms of the Offer that is adverse to
holders of Shares. The Per Share Amount shall, subject to any applicable
withholding of taxes, be net to each seller in cash, upon the terms and subject
to the conditions of the Offer. Notwithstanding the foregoing, without the
consent of the Company, Purchaser shall have the right to extend the Offer (but
in no event later than the Termination Date) (i) from time to time 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 and (iii) on one or more
occasions for an aggregate period of not more than 10 business days beyond the
latest expiration date that would otherwise be permitted under clause (i) or
(ii) of this sentence, if, on such expiration date, the number of Shares
tendered (and not withdrawn) pursuant to the Offer, together with the Shares
then owned by Parent, represents more than 80% but less than 90% of the
outstanding Shares on a fully-diluted basis. If all of the conditions to the
Offer are not satisfied or waived on any scheduled expiration date of the Offer,
subject to Section 8.04(b), Purchaser shall extend the Offer from time to time
until such conditions are satisfied or waived. Upon the terms and subject to
the conditions of the Offer, Purchaser shall accept for payment Shares that have
been validly tendered and not withdrawn pursuant to the
2
<PAGE>
Offer at the earliest time that all conditions to the Offer shall have been
satisfied or waived by Purchaser. Subject to the terms and conditions of the
Offer (including, without limitation, the Minimum Condition), Purchaser shall
pay, as promptly as practicable after expiration of the Offer, for all Shares
validly tendered and not withdrawn.
(b) As soon as reasonably practicable on the date of commencement of the
Offer, Purchaser shall file with the Securities and Exchange Commission (the
"SEC") a Tender Offer Statement on Schedule 14D-1, including all exhibits
thereto (together with all amendments and supplements thereto, the "Schedule
14D-1"), with respect to the Offer. The Schedule 14D-1 shall contain or shall
incorporate by reference an offer to purchase (the "Offer to Purchase") and the
related form of letter of transmittal and any related summary advertisement (the
Schedule 14D-1, the Offer to Purchase and such other documents, together with
all supplements and amendments thereto, being referred to herein collectively as
the "Offer Documents"). Parent, Purchaser and the Company shall correct
promptly any information provided by any of them for use in the Offer Documents
which shall become false or misleading, and Parent and Purchaser shall take all
steps necessary to cause the Schedule 14D-1, as so corrected, to be filed with
the SEC and the other Offer Documents, as so corrected, to be disseminated to
holders of Shares, in each case as and to the extent required by applicable Law.
The Company and its counsel shall be given an opportunity to review and comment
on the Offer Documents (and any amendments thereto) prior to their being filed
with the SEC or disseminated to the holders of Shares. Parent and Purchaser
shall provide the Company and its counsel with any comments or other
communications, whether written or oral, that Parent, Purchaser or their counsel
may receive from time to time from the SEC or its staff with respect to the
Offer Documents promptly after receipt of such comments or other communications.
Section 1.02. Company Action. (a) The Company hereby approves of and
consents to the Offer and represents that the Company Board, at a meeting duly
called and held on May 24, 1999, has, by the unanimous vote of all directors
present and voting, (A) determined that this Agreement and the transactions
contemplated thereby, including the Offer and the Merger, are fair to and in the
best interests of the holders of the Shares, (B) approved and declared advisable
this Agreement and the transactions contemplated hereby and (C) recommended that
the stockholders of the Company accept the Offer and tender their Shares
pursuant to the Offer and approve and adopt this Agreement and the transactions
contemplated hereby. Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ") has delivered to the Company Board a written opinion that the Per Share
Amount to be received by the holders of Shares (other than Parent and its
subsidiaries) pursuant to the Offer and the Merger is fair to the holders of the
Shares from a financial point of view. The Company hereby consents to the
3
<PAGE>
inclusion in the Offer Documents of the recommendations of the Company Board
described in the first sentence of this Section 1.02(a).
(b) As soon as reasonably practicable on the date of commencement of the
Offer, the Company shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9, including all exhibits thereto (together with all
amendments and supplements thereto, the "Schedule 14D-9"), containing the
recommendation of the Company Board described in Section 102, and shall
disseminate the Schedule 14D-9 to the extent required by Rule 14d-9 under the
Exchange Act of 1934, as amended (the "Exchange Act") and any other applicable
Law. The Company, Parent and Purchaser shall correct promptly any information
provided by any of them for use in the Schedule 14D-9 which shall become false
or misleading, and the Company shall take all steps necessary to cause the
Schedule 14D-9, as so corrected, to be filed with the SEC and disseminated to
holders of Shares, in each case as and to the extent required by applicable Law.
Parent and its counsel shall be given an opportunity to review and comment on
the Schedule 14D-9 (and any amendments thereto) prior to its being filed with
the SEC. The Company shall provide Parent, Purchaser and their counsel with any
comments or other communications, whether written or oral, that the Company or
its counsel may receive from time to time from the SEC or its staff with respect
to the Schedule 14D-9 promptly after receipt of such comments or other
communications.
(c) The Company (i) shall promptly furnish Purchaser with mailing labels
containing the names and addresses of all record holders of Shares and with
security position listings of Shares held in stock depositories, each as of a
recent date, together with all other available listings and computer files
containing names, addresses and security position listings of record holders and
beneficial owners of Shares and (ii) shall furnish Purchaser with such
additional information, including, without limitation, updated listings and
computer files of stockholders, mailing labels and security position listings,
and such other assistance as Parent, Purchaser or their agents may reasonably
request in connection with the Offer.
ARTICLE 2
The Merger
Section 2.01. The Merger. At the Effective Time (as hereinafter defined)
and upon the terms and subject to the conditions of this Agreement and in
accordance with the DGCL, Purchaser shall be merged with and into the Company in
the Merger. Following the Merger, the Company shall continue as the surviving
4
<PAGE>
corporation (the "Surviving Corporation") and the separate corporate existence
of Purchaser shall cease.
Section 2.02. Effective Time. Subject to the provisions of this Agreement,
Parent, Purchaser and the Company shall cause the Merger to be consummated by
filing an appropriate Certificate of Merger or other appropriate documents (the
"Certificate of Merger") with the Secretary of State of the State of Delaware in
such form as required by, and executed in accordance with, the relevant
provisions of the DGCL, as soon as practicable on the Closing Date (as
hereinafter defined). The Merger shall become effective upon such filing or at
such time thereafter as is provided in the Certificate of Merger (the "Effective
Time").
Section 2.03. Closing of the Merger. The closing of the Merger (the
"Closing") will take place at a time and on a date to be specified by the
parties (the "Closing Date"), which shall be no later than the second business
day after satisfaction or waiver of the conditions set forth in Article 7 (other
than those conditions that by their nature are to be satisfied at the Closing,
but subject to the fulfillment or waiver of those conditions), at the offices of
Shearman & Sterling, 599 Lexington Avenue, New York, New York 10022, or at such
other time, date or place as agreed to in writing by the parties hereto.
Section 2.04. Effects of the Merger. The Merger shall have the effects set
forth in the DGCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the properties, rights, privileges, powers
and franchises of the Company and Purchaser shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Purchaser
shall become the debts, liabilities and duties of the Surviving Corporation.
Section 2.05. Certificate of Incorporation and Bylaws. The certificate of
incorporation of the Company in effect at the Effective Time shall be the
certificate of incorporation of the Surviving Corporation until amended in
accordance with applicable law. The bylaws of the Purchaser in effect at the
Effective Time shall be the bylaws of the Surviving Corporation until amended in
accordance with applicable law.
Section 2.06. Directors. The directors of Purchaser at the Effective Time
shall be the initial directors of the Surviving Corporation, to hold office in
accordance with the certificate of incorporation and bylaws of the Surviving
Corporation until their successors are duly elected or appointed and qualified
or until their earlier death, resignation or removal.
5
<PAGE>
Section 2.07. Officers. The officers of the Company at the Effective Time
shall be the initial officers of the Surviving Corporation, to hold office in
accordance with the certificate of incorporation and bylaws of the Surviving
Corporation until their successors are duly elected or appointed and qualified
or until their earlier death, resignation or removal.
Section 2.08. Conversion of Shares. (a) At the Effective Time, each
outstanding share of Common Stock, par value $.01 per share, of Purchaser shall,
by virtue of the Merger and without any action on the part of Purchaser, the
Company or the holder thereof, be converted into one fully paid and non-
assessable share of Common Stock, par value $.001 per share, of the Surviving
Corporation.
(b) At the Effective Time, each Share, including the corresponding Company
Rights (as hereinafter defined), issued and outstanding immediately prior to the
Effective Time (other than (i) Shares held by the Company, (ii) Shares held by
Parent or any of its subsidiaries (as hereinafter defined) and (iii) any
Dissenting Shares (as hereinafter defined)) shall, by virtue of the Merger and
without any action on the part of Purchaser, the Company or the holder thereof,
be converted into and exchangeable for the right to receive an amount equal to
the Per Share Amount in cash (the "Merger Consideration") payable, without
interest, to the holder of such Share, upon surrender, in the manner provided in
Section 211, of the Certificate (as hereinafter defined) that formerly
represented such Share.
(c) At the Effective Time, each Share held by Parent, each subsidiary of
Parent or the Company immediately prior to the Effective Time shall, by virtue
of the Merger and without any action on the part of Parent, any subsidiary of
Parent or the Company be canceled, retired and cease to exist and no payment
shall be made with respect thereto.
Section 2.09. Stock Options; Restricted Stock. (a) As soon as practicable
following the date of this Agreement, Parent and the Company (or, if
appropriate, any committee of the Company Board administering Company's Stock
Option Plan for Employees, as amended and restated as of January 28, 1998 (the
"Option Plan"), shall take such action as may be required to effect the
following provisions of this Section 2.09. At the Effective Time each (A)
unvested option and (B) vested option whose exercise price immediately prior to
the Effective Time equals or exceeds $12.00, in each case to purchase Shares
pursuant to the Option Plan (a "Company Stock Option"), which is then
outstanding shall be assumed by Parent and converted into an option (or a new
substitute option shall be granted) (an "Assumed Stock Option") to purchase the
number of shares of Georgia-Pacific Corporation-Georgia-Pacific Group common
stock, par value $.80 per share ("Parent Common Stock") (rounded up to the
nearest whole share) equal to (x)
6
<PAGE>
the number of Shares subject to such option multiplied by (y) the Merger
Consideration divided by the closing price (as reported in the New York City
edition of the Wall Street Journal, or if not reported therein, another
nationally recognized source) for a share of Parent Common Stock on the date of
the Effective Time, at an exercise price per share of Parent Common Stock
(rounded down to the nearest penny) equal to (A) the former exercise price per
share of Company Common Stock under such option immediately prior to the
Effective Time divided by (B) the Merger Consideration divided by the closing
price (as reported in the New York City edition of the Wall Street Journal, or
if not reported therein, another nationally recognized source) for a share of
Parent Common Stock on the date of the Effective Time; provided, however, that
in the case of any Company Stock Option which is intended to qualify as an
incentive stock option under Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), the conversion formula shall be adjusted, if necessary,
to comply with Section 424(a) of the Code. Except as provided above each Assumed
Stock Option shall be subject to the same terms and conditions (including
expiration date, vesting and exercise provisions) as were applicable to the
converted Company Stock Option immediately prior to the Effective Time;
provided, however, that if the employment of any holder of an Assumed Stock
Option is terminated by the Company other than for cause after the Effective
Time, all Assumed Options held by such holder shall be 100% vested and remain
exercisable until the earlier of (x) 90 days beginning on the date of such
termination and (y) the expiration of the term of the Assumed Option.
(b) As soon as practicable after the Effective Time, Parent shall deliver
to the holders of Company Stock Options appropriate notices setting forth such
holders' rights pursuant to the Option Plan and the agreements evidencing the
grants of such Company Stock Options and indicating that such Company Stock
Options and agreements have been assumed by Parent and shall continue in effect
on the same terms and conditions (subject to the adjustments required by the
terms thereof or by this Section 2.09).
(c) Parent shall take such actions as are reasonably necessary for the
conversion of Company Stock Options into Assumed Stock Options pursuant to this
Section 2.09, including the reservation, issuance and listing of shares of
Parent Common Stock as is necessary to effectuate the transactions contemplated
by this Section 2.09. Parent shall use its reasonable best efforts to prepare
and file with the SEC as soon as practicable after the Effective Time a
registration statement on Form S-8 or other appropriate form with respect to
shares of Parent Common Stock subject to the Assumed Stock Options and to
maintain the effectiveness of such registration statement covering such Assumed
Stock Options (and to maintain the current status of the prospectus contained
therein) for so long as any of such Assumed Stock Options remain outstanding.
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(d) At the Effective Time, each vested option to purchase Shares under the
Option Plan whose exercise price immediately prior to the Effective Time is less
than $12.00 and each option to purchase Shares under the Company's Directors'
Stock Option Plan, as amended and restated as of January 28, 1998 (the
"Directors' Option Plan"), whether vested or unvested, shall be canceled, and
Parent shall pay each holder thereof in cash at the Effective Time for each such
option an amount determined by multiplying (A) the excess, if any, of the Merger
Consideration over the applicable exercise price per Share of such option by (B)
the number of Shares to which such option relates.
(e) At the Effective Time, any restricted Shares or share units awarded
pursuant to any plan, arrangement or transaction, including the Restricted Stock
Plan for Directors, as amended and restated on January 28, 1998 (the "Directors
Restricted Stock Plan"), and the Company's Incentive Compensation Plan, as
amended and restated as of January 28, 1998 (the "ICP"), outstanding immediately
prior to the Effective Time shall be cancelled, and Parent shall pay to each
holder thereof in cash at the Effective Time for each such restricted Share or
share unit an amount determined by multiplying (A) the Merger Consideration by
(B) the number of such restricted Shares or share units held by such holder.
(f) Prior to the Effective Time, the Company shall take all actions
(including, if appropriate, amending the terms of the Option Plan, the
Directors' Option Plan, the Directors' Restricted Stock Plan and the ICP) that
are necessary to give effect to the transactions contemplated by this Section
2.09.
Section 2.10. Payment Fund. Prior to the Effective Time, Parent shall
appoint a commercial bank or trust company reasonably acceptable to the Company
to act as paying agent hereunder for the purpose of exchanging the Merger
Consideration for Shares (the "Paying Agent"). Prior to the Effective Time,
Parent shall deposit with the Paying Agent, in trust for the benefit of holders
of Shares, cash sufficient to pay the Merger Consideration payable pursuant to
Section 2.08 in exchange for outstanding Shares. Such cash deposited with the
Paying Agent shall hereinafter be referred to as the "Payment Fund."
Section 2.11. Payment Procedures. As soon as reasonably practicable after
the Effective Time, Parent and the Surviving Corporation shall cause the Paying
Agent to mail to each holder of a certificate or certificates which immediately
prior to the Effective Time represented outstanding Shares ("Certificates") (i)
a letter of transmittal which shall specify that delivery shall be effected, and
risk of loss and title to Certificates shall pass, only upon delivery of
Certificates to the Paying Agent, and which letter shall be in customary form
and have such other provisions as Parent may reasonably specify and (ii)
instructions
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for effecting the surrender of such Certificates in exchange for the applicable
Merger Consideration. Upon surrender of a Certificate to the Paying Agent
together with such letter of transmittal, duly executed and completed in
accordance with the instructions thereto, and such other documents as may
reasonably be required by the Paying Agent, the holder of such Certificate shall
be entitled to receive in payment therefor a check in the amount equal to the
cash that such holder has the right to receive pursuant to the provisions of
this Article 2. No interest will be paid or will accrue on any cash payable
pursuant to Section 2.08. In the event of a transfer of ownership of Company
Common Stock which is not registered in the transfer records of the Company, a
check in the proper amount of the Merger Consideration payable pursuant to
Section 2.08 may be issued with respect to such Shares to such a transferee if a
Certificate or Certificates representing such Shares are presented to the Paying
Agent, accompanied by all documents required to evidence and effect such
transfer and to evidence that any applicable stock transfer taxes have been
paid.
Section 2.12. No Further Ownership Rights in Company Common Stock. All cash
paid upon conversion of the Shares in accordance with the terms of Article 1 and
this Article 2 shall be deemed to have been issued or paid in full satisfaction
of all rights pertaining to the Shares.
Section 2.13. Dissenting Shares. (a) Notwithstanding any other provisions
of this Agreement to the contrary, Shares that are outstanding immediately prior
to the Effective Time and that are held by stockholders who shall not have voted
in favor of the Merger or consented thereto in writing and who shall have
demanded properly in writing appraisal for such shares in accordance with
Section 262 of the DGCL (collectively, the "Dissenting Shares") shall not be
converted into or represent the right to receive the Merger Consideration. Such
stockholders shall be entitled to receive payment of the appraised value of such
shares of Company Common Stock held by them in accordance with the provisions of
such Section 262, except that all Dissenting Shares held by stockholders who
shall have failed to perfect or who effectively shall have withdrawn or lost
their rights to appraisal of such shares of Company Common Stock under such
Section 262 shall thereupon be deemed to have been converted into and to have
become exchangeable, as of the Effective Time, for the right to receive, without
any interest thereon, the Merger Consideration, upon surrender, in the manner
provided in Section 2.11, of the Certificate or Certificates that formerly
represented such shares of Company Common Stock.
(b) The Company shall give Parent (i) prompt notice of any demands for
appraisal received by the Company, withdrawals of such demands, and any other
instruments served pursuant to DGCL and received by the Company and (ii) the
opportunity to direct all negotiations and proceedings with respect to demands
for
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appraisal under DGCL. The Company shall not, except with the prior written
consent of Parent, make any payment with respect to any demands for appraisal or
offer to settle or settle any such demands.
Section 2.14. Termination of Payment Fund. Any portion of the Payment Fund
which remains undistributed to the holders of Certificates for six months after
the Effective Time shall be delivered to the Surviving Corporation or otherwise
on the instruction of the Surviving Corporation, and any holders of the
Certificates who have not theretofore complied with this Article 2 shall
thereafter look only to the Surviving Corporation and Parent for the Merger
Consideration with respect to the Shares formerly represented thereby to which
such holders are entitled pursuant to Section 2.08 and Section 2.11. Any such
portion of the Payment Fund remaining unclaimed by holders of Shares 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 (as hereinafter defined)) shall, to the extent permitted by law, become
the property of the Surviving Corporation free and clear of any claim or
interest of any person previously entitled thereto.
Section 2.15. No Liability. None of Parent, Purchaser, the Company, the
Surviving Corporation or the Paying Agent shall be liable to any person in
respect of any Merger Consideration from the Payment Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar Law.
Section 2.16. Investment of the Payment Fund. The Paying Agent shall
invest the cash included in the Payment Fund as directed by Parent on a daily
basis. Any interest and other income resulting from such investments shall
promptly be paid to Parent.
Section 2.17. Lost 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
the Surviving Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Paying Agent will deliver in payment for such lost, stolen or destroyed
Certificate the applicable Merger Consideration with respect to the Shares
formerly represented thereby.
Section 2.18. Withholding Rights. Each of the Surviving Corporation and
Parent shall be entitled to deduct and withhold from the Merger Consideration
otherwise payable pursuant to this Agreement to any holder of Shares such
amounts as it is required to deduct and withhold with respect to the making of
such payment under the Code and the rules and regulations promulgated
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thereunder, or any provision of a Law relating to Taxes. To the extent that
amounts are so withheld by the Surviving Corporation or Parent, as the case may
be, such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the Shares in respect to which such deduction
and withholding was made by the Surviving Corporation or Parent, as the case may
be.
Section 2.19. Stock Transfer Books. The stock transfer books of the
Company shall be closed immediately upon the Effective Time and there shall be
no further registration of transfers of Shares thereafter on the records of the
Company. On or after the Effective Time, any Certificates presented to the
Paying Agent or Parent for any reason shall be converted into the Merger
Consideration with respect to the Shares formerly represented thereby.
ARTICLE 3
Representations and Warranties of the Company
Except as set forth in the disclosure schedule delivered by the Company to
Parent prior to the execution of this Agreement (the "Company Disclosure
Schedule") (each section of which qualifies the correspondingly-numbered
representation and warranty or covenant to the extent specified therein), the
Company hereby represents and warrants to each of Parent and Purchaser as
follows:
Section 3.01. Organization and Qualification; Subsidiaries. (a) The
Company and each of its subsidiaries (as hereinafter defined) is a corporation
or legal entity duly organized, validly existing and in good standing under the
Laws of the jurisdiction of its incorporation or formation and has all requisite
corporate, partnership or similar power and authority to own, lease and operate
its properties and to carry on its businesses as now conducted and proposed by
the Company to be conducted.
(b) Section 3.01 of the Company Disclosure Schedule identifies all
subsidiaries of the Company.
(c) Each of the Company and its subsidiaries is duly qualified or licensed
and in good standing to do business 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 or licensing necessary, except where the failure to be
so duly qualified or licensed and in good standing does not and would not
reasonably
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be expected to have, individually or in the aggregate, a Material Adverse Effect
on the Company.
(d) The Company has heretofore made available to Parent accurate and
complete copies of the certificate of incorporation and bylaws or equivalent
constituent documents, as currently in effect, of each of the Company and each
of its subsidiaries which on the date of determination is a "significant
subsidiary" within the meaning of Rule 1-02(w) of Regulation S-X promulgated
under the Exchange Act ("Significant Subsidiary").
