<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: November 6, 1995
FEDERAL PAPER BOARD COMPANY, INC.
(Exact Name of Registrant as Specified in its Charter)
NORTH CAROLINA
(State or Other Jurisdiction of Incorporation)
1-3838 22-0904830
(Commission File Number) (I.R.S. Employer Identification Number)
75 CHESTNUT RIDGE ROAD, MONTVALE, NEW JERSEY 07645
(Address of Principal Executive Offices) (Zip Code)
(201) 391-1776
(Registrant's Telephone Number, Including Area Code)
The Index to Exhibits appears on page 5.
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INFORMATION INCLUDED IN THIS REPORT
ITEM 1(b). CHANGES IN CONTROL OF REGISTRANT.
On November 6, 1995, Federal Paper Board Company, Inc. (the
"Registrant") and International Paper Company ("IP") entered into an Agreement
and Plan of Merger (the "Merger Agreement"), providing for a merger (the
"Merger") pursuant to which, and subject to the terms thereof, the Registrant
would become a wholly owned subsidiary of IP. As of the effective time of the
Merger, each outstanding share of the Registrant's common stock (the "Registrant
Common Stock"), other than shares as to which dissenters' rights may have been
properly exercised, shares held in the treasury of the Registrant or by any of
its subsidiaries and shares owned by IP or any of its subsidiaries, shall be
converted into, at the election of the holder thereof, the right to receive one
of the following (or a combination of both as determined under the Merger
Agreement): (i) the number of shares of IP's common stock ("IP Common Stock")
determined by dividing $55.00 by an average of the last sales price of IP Common
Stock on the New York Stock Exchange, Inc. Composite Tape for the 20 consecutive
trading days ending on the trading day which is five days prior to the closing
of the Merger, subject to the limitation that not more than 1.612 and not less
than 1.275 shares of IP Common Stock will be issued; and (ii) $55.00 in cash.
The election to receive cash or IP Common Stock will be subject to adjustment so
that approximately 49% of the Registrant Common Stock will be exchanged for
cash, and 51% will be exchanged for shares of IP Common Stock. The Merger is
intended to qualify as a tax-free reorganization.
The foregoing description of the Merger Agreement does not purport
to be complete and is qualified in its entirety by reference to the Merger
Agreement, a copy of which is attached hereto as Exhibit 2.1 and is hereby
incorporated by reference in its entirety. A copy of the joint press release
issued by the Registrant and IP on November 6, 1995 is attached hereto as
Exhibit 99.1 and is hereby incorporated by reference in its entirety.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
NOT APPLICABLE.
(b) Pro Forma Financial Information.
NOT APPLICABLE.
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(c) Exhibits.
2.1 Agreement and Plan of Merger, dated as of November 6,
1995, among Federal Paper Board Company, Inc.,
International Paper Company and Focus Merger Co., Inc.
99.1 Joint Press Release issued by Federal Paper Board
Company, Inc. and International Paper Company on
November 6, 1995.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FEDERAL PAPER BOARD COMPANY, INC.
DATE: November 16, 1995 By: /s/ Quentin J. Kennedy
------------------------------------------
Name: Quentin J. Kennedy
Title: Director, Executive Vice President
and Secretary
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INDEX TO EXHIBITS
Exhibit
- -------
2.1 Agreement and Plan of Merger, dated as of November 6, 1995, among
Federal Paper Board Company, Inc., International Paper Company and
Focus Merger Co., Inc.
99.1 Joint Press Release issued by Federal Paper Board Company, Inc. and
International Paper Company on November 6, 1995.
<PAGE> 1
CONFORMED COPY
================================================================================
AGREEMENT AND PLAN OF MERGER
Among
INTERNATIONAL PAPER COMPANY,
FOCUS MERGER CO., INC.
and
FEDERAL PAPER BOARD COMPANY, INC.
Dated as of November 6, 1995
================================================================================
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TABLE OF CONTENTS
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ARTICLE I
THE MERGER
SECTION 1.01. The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.02. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.03. Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.04. Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.05. Articles of Incorporation and By-Laws of the Surviving Corporation . . . . . 2
SECTION 1.06. Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.07. Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.01. Capital Stock of Merger Sub . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.02. Cancellation of Treasury Stock and Parent Owned Stock . . . . . . . . . . . . 3
SECTION 2.03. Conversion of Company Common Stock . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.04. Shares of Dissenting Shareholders . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.05. Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.06. Stock Transfer Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01. Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.02. Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.03. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.04. Noncontravention; Filings and Consents . . . . . . . . . . . . . . . . . . . 14
SECTION 3.05. Company SEC Documents; Financial Statements . . . . . . . . . . . . . . . . . 15
SECTION 3.06. Information Supplied . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.07. Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.08. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.09. Absence of Changes in Benefit Plans . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.10. Employee Benefits; ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.11. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
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SECTION 3.12. Compliance with Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.13. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.14. Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.15. Trademarks, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.16. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.17. Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.18. Voting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.19. Opinions of Financial Advisors . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.20. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
SECTION 4.01. Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.02. Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.03. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 4.04. Noncontravention; Filings and Consents . . . . . . . . . . . . . . . . . . . 25
SECTION 4.05. Parent SEC Documents; Financial Statements . . . . . . . . . . . . . . . . . 26
SECTION 4.06. Information Supplied . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 4.07. Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . 27
SECTION 4.08. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 4.09. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 4.10. Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 4.11. Ownership of Company Capital Stock . . . . . . . . . . . . . . . . . . . . . 28
SECTION 4.12. Interim Operations of Merger Sub. . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 4.13. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 5.01. Conduct of Business of the Company . . . . . . . . . . . . . . . . . . . . . 29
SECTION 5.02. Conduct of Business of Parent. . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 5.03. Other Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 5.04. No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Company Shareholders' Meeting . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 6.02. Registration Statement; Proxy Statement . . . . . . . . . . . . . . . . . . 34
SECTION 6.03. Access to Information; Confidentiality . . . . . . . . . . . . . . . . . . 35
SECTION 6.04. Approvals and Consents; Cooperation . . . . . . . . . . . . . . . . . . . . 36
SECTION 6.05. Company Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 6.06. Company Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 6.07. Indemnification and Insurance . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 6.08. Redemption of Convertible Preferred Stock . . . . . . . . . . . . . . . . . 41
SECTION 6.09. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 6.10. Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 6.11. Obligations of Merger Sub . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 6.12. Affiliates' Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 6.13. Plan of Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 6.14. Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 6.15. Letters of Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 6.16. Stock Exchange Listing . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 6.17. Parent Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. Conditions to the Obligations of Each Party . . . . . . . . . . . . . . . . 44
SECTION 7.02. Conditions to the Obligations of Parent and Merger Sub . . . . . . . . . . 45
SECTION 7.03. Conditions to the Obligations of the Company . . . . . . . . . . . . . . . 46
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 8.02. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 8.03. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 8.04. Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
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ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Nonsurvival of Representations . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 9.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 9.03. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 9.04. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 9.05. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 9.06. Entire Agreement; No Third-Party Beneficiaries . . . . . . . . . . . . . . 52
SECTION 9.07. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 9.08. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 9.09. Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
EXHIBIT A Form of Affiliate Letter for Affiliates of the Company
EXHIBIT B Form of Company Tax Opinion Representation Letter
EXHIBIT C Form of Parent Tax Opinion Representation Letter
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AGREEMENT AND PLAN OF MERGER dated as of November 6, 1995 among
International Paper Company, a New York corporation ("Parent"), Focus Merger
Co., Inc., a North Carolina corporation and a wholly owned subsidiary of Parent
("Merger Sub"), and Federal Paper Board Company, Inc., a North Carolina
corporation (the "Company").
WITNESSETH:
WHEREAS, the respective Boards of Directors of Parent, Merger Sub
and the Company have approved the acquisition of the Company by Parent upon the
terms and subject to the conditions set forth in this Agreement and Plan of
Merger, including, without limitation, the exhibits attached hereto
(collectively, this "Agreement");
WHEREAS, the respective Boards of Directors of Parent, Merger Sub
and the Company have approved the merger of the Company with and into Merger Sub
as set forth below (the "Merger") upon the terms and subject to the conditions
set forth in this Agreement, whereby each issued and outstanding share of common
stock, par value $5.00 per share, of the Company ("Company Common Stock"), other
than shares owned directly or indirectly by Parent or by the Company and other
than Dissenting Shares (as defined in Section 2.04), will be converted into the
right to receive shares of common stock, par value $1.00 per share, of Parent
("Parent Common Stock") or cash or a combination thereof subject to the
provisions of Article II of this Agreement;
WHEREAS, for federal income tax purposes, the Merger is intended
to qualify as a reorganization under the provisions of Section 368(a) of the
United States Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe certain conditions to the Merger;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Parent, Merger Sub and the Company hereby agree as follows:
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2
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the North
Carolina Business Corporation Act (the "NCBCA"), the Company shall be merged
with and into Merger Sub at the Effective Time of the Merger (as defined in
Section 1.03). Following the Merger, the separate corporate existence of the
Company shall cease, and Merger Sub shall continue as the surviving corporation
(the "Surviving Corporation") and shall succeed to and assume all the rights and
obligations of the Company in accordance with the NCBCA. At the election of
Parent prior to the effective date of the Registration Statement (as defined in
Section 6.02), any direct or indirect wholly owned subsidiary of Parent may be
substituted for Merger Sub as a constituent corporation in the Merger, provided
that no such substitution shall be made if it would materially delay or impede
the Merger or any of the other transactions contemplated by this Agreement. In
such event, the parties agree to execute an appropriate amendment to this
Agreement in order to reflect the foregoing.
SECTION 1.02. Closing. The closing of the Merger shall take place
at 10:00 a.m. on a date to be specified by the parties which shall be no later
than the second business day after the satisfaction or waiver of the conditions
set forth in Article VII (the "Closing Date") at the offices of Shearman &
Sterling, 599 Lexington Avenue, New York, New York 10022, unless another date or
place is agreed to in writing by the parties hereto.
SECTION 1.03. Effective Time. On the Closing Date, or as soon as
practicable thereafter, the parties shall file articles of merger or other
appropriate documents (in any such case, the "Articles of Merger") executed in
accordance with the relevant provisions of the NCBCA and shall make all other
filings or recordings required under the NCBCA. The Merger shall become
effective at such time as the Articles of Merger are duly filed with the North
Carolina Secretary of State, or at such later time as is agreed upon by the
parties and specified in the Articles of Merger (such time as the Merger becomes
effective is referred to herein as the "Effective Time").
SECTION 1.04. Effects of the Merger. The Merger shall have the
effects set forth in Section 55-11-06 of the NCBCA.
SECTION 1.05. Articles of Incorporation and By-Laws of the
Surviving Corporation. (a) Subject to the provisions of Section 6.07(a), the
Articles of Incorporation of Merger Sub as in effect immediately prior to the
Effective Time shall become the Articles of Incorporation of the Surviving
Corporation after the Effective Time (except that Article I of the Articles of
Incorporation shall be amended as of the Effective Time to read as follows:
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3
"The name of the Corporation is Federal Paper Board Company, Inc."), and
thereafter may be amended as provided therein and as permitted by law and this
Agreement.
(b) Subject to the provisions of Section 6.07(a), the By-Laws of
Merger Sub as in effect immediately prior to the Effective Time shall become the
By-Laws of the Surviving Corporation after the Effective Time, and thereafter
may be amended as provided therein and as permitted by law and this Agreement.
SECTION 1.06. Directors. The directors of Merger Sub immediately
prior to the Effective Time shall become the directors of the Surviving
Corporation, until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
SECTION 1.07. Officers. The officers of the Company immediately
prior to the Effective Time shall become the officers of the Surviving
Corporation, until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.01. Capital Stock of Merger Sub. As of the Effective
Time, by virtue of the Merger and without any action on the part of the holder
of any shares of Company Common Stock or any shares of capital stock of Merger
Sub, each share of common stock, without par value, of Merger Sub issued and
outstanding immediately prior to the Effective Time shall be converted into and
become one fully paid and nonassessable share of common stock, without par
value, of the Surviving Corporation.
SECTION 2.02. Cancellation of Treasury Stock and Parent Owned
Stock. As of the Effective Time, by virtue of the Merger and without any action
on the part of the holder of any shares of Company Common Stock or any shares of
capital stock of Merger Sub, each share of Company Common Stock issued and held
immediately prior to the Effective Time in the Company's treasury or by any of
the Company's direct or indirect wholly owned subsidiaries and each share of
Company Common Stock that is owned by Parent, Merger Sub or any other subsidiary
of Parent shall automatically be cancelled and retired and shall cease to exist,
and no consideration shall be delivered in exchange therefor.
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4
SECTION 2.03. Conversion of Company Common Stock. (a) As of the
Effective Time, by virtue of the Merger and without any action on the part of
the holder of any shares of Company Common Stock or any shares of capital stock
of Merger Sub, except as otherwise provided in this Section 2.03 and subject to
Sections 2.04 and 2.05(f), each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares to be
cancelled in accordance with Section 2.02) shall be converted into, at the
election of the holder thereof, one of the following (or a combination of shares
of Parent Common Stock and cash determined in accordance with Sections 2.03(d),
(e), (f) and (g)) (the "Merger Consideration"):
(i) the right to receive the number of shares of Parent Common
Stock determined by dividing $55.00 by the Average Parent Share Price and
rounding the result to the nearest one thousandth of a share (the "Stock
Consideration"); provided, however, that in no event shall the Stock
Consideration be less than 1.275 or more than 1.612 shares of Parent
Common Stock; provided, further, that, in any event, if between the date
of this Agreement and the Effective Time the outstanding shares of Parent
Common Stock shall have been changed into a different number of shares or
a different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of
shares, the Stock Consideration shall be correspondingly adjusted to the
extent appropriate to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of
shares. The " Average Parent Share Price" means the average of the last
sales prices per share of Parent Common Stock on the New York Stock
Exchange, Inc. (the "Stock Exchange") Composite Tape for the 20
consecutive trading days ending on the trading day which is five days
prior to the Closing Date; or
(ii) the right to receive in cash from Parent, without interest,
an amount equal to $55.00 (the "Cash Consideration").
As of the Effective Time, all such shares of Company Common Stock shall no
longer be outstanding and shall automatically be cancelled and retired and shall
cease to exist, and each holder of a certificate representing any such shares of
Company Common Stock shall cease to have any rights with respect thereto, except
the right to receive the Merger Consideration.
(b) Elections. Subject to the election and allocation procedures
set forth in this Section 2.03, each holder of record of Company Common Stock as
of the record date for the Company Shareholders' Meeting (as defined in Section
6.01) will be entitled, with respect to each share of Company Common Stock held
by such holder, to (i) elect to receive the Stock Consideration (a "Stock
Election"), or (ii) elect to receive the Cash Consideration (a "Cash Election"),
or (iii) indicate that such holder has no preference as to the receipt of the
Stock Consideration or the Cash Consideration (a "Non-Election").
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(c) Election Numbers. The number of shares of Company Common Stock
to be converted into the right to receive the Cash Consideration in the Merger
shall be equal to (A) 49% of the number of shares of Company Common Stock
outstanding immediately prior to the Effective Time less (B) the aggregate
number of shares of Company Common Stock as to which a notice of dissent has
been timely and properly filed pursuant to Section 55-13-21 of the NCBCA and not
withdrawn as of the Election Deadline (as defined in Section 2.03(i)) (the "Cash
Election Number"). The number of shares of Company Common Stock to be converted
into the right to receive the Stock Consideration in the Merger (the "Stock
Election Number") shall be equal to 51% of the number of shares of Company
Common Stock outstanding immediately prior to the Effective Time.
(d) Cash Election Adjustments. If the aggregate number of shares
of Company Common Stock covered by Cash Elections (the "Cash Election Shares")
exceeds the Cash Election Number, all shares of Company Common Stock covered by
Stock Elections (the "Stock Election Shares") and all shares of Company Common
Stock covered by Non-Elections (the "Non-Election Shares") shall be converted
into the right to receive the Stock Consideration, and the Cash Election Shares
shall be converted into the right to receive Parent Common Stock and cash in the
following manner:
each Cash Election Share shall be converted into the right to
receive (i) an amount in cash, without interest, equal to the
product of (x) the Cash Consideration and (y) a fraction (the
"Cash Fraction"), the numerator of which shall be the Cash
Election Number and the denominator of which shall be the total
number of Cash Election Shares, and (ii) a number of shares of
Parent Common Stock equal to the product of (x) the Stock
Consideration and (y) a fraction equal to one minus the Cash
Fraction.
(e) Stock Election Adjustments. If the aggregate number of Stock
Election Shares exceeds the Stock Election Number, all Cash Election Shares and
all Non-Election Shares shall be converted into the right to receive the Cash
Consideration, and the Stock Election Shares shall be converted into the right
to receive Parent Common Stock and cash in the following manner:
each Stock Election Share shall be converted into the right to
receive (i) a number of shares of Parent Common Stock equal to the
product of (x) the Stock Consideration and (y) a fraction (the
"Stock Fraction"), the numerator of which shall be the Stock
Election Number and the denominator of which shall be the total
number of Stock Election Shares, and (ii) an amount in cash,
without interest, equal to the product of (x) the Cash
Consideration and (y) a fraction equal to one minus the Stock
Fraction.