Section 3.02. Capitalization of the Company and its Subsidiaries. (a) The
authorized capital stock of the Company consists of: (i) 250,000,000 Shares, of
which 70,218,397 Shares were issued and outstanding and 3,052 shares of which
were held in the Company's treasury, in each case, as of the close of business
on May 21, 1999, and (ii) 10,000,000 shares of preferred stock, par value $.001
per share, no shares of which are outstanding. All of the issued and
outstanding Shares have been validly issued, and are duly authorized, fully
paid, non-assessable and free of preemptive rights. As of May 21, 1999,
5,176,485 Shares were issuable pursuant to awards that have been granted under
the Directors Restricted Stock Plan, the Option Plan and the Directors' Option
Plan. Except for the Company Rights and as set forth above, as of the date
hereof, there are outstanding (i) no shares of capital stock or other voting
securities of the Company, (ii) no securities of the Company or its subsidiaries
convertible into or exchangeable for shares of capital stock or voting
securities of the Company, (iii) no options or other rights to acquire from the
Company or its subsidiaries, and no obligations of the Company or its
subsidiaries to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of the
Company, and (iv) no equity equivalents, interests in the ownership or earnings
of the Company or its subsidiaries or other similar rights (including stock
appreciation rights) (collectively, "Company Securities"). There are no
outstanding obligations of the Company or its subsidiaries to repurchase, redeem
or otherwise acquire any Company Securities. There are no stockholder
agreements, voting trusts or other agreements or understandings to which the
Company is a party or to which it is bound relating to the voting of any shares
of capital stock of the Company.
(b) All of the outstanding capital stock of the Company's subsidiaries is
owned by the Company, directly or indirectly, free and clear of any Lien (as
hereinafter defined) or any other limitation or restriction (including any
restriction on the right to vote or sell the same, except as may be provided as
a matter of law). There are no securities of the Company or its subsidiaries
convertible into or exchangeable for, no options or other rights to acquire from
the Company or its subsidiaries, and no other contract, understanding,
arrangement or obligation
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(whether or not contingent) providing for the issuance or sale, directly or
indirectly, of, or granting a right of first refusal, first negotiation, last
look or similar right with respect to, any capital stock or other ownership
interests in, or any other securities of, any subsidiary of the Company. There
are no outstanding contractual obligations of the Company or its subsidiaries to
repurchase, redeem or otherwise acquire any outstanding shares of capital stock
or other ownership interests in any subsidiary of the Company. For purposes of
this Agreement, "Lien" means, with respect to any asset (including, without
limitation, any security) any mortgage, lien, pledge, charge, security interest
or encumbrance of any kind in respect of such asset.
Section 3.03. Authority Relative to this Agreement. (a) The Company has
all necessary corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. No other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby (other than,
with respect to the Merger, the Company Requisite Vote (as hereinafter
defined)). This Agreement has been duly and validly executed and delivered by
the Company and constitutes a valid, legal and binding agreement of the Company,
enforceable against the Company in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
(b) The Company Board has duly and validly authorized the execution and
delivery of this Agreement and approved the consummation of the transactions
contemplated hereby, and has taken all corporate actions required to be taken by
the Company Board for the consummation of the transactions, including the Offer
and the Merger, contemplated hereby and, subject to Section 6.04(b), has
resolved (i) to deem this Agreement and the transactions contemplated hereby,
including the Merger, taken together, advisable and fair to and in the best
interests of the Company and its stockholders, and (ii) to recommend that the
stockholders of the Company approve and adopt this Agreement. The Company Board
has directed that this Agreement be submitted to the stockholders of the Company
for their approval. The affirmative approval of the holders of Shares
representing a majority of the votes that may be cast by the holders of all
outstanding Shares (the "Company Requisite Vote") is the only vote of the
holders of any class or series of capital stock of the Company necessary to
adopt this Agreement and approve the transactions contemplated hereby, including
the Merger.
Section 3.04. SEC Reports; Financial Statements. The Company has filed all
required forms, reports and documents with the SEC since November 1,
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1996, each of which has complied in all material respects with all applicable
requirements of the Securities Act and the Exchange Act, each as in effect on
the dates such forms, reports and documents were filed. The Company has
heretofore made available to Parent, in the form filed with the SEC (including
any amendments thereto), (i) its Annual Reports on Form 10-K for each of the
fiscal years ended September 30, 1997 and 1998 and its Form 10 filed November
26, 1996, (ii) all definitive proxy statements relating to the Company's
meetings of stockholders (whether annual or special) held since January 1, 1997,
and (iii) all other reports or registration statements filed by the Company with
the SEC since November 1, 1996 (the "Company SEC Reports"). None of such forms,
reports or documents, including, without limitation, any financial statements or
schedules included or incorporated by reference therein, contained, when filed,
any untrue statement of a material fact or omitted to state a material fact
required to be stated or incorporated by reference therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The consolidated financial statements of the Company
included in the Company SEC Reports complied as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto and fairly present, in conformity with generally
accepted accounting principles applied on a consistent basis ("GAAP") (except as
may be indicated in the notes thereto), 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 year-end adjustments).
Section 3.05. No Undisclosed Liabilities. Except as and to the extent
publicly disclosed by the Company in the Company SEC Reports, none of the
Company or its subsidiaries has any liabilities or obligations of any nature,
whether or not accrued, contingent or otherwise, and there is no existing
condition, situation or set of circumstances which would reasonably be expected
to result in such a liability or obligation, other than liabilities or
obligations provided for in the consolidated balance sheet of the Company
(including the notes thereto) as of September 30, 1998, liabilities or
obligations under this Agreement and liabilities or obligations which would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company.
Section 3.06. Absence of Changes. Except as and to the extent publicly
disclosed in the Company SEC Reports or as expressly permitted by Section 5.01,
since September 30, 1998, the Company and its subsidiaries have conducted their
business in the ordinary and usual course consistent with past practice and
there has not been:
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(a) any event, occurrence or development which does or would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company (other
than payment of the Company's regular quarterly cash dividend on Company Common
Stock), or any repurchase, redemption or other acquisition by the Company or any
subsidiary of the Company of any Company Securities;
(c) any amendment of any term of any outstanding security of the Company
or any subsidiary of the Company that would materially increase the obligations
of the Company or such subsidiary under such security;
(d) (x) any incurrence or assumption by the Company or any subsidiary of
the Company of any indebtedness for borrowed money, other than borrowings under
existing credit facilities (or any renewals, replacements or extensions that do
not increase the aggregate commitments thereunder) that are incurred (A) in the
ordinary and usual course of business consistent with past practice (it being
understood that any indebtedness incurred prior to the date hereof in respect of
capital expenditures shall be considered to have been in the ordinary and usual
course of business consistent with past practice) or (B) in connection with (1)
any acquisition or capital expenditure permitted by Section 501 or (2) the
transactions contemplated hereby, or (y) any guarantee, endorsement or other
incurrence or assumption of liability (whether directly, contingently or
otherwise) by the Company or any subsidiary of the Company for the obligations
of any other person (other than the Company or any wholly owned subsidiary of
the Company), other than in the ordinary and usual course of business consistent
with past practice;
(e) any creation or assumption by the Company or any subsidiary of the
Company of any Lien on any material asset of the Company or any subsidiary of
the Company other than in the ordinary and usual course of business consistent
with past practice;
(f) any making of any loan, advance or capital contribution to or
investment in any person by the Company or any subsidiary of the Company other
than (i) loans, advances or capital contributions to or investments in wholly
owned subsidiaries of the Company or (ii) loans or advances to employees of the
Company or any subsidiary made in the ordinary and usual course of business
consistent with past practice;
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(g) (i) any contract or agreement entered into by the Company or any
subsidiary of the Company on or prior to the date hereof relating to any
material acquisition or disposition of any assets or business other than in the
ordinary course of business or (ii) any modification, amendment, assignment,
termination or relinquishment by the Company or any subsidiary of the Company of
any contract, license or other right (including any insurance policy naming it
as a beneficiary or a loss payable payee) that does or would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company;
(h) any material change in any method of accounting or accounting
principles or practice by the Company or any subsidiary of the Company, except
for any such change required by reason of a change in GAAP; or
(i) any (i) grant of any severance or termination pay to any director,
officer or employee of the Company or any of its subsidiaries, (ii) entering
into of any employment, deferred compensation, change in control or other
similar agreement (or any amendment to any such existing agreement) with any
director, officer or employee of the Company or any of its subsidiaries, (iii)
increase in benefits payable under any existing severance or termination pay
policies or employment agreements or (iv) increase in compensation, bonus or
other benefits payable to directors, officers or employees of the Company or any
of its subsidiaries other than, in the case of clause (i) with respect to non-
executive employees and clause (iv) only, in the ordinary course of business
consistent with past practice.
Section 3.07. Information Supplied. None of the information supplied or to
be supplied by the Company for inclusion or incorporation by reference in (i)
the Offer Documents or any amendments or supplements thereto to be filed with
the SEC by Parent in connection with the Offer will, at the time filed with the
SEC, at the time mailed to holders of Shares and at the time of the consummation
of the Offer, 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 were
made, not misleading, and (ii)(x) the proxy statement (the "Proxy Statement") or
any amendments or supplements thereto relating to the Company Stockholder
Meeting will, at the date mailed to stockholders and at the time of the Company
Stockholder Meeting or (y) the Schedule 14D-9 or any amendments or supplements
thereto will, at the time filed with the SEC and at the time mailed to holders
of Shares, 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
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circumstances under which they were made, not misleading. If at any time prior
to the Effective Time any event with respect to the Company, its officers and
directors or any of its subsidiaries should occur which is required to be
described in an amendment of, or a supplement to, (i) the Schedule 14D-9 or the
Proxy Statement, such amendment or supplement (which Parent shall have a
reasonable opportunity to review) shall be promptly filed with the SEC and, as
required by Law, disseminated to the stockholders of the Company or (ii) the
Offer Documents, the Company shall promptly notify Parent and provide Parent
with such information as is necessary to allow Parent to prepare such amendment
and supplement. The Schedule 14D-9 and the Proxy Statement, and any amendment or
supplement thereto, when filed, distributed or disseminated, as applicable, will
comply as to form in all material respects with the provisions of the Exchange
Act and the rules and regulations thereunder.
Section 3.08. Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Securities Act, the Exchange Act, state
securities or blue sky laws, the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), the filing and recordation of the Certificate
of Merger as required by the DGCL and as otherwise set forth in Section 3.08 to
the Company Disclosure Schedule, no filing with or notice to, and no permit,
authorization, consent or approval of, any court or tribunal or administrative,
governmental or regulatory body, agency or authority (a "Governmental Entity")
or other third party is necessary for the execution and delivery by the Company
of this Agreement or the consummation by the Company of the transactions
contemplated hereby, except where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings or give such
notice does not and would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company.
Section 3.09. No Default. Neither the Company nor any of its subsidiaries
are in violation of any term of (i) its certificate of incorporation, bylaws or
other organizational documents, (ii) any agreement or instrument related to
indebtedness for borrowed money or any other agreement to which it is a party or
by which it is bound, or (iii) any foreign or domestic law, order, writ,
injunction, decree, ordinance, award, stipulation, statute, judicial or
administrative doctrine, rule or regulation enacted by a Governmental Entity
("Law") applicable to the Company, its subsidiaries or any of their respective
properties or assets, the consequence of which violation does or would
reasonably be expected to (A) have, in the case of (ii) or (iii), individually
or in the aggregate, a Material Adverse Effect on the Company or (B) prevent or
materially delay the performance of this Agreement by the Company. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby will not
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(i) violate the certificate of incorporation, bylaws or other organizational
documents of the Company or any of its subsidiaries, (ii) violate or conflict
with, constitute a default under, require any consent, waiver or notice under
any term of, or result in the reduction or loss of any benefit or the creation
or acceleration of any right or obligation under, any agreement, note, bond,
mortgage, indenture, contract, lease, Company Permit (as hereinafter defined) or
other obligation or right to which the Company or any of its subsidiaries is a
party or by which any of the assets or properties of the Company or any of its
subsidiaries is bound, (iii) violate any applicable Law, or (iv) result in the
creation or imposition of any Lien upon any of the properties or assets of the
Company or any of its subsidiaries, except, in the case of clauses (ii) through
(iv) only, where any of the foregoing do not or would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on the
Company.
Section 3.10. Litigation. Except as and to the extent publicly disclosed
by the Company in the Company SEC Reports, there is no suit, claim, action or
proceeding pending or, to the Company's knowledge, threatened, nor to the
knowledge of the Company, is there any investigation pending or threatened,
against the Company or any of its subsidiaries or any of their respective
properties or assets which (a) would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company or
(b) as of the date hereof, questions the validity of this Agreement or any
action to be taken by the Company in connection with the consummation of the
transactions contemplated hereby or is reasonably likely to otherwise prevent or
delay the consummation of the transactions contemplated by this Agreement.
Except as and to the extent publicly disclosed by the Company in the Company SEC
Reports, none of the Company or its subsidiaries is subject to any outstanding
order, writ, injunction or decree which does or would reasonably be expected to
have a Material Adverse Effect on the Company.
Section 3.11. Compliance with Applicable Law. The Company and its
subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities necessary for the lawful conduct of their
respective businesses (the "Company Permits"), except for failures to hold such
permits, licenses, variances, exemptions, orders and approvals which do not or
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company. The Company and its subsidiaries are in
compliance with the terms of the Company Permits, except where the failure to so
comply does not or would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company. The businesses of the
Company and its subsidiaries are not being conducted in violation of any Law
applicable to the Company or its subsidiaries, except for violations or possible
violations which do not and would not reasonably be expected to have,
individually
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or in the aggregate, a Material Adverse Effect on the Company. To the Company's
knowledge, no investigation or review by any Governmental Entity with respect to
the Company or its subsidiaries is pending or threatened, nor, to the Company's
knowledge, has any Governmental Entity indicated an intention to conduct the
same, other than, in each case, those which do not or would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company.
Section 3.12. Employee Plans. (a) Section 3.12(a) of the Company
Disclosure Schedule lists all material "employee benefit plans," as defined in
Section 3(3) of ERISA, including any "multiemployer plan," as defined in Section
3(37) of ERISA (a "Multiemployer Plan") and all other material employee benefit
plans or other benefit arrangements, including, without regard to materiality,
all executive compensation, directors' benefit, bonus or other incentive
compensation, change in control, severance and deferred compensation plans which
the Company or any of its subsidiaries maintains, contributes to or has any
obligation to or liability for (each a "Company Employee Benefit Plan" and
collectively, the "Company Employee Benefit Plans").
(b) True, correct and complete copies of each Company Employee Benefit
Plan (and, where applicable, the most recent summary plan description, actuarial
report, determination letter, most recent Form 5500 and trust agreement) have
been made available to Parent for review prior to the date hereof.
(c) As of the date hereof, (i) all payments required to be made by or
under any Company Employee Benefit Plan, any related trusts, or any collective
bargaining agreement have been made; (ii) the Company and its subsidiaries have
performed all material obligations required to be performed by them under any
Company Employee Benefit Plan; (ii) the Company Employee Benefit Plans have been
administered in material compliance with their terms and the requirements of
ERISA, the Code and other applicable Laws; (iv) there are no material actions,
suits, arbitrations or claims (other than routine claims for benefit) pending or
threatened with respect to any Company Employee Benefit Plan; and (v) the
Company and its subsidiaries have no material liability as a result of any
"prohibited transaction" (as defined in Section 406 of ERISA and Section 4975 of
the Code) for any excise tax or civil penalty.
(d) None of the Company Employee Benefit Plans is subject to Title IV of
ERISA (the "Company Title IV Plans") and, as of the most recent plan valuation
date, the "accumulated benefit obligations", and the "projected benefit
obligations" of each Company Title IV Plan that is currently sponsored by the
Company or any trades or businesses (whether or not incorporated) which are or
have ever been under common control, or which are or have ever been treated as a
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single employer, with the Company under Section 414(b), (c), (m) or (o) of the
Code (an "ERISA Affiliate") using the actuarial assumptions used by each such
plan's actuary for FAS 87 purposes, does not exceed the fair market value of the
assets of each such Plan.
(e) The Company and its subsidiaries have not incurred any material
withdrawal liability with respect to any Company Benefit Plan which is a
Multiemployer Plan.
(f) Each of the Company Benefit Plans which is intended to be "qualified"
within the meaning of Section 401(a) of the Code has been determined by the
Internal Revenue Service to be so "qualified" and the Company knows of no fact
which would adversely affect the qualified status of any such plan.
(g) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
material payment becoming due, or materially increase the amount of compensation
due, to any current or former employee of the Company or any of its
subsidiaries; (ii) materially increase any benefits otherwise payable under any
Company Employee Benefit Plan; or (iii) result in the acceleration of the time
of payment or vesting of any such material benefits.
Section 3.13. Labor Matters. (a) Section 3.13 of the Company Disclosure
Schedule sets forth a list of all material employment, labor or collective
bargaining agreements to which the Company or any subsidiary of the Company is
party and except as set forth therein, there are no material employment, labor
or collective bargaining agreements which pertain to employees of the Company or
any of its subsidiaries. The Company has heretofore made available to Parent
true and complete copies of the (A) employment agreements listed on Section 3.13
of the Company Disclosure Schedule and the (B) labor or collective bargaining
agreements listed on Section 3.13 of the Company Disclosure Schedule, together
with all amendments, modifications, supplements and side letters affecting the
duties, rights and obligations of any party thereunder.
(b) (i) No employees of the Company or any of its subsidiaries are
represented by any material labor organization; no material labor organization
or group of employees of the Company or any of its subsidiaries has made a
pending written demand for recognition or certification; and, to the Company's
knowledge, there are no material representation or certification proceedings or
petitions seeking a representation proceeding presently pending or threatened in
writing to be brought or filed with the National Labor Relations Board or any
other labor relations tribunal or authority. To the Company's knowledge, there
are no material organizing activities involving the Company or any of its
Subsidiaries
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presently being engaged in by any labor organization or group of employees of
the Company or any of its subsidiaries;
(ii) There are no strikes, work stoppages, unfair labor practice charges,
grievances or complaints pending or threatened in writing by or on behalf of any
employee or group of employees of the Company or any of its Subsidiaries other
than any such charges, grievances or complaints which do not and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company; and
(iii) There are no complaints, charges or claims against the Company or any
of its subsidiaries pending, or threatened in writing to be brought or filed,
with any Governmental Entity or arbitrator based on, arising out of, in
connection with, or otherwise relating to the employment or termination of
employment of any individual by the Company or any of its subsidiaries other
than any such complaints, charges or claims which do not and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company.
(c) The Company and each of its subsidiaries is in compliance with all
Laws relating to the employment of labor, including all such laws and orders
relating to wages, hours, collective bargaining, discrimination, civil rights,
safety and health, workers' compensation and the collection and payment of
withholding and/or Social Security taxes and similar taxes other than any such
non-compliance which does not or would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company.
Section 3.14. Environmental Matters. (a) For purposes of this Agreement:
(i) "Environmental Costs and Liabilities" means any and all losses,
liabilities, obligations, damages (including compensatory, punitive and
consequential damages), fines, penalties, judgments, actions, claims, costs and
expenses (including, without limitation, fees, disbursements and expenses of
legal counsel, experts, engineers and consultants and the costs of investigation
and feasibility studies and cost to clean up, remove, treat, or in any other way
address any Hazardous Materials (as hereinafter defined)) arising from, under or
pursuant to any Environmental Law (as hereinafter defined);
(ii) "Environmental Law" means any applicable federal, state, local or
foreign law (including common law), statute, rule, regulation, ordinance, decree
or other legal requirement relating to the protection of
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natural resources, the environment and public and employee health and safety or
pollution or the release or exposure to Hazardous Materials (as hereinafter
defined) and shall include, without limitation, the Comprehensive Environmental
Response, Compensation, and Liability Act ("CERCLA") (42 U.S.C. (S) 9601 et
seq.), the Hazardous Materials Transportation Act (49 U.S.C. (S) 1801 et seq.),
the Resource Conservation and Recovery Act (42 U.S.C. (S) 6901 et seq.), the
Clean Water Act (33 U.S.C. (S) 1251 et seq.), the Clean Air Act (33 U.S.C. (S)
7401 et seq.), the Toxic Substances Control Act (15 U.S.C. (S) 7401 et seq.),
the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. (S) 136 et
seq.), and the Occupational Safety and Health Act (29 U.S.C. (S) 651 et seq.)
("OSHA") and the regulations promulgated pursuant thereto, and any such
applicable state or local statutes, and the regulations promulgated pursuant
thereto as such laws have been and may be amended or supplemented through the
Closing Date;
(ii) "Hazardous Material" means any substance, material or waste which is
regulated, classified or otherwise characterized as hazardous, toxic, pollutant,
contaminant or words of similar meaning or regulatory effect by any Governmental
Entity or the United States, and includes, without limitation, petroleum,
petroleum by-products and wastes, asbestos and polychlorinated biphenyls;
(iv) "Release" means any release, spill, effluent, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching, or
migration into the indoor or outdoor environment, or into or out of any property
currently or formerly owned, operated or leased by the applicable party or its
subsidiaries; and
(v) "Remedial Action" means all actions, including, without limitation,
any capital expenditures, required by a Governmental Entity or required under or
taken pursuant to any Environmental Law, or voluntarily undertaken to (A) clean
up, remove, treat, or in any other way, ameliorate or address any Hazardous
Materials or other substance in the indoor or outdoor environment; (B) prevent
the Release or threat of Release, or minimize the further Release of any
Hazardous Material so it does not endanger or threaten to endanger the indoor or
outdoor environment; (C) perform pre-remedial studies and investigations or
post-remedial monitoring and care pertaining or relating to a Release; or (D)
bring the applicable party into compliance with any Environmental Law.
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(b) Except as disclosed in the Company SEC Reports or as would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect:
(i) The operations of the Company and its subsidiaries have been and are
in compliance with all Environmental Laws, and the Company is not aware of any
facts, circumstances or conditions, which would prevent compliance in the
future;
(ii) The Company and its subsidiaries have obtained and are in compliance
with all permits, authorizations, licenses or similar approvals required under
applicable Environmental Laws for the operations of their respective businesses;
(iii) The Company and its subsidiaries are not subject to any outstanding
written orders or material contracts with any Governmental Entity or other
person respecting (A) Environmental Laws, (B) Remedial Action or (C) any Release
or threatened Release of a Hazardous Material;
(iv) Neither the Company nor any of its subsidiaries has any actual or
contingent liability , and there are no facts, conditions, situations or set of
circumstances that could reasonably be expected to result in or be the basis for
any such liability in connection with the Release of any Hazardous Material
(whether on-site or off-site) nor have such entities incurred or do such
entities reasonably expect to incur any Environmental Costs and Liabilities;
(v) The operations of the Company or its subsidiaries do not involve the
generation, transportation, treatment, storage or disposal of hazardous waste,
as defined and regulated under 40 C.F.R. Parts 260-270 (in effect as of the date
of this Agreement) or any state equivalent;
(vi) No judicial or administrative proceedings are pending or, to the
Company's knowledge, threatened against the Company or its subsidiaries alleging
the violation of or seeking to impose liability pursuant to any Environmental
Law and no claim, summons or order has been received, no complaint has been
filed, no penalty has been assessed, and no investigations, actions, suits or
proceedings are pending or, to the Company's knowledge, threatened against the
Company or any of its subsidiaries under Environmental Laws; and
(vii) The Company has made available to Parent copies of all
environmentally related assessments, audits, investigations, sampling or
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similar reports of which the Company has knowledge relating to the Company or
its subsidiaries or any real property currently or formerly owned, operated or
leased by or for the Company or its subsidiaries.
Section 3.15. Taxes. Except as disclosed on Section 3.15 of the Company
Disclosure Schedule or except as would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company:
(a) Each of the Company and each subsidiary has timely filed, or has
caused to be timely filed on its behalf (taking into account any extension of
time within which to file), all Tax Returns required to be filed by it, and all
such filed Tax Returns are true, complete and accurate in all material respects.
All Taxes shown to be due on such Tax Returns, or otherwise required to be paid
by the Company or a subsidiary, have been timely paid.
(b) The most recent financial statements contained in the Company SEC
Reports reflect an adequate reserve for all Taxes payable by the Company and its
subsidiaries for all Taxable periods and portions thereof through the date of
such financial statements. No deficiency with respect to Taxes has been
proposed, asserted or assessed against the Company or any subsidiary.
(c) The Federal income Tax Returns of the Company and each subsidiary have
been examined by and settled with the United States Internal Revenue Service (or
the applicable statue of limitations has expired) for all years through 1990.
All assessments for Taxes due with respect to such completed and settled
examinations or any concluded litigation have been fully paid.
(d) Neither the Company nor any subsidiary has any obligation under any
agreement (either with any person or any taxing authority) with respect to
Taxes.
(e) Neither the Company nor any subsidiary has constituted either a
"distributing corporation" or a "controlled corporation" (within the meaning of
Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for tax-
free treatment under Section 355 of the Code since the effective date of Section
355(e) of the Code.
(f) Since December 31, 1984, neither the Company nor any subsidiary has
been a member of an affiliated group of corporations within the meaning of
Section 1504 of the Code, other than the affiliated group of which the Company
is the common parent.
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(g) No audit or other administrative or court proceedings are pending with
respect to Federal income or state income or franchise Taxes of the Company or
any subsidiary and no notice thereof has been received. No issue has been raised
by any taxing authority in any presently pending Federal income or state income
or franchise Tax audit that could be material and adverse to the Company or any
subsidiary for any period after the Effective Time.
(h) No claim has been made by a taxing authority in a jurisdiction where
neither the Company nor any subsidiary files state income or franchise Tax
Returns that the Company or any subsidiary is or may be subject to income or
franchise taxation in that jurisdiction.
(i) Neither the Company nor any subsidiary is a party to any contract,
agreement or other arrangement which provides for the payment of any amount
which would not be deductible by reason of Section 162(m) of the Code.
(j) The Company has made available to Parent true and complete copies of
(i) all Federal income Tax Returns of the Company and its subsidiaries for the
preceding three taxable years and (ii) any audit report issued within the last
three years (or otherwise with respect to any audit or proceeding in progress)
relating to Federal income Taxes of the Company or any subsidiary.
(k) Neither the Company nor any subsidiary (or any employee, officer or
director thereof) has taken or agreed to take any action that could reasonably
be expected to give rise to any liability of the Company under Section V of the
Tax Sharing and Indemnification Agreement dated as of November 20, 1996 between
Alco Standard Corporation and the Company.
(l) Other than with respect to Mexico, Canada or any country in which the
Company's international division operates, the Company does not currently have,
and since December 31, 1996 has not had, a permanent establishment in any
foreign country as defined in any applicable tax treaty or convention between
the United States and any such foreign country.
(m) Since December 31, 1996, The Unisource Foundation has filed all
appropriate Tax Returns and such Tax Returns, when filed, were true, complete
and correct in all material respects. Since December 31, 1996, neither The
Unisource Foundation nor any manager thereof has engaged in any acts of self-
dealing as defined in Section 4941 of the Code; provided, however, that it is
acknowledged that The Unisource Foundation has made contributions to
organizations the board of trustees, board of directors or officers of which
included members of the board of trustees, board of directors, contribution
committee members or officers of The Unisource Foundation and such
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contributions shall not, for the purposes of this Section 3.15(m), constitute
self-dealing.
(n) For purposes of this Agreement:
"Taxes" includes all forms of taxation, whenever created or imposed, and
whether of the United States or elsewhere, and whether imposed by a local,
municipal, governmental, state, foreign, Federal or other Governmental Entity,
or in connection with any agreement with respect to Taxes (including, without
limitation, the Tax Sharing and Indemnification Agreement dated as of November
20, 1996, between Alco Standard Corporation and the Company), including all
interest, penalties and additions imposed with respect to such amounts.
"Tax Returns" means all Federal, state, local, provincial and foreign Tax
returns, declarations, statements, reports, schedules, forms and information
returns and any amended Tax return relating to Taxes.
Section 3.16. Material Contracts. All of the material contracts of the
Company and its subsidiaries that are required to be described in the Company
SEC Reports or to be filed as exhibits thereto are described in the Company SEC
Reports or filed as exhibits thereto and are in full force and effect. Neither
the Company nor any of its subsidiaries nor any other party is in breach of or
in default under any such contract, except for such breaches and defaults as
have not had and would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company. No contract exists
which restricts or limits, or purports to restrict or limit, the ability of the
Company or any of its subsidiaries from (i) purchasing from or selling to any
person paper or tissue products or other supplies except for any such contract
that the Company may cancel with not more than 90 days' notice, or (ii)
competing in any line of business or with any person or in any geographic area
or during any period of time.
Section 3.17. Insurance. The insurance policies maintained by the Company
or any of its subsidiaries have been issued by insurers, which, to the Company's
knowledge, are reputable and financially sound, and provide coverage for the
operations conducted by the Company and its subsidiaries of a reasonably prudent
scope and coverage.
Section 3.18. Real Property.
(a) Section 3.18 of the Company Disclosure Schedule sets forth all of the
material real property owned in fee by the Company and its subsidiaries. Each of
the Company and its subsidiaries has good and marketable title to each parcel of
real property owned by it free and clear of all Liens, except (i) taxes and
general
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and special assessments not in default and payable without penalty and interest,
and (ii) other liens, mortgages, pledges, encumbrances and security interests
which do not materially interfere with the Company's or any of its subsidiaries'
use and enjoyment of such real property or materially detract from or diminish
the value thereof.
(b) Section 3.18 of the Company Disclosure Schedule sets forth all
material leases, subleases and other agreements (the "Company Real Property
Leases") under which the Company or any of its subsidiaries uses or occupies or
has the right to use or occupy, now or in the future, any real property. Each
Company Real Property Lease constitutes the valid and legally binding obligation
of the Company or its subsidiaries, enforceable in accordance with its terms
(except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar Laws of general
applicability relating to or affecting creditors' rights or by general equity
principles), and is in full force and effect. The consummation of the
transactions contemplated by this Agreement will not result in any termination
event or condition or default of a material nature on the part of the Company or
any such subsidiary under any Company Real Property Lease.
Section 3.19. Intellectual Property.
(a) The Company and its subsidiaries own or possess adequate licenses or
other valid rights to use all material Intellectual Property used or held for
use in connection with the business of the Company and its subsidiaries as
currently conducted or as contemplated to be conducted.
(b) No current or prior use of any Intellectual Property by the Company
and its subsidiaries infringes on or otherwise violates the rights of any person
and such use is and has been in accordance with all applicable licenses,
pursuant to which the Company or any of its subsidiaries acquired the right to
use such Intellectual Property other than as would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Company.
(c) No Intellectual Property owned/or licensed by the Company or its
subsidiaries is being used or enforced in a manner that would result in the
abandonment, cancellation or unenforceability of such Intellectual Property
other than as would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company. For purposes of this
Agreement, "Intellectual Property" means all trademarks, trademark rights, trade
names, trade name rights, trade dress and other indications of origin, brand
names, certification rights, service marks, applications for trademarks and for
service marks, know-how and other proprietary rights and information;
inventions,
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discoveries and ideas, whether patentable or not, in any jurisdiction; patents,
patent rights and trade secrets; writings and other works, whether copyrightable
or not, in any jurisdiction; and any similar intellectual property or
proprietary rights.
Section 3.20. Year 2000. (a) Except as disclosed in the Company SEC
Reports, the Computer Programs (as hereinafter defined), computer firmware,
computer hardware (whether general or special purpose) and other similar or
related items of automated, computerized and/or software system(s) that are used
by the Company or by any of its subsidiaries in the conduct of their respective
businesses will not malfunction, will not cease to function, will not generate
incorrect data, and will not provide incorrect results when processing,
providing, and/or receiving (i) date-related data into and between the twentieth
and twenty-first centuries and (ii) date-related data in connection with any
valid date in the twentieth and twenty-first centuries.
(b) Neither the Company nor any of its subsidiaries has made other
representations or warranties to third parties regarding the ability of any
product or service sold, licensed, rendered or otherwise provided by the Company
or by any of its subsidiaries in the conduct of their respective businesses to
operate without malfunction, to operate without ceasing to function, to generate
correct data and to produce correct results when processing, providing and/or
receiving (i) date-related data into and between the twentieth and twenty-first
centuries and (ii) date-related data in connection with any valid date in the
twentieth and twenty-first centuries. For the purposes of this Agreement,
"Computer Programs" means (i) any and all material computer software programs,
including all source and object code; (ii) material databases and compilations,
including any and all data and collections of data, whether machine readable or
otherwise; (iii) material billing, reporting, and other management information
systems; (iv) all material descriptions, flow-charts and other work product used
to design, plan, organize and develop any of the foregoing; (v) all material
content contained on any Internet site(s); and (vi) all material documentation,
including user manuals and training materials, relating to any of the foregoing.
Section 3.21. Opinion of Financial Advisor. DLJ has delivered to the
Company Board its opinion, dated the date of this Agreement, to the effect that,
as of such date, the Merger Consideration is fair to the holders of Shares from
a financial point of view, and such opinion has not been withdrawn or modified.
Section 3.22. Brokers. No broker, finder or investment banker (other
than DLJ, a true and correct copy of whose engagement agreement has been
provided to Parent) is entitled to any brokerage, finder's or other fee or
commission or expense reimbursement in connection with the transactions
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contemplated by this Agreement based upon arrangements made by and on behalf of
the Company or any of its affiliates.
Section 3.23. Takeover Statute. The Company has taken all action required
to be taken by it in order to exempt this Agreement and the transactions
contemplated hereby from, and this Agreement and the transactions contemplated
hereby (the "Covered Transactions") are exempt from, the requirements of any
"moratorium", "control share", "fair price", "affiliate transaction", "business
combination" or other antitakeover Laws and regulations of any state
(collectively, "Takeover Statutes"), including, without limitation, Section 203
of the DGCL, or any antitakeover provision in the Company's certificate of
incorporation or bylaws. The provisions of Section 203 of DGCL do not apply to
the Covered Transactions as they have been approved by the Company Board.
Section 3.24. Amendment to Rights Agreement. The Company Board has taken
all necessary action (including any amendment thereof) under the Rights
Agreement, dated as of December 30, 1996, between the Company and National City
Bank, as Rights Agent (the "Rights Agreement"), so that none of the execution or
delivery of this Agreement, the purchase of Shares pursuant to the Offer in
accordance with Article 1, the payment of the Merger Consideration in accordance
with Article 2 or any other transaction contemplated hereby will cause (i) the
rights (the "Company Rights") issued pursuant to the Rights Agreement to become
exercisable under the Rights Agreement, (ii) Parent or Purchaser to be deemed an
"Acquiring Person" (as defined in the Rights Agreement), or (iii) the "Stock
Acquisition Date" (as defined in the Rights Agreement) to occur upon any such
event. The Company Board has amended the Rights Agreement in order to provide
that the transactions contemplated by the Agreement and Plan of Merger dated as
of February 28, 1999 among the Company, UGI Corporation and Vulcan Acquisition
Corp. (the "UGI Merger Agreement") are no longer exempt from causing (x) the
Company Rights to become exercisable under the Rights Agreement, (y) UGI
Corporation or Vulcan Acquisition Corp. from being deemed an "Acquiring Person"
or (z) the "Stock Acquisition Date" to occur.
Section 3.25. Break-up Fee. The Company has paid to UGI Corporation an
amount equal to $25,000,000 in consideration of its obligation pursuant to
Section 8.5(b) of the UGI Merger Agreement. The Company has terminated the UGI
Merger Agreement.
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ARTICLE 4
Representations and Warranties of Parent and Purchaser
Except as set forth in the disclosure schedule delivered by Parent to the
Company prior to the execution of this Agreement (the "Parent Disclosure
Schedule") (each section of which qualifies the correspondingly-numbered
representation and warranty or covenant to the extent specified therein), Parent
and Purchaser hereby represent and warrant to the Company as follows:
Section 4.01. Organization and Qualification; Subsidiaries. (a) Parent
and each of its subsidiaries is a corporation or legal entity duly organized,
validly existing and in good standing under the Laws of the jurisdiction of its
incorporation and has all requisite corporate, partnership or similar power and
authority to own, lease and operate its properties and to carry on its
businesses as now conducted and proposed by Parent to be conducted.
(b) Section 4.01 of the Parent Disclosure Schedule identifies all
subsidiaries of Parent.
(c) Each of Parent and its subsidiaries is duly qualified or licensed and
in good standing to do business 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 or licensing necessary, except where the failure to be
so duly qualified or licensed and in good standing does not and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Parent.
(d) Parent has heretofore made available to Company accurate and complete
copies of the certificate of incorporation and bylaws or equivalent constituent
documents, as currently in effect, of each of Parent and its subsidiaries which
on the date of determination is a Significant Subsidiary and of Purchaser.
Section 4.02. Authority Relative to this Agreement. Each of Parent and
Purchaser has all necessary corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
boards of directors of Parent and Purchaser and by Parent as the sole
stockholder of Purchaser, and no other corporate proceedings on the part of
Parent or Purchaser are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by each of Parent and Purchaser and constitutes a valid,
legal and binding agreement of each of Parent and Purchaser, enforceable against
each of Parent and Purchaser in accordance with its terms, subject to applicable
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bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and subject, as to enforceability, to
general principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
Section 4.03. SEC Reports; Financial Statements. (a) Parent has filed all
required forms, reports and documents with the SEC since January 1, 1996, each
of which has complied in all material respects with all applicable requirements
of the Securities Act and the Exchange Act, each as in effect on the dates such
forms, reports and documents were filed. Parent has heretofore made available
to the Company, in the form filed with the SEC (including any amendments
thereto), (i) its Annual Reports on Form 10-K for each of the fiscal years ended
December 31, 1996, 1997 and 1998, (ii) all definitive proxy statements relating
to Parent's meetings of stockholders (whether annual or special) held since
January 1, 1996, and (iii) all other reports or registration statements filed by
Parent with the SEC since January 1, 1996 (the "Parent SEC Reports"). None of
such forms, reports or documents, including, without limitation, any financial
statements or schedules included or incorporated by reference therein,
contained, when filed, any untrue statement of a material fact or omitted to
state a material fact required to be stated or incorporated by reference therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The consolidated
financial statements of Parent included in Parent SEC Reports complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto and fairly
present, in conformity with GAAP applied on a consistent basis (except as may be
indicated in the notes thereto), 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 year-end adjustments).
Section 4.04. No Undisclosed Liabilities. Except as and to the extent
publicly disclosed by Parent in the Parent SEC Reports or as disclosed in
Section 4.05 of the Parent Disclosure Schedule, none of Parent or its
subsidiaries had any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, and there is no existing condition, situation
or set of circumstances which would reasonably be expected to result in such a
liability or obligation, other than liabilities or obligations provided for in
the consolidated balance sheet of Parent (including the notes thereto) as of
December 31, 1998, liabilities or obligations under this Agreement and
liabilities or obligations which would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent.
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Section 4.05. Absence of Changes. Except as and to the extent publicly
disclosed in the Parent SEC Reports, since December 31, 1998, Parent and its
subsidiaries have conducted their business in the ordinary and usual course
consistent with past practice and there has not been any event, occurrence or
development which does or would reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on Parent.
Section 4.06. Information Supplied. None of the information supplied or
to be supplied by Parent or Purchaser for inclusion or incorporation by
reference in (i) the Offer Documents or the Schedule 14D-9 or any amendments or
supplements thereto will, at the time filed with the SEC, at the time mailed to
holders of Shares and at the time of the consummation of the Offer, contain any
untrue statement of a material fact or omit to state any 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 and (ii) the Proxy
Statement will, at the date mailed to stockholders and at the time of the
Company Stockholder 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 were made, not misleading. If at any time prior to the Effective Time any
event with respect to Parent, its officers and directors or any of its
subsidiaries should occur which is required to be described in an amendment of,
or a supplement to, (i) the Proxy Statement or the Schedule 14D-9, Parent shall
promptly so advise the Company and provide to the Company such information as
necessary to allow the Company to prepare such amendment or supplement or (ii)
the Offer Documents, such amendment or supplement (which the Company shall have
a reasonable opportunity to review) shall be promptly filed with the SEC and, as
required by Law, disseminated to the stockholders of the Company. The Offer
Documents and any amendments or supplements thereto, when filed, distributed or
disseminated, as applicable, will comply as to form in all material respects
with the provisions of the Exchange Act and the rules and regulations
thereunder.
Section 4.07. Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Securities Act, the Exchange Act, state
securities or blue sky laws, the HSR Act, the filing and recordation of the
Certificate of Merger as required by the DGCL and as otherwise set forth in
Section 4.07 to the Parent Disclosure Schedule, no filing with or notice to, and
no permit, authorization, consent or approval of, any Governmental Entity or
other third party is necessary for the execution and delivery by Parent or
Purchaser of this Agreement or the consummation by Parent or Purchaser of the
transactions contemplated hereby, except where the failure to obtain such
permits, authorizations, consents or approvals or to make such filings or give
such notice
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does not and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent.
Section 4.08. No Default. Neither Parent nor any of its subsidiaries are
in violation of any term of (i) its certificate of incorporation, bylaws or
other organizational documents, (ii) any agreement or instrument related to
indebtedness for borrowed money or any other agreement to which it is a party or
by which it is bound, or (iii) any Law applicable to Parent, its subsidiaries or
any of their respective properties or assets, the consequence of which violation
does or would reasonably be expected to (A) have, in the case of (ii) or (iii)
individually or in the aggregate, a Material Adverse Effect on Parent or (B)
prevent or materially delay the performance of this Agreement by Parent or
Purchaser. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not (i) violate the
certificate of incorporation, bylaws or other organizational documents of Parent
or any of its subsidiaries, (ii) violate or conflict with, constitute a default
under, require any consent, waiver or notice under any term of, or result in the
reduction or loss of any benefit or the creation or acceleration of any right or
obligation under, any agreement, note, bond, mortgage, indenture, contract,
lease, Parent Permit (as hereinafter defined) or other obligation or right to
which Parent or any of its subsidiaries is a party or by which any of the assets
or properties of Parent or any of its subsidiaries is bound, (iii) violate any
applicable Law, or (iv) result in the creation or imposition of any Lien upon
any of the properties or assets of Parent or any of its subsidiaries, except, in
the case of clauses (ii) through (iv) only, where any of the foregoing do not or
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent.
Section 4.09. Litigation. Except as and to the extent publicly disclosed
by Parent in the Parent SEC Reports, there is no suit, claim, action or
proceeding pending or, to Parent's knowledge, threatened, nor to the knowledge
of Parent, is there any investigation pending or threatened, against Parent or
any of its subsidiaries or any of their respective properties or assets which
(a) would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent or (b) as of the date hereof, questions the
validity of this Agreement or any action to be taken by Parent in connection
with the consummation of the transactions contemplated hereby or is reasonably
likely to otherwise prevent or delay the consummation of the transactions
contemplated by this Agreement. Except as and to the extent publicly disclosed
by Parent in the Parent SEC Reports, none of Parent or its subsidiaries is
subject to any outstanding order, writ, injunction or decree which does or would
reasonably be expected to have a Material Adverse Effect on Parent.
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Section 4.10. Compliance With Applicable Law. Parent and its subsidiaries
hold all permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary for the lawful conduct of their respective
businesses (the "Parent Permits"), except for failures to hold such permits,
licenses, variances, exemptions, orders and approvals which do not or would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Parent. Parent and its subsidiaries are in compliance with the
terms of the Parent Permits, except where the failure so to comply does not or
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent. The businesses of Parent and its
subsidiaries are not being conducted in violation of any Law applicable to
Parent or its subsidiaries except for violations or possible violations which do
not and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent. To the knowledge of Parent, no
investigation or review by any Governmental Entity with respect to Parent or its
subsidiaries is pending or threatened, nor, to Parent's knowledge, has any
Governmental Entity indicated an intention to conduct the same, other than, in
each case, those which do not or would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent.