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6
(f) Non-Election Adjustments. In the event that neither Section
2.03(d) nor 2.03(e) above is applicable, all Cash Election Shares shall be
converted into the right to receive the Cash Consideration, all Stock Election
Shares shall be converted into the right to receive the Stock Consideration, and
the Non-Election Shares, if any, shall be converted into the right to receive
Parent Common Stock and cash in the following manner:
each Non-Election Share shall be converted into the right to
receive (i) an amount in cash, without interest, equal to the
product of (x) the Cash Consideration and (y) a fraction (the
"Non-Election Fraction"), the numerator of which shall be the
excess of (A) the Cash Election Number over (B) the total number
of Cash Election Shares and the denominator of which shall be the
excess of (C) the number of shares of Company Common Stock
outstanding immediately prior to the Effective Time (other than
Dissenting Shares) over (D) the sum of the total number of Cash
Election Shares and Stock Election Shares and (ii) a number of
shares of Parent Common Stock equal to the product of (x) the
Stock Consideration and (y) a fraction equal to one minus the
Non-Election Fraction.
(g) Adjustments Relating to Tax Opinions. If either (i) the tax
opinion of Shearman & Sterling referred to in Section 7.03(c) cannot be rendered
(as reasonably determined by Shearman & Sterling and concurred in by Skadden,
Arps, Slate, Meagher & Flom) or (ii) the tax opinion of Skadden, Arps, Slate,
Meagher & Flom referred to Section 7.02(d) cannot be rendered (as reasonably
determined by Skadden, Arps, Slate, Meagher & Flom and concurred in by Shearman
& Sterling), in either case as a result of the Merger potentially failing to
satisfy continuity of interest requirements under applicable federal income tax
principles relating to reorganizations under Section 368(a) of the Code, then
Parent shall reduce to the minimum extent necessary to enable the relevant tax
opinion or opinions, as the case may be, to be rendered, the Cash Election
Number and correspondingly increase the Stock Election Number. The requirement
to issue additional shares of Parent Common Stock pursuant to the foregoing
sentence shall not be applicable in the event Parent would be required
thereunder to issue in the aggregate (including upon the exercise of Substitute
Options (as defined in Section 6.05)) more than 50 million shares of Parent
Common Stock (with such number of shares being correspondingly adjusted to
reflect the occurrence of any of the events set forth in the second proviso of
Section 2.03(a)(i)).
(h) Exercise of Election. All Cash Elections, Stock Elections and
Non-Elections shall be made on a form designed for that purpose and mutually
acceptable to the Company and Parent (a "Form of Election") and mailed to
holders of record of shares of Company Common Stock as of the record date for
the Company Shareholders' Meeting or such other date as Parent and the Company
shall mutually agree (the "Election Form Record Date"). Parent and the Company
shall make available one or more Election Forms as may be reasonably requested
by all persons who become holders (or beneficial owners) of
<PAGE> 12
7
Company Common Stock between the Election Form Record Date and the close of
business on the day prior to the Election Deadline. Elections shall be made by
holders of Company Common Stock by mailing to the Exchange Agent (as defined in
Section 2.05) a Form of Election. To be effective, a Form of Election must be
properly completed, signed and submitted to the Exchange Agent and accompanied
by the Certificates (as defined in Section 2.05(b)) representing the shares of
Company Common Stock as to which the election is being made (or an appropriate
guarantee of delivery by an appropriate trust company in the United States or a
member of a registered national securities exchange or the National Association
of Securities Dealers, Inc.). Parent will have the discretion, which it may
delegate in whole or in part to the Exchange Agent, to reasonably determine
whether Forms of Election have been properly completed, signed and submitted or
revoked and to disregard immaterial defects in Forms of Election. The decision
of Parent (or the Exchange Agent) in such matters shall be conclusive and
binding. Neither Parent nor the Exchange Agent will be under any obligation to
notify any person of any defect in a Form of Election submitted to the Exchange
Agent. The Exchange Agent shall also make all computations contemplated by this
Section 2.03 and all such computations shall be conclusive and binding on the
holders of Company Common Stock.
(i) Election Deadline. A Form of Election must be received by the
Exchange Agent by the close of business on the last business day prior to the
Closing Date (the "Election Deadline") in order to be effective. Any holder of
Company Common Stock who has made an election by submitting a Form of Election
to the Exchange Agent may at any time prior to the Election Deadline change such
holder's election by submitting a revised Form of Election, properly completed
and signed that is received by the Exchange Agent prior to the Election
Deadline. Any holder of Company Common Stock may at any time prior to the
Election Deadline revoke his election and withdraw his Certificates deposited
with the Exchange Agent by written notice to the Exchange Agent received by the
close of business on the day prior to the Election Deadline. As soon as
practicable after the Election Deadline, the Exchange Agent shall determine the
allocation of the cash portion of the Merger Consideration and the stock portion
of the Merger Consideration and shall notify Parent of its determination.
Promptly after such notification, Parent shall issue a press release announcing
in reasonable detail the results of the Exchange Agent's allocation of the
Merger Consideration.
(j) Deemed Non-Election. For the purposes hereof, a holder of
Company Common Stock who does not submit a Form of Election which is received by
the Exchange Agent prior to the Election Deadline shall be deemed to have made a
Non-Election. If Parent or the Exchange Agent shall determine that any purported
Cash Election or Stock Election was not properly made, such purported Cash
Election or Stock Election shall be deemed to be of no force and effect and the
shareholder making such purported Cash Election or Stock Election shall for
purposes hereof, be deemed to have made a Non-Election.
<PAGE> 13
8
SECTION 2.04. Shares of Dissenting Shareholders. Notwithstanding
anything in this Agreement to the contrary, any shares of Company Common Stock
that are issued and outstanding as of the Effective Time and that are held by a
shareholder who has exercised his right (to the extent such right is available
by law) to demand and to receive the fair value of such shares (the "Dissenting
Shares") under Article 13 of the NCBCA shall not be converted into the right to
receive the Merger Consideration unless and until the holder shall have failed
to perfect, or shall have effectively withdrawn or lost, his right to dissent
from the Merger under the NCBCA and to receive such consideration as may be
determined to be due with respect to such Dissenting Shares pursuant to and
subject to the requirements of Article 13 of the NCBCA. If any such holder shall
have so failed to perfect or have effectively withdrawn or lost such right, each
share of such holder's Company Common Stock shall thereupon be deemed to have
been converted into and to have become, as of the Effective Time, the right to
receive, without any interest thereon, the Stock Consideration or the Cash
Consideration or a combination thereof as determined by Parent in its sole
discretion. The Company shall give Parent (i) prompt notice of any notice or
demands for appraisal or payment for shares of Company Common Stock received by
the Company and (ii) the opportunity to participate in and direct all
negotiations and proceedings with respect to any such demands or notices. The
Company shall not, without the prior written consent of Parent, make any payment
with respect to, or settle, offer to settle or otherwise negotiate, any such
demands.
SECTION 2.05. Exchange of Certificates. (a) Exchange Agent. From
and after the Effective Time, (i) Parent shall make available to a bank or trust
company designated by Parent and reasonably satisfactory to the Company (the
"Exchange Agent"), for the benefit of the holders of shares of Company Common
Stock (other than Dissenting Shares), for exchange in accordance with this
Article II through the Exchange Agent, (i) certificates evidencing such number
of shares of Parent Common Stock issuable to holders of Company Common Stock in
the Merger pursuant to Section 2.03 and (ii) cash in the amount required to be
exchanged for shares of Company Common Stock in the Merger pursuant to Section
2.03 (such certificates for shares of Parent Common Stock, together with any
dividends or distributions with respect thereto and cash, being hereinafter
referred to as the "Exchange Fund"). The Exchange Agent shall, pursuant to
irrevocable instructions, deliver the cash and the Parent Common Stock
contemplated to be issued pursuant to Section 2.03 out of the Exchange Fund.
Except as contemplated by Section 2.05(g) hereof, the Exchange Fund shall not be
used for any other purpose.
(b) Exchange Procedures. As promptly as practicable after the
Effective Time, Parent shall cause the Exchange Agent to mail to each holder of
a certificate or certificates (to the extent such certificates have not already
been submitted to the Exchange Agent with Forms of Election) which immediately
prior to the Effective Time represented outstanding shares (other than
Dissenting Shares) of Company Common Stock (the "Certificates") (i) a letter of
transmittal (which shall be in customary form and shall specify
<PAGE> 14
9
that delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon proper delivery of the Certificates to the Exchange Agent)
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates evidencing shares of Parent Common Stock or cash.
(c) Exchange of Certificates. Upon surrender to the Exchange Agent
of a Certificate for cancellation, together with such letter of transmittal,
duly executed and completed in accordance with the instructions thereto, and
such other documents as may be reasonably required pursuant to such
instructions, the holder of such Certificate shall be entitled to receive in
exchange therefor (A) a Certificate representing that number of whole shares of
Parent Common Stock, if any, which such holder has the right to receive pursuant
to this Article II and (B) a check in the amount equal to the cash, if any,
which such holder has the right to receive pursuant to the provisions of this
Article II (including any cash in lieu of any fractional shares of Parent Common
Stock to which such holder is entitled pursuant to Section 2.05(f) and any
dividends or other distributions to which such holder is entitled pursuant to
Section 2.05(d)), and the Certificate so surrendered shall forthwith be
cancelled. In the event of a transfer of ownership of shares of Company Common
Stock which is not registered in the transfer records of the Company, the
applicable Merger Consideration, cash in lieu of any fractional shares of Parent
Common Stock to which such holder is entitled pursuant to Section 2.05(f) and
any dividends or other distributions to which such holder is entitled pursuant
to Section 2.05(d) may be issued to a transferee if the Certificate representing
such shares of Company Common Stock is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer and
by evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.05, each Certificate shall be
deemed at all times after the Effective Time to represent only the right to
receive upon such surrender the applicable Merger Consideration with respect to
the shares of Company Common Stock formerly represented thereby, cash in lieu of
any fractional shares of Parent Common Stock to which such holder is entitled
pursuant to Section 2.05(f) and any dividends or other distributions to which
such holder is entitled pursuant to Section 2.05(d).
(d) Distributions with Respect to Unexchanged Shares of Parent
Common Stock. No dividends or other distributions declared or made after the
Effective Time with respect to Parent Common Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Common Stock represented thereby, and no cash
payment in lieu of any fractional shares shall be paid to any such holder
pursuant to Section 2.05(f), until the holder of such Certificate shall
surrender such Certificate. Subject to the effect of escheat, tax or other
applicable laws, following surrender of any such Certificate, there shall be
paid to the holder of the certificates representing whole shares of Parent
Common Stock issued in exchange therefor, without interest, (i) promptly, the
amount of any cash payable with respect to a fractional share of Parent Common
Stock to which such holder is entitled pursuant to Section 2.05(f)
<PAGE> 15
10
and the amount of dividends or other distributions with a record date after the
Effective Time and theretofore paid with respect to such whole shares of Parent
Common Stock, and (ii) at the appropriate payment date, the amount of dividends
or other distributions, with a record date after the Effective Time but prior to
surrender and a payment date occurring after surrender, payable with respect to
such whole shares of Parent Common Stock.
(e) No Further Rights in Company Common Stock. All shares of
Parent Common Stock issued or cash paid upon conversion of the shares of Company
Common Stock in accordance with the terms hereof (including any cash paid
pursuant to Section 2.05(d) or (f)) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Company Common Stock.
(f) No Fractional Shares. No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interests will not entitle
the owner thereof to vote or to any other rights of a shareholder of Parent.
Each holder of a fractional share interest shall be paid an amount in cash equal
to the product obtained by multiplying (i) such fractional share interest to
which such holder (after taking into account all fractional share interests then
held by such holder) would otherwise be entitled by (ii) the Average Parent
Share Price. As promptly as practicable after the determination of the amount of
cash, if any, to be paid to holders of fractional share interests, the Exchange
Agent shall so notify Parent, and Parent shall deposit such amount with the
Exchange Agent and shall cause the Exchange Agent to forward payments to such
holders of fractional share interests subject to and in accordance with the
terms of Sections 2.05(b), (c) and (d).
(g) Termination of Exchange Fund. Any portion of the Exchange Fund
(including any shares of Parent Common Stock) which remains undistributed to the
holders of Company Common Stock for one year after the Effective Time shall be
delivered to Parent, upon demand, and any holders of Company Common Stock who
have not theretofore complied with this Article II shall thereafter look only to
Parent for the applicable Merger Consideration, any cash in lieu of fractional
shares of Parent Common Stock to which they are entitled pursuant to Section
2.05(f) and any dividends or other distributions with respect to the Parent
Common Stock to which they are entitled pursuant to Section 2.05(d). Any portion
of the Exchange Fund remaining unclaimed by holders of shares of Company Common
Stock as of a date which is immediately prior to such time as such amounts would
otherwise escheat to or become property of any government entity shall, to the
extent permitted by applicable law, become the property of Parent free and clear
of any claims or interest of any person previously entitled thereto.
(h) No Liability. None of the Exchange Agent, Parent nor the
Surviving Corporation shall be liable to any holder of shares of Company Common
Stock for any such
<PAGE> 16
11
shares of Parent Common Stock (or dividends or distributions with respect
thereto), or cash delivered to a public official pursuant to any abandoned
property, escheat or similar law.
(i) Withholding Rights. Each of the Surviving Corporation and
Parent shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company Common
Stock such amounts as it is required to deduct and withhold with respect to the
making of such payment under the Code, or any provision of state, local or
foreign tax law. 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 of Company Common Stock in respect of which such deduction and
withholding was made by the Surviving Corporation or Parent, as the case may be.
(j) 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
Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the applicable Merger Consideration, any cash in lieu of fractional
shares of Parent Common Stock to which the holders thereof are entitled pursuant
to Section 2.05(f) and any dividends or other distributions to which the holders
thereof are entitled pursuant to this Agreement.
(k) Further Assurances. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of either of the Merger Sub or the Company acquired or to
be acquired by the Surviving Corporation as a result of, or in connection with,
the Merger or otherwise to carry out this Agreement, the officers of the
Surviving Corporation shall be authorized to execute and deliver, in the name
and on behalf of each of the Merger Sub and the Company or otherwise, all such
deeds, bills of sale, assignments and assurances and to take and do, in such
names and on such behalves or otherwise, all such other actions and things as
may be necessary or desirable to vest, perfect or confirm any and all right,
title and interest in, to and under such rights, properties or assets in the
Surviving Corporation or otherwise to carry out the purposes of this Agreement.
SECTION 2.06. Stock Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and there shall be no
further registration of transfers of shares of Company Common Stock thereafter
on the records of the Company. From and after the Effective Time, the holders of
certificates representing shares of
<PAGE> 17
12
Company Common Stock outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such shares of Company Common Stock,
except as otherwise provided herein or by law. On or after the Effective Time,
any Certificates presented to the Exchange Agent or Parent for any reason shall
be converted into shares of Parent Common Stock, any cash in lieu of fractional
shares of Parent Common Stock to which the holders thereof are entitled pursuant
to Section 2.05(f) and any dividends or other distributions to which the holders
thereof are entitled pursuant to Section 2.05(d).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger
Sub as follows:
SECTION 3.01. Organization. Each of the Company and its
Significant Subsidiaries (as defined below) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority and all
necessary government approvals to own, lease and operate its properties and to
carry on its business as now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power, authority and
governmental approvals would not have a material adverse effect. For purposes of
this Agreement, a "Significant Subsidiary" means any subsidiary of the Company
or Parent, as the case may be, that constitutes a significant subsidiary within
the meaning of Rule 1-02 of Regulation S-X of the Securities and Exchange
Commission (the "SEC"). The Company and each of its subsidiaries is duly
qualified or licensed to do business and in good standing in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing necessary, except
where the failure to be so duly qualified or licensed and in good standing would
not have a material adverse effect. The Company has made available to Parent
complete and correct copies of its Articles of Incorporation, as amended, and
ByLaws and the articles of incorporation and by-laws or other comparable charter
or organizational documents of its Significant Subsidiaries, in each case as
amended to the date of this Agreement. The list of subsidiaries of the Company
set forth in Schedule 3.01 of the separate disclosure schedule delivered by the
Company to Parent prior to the execution of this Agreement (the "Company
Disclosure Schedule") is a true and accurate list of all the subsidiaries of the
Company. All the outstanding shares of capital stock of each Significant
Subsidiary of the Company are owned by the Company or by another wholly owned
subsidiary of the Company, free and clear of all liens, and are duly authorized,
validly issued, fully paid and nonassessable.
<PAGE> 18
13
SECTION 3.02. Capitalization. The authorized capital stock of the
Company consists of 240,000,000 shares of Company Common Stock, 1,900,000 shares
of Convertible Preferred Stock and 10,000,000 shares of Class A Preferred Stock,
par value $1.00 per share, of the Company ("Class A Preferred Stock"). As of
October 7, 1995, (i) 47,248,878 shares of Company Common Stock, 48,635 shares of
Convertible Preferred Stock and no shares of Class A Preferred Stock were issued
and outstanding, (ii) 2,693,071 shares of Company Common Stock were reserved for
issuance upon exercise of outstanding Company Stock Options (as defined in
Section 6.05), (iii) 243,661 shares of Company Common Stock were reserved for
issuance upon conversion of the Convertible Preferred Stock and (iv) 66,171
shares of Company Common Stock were held in the treasury of the Company. All the
outstanding shares of Company Common Stock are, and all shares which may be
issued pursuant to the Company Stock Options and the Convertible Preferred Stock
will be, when issued in accordance with the respective terms thereof, duly
authorized, validly issued, fully paid and nonassessable and free of any
pre-emptive rights in respect thereof. As of the date hereof, no bonds,
debentures, notes or other indebtedness of the Company convertible into voting
securities of the Company are issued or outstanding and, except as set forth
above, (i) no shares of capital stock or other voting securities of the Company
are outstanding, (ii) no equity equivalents, interests in the ownership or
earnings of the Company or other similar rights are outstanding and (iii) there
are no existing options, warrants, calls, subscriptions or other rights or
agreements or commitments relating to the capital stock of the Company or any of
its subsidiaries or obligating the Company or any of its subsidiaries to issue,
transfer or sell any shares of capital stock, or other equity interest in, the
Company or any of its subsidiaries or obligating the Company or any of its
subsidiaries to grant, extend or enter into any such option, warrant, call,
subscription or other right, agreement or commitment. As of the date of this
Agreement, except as contemplated by Section 6.08, there are no outstanding
contractual obligations of the Company or any of its subsidiaries to repurchase,
redeem or otherwise acquire any shares of capital stock of the Company or any of
its subsidiaries.