Section 4.11. Year 2000. (a) Except as disclosed in the Parent SEC
Reports, the Computer Programs, computer firmware, computer hardware (whether
general or special purpose) and other similar or related items of automated,
computerized and/or software system(s) that are used by Parent or by any of its
subsidiaries in the conduct of their respective businesses will not malfunction,
will not cease to function, will not generate incorrect data, and will not
provide incorrect results when processing, providing, and/or receiving (i) date-
related data into and between the twentieth and twenty-first centuries and (ii)
date-related data in connection with any valid date in the twentieth and twenty-
first centuries.
(b) Neither Parent nor any of its subsidiaries has made other
representations or warranties to third parties regarding the ability of any
product or service sold, licensed, rendered or otherwise provided by Parent or
by any of its subsidiaries in the conduct of their respective businesses to
operate without malfunction, to operate without ceasing to function, to generate
correct data and to produce correct results when processing, providing and/or
receiving (i) date-related data into and between the twentieth and twenty-first
centuries and (ii) date-related data in connection with any valid date in the
twentieth and twenty-first centuries.
Section 4.12. No Prior Activities. Except for obligations incurred in
connection with its incorporation or organization or the negotiation and
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consummation of this Agreement and the transactions contemplated hereby,
Purchaser has neither incurred any obligation or liability nor engaged in any
business or activity of any type or kind whatsoever or entered into any
agreement or arrangement with any person.
Section 4.13. Vote Required. 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 4.14. Sufficient Funds. As of the Closing Parent will have
sufficient available funds to pay in cash the Merger Consideration payable by it
pursuant to this Agreement. As of the closing of the Offer, Parent will have
sufficient available funds to pay in cash the amount required to purchase all
Shares validly tendered and not withdrawn.
Section 4.15. Funded Break-up Fee. Parent has paid to the Company,
immediately prior to the execution of this Agreement, an amount equal to
$25,000,000 (the "Funded Break-up Fee") in order to reimburse the Company for
the amount paid by the Company pursuant to Section 8.5(b) of the Agreement and
Plan of Merger dated as of February 28, 1999 among the Company, UGI Corporation
and Vulcan Acquisition Corp.
ARTICLE 5
Covenants Related to Conduct of Business
Section 5.01. Conduct of Business of the Company. Except as contemplated
by this Agreement, during the period from the date hereof to the Effective Time,
the Company covenants and agrees that it will, and will cause each of its
subsidiaries to, conduct its operations in the ordinary and usual course of
business consistent with past practice and, to the extent consistent therewith,
with no less diligence and effort than would be applied in the absence of this
Agreement, seek to preserve intact its current business organizations, seek to
keep available the service of its current officers and employees and seek to
preserve its relationships with customers, suppliers and others having business
dealings with it to the end that goodwill and ongoing businesses shall be
unimpaired at the Effective Time. Without limiting the generality of the
foregoing, and except as otherwise expressly provided in this Agreement or in
the Company Disclosure Schedule, prior to the Effective Time, the Company will
not, nor will any of its subsidiaries, without the prior written consent of
Parent, which consent shall not be unreasonably withheld or delayed:
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(a) amend its certificate of incorporation or bylaws (or other similar
governing instrument) or in the case of the Company amend, modify or terminate
the Rights Agreement;
(b) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any stock
of any class or any other securities convertible into or exchangeable for any
stock or any equity equivalents (including, without limitation, any stock
options or stock appreciation rights), except (i) for the issuance or sale of
shares pursuant to outstanding stock options as set forth in Section 5.01(b) of
the Company Disclosure Schedule, or (ii) the issuance of other shares of Company
Common Stock upon the exercise of outstanding securities convertible into or
exchangeable for such shares;
(c) (i) split, combine or reclassify any shares of its capital stock, (ii)
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock
except, for the payment of regular quarterly cash dividends with usual record
and payment dates in accordance with past dividend practice, in the case of the
Company not to exceed $.05 per share of Company Common Stock, (iii) make any
other actual, constructive or deemed distribution in respect of any shares of
its capital stock or otherwise make any payments to stockholders in their
capacity as such, or (iv) redeem, repurchase or otherwise acquire any of its
securities or any securities of any of its subsidiaries (including in the case
of the Company redeeming any Rights);
(d) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization (other
than the Merger);
(e) alter through merger, liquidation, reorganization, restructuring or in
any other fashion the corporate structure or ownership of any subsidiary;
(f) (i) incur or assume any long-term or short-term debt or issue any debt
securities, except for borrowings under existing lines of credit in the ordinary
and usual course of business consistent with past practice; (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person, except in
the ordinary and usual course of business consistent with past practice and
except for obligations of the wholly owned subsidiaries; (iii) make any loans,
advances or capital contributions to, or investments in, any other person (other
than to its wholly owned subsidiaries or customary loans or advances to
employees in the ordinary
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and usual course of business consistent with past practice and in amounts not
material to the maker of such loan or advance); (iv) pledge or otherwise
encumber shares of its capital stock or its subsidiaries; or (v) mortgage or
pledge any of its material assets, tangible or intangible, or create or suffer
to exist any material Lien thereupon;
(g) except as may be required by law or as contemplated by this Agreement,
enter into, adopt or amend or terminate any bonus, profit sharing, compensation,
severance, termination, stock option stock, appreciation right, performance
unit, stock equivalent, stock purchase agreement, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreement, trust,
plan, fund, award or other arrangement for the benefit or welfare of any
director, officer or employee in any manner, or (except for normal increases in
the ordinary and usual course of business consistent with past practice that, in
the aggregate, do not result in a material increase in benefits or compensation
expense to it, and as required under existing agreements) increase in any manner
the compensation or fringe benefits of any director, officer or employee or pay
any benefit not required by any plan and arrangement as in effect as of the date
hereof (including, without limitation, the granting of stock appreciation rights
or performance units);
(h) acquire, sell, lease or dispose of any assets outside the ordinary and
usual course of business consistent with past practice or any assets which in
the aggregate are material to it and its subsidiaries taken as a whole, enter
into any commitment or transaction outside the ordinary and usual course of
business consistent with past practice or grant any exclusive distribution
rights;
(i) except as may be required as a result of a change in Law or in GAAP,
change any of the accounting principles or practices used by it;
(j) revalue in any material respect any of its assets, including, without
limitation, writing down the value of inventory or writing-off notes or accounts
receivable other than in the ordinary and usual course of business consistent
with past practice or as required by GAAP;
(k) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof or any equity interest therein; (ii) enter into any contract or
agreement, other than in the ordinary and usual course of business consistent
with past practice or amend in any material respect any of the Company Contracts
or the agreements referred to in Section 3.18; (iii) authorize new capital
expenditures not provided for in the Company's annual budget which, in the
aggregate, are in excess of $5,000,000; or (iv) enter into or amend any
contract, agreement,
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commitment or arrangement providing for the taking of any action that would be
prohibited hereunder;
(l) make or revoke any tax election or settle or compromise any tax
liability material to it and its subsidiaries taken as a whole or change (or
make a request to any taxing authority to change) any material aspect of its
method of accounting for tax purposes;
(m) 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 in the ordinary
and usual course of business consistent with past practice of liabilities
incurred in the ordinary and usual course of business consistent with past
practice, or waive the benefits of, or agree to modify in any manner, any
confidentiality, standstill or similar agreement to which it or any of its
subsidiaries is a party;
(n) settle or compromise any material pending or threatened suit, action
or claim relating to the transactions contemplated hereby;
(o) enter into any agreement or arrangement that limits or otherwise
restricts it or any of its subsidiaries or any successor thereto or that is
reasonably likely to, after the Effective Time, limit or restrict the Surviving
Corporation and its affiliates (including Parent) or any successor thereto, from
engaging or competing in any line of business or in any geographic area; or
(p) take, propose to take, or agree in writing or otherwise to take, any
of the actions described in Sections 5.01(a) through 5.01(o) or any action which
would make any of its representations or warranties contained in this Agreement
(i) which are qualified as to materiality untrue or incorrect or (ii) which are
not so qualified untrue or incorrect in any material respect.
Section 5.02. Access to Information. (a) Between the date hereof and the
Effective Time, the Company shall give the Parent and Parent's authorized
representatives (including counsel, financial advisors and auditors) reasonable
access during normal business hours to all its and its subsidiaries' employees,
plants, offices, warehouses and other facilities and to all its and its
subsidiaries' books and records and will permit Parent to make such inspections
as Parent may reasonably require and will cause its officers and those of its
subsidiaries to furnish Parent with such financial and operating data and other
information with respect to its business, properties and personnel and its
subsidiaries as Parent may from time to time reasonably request, provided that
no investigation pursuant to this Section 5.02(a) shall affect or be deemed to
modify any of the representations or warranties contained herein.
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(b) Between the date hereof and the Effective Time, the Company shall
furnish to Parent at the earliest time they are available, such quarterly and
annual financial statements as are prepared for its Company SEC Reports which
shall be in accordance with such entity's books and records.
(c) Each of the Company and Parent will hold and will cause its authorized
representatives to hold in confidence all documents and information concerning
the other in connection with the transactions contemplated by this Agreement
pursuant to the terms of that certain Confidentiality Agreement entered into
between the Company and Parent dated May 13, 1999 (the "Confidentiality
Agreement").
ARTICLE 6
Additional Agreements
Section 6.01. Preparation of the Proxy Statement. (a) To the extent
required to effect the Merger, the Company will, as promptly as practicable,
prepare and file with the SEC the Proxy Statement in connection with the Company
Requisite Vote with respect to the Merger. The Company shall use its reasonable
efforts to cause the Proxy Statement to be "cleared" by the SEC for mailing to
the stockholders of the Company as promptly as practicable after the filing
thereof. Parent shall furnish all information concerning it and the holders of
its capital stock as the Company may reasonably request in connection with such
actions. Subject to Section 6.04, the Proxy Statement shall include the
recommendation of the Company Board in favor of approval and adoption of this
Agreement. Parent shall have the right to review the Proxy Statement and
comment thereon before it is filed with the SEC. The Company will use its
reasonable best efforts to cause the Proxy Statement to be mailed to its
stockholders at the earliest practicable date.
(b) Notwithstanding the foregoing, in the event that Purchaser shall
acquire at least 90 percent of the then outstanding Shares, the parties hereto
agree, at the request of Purchaser, subject to Article 7, to take all necessary
and appropriate action to cause the Merger to become effective, in accordance
with Section 253 of the DGCL, as soon as reasonably practicable after such
acquisition, without a meeting of the stockholders of the Company.
Section 6.02. Meetings. To the extent required to effect the Merger, the
Company shall take all lawful action to (i) cause a special meeting of its
stockholders (the "Company Stockholder Meeting") to be duly called and held as
soon as practicable after the closing of the Offer for the purpose of voting on
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the approval and adoption of this Agreement and (ii) solicit proxies from its
stockholders to obtain the Company Requisite Vote for the approval and adoption
of this Agreement. Subject to Section 6.04, the Company Board shall recommend
approval and adoption of this Agreement and the Merger by the Company's
stockholders and shall not withdraw, amend or modify in a manner adverse to
Parent such recommendation (or announce publicly its intention to do so). To
the extent permitted by applicable Law, Parent and Purchaser each agree to vote
all Shares beneficially owned by them in favor of the Merger.
Section 6.03. Reasonable Best Efforts. (a) Subject to the terms and
conditions of this Agreement, each party will use its reasonable best efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under applicable Laws to consummate the
Offer and the Merger and the other transactions contemplated by this Agreement.
In furtherance and not in limitation of the foregoing, each party hereto agrees
to make an appropriate filing of a Notification and Report Form pursuant to the
HSR Act with respect to the transactions contemplated hereby as promptly as
practicable and to supply as promptly as practicable any additional information
and documentary material that may be requested pursuant to the HSR Act and to
take all other actions necessary to cause the expiration or termination of the
applicable waiting periods under the HSR Act as soon as practicable.
(b) Each of Parent and the Company shall, in connection with the efforts
referenced in Section 6.03(a) to obtain all requisite approvals and
authorizations for the transactions contemplated by this Agreement under the HSR
Act or any other Antitrust Law, use its reasonable best efforts to (i) cooperate
in all respects with each other in connection with any filing or submission and
in connection with any investigation or other inquiry, including any proceeding
initiated by a private party; (ii) keep the other party informed in all material
respects of any material communication received by such party from, or given by
such party to, the Federal Trade Commission (the "FTC"), the Antitrust Division
of the Department of Justice (the "DOJ") or any other Governmental Entity and of
any material communication received or given in connection with any proceeding
by a private party, in each case regarding any of the transactions contemplated
hereby; and (iii) permit the other party to review any material communication
given by it to, and consult with each other in advance of any meeting or
conference with, the FTC, the DOJ or any such other Governmental Entity or, in
connection with any proceeding by a private party, with any other person, and to
the extent permitted by the FTC, the DOJ or such other applicable Governmental
Entity or other person, give the other party the opportunity to attend and
participate in such meetings and conferences. For purposes of this Agreement,
"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 Laws
that are
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designed or intended to prohibit, restrict or regulate actions having the
purpose or effect of monopolization or restraint of trade or lessening of
competition through merger or acquisition.
(c) In furtherance and not in limitation of the covenants of the parties
contained in Sections 6.03(a) and (b), each of Parent and the Company shall use
its reasonable best efforts to resolve such objections, if any, as may be
asserted with respect to the transactions contemplated hereby under any
Antitrust Law. In connection with the foregoing, if any administrative or
judicial action or proceeding, including any proceeding by a private party, is
instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Antitrust Law, each of Parent
and the Company shall cooperate in all respects with each other and use its
respective reasonable best efforts to contest and resist any such action or
proceeding and to have vacated, lifted, reversed or overturned any decree,
judgment, injunction or other order, whether temporary, preliminary or
permanent, that is in effect and that prohibits, prevents or restricts
consummation of the transactions contemplated by this Agreement. Notwithstanding
the foregoing or any other provision of this Agreement, nothing in this Section
6.03 shall (i) limit a party's right to terminate this Agreement pursuant to
Section 8.02(i) so long as such party has up to then complied in all material
respects with its obligations under this Section 6.03 or (ii) require Parent or
the Company to dispose or hold separate any part of its business or operations
or agree not to compete in any geographic area or line of business.
Section 6.04. Acquisition Proposals. (a) From the date hereof until the
Effective Time and except as expressly permitted by the following provisions of
this Section 6.04, the Company will not, nor will it permit any of its
subsidiaries to, nor will it authorize or permit any of its officers, directors
or employees of or any investment banker, attorneys, accountants or other
advisors or representatives to, directly or indirectly, (i) solicit, initiate or
knowingly encourage the submission of any Acquisition Proposal (as hereinafter
defined) or (ii) participate in any discussions or negotiations regarding, or
furnish to any person any information with respect to, or take any other action
to facilitate, any Acquisition Proposal or any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal; provided, however, that nothing contained in this Section
6.04(a) shall prohibit the Company Board from furnishing information to, or
entering into discussions or negotiations with, any person that makes an
unsolicited bona fide written Acquisition Proposal if, and only to the extent
that (A) the Offer shall not have closed, (B) the Company Board, after
consultation with and based upon the advice of independent legal counsel,
determines in good faith that such action is necessary for the Company Board to
comply with its fiduciary duties to its stockholders under applicable Law, (C)
the Company Board, after consultation with its financial advisor, determines in
good
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faith that such Acquisition Proposal is reasonably likely to lead to an
Acquisition Proposal that, if accepted, is reasonably likely to be consummated,
taking into account all legal, financial and regulatory aspects of the proposal
and the person making the proposal and would, if consummated, result in a
transaction more favorable to its stockholders from a financial point of view
than the Offer and the Merger (any such more favorable Acquisition Proposal
being referred to herein as a "Superior Proposal") and (D) prior to taking such
action, the Company (x) provides reasonable notice to Parent to the effect that
it is taking such action and (y) receives from such person an executed
confidentiality/ standstill agreement in reasonably customary form and in any
event containing terms at least as stringent as those contained in the
Confidentiality Agreement. Prior to providing any information to or entering
into discussions or negotiations with any person in connection with an
Acquisition Proposal by such person, the Company shall notify Parent of any
Acquisition Proposal (including, without limitation, the material terms and
conditions thereof and the identity of the person making it) as promptly as
practicable (but in no case later than 24 hours) after its receipt thereof,
shall thereafter inform Parent on a prompt basis of the status of any
discussions or negotiations with such a third party and any material changes to
the terms and conditions of such Acquisition Proposal and shall promptly give
Parent a copy of any information delivered to such person which has not
previously been reviewed by Parent. Immediately after the execution and delivery
of this Agreement, the Company will, and will cause its subsidiaries,
affiliates, officers, directors, employees, investment bankers, attorneys,
accountants and other agents to, cease and terminate any existing activities,
discussions or negotiations with any third parties conducted heretofore with
respect to any possible Acquisition Proposal and shall notify each third party
that it, or any officer, director, investment advisor, financial advisor,
attorney or other representative retained by it, has had discussions with during
the 30 days prior to the date of this Agreement that the Company Board no longer
seeks the making of any Acquisition Proposal. The Company will take the
necessary steps to promptly inform the individuals or entities referred to in
the first sentence hereof of the obligations undertaken in this Section 6.04(a).
(b) The Company Board will not withdraw or modify, or propose to withdraw
or modify, in a manner adverse to Parent, its approval or recommendation of this
Agreement, the Offer or the Merger unless the Company Board determines in good
faith, taking into account all legal, financial and regulatory aspects, that the
failure to do so would constitute a breach by the Company Board of its fiduciary
duties under applicable Law; provided, however, the Company Board may not
approve or recommend (and in connection therewith, withdraw or modify its
approval or recommendation of this Agreement, the Offer or the Merger) an
Acquisition Proposal unless such an Acquisition Proposal is a Superior Proposal
(and the Company first shall have complied with its obligations
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set forth in Section 8.03(a), and the time period referred to in the last
sentence of Section 8.03(a) has expired) and unless it shall have first
consulted with outside counsel and have determined that the refusal to do so
would constitute a breach by the Company Board of its fiduciary duties under
applicable Law. Nothing contained in this Section 6.04(b) shall prohibit the
Company from taking and disclosing to its stockholders a position contemplated
by Rule 14e-2(a) promulgated under the Exchange Act or from making any
disclosure to its stockholders which, in the good faith reasonable judgment of
the Company Board, based on the advice of independent legal counsel, is required
under applicable Law. Notwithstanding anything contained in this Agreement to
the contrary, any action by the Company Board permitted by, and taken in
accordance with, this Section 6.04(b) shall not constitute a breach of this
Agreement by the Company. Nothing in this Section 6.04(b) shall (i) permit the
Company to terminate this Agreement (except as provided in Article 8 hereof) or
(ii) affect any other obligations of the Company under this Agreement.
Section 6.05. Public Announcements. Each of Parent, Purchaser and the
Company will consult with one another before issuing any press release or
otherwise making any public statements with respect to the transactions
contemplated by this Agreement, including the Offer and the Merger, and shall
not issue any such press release or make any such public statement prior to such
consultation, except as may be required by applicable Law or by obligations
pursuant to any listing agreement with any securities exchange, as determined by
Parent, Purchaser or the Company, as the case may be.
Section 6.06. Indemnification; Directors' and Officers' Insurance. (a)
From and after the Effective Time, to the fullest extent permitted by applicable
Law, the Surviving Corporation shall, and Parent shall cause the Surviving
Corporation to, indemnify, defend and hold harmless each person who is now, or
has been at any time prior to the date hereof, or who becomes prior to the
Effective Time, a director, officer or employee of the Company or any subsidiary
thereof (each an "Indemnified Party" and, collectively, the "Indemnified
Parties") against all losses, expenses (including reasonable attorneys' fees and
expenses), claims, damages, liabilities or, subject to the proviso of the next
succeeding sentence, amounts paid in settlement, arising out of actions or
omissions occurring at or prior to the Effective Time and whether asserted or
claimed prior to, at or after the Effective Time that are in whole or in part
(i) based on or arising out of the fact that such person is or was a director,
officer or employee of such party or a subsidiary of such party or (ii) based
on, arising out of or pertaining to the transactions contemplated by this
Agreement. In the event of any such loss, expense, claim, damage or liability
(whether or not arising before the Effective Time), (i) the Surviving
Corporation shall pay the reasonable fees and expenses of counsel selected by
the Indemnified Parties, which counsel shall be
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reasonably satisfactory to Parent, promptly after statements therefor are
received and otherwise advance to such Indemnified Party upon request
reimbursement of documented expenses reasonably incurred, in either case to the
extent not prohibited by the DGCL and upon receipt of any affirmation and
undertaking required by the DGCL, (ii) the Surviving Corporation will cooperate
in the defense of any such matter and (iii) any determination required to be
made with respect to whether an Indemnified Party's conduct complies with the
standards set forth under the DGCL and the Surviving Corporation's articles of
incorporation or bylaws shall be made by independent counsel mutually acceptable
to Parent and the Indemnified Party; provided, however, that the Surviving
Corporation shall not be liable for any settlement effected without its written
consent (which consent shall not be unreasonably withheld). The Indemnified
Parties as a group may retain only one law firm with respect to each related
matter except to the extent there is, in the opinion of counsel to an
Indemnified Party, under applicable standards of professional conduct, a
conflict on any significant issue between positions of any two or more
Indemnified Parties.
(b) For a period of 6 years after the Effective Time, Parent shall cause
to be maintained in effect the policies of directors' and officers' liability
insurance maintained by the Company for the benefit of those persons who are
covered by such policies at the Effective Time (or Parent may substitute
therefor policies of at least the same coverage with respect to matters
occurring prior to the Effective Time), to the extent that such liability
insurance can be maintained or obtained annually at a cost to Parent not greater
than 200 percent of the premium for the current Company directors' and officers'
liability insurance; provided that if such insurance cannot be so maintained or
obtained at such cost, Parent shall maintain or obtain as much of such insurance
as can be so maintained or obtained at a cost equal to 200 percent of the
current annual premiums of the Company for such insurance.