SECTION 3.03. Authority. The Company has the requisite corporate
power and authority to execute and deliver this Agreement and, subject to the
requisite approval of this Agreement by the holders of the outstanding shares of
Company Common Stock and Convertible Preferred Stock, voting together as one
class, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject to the requisite approval
of this Agreement by the holders of the outstanding shares of Company Common
Stock and Convertible Preferred Stock, voting together as one class. This
Agreement has been duly executed and delivered by the Company and, assuming this
Agreement constitutes the valid and binding obligation of Parent and Merger Sub,
constitutes the valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and
<PAGE> 19
14
similar laws, now or hereafter in effect, affecting creditors' rights and
remedies and to general principles of equity.
SECTION 3.04. Noncontravention; Filings and Consents. (a) Except
as set forth in Schedule 3.04 of the Company Disclosure Schedule, the execution
and delivery of this Agreement by the Company do not, and the consummation of
the transactions contemplated by this Agreement and compliance with the
provisions of this Agreement will not, conflict with, or result in any violation
of, or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation, or acceleration of any obligation
or to loss of a material benefit under, or result in the creation of any lien
upon any of the properties or assets of the Company or any of its subsidiaries
under (i) the Articles of Incorporation, as amended, or By-Laws of the Company
or the comparable charter or organizational documents of any of its Significant
Subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to the Company or any of its Significant Subsidiaries or
their respective properties or assets or (iii) subject to the governmental
filings and other matters referred to in paragraph (b) below, any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to the
Company or any of its subsidiaries or their respective properties or assets,
other than, in the case of clauses (ii) and (iii), any such conflicts,
violations, defaults, rights or liens that individually or in the aggregate
would not (x) impair in any material respect the ability of the Company to
perform its obligations under this Agreement or (y) prevent or impede, in any
material respect, the consummation of the transactions contemplated by this
Agreement.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with, any federal, state or local government
or any court, administrative or regulatory agency or commission or other
governmental authority or agency, domestic or foreign (a "Governmental Entity"),
is required by the Company or any of its subsidiaries in connection with the
execution and delivery of this Agreement by the Company or the consummation by
the Company of the transactions contemplated by this Agreement, except for (i)
the filing of a premerger notification and report form by the Company under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (ii) the filing of a notification with the European Commission under
Council Regulation (EEC) No. 4064/89 ("Regulation 4064/89"), (iii) the filing
with the SEC of (x) the Proxy Statement (as defined in Section 6.02) and (y)
such reports under Section 13(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as may be required in connection with this
Agreement and the transactions contemplated by this Agreement, (iv) the filing
of the Articles of Merger with the North Carolina Secretary of State and
appropriate documents with the relevant authorities of other states in which the
Company is qualified to do business, (v) the filing of such notices and other
reports as may be required to comply with the Connecticut Transfer Act ("CTA"),
(vi) such as may be required by any applicable state securities or "blue sky"
laws and (vii) such other consents, approvals, orders, authorizations,
<PAGE> 20
15
registrations, declarations and filings the failure of which to be obtained or
made would not, individually or in the aggregate, (x) impair in any material
respect the ability of the Company to perform its obligations under this
Agreement or (y) prevent or impede, in any material respect, the consummation of
the transactions contemplated by this Agreement.
SECTION 3.05. Company SEC Documents; Financial Statements. The
Company has filed all required reports, proxy statements, forms, and other
documents with the SEC since December 31, 1993 and prior to the date of this
Agreement (the "Company SEC Documents"). As of their respective dates, (i) the
Company SEC Documents complied, and all similar documents filed prior to the
Closing Date will comply, in all material respects with the requirements of the
Securities Act of 1933, as amended (the "Securities Act") or the Exchange Act,
as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such Company SEC Documents and (ii) none of the Company
SEC Documents contained, nor will any similar document filed after the date of
this Agreement contain, any untrue statement of a material fact or omitted to
state a 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. The financial statements of the Company included in the
Company SEC Documents (including any similar documents filed after the date of
this Agreement) comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto have been prepared in accordance with generally accepted
accounting principles (except, in the case of unaudited statements, as permitted
by Form 10-Q of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly present
the consolidated financial position of the Company and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). Except as set forth
in Schedule 3.05 of the Company Disclosure Schedule and except as set forth in
the Company SEC Documents, and except for liabilities and obligations incurred
in the ordinary course of business consistent with past practice since the date
of the most recent consolidated balance sheet included in the Company SEC
Documents, neither the Company nor any of its subsidiaries has any liabilities
or obligations of any nature (whether accrued, absolute, contingent or
otherwise) required by generally accepted accounting principles to be set forth
on a consolidated balance sheet of the Company and its consolidated subsidiaries
or in the notes thereto and which, individually or in the aggregate, would
reasonably be expected to have a material adverse effect.
SECTION 3.06. Information Supplied. None of the information to be
supplied by the Company expressly for inclusion or incorporation by reference in
the Registration Statement and the Proxy Statement will, (i) on the date the
Proxy Statement is first mailed to the shareholders of the Company and Parent,
(ii) at the time the Registration Statement becomes effective and (iii) at the
time of the Company Shareholders' Meeting (as
<PAGE> 21
16
defined in Section 6.01), contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading, except that no representation or warranty is made
by the Company with respect to statements made or incorporated by reference
therein based on information supplied by Parent or Merger Sub specifically for
inclusion or incorporation by reference therein. The Proxy Statement will comply
as to form in all material respects with the requirements of the Exchange Act
and the rules and regulations thereunder.
SECTION 3.07. Absence of Certain Changes or Events. Except as
disclosed in the Company SEC Documents or as set forth in Schedule 3.07 of the
Company Disclosure Schedule or as contemplated by this Agreement, since
September 9, 1995, the Company and its subsidiaries have conducted their
respective businesses only in the ordinary course, and there has not been (i)
any material adverse change in the Company, (ii) any declaration, setting aside
or payment of any dividend or other distribution with respect to the Company's
capital stock other than the regular quarterly dividends on the shares of
Company Common Stock, Convertible Preferred Stock and Class A Preferred Stock,
(iii) any split, combination or reclassification of any of the Company's capital
stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, (iv) (A) any granting by the Company or any of its subsidiaries
to any officer of the Company or any of its subsidiaries of any increase in
compensation, except in the ordinary course of business consistent with prior
practice, (B) any granting by the Company or any of its subsidiaries to any such
officer of any increase in severance or termination pay, except as part of a
standard employment package to any person promoted or hired, (C) except
termination arrangements in the ordinary course of business consistent with past
practice with employees other than any executive officer of the Company, any
entry by the Company or any of its subsidiaries into any employment, severance
or termination agreement with any such officer, or (D) any material
modifications to any existing Company Benefit Plans (as defined in Section 3.10)
other than such modifications required by law, (v) any damage, destruction or
loss, whether or not covered by insurance, that has or reasonably would be
expected to have a material adverse effect on the Company or (vi) any change in
accounting methods, principles or practices by the Company materially affecting
its assets, liabilities or business, except insofar as may have been required by
a change in generally accepted accounting principles.
SECTION 3.08. Litigation. Except as disclosed in the Company SEC
Documents or as set forth in Schedule 3.08 of the Company Disclosure Schedule,
there are no suits, actions or proceedings pending or, to the knowledge of the
Company, threatened against the Company or any of its subsidiaries that would
reasonably be expected, individually or in the aggregate, to have a material
adverse effect. Except as disclosed in the Company SEC Documents, neither the
Company nor any of its subsidiaries is subject to any
<PAGE> 22
17
outstanding order, writ, injunction or decree that would reasonably be expected
to have a material adverse effect.
SECTION 3.09. Absence of Changes in Benefit Plans. Except as
disclosed in Schedule 3.09 of the Company Disclosure Schedule, since December
31, 1994 there has not been any adoption or amendment in any material respect by
the Company or any of its subsidiaries of any collective bargaining agreement or
any bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, retirement,
severance, disability, death benefit, hospitalization, medical or other plan,
arrangement or understanding providing benefits to any current or former
employee, officer or director of the Company or any of its subsidiaries. Except
as disclosed in Schedule 3.09 of the Company Disclosure Schedule, there exist no
employment, consulting, severance, termination or indemnification agreements,
arrangements or understandings between the Company or any of its subsidiaries
and any current or former employee, officer or director of the Company or any of
its subsidiaries, and there is no oral or written understanding or arrangement
to enter into any such agreement with any such individual.
SECTION 3.10. Employee Benefits; ERISA. (a) Schedule 3.10 of the
Company Disclosure Schedule contains a list of all "employee pension benefit
plans" (as defined in Section 3(2) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) (sometimes referred to herein as "Company
Pension Plans"), "employee welfare benefit plans" (as defined in Section 3(1) of
ERISA) (sometimes referred to herein as "Welfare Plans"), and each other plan,
arrangement or policy (written or oral) relating to stock options, stock
purchases, compensation, deferred compensation, severance, fringe benefits or
other employee benefits, in each case maintained, or contributed to, by the
Company or any of its subsidiaries or any other person or entity that, together
with the Company is treated as a single employer under Section 414(b), (c), (m)
or (o) of the Code (each, together with the Company, a "Commonly Controlled
Entity"), for the benefit of any current or former employees, officers, agents
or directors of the Company or any of its subsidiaries (all of the foregoing
being herein called "Company Benefit Plans"). The Company has made available to
Parent true and complete copies of (w) each Company Benefit Plan (or, in the
case of any unwritten Company Benefit Plans, descriptions thereof), (x) the most
recent annual report on Form 5500 filed with the Internal Revenue Service with
respect to each Company Benefit Plan (if any such report was required), (y) the
most recent summary plan description (or similar document) for each Company
Benefit Plan for which a summary plan description is required or was otherwise
provided to plan participants or beneficiaries and (z) each trust agreement and
group annuity contract relating to any Company Benefit Plan.
(b) Except as disclosed in Schedule 3.10 of the Company Disclosure
Schedule, all Company Pension Plans and related trusts that are intended to be
tax-qualified plans have been the subject of determination letters from the
Internal Revenue Service to the
<PAGE> 23
18
effect that such Company Pension Plans and related trusts are qualified and
exempt from federal income taxes under Sections 401(a) and 501(a), respectively,
of the Code, and no such determination letter has been revoked nor, to the
knowledge of the Company, has revocation been threatened; no event has occurred
and no circumstances exist that would adversely affect the tax qualification of
such Company Pension Plan nor has any such Company Pension Plan been amended
since the date of its most recent determination letter or application therefor
in any respect that would adversely affect its qualification or materially
increase its costs or require security under Section 302 of ERISA.
(c) Each Company Benefit Plan has been administered in all
material respects in accordance with its terms. The Company Benefit Plans are,
and have been administered, in compliance in all material respects with the
applicable provisions of ERISA, the Code, and all other applicable laws. There
are no investigations by any governmental agency, termination proceedings or
other claims (except claims for benefits payable in the normal operation of the
Company Benefit Plans), suits or proceedings against or involving any Company
Benefit Plan or asserting any rights to or claims for benefits under any Company
Benefit Plan that could give rise to any material liability, and there are not
any facts that would reasonably be expected to give rise to any material
liability in the event of any such investigation, claim, suit or proceeding.
(d) No Commonly Controlled Entity is required to contribute to any
"multiemployer plan" as defined in Section 4001(a)(3) of ERISA or has withdrawn
from any such multiemployer plan where such withdrawal has resulted or would
result in any material "withdrawal liability" (within the meaning of Section
4201 of ERISA) that has not been fully paid. None of the Company, any of its
subsidiaries, any officer of the Company or any of its subsidiaries or any of
the Company Benefit Plans which are subject to ERISA, including the Company
Pension Plans, any trusts created thereunder or any trustee or administrator
thereof, has engaged in a "prohibited transaction" (as such term is defined in
Section 406 of ERISA or Section 4975 of the Code) or any other breach of
fiduciary responsibility that could subject the Company, any of its subsidiaries
or any officer of the Company or any of its subsidiaries to any material tax or
penalty on prohibited transactions imposed by such Section 4975 or to any
material liability under Section 502(i) or (l) of ERISA. Neither any of such
Company Benefit Plans nor any of such trusts has been terminated, nor has there
been any "reportable event" (as that term is defined in Section 4043 of ERISA)
with respect thereto, during the last five years.
(e) Except as set forth in Schedule 3.10 of the Company Disclosure
Schedule, no employee of the Company or any of its subsidiaries will be entitled
to any severance benefits or any other additional benefits or any acceleration
of the time of payment or vesting of any benefits under any Company Benefit Plan
as a result of the transactions contemplated by this Agreement.
<PAGE> 24
19
(f) No liability under Title IV of ERISA has been incurred by the
Company or any Commonly Controlled Entity that has not been satisfied in full,
and no condition exists that presents a material risk to the Company or any
Commonly Controlled Entity of incurring a liability under such Title, other than
liability for premiums due the Pension Benefit Guaranty Corporation ("PBGC")
(which premiums have been paid when due). To the extent this representation
applies to sections 4064, 4069 or 4204 of Title IV of ERISA, it is made not only
with respect to each Company Pension Plan but also with respect to any employee
benefit plan, program, agreement or arrangement subject to Title IV of ERISA to
which the Company or any Commonly Controlled Entity made, or was required to
make, contributions during the five (5)-year period ending on the Closing Date.
No Company Pension Plan or any trust established thereunder has incurred any
"accumulated funding deficiency" (as defined in section 302 of ERISA and section
412 of the Code), whether or not waived, as of the last day of the most recent
fiscal year of each Company Pension Plan ended prior to the Closing Date; and
all contributions required to be made with respect thereto (whether pursuant to
the terms of any Company Pension Plan or otherwise) on or prior to the Closing
Date have been timely made.
(g) The Tait U.K. Pension Scheme has been administered in all
material respects in accordance with applicable law, all contributions required
to be made thereto on or prior to the Effective Time have been or will be timely
made, and such Scheme has been funded in accordance with local law and practice.
SECTION 3.11. Taxes. Each of the Company and each of its
subsidiaries has filed all tax returns and reports required to be filed by it
and has paid (or the Company has paid on its behalf) all taxes required to be
paid by it, and the most recent financial statements contained in the Company
SEC Documents 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 deficiencies for any taxes have been
proposed, asserted or assessed against the Company or any of its subsidiaries,
and no requests for waivers of the time to assess any such taxes are pending.
The federal income tax returns of the Company and each of its subsidiaries
consolidated in such returns have been examined by and settled with the United
States Internal Revenue Service for all years through 1992. As used in this
Agreement, "taxes" shall include all federal, state, local and foreign income,
property, sales, excise and other taxes, tariffs or governmental charges of any
nature whatsoever.
SECTION 3.12. Compliance with Applicable Laws. Except as disclosed
in the Company SEC Documents or as set forth in Schedule 3.12 of the Company
Disclosure Schedule, to the knowledge of the Company, since January 1, 1993
neither the Company nor any of its subsidiaries has violated or failed to comply
with any statute, law, regulation, rule, judgment, decree or order of any
Governmental Entity applicable to its business or operations, except for
violations and failures to comply that would not, individually or in the
<PAGE> 25
20
aggregate, reasonably be expected to result in a material adverse effect. The
conduct of the business of the Company and its subsidiaries is in conformity
with all federal, state and local governmental and regulatory requirements
applicable to its business and operations, except where such nonconformities
would not, in the aggregate, reasonably be expected to result in a material
adverse effect. The Company and its subsidiaries have all permits, licenses and
franchises from governmental agencies required to conduct their businesses as
now being conducted, except for such permits, licenses and franchises the
absence of which would not, in the aggregate, reasonably be expected to result
in a material adverse effect.
SECTION 3.13. Environmental Matters. Except as disclosed in the
Company SEC Documents or as set forth in Schedule 3.13 of the Company Disclosure
Schedule and except as would not, individually or in the aggregate, reasonably
be expected to result in a material adverse effect:
(a) To the knowledge of the Company, (i) the Company and its
subsidiaries are in compliance with all applicable Environmental Laws and
(ii) the Company and its subsidiaries hold all Environmental Permits
necessary for their operations and properties and are in compliance with
the terms and conditions of all such Environmental Permits.
(b) To the knowledge of the Company, there is no written claim,
demand, notice or complaint alleging violation of, or liability under,
any Environmental Laws pending or threatened against the Company and its
subsidiaries, or against any person or entity whose liability for any
such claim, demand, notice or complaint the Company or any of its
subsidiaries has retained or assumed either contractually or by operation
of law.
(c) The Company and its subsidiaries have not received any written
request for information relating to, or been notified that any of them is
a potentially responsible party under, CERCLA or any similar state, local
or foreign law.
(d) The Company has not entered into or agreed to any consent
decree or order, and is not subject to any judgment, decree or judicial
order, relating to compliance with Environmental Laws or Environmental
Permits or the investigation, sampling, monitoring, treatment,
remediation, removal or cleanup of Hazardous Materials, and, to the
knowledge of the Company, no investigation, litigation or other
proceeding is pending or threatened with respect thereto.
(e) None of the properties of the Company or its subsidiaries is
listed or, to the knowledge of the Company, proposed for listing, on the
"National Priorities List" under CERCLA, as updated through the date
hereof, or any similar state list of sites requiring investigation or
cleanup.
<PAGE> 26
21
(f) To the knowledge of the Company, Hazardous Materials have not
been released, discharged or disposed of on any of the properties owned
or occupied by the Company or its subsidiaries in any manner or quantity
which requires investigation, assessment, monitoring, remediation or
cleanup under currently applicable Environmental Laws.
(g) The Company has made available to Parent copies of all
environmental audits, assessments or studies completed since January 1,
1993 within its possession with respect to the facilities or real
property currently owned, leased or operated by the Company or any
subsidiary.
(h) To the knowledge of the Company, there are no past or present
actions, activities, circumstances, conditions, events or incidents
(including, without limitation, the release, emission, discharge,
presence or disposal of any Hazardous Materials) which could reasonably
be expected to form the basis of any claim, demand, notice or complaint
alleging violation of, or liability under, any Environmental Laws against
the Company and its subsidiaries, or against a person or entity whose
liability for any such claim, demand, notice or complaint the Company or
any of its subsidiaries has retained or assumed either contractually or
by operation of law.
(i) For purposes of this Agreement:
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended as of the date
hereof.
"Environmental Laws" means any federal, state, local or
foreign statute, law, ordinance, regulation, rule, code or order
and any enforceable judicial or administrative interpretation
thereof, including any judicial or administrative order, consent
decree or judgment, relating to pollution or protection of
industrial hygiene or of the environment or natural resources,
including, without limitation, those relating to the use,
handling, transportation, treatment, storage, disposal, release or
discharge of Hazardous Materials, in effect as of the date hereof.
"Environmental Permits" means any permit, approval,
identification number, license or other authorization required of
the Company or its subsidiaries, or Parent or its subsidiaries, as
the case may be, under any applicable Environmental Law.
"Hazardous Materials" means (a) any petroleum, petroleum
products, by products or breakdown products, radioactive
materials, asbestos-containing
<PAGE> 27
22
materials or polychlorinated biphenyls or (b) any chemical,
material or substance defined or regulated as toxic or hazardous
or as a pollutant or contaminant or waste under any applicable
Environmental Law.
SECTION 3.14. Title to Properties. (a) Except as disclosed in the
Company SEC Documents or as set forth in Schedule 3.14 of the Company Disclosure
Schedule, each of the Company and each of its subsidiaries has good and
marketable title to, or valid leasehold interests in, all its properties and
assets except for such as are no longer used or useful in the conduct of its
businesses or as have been disposed of in the ordinary course of business and
except for defects in title, easements, restrictive covenants and similar
encumbrances or impediments that, in the aggregate, do not materially interfere
with its ability to conduct its business as currently conducted. All such assets
and properties, other than assets and properties in which the Company or any of
its subsidiaries has leasehold interests, are free and clear of all liens other
than those set forth in Schedule 3.14 of the Company Disclosure Schedule and
except for liens that, in the aggregate, do not and will not materially
interfere with the ability of the Company and its subsidiaries to conduct their
businesses as currently conducted.
(b) Except as disclosed in the Company SEC Documents or as set
forth in Schedule 3.14 of the Company Disclosure Schedule, each of the Company
and its subsidiaries has complied in all material respects with the terms of all
material leases to which it is a party and under which it is in occupancy, and
all such leases are in full force and effect. Each of the Company and its
subsidiaries enjoys peaceful and undisturbed possession under all such material
leases.
SECTION 3.15. Trademarks, Etc. The material patents, trademarks
(registered or unregistered), trade names, service marks and copyrights and
applications therefor owned by or licensed to the Company and its subsidiaries
(collectively, "Intellectual Property Rights") are sufficient to allow each of
the Company and each of its Significant Subsidiaries to conduct, and to continue
to conduct, its business as currently conducted in all material respects. To the
knowledge of the Company, each of the Company and each of its Significant
Subsidiaries owns or has sufficient unrestricted right to use the Intellectual
Property Rights in order to allow it to conduct, and to continue to conduct, its
business as currently conducted in all material respects, and the consummation
of the transactions contemplated hereby will not alter or impair such ability in
any respect. Except as set forth in Schedule 3.15 of the Company Disclosure
Schedule, to the knowledge of the Company, neither the Company nor any of its
Significant Subsidiaries has received any written notice from any other person
pertaining to or challenging the right of the Company or any of its Significant
Subsidiaries to use any of the Intellectual Property Rights. To the knowledge of
the Company, no claims are pending by any person with respect to the ownership,
validity, enforceability or use of any such Intellectual Property Rights
challenging or questioning the validity or effectiveness of any of the
foregoing. Except as set forth in Schedule 3.15 of the
<PAGE> 28
23
Company Disclosure Schedule, to the knowledge of the Company, neither the
Company nor any of its Significant Subsidiaries has made any claim of a
violation or infringement by others of its rights to or in connection with the
Intellectual Property Rights.
SECTION 3.16. Insurance. To the knowledge of the Company, the
Company and its Significant Subsidiaries have obtained and maintained in full
force and effect insurance with responsible and reputable insurance companies or
associations in such amounts, on such terms and covering such risks, including
fire and other risks insured against by extended coverage, as is reasonably
prudent, and each has maintained in full force and effect public liability
insurance, insurance against claims for personal injury or death or property
damage occurring in connection with the activities of the Company or its
Significant Subsidiaries or any properties owned, occupied or controlled by the
Company or its Significant Subsidiaries, in such amount as reasonably deemed
necessary by the Company or its Significant Subsidiaries.
SECTION 3.17. Reorganization. To the knowledge of the Company,
neither it nor any of its subsidiaries has taken any action or failed to take
any action which action or failure would jeopardize the qualification of the
Merger as a reorganization within the meaning of Section 368(a) of the Code.
SECTION 3.18. Voting Requirements. The affirmative vote of the
holders of a majority of the outstanding shares of Company Common Stock and
Convertible Preferred Stock, voting together as one class, entitled to vote
approving this Agreement is the only vote of the holders of any class of the
Company's capital stock necessary to approve this Agreement and the transactions
contemplated by this Agreement.
SECTION 3.19. Opinions of Financial Advisors. The Company has
received (a) an opinion from J.P. Morgan Securities Inc. to the effect that, as
of the date of this Agreement, the consideration to be received in the Merger by
the holders of Company Common Stock is fair to the holders of Company Common
Stock from a financial point of view and (b) an opinion from Goldman, Sachs &
Co., to the effect that, as of the date of this Agreement, the consideration to
be received in the Merger by the holders of Company Common Stock is fair to the
holders of Company Common Stock.
SECTION 3.20. Brokers. No broker, investment banker, financial
advisor or other person, other than J.P. Morgan Securities Inc. and Goldman,
Sachs & Co., the fees and expenses of which will be paid by the Company, is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company. The Company has
provided Parent true and correct copies of the agreements between the Company
and each of J.P. Morgan Securities Inc. and Goldman, Sachs & Co.
<PAGE> 29
24
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby jointly and severally represent and
warrant to the Company as follows:
SECTION 4.01. Organization. Each of Parent and Merger Sub and
Parent's Significant Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority and all
necessary government approvals to own, lease and operate its properties and to
carry on its business as now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power, authority and
governmental approvals would not have a material adverse effect. Each of Parent
and Merger Sub and each of Parent's subsidiaries is duly qualified or licensed
to do business and in good standing in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except where the failure to be
so duly qualified or licensed and in good standing would not have a material
adverse effect. Each of Parent and Merger Sub has made available to the Company
complete and correct copies of its respective Articles of Incorporation and
By-Laws and the articles of incorporation and by-laws or other comparable
charter or organizational documents of Parent's Significant Subsidiaries, in
each case as amended to the date of this Agreement. The list of subsidiaries of
Parent filed by Parent with its most recent Report on Form 10-K is on the date
of this Agreement a true and accurate list of all the subsidiaries which are
required to be set forth therein. Merger Sub has no subsidiaries.
SECTION 4.02. Capitalization. (a) The authorized capital stock of
Parent consists of 400,000,000 shares of Parent Common Stock, 8,750,000 shares
of Serial Preferred, par value $1.00 per share (the "Serial Preferred Stock"),
and 400,000 shares of Cumulative $4 Preferred Stock, without par value (the "$4
Preferred"). As of September 30, 1995, (i) 260,824,389 shares of Parent Common
Stock, no shares of the Serial Preferred Stock and 15,780 shares of the $4
Preferred were issued and outstanding. As of July 31, 1995, (i) 8,679,116 shares
of Parent Common Stock were reserved for issuance upon exercise of outstanding
options ("Parent Stock Options"), and (ii) 9,000,000 shares of Parent Common
Stock were reserved for issuance upon the conversion of outstanding Trust Issued
Tax Deductible Convertible Preferred (the "Trust Preferred"). All the
outstanding shares of Parent Common Stock are, and all shares which may be
issued pursuant to Parent Stock Options and the Trust Preferred will be, when
issued in accordance with the respective terms thereof, duly authorized, validly
issued, fully paid and nonassessable and free of any pre-emptive rights in
respect thereof. As of the date hereof, no bonds, debentures, notes or other
indebtedness of Parent convertible into voting securities of Parent are issued
or outstanding and, except as set forth above, (i) no shares of capital stock or
other voting
<PAGE> 30
25
securities of Parent are outstanding, (ii) no equity equivalents, interests in
the ownership or earnings of Parent or other similar rights are outstanding and
(iii) there are no existing options, warrants, calls, subscriptions or other
rights or agreements or commitments relating to the capital stock of Parent or
obligating Parent or any of its subsidiaries to issue, transfer or sell any
shares of capital stock, or other equity interest in, Parent or obligating
Parent or any of its subsidiaries to grant, extend or enter into any such
option, warrant, call, subscription or other right, agreement or commitment. As
of the date hereof, there are no outstanding contractual obligations of Parent
or any of its subsidiaries to repurchase, redeem or otherwise acquire any shares
of capital stock of Parent.
(b) The authorized capital stock of Merger Sub consists of 1,000
shares of common stock, without par value, all of which are duly authorized,
validly issued, fully paid and nonassessable and free of any pre-emptive rights
in respect thereof and all of which are owned by Parent.
SECTION 4.03. Authority. Each of Parent and Merger Sub has the
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated by this Agreement. The execution
and delivery of this Agreement by Parent and Merger Sub and the consummation by
Parent and Merger Sub of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and Merger
Sub and does not require the approval of the shareholders of Parent. This
Agreement has been duly executed and delivered by Parent and Merger Sub and,
assuming this Agreement constitutes the valid and binding obligation of the
Company, constitutes the valid and binding obligation of Parent and Merger Sub,
enforceable against Parent and Merger Sub in accordance with its terms, subject
to bankruptcy, insolvency, reorganization, moratorium and similar laws, now or
hereafter in effect, affecting creditors' rights and remedies and to general
principles of equity.
SECTION 4.04. Noncontravention; Filings and Consents. (a) The
execution and delivery of this Agreement by either Parent or Merger Sub do not,
and the consummation of the transactions contemplated by this Agreement and
compliance with the provisions of this Agreement will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation, or
acceleration of any obligation or to loss of a material benefit under, or result
in the creation of any lien upon any of the properties or assets of Parent or
Merger Sub or any of Parent's subsidiaries under (i) the Articles of
Incorporation or By-Laws of either Parent or Merger Sub or the comparable
charter or organizational documents of any of Parent's Significant Subsidiaries,
(ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or
other agreement, instrument, permit, concession, franchise or license applicable
to Parent or Merger Sub or any of Parent's Significant Subsidiaries or their
respective properties or assets or (iii) subject to the governmental filings and
other matters referred to in paragraph (b) below, any judgment, order, decree,
statute, law, ordinance, rule
<PAGE> 31
26
or regulation applicable to Parent or Merger Sub or any of Parent's subsidiaries
or their respective properties or assets, other than, in the case of clauses
(ii) and (iii), any such conflicts, violations, defaults, rights or liens that
individually or in the aggregate would not (x) impair in any material respect
the ability of Parent or Merger Sub to perform their respective obligations
under this Agreement or (y) prevent or impede, in any material respect, the
consummation of the transactions contemplated by this Agreement.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, is required
by Parent or Merger Sub or any of Parent's subsidiaries in connection with the
execution and delivery of this Agreement by Parent or Merger Sub or the
consummation by Parent or Merger Sub of the transactions contemplated by this
Agreement, except for (i) the filing of a premerger notification and report form
by Parent and Merger Sub under the HSR Act, (ii) the filing with the SEC of the
Proxy Statement and the Registration Statement, (iii) the filing of a
notification with the European Commission under Regulation 4064/89, (iv) the
filing of the Articles of Merger with the North Carolina Secretary of State and
appropriate documents with the relevant authorities of other states in which
Parent is qualified to do business, (v) the filing of such notices and other
reports as may be required to comply with the CTA, (vi) such as may be required
by any applicable state securities or "blue sky" laws and (vii) such other
consents, approvals, orders, authorizations, registrations, declarations and
filings the failure of which to be obtained or made would not, individually or
in the aggregate, (x) impair in any material respect the ability of Parent or
Merger Sub to perform their respective obligations under this Agreement or (y)
prevent or impede, in any material respect, the consummation of the transactions
contemplated by this Agreement.
SECTION 4.05. Parent SEC Documents; Financial Statements. Parent
has filed all required reports, proxy statements, forms, and other documents
with the SEC since December 31, 1993 and prior to the date of this Agreement
(the "Parent SEC Documents"). As of their respective dates, (i) the Parent SEC
Documents complied, and all similar documents filed prior to the Closing Date
will comply, in all material respects with the requirements of the Securities
Act or the Exchange Act, as the case may be, and the rules and regulations of
the SEC promulgated thereunder applicable to such Parent SEC Documents and (ii)
none of the Parent SEC Documents contained, nor will any similar document filed
after the date of this Agreement contain, any untrue statement of a material
fact or omitted to state a 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. The financial statements of Parent
included in the Parent SEC Documents (including any similar documents filed
after the date of this Agreement) comply as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles (except, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as
<PAGE> 32
27
may be indicated in the notes thereto) and fairly present the consolidated
financial position of Parent and its consolidated subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). Except as set forth in the Parent SEC Documents,
and except for liabilities and obligations incurred in the ordinary course of
business consistent with past practice since the date of the most recent
consolidated balance sheet included in the Parent SEC Documents, neither Parent
nor any of its subsidiaries has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) required by generally
accepted accounting principles to be set forth on a consolidated balance sheet
of Parent and its consolidated subsidiaries or in the notes thereto and which,
individually or in the aggregate, would reasonably be expected to have a
material adverse effect.
SECTION 4.06. Information Supplied. None of the information
supplied or to be supplied by Parent or Merger Sub expressly for inclusion or
incorporation by reference in the Registration Statement and the Proxy Statement
will, (i) on the date the Proxy Statement is first mailed to the shareholders of
the Company and Parent, (ii) at the time the Registration Statement becomes
effective and (iii) at the time of the Company Shareholders' Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading, except that no representation or warranty is made by Parent or
Merger Sub with respect to statements made or incorporated by reference therein
based on information supplied by the Company specifically for inclusion or
incorporation by reference therein. The Registration Statement and the Proxy
Statement will comply as to form in all material respects with the requirements
of the Exchange Act and the Securities Act and the rules and regulations
thereunder.
SECTION 4.07. Absence of Certain Changes or Events. Except as
disclosed in the Parent SEC Documents or contemplated by this Agreement, since
June 30, 1995 and prior to the date of this Agreement, Parent and its
subsidiaries have conducted their respective businesses only in the ordinary
course, and there has not been (i) any declaration, setting aside or payment of
any dividend or other distribution with respect to Parent's capital stock other
than the regular quarterly dividends on the shares of Parent Common Stock and
the $4 Preferred, (ii) any split, combination or reclassification of any of
Parent's capital stock or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of or in substitution for shares of
its capital stock or (iii) any change in accounting methods, principles or
practices by Parent materially affecting its assets, liabilities or business,
except insofar as may have been required by a change in generally accepted
accounting principles. Except as disclosed in the Parent SEC Documents, since
June 30, 1995, there has not been (i) any material adverse change in Parent or
(ii) any damage, destruction or loss, whether or not covered by insurance, that
has or reasonably could be expected to have, a material adverse effect on
Parent.
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SECTION 4.08. Litigation. Except as disclosed in the Parent SEC
Documents, there are no suits, actions or proceedings pending or, to the
knowledge of Parent, threatened against Parent or any of its subsidiaries that
would reasonably be expected to have, individually or in the aggregate, a
material adverse effect. Except as disclosed in the Parent SEC Documents,
neither Parent nor any of its subsidiaries is subject to any outstanding order,
writ, injunction or decree that would reasonably be expected to have a material
adverse effect.