(c) In the event Parent or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, then and in either such case, proper provision shall be made so that the
successors and assigns of Parent shall assume the obligations set for in this
Section 6.06.
(d) In addition to the indemnification provided pursuant to Section
6.06(a), to the fullest extent permitted by Law, from and after the Effective
Time, all rights to indemnification now existing in favor of the employees,
agents, directors or officers of the Company and its subsidiaries with respect
to their activities as such prior to the Effective Time, as provided in the
Company's certificate of incorporation or bylaws, in effect on the date hereof,
shall
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survive the Merger and shall continue in full force and effect for a period of
not less than six years from the Effective Time.
(e) The provisions of this Section 6.06 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party, his or her heirs and
his or her representatives.
Section 6.07. Notification of Certain Matters. The Company shall give
prompt notice to Parent and Purchaser, and Parent and Purchaser shall give
prompt notice to the Company, of (i) the occurrence or nonoccurrence of any
event the occurrence or nonoccurrence of which would be likely to cause any
representation or warranty contained in this Agreement, which is qualified as to
materiality, to be untrue or inaccurate, or any representation or warranty not
so qualified, to be untrue or inaccurate in any material respect at or prior to
the closing of the Offer, (ii) any material failure of the Company, Parent or
Purchaser, as the case may be, to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder, (iii) any notice
of, or other communication relating to, a default or event which, with notice or
lapse of time or both, would become a default, received by it or any of its
subsidiaries subsequent to the date of this Agreement and prior to the Effective
Time under any contract or agreement to which it or any of its subsidiaries is a
party or is subject material to the financial condition, business or results of
operations of it and its subsidiaries, taken as a whole, (iv) 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, or (v) any Material Adverse Effect with respect to such party;
provided, however, that the delivery of any notice pursuant to this Section 6.07
shall not cure such breach or non-compliance or limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
Section 6.08. Employee Matters. Parent shall cause the Surviving
Corporation to honor the obligations of the Company or any of its subsidiaries
under the provisions of all collective bargaining, employment, consulting,
termination, severance, change in control and indemnification agreements between
and among the Company or any of its subsidiaries and any current or former
officer, director, consultant or employee of the Company or any of its
subsidiaries as set forth in the appropriate Sections of the Company Disclosure
Schedule. For a period of six months following the Effective Time, Parent
agrees that it will maintain, or will cause the Surviving Corporation and its
subsidiaries to maintain, for the benefit of the employees of the Company and
any of its subsidiaries following the Effective Time compensation and benefit
plans, programs, arrangements and policies (other than equity based compensation
plans, programs, arrangements and policies) as will provide compensation and
benefits which in the
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aggregate are not materially less favorable than those provided to such
employees as of the date hereof under the Company Employee Benefit Plans (other
than such equity based compensation plans, programs, arrangement and policies)
in accordance with their written terms (except as set forth on Sections 3.12 and
5.01 of the Company Disclosure Schedule with respect to acceleration of options
on termination of employment by the Company) as made available to Parent and
without regard to formal or informal discretionary provisions; provided,
however, the equity match in the Company's Retirement Savings Plan (the "RSP")
shall be continued during such period substituting a cash contribution in lieu
of Company Common Stock unless, at the discretion of Parent, Parent elects to
substitute common stock of Parent. In the event that after the Effective Time
the employment of any participant in the RSP at the Effective Time is terminated
by the Company other than for Cause, such participant shall be 100% vested in
any RSP matching contributions made by the Company on behalf of such participant
or, at Parent's option, to the extent necessary to avoid adversely effecting the
qualified status of the RSP under the Code, will receive a cash payment in an
amount equal to any forfeited matching contributions under the RSP. Parent shall
pay to the individuals listed on Section 6.08 of the Company Disclosure Schedule
the amounts identified as targeted 1999 ICP bonus amounts opposite each such
name in accordance with the payment schedule under the ICP.
Section 6.09. Post-Merger Board of Directors. (a) Promptly upon the
purchase by Purchaser of Shares pursuant to the Offer, and from time to time
thereafter, Purchaser shall be entitled to designate up to such number of
directors, rounded up to the next whole number, on the Company Board as shall
give Purchaser representation on the Company Board equal to the product of the
total number of directors on the Company Board (giving effect to the directors
elected pursuant to this sentence) multiplied by the percentage that the
aggregate number of Shares beneficially owned by Purchaser following such
purchase bears to the total number of Shares then outstanding, and the Company
shall, at such time, promptly take all actions necessary to cause Purchaser's
designees to be elected as directors of the Company, including increasing the
size of the Company Board or securing the resignations of incumbent directors or
both. At such times, the Company shall use its best efforts to cause persons
designated by Purchaser to constitute the same percentage as persons designated
by Purchaser shall constitute of the Company Board of (i) each committee of the
Company Board, (ii) each board of directors of each domestic subsidiary and
(iii) each committee of each such board, in each case only to the extent
permitted by applicable law. Notwithstanding the foregoing, until the Effective
Time, the Company shall use its best efforts to ensure that (a) at least two
members of the Company Board and (b) at least one member of each committee of
the Company Board and the boards and committees of the Company's domestic
subsidiaries who, as of the date hereof,
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neither were designated by Purchaser nor are employees of the Company remain
members of the Company Board and of such boards and committees.
(b) The Company shall promptly take all actions required pursuant to
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order
to fulfill its obligations under this Section 609 and shall include in the
Schedule 14D-9 such information with respect to the Company and its officers and
directors as is required under Section 14(f) and Rule 14f-1 to fulfill such
obligations. Parent or Purchaser shall supply to the Company and be solely
responsible for any information with respect to either of them and their
nominees, officers, directors and affiliates required by such Section 14(f) and
Rule 14f-1.
(c) Following the designation of designees of Purchaser pursuant to this
Section 609 and notwithstanding any other provision of this Agreement, prior to
the Effective Time, any amendment of this Agreement or the Certificate of
Incorporation or Bylaws of the Company, any termination of this Agreement by the
Company, any extension by the Company of the time for the performance of any of
the obligations or other acts of Parent or Purchaser or waiver of any of the
Company's rights hereunder shall require the concurrence of a majority of the
directors of the Company then in office who neither were designated by Purchaser
nor are employees of the Company.
Section 6.10. 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 (a) Expenses incurred in connection with the filing, printing
and mailing of the Schedule 14D-9 and the Proxy Statement, which shall be paid
by Parent and (b) if applicable, as provided in Section 8.05. As used in this
Agreement, "Expenses" includes all out-of-pocket expenses (including all fees
and expenses of counsel, accountants, investment bankers, experts and
consultants to a party hereto and its affiliates) incurred by a party or on its
behalf in connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement and the transactions
contemplated hereby, including the preparation, printing, filing and mailing of
the Schedule 14D-9, the Offer Documents and the Proxy Statement and any
amendments or supplements thereto, as appropriate, and the solicitation of
stockholder approval and all other matters related to the transactions
contemplated hereby.
Section 6.11. Obligations of Purchaser. Parent will take all action
necessary to cause Purchaser to perform its obligations under this Agreement and
to consummate the Offer and the Merger on the terms and conditions set forth in
this Agreement.
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Section 6.12. Antitakeover Statutes. If any Takeover Statute is or may
become applicable to the Offer or the Merger, each of Parent and Company shall
take such actions as are necessary so that the transactions contemplated by this
Agreement may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise act to eliminate or minimize the effects of
any Takeover Statute on the Offer or the Merger.
Section 6.13. The Unisource Foundation. Parent agrees that it shall (a)
honor all commitments made by the Company to The Unisource Foundation as of the
date of this Agreement and (b) cause The Unisource Foundation to continue its
charitable programs existing on the date of this Agreement for a period of three
years following the Closing.
ARTICLE 7
Conditions to Consummation of the Merger
Section 7.01. Conditions to Each Party's Obligations to Effect the Merger.
The respective obligations of each party to consummate the transactions
contemplated by this Agreement are subject to the fulfillment at or prior to the
Effective Time of each of the following conditions, any or all of which may be
waived in whole or in part by the party being benefitted thereby, to the extent
permitted by applicable Law:
(a) To the extent required by applicable Law, this Agreement shall have
been approved and adopted by the Company Requisite Vote at the Company
Stockholder Meeting.
(b) Any waiting period applicable to the Merger under the HSR Act shall
have expired or early termination thereof shall have been granted.
(c) There shall not be in effect any Law of any Governmental Entity of
competent jurisdiction, restraining, enjoining or otherwise preventing
consummation of the transactions contemplated by this Agreement.
(d) Purchaser or its permitted assignee shall have purchased all Shares
validly tendered and not withdrawn pursuant to the Offer; provided, however,
that this condition shall not be applicable to the obligations of Parent or
Purchaser if, in breach of this Agreement or the terms of the Offer, Purchaser
fails to purchase any Shares validly tendered and not withdrawn pursuant to the
Offer.
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ARTICLE 8
Termination; Amendment; Waiver
Section 8.01. Termination by Mutual Agreement. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, whether before or after the approval of this Agreement by the Company
Requisite Vote, if required, by mutual written consent of the Company and Parent
by action of their respective Boards of Directors.
Section 8.02. Termination by Either Parent or the Company. This Agreement
may be terminated and the Merger may be abandoned at any time prior to the
Effective Time by action of either the Parent Board or the Company Board if (i)
the Merger shall not have been consummated by December 31, 1999 (the
"Termination Date"), whether such date is before or after the date of approval
of this Agreement by the Company Requisite Vote, if required; (ii) the Company's
stockholders shall have rejected the Merger and the Merger Agreement at the
Company Stockholder Meeting, if required, or at any adjournment or postponement
thereof; or (iii) any Law permanently restraining, enjoining or otherwise
prohibiting consummation of the Merger shall become final and non-appealable
(whether before or after the approval by the Company Requisite Vote, if
required); provided that the right to terminate this Agreement pursuant to this
Section 802 shall not be available to any party that has breached in any
material respect its obligations under this Agreement in any manner that shall
have proximately contributed to the occurrence of the failure of the Merger to
be consummated.
Section 8.03. Termination by the Company. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the acceptance
of Shares for payment pursuant to the Offer (or, if the Offer has been
terminated and this Agreement remains in effect, prior to the approval of this
Agreement by the Company Requisite Vote), by action of the Company Board:
(a) If (i) the Company is not in breach of Section 604, (ii) the Shares
have not been accepted for payment pursuant to the Offer (or, if the Offer has
been terminated and this Agreement remains in effect, this Agreement has not
been approved by the Company Requisite Vote at the Company Stockholder Meeting),
(iii) the Company Board authorizes the Company, subject to complying with the
terms of this Agreement, to enter into a binding written agreement concerning a
transaction that constitutes a Superior Proposal and the Company notifies Parent
in writing that it intends to enter into such an agreement, attaching the most
current version of such agreement to such notice, (iv) Parent does not make,
within five business days of receipt of the Company's written notification of
its intention to enter into a binding agreement for a Superior Proposal, an
offer that
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the Company Board determines, in good faith after consultation with its
financial advisors, is at least as favorable, from a financial point of view, to
the stockholders of the Company as the Superior Proposal and (v) the Company
prior to such termination pays to Parent in immediately available funds the fees
required to be paid pursuant to Section 805. The Company agrees (x) that it will
not enter into a binding agreement referred to in clause (iii) above until at
least the sixth business day after it has provided the notice to Parent required
thereby and (y) to notify Parent promptly if its intention to enter into the
written agreement referred to in its notification shall change at any time after
giving such notification; or
(b) If (i) Purchaser shall not have accepted for payment any Shares
pursuant to the Offer within 120 days following commencement of the Offer or
(ii) Purchaser shall have failed to commence the Offer within 60 days following
the date of this Agreement, unless such failure to accept for payment or
commence shall have been caused by or resulted from the failure of the Company
to perform in any material respect any of its covenants or agreements contained
in this Agreement or the material breach by the Company of any of its
representations or warranties contained in this Agreement.
Section 8.04. Termination by Parent. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the acceptance of Shares
for payment pursuant to the Offer (or, if the Offer has been terminated and this
Agreement remains in effect, prior to approval of this Agreement by the Company
Requisite Vote), by action of the Parent Board if:
(a) the Company enters into a binding agreement for a Superior Proposal or
prior to the acceptance of Shares for payment pursuant to the Offer (or, if the
Offer is terminated and this Agreement remains in effect, prior to the approval
of this Agreement by the Company Requisite Vote) the Company Board shall have
withdrawn or adversely modified its approval or recommendation of this
Agreement, the Offer or the Merger; or
(b) If (i) Purchaser shall not have accepted for payment any Shares
pursuant to the Offer within 120 days following commencement of the Offer or
(ii) Purchaser shall have failed to commence the Offer within 60 days following
the date of this Agreement, unless such failure to accept for payment or
commence shall have been caused by or resulted from the failure of Parent or
Purchaser to perform in any material respect any of their covenants or
agreements contained in this Agreement or the material breach by Parent or
Purchaser of any of their representations or warranties contained in this
Agreement.
Section 8.05. Effect of Termination and Abandonment. (a) In the event of
termination of this Agreement pursuant to this Article 8, this Agreement (other
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than as set forth in this Section 8.05 or Sections 5.02(c), 6.10, 9.04, 9.08 and
9.09) shall become void and of no effect with no liability on the part of any
party hereto (or of any of its directors, officers, employees, agents, legal and
financial advisors or other representatives); provided, however, that no such
termination shall relieve any party hereto of any liability or damages resulting
from any willful breach of this Agreement.
(b) (i) In the event that this Agreement is terminated by Parent pursuant
to Section 8.04(b) as the result of a failure of performance or breach of the
Company, then the Company shall pay Parent an amount, not to exceed $5,000,000,
equal to the documented Expenses incurred by Parent in connection with this
Agreement.
(ii) In the event that this Agreement is terminated pursuant to the
provisions hereof by either Parent or the Company for any reason, other than
a termination pursuant to (x) Section 8.01, (y) Section 8.02 where the
termination did not result from a failure of performance or breach by the
Company or (z) Section 8.03(b) or 8.04(b) where the termination did not
result from a failure to satisfy the conditions specified in paragraphs (a)
through (g) of Annex A (unless, in the case of paragraphs (a) and (b) of
Annex A, such termination resulted from the actions of any antitrust
regulatory authority or, in the case of paragraph (d), such termination
resulted from the occurrence of an event specified in clause (iv) thereof),
the Company shall pay Parent, prior to such termination if termination is by
the Company and within two business days after such termination if
termination is by Parent, by wire transfer of immediately available funds,
an amount equal to $25,000,000 in order to reimburse Parent for the payment
of the Funded Break-up Fee.
(iii) In the event that this Agreement is terminated by (A) the Company
pursuant to Section 8.03(a), (B) Parent pursuant to Section 8.04(a) or
(C)(1) Parent pursuant to Section 8.04(b) as a result of a willful failure
or breach by the Company and (2) at the time of such willful failure or
breach there shall have been an Acquisition Proposal involving the Company
(which proposal shall not have been withdrawn prior to the time of such
termination) and (3) within 6 months of such termination, an Acquisition
Proposal by a third party, or within 9 months of such termination, an
Acquisition Proposal by the party that made the Acquisition Proposal
referred to in clause (C)(2) of this Section 8.05(b)(iii) is entered into,
agreed to or consummated by the Company, in addition to any amount to be
paid by the Company to Parent pursuant to Section 8.05(b)(ii), the Company
shall pay to Parent a termination fee of $25,000,000 by wire transfer of
immediately available funds; such
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termination fee to be paid to Parent (x) prior to termination of this
Agreement by the Company in the case of clause (A) of this Section
8.05(b)(iii), (y) within two business days after termination by Parent in
the case of clause (B) of this Section 8.05(b)(iii) or (z) on the earlier
of the date an agreement is entered into with respect to an Acquisition
Proposal or an Acquisition Proposal is agreed and consummated in the case
of clause (C) of this Section 8.05(b)(iii).
(iv) In the event that (A) this Agreement is terminated by Parent or the
Company pursuant to Section 8.02(ii) or by Parent pursuant to Section
8.04(b) as a result of the failure to satisfy the Minimum Condition, (B) at
the time of such termination there shall have been an Acquisition Proposal
involving the Company (which proposal shall not have been withdrawn prior
to the time of such termination) and (C) within 6 months of such
termination, an Acquisition Proposal by a third party, or within 9 months
of such termination, any Acquisition Proposal by the party that made the
Acquisition Proposal referred to above in clause (B) of this Section
8.05(b)(iv) is entered into, agreed to or consummated by the Company, in
addition to any amount to be paid by the Company to Parent pursuant to
Section 8.05(b)(ii), the Company shall pay to Parent a termination fee of
$25,000,000 by wire transfer of immediately available funds on the earlier
of the date an agreement is entered into with respect to an Acquisition
Proposal or an Acquisition Proposal is agreed and consummated.
(c) (i) In the event that this Agreement is terminated by the Company
pursuant to Section 8.03(b) as the result of the failure of performance or
breach of Parent, then Parent shall pay the Company an amount not to exceed
$5,000,000 equal to the documented Expenses incurred by the Company in
connection with this Agreement.
(ii) In the event that (A) this Agreement is terminated pursuant to
Section 8.03(b) as a result of a willful failure or breach by Parent or
Purchaser and (B) at the time of such willful failure or breach there shall
have been a Parent Acquisition Proposal (which Parent Acquisition Proposal
shall have been conditioned upon the Offer or the Merger failing to close)
and (C) within 6 months of such termination, a Parent Acquisition Proposal
by a third party, or within 9 months of such termination, a Parent
Acquisition Proposal by the party that made the Parent Acquisition Proposal
referred to in clause (B) of this Section 8.05(c)(ii) is entered into,
agreed to or consummated by Parent, then Parent shall pay the Company a
termination fee of $25,000,000, in immediately available funds on the
earlier of the date an agreement is entered into with respect to a Parent
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Acquisition Proposal or a Parent Acquisition Proposal is agreed to or
consummated.
(d) The Company and Parent each acknowledge that the agreements contained
in Sections 8.05(b) and 8.05(c) are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, the Company,
Parent and Purchaser would not have entered into this Agreement; accordingly, if
either the Company or Parent, as the case may be, fails to promptly pay any
amount due pursuant to Section 8.05(b) or 8.05(c), as the case may be, and, in
order to obtain such payment, the other party commences a suit which results in
a judgment against the defaulting party for any amount required to be paid
pursuant to this Section 805, the defaulting party shall pay the other party its
costs and expenses (including attorneys' fees) in connection with such suit,
together with interest from the date of termination of this Agreement on the
amount owed at the prime rate of Morgan Guaranty Trust Company of New York in
effect from time to time during such period plus two percent.
(e) Notwithstanding anything to the contrary set forth in this Section
805, in no event shall the Expenses or termination fees paid pursuant to this
Section 805 (exclusive of any payment owed pursuant to Section 8.05(b)(ii))
exceed $25,000,000 in the aggregate.
Section 8.06. Amendment. This Agreement may be amended by action taken by
the Company, Parent and Purchaser at any time before or after approval of the
Merger by the Company Requisite Vote but, after any such approval, no amendment
shall be made which requires the approval of such stockholders under applicable
Law without such approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of the parties hereto.
Section 8.07. Extension; Waiver. At any time prior to the Effective Time,
each party hereto (for these purposes, Parent and Purchaser shall together be
deemed one party and the Company shall be deemed the other party) may (i) extend
the time for the performance of any of the obligations or other acts of the
other party, (ii) waive any inaccuracies in the representations and warranties
of the other party contained herein or in any document, certificate or writing
delivered pursuant hereto or (iii) waive compliance by the other party with any
of the agreements or conditions contained herein. Any agreement on the part of
either party hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party. The failure
of either party hereto to assert any of its rights hereunder shall not
constitute a waiver of such rights.
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ARTICLE 9
Miscellaneous
Section 9.01. Nonsurvival of Representations and Warranties. None of the
representations, warranties, covenants and agreements in this Agreement or in
any exhibit, schedule or instrument delivered pursuant to this Agreement shall
survive beyond the Effective Time or, in the case of the Company, shall survive
the acceptance for payment of, and payment for, Shares by Purchaser pursuant to
the Offer. Notwithstanding the foregoing, this Section 9.01 shall not limit any
covenant or agreement of Parent or Purchaser which by its terms contemplates
performance after the Effective Time.
Section 9.02. Entire Agreement; Assignment. (a) This Agreement and the
Confidentiality Agreement constitute the entire agreement between the parties
hereto with respect to the subject matter hereof and supersede all other prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof.
(b) Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by operation of law (including, but not limited to,
by merger or consolidation) or otherwise; provided, however, that Purchaser may
assign, in its sole discretion, any or all of its rights, interests and
obligations under this Agreement to any direct wholly owned subsidiary of
Parent, but no such assignment shall relieve Parent or Purchaser of its
obligations hereunder if such assignee does not perform such obligations. Any
assignment in violation of the preceding sentence shall be void. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by, the parties and their respective successors and
assigns.
Section 9.03. Notices. All notices, requests, instructions or other
documents to be given under this Agreement shall be in writing and shall be
deemed given, (i) five business days following sending by registered or
certified mail, postage prepaid, (ii) when sent, if sent by facsimile; provided
that the fax is promptly confirmed by telephone confirmation thereof, (iii) when
delivered, if delivered personally to the intended recipient and (iv) one
business day following sending by overnight delivery via a national courier
service, and in each case, addressed to a party at the following address for
such party:
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if to Parent or to Purchaser, to:
Georgia-Pacific Corporation
133 Peachtree Street, N.E.
Atlanta, GA 30303
Attention: Chairman and Chief Executive Officer
Facsimile: (404) 230-1674
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Attention: Creighton Condon, Esq.
Facsimile: (212) 848-7179
if to the Company, to:
Unisource Worldwide
1100 Cassat Road
Berwyn, PA 19312
Attention: President
Facsimile: (610) 296-4470
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Attention: Carole Schiffman, Esq.