SECTION 4.09. Environmental Matters. Except as disclosed in the
Parent SEC Documents and except as would not, individually or in the aggregate,
be reasonably expected to result in a material adverse effect, to the knowledge
of Parent, (i) Parent and its subsidiaries are in compliance with all applicable
Environmental Laws and the terms and conditions of all applicable Environmental
Permits and (ii) no Hazardous Materials have been released, discharged or
disposed of on any of the properties owned or occupied by Parent or its
subsidiaries in any manner or quantity which requires investigation, assessment,
monitoring, remediation or cleanup under currently applicable Environmental
Laws.
SECTION 4.10. Reorganization. To the knowledge of Parent, neither
Parent nor any of its subsidiaries has taken any action or failed to take any
action which action or failure would jeopardize the qualification of the Merger
as a reorganization within the meaning of Section 368(a) of the Code.
SECTION 4.11. Ownership of Company Capital Stock. Neither Parent
nor Merger Sub nor any of their respective affiliates is the beneficial owner of
any shares of capital stock of the Company.
SECTION 4.12. Interim Operations of Merger Sub. Merger Sub was
formed solely for the purpose of engaging in the transactions contemplated by
this Agreement and has not engaged in any business activities or conducted any
operations other than in connection with the performance of its obligations
hereunder.
SECTION 4.13. Brokers. No broker, investment banker, financial
advisor or other person, other than CS First Boston Corporation, the fees and
expenses of which will be paid by Parent, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent or Merger Sub.
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ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 5.01. Conduct of Business of the Company. Prior to the
Effective Time, the Company agrees (except as expressly contemplated or
permitted by this Agreement, as set forth in Schedule 5.01 of the Company
Disclosure Schedule, or to the extent that Parent shall otherwise consent in
writing) as follows:
(a) Ordinary Course. The Company and its subsidiaries shall carry
on their respective businesses in the usual, regular and ordinary course
in substantially the same manner as heretofore conducted and shall use
all reasonable efforts to preserve intact their present business
organizations, keep available the services of their present officers and
employees and preserve their relationships with customers, suppliers and
others having business dealings with the Company and its subsidiaries.
(b) Dividends; Changes in Stock. The Company shall not (i) declare
or pay any dividends on or make other distributions in respect of any of
its capital stock other than regular quarterly dividends not to exceed
$0.40 per share on the Company Common Stock and dividends required to be
paid pursuant to the terms of the Convertible Preferred Stock, (ii)
split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock or (iii)
except as contemplated by Section 6.08, repurchase, redeem or otherwise
acquire, or permit any subsidiary to repurchase, redeem or otherwise
acquire, any shares of capital stock.
(c) Issuance of Securities. The Company shall not, and it shall
not permit any of its subsidiaries to, issue, deliver or sell, or
authorize or propose the issuance, delivery or sale of, any shares of its
capital stock of any class or any securities convertible into, or any
rights, warrants, calls, subscriptions or options to acquire, any such
shares or convertible securities, or any other ownership interest other
than (i) the issuance of shares of Company Common Stock upon the exercise
of stock options or stock appreciation rights or warrants granted under
the Company Stock Option Plans (as defined in Section 6.05) and
outstanding on the date of this Agreement and in accordance with the
present terms of such options or stock appreciation rights, (ii)
issuances by a wholly owned subsidiary of the Company of its capital
stock to the Company and (iii) the issuance of shares of Company Common
Stock upon conversion of shares of Convertible Preferred Stock.
(d) Governing Documents. The Company shall not amend or propose to
amend its Articles of Incorporation, as amended, or By-Laws.
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(e) No Acquisitions. The Company shall not, and it shall not
permit any of its subsidiaries to, acquire or agree to acquire by merging
or consolidating with, or by purchasing a substantial equity interest in
or substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof.
(f) No Dispositions. The Company shall not, and it shall not
permit any of its subsidiaries to, sell, lease, encumber or otherwise
dispose of, or agree to sell, lease, encumber or otherwise dispose of,
any of its material assets other than (i) sales in the ordinary course of
business consistent with past practice, (ii) equipment and property no
longer used in the operation of the Company's business and (iii) assets
related to discontinued operations of the Company or its subsidiaries.
(g) Indebtedness. The Company shall not, and it shall not permit
any of its subsidiaries to, incur (which shall not be deemed to include
entering into credit agreements, lines of credit or similar arrangements
until borrowings are made under such arrangements) any indebtedness for
borrowed money or guarantee any such indebtedness or issue or sell any
debt securities or warrants or rights to acquire any debt securities of
the Company or any of its subsidiaries or guarantee any debt securities
of others, except in the ordinary course of business consistent with past
practice, including, without limitation, borrowings under the Company's
existing credit agreements and overnight borrowings.
(h) Tax Matters. The Company shall not make any tax election that
would have a material adverse effect or settle or compromise any income
tax liability of the Company or of any of its subsidiaries that would
have a material adverse effect. The Company shall, before filing or
causing to be filed any material tax return of the Company or any of its
subsidiaries, consult with Parent and its advisors as to the positions
and elections that may be taken or made with respect to such return.
(i) Discharge of Liabilities. The Company shall not, and it shall
not permit any of its subsidiaries to, pay, discharge, settle or satisfy
any claim, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise) in any amount in excess of $3
million, other than the payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice or in
accordance with their terms, of liabilities recognized or disclosed in
the most recent consolidated financial statements (or the notes thereto)
of the Company included in the Company SEC Documents or incurred since
the date of such financial statements in the ordinary course of business
consistent with past practice, or waive the benefit of, or agree to
modify in any manner, any confidentiality, standstill or similar
agreement to which the Company or any of its subsidiaries is a party.
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(j) Material Contracts. Except in the ordinary course of business,
neither the Company nor any of its subsidiaries shall modify, amend or
terminate any material contract or agreement to which the Company or such
subsidiary is a party or waive, release or assign any material rights or
claims.
(k) Employee Benefits. The Company shall not, and shall not permit
any of its subsidiaries to, (i) grant any increase in the compensation of
any of its directors, officers or key employees, except for increases for
officers and employees in the ordinary course of business, (ii) pay or
agree to pay any pension, retirement allowance or other employee benefit
not required or contemplated by any of the existing Company Benefit Plans
as in effect on the date hereof to any director, officer or key employee,
(iii) enter into any new employment, severance or termination agreement
with any such director, officer or key employee or (iv) except as may be
required to comply with applicable law, become obligated under any
Company Benefit Plan which was not in existence on the date hereof or
amend any such plan in existence on the date hereof to enhance the
benefits thereunder.
(1) Capital Expenditures. The Company shall not, and shall not
permit any of its subsidiaries to, authorize or make any capital
expenditures other than capital expenditures (i) described in the summary
of approved capital expenditures set forth in Schedule 5.01 of the
Company Disclosure Schedule, (ii) incurred in the ordinary course of the
business of the Company and its subsidiaries as currently conducted
(including, without limitation, capital expenditures required as a result
of ordinary maintenance and repair) or (iii) not otherwise described in
clauses (i) and (ii) above which, in the aggregate, do not exceed $60
million.
SECTION 5.02. Conduct of Business of Parent. Prior to the
Effective Time, Parent agrees (except as expressly contemplated or permitted by
this Agreement, or to the extent that the Company shall otherwise consent in
writing) as follows:
(a) Dividends; Changes in Stock. Parent shall not (i) engage in
any material repurchase at a premium, recapitalization, restructuring or
reorganization with respect to Parent's capital stock, including, without
limitation, by way of any extraordinary dividends on or other
extraordinary distributions in respect of any of its capital stock, or
(ii) amend any material term or provision of Parent Common Stock.
(b) Material Acquisitions. Parent shall not, and shall not permit
any of its subsidiaries to, acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets
of or equity in, or by any other manner, any business or any corporation,
partnership, association or other business organization or division
thereof, or otherwise acquire or agree to acquire any assets if the
entering into of a definitive agreement relating to or the consummation
of such
<PAGE> 37
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acquisition, merger or consolidation would (A) impose any material delay
in the obtaining of, or significantly increase the risk of not obtaining,
any authorizations, consents, orders, declarations or approvals of any
Governmental Entity necessary to consummate the Merger or the expiration
or termination of any applicable waiting period, (B) significantly
increase the risk of any Governmental Entity entering an order
prohibiting the consummation of the Merger or (C) significantly increase
the risk of not being able to remove any such order on appeal or
otherwise.
(c) Other Actions. Parent shall not, and shall not permit any of
its subsidiaries to take, or fail to take, any other action which would
reasonably be expected to impede, interfere with, prevent or materially
delay the Merger.
SECTION 5.03. Other Actions. Each of Parent, Merger Sub and the
Company shall not, and shall not permit any of its subsidiaries to, take any
action that would, or that would reasonably be expected to, result in (i) any of
its representations and warranties set forth in this Agreement that are
qualified as to materiality becoming untrue, (ii) any of such representations
and warranties that are not so qualified becoming untrue in any material respect
or (iii) except as otherwise permitted by Section 5.04 or Section 6.01, any of
the conditions to the Merger set forth in Article VII not being satisfied.
SECTION 5.04. No Solicitation. (a) The Company shall not, nor
shall it permit any of its subsidiaries to, nor shall it authorize or permit any
officer, director or employee of, or any investment banker, attorney or other
advisor or representative of, the Company or any of its subsidiaries to, (i)
solicit or initiate, or knowingly encourage the submission of, any "competitive
proposal" (as defined below in this Section 5.04(a)) 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 knowingly facilitate the making of
any proposal that constitutes, or may reasonably be expected to lead to, a
competitive proposal; provided, however, that, prior to the Effective Time, if
the Board of Directors concludes, after consultation with counsel, that its
fiduciary duties to the Company's shareholders under applicable law require such
action, the Company may, in response to an unsolicited competitive proposal, (x)
furnish information with respect to the Company to the party making such
competitive proposal and its representatives, counsel and advisors pursuant to a
confidentiality agreement with such party containing customary terms and
provisions regarding the nondisclosure of confidential information and (y)
participate in negotiations regarding such competitive proposal; provided,
further, upon the furnishing of such information to any such party, the Company
shall notify Parent that it has done so and shall identify such party in such
notice. Without limiting the foregoing, it is understood that any violation of
the restrictions set forth in the preceding sentence by any director, officer,
investment banker, attorney or other advisor or representative of the Company or
any of its subsidiaries, whether or not such person is purporting to act on
behalf of the Company or any of its subsidiaries or otherwise, shall be deemed
to be a breach of this Section 5.04(a) by
<PAGE> 38
33
the Company. For purposes of this Agreement, "competitive proposal" means any
proposal or offer from any person relating to any direct or indirect acquisition
or purchase of all or a substantial part of the assets of the Company or any of
its subsidiaries (other than the Convertible Preferred Stock) or of over 50% of
any class of equity securities of the Company or any of its subsidiaries, any
tender offer or exchange offer that if consummated would result in any person
beneficially owning 50% or more of any class of equity securities of the Company
or any of its subsidiaries (other than the Convertible Preferred Stock), any
merger, consolidation, business combination, sale of substantially all the
assets, recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of its subsidiaries, other than the transactions
contemplated by this Agreement, or any other transaction the consummation of
which would reasonably be expected to impede, interfere with, prevent or
materially delay the Merger or which would reasonably be expected to dilute
materially the benefits to Parent of the transactions contemplated hereby. The
Company agrees not to release any third party from, or waive any provision of,
any confidentiality or standstill agreement to which the Company is a party.
(b) Except as set forth in this Section 5.04(b) or Section 6.01,
neither the Board of Directors of the Company nor any committee thereof shall
(i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to
Parent, the approval or recommendation by the Board of Directors or any such
committee of this Agreement or the Merger, (ii) approve or recommend, or propose
to approve or recommend, any competitive proposal or (iii) enter into any
agreement with respect to any competitive proposal. Notwithstanding the
foregoing, in the event prior to the Effective Time if the Board of Directors
concludes, after consultation with counsel, failure to do so would violate its
fiduciary duties to the Company's shareholders under applicable law, the Board
of Directors may withdraw or modify its approval or recommendation of this
Agreement or the Merger, approve or recommend a competitive proposal, or enter
into an agreement with respect to a competitive proposal, in each case involving
a competitive proposal at any time after midnight on the third business day
following Parent's receipt of written notice advising Parent that the Board of
Directors has received a competitive proposal which includes a description of
the material terms and conditions of such proposal and which it intends to
consider accepting, specifying the material terms and conditions of such
competitive proposal and identifying the person making such competitive
proposal. Notwithstanding anything to the contrary in the foregoing, from the
date of this Agreement until February 28, 1996, the Company shall not (i) engage
in negotiations with or provide information to any party making a competitive
proposal unless the Board of Directors concludes that such proposal could
reasonably be expected to lead to a transaction which is financially superior to
the transactions contemplated by this Agreement or (ii) enter into any agreement
with respect to a competitive proposal unless the Board of Directors of the
Company determines, after consultation with its financial advisors, that such
competitive proposal is financially superior to the transactions contemplated by
this Agreement. The Company shall consider any proposal submitted by Parent that
enhances the value to be received by the Company's
<PAGE> 39
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shareholders pursuant to the terms of this Agreement. Nothing contained in this
Section 5.04 shall prohibit the Company from taking and disclosing to its
shareholders a position contemplated by Rule 14e-2(a) promulgated under the
Exchange Act or from making any disclosure to the Company's shareholders if, in
the opinion of the Company's Board of Directors, after consultation with
counsel, failure to so disclose would be inconsistent with its fiduciary duties
under applicable law.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Company Shareholders' Meeting. Subject to the
following sentence, the Company shall call and hold a meeting of its
shareholders (the "Company Shareholders' Meeting") as promptly as practicable to
consider and vote upon the approval of this Agreement and the Company shall use
its reasonable efforts to hold the Company Shareholders' Meeting as soon as
practicable after the date on which the Registration Statement becomes
effective. The Board of Directors of the Company shall recommend such approval,
and the Company shall take all lawful action to solicit such approval,
including, without limitation, timely mailing the Proxy Statement; provided,
however, that calling the Company Shareholders' Meeting, mailing the Proxy
Statement and making such recommendation or solicitation is subject to any
action (including any withdrawal or change of its recommendation) taken by, or
upon authority of, the Board of Directors of the Company (i) upon concluding
after consultation with counsel that the failure to so act would violate its
fiduciary duties to its shareholders under applicable law or (ii) in the event
that (A) each of J.P. Morgan Securities Inc. and Goldman, Sachs & Co. shall have
withdrawn its opinion to the effect that, in the case of J.P. Morgan Securities
Inc., the consideration to be received in the Merger by the holders of Company
Common Stock is fair to such holders from a financial point of view, and in the
case of Goldman, Sachs & Co., that the consideration to be received in the
Merger by the holders of Company Common Stock is fair to such holders or (B)
each such firm shall have failed to deliver its updated written opinion to the
same effect dated the date of the Proxy Statement. Notwithstanding anything to
the contrary contained in this Agreement, any such failure to call the Company
Shareholders' Meeting, solicit proxies or take other action to secure the vote
or consent of shareholders permitted by the terms of this Section 6.01 shall not
constitute a breach of this Agreement by Parent or the Company, as the case may
be.
SECTION 6.02. Registration Statement; Proxy Statement. (a) As
promptly as practicable after the execution of this Agreement, (i) Parent and
the Company shall cooperate and prepare and Parent shall file with the SEC a
registration statement on Form S-4 (together with all amendments thereto, the
"Registration Statement") in connection with the registration under the
Securities Act of the shares of Parent Common Stock to be issued to
<PAGE> 40
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the shareholders of the Company in the Merger, a portion of which Registration
Statement shall also serve as the proxy statement (together with any amendments
thereof or supplements thereto, the "Proxy Statement") relating to the Company
Shareholders' Meeting. The respective parties will cause the Proxy Statement and
the Registration Statement to comply as to form in all material respects with
the applicable provisions of the Securities Act, the Exchange Act and the rules
and regulations thereunder. The Company shall furnish all information concerning
the Company as Parent may reasonably request in connection with such actions and
the preparation of the Registration Statement and the Proxy Statement. Parent
shall use all reasonable efforts, and the Company will cooperate with Parent, to
cause the Registration Statement to become effective as promptly as practicable
and to keep the Registration Statement effective as long as is necessary to
consummate the Merger. Prior to the effective date of the Registration
Statement, Parent shall take all action required under any applicable federal or
state securities laws in connection with the issuance of shares of Parent Common
Stock pursuant to the Merger. Parent shall, as promptly as practicable, provide
copies of any written comments received from the SEC with respect to the
Registration Statement to the Company and advise the Company of any verbal
comments with respect to the Registration Statement received from the SEC. As
promptly as practicable after the Registration Statement shall have become
effective, the Company shall mail the Proxy Statement to its shareholders.
(b) No amendment or supplement to the Proxy Statement or the
Registration Statement will be made by Parent or the Company without the
approval of the other party. Parent will advise the Company, promptly after it
receives notice thereof, of the time when the Registration Statement has become
effective or any supplement or amendment has been filed, of the issuance of any
stop order, of the suspension of the qualification of Parent Common Stock
issuable in connection with the Merger for offering or sale in any jurisdiction,
or of any request by the SEC for amendment of the Proxy Statement or the
Registration Statement or comments thereon and responses thereto or requests by
the SEC for additional information.
(c) Notwithstanding anything to the contrary in this Agreement, (i)
Parent shall have no obligation to mail the Proxy Statement to the Company's
stockholders unless and until Parent shall have received the "comfort letter"
referred to in Section 6.15(a) and (ii) the Company shall have no obligation to
mail the Proxy Statement to its stockholders unless and until the Company shall
have received the "comfort letter" referred to in Section 6.15(b).
SECTION 6.03. Access to Information; Confidentiality. (a) As
permitted by law, the Company shall afford to Parent, and to Parent's officers,
employees, accountants, counsel, financial advisors and other representatives,
reasonable access during normal business hours during the period prior to the
Effective Time to all the properties, books, contracts, commitments and records
of the Company and its subsidiaries, and during such
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36
period, the Company shall furnish promptly to Parent (a) a copy of each report,
schedule, registration statement and other document filed by it or its
subsidiaries during such period pursuant to the requirements of applicable
federal or state securities laws and (b) all other information concerning its
business, properties and personnel as Parent may reasonably request. Until the
Effective Time, Parent will be bound by the terms of the confidentiality
agreement with the Company dated September 28, 1995 (the "Confidentiality
Agreement"), except as otherwise agreed to by the Company.
(b) As permitted by law, Parent shall afford to the Company, and to
the Company's officers, employees, accountants, counsel, financial advisors and
other representatives, reasonable access during normal business hours during the
period prior to the Effective Time to all the properties, books, contracts,
commitments and records of Parent and its subsidiaries reasonably necessary in
connection with preparing the Proxy Statement, including the opinions of
Goldman, Sachs & Co. and J.P. Morgan Securities Inc., dated the date of the
Proxy Statement, and during such period, Parent shall furnish promptly to the
Company a copy of each report, schedule, registration statement and other
document filed by it or its subsidiaries during such period pursuant to the
requirements of federal or state securities laws. The Company will keep such
information provided to it by Parent confidential, except to the extent such
information (i) is provided to the Company for its use in connection with the
preparation of the Proxy Statement, (ii) is or becomes generally available to
the public (other than as a result of a disclosure by the Company), (iii) was
available to the Company on a nonconfidential basis prior to disclosure by
Parent to the Company or (iv) becomes available to the Company on a
nonconfidential basis from a source other than Parent which is entitled to
disclose it, and except as required by law or as otherwise agreed to by Parent.
SECTION 6.04. Approvals and Consents; Cooperation. (a) Upon the
terms and subject to the conditions set forth in this Agreement, each of the
parties agrees to use all reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable to consummate
and make effective, in the most expeditious manner practicable, the Merger and
the other transactions contemplated by this Agreement, including (i) the
obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Entities and the making of all necessary
registrations and filings (including filings with Governmental Entities) and the
taking of all reasonable steps as may be necessary to obtain an approval or
waiver from, or to avoid an action or proceeding by, any Governmental Entity,
(ii) the obtaining of all necessary consents, approvals or waivers from third
parties, (iii) the defending of any lawsuits or other legal proceedings, whether
judicial or administrative, investigating or challenging this Agreement or the
consummation of any of the transactions contemplated by this Agreement,
including seeking to have any stay or temporary restraining order entered by any
court or other Governmental Entity vacated or reversed and (iv) the execution
and delivery of any additional instruments necessary to
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consummate the transactions contemplated by, and to fully carry out the purposes
of, this Agreement.
(b) Parent and the Company shall file as soon as practicable after
the date of this Agreement notifications under the HSR Act and shall respond as
promptly as practicable to all inquiries or requests received from the Federal
Trade Commission or the Antitrust Division of the Department of Justice for
additional information or documentation and shall respond as promptly as
practicable to all inquiries and requests received from any State Attorney
General or other Governmental Entity in connection with antitrust matters. The
parties shall cooperate with each other in connection with the making of all
such filings or responses, including providing copies of all such documents to
the other party and its advisors prior to filing or responding. Parent and
Merger Sub agree to use their respective best efforts to avoid the entry of (or,
if entered, to lift, vacate or reverse) any order, decree, judgment or ruling of
any court or Governmental Entity restraining or preventing the consummation of
the Merger on the basis of any federal, state or local antitrust laws or
regulations, including by committing to or effecting (by consent decree, hold
separate order or otherwise) the sale or disposition of such assets of Parent or
the Company as may be required to avoid (or, if entered, to lift, vacate or
reverse) any such order, decree, judgment or ruling; provided, however, that in
no event shall Parent, the Company or Merger Sub be obligated under this Section
6.04 to sell, or hold separate, a pulp mill, a paper plant or a paper machine.
SECTION 6.05. Company Stock Options. (a) All options (the "Company
Stock Options") outstanding, whether or not exercisable and whether or not
vested, at the Effective Time under the Company's 1992 Key Employees Stock
Option Plan, 1992 Stock Option for Non-Employee Directors and 1989 Key Employees
Stock Option Plan (collectively, the "Company Stock Option Plans"), shall remain
outstanding following the Effective Time. A listing of all outstanding Company
Stock Options as of November 5, 1995, showing what portions of such Company
Stock Options are exercisable as of such date, the dates upon which such Company
Stock Options expire, the exercise price of such Company Stock Options, the
number of limited rights tandem thereto, and whether such option is intended to
qualify as an "incentive stock opinion" within the meaning of Section 422 of the
Code, is set forth in Schedule 6.05 of the Company Disclosure Schedule. At the
Effective Time, the Company Stock Options shall, by virtue of the Merger and
without any further action on the part of the Company or the holder thereof, be
assumed by Parent in such manner that Parent (i) is a corporation "assuming a
stock option in a transaction to which Section 424(a) applied" within the
meaning of Section 424 of the Code or (ii) to the extent that Section 424 of the
Code does not apply to any such Company Stock Options, would be such a
corporation were Section 424 of the Code applicable to such Company Stock
Options. From and after the Effective Time, all references to the Company in the
Company Stock Option Plans and the applicable stock option agreements issued
thereunder shall be deemed to refer to Parent, which shall have assumed the
Company Stock Option Plans as of
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the Effective Time by virtue of this Agreement and without any further action.
Each Company Stock Option assumed by Parent (each, a "Substitute Option") shall
be exercisable upon the same terms and conditions as under the applicable
Company Stock Option Plan and the applicable option agreement issued thereunder,
except that (A) each such Substitute Option shall be exercisable for, and
represent the right to acquire, that whole number of shares of Parent Common
Stock (rounded up or down to the nearest whole share) equal to the number of
shares of Company Common Stock subject to such Company Stock Option multiplied
by the Stock Consideration; and (B) the option price per share of Parent Common
Stock shall be an amount equal to the option price per share of Company Common
Stock subject to such Company Stock Option in effect immediately prior to the
Effective Time divided by the Stock Consideration (the option price per share,
as so determined, being rounded upward to the nearest full cent). Such
Substitute Option shall otherwise be subject to the same terms and conditions as
such Company Stock Option, which in accordance with the terms thereof and
pursuant to action heretofore taken by the Compensation Committee of the
Company's Board of Directors shall vest and become immediately exercisable as of
the Effective Time, and any limited rights relating to such Company Stock Option
shall continue to be exercisable until thirty days following the Effective Time.
(b) As soon as practicable after the Effective Time, Parent shall
deliver to each holder of an outstanding Company Stock Option an appropriate
notice setting forth such holder's rights pursuant thereto and such Company
Stock Option shall continue in effect on the same terms and conditions
(including any antidilution provisions, and subject to the adjustments required
by this Section 6.05 after giving effect to the Merger). Parent shall comply
with the terms of all such Company Stock Options and ensure, to the extent
required by, and subject to the provisions of, the Company Stock Option Plans,
that Company Stock Options which qualified as incentive stock options under
Section 422 of the Code prior to the Effective Time continue to qualify as
incentive stock options after the Effective Time. Parent shall take all
corporate action necessary to reserve for issuance a sufficient number of shares
of Parent Common Stock for delivery upon exercise of Substitute Options pursuant
to the terms set forth in this Section 6.05. As soon as practicable after the
Effective Time, the shares of Parent Common Stock subject to Company Stock
Options will be covered by an effective registration statement on Form S-8 (or
any successor form) or another appropriate form and Parent shall use its
reasonable efforts to maintain the effectiveness of such registration statement
or registration statements for so long as Substitute Options remain outstanding.
In addition, Parent shall use all reasonable efforts to cause the shares of
Parent Common Stock subject to Company Stock Options to be listed on the Stock
Exchange and such other exchanges as Parent shall determine.
SECTION 6.06. Company Benefit Plans. (a) For a period of at least
two years after the Effective Time, Parent shall cause the Surviving Corporation
to continue to maintain the Company's existing compensation, severance, welfare
and pension benefit plans, programs and arrangements (other than any stock-based
plans, programs and arrangements
<PAGE> 44
39
for which alternative incentive compensation plans will be put into effect
pursuant to paragraph (b) below) for the benefit of current and former employees
of the Company and its subsidiaries (subject to such modification as may be
required by applicable law or to maintain the tax exempt status of any such plan
which is intended to be qualified under Section 401(a) of the Code); provided,
however, that nothing herein shall prohibit Parent from (i) replacing any such
existing plan, program or arrangement with a plan, program or arrangement which
provide such employees with benefits which are not less favorable in the
aggregate than the benefits that would have been provided under such existing
plan, program or arrangement to the extent such replacement is permitted under
the terms of the applicable plan, program or arrangement or (ii) including
current employees of the Company in the plans, programs and arrangements
generally available to employees of Parent and its subsidiaries other than the
Surviving Corporation in lieu of participation in any Company plan, program or
arrangement.
(b) All service credited to each employee by the Company through
the Effective Time shall be recognized by Parent for all purposes, including for
purposes of eligibility, vesting and benefit accruals under any employee benefit
plan provided by Parent for the benefit of the employees; provided, however,
that, to the extent necessary to avoid duplication of benefits, amounts payable
under employee benefit plans provided by Parent may be reduced by amounts
payable under similar Company plans with respect to the same periods of service.
Any benefits accrued by employees of the Company and its subsidiaries prior to
the Effective Time under any of the Company's defined benefit pension plans that
employ a final average pay formula shall be calculated based on such employees'
final average pay with the Surviving Corporation or any successor to the
Surviving Corporation or other affiliate of Parent employing such employees. In
addition, with respect to any welfare benefit plan established or maintained by
Parent or its subsidiaries for the benefit of employees of the Company, Parent
shall, or shall cause the relevant subsidiary to, waive any pre-existing
condition exclusions (other than any pre-existing condition that was not waived
by a Company plan) and provide that any covered expenses incurred on or before
the Effective Time in respect of the current plan year by any employee of the
Company (or any covered dependent of such an employee) shall be taken into
account for purposes of satisfying applicable deductible, coinsurance and
maximum out-of-pocket provisions after the Effective Time in respect of such
current plan year.
(c) Parent hereby agrees to cause the Surviving Corporation to
honor (without modification) and assume the severance policies, employment
agreements, executive termination agreements and individual benefit arrangements
listed in Schedule 3.09 of the Company Disclosure Schedule.
(d) The provisions of this Section 6.06 shall not apply to any
employee subject to the terms of a collective bargaining plan.
<PAGE> 45
40
(e) The Company may pay bonuses with respect to 1995 to
participants in the Company's Key Employees Long-Term Compensation Plan (the
"Long-Term Plan") in an amount per participant not to exceed 60% of base salary
as in effect on January 1, 1995, and in an aggregate amount not to exceed $5.0
million. With respect to all other outstanding Contingent Incentive Awards
granted under the Long-Term Plan (payable in respect of calendar years 1996 and
1997), such awards shall be cancelled as of the Effective Time in exchange for
the amounts determined in accordance with, and payable subject to the terms of,
this Section 6.06(e). As of the Effective Time, the value of each Contingent
Incentive Award shall be (i) determined using a price per share of Company
Common Stock of $40 and (ii) otherwise limited to the portion of such award
accrued as of the Effective Time by the Company for income statement purposes in
accordance with generally accepted accounting principles and past practice. The
amount determined in accordance with the immediately preceding sentence shall be
paid to the holder of each cancelled Contingent Incentive Award on January 1,
1997; provided, however, that such amount shall be forfeited upon any
termination of the participant's employment prior to such date other than as a
consequence of death, disability, retirement under the Company's pension plans
or involuntary termination under the severance policy applicable to the
participant.
SECTION 6.07. Indemnification and Insurance. (a) Parent and the
Surviving Corporation agree that the indemnification obligations set forth in
the Company's Articles of Incorporation, as amended, and the Company's By-Laws,
in each case as of the date of this Agreement, shall survive the Merger (and,
prior to the Effective Time, Parent shall cause the Articles of Incorporation
and By-Laws of Merger Sub to reflect such provisions) and shall not be amended,
repealed or otherwise modified for a period of six years after the Effective
Time in any manner that would adversely affect the rights thereunder of the
individuals who on or prior to the Effective Time were directors, officers,
employees or agents of the Company or its subsidiaries.
(b) The Company shall, to the fullest extent permitted under
applicable law and regardless of whether the Merger becomes effective, indemnify
and hold harmless, and, after the Effective Time, Parent and the Surviving
Corporation shall, to the fullest extent permitted under applicable law,
indemnify and hold harmless, each present and former director or officer of the
Company and each subsidiary of the Company and each such person who served at
the request of the Company or any subsidiary of the Company as a director,
officer, trustee, partner, fiduciary, employee or agent of another corporation,
partnership, joint venture, trust, pension or other employee benefit plan or
enterprise (collectively, the "Indemnified Parties") against all costs and
expenses (including reasonable attorneys' fees), judgments, fines, losses,
claims, damages, liabilities and settlement amounts paid in connection with any
claim, action, suit, proceeding or investigation (whether arising before or
after the Effective Time), whether civil, administrative or investigative,
arising out of or pertaining to any action or omission in their capacity as an
officer or director, in each case occurring before the Effective Time (including
the transactions contemplated by this
<PAGE> 46
41
Agreement). Without limiting the foregoing, in the event of any such claim,
action, suit, proceeding or investigation, (i) the Company or Parent and the
Surviving Corporation, as the case may be, shall pay the fees and expenses of
counsel selected by any Indemnified Party, which counsel shall be reasonably
satisfactory to the Company or to Parent and the Surviving Corporation, as the
case may be, promptly after statements therefor are received (unless the
Surviving Corporation shall elect to defend such action) and (ii) the Company
and Parent and the Surviving Corporation shall cooperate in the defense of any
such matter; provided, however, that neither the Company nor Parent or the
Surviving Corporation shall be liable for any settlement effected without its
written consent (which consent shall not be unreasonably withheld).
(c) For six years from the Effective Time, the Surviving
Corporation shall provide to the Company's current directors and officers
liability insurance protection of the same kind and scope as that provided by
the Company's directors' and officers' liability insurance policies (copies of
which have been made available to Parent); provided, however, that in no event
shall the Surviving Corporation be required to expend in any one year an amount
in excess of 200% of the annual premiums currently paid by the Company for such
insurance; and, provided, further, that if the annual premiums of such insurance
coverage exceed such amount, the Surviving Corporation shall be obligated to
obtain a policy with the greatest coverage available for a cost not exceeding
such amount.
(d) In the event the Company or the Surviving Corporation or any of
their respective successors or assigns (i) consolidates with or merges into any
other person or shall not be the continuing or surviving corporation or entity
in such consolidation or merger or (ii) transfers all or substantially all its
properties and assets to any person, then, and in each case, proper provision
shall be made so that the successors and assigns of the Company or the Surviving
Corporation, as the case may be, honor the indemnification obligations set forth
in this Section 6.07.
(e) The obligations of the Company, the Surviving Corporation, and
Parent under this Section 6.07 shall not be terminated or modified in such a
manner as to adversely affect any director, officer, employee, agent or other
person to whom this Section 6.07 applies without the consent of such affected
director, officer, employees, agents or other persons (it being expressly agreed
that each such director, officer, employee, agent or other person to whom this
Section 6.07 applies shall be third-party beneficiaries of this Section 6.07).
SECTION 6.08. Redemption of Convertible Preferred Stock. Prior to
the date on which the Registration Statement becomes effective, the Company
shall give notice to all holders of Convertible Preferred Stock that, on a date
designated by the Company which shall be a date prior to the Effective Time, all
shares of Convertible Preferred Stock shall be called for redemption, in
accordance with the terms thereof as set forth in Article Third of
<PAGE> 47
42
the Company's Articles of Incorporation, as amended, at the price provided for
therein. The Company will cause the redemption to be consummated, and the shares
of Convertible Preferred Stock to no longer be outstanding, prior to the
Effective Time.
SECTION 6.09. Fees and Expenses. (a) Except as provided below in
this Section 6.09, all fees and expenses incurred in connection with this
Agreement and the Merger and any other transaction contemplated by this
Agreement shall be paid by the party incurring such fees or expenses, whether or
not the Merger is consummated.