Facsimile: (212) 450-4800
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above.
Section 9.04. Governing Law; Waiver of Jury Trial. (a) This Agreement
shall be governed by and construed in accordance with the Laws of the State of
New York, applicable to contracts executed in and to be fully performed in such
state, without giving effect to the choice of law principles thereof, and except
to the extent the provisions of this Agreement (including any documents or
instruments referred to herein) are expressly governed by the DGCL.
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(b) Each of the parties hereto hereby waives any right to trial by jury in
any action or proceeding in connection with this Agreement or any transaction
relating hereto.
Section 9.05. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
Section 9.06. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and its successors and
permitted assigns, and, except as provided in Section 6.06, nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.
Section 9.07. Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
Section 9.08. Specific Performance. 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 or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any court of the
United States located in the State of New York or in New York state court, this
being in addition to any other remedy to which they are entitled at law or in
equity. In addition, each of the parties hereto (a) consents to submit itself to
the personal jurisdiction of any federal court located in the State of New York
or any New York state court in the event any dispute arises out of this
Agreement or any of the transactions contemplated hereby, (b) agrees that it
will not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court and (c) agrees that it will not bring any
action relating to this Agreement or any of the transactions contemplated hereby
in any court other than a federal or state court sitting in the State of New
York.
56
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Section 9.09. Brokers. Except as otherwise provided in Section 6.06, the
Company agrees to indemnify and hold harmless Parent and Purchaser, and Parent
and Purchaser agree to indemnify and hold harmless the Company, from and against
any and all liability to which Parent and Purchaser, on the one hand, or the
Company, on the other hand, may be subjected by reason of any brokers, finder's
or similar fees or expenses with respect to the transactions contemplated by
this Agreement to the extent such similar fees and expenses are attributable to
any action undertaken by or on behalf of the Company, or Parent or Purchaser, as
the case may be.
Section 9.10. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
Section 9.11. Interpretation. (a) The words "hereof," "herein" and
"herewith" and words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement as a whole and not to any particular
provision of this Agreement, and article, section, paragraph, exhibit and
schedule references are to the articles, sections, paragraphs, exhibits and
schedules of this Agreement unless otherwise specified. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation." The definitions
contained in this Agreement are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the feminine and neuter
genders of such terms. Any agreement, instrument or statute defined or referred
to herein or in any agreement or instrument that is referred to herein means
such agreement, instrument or statute as from time to time amended, qualified or
supplemented, including (in the case of agreements and instruments) by waiver or
consent and (in the case of statutes) by succession of comparable successor
statutes and all attachments thereto and instruments incorporated therein.
References to a person are also to its permitted successors and assigns.
(b) The phrases "the date of this Agreement," "the date hereof" and terms
of similar import, unless the context otherwise requires, shall be deemed to
refer to May 25, 1999. The phrase "made available" in this Agreement shall mean
that the information referred to has been actually delivered to the party to
whom such information is to be made available.
(c) The parties have participated jointly in the negotiation and drafting
of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no
57
<PAGE>
presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement.
Section 9.12. Definitions. (a) "Acquisition Proposal" means an inquiry,
offer or proposal regarding any of the following (other than the transactions
contemplated by this Agreement) involving the Company or any of its
subsidiaries: (w) any merger, consolidation, share exchange, recapitalization,
business combination or other similar transaction; (x) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of all or
substantially all the assets of the Company and its subsidiaries, taken as a
whole, in a single transaction or series of related transactions; (y) any tender
offer or exchange offer for 20 percent or more of the outstanding Shares or the
filing of a registration statement under the Securities Act in connection
therewith; or (z) any public announcement of a proposal, plan or intention to do
any of the foregoing or any agreement to engage in any of the foregoing.
(b) "beneficial ownership" or "beneficially own" shall have the meaning
provided in Section 13(d) of the Exchange Act and the rules and regulations
thereunder.
(c) "business day" means any day on which the principal offices of the SEC
in Washington, D.C. are open to accept filings, or, in the case of determining a
date when any payment is due, any day on which banks are not required or
authorized by law or executive order to close in the City of New York.
(d) "Cause" means the willful and continued failure of an employee of the
Company to substantially perform his or her duties (other than as a result of
total or partial incapacity due to physical or mental illness or as a result of
a termination by the employee for Good Reason) after a written demand for
substantial performance is delivered to the employee by the Company Board, which
demand specifically identifies the manner in which the Company Board believes
that the employee has not substantially performed his or her duties, (B) the
employee's willful engaging in conduct which is demonstrably and materially
injurious to the Company, monetarily or otherwise or (C) the employee's
conviction of a felony under the laws of the United States or any state thereof.
For purposes of this definition, no act or failure to act on the employee's part
shall be deemed "willful" unless done or omitted to be done by the employee not
in good faith and without reasonable belief that his or her action or omission
was in the best interest of the Company. Notwithstanding the foregoing, the
employee shall not be deemed to have been terminated for Cause unless and until
there shall have been delivered to the employee a copy of a resolution duly
adopted by the affirmative vote (which cannot be delegated) of not less than
three-quarters of the entire membership of the Company Board at a meeting of the
Company Board
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called and held for such purpose (after reasonable notice to the employee and an
opportunity for the employee, together with his or her counsel, to be heard
before the Company Board), finding that in the good faith opinion of the Company
Board the employee was guilty of conduct set forth in subclauses (A), (B) or (C)
above, specifying the particulars thereof in detail.
(e) "Good Reason" means any of the following: (A) an employee is removed
from his position for any reason other than by reason of death, disability,
retirement or for Cause, (B) a material reduction of an employee's duties, a
material diminution in an employee's position or a material adverse change in
the employee's reporting relationship from those in effect prior to the date of
the closing of the Offer, or (C) a reduction in the employee's salary or bonus,
a reduction in the employee's benefits or a relocation of the employee's current
place of employment outside of a 35 mile radius from such place of employment.
(f) "know" or "knowledge" means, with respect to any party, the knowledge
of such party's executive officers.
(g) "Material Adverse Effect" means with respect to any party, a material
adverse effect on (i) the business, results of operations or financial condition
of such party and its subsidiaries, taken as a whole, other than any effect
arising out of or attributable to the economy, the securities markets in general
or the industries generally in which a party and its subsidiaries operate or
(ii) the ability of such party to consummate the transactions contemplated by
this Agreement.
(h) "Parent Acquisition Proposal" means an inquiry, offer or proposal
regarding any of the following involving Parent or any of its subsidiaries: (w)
any merger, consolidation, share exchange, recapitalization, business
combination or other similar transaction; (x) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of all or substantially all the
assets of Parent and its subsidiaries, taken as a whole, in a single transaction
or series of related transactions; (y) any tender offer or exchange offer for 20
percent or more of the outstanding shares of Parent common stock or the filing
of a registration statement under the Securities Act in connection therewith; or
(z) any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
(i) "person" means an individual, corporation, limited liability company,
partnership, association, trust, unincorporated organization, other entity or
group (as defined in the Exchange Act).
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(j) "subsidiary" means, when used with reference to any entity, any
corporation or other organization, whether incorporated or unincorporated, (i)
of which such entity or any other subsidiary of such entity is a general or
managing partner or (ii) the outstanding voting securities or interests of,
which having by their terms ordinary voting power to elect a majority of the
board of directors or others performing similar functions with respect to such
corporation or other organization, is directly or indirectly owned or controlled
by such entity or by any one or more of its subsidiaries.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
GEORGIA-PACIFIC CORPORATION
By: /s/ A. D. CORRELL
-----------------------------------
Name: A. D. Correll
Title: Chairman, Chief Executive
Officer and President
ATLANTA ACQUISITION CORP.
By: /s/ A. D. CORRELL
-----------------------------------
Name: A. D. Correll
Title: Chairman, Chief Executive
Officer and President
UNISOURCE WORLDWIDE, INC.
By: /s/ RAY B. MUNDT
-----------------------------------
Name: Ray B. Mundt
Title: Chairman and Chief
Executive Officer
<PAGE>
ANNEX A
-------
Conditions to the Offer
-----------------------
Notwithstanding any other provision of the Offer but subject to compliance
with Section 1.01(a) of the Merger Agreement, Purchaser shall not be required to
accept for payment or pay for any Shares tendered pursuant to the Offer, and may
terminate or amend the Offer in accordance with the Merger Agreement and may
extend the acceptance for payment of and payment for Shares tendered, if (i) the
Minimum Condition shall not have been satisfied, (ii) any applicable waiting
period under the HSR Act shall not have expired or been terminated prior to the
expiration of the Offer, or (iii) at any time on or after the date of this
Agreement, and prior to the acceptance for payment of Shares, any of the
following conditions shall exist and remain in effect:
(a) there shall have been instituted or be pending by any Governmental
Entity any action or proceeding before any court or governmental, administrative
or regulatory authority or agency, domestic or foreign, (i) challenging or
seeking to make illegal, materially delay or otherwise directly or indirectly
restrain or prohibit the making of the Offer, the acceptance for payment of, or
payment for, any Shares by Parent, Purchaser or any other affiliate of Parent,
or the consummation of any other transaction contemplated thereby; (ii) seeking
to prohibit or limit materially the ownership or operation by the Company,
Parent or any of their subsidiaries of all or any material portion of the
business or assets of the Company, Parent or any of their subsidiaries, or to
compel the Company, Parent or any of their subsidiaries to dispose of or hold
separate all or any material portion of the business or assets of the Company,
Parent or any of their subsidiaries, as a result of the transactions
contemplated thereby; (iii) seeking to impose or confirm limitations on the
ability of Parent, Purchaser or any other affiliate of Parent to exercise
effectively full rights of ownership of any Shares, including, without
limitation, the right to vote any Shares acquired by Purchaser pursuant to the
Offer or otherwise on all matters properly presented to the Company's
stockholders, including, without limitation, the approval and adoption of this
Agreement and the transactions contemplated hereby; (iv) seeking to require
divestiture by Parent, Purchaser or any other affiliate of Parent of any Shares;
or (v) which otherwise has a Material Adverse Effect on the Company or Parent;
(b) there shall have been any action taken, or any statute, rule,
regulation, legislation, interpretation, judgment, order or injunction enacted,
entered, enforced, promulgated, amended, issued or deemed applicable to (i)
Parent, the Company or any subsidiary or affiliate of Parent or the Company or
(ii) any
<PAGE>
transaction contemplated by this Agreement, by any legislative body, court,
government or governmental, administrative or regulatory authority or agency,
domestic or foreign, other than the routine application of the waiting period
provisions of the HSR Act to the Offer or the Merger, which is reasonably likely
to result, directly or indirectly, in any of the consequences referred to in
clauses (i) through (v) of paragraph (a) above;
(c) there shall have occurred any change, condition, event or development
that has a Material Adverse Effect on the Company;
(d) there shall have occurred (i) any general suspension of, or limitation
on prices for, trading in securities on the New York Stock Exchange, (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, administrative or regulatory
authority or agency, domestic or foreign, on the extension of credit by banks or
other lending institutions in the United States, (iv) a commencement of a war or
armed hostilities or other national or international calamity directly or
indirectly involving the United States (other than any war or armed hostilities
or other calamity in the Balkan States) that is material to the United States or
(v) in the case of any of the foregoing existing on the date hereof, a material
acceleration or worsening thereof;
(e) it shall have been publicly disclosed or Purchaser shall have
otherwise learned that beneficial ownership (determined for the purposes of this
paragraph as set forth in Rule 13d-3 promulgated under the Exchange Act) of 20%
or more of the then outstanding Shares has been acquired by any person, other
than Parent or any of its affiliates;
(f) any representation or warranty of the Company in the Merger Agreement
which is qualified as to materiality or Material Adverse Effect shall not be
true and correct in all respects or any such representation or warranty that is
not so qualified shall not be true and correct in any respect that would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company; or
(g) the Company shall have failed to perform in any material respect any
obligation or to comply in any material respect with any agreement or covenant
of the Company to be performed or complied with by it under the Merger
Agreement,
which, in the reasonable, good faith judgment of Purchaser, 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.
<PAGE>
The foregoing conditions are for the sole benefit of Purchaser and Parent
and may be asserted by Purchaser or Parent regardless of the circumstances
giving rise to any such condition or may be waived by Purchaser or Parent in
whole or in part at any time and from time to time in their sole discretion.
The failure by Parent or Purchaser 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.
<PAGE>
EXHIBIT C
May 13, 1999
Unisource Worldwide, Inc.
1100 Cassatt Road
P.O. Box 3000-0935
Berwyn, PA 19312
Confidentiality Agreement
-------------------------
Ladies/Gentlemen:
In order to evaluate a possible transaction (the "Proposed Transaction")
between Unisource Worldwide Inc. (the "Disclosing Party") and Georgia-Pacific
Corporation (the "Receiving Party"), the Disclosing Party may disclose and
deliver to the Receiving Party, upon execution and delivery of this letter
agreement, certain information regarding its properties, employees, finances,
businesses, operations, assets and financial affairs. All such information
furnished by the Disclosing Party or its Representatives (as defined below),
whether furnished before or after the date hereof, whether oral or written, and
regardless of the manner in which it is furnished, is referred to in this letter
agreement as "Proprietary Information". The term Proprietary Information shall
include, without limitation, all data, reports, interpretations, forecasts and
records containing or otherwise reflecting information concerning the Disclosing
Party, its respective affiliates and subsidiaries, whether prepared by such
party or others, and any summaries or other documents created by either party or
others which refer to, relate to, discuss, constitute, or embody all or any
portion of the Proprietary Information. The term Proprietary Information shall
not include, however, information which (a) is or becomes generally available to
the public other than as a result of a disclosure by the Receiving Party or its
Representatives, (b) was available to the Receiving Party on a non-confidential
basis prior to its disclosure by the Disclosing Party or its Representatives,
(c) is independently developed by the Receiving Party without violation of this
letter agreement or (d) becomes available to the Receiving Party on a non-
confidential basis from a person other than the Disclosing Party or its
Representatives who is not, to the Receiving Party's knowledge based on
reasonable
<PAGE>
inquiry, otherwise bound by a confidentiality agreement with the Disclosing
Party or any of its Representatives, or is otherwise not, to the Receiving
Party's knowledge based on reasonable inquiry, under an obligation to the
Disclosing Party or any of its Representatives not to transmit the information
to the Receiving Party. As used in this letter agreement, the term
"Representatives" means with respect to any person: (a) the directors of such
person and those of its officers and employees (including officers and employees
of its subsidiaries) who need to know the Proprietary Information for the
purposes of evaluating or negotiating the Proposed Transaction and (b) those
attorneys, advisors, accountants, underwriters, lenders and consultants of such
person who are not officers or employees of such person who need to know the
Proprietary Information for purposes of evaluating or negotiating the Proposed
Transaction, and who agree to keep such information confidential in accordance
with the terms of this letter agreement. The Receiving Party agrees to be
responsible for any breach of this letter agreement by its Representatives.
Subject to the immediately-succeeding paragraph, unless otherwise agreed to
in writing by the Disclosing Party, the Receiving Party agrees:
(a) except as required by law, to keep all Proprietary Information
confidential and not to disclose or reveal any Proprietary Information
to any person other than its Representatives who are actively and
directly participating in the evaluation of the Proposed Transaction;
(b) not to use Proprietary Information for any purpose other than in
connection with its evaluation of the Proposed Transaction or the
consummation of the Proposed Transaction; and
(c) except as required by law or pursuant to the rules of, or a listing
agreement with, any national securities exchange, not to disclose to
any person (other than those of its Representatives who are actively
and directly participating in the evaluation of the Proposed
Transaction) any information about the Proposed Transaction, or the
terms or conditions or any other facts relating thereto, including,
without limitation, the fact that discussions are taking place with
respect thereto, the status thereof or the fact that Proprietary
Information has been made available to the Receiving Party or its
Representatives.
In the event that the Receiving Party is requested pursuant to, or required
by, applicable law, regulation or stock exchange rule, or by legal or regulatory
process, to disclose any Proprietary Information or any other information
concerning the Proposed Transaction, the Receiving Party agrees that it will
provide the Disclosing Party with prompt notice of such request or requirement
in
2
<PAGE>
order to enable the Disclosing Party to seek an appropriate protective order or
other remedy and to consult with the Receiving Party with respect to the
Disclosing Party taking steps to resist or narrow the scope of such request or
legal process or to waive compliance, in whole or in part, with the terms of
this letter agreement. In any such event, the Receiving Party will, upon the
request of the Disclosing Party, use its reasonable commercial best efforts to
ensure that all Proprietary Information and other information that is so
disclosed will be accorded confidential treatment and shall furnish only that
portion of the Proprietary Information which it is advised by counsel is legally
required.
The Receiving Party also agrees that for a period of twenty-four months
from the date of this letter agreement, neither it nor any of its controlled
affiliates will, without the prior written consent of the Disclosing Party:
(a) acquire, offer to acquire or agree to acquire, directly or indirectly,
by purchase or otherwise, any voting securities or direct or indirect
rights to acquire any voting securities of the Disclosing Party, or any
subsidiary thereof, or of any successor to, or person in control of,
the Disclosing Party, or any assets of the Disclosing Party, or any
subsidiary or division thereof, or of any such successor or controlling
person other than immaterial asset purchases in the ordinary course of
business and acquisitions of securities in the ordinary course for
investment purposes by pension funds;
(b) make, or in any way participate, directly or indirectly, in any
"solicitation" of "proxies" to vote (as such terms are used in the
rules of the Securities and Exchange Commission), or seek to advise or
influence any person or entity with respect to the voting of any voting
securities of the Disclosing Party;
(c) form, join or in any way participate in a "group" as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended, in
connection with any of the foregoing; or
(d) otherwise act, alone or in concert with others (including by providing
financing for another party), to seek or offer to control or influence,
in any manner, the management, Board of Directors or policies of the
Disclosing Party.
The Receiving Party covenants and agrees that, during such period, unless and
until such party shall have been specifically invited in writing by the
Disclosing Party, it will not, and will cause each of its affiliates not to,
directly or indirectly, (x) solicit, seek or offer to effect, negotiate with or
provide any information to any
3
<PAGE>
party with respect to, or (y) make any statement or proposal, whether written or
oral, either alone or in concert with others, to the Board of Directors of the
Disclosing Party, to any director or officer of the Disclosing Party or to any
shareholder of the Disclosing Party, or otherwise make any public announcement
or proposal or offer whatsoever with respect to (i) any form of business
combination or transaction involving the Disclosing Party or any affiliate
thereof, including, without limitation, a merger, exchange offer or liquidation
of the Disclosing Party's assets, (ii) any form of restructuring,
recapitalization or similar transaction with respect to the Disclosing Party or
any affiliate thereof, (iii) any request to waive or terminate the provisions of
this letter agreement or (iv) any proposal or other statement with respect to
the Disclosing Party inconsistent with the terms of this letter agreement, or
instigate or encourage any third party to do any of the foregoing.
The Receiving Party acknowledges that Proprietary Information provided by
the Disclosing Party is and at all times remains, the sole and exclusive
property of the Disclosing Party, and the Disclosing Party has the exclusive
right, title and interest to such Proprietary Information. No right or license,
by implication or otherwise, is granted by the Disclosing Party as a result of
disclosure of Proprietary Information under this letter agreement.
The Receiving Party acknowledges that neither the Disclosing Party nor any
of its Representatives make any express or implied representation or warranty as
to the accuracy or completeness of any Proprietary Information and that the
Receiving Party also agrees that it shall be entitled to rely solely on such
representations and warranties regarding Proprietary Information as may be made
to it in any final agreement relating to the Proposed Transaction subject to the
terms and conditions of such agreement. The Receiving Party agrees that neither
the Disclosing Party nor any of its directors, officers or Representatives shall
have any liability to the Receiving Party or any of its Representatives relating
to or arising from the use of any Proprietary Information by the Receiving Party
or its Representatives or for any errors therein or omissions therefrom except
to the extent liabilities may be created under any definitive agreement executed
by the parties.
This letter agreement binds the parties only with respect to the matters
expressly set forth herein and neither party is bound or committed to negotiate
or consummate the Proposed Transaction unless and until a definitive agreement
on such matters has been executed and delivered on behalf of both parties by
their duly-authorized officers.
If either party hereto determines that it does not wish to proceed with the
Proposed Transaction, it will promptly advise the other party of that decision.
In
4
<PAGE>
such case or if the Proposed Transaction is not consummated by the Disclosing
Party and the Receiving Party, the Receiving Party will promptly return to the
Disclosing Party all copies of Proprietary Information provided by the
Disclosing Party in its possession or in the possession of any of its
Representatives and will not retain any copies or other reproductions, in whole
or in part, of such material. All other documents, memoranda, notes, summaries,
analyses, extracts, compilations, studies or other material whatsoever prepared
by the Receiving Party or any of its Representatives based on the Proprietary
Information will be destroyed and such destruction will be certified in writing
to the Disclosing Party by an authorized officer supervising such destruction.
Each party is aware, and will advise its Representatives who are informed
of the matters that are the subject of this letter agreement, of the
restrictions imposed by the United States securities laws on the purchase or
sale of securities by any person who has received material, non-public
information from the issuer of such securities and on the communication of such
information to any other person when it is reasonably foreseeable that such
other person is likely to purchase or sell such securities in reliance upon such
information.
The Disclosing Party agrees that, if it delivers the notice referred to in
Section 8.3(a)(iii) of the Agreement and Plan of Merger dated as of February 28,
1999 (the "UGI Agreement") among the Disclosing Party, UGI Corporation ("UGI")
and Vulcan Acquisition Corp. with respect to a Superior Proposal (as defined in
the UGI Agreement) made by a party other than the Receiving Party, the
Disclosing Party will issue a press release regarding the delivery of such
notice. The Disclosing Party further agrees that it will not enter into a
binding written agreement with respect to the Superior Proposal made by such
other party until at least two business days after issuance of the press release
referred to above.