(b) The Company shall pay to Parent upon demand a fee of $80.0
million (the "Termination Fee") if (i) Parent terminates this Agreement pursuant
to Section 8.01(c)(ii) or (c)(iii), (ii) the Company terminates this Agreement
pursuant to Section 8.01(f), (iii) (x) this Agreement is terminated by the
Company or Parent pursuant to Section 8.01(h), (y) prior to the Company
Shareholders' Meeting but after the date of this Agreement a competitive
proposal has been made to the Company and (z) within one year of the date of
such termination and as a result of such competitive proposal, the Company
enters into a definitive agreement with respect to the transaction contemplated
by such competitive proposal, or (iv) (A) Parent or the Company terminates this
Agreement pursuant to Section 8.01(b), (B) prior to such termination but after
the date of this Agreement, a competitive proposal has been made to the Company,
(C) the Board of Directors of the Company had withdrawn its recommendation or
approval of this Agreement because of the existence of such competitive proposal
or J.P. Morgan Securities Inc. and Goldman, Sachs & Co. shall have failed to
deliver the updated written opinions contemplated by Section 6.01 because of the
existence of such competitive proposal, (D) the Company Shareholders' Meeting
shall not have occurred and (E) within one year of the date of such termination
and as a result of such competitive proposal, the Company enters into a
definitive agreement with respect to the transaction contemplated by such
competitive proposal; provided, however, the Company shall not be obligated to
pay the Termination Fee to Parent if, at the time of any termination of this
Agreement referred to in clauses (i), (ii), (iii) or (iv) of this paragraph (b),
Parent shall be in material breach of any of its material representations,
warranties, covenants or agreements set forth in this Agreement.
SECTION 6.10. Notification. Each of the Company and Parent shall
give prompt notice to the other of (i) any representation or warranty made by it
contained in this Agreement that is qualified as to materiality becoming untrue
or inaccurate in any respect or any such representation or warranty that is not
so qualified becoming untrue or inaccurate in any material respect or (ii) the
failure by it to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
<PAGE> 48
43
SECTION 6.11. Obligations of Merger Sub. Parent shall take all
action necessary to cause Merger Sub to perform its obligations under this
Agreement and to consummate the Merger on the terms and subject to the
conditions set forth in this Agreement.
SECTION 6.12. Affiliates' Letters. No later than 45 days from the
date of this Agreement, the Company shall deliver to Parent a list of names and
addresses of those persons who were, in the Company's reasonable judgment, on
such date, affiliates within the meaning of Rule 145 of the rules and
regulations promulgated under the Securities Act (each such person being an
"Affiliate") of the Company. The Company shall provide Parent with such
information and documents as Parent shall reasonably request for purposes of
reviewing such list. The Company shall use its reasonable efforts to deliver or
cause to be delivered to Parent, prior to the Effective Time, a letter
substantially in the form attached hereto as Exhibit A, executed by each of the
Affiliates of the Company identified in the foregoing list and of any person who
shall have become an Affiliate of the Company subsequent to the delivery of such
list.
SECTION 6.13. Plan of Reorganization. This Agreement is intended to
constitute a "plan of reorganization" within the meaning of Section 1.368-2(g)
of the income tax regulations promulgated under the Code. From and after the
date of this Agreement and until the Effective Time, each party hereto shall use
its reasonable efforts, subject to the last sentence of Section 2.03(g), to
cause the Merger to qualify, and will not knowingly take any actions or cause
any actions to be taken which could prevent the Merger from qualifying, as a
reorganization under the provisions of Section 368(a) of the Code. Following the
Effective Time, neither the Surviving Corporation, Parent nor any of their
affiliates shall knowingly take any action or knowingly cause any action to be
taken which would cause the Merger to fail to qualify as a reorganization under
Section 368(a) of the Code.
SECTION 6.14. Public Announcements. Unless otherwise required by
applicable law or the requirements of any listing agreement with any applicable
stock exchange, Parent and the Company shall each use their reasonable efforts
to consult with each other before issuing any press release or otherwise making
any public statements with respect to this Agreement or any transaction
contemplated by this Agreement and shall not issue any such press release or
make any such public statement prior to such consultation.
SECTION 6.15. Letters of Accountants. (a) The Company shall use its
reasonable efforts to cause to be delivered to Parent a "comfort" letter of
Deloitte & Touche, LLP, the Company's independent public accountants, dated and
delivered the date on which the Registration Statement shall become effective,
and addressed to Parent, in the form, scope and content contemplated by
Statement on Auditing Standards No. 49 issued by the American Institute of
Certified Public Accountants, Inc. ("SAS 49"), relating to the financial
statements and other financial data with respect to the Company and its
consolidated
<PAGE> 49
44
subsidiaries included or incorporated by reference in the Proxy Statement and
such other matters as may be reasonably required by Parent, and based upon
procedures carried out to a specified date not earlier than five days prior to
the date thereof.
(b) Parent shall use its reasonable efforts to cause to be
delivered to the Company a "comfort" letter of Arthur Andersen LLP, Parent's
independent public accountants, dated the date on which the Registration
Statement shall become effective, and addressed to the Company, in the form,
scope and content contemplated by SAS 49, relating to the financial statements
and other financial data with respect to Parent and its consolidated
subsidiaries included in or incorporated by reference in the Proxy Statement and
such other matters as may be reasonably required by the Company, and based upon
procedures carried out to a specified date not earlier than five days prior to
the date thereof.
SECTION 6.16. Stock Exchange Listing. Parent shall promptly prepare
and submit to the Stock Exchange a listing application covering the shares of
Parent Common Stock to be issued in the Merger and pursuant to Substitute
Options, and shall use its reasonable efforts to obtain, prior to the Effective
Time, approval for the listing of such Parent Common Stock, subject to official
notice to the Stock Exchange of issuance, and the Company shall cooperate with
Parent with respect to such listing.
SECTION 6.17. Parent Board of Directors. Parent shall take all
necessary action to cause John R. Kennedy to be appointed to the Board of
Directors of Parent as of the Effective Time, to serve until the next annual
election of directors of Parent. In connection with such election, Parent shall
take all necessary action to include John R. Kennedy as a nominee for the Board
of Directors of Parent recommended by such Board of Directors for election by
Parent's shareholders to the Board.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. Conditions to the Obligations of Each Party. The
obligations of the Company, Parent and Merger Sub to consummate the Merger are
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) Registration Statement. The Registration Statement shall have
become effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued by the
SEC and no proceeding for that purpose shall have been initiated by the
SEC.
<PAGE> 50
45
(b) Company Shareholder Approval. This Agreement shall have been
approved by the requisite affirmative vote of the shareholders of the
Company in accordance with the Company's Articles of Incorporation, as
amended, and the NCBCA.
(c) No Injunction or Restraint. No Governmental Entity shall have
enacted, issued, promulgated, enforced or entered any law, rule,
regulation or order which is then in effect and has the effect of making
the Merger illegal or otherwise prohibiting consummation of the Merger.
(d) HSR Act. Any waiting period (and any extension thereof)
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated.
(e) Stock Exchange Listing. The shares of Parent Common Stock to
be issued in the Merger and pursuant to Substitute Options shall have been
authorized for listing on the Stock Exchange, subject to official notice
of listing.
SECTION 7.02. Conditions to the Obligations of Parent and Merger
Sub. The obligations of Parent and Merger Sub to consummate the Merger are
subject to the satisfaction or waiver by Parent on or prior to the Closing Date
of the following further conditions:
(a) Company Representations and Warranties. Each of the
representations and warranties of the Company contained in this Agreement
that is qualified by materiality shall be true and correct on and as of
the Closing Date as if made on and as of such date (other than
representations and warranties which address matters only as of a certain
date which shall be true and correct as of such certain date) and each of
the representations and warranties that is not so qualified shall be true
and correct in all material respects on and as of the Closing Date, as if
made on and as of such date (other than representations and warranties
which address matters only as of a certain date which shall be true and
correct in all material respects as of such certain date), in each case
except as contemplated or permitted by this Agreement, and Parent shall
have received a certificate of the Chairman, President or Chief Financial
Officer of the Company to such effect.
(b) Company Agreements and Covenants. The Company shall have
performed or complied in all material respects with all material
agreements and covenants required by this Agreement to be performed or
complied with by it on or prior to the Closing Date, and Parent shall have
received a certificate of the Chairman, President or Chief Financial
Officer of the Company to that effect.
<PAGE> 51
46
(c) Consents and Approvals. All consents, approvals and
authorizations legally required to be obtained to consummate the Merger
shall have been obtained from all Governmental Entities, except for such
consents, approvals and authorizations the failure of which to obtain
would not have a material adverse effect on Parent (assuming for purposes
of this paragraph (c) that the Merger shall have been effected).
(d) Tax Opinion. Parent shall have received the opinion of Skadden,
Arps, Slate, Meagher & Flom, counsel to Parent, based upon representation
letters substantially in the forms of Exhibits B and C to this Agreement,
dated on or about the Closing Date, and such other facts, representations
and assumptions concerning, among other things, the actions of the
shareholders of the Company as counsel may reasonably deem relevant, to
the effect that the Merger will be treated for federal income tax purposes
as a reorganization qualifying under the provisions of Section 368(a) of
the Code and that each of Parent, Merger Sub and the Company will be a
party to the reorganization within the meaning of Section 368(b) of the
Code, dated on the Closing Date.
SECTION 7.03. Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Merger are subject to the
satisfaction or waiver by the Company on or prior to the Closing Date of the
following further conditions:
(a) Parent Representations and Warranties. Each of the
representations and warranties of each of Parent and Merger Sub contained
in this Agreement that is qualified by materiality shall be true and
correct on and as of the Closing Date as if made on and as of such date
(other than representations and warranties which address matters only as
of a certain date which shall be true and correct as of such certain date)
and each of the representations and warranties that is not so qualified
shall be true and correct in all material respects on and as of the
Closing Date as if made on and as of such date (other than representations
and warranties which address matters only as of a certain date which shall
be true and correct in all material respects as of such certain date), in
each case except as contemplated or permitted by this Agreement, and the
Company shall have received a certificate of the Chairman, President or
Chief Financial Officer of each of Parent and Merger Sub to such effect.
(b) Parent Agreements and Covenants. Each of Parent and Merger Sub
shall have performed or complied in all material respects with all
material agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Closing Date, and the
Company shall have received a certificate of the Chairman, President or
Chief Financial Officer of each of Parent and Merger Sub to that effect.
<PAGE> 52
47
(c) Tax Opinion. The Company shall have received the opinion of
Shearman & Sterling, counsel to the Company, based upon representation
letters substantially in the forms of Exhibits B and C to this Agreement,
dated on or about the Closing Date, and such other facts, representations
and assumptions concerning, among other things, the actions of the
shareholders of the Company as counsel may reasonably deem relevant, to
the effect that the Merger will be treated for federal income tax
purposes as a reorganization qualifying under the provisions of Section
368(a) of the Code and that each of Parent, Merger Sub and the Company
will be a party to the reorganization within the meaning of Section
368(a) of the Code, dated on the Closing Date.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated and
the Merger and the other transactions contemplated by this Agreement may be
abandoned at any time prior to the Effective Time, whether before or after
approval thereof by shareholders of the Company or Parent, as follows:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the Effective Time shall
not have occurred on or before May 31, 1996; provided, however, that the
right to terminate this Agreement under this Section 8.01(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before May 31, 1996; provided further that,
upon written notice to Parent from the Company, Parent shall not have the
right to terminate this Agreement under this Section 8.01(b) until August
31, 1996 if the Merger shall not have been consummated as a result of (i)
the Company or Parent having failed by May 31, 1996 to receive all
required regulatory approvals or consents with respect to the Merger
necessary to satisfy the condition set forth in Section 7.02(c), (ii) the
entering of an order or any pending action commenced by any applicable
federal governmental antitrust authority seeking an order which would
have the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger, or (iii) the failure of the condition set
forth in Section 7.01(d) to be satisfied;
(c) by Parent if (i) the Board of Directors of the Company or any
committee thereof shall have withdrawn or modified in a manner adverse to
Parent its
<PAGE> 53
48
approval or recommendation of this Agreement and the Merger, (ii) the
Board of Directors of the Company or any committee thereof shall have
approved or recommended any competitive proposal or (iii) the Company
shall have entered into any agreement with respect to any competitive
proposal in accordance with Section 5.04(b) of this Agreement;
(d) by either Parent or the Company if any Governmental Entity
shall have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the Merger
and such order, decree or ruling or other action shall have become final
and nonappealable; provided, however, that the party seeking to terminate
this Agreement under this Section 8.01(d) shall have used its best
efforts to remove such injunction, order or decree;
(e) by Parent in the event of a breach by the Company of any
representation, warranty, covenant or other agreement contained in this
Agreement which (A) would give rise to the failure of a condition set
forth in Section 7.02(a) or (b) and (B) cannot be or has not been cured
within 20 days after the giving by Parent of written notice to the
Company;
(f) by the Company in connection with entering into a definitive
agreement in accordance with Section 5.04(b), provided it has complied
with all provisions thereof, including the notice provisions therein;
(g) by the Company if Merger Sub or Parent shall have breached in
any material respect any of their respective representations, warranties,
covenants or other agreements contained in this agreement, which failure
to perform is incapable of being cured or has not been cured within 20
days after the giving of written notice by the Company to Parent or
Merger Sub, as applicable, except, in any case, such failures which are
not reasonably likely to affect adversely Parent's or Merger Sub's
ability to complete the Merger; or
(h) by Parent or the Company if the shareholders of the Company do
not approve this Agreement at the Company Shareholders' Meeting or any
adjournment or postponement thereof.
SECTION 8.02. Effect of Termination. In the event of termination
of this Agreement by either the Company or Parent as provided in Section 8.01,
this Agreement shall forthwith become void and have no effect, without any
liability or obligation on the part of Parent, Merger Sub or the Company, other
than the provisions of Section 3.20, Section 4.13, the last sentence of Sections
6.03(a) and (b), Section 6.09, this Section 8.02 and Article IX, and except to
the extent that such termination results from the wilful and
<PAGE> 54
49
material breach by a party of any of its representations, warranties, covenants
or agreements set forth in this Agreement.
SECTION 8.03. Amendment. This Agreement may be amended by the
parties at any time before or after any required approval of this Agreement by
the shareholders of the Company; provided, however, that after any such
approval, there shall not be made any amendment that by law requires further
approval by such shareholders without the further approval of such shareholders.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties.
SECTION 8.04. Extension; Waiver. At any time prior to the
Effective Time, the parties may (a) extend the time for the performance of any
of the obligations or other acts of the other parties, (b) waive any
inaccuracies in the representations and warranties contained in this Agreement
or in any document delivered pursuant to this Agreement or (c) subject to the
proviso of Section 8.03, waive compliance with any of the agreements or
conditions contained in this Agreement. Any agreement on the part of a party to
any such extension or waiver shall be valid only if set forth in any instrument
in writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of those rights.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Nonsurvival of Representations. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 9.01
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
SECTION 9.02. Notices. All notices, requests, claims, demands and
other communications under this Agreement shall be in writing and shall be
deemed given if delivered personally or sent by overnight courier (providing
proof of delivery) to the parties at the following addresses (or at such address
for a party as shall be specified by like notice):
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50
(a) if to Parent or Merger Sub, to:
International Paper Company
Two Manhattanville Road
Purchase, New York 10577
Attention: General Counsel
Facsimile No.: (914) 397-1612
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attention: Blaine V. Fogg, Esq.
Facsimile No.: (212) 735-2000
(b) if to the Company, to:
Federal Paper Board Company, Inc.
75 Chestnut Ridge Road
Montvale, New Jersey 07645
Attention: Executive Vice President
Facsimile No.: (201) 307-6132
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: John J. Madden, Esq.
Facsimile No.: (212) 848-7179
SECTION 9.03. Definitions. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first person;
(b) "control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly, of
the power to direct or
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51
cause the direction of the management and policies of a person, whether
through the ownership of voting securities, by contract or otherwise;
(c) "knowledge" or "known" means, with respect to the matter in
question, if any of the executive officers of the Company or Parent, as
the case may be, has actual knowledge of such matter;
(d) "lien" means any encumbrance, hypothecation, infringement,
lien, mortgage, pledge, restriction, security interest, title retention
or other security arrangement, or any adverse right or interest, charge
or claim of any nature whatsoever of, on, or with respect to any asset,
property or property interest; provided, however, that the term "lien"
shall not include (i) liens for water and sewer charges and current taxes
not yet due and payable or being contested in good faith, (ii)
mechanics', carriers', workers', repairers', materialmen's,
warehousemen's and other similar liens arising or incurred in the
ordinary course of business or (iii) all liens approved in writing by the
other party hereto;
(e) "material adverse change" or "material adverse effect" means,
when used in connection with the Company or Parent, any change or effect
(or any development that, insofar as can reasonably be foreseen, is
likely to result in any change or effect) that is materially adverse to
the business, financial condition or results of operations of such party
and its subsidiaries taken as a whole;
(f) "person" means an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity;
and
(g) a "subsidiary" of any person means another person, an amount
of the voting securities, other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its
Board of Directors or other governing body (or, if there are no such
voting interests, 50% or more of the equity interests of which) is owned
directly or indirectly by such first person.
SECTION 9.04. Interpretation. When a reference is made in this
Agreement to a Section, Exhibit or Schedule, such reference shall be to a
Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation".
SECTION 9.05. Counterparts. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and the same
agreement and shall
<PAGE> 57
52
become effective when one or more counterparts have been signed by each of the
parties and delivered to the other parties, it being understood that all parties
need not sign the same counterpart.
SECTION 9.06. Entire Agreement; No Third-Party Beneficiaries. This
Agreement constitutes the entire agreement, and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement (provided, however, that the provisions of the
Confidentiality Agreement shall remain valid and in effect) and, except for the
provisions of Article II and Sections 6.05, 6.06 and 6.07, is not intended to
confer upon any person other than the parties any rights or remedies hereunder.
SECTION 9.07. Assignment. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties, except that Merger Sub may
assign, in its sole discretion, any or all of its rights, interests and
obligations under this Agreement to Parent or to any direct or indirect wholly
owned subsidiary of Parent, but no such assignment shall relieve Merger Sub of
any of its obligations under this Agreement. 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 9.08. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York, without
regard to any applicable conflicts of law, except to the extent that the NCBCA
shall be held to govern the terms of the Merger.