It is understood that the covenants of this letter agreement and the
Proprietary Information disclosed are special, unique and of extraordinary
character. The Disclosing Party may be irreparably harmed by a breach of this
letter agreement, and the use of the Proprietary Information for the business
purposes of any person other than the Disclosing Party may enable such person to
compete unfairly with the Disclosing Party. In the event that the Receiving
Party or its Representatives shall have knowledge of any breach of the
confidentiality of, or the misappropriation of, any of the Proprietary
Information, the Receiving Party shall promptly give notice thereof to the
Disclosing Party. Without prejudice to the rights and remedies otherwise
available to the Disclosing Party, the Disclosing Party shall be entitled to
equitable relief by way of injunction or otherwise if the Receiving Party or any
of its Representatives breach or threaten to breach any of the provisions of
this letter agreement.
5
<PAGE>
It is further understood and agreed that no failure or delay by the
Disclosing Party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise of any right, power or privilege
hereunder.
This letter agreement shall be governed by, and construed in accordance
with, the laws of the State of New York applicable to contracts executed in, and
to be performed in, that state. This letter agreement shall not be assignable
except by operation of law to a successor by merger; provided, however, that
such successor shall be bound by all of the terms of this letter agreement.
The Disclosing Party (i) represents and warrants that this letter agreement
contains terms and conditions no more restrictive to the Receiving Party than
those contained in the Confidentiality Agreement, dated January 20, 1999,
between the Disclosing Party and UGI and (ii) agrees that if the Disclosing
Party enters into a confidentiality agreement with any party relating to a
possible Acquisition Proposal (as defined in the UGI Agreement) and containing
terms and conditions that are less restrictive to the receiving party thereunder
than those contained in this letter agreement, the Disclosing Party shall
promptly provide written notice to the Receiving Party specifying in detail the
content of those less restrictive terms and conditions, in which event this
letter agreement shall be deemed automatically amended to include such less
restrictive terms and conditions.
This letter agreement and the Confidentiality Agreement (the "Other Letter
Agreement") dated as of the date hereof between the Receiving Party and the
Disclosing Party pursuant to which the Receiving Party will provide information
to the Disclosing Party in order to permit the Disclosing Party to evaluate the
Proposed Transaction contain the entire agreement between the Disclosing Party
and the Receiving Party concerning the subject matter hereof and thereof, and no
modification of this letter agreement or the Other Letter Agreement or waiver of
the terms and conditions hereof or thereof shall be binding upon the Disclosing
Party or the Receiving Party, unless approved in writing by each of the parties
hereto.
6
<PAGE>
Please confirm your agreement with the foregoing by signing and returning
to the undersigned the duplicate copy of this letter enclosed herewith.
GEORGIA-PACIFIC CORPORATION
By: /s/ James F. Kelley
-----------------------------------------------------
Name: James F. Kelley
Title: Senior Vice President and General Counsel
ACCEPTED AND AGREED as of
the date first written above:
UNISOURCE WORLDWIDE, INC.
By: /s/ Thomas A. Decker
-----------------------------------------------------
Name: Thomas A. Decker
Title: Senior Vice President, General Counsel
and Secretary
7
<PAGE>
EXHIBIT D
May 13, 1999
Georgia-Pacific Corporation
133 Peachtree Street, N.E.
Atlanta, Georgia 30303
Confidentiality Agreement
-------------------------
Ladies/Gentlemen:
In order to evaluate a possible transaction (the "Proposed Transaction")
between Georgia-Pacific Corporation (the "Disclosing Party") and Unisource
Worldwide, Inc. (the "Receiving Party"), the Disclosing Party may disclose and
deliver to the Receiving Party, upon execution and delivery of this letter
agreement, certain information regarding its properties, employees, finances,
businesses, operations, assets and financial affairs. All such information
furnished by the Disclosing Party or its Representatives (as defined below),
whether furnished before or after the date hereof, whether oral or written, and
regardless of the manner in which it is furnished, is referred to in this letter
agreement as "Proprietary Information". The term Proprietary Information shall
include, without limitation, all data, reports, interpretations, forecasts and
records containing or otherwise reflecting information concerning the Disclosing
Party, its respective affiliates and subsidiaries, whether prepared by such
party or others, and any summaries or other documents created by either party or
others which refer to, relate to, discuss, constitute, or embody all or any
portion of the Proprietary Information. The term Proprietary Information shall
not include, however, information which (a) is or becomes generally available to
the public other than as a result of a disclosure by the Receiving Party or its
Representatives, (b) was available to the Receiving Party on a non-confidential
basis prior to its disclosure by the Disclosing Party or its Representatives,
(c) is independently developed by the Receiving Party without violation of this
letter agreement or (d) becomes available to the Receiving Party on a non-
confidential basis from a person other than the Disclosing Party or its
Representatives who is not, to the Receiving Party's knowledge based on
reasonable inquiry, otherwise bound by a confidentiality agreement with the
Disclosing Party or any of its Representatives, or is otherwise not, to the
Receiving Party's knowledge based on reasonable inquiry, under an obligation to
the Disclosing Party or any of its Representatives
<PAGE>
not to transmit the information to the Receiving Party. As used in this letter
agreement, the term "Representatives" means with respect to any person: (a) the
directors of such person and those of its officers and employees (including
officers and employees of its subsidiaries) who need to know the Proprietary
Information for the purposes of evaluating or negotiating the Proposed
Transaction and (b) those attorneys, advisors, accountants, underwriters,
lenders and consultants of such person who are not officers or employees of such
person who need to know the Proprietary Information for purposes of evaluating
or negotiating the Proposed Transaction, and who agree to keep such information
confidential in accordance with the terms of this letter agreement. The
Receiving Party agrees to be responsible for any breach of this letter agreement
by its Representatives.
Subject to the immediately-succeeding paragraph, unless otherwise agreed to
in writing by the Disclosing Party, the Receiving Party agrees:
(a) except as required by law, to keep all Proprietary Information
confidential and not to disclose or reveal any Proprietary Information
to any person other than its Representatives who are actively and
directly participating in the evaluation of the Proposed Transaction;
(b) not to use Proprietary Information for any purpose other than in
connection with its evaluation of the Proposed Transaction or the
consummation of the Proposed Transaction; and
(c) except as required by law or to the extent required by the Agreement
and Plan of Merger dated as of February 28, 1999 among UGI Corporation,
the Receiving Party and Vulcan Acquisition Corp. or pursuant to the
rules of, or a listing agreement with, any national securities
exchange, not to disclose to any person (other than those of its
Representatives who are actively and directly participating in the
evaluation of the Proposed Transaction) any information about the
Proposed Transaction, or the terms or conditions or any other facts
relating thereto, including, without limitation, the fact that
discussions are taking place with respect thereto, the status thereof
or the fact that Proprietary Information has been made available to the
Receiving Party or its Representatives.
In the event that the Receiving Party is requested pursuant to, or required
by, applicable law, regulation or stock exchange rule, or by legal or regulatory
process, to disclose any Proprietary Information or any other information
2
<PAGE>
concerning the Proposed Transaction, the Receiving Party agrees that it will
provide the Disclosing Party with prompt notice of such request or requirement
in order to enable the Disclosing Party to seek an appropriate protective order
or other remedy and to consult with the Receiving Party with respect to the
Disclosing Party taking steps to resist or narrow the scope of such request or
legal process or to waive compliance, in whole or in part, with the terms of
this letter agreement. In any such event, the Receiving Party will, upon the
request of the Disclosing Party, use its reasonable commercial best efforts to
ensure that all Proprietary Information and other information that is so
disclosed will be accorded confidential treatment and shall furnish only that
portion of the Proprietary Information which it is advised by counsel is legally
required.
The Receiving Party also agrees that for a period of twenty-four months
from the date of this letter agreement, neither it nor any of its controlled
affiliates will, without the prior written consent of the Disclosing Party:
(a) acquire, offer to acquire or agree to acquire, directly or indirectly,
by purchase or otherwise, any voting securities or direct or indirect
rights to acquire any voting securities of the Disclosing Party, or any
subsidiary thereof, or of any successor to, or person in control of,
the Disclosing Party, or any assets of the Disclosing Party, or any
subsidiary or division thereof, or of any such successor or controlling
person other than immaterial asset purchases in the ordinary course of
business and acquisitions of securities in the ordinary course for
investment purposes by pension funds;
(b) make, or in any way participate, directly or indirectly, in any
"solicitation" of "proxies" to vote (as such terms are used in the
rules of the Securities and Exchange Commission), or seek to advise or
influence any person or entity with respect to the voting of any voting
securities of the Disclosing Party;
(c) form, join or in any way participate in a "group" as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended, in
connection with any of the foregoing; or
(d) otherwise act, alone or in concert with others (including by providing
financing for another party), to seek or offer to control or influence,
in any manner, the management, Board of Directors or policies of the
Disclosing Party.
The Receiving Party covenants and agrees that, during such period, unless and
until such party shall have been specifically invited in writing by the
Disclosing
3
<PAGE>
Party, it will not, and will cause each of its affiliates not to, directly or
indirectly, (x) solicit, seek or offer to effect, negotiate with or provide any
information to any party with respect to, or (y) make any statement or proposal,
whether written or oral, either alone or in concert with others, to the Board of
Directors of the Disclosing Party, to any director or officer of the Disclosing
Party or to any shareholder of the Disclosing Party, or otherwise make any
public announcement or proposal or offer whatsoever with respect to (i) any form
of business combination or transaction involving the Disclosing Party or any
affiliate thereof, including, without limitation, a merger, exchange offer or
liquidation of the Disclosing Party's assets, (ii) any form of restructuring,
recapitalization or similar transaction with respect to the Disclosing Party or
any affiliate thereof, (iii) any request to waive or terminate the provisions of
this letter agreement or (iv) any proposal or other statement with respect to
the Disclosing Party inconsistent with the terms of this letter agreement, or
instigate or encourage any third party to do any of the foregoing.
The Receiving Party acknowledges that Proprietary Information provided by
the Disclosing Party is and at all times remains, the sole and exclusive
property of the Disclosing Party, and the Disclosing Party has the exclusive
right, title and interest to such Proprietary Information. No right or license,
by implication or otherwise, is granted by the Disclosing Party as a result of
disclosure of Proprietary Information under this letter agreement.
The Receiving Party acknowledges that neither the Disclosing Party nor any
of its Representatives make any express or implied representation or warranty as
to the accuracy or completeness of any Proprietary Information and that the
Receiving Party also agrees that it shall be entitled to rely solely on such
representations and warranties regarding Proprietary Information as may be made
to it in any final agreement relating to the Proposed Transaction subject to the
terms and conditions of such agreement. The Receiving Party agrees that neither
the Disclosing Party nor any of its directors, officers or Representatives shall
have any liability to the Receiving Party or any of its Representatives relating
to or arising from the use of any Proprietary Information by the Receiving Party
or its Representatives or for any errors therein or omissions therefrom except
to the extent liabilities may be created under any definitive agreement executed
by the parties.
This letter agreement binds the parties only with respect to the matters
expressly set forth herein and neither party is bound or committed to negotiate
or consummate the Proposed Transaction unless and until a definitive agreement
on such matters has been executed and delivered on behalf of both parties by
their duly-authorized officers.
4
<PAGE>
If either party hereto determines that it does not wish to proceed with the
Proposed Transaction, it will promptly advise the other party of that decision.
In such case or if the Proposed Transaction is not consummated by the Disclosing
Party and the Receiving Party, the Receiving Party will promptly return to the
Disclosing Party all copies of Proprietary Information provided by the
Disclosing Party in its possession or in the possession of any of its
Representatives and will not retain any copies or other reproductions, in whole
or in part, of such material. All other documents, memoranda, notes, summaries,
analyses, extracts, compilations, studies or other material whatsoever prepared
by the Receiving Party or any of its Representatives based on the Proprietary
Information will be destroyed and such destruction will be certified in writing
to the Disclosing Party by an authorized officer supervising such destruction.
Each party is aware, and will advise its Representatives who are informed
of the matters that are the subject of this letter agreement, of the
restrictions imposed by the United States securities laws on the purchase or
sale of securities by any person who has received material, non-public
information from the issuer of such securities and on the communication of such
information to any other person when it is reasonably foreseeable that such
other person is likely to purchase or sell such securities in reliance upon such
information.
It is understood that the covenants of this letter agreement and the
Proprietary Information disclosed are special, unique and of extraordinary
character. The Disclosing Party may be irreparably harmed by a breach of this
letter agreement, and the use of the Proprietary Information for the business
purposes of any person other than the Disclosing Party may enable such person to
compete unfairly with the Disclosing Party. In the event that the Receiving
Party or its Representatives shall have knowledge of any breach of the
confidentiality of, or the misappropriation of, any of the Proprietary
Information, the Receiving Party shall promptly give notice thereof to the
Disclosing Party. Without prejudice to the rights and remedies otherwise
available to the Disclosing Party, the Disclosing Party shall be entitled to
equitable relief by way of injunction or otherwise if the Receiving Party or any
of its Representatives breach or threaten to breach any of the provisions of
this letter agreement.
It is further understood and agreed that no failure or delay by the
Disclosing Party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise of any right, power or privilege
hereunder.
This letter agreement shall be governed by, and construed in accordance
with, the laws of the State of New York applicable to contracts executed in, and
to be performed in, that state. This letter agreement shall not be assignable
except
5
<PAGE>
by operation of law to a successor by merger; provided, however, that
such successor shall be bound by all of the terms of this letter agreement.
This letter agreement and the Confidentiality Agreement (the "Other Letter
Agreement") dated as of the date hereof between the Receiving Party and the
Disclosing Party pursuant to which the Receiving Party will provide information
to the Disclosing Party in order to permit the Disclosing Party to evaluate the
Proposed Transaction contain the entire agreement between the Disclosing Party
and the Receiving Party concerning the subject matter hereof and thereof, and no
modification of this letter agreement or the Other Letter Agreement or waiver of
the terms and conditions hereof or thereof shall be binding upon the Disclosing
Party or the Receiving Party, unless approved in writing by each of the parties
hereto.
6
<PAGE>
Please confirm your agreement with the foregoing by signing and returning
to the undersigned the duplicate copy of this letter enclosed herewith.
UNISOURCE WORLDWIDE, INC.
By: /s/ Thomas A. Decker
-----------------------------------------
Name: Thomas A. Decker
Title: Senior Vice President, General
Counsel and Secretary
ACCEPTED AND AGREED as of
the date first written above:
GEORGIA-PACIFIC CORPORATION
By: /s/ James F. Kelley
---------------------------
Name: James F. Kelley
Title: Senior Vice President and General Counsel
7
<PAGE>
EXHIBIT E
[Form of Letter Agreement]
- -------------------
- -------------------
- -------------------
Dear :
-------
Unisource Worldwide, Inc. (the "Company") considers it essential to the
best interests of its stockholders to foster the continuous employment of the
key management personnel of the Company. In this connection, the Board of
Directors of the Company (the "Board") recognizes that the possibility of a
change in control of the Company exists and that such possibility, and the
uncertainty and questions which it may raise, may result in the departure or
distraction of key management personnel to the detriment of the Company and its
stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of key management
personnel, including yourself, to their assigned duties without distraction in
the face of potentially disturbing circumstances arising from any possible
change in control of the Company. The Board has also determined that it is in
the best interest of the Company and its stockholders to ensure your continued
availability to the Company in the event of a change in control.
In order to induce you to remain in the employ of the Company, the Company
agrees that you shall receive the severance benefits set forth in this letter
agreement (the "Agreement") in the event your employment with the Company is
terminated subsequent to a Change in Control (as defined in Section 2 below)
under the circumstances described below.
1. Term of Agreement. This Agreement shall be effective as of the date
hereof and shall continue in effect during the period you are employed by the
Company or any of its affiliates or successors and for 25 months after you cease
to be so employed following a Change in Control.
2. Change in Control. For purposes of this Agreement, the phrase "Change
in Control" shall mean first to occur of the following events:
<PAGE>
2
(a) any "Person" or "Group" (as such terms are used in Section 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended, (the
"Exchange Act")), other than any employee benefit plan sponsored by the
Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities representing
25% or more of the combined voting power of the Company's then outstanding
voting securities;
(b) individuals who constitute the Board on January 1, 1999 (the
"Incumbent Board") cease for any reason to constitute at least a majority
thereof, provided that any person becoming a director subsequent to such
date whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least three-quarters of the
directors comprising the Incumbent Board (either by a specific vote or by
approval of the proxy statement of the Company in which such person is
named as a nominee of the Company for director), but excluding for this
purpose any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act) or other actual or threatened solicitation of proxies or consents by
or on behalf of an individual, corporation, partnership, group, associate
or other entity or "person" other than the Board, shall be, for purposes of
this paragraph (b), considered as though such person were a member of the
Incumbent Board;
(c) the approval by the shareholders of the Company of a plan or
agreement providing (i) for a merger or consolidation of the Company other
than with a wholly-owned subsidiary and other than a merger or
consolidation that would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately
after such merger or consolidation, or (ii) for a sale, exchange or other
disposition of all or substantially all of the assets of the Company; or
(d) the adoption of a resolution by the Incumbent Board stating that
a specified event or transaction shall constitute a Change in Control for
purposes of this Agreement.
3. Termination Following Change in Control. (a) Definitions.
-----------
(i) Disability. You shall be deemed to be under a Disability if you
become totally and permanently disabled (as defined in the Company's Long-
Term Disability Plan applicable to senior executive officers as in effect
on the date hereof).
<PAGE>
3
(ii) Retirement. Termination by the Company or you of your
employment based on "Retirement" shall mean termination in accordance with
the Company's retirement policy, including early retirement, generally
applicable to its salaried employees or in accordance with any retirement
arrangement established with your written consent with respect to you.
(iii) Cause. Termination by the Company of your employment for
"Cause" shall mean termination upon (A) your willful and continued failure
substantially to perform your duties with the Company (other than as a
result of total or partial incapacity due to physical or mental illness or
as a result of a termination by you for Good Reason) after a written demand
for substantial performance is delivered to you by the Board, which demand
specifically identifies the manner in which the Board believes that you
have not substantially performed your duties, (B) your willful engaging in
conduct which is demonstrably and materially injurious to the Company,
monetarily or otherwise or (C) your conviction of a felony under the laws
of the United States or any state thereof. For purposes of this clause
(iii), no act or failure to act on your part shall be deemed "willful"
unless done or omitted to be done by you not in good faith and without
reasonable belief that your action or omission was in the best interest of
the Company. Notwithstanding the foregoing, you shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered
to you a copy of a resolution duly adopted by the affirmative vote (which
cannot be delegated) of not less than three-quarters (3/4) of the entire
membership of the Board at a meeting of the Board called and held for such
purpose (after reasonable notice to you and an opportunity for you,
together with your counsel, to be heard before the Board), finding that in
the good faith opinion of the Board you were guilty of conduct set forth
above in subclauses (A), (B) or (C) above, specifying the particulars
thereof in detail.
(iv) Good Reason. For purposes of this Agreement, "Good Reason"
shall mean, without your express written consent, any of the following:
(A) You are removed from your position for any reason other
than by reason of your death, Disability or Retirement or for Cause;
(B) A material reduction in your duties, a material
diminution in your position or a material adverse change in your
reporting relationship from those in effect prior to the date of the
Change in Control;
(C) The Company fails to pay you any amounts otherwise
vested and due under any applicable compensation or
<PAGE>
4
employment plan or agreement, including any bonus, and such failure
continues for ten (10) business days following notice to the Company
thereof;
(D) A reduction in your pay or bonus opportunity as in
effect immediately prior to the Change in Control or as the same may
be increased from time to time;
(E) The failure by the Company to continue in effect any
compensation plan in which you participate, including but not limited
to the compensation plans in effect on the date hereof or any
substitute plans adopted prior to the Change in Control, unless an
equitable arrangement (embodied in an ongoing substitute or
alternative plan providing you with substantially similar benefits)
has been made with respect to such plan in connection with the Change
in Control, or the failure by the Company to continue your
participation therein on the same basis, both in terms of the amount
of benefits provided and the level of your participation relative to
other participants, as existed at the time of the Change in Control;
(F) The failure by the Company to continue to provide you
with benefits at least as favorable to those enjoyed by you under any
of the Company's pension, life insurance, medical, health and
accident, disability, deferred compensation or savings plans in which
you were participating at the time of the Change in Control, or the
taking of any action by the Company which would directly or indirectly
materially reduce any of such benefits or deprive you of any material
fringe benefit enjoyed by you at the time of the Change in Control,
except where such failure to provide benefit plans or fringe benefits
is due to a change by the Company in such plans or benefits applicable
to employees of the Company in general; or
(G) The failure by the Company to provide you with the
number of paid vacation days to which you are entitled on the basis of
the Company's practice with respect to you as in effect at the time of
the Change in Control; or
(H) The failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to perform this
Agreement, as contemplated in Section 5 hereof; or
(I) Any purported termination of your employment which is
not effected pursuant to a Notice of Termination satisfying the
requirements of Subsection (b) below (and, if applicable, the
requirements of Subsection (a)(iii) above);
<PAGE>
5
for purposes of this Agreement, no such purported termination shall be
effective; or
(J) Your office is relocated outside of a thirty-five (35)
mile radius of your place of employment immediately prior to a Change
in Control.
(b) Notice of Termination. Any purported termination of your employment
---------------------
by the Company or by you shall be communicated by written Notice of Termination
to the other party hereto in accordance with Section 6 hereof. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the provision so
indicated.
(c) Date of Termination. "Date of Termination" shall mean (i) if your
-------------------
employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that you shall not have returned to the full-time
performance of your duties during such thirty (30) day period), (ii) if your
employment is terminated by reason of your death, the date of your death, and
(iii) if your employment is terminated by reason of your Retirement, for Cause,
for Good Reason or for any other reason (other than Disability or death), the
date specified in the Notice of Termination (which, in the case of a termination
for Cause shall not be less than thirty (30) nor more than sixty (60) days from
the date such Notice of Termination is given). In the event that you terminate
your employment for Good Reason, the Company shall have seven (7) calendar days
after receiving the Notice of Termination to cure the "Good Reason." In the
event such cure has not been effected within such seven (7) day period, your
Notice of Termination shall be immediately effective in accordance with its
terms. In the event the Company terminates your employment for "Cause," you
shall have seven (7) calendar days after receiving the Notice of Termination to
cure the "Cause." In the event such cure has not been effected within such seven
(7) day period, the Company's Notice of Termination shall be immediately
effective in accordance with its terms.
4. Compensation Upon Termination of Employment. Upon termination of your
employment you shall be entitled to the following benefits:
(a) Termination for Cause or for Other Than Good Reason, Disability,
----------------------------------------------------------------
Death or Retirement. If your employment shall be terminated by the Company
-------------------
for Cause or by you other than for Good Reason, Disability, death or
Retirement, the Company shall pay you your full base salary through the
Date of Termination at the rate in effect at the time Notice of Termination
is given and any amounts to be paid to you pursuant to the Company's
retirement and other benefit plans of the Company then
<PAGE>
6
in effect, and the Company shall have no further obligations to you under
this Agreement.
(b) Termination for Retirement, Death or Disability. If your
-----------------------------------------------
employment shall be terminated by the Company or by you for Retirement, or
by reason of your death or Disability, the Company shall pay to you or your
estate, as the case may be, your full base salary through the Date of
Termination at the rate in effect at the time Notice of Termination is
given, and any other benefits shall be determined in accordance with the
Company's retirement, benefit, disability and insurance programs then in
effect.
(c) Termination for Good Reason or for Other Than Cause, Death,
-----------------------------------------------------------
Disability or Retirement. If within the twenty-four (24) month period
------------------------
following a Change in Control your employment with the Company shall be
terminated (i) by the Company other than for Cause and other than because
of your death, Disability or Retirement or (ii) by you for Good Reason,
then, effective as of the Date of Termination, any employment agreement
between you and the Company shall terminate and you shall not have any
obligations or be entitled to any severance benefits thereunder and, in
lieu of any severance benefits which you otherwise would be eligible to
receive under severance plans of the Company as in effect immediately prior
to the Change in Control, you shall be entitled to the benefits provided
below:
(i) The Company shall pay you (i) your full base salary
through the Date of Termination at the rate in effect at the time the
Notice of Termination is given, plus all other amounts to which you
are entitled under any compensation or benefit plan of the Company
(excluding any severance benefits under the Company's severance plan
referred to above) at the time such payments are due under the terms
of such plans and (ii) an amount equal to the annual target bonus (or,
alternatively, equal to any guaranteed bonus if greater than the
annual target bonus) for the year in which the Date of Termination
occurs, multiplied by a fraction, the numerator of which is the number
of months or fraction thereof in which you were employed by the
Company in such year, and the denominator of which is 12.
(ii) In lieu of any further salary payments to you for
periods subsequent to the Date of Termination, the Company shall pay
as severance to you, not later than the fifth day following the Date
of Termination, upon the execution of a release, in form substantially
similar to the form annexed hereto as Exhibit A, provided by the
Company, a lump sum severance payment (the "Severance Payment") equal
to [_] times the sum of (i) your
<PAGE>
7
annual base salary as in effect immediately prior to the Change in
Control or, if greater, as in effect immediately prior to the Date of
Termination and (ii) the amount of the target bonus in effect
immediately prior to the Change in Control, assuming 100% attainment
of relevant target performance for such year under the bonus plan
applicable to senior company executives; provided however, that the
amounts in (i) and (ii) shall not exceed $[ ] for any annual
period.
(iii) In lieu of participation for twenty-four (24) months
following such termination in the life, medical, health and accident,
and disability insurance plans of Company in which you were eligible
to participate immediately prior to the Change in Control, a lump sum
payment, payable at the time of the Severance Payment, in cash equal
to the cost to the Company, as of the Change in Control, for providing
such benefits for such period plus such additional amount that after
payment of all applicable Federal, state and local taxes thereon,
computed at the marginal rates , is equal to all such taxes, so
computed, imposed with respect to such payment.
(iv) The Company shall cause you to be 100% vested in your
accrued benefit under the Company's Supplemental Employee Retirement
Plan (the "SERP") as of the Date of Termination and to pay to you, not
later than the fifth day following the Date of Termination, in a lump
sum, the present value of such benefit, calculated by the actuarial
firm utilized by the Company immediately prior to the Change in
Control, in accordance with the terms of the SERP and pursuant to the
actuarial procedures and assumptions utilized by such actuarial firm
immediately prior to the Change in Control.
(v) (A) Anything herein to the contrary notwithstanding,
in the event that it is determined that any payment or distribution by
the Company to or for your benefit, whether paid or payable or
distributed or distributable pursuant to the terms hereof or
otherwise, other than any payment pursuant to this Section 4(c)(v)(A),
(a "Payment"), would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code") or
any interest or penalties with respect to such excise tax (such excise
tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then you shall be
entitled to receive, within fifteen (15) business days following the
determination described in Section 4(c)(v)(B) below, an additional
payment ("Excise Tax Adjustment Payment") in an amount such that after
payment by
<PAGE>
8
you of all applicable Federal, state and local taxes (computed at the
maximum marginal rates and including any interest or penalties imposed
with respect to such taxes), including any Excise Tax, imposed upon
the Excise Tax Adjustment Payment, you shall retain an amount of the
Excise Tax Adjustment Payment equal to the Excise Tax imposed upon the
Payments.
(B) All determinations required to be made under this
Section 4(c)(v), including whether an Excise Tax Adjustment Payment is
required and the amount of such Excise Tax Adjustment Payment, shall
be made by the accounting firm utilized by the Company immediately
prior to the Change in Control, which shall provide to the Company and
you detailed supporting calculations within fifteen (15) business days
of the Date of Termination. Except as hereinafter provided, any
determination by such accounting firm shall be binding upon the
Company and you. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination
hereunder, it is possible that (x) Excise Tax Adjustment Payments
which should have been made will not have been made by the Company
("Underpayment"), or (y) certain Payments will have been made which
should not have been made ("Overpayment"), consistent with the
calculations required to be made hereunder. In the event of an
Underpayment, the Company shall promptly determine the amount of the
Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for your benefit. In the event that
you discover that an Overpayment shall have occurred, the amount
thereof shall be promptly repaid to the Company.
(vi) The Company shall also pay to you as incurred all
legal and accounting fees and expenses incurred by you as a result of
such termination (including all such fees and expenses, if any, in
seeking to obtain or enforce any right or benefit provided by this
Agreement or any other compensation-related plan, agreement or
arrangement of the Company) unless your claim is found by an arbitral
tribunal of competent jurisdiction to have been frivolous.
(vii) All your options to purchase equity securities of the
Company outstanding under any Company stock option or incentive plan,
whether vested or unvested, shall be immediately exercisable on the
Date of Termination and shall expire, to the extent not then
exercised, 90 days after the Date of Termination.
<PAGE>
9
(d) No Mitigation. You shall not be required to mitigate the amount
-------------
of any payment provided for in this Section 4 by seeking other employment
or otherwise, nor shall the amount of any payment or benefit provided for
in this Section 4 be reduced by any compensation earned by you as the
result of employment by another employer or by retirement benefits after
the Date of Termination, or otherwise.
(e) Other Benefits. In addition to all other amounts payable to you
--------------
under this Section 4, you shall be entitled to receive all benefits payable
to you under any other plan or agreement relating to retirement benefits in
accordance with the terms of such plan or agreement, provided, however,
that the severance payments referred to in Section 4(c) shall be in lieu of
any severance payments, or payments in lieu of notice, under any employment
agreement between you and the Company entered into prior to the date
hereof.
5. Successors; Binding Agreement. (a) Assumption of Agreement. The
-----------------------
Company shall require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as herein before defined and any
successor to its business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise. Prior to a Change in
Control, the term "Company" shall also mean any affiliate of the Company to
which you may be transferred and the Company shall cause such successor employer
to be considered the "Company" bound by the terms of this Agreement and this
Agreement shall be amended to so provide. Following a Change in Control, the
term "Company" shall not mean any affiliate of the Company to which you may be
transferred unless you shall have previously approved of such transfer in
writing, in which case the Company shall cause such successor employer to be
considered the "Company" bound by the terms of this Agreement and this Agreement
shall be amended to so provide.
(b) Enforceability. This Agreement shall inure to the benefit of and be
--------------
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If you
should die while any amount would still be payable to you hereunder if you had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to your devisee, legatee or
other designee or, if there is no such designee, to your estate.
6. Notice. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
<PAGE>
10
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement; provided
that all notices to the Company shall be directed to the attention of the Board
with a copy to the Secretary of the Company, or to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon receipt.
7. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by you and such officer as may be specifically designated by
the Board. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement.
8. Governing Law. This Agreement shall be governed by and construed in
accordance with the substantive law (and not the choice of law rules) of the
Commonwealth of Pennsylvania.
9. Validity. If any provision of this Agreement shall be declared to be
invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
10. Counterparts. This Agreement may be signed in several counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
11. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Philadelphia, Pennsylvania in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided that you shall be
entitled to seek specific performance of your right to be paid until the Date of
Termination during the pendency of any dispute or controversy arising under or
in connection with this Agreement.
12. Continued Employment. You agree to be bound by the terms and
conditions of this Agreement and to remain in the employ of the Company during
any period following any public announcement by any person of any proposed
transaction or transactions which, if effected, would result in a Change in
Control until a Change in Control has taken place or, in the opinion of the
Board, such person has abandoned or terminated its efforts to effect a Change in
Control. Subject to the foregoing, nothing contained in this Agreement shall
impair or
<PAGE>
11
interfere in any way with your right to terminate your employment or the right
of the Company or any subsidiary to terminate your employment with or without
cause prior to a Change in Control, in which such event all rights and
obligations hereunder shall immediately terminate. Nothing contained in this
Agreement shall be construed as a contract of employment between the Company and
you.
13. Payment Obligations Absolute. Subject to the execution by you and the
Company of mutual releases following a Change in Control and prior to payment of
the Severance Payment, the Company's obligations to make all payments and honor
all commitments under this Agreement shall be absolute and unconditional and
shall not be affected by any circumstances including, without limitation, any
set-off, counterclaim, recoupment, defense or other right which the Company may
have against you.
14. Interest on Late Payments. To the extent that any payments required
to be made hereunder following a Change in Control are not made within the
period specified therefor, the Company shall be liable for interest on such
delayed payments at the rate of 150% of the prime rate, compounded monthly, as
posted by the Morgan Guaranty Trust Company of New York, from time to time.
15. Withholding. Payments under this Agreement will be subject to normal
deductions for taxes and other legally required withholding.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter which
will then constitute our agreement on this subject.
Sincerely,
UNISOURCE WORLDWIDE, INC.
By________________________
Ray B. Mundt
Chairman & CEO
<PAGE>
12
Agreed to this _____ day of
______________, 1999
____________________________
<PAGE>
ATTACHMENT A
WAIVER AND RELEASE OF CLAIMS
----------------------------
In consideration of, and subject to, the payment to be made by Unisource
Worldwide, Inc., (the "Company"), of the "Severance Payment" (as defined in the
Agreement entered into between me and the Company on (date), I hereby waive any
claims I may have for employment or re-employment by the Company or any
subsidiary of the Company after the date hereof, and I further agree to and do
release and forever discharge the Company or any subsidiary of the Company, and
their respective past and present officers, directors, shareholders, employees
and agents from any and all claims and causes of action, known or unknown,
arising out of or relating to my employment with the Company or any subsidiary
of the Company, or the termination thereof, including, but not limited to,
wrongful discharge, breach of contract, tort, fraud, the Civil Rights Acts, Age
Discrimination in Employment Act, Employee Retirement Income Security Act,
Americans with Disabilities Act, or any other federal, state or local
legislation or common law relating to employment or discrimination in employment
or otherwise.
Notwithstanding the foregoing or any other provision hereof, nothing in
this Waiver and Release of Claims shall adversely affect (i) my rights under the
Agreement (other than my rights to the Severance Payment); (ii) my rights under
the Company's letter to me dated July 1, 1998, as amended on December 8, 1998;
(iii) my rights under plans, programs and arrangements of the Company or any
subsidiary of the Company which are accrued but unpaid as of the date of my
termination; or (iv) my rights to indemnification under any indemnification
agreement, applicable law and the certificates of incorporation and bylaws of
the Company and any subsidiary of the Company, and my rights under any
directors' and officers' liability insurance policy covering me.
The "Change-in-Control Payment" to be made to me pursuant to the Agreement
and in consideration of this general release of claims is in addition to all
other amounts, including those amounts described in the preceding paragraph, to
which I may have been entitled had I not executed this Waiver and Release of
---- -------- ---
Claims.
I acknowledge that I have signed this Waiver and Release of Claims
voluntarily, knowingly, of my own free will and without reservation or duress,
and that no promises or representations have been made to me by any person to
induce me to do so other than the promise of payment set forth in the first
paragraph above and the Company's acknowledgment of my rights reserved under the
second paragraph above.
I acknowledge that I have been given not less than twenty-one (21) days to
review and consider this Waiver and Release of Claims, and that I have had the
opportunity to consult with an attorney or other advisor of my choice and have
been advised by the Company to do so if I choose. I may revoke this Waiver and
Release of Claims seven (7) days or less after its execution by providing
written notice to the Company.
<PAGE>
I understand that this Waiver and Release of Claims is not effective and
that I will not receive any payment hereunder until the revocation period has
expired.
Finally, I acknowledge that I have read this Waiver and Release of Claims
and understand all of its terms.
____________________________________
(Employee's Signature)
------------------------------------
Print Name
____________________________________
Date Signed
<PAGE>
EXHIBIT F
[LOGO]
Unisource Worldwide, Inc.
1100 Cassatt Road
Berwyn, PA 19312
Ray B. Mundt
Chairman of the Board and
Chief Executive Officer
May 28, 1999
Dear Stockholders:
I am pleased to inform you that on May 25, 1999 Unisource Worldwide, Inc.
and Georgia-Pacific Corporation entered into a Merger Agreement pursuant to
which a subsidiary of Georgia-Pacific is today commencing a tender offer to
purchase all outstanding shares of Unisource common stock for $12.00 per
share, net to the seller in cash. The shares of Unisource common stock not
acquired in the tender offer will be acquired in a second step merger at the
same per share price.
Your Board of Directors, by the unanimous vote of all directors present and
voting, has determined that the tender offer and the merger are fair to and in
the best interests of Unisource and its stockholders and has approved the
Merger Agreement, the tender offer and the merger. Your Board of Directors
recommends that you accept the tender offer by tendering your shares in the
tender offer.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors referred to in the attached Schedule 14D-
9 (that is being filed today with the Securities and Exchange Commission).
Accompanying this letter, in addition to the attached Schedule 14D-9
relating to the tender offer, is the Offer to Purchase, together with related
materials, including a Letter of Transmittal to be used for tendering your
shares.
These documents set forth the terms and conditions of the tender offer and
provide instructions as to how to tender your shares. We urge you to read the
enclosed materials carefully.
On behalf of the management and the Board of Directors of Unisource
Worldwide, Inc., we thank you for your support.
Sincerely,
/s/ Ray B. Mundt
-------------------------------
Ray B. Mundt
Chairman of the Board and Chief
Executive Officer
<PAGE>
EXHIBIT H
[GEORGIA-PACIFIC NEWS LETTERHEAD AND LOGO]
133 Peachtree Street Northeast
Atlanta, Georgia 30303
(404) 652-4000
News from Georgia-Pacific
Release No. C-1522
Contact: Ken Haldin
(404) 652-6098
Contact: Martha A.Buckley
Unisource Worldwide
(610) 722-3511
May 25, 1999
GEORGIA-PACIFIC AND UNISOURCE WORLDWIDE TO MERGE
-------------------------------------------------
ATLANTA, Ga. and BERWYN, Pa. -- Georgia-Pacific Corp. and Unisource Worldwide,
Inc. today jointly announced that each of their boards of directors has approved
a definitive merger agreement under which Georgia-Pacific will acquire all
outstanding shares of Unisource for $12 per share in cash. After the merger,
Unisource will conduct business under its existing name as a separate
distribution subsidiary of Georgia-Pacific Group (NYSE:GP), the pulp, paper and
building products business of Georgia-Pacific Corp.
The arrangement strategically unites Atlanta-based Georgia-Pacific, one of the
world's leading forest products companies, with Berwyn, Pa.-based Unisource
(NYSE:UWW), the largest independent marketer and distributor of printing and
imaging paper and supply systems in North America. Combined revenues of the two
companies exceeded $20 billion last year.
The value of the transaction is approximately $840 million plus assumption of
approximately $400 million in net debt.
Under the agreement signed by both companies, Georgia-Pacific (through a wholly
owned subsidiary) will begin a tender offer on May 28 to purchase all of the
outstanding common stock of Unisource at $12 per share, net to the seller in
cash (excluding any tax effect). Unisource's board of directors has agreed to
recommend that its stockholders accept the offer and tender their shares. The
tender offer is scheduled to close June 25 but may be extended by Georgia-
Pacific under certain conditions.
Georgia-Pacific will have no obligation to purchase any Unisource shares in the
tender offer unless, among other conditions, shares representing at least the
majority of all outstanding Unisource shares are properly tendered to Georgia-
Pacific. Once the tender offer is completed, the Georgia-Pacific subsidiary will
be merged into Unisource. A meeting of Unisource stockholders to approve the
merger will be held only if fewer than 90 percent of shares are tendered. The
transaction is subject to usual regulatory approvals.
It is anticipated that the merger will be accretive to Georgia-Pacific Group
earnings and cash flow in 1999 and 2000.
"The combination of Georgia-Pacific and Unisource is an outstanding strategic
and operational fit that will merge the underlying values of both businesses
into a fundamentally stronger whole," said A.D. "Pete" Correll, chairman and
chief executive officer of Georgia-Pacific Corp. "We expect to achieve immediate
operational synergies and to implement aggressive cost reductions so that this
merger will deliver value to Georgia-Pacific Group shareholders."
<PAGE>
Page 2
Correll added that a major due diligence process was conducted before the
arrangement was finalized. "Based on our intensive review of the Unisource
business, including its operations, management, employees and financial
condition, we believe we can achieve our goal of adding value and realizing both
short- and long-term synergies through this transaction," Correll said. "This
merger is consistent with Georgia-Pacific's fundamental financial strategy of
maintaining capital discipline and investing in businesses that will provide
returns above the cost of capital. We are confident that this is a positive
strategic combination for both organizations."
When notified of the Georgia-Pacific transaction, UGI Corp. informed Unisource
that UGI would not make any further offer, and the previously announced merger
agreement between Unisource and UGI has been terminated.
Ray B. Mundt, chairman and chief executive officer of Unisource Worldwide, said,
"Our board of directors carefully considered both Georgia-Pacific's proposal and
the pending merger with UGI and concluded that the transaction with Georgia-
Pacific is superior for Unisource stockholders. Georgia-Pacific has been an
outstanding supply partner to Unisource for many years, and we're delighted to
join forces with their company for the benefit of all of our stakeholders."
Wasserstein Perella & Co. Inc. is acting as the dealer manager for the tender
offer. D.F King & Co. Inc. will be the information agent.
NOTE: Georgia-Pacific will conduct a telephone conference call at 1 p.m. Eastern
- ----
today (Tuesday, May 25) for financial analysts and media to review this
morning's announcement of the Georgia-Pacific Corp.-Unisource Worldwide Inc.
merger agreement. The conference call will feature A.D. "Pete" Correll, chairman
and chief executive officer; John F. McGovern, executive vice president -
finance and chief financial officer; and Lee M. Thomas, executive vice president
- - paper and chemicals.
To participate in this call, dial (888) 467-8159 (domestic United States) or
(712) 271-0038 (international). Password to participate is "GAPAC." Replay of
the conference call will be available beginning at 2:30 p.m. by dialing (800)
308-7861 (domestic) or (402) 220-3846. (No password is required.) This replay
will remain available through Friday, May 28.
Georgia-Pacific (www.gp.com) is the leading manufacturer and distributor of
----------
building products in the United States and one of the world's leading
manufacturers and distributors of pulp, paper and related chemicals for the
forest products industry. It consists of two distinct operating groups: Georgia-
Pacific Group, which includes the pulp, paper and building products business,
and The Timber Company (NYSE: TGP), which manages 5 million acres of timberland
in North America. The company employs 45,000 people at more than 400 locations
in the United States and Canada. Revenues in 1998 were $13.2 billion.
Unisource Worldwide (http://www.unisourcelink.com) is the largest independent
----------------------------
distributor of printing and imaging products, packaging systems and sanitary
maintenance supplies in North America. Fiscal 1998 revenues were $7.4 billion.
================================================================================
Certain statements contained in this release, including, without limitation,
future earnings and cash flows of both Unisource and Georgia-Pacific, and the
existence and achievement of cost savings and synergies of the merged
businesses, are forward-looking statements (as such term is defined under the
Private Securities Litigation Reform Act of 1995) based on current expectations.
The accuracy of such statements is subject to a number of risks, uncertainties
and assumptions including, but not limited to, the effect of general global and
domestic economic conditions on the demand for pulp and paper and building
products; the likelihood of at least a majority of Unisource shares being
tendered in the tender offer; shareholder approval of the merger of a Georgia-
Pacific subsidiary into Unisource if necessary; realization of cost savings,
synergies and opportunities to integrate and rationalize the two businesses; the
effect of changes in the productive capacity of manufacturers of competitive
products, and other factors listed in Georgia-Pacific Corp.'s Securities and
Exchange Commission filings, including but not limited to, its Annual Report on
Form 10-K dated Dec. 31, 1998, on file and recorded March 18, 1999.
================================================================================