SECTION 9.09. Enforcement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms 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 by this Agreement, (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 by this Agreement in any court other than a federal or state court
sitting in the State of New York.
<PAGE> 58
53
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused
this Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
INTERNATIONAL PAPER COMPANY
by /s/ James P. Melican
--------------------------------
Name: James P. Melican
Title: Executive Vice President
FOCUS MERGER CO., INC.
by /s/ James P. Melican
--------------------------------
Name: James P. Melican
Title: Executive Vice President
FEDERAL PAPER BOARD COMPANY, INC.
by /s/ Quentin J. Kennedy
--------------------------------
Name: Quentin J. Kennedy
Title: Executive Vice President
<PAGE> 59
EXHIBIT A
FORM OF AFFILIATE LETTER FOR
AFFILIATES OF THE COMPANY
/____________/, 1996
International Paper Company
Two Manhattanville Road
Purchase, New York 10577
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be
deemed to be an "affiliate" of Federal Paper Board Company, Inc., a North
Carolina corporation (the "Company"), as the term "affiliate" is defined for
purposes of paragraphs (c) and (d) of Rule 145 of the rules and regulations (the
"Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"). Pursuant
to the terms of the Agreement and Plan of Merger dated as of November 6, 1995
(the "Merger Agreement") among International Paper Company, a New York
corporation ("Parent"), Focus Merger Co., Inc., a North Carolina corporation
("Merger Sub"), and the Company, the Company will be merged with and into Merger
Sub (the "Merger"). Capitalized terms used in this letter without definition
shall have the meanings assigned to them in the Merger Agreement.
As a result of the Merger, I may receive shares of common stock,
par value $1.00 per share, of Parent (the "Parent Shares"). I would receive such
Parent Shares in exchange for shares (or upon exercise of options for shares)
owned by me of common stock, par value $5.00 per share, of the Company (the
"Company Shares").
1. I represent, warrant and covenant to Parent that in the event I
receive any Parent Shares as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of the
Parent Shares in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable limitations
upon my ability to sell, transfer or otherwise dispose of the Parent Shares, to
the extent I felt necessary, with my counsel or counsel for the Company.
<PAGE> 60
2
C. I have been advised that the issuance of the Parent Shares to
me pursuant to the Merger has been registered with the Commission under the Act
on a Registration Statement on Form S-4. However, I have also been advised that,
because at the time the Merger is submitted for a vote of the shareholders of
the Company, (a) I may be deemed to be an affiliate of the Company and (b) the
distribution by me of the Parent Shares has not been registered under the Act, I
may not sell, transfer or otherwise dispose of the Parent Shares issued to me in
the Merger unless (i) such sale, transfer or other disposition is made in
conformity with the volume and other limitations of Rule 145 promulgated by the
Commission under the Act, (ii) such sale, transfer or other disposition has been
registered under the Act or (iii) in the opinion of counsel reasonably
acceptable to Parent, such sale, transfer or other disposition is otherwise
exempt from registration under the Act.
D. I understand that Parent is under no obligation to register the
sale, transfer or other disposition of the Parent Shares by me or on my behalf
under the Act or, except as provided in paragraph 2(A) below, to take any other
action necessary in order to make compliance with an exemption from such
registration available.
E. I understand that there will be placed on the certificates for
the Parent Shares issued to me, or any substitutions therefor, a legend stating
in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT
OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY
ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT
DATED [____________], 1996 BETWEEN THE REGISTERED HOLDER HEREOF
AND INTERNATIONAL PAPER COMPANY, A COPY OF WHICH AGREEMENT IS ON
FILE AT THE PRINCIPAL OFFICES OF INTERNATIONAL PAPER COMPANY."
F. I understand that unless a sale or transfer is made in
conformity with the provisions of Rule 145, or pursuant to a registration
statement, Parent reserves the right to put the following legend on the
certificates issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM
A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE
145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES. THE
SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR
RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE
MEANING OF THE SECURITIES ACT OF 1933 AND MAY
<PAGE> 61
3
NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE
WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933."
G. Execution of this letter should not be considered an admission
on my part that I am an "affiliate" of the Company as described in the first
paragraph of this letter, nor as a waiver of any rights I may have to object to
any claim that I am such an affiliate on or after the date of this letter.
2. By Parent's acceptance of this letter, Parent hereby agrees with
me as follows:
A. For so long as and to the extent necessary to permit me to sell
the Parent Shares pursuant to Rule 145 and, to the extent applicable, Rule 144
under the Act, Parent shall (a) use its reasonable efforts to (i) file, on a
timely basis, all reports and data required to be filed with the Commission by
it pursuant to Section 13 of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), and (ii) furnish to me upon request a written statement as to
whether Parent has complied with such reporting requirements during the 12
months preceding any proposed sale of the Parent Shares by me under Rule 145,
and (b) otherwise use its reasonable efforts to permit such sales pursuant to
Rule 145 and Rule 144. Parent hereby represents to me that it has filed all
reports required to be filed with the Commission under Section 13 of the 1934
Act during the preceding 12 months.
B. It is understood and agreed that certificates with the legends
set forth in paragraphs E and F above will be substituted by delivery of
certificates without such legend if (i) two years shall have elapsed from the
date the undersigned acquired the Parent Shares received in the Merger and the
provisions of Rule 145(d)(2) are then available to the undersigned, (ii) three
years shall have elapsed from the date the undersigned acquired the Parent
Shares received in the Merger and the provisions of Rule 145(d)(3) are then
applicable to the undersigned, or (iii) Parent has received either an opinion of
counsel, which
<PAGE> 62
4
opinion and counsel shall be reasonably satisfactory to Parent, or a "no action"
letter obtained by the undersigned from the staff of the Commission, to the
effect that the restrictions imposed by Rule 145 under the Act no longer apply
to the undersigned.
Very truly yours,
----------------------------------
Name:
Agreed and accepted this __day
of [____________], 1996, by
INTERNATIONAL PAPER COMPANY
By:
----------------------------
Name:
Title:
<PAGE> 63
EXHIBIT B
FORM OF COMPANY TAX OPINION REPRESENTATION LETTER
____________, 1996
Shearman & Sterling
Citicorp Center
153 East 53rd Street
New York, NY 10022-4676
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
Dear Sirs:
On behalf of the Company, the undersigned, in connection with the
opinions to be delivered by your firms pursuant to Sections 7.03(c) and 7.02(d)
of the Agreement and Plan of Merger dated as of November 6, 1995, among Parent,
Merger Sub and the Company,* hereby certifies that, to the extent the facts
relate to the Company to his knowledge and after due diligence, and to the
extent otherwise without knowledge to the contrary, the descriptions of the
facts contained in the Registration Statement and the Proxy Statement completely
and accurately describe the Merger and the transactions leading up thereto and
further that:
1. The fair market value of the Parent Common Stock and other
consideration received by each Company shareholder will be approximately equal
to the fair market value of the Company Common Stock surrendered in the
exchange.
2. There is no intercorporate indebtedness existing between Parent and
the Company or between Merger Sub and the Company that was issued, acquired, or
will be settled at a discount.
3. The Company is not an investment company as defined in section
368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code.
- ---------------------
* For purposes of this certificate, capitalized terms used and not otherwise
defined herein shall have the meaning ascribed thereto in the Agreement and Plan
of Merger.
<PAGE> 64
2
4. To the best knowledge of the management of the Company there is no
plan or intention on the part of the shareholders of the Company on the date
hereof to sell, exchange or otherwise dispose of a number of shares of Parent
Common Stock received in the Merger that would reduce such Company shareholders'
ownership of Parent Common Stock to a number of shares having a value, as of the
date of the Merger, of less than 40 percent of the value of all of the formerly
outstanding Company Common Stock and Convertible Preferred Stock as of the same
date. For purposes of this representation, shares of Convertible Preferred Stock
redeemed prior to the Merger and shares of Company Common Stock exchanged for
cash or other property in the Merger, surrendered by dissenters or exchanged for
cash in lieu of fractional shares of Parent Common Stock will be treated as
outstanding Company stock on the date of the Merger. In addition, and not in
limitation of the foregoing, the Company has considered, in making this
representation, any shares of Company Common Stock that have been sold, redeemed
or otherwise disposed of by shareholders who own 5 percent or more of the
Company Common Stock, or by shareholders who are officers or directors of the
Company, after the announcement of the Merger and prior to the Effective Time to
the extent the management of the Company has knowledge on the date hereof of any
such sales, redemptions or dispositions. Except as set forth on Annex I to this
letter, to the knowledge of the management of the Company there are no
shareholders who own 5 percent or more of the Company Common Stock on the date
hereof.
5. At the Effective Time, Merger Sub will acquire at least 90 percent of
the fair market value of the net assets and at least 70 percent of the fair
market value of the gross assets held by the Company immediately prior to the
Merger. For purposes of this representation, amounts used by the Company to pay
its reorganization expenses and all redemptions, including the redemption of the
Convertible Preferred Stock prior to the Merger, and distributions (except for
regular, normal dividends) made by the Company immediately preceding the
transfer will be included as assets of the Company held immediately prior to the
Merger.
6. The liabilities of the Company assumed by Merger Sub and the
liabilities to which the transferred assets of the Company are subject were
incurred by the Company in the ordinary course of its business.
7. The fair market value of the assets of the Company transferred to
Merger Sub will equal or exceed the sum of the liabilities assumed by Merger
Sub, plus the amount of liabilities, if any, to which the transferred assets are
subject.
8. The Company is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of section 368(a)(3)(A) of the Internal Revenue
Code.
<PAGE> 65
3
9. None of the compensation received by any shareholder-employees of the
Company will be separate consideration for, or allocable to, any of their shares
of Company Common Stock.
10. The payment of cash in lieu of fractional shares of Parent Common
Stock is solely for the purpose of avoiding the expense and inconvenience to
Parent of issuing fractional shares of Parent Common Stock and does not
represent separately bargained- for consideration.
I understand that Shearman & Sterling, as counsel for the Company, and
Skadden, Arps, Slate, Meagher & Flom, as counsel for Parent, will rely on this
certificate in rendering their respective opinions concerning certain of the
federal income tax consequences of the Merger and hereby commit to inform them
if, for any reason, any of the foregoing representations ceases to be true prior
to the Effective Time.
FEDERAL PAPER BOARD COMPANY, INC.
BY: ______________________
Name:
Title:
<PAGE> 66
Annex I
<TABLE>
<CAPTION>
Beneficially Percent
Beneficial Owner* Owned Shares of Class
- ----------------- ------------ --------
<S> <C> <C>
</TABLE>
- --------------
* /Attach SEC filings/
<PAGE> 67
EXHIBIT C
FORM OF PARENT TAX OPINION REPRESENTATION LETTER
__________, 1996
Shearman & Sterling
Citicorp Center
153 East 53rd Street
New York, NY 10022-4676
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
Dear Sirs:
On behalf of Parent and Merger Sub, the undersigned, in connection with
the opinions to be delivered by your firms pursuant to Sections 7.03(c) and
7.02(d) of the Agreement and Plan of Merger dated as of November 6, 1995, among
Parent, Merger Sub and the Company,* hereby certifies that, to the extent the
facts relate to Parent and Merger Sub to his knowledge and after due diligence,
and to the extent otherwise without knowledge to the contrary, the descriptions
of the facts contained in the Registration Statement and the Proxy Statement
completely and accurately describe the Merger and the transactions leading up
thereto and further that:
1. The fair market value of the Parent Common Stock and other
consideration received by each Company shareholder will be approximately equal
to the fair market value of the Company Common Stock surrendered in the
exchange.
2. There is no intercorporate indebtedness existing between Parent and
the Company or between Merger Sub and the Company that was issued, acquired, or
will be settled at a discount.
3. Neither Parent nor Merger Sub is an investment company as defined in
section 368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code.
- ---------------
* For purposes of this certificate, capitalized terms used and not otherwise
defined herein shall have the meaning ascribed thereto in the Agreement and Plan
of Merger.
<PAGE> 68
2
4. At the Effective Time, Merger Sub will acquire at least 90 percent of
the fair market value of the net assets and at least 70 percent of the fair
market value of the gross assets held by the Company immediately prior to the
Merger. For purposes of this representation, amounts paid by the Company to
dissenters, amounts paid by the Company to shareholders who receive cash or
other property, assets of the Company used to pay reorganization expenses, and
all redemptions, including the redemption of the Convertible Preferred Stock
prior to the Merger, and distributions (except for regular, normal dividends)
made by the Company immediately before the Merger will be included as assets
held by the Company immediately prior to the Merger.
5. Prior to the Merger, Parent will be in control of Merger Sub within
the meaning of the section 368(c) of the Internal Revenue Code.
6. Parent has no plan or intention to redeem or otherwise acquire after
the date of the Merger any of the Parent Common Stock to be issued in the
Merger.
7. Parent has no plan or intention to liquidate Merger Sub; to merge
Merger Sub with and into another corporation; to sell or otherwise dispose of
any of the stock of Merger Sub; or to cause Merger Sub to sell or otherwise
dispose of any of the assets of the Company acquired in the Merger, except for
dispositions made in the ordinary course of business, or transfers described in
section 368(a)(2)(C) of the Internal Revenue Code.
8. Following the Merger, Merger Sub will continue the historic business
of the Company or use a significant portion of the Company's business assets in
a business.
9. Following the Merger, Merger Sub will not issue additional shares of
its stock that would result in Parent losing control of Merger Sub within the
meaning of section 368(c) of the Internal Revenue Code.
10. No stock of Merger Sub will be issued in the Merger.
11. The payment of cash in lieu of fractional shares of Parent Common
Stock is solely for the purpose of avoiding the expense and inconvenience to
Parent of issuing fractional shares of Parent Common Stock and does not
represent separately bargained- for consideration.
12. None of the compensation received by any shareholder-employees of the
Company will be separate consideration for, or allocable to, any of their shares
of Company Common Stock.
<PAGE> 69
3
I understand that Shearman & Sterling, as counsel for the Company, and Skadden,
Arps, Slate, Meagher & Flom, as counsel for Parent, will rely on this
certificate in rendering their opinion concerning certain of the federal income
tax consequences of the Merger and hereby commit to inform them if, for any
reason, any of the foregoing representations ceases to be true prior to the
Effective Time.
INTERNATIONAL PAPER COMPANY
BY:
---------------------------
Name:
Title:
<PAGE> 1
[INTERNATIONAL PAPER LOGO]
2 MANHATTANVILLE ROAD
PURCHASE NY 10577-2196
NEWS RELEASE
IP MEDIA CONTACTS: IP ANALYST CONTACTS: FEDERAL PAPER BOARD CONTACT:
Carl Gagliardi Carol Tutundgy Quentin J. Kennedy
(914) 397-1666 (914) 397-1632 201-391-1776
Molly Sullivan Maryanne Rupy
(914) 397-1652 (914) 397-1626
Brian Turcotte
(914) 397-1623
INTERNATIONAL PAPER, FEDERAL PAPER BOARD ANNOUNCE MERGER
NOVEMBER 6, 1995
PURCHASE, N.Y. - International Paper and Federal Paper Board announced today
that they have agreed to merge. Once the merger is complete, Federal Paper
Board, a diversified forest products company with $1.57 billion in 1994 net
sales, will become a wholly owned subsidiary of International Paper. The
transaction, which is valued at $3.5 billion, including assumption of debt, is
subject to approval by Federal Paper Board's shareholders, as well as by
regulatory authorities. It is expected to close in the first quarter of next
year.
In the merger, Federal Paper Board's shareholders will be entitled to
receive at their election, either $55 in cash per share or $55 worth of
International Paper common stock per share, subject to the limitation that not
more than 1.612 and not less than 1.275 International Paper shares will be
issued for each Federal Paper Board share exchanged for International Paper
stock. The shareholder election to receive cash or International Paper stock
will be subject to adjustment so that, in the aggregate, approximately 49
percent of the Federal Paper Board shares will be exchanged for cash. The merger
is intended to qualify as a tax-free reorganization.
"This is a wonderful opportunity to combine two first-class organizations
in a way that will strengthen both," said John R. Kennedy, Federal Paper Board's
president and chief executive
<PAGE> 2
officer. "Our complementary businesses will provide an opportunity to better
serve a broader range of customers. The combination of cash and International
Paper stock is an excellent value for our shareholders."
"Merging with this outstanding forest products company will help us
enhance our position as one of the industry's most efficient producers," said
John A. Georges, chairman and chief executive officer of International Paper.
"With Federal Paper Board, we gain two world-class facilities in its Riegelwood,
N.C., and Augusta, Ga., mills."
Over the last six years, Federal Paper Board has invested over $1.7
billion in upgrades and process improvements to these and other facilities.
Along with the two mills comes over a half million acres of valuable and mature
plantation timberland close to their facilities. Federal Paper Board's Tait
facility in Scotland is an important supplier of uncoated free sheet in the
United Kingdom and will be a significant addition to International Paper's
existing product lines in Europe.
"We are pleased to welcome Jack Kennedy to our board," said Mr. Georges,
"and we are looking forward to having the Federal Paper Board employees become
part of the International Paper family."
International Paper, headquartered in Purchase, N.Y., is a worldwide
producer of printing papers, packaging and forest products. The company also
operates specialty businesses and a broadly based paper distribution network.
International Paper has manufacturing operations in 28 countries and exports its
products to more than 130 nations.
# # #
