<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
______________________________MANVILLE CORPORATION______________________________
(Name of Registrant as Specified in Its Charter)
______________________________MANVILLE CORPORATION______________________________
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/X/ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: Common
Stock, par value $.01 per share, of Riverwood International Corporation
held by Manville Corporation
________________________________________________________________________________
(2) Aggregate number of securities to which transaction applies: 53,399,558
shares of Common Stock, of Riverwood International Corporation held by
Manville Corporation
________________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): $20.25 per
share cash price
________________________________________________________________________________
(4) Proposed maximum aggregate value of transaction: $1,081,341,049.50
________________________________________________________________________________
(5) Total fee paid: $216,269.00
________________________________________________________________________________
/X/ Fee paid previously with preliminary materials.
/X/ Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: $216,269.00
________________________________________________________________________________
(2) Form, Schedule or Registration Statement No.: Schedule 14A
________________________________________________________________________________
(3) Filing Party: Manville Corporation
________________________________________________________________________________
(4) Date Filed: December 8, 1995
________________________________________________________________________________
<PAGE>
[LOGO]
MANVILLE CORPORATION
P. O. Box 5108
Denver, CO 80217-5108
(303) 978-2000
February 26, 1996
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders
(together with any postponement or adjournment thereof, the "Special Meeting")
of Manville Corporation ("Manville"), to be held on March 27, 1996 at 10:00
a.m., local time, at the Rihga Royal Hotel, 151 West 54th Street, New York, New
York. A Notice of the Special Meeting, a Proxy Statement containing information
about the matters to be acted upon at the Special Meeting and a proxy card are
enclosed.
At the Special Meeting, you will be asked to consider and vote upon (i) the
Profit Sharing Exchange Agreement, dated October 25, 1995 (the "Profit Sharing
Exchange Agreement"), between Manville and Manville Personal Injury Settlement
Trust (the "PI Trust") and the transactions contemplated thereby, including the
issuance by Manville to the PI Trust of newly issued shares (the "Conversion
Shares") of common stock, par value $.01 per share, of Manville (the "Common
Stock"), representing 20% of the outstanding Common Stock on a fully diluted
basis as of the date of issuance (assuming exercise of all then outstanding
options, warrants and other rights to acquire Common Stock and after giving
effect to such issuance) in exchange for the elimination of the PI Trust's right
to receive annually 20% of Manville's adjusted net earnings and the elimination
of the PI Trust's right to receive, under certain circumstances, a portion of
the proceeds from certain asset sales by Manville (such transaction being
referred to as the "Exchange"); (ii) the disposition by Manville of all of the
shares of common stock of Riverwood International Corporation ("Riverwood") held
by Manville as a result of the merger (the "Merger") of CDRO Acquisition
Corporation (the "Purchaser"), a wholly owned subsidiary of RIC Holding, Inc.,
formerly named CDRO Holding Corporation ("Parent"), with and into Riverwood,
pursuant to the Agreement and Plan of Merger, dated as of October 25, 1995, by
and among Riverwood, Parent and the Purchaser (the "Merger Agreement") (such
disposition of the Riverwood shares held by Manville in the Merger being
referred to as the "Riverwood Disposition"); and (iii) a proposed amendment to
Manville's Restated Certificate of Incorporation which would, following the
Merger, effect a change in the name of Manville to "Schuller Corporation" (the
"Proposed Amendment").
The accompanying Proxy Statement provides a detailed description of the
Profit Sharing Exchange Agreement and the transactions contemplated thereby,
including the proposed Exchange, the proposed Riverwood Disposition and the
Proposed Amendment, as well as certain financial and other information. You are
urged to read this material in its entirety and to consider it carefully. The
Board of Directors has fixed the close of business on February 1, 1996 as the
record date for determining the holders of Common Stock entitled to notice of,
and to vote at, the Special Meeting ("the Record Date"). Only holders of record
of Common Stock at the close of business on the Record Date are entitled to
notice of, and to vote at, the Special Meeting.
Pursuant to the terms of the Profit Sharing Exchange Agreement, the sale or
other disposition by Manville of all or a substantial portion of its investment
in Riverwood (a "Disposition") is a condition to consummation of the Exchange.
The Riverwood Disposition will constitute a Disposition. In addition, the Profit
Sharing Exchange Agreement contemplates that Manville will declare and pay, and
the Exchange will occur only following the declaration of, a dividend of the net
proceeds to Manville from a Disposition (after permitted discretionary
redemptions by Manville of certain debt and preferred stock of Manville), on a
PRO RATA basis to all holders of Common Stock, subject to certain conditions.
THERE CAN BE NO ASSURANCE, HOWEVER, THAT ANY DISPOSITION WILL OCCUR, THAT
MANVILLE WILL PAY ANY DIVIDEND PURSUANT TO THE PROFIT SHARING EXCHANGE AGREEMENT
OR OTHERWISE, OR THAT THE EXCHANGE WILL BE CONSUMMATED.
In the Merger, among other things, each share of common stock, par value
$.01 per share, of Riverwood (the "Riverwood Common Stock") would be converted
into the right to receive $20.25 per share in cash, without interest, or
approximately $1.08 billion in the aggregate for the approximately 81.3% of the
outstanding Riverwood Common Stock held by Manville as of February 1, 1996, the
<PAGE>
record date for the special meeting of Riverwood stockholders called to consider
and vote upon the Merger. Approval and adoption of the Merger Agreement requires
the affirmative vote of the holders of a majority of the outstanding shares of
Riverwood Common Stock entitled to vote thereon. Accordingly, such approval and
adoption would require the affirmative vote of Manville. Manville has agreed to
vote its shares of Riverwood Common Stock in favor of the Merger, subject to
certain conditions (including, among other things, approval of the Riverwood
Disposition by Manville stockholders), and has agreed to provide certain
indemnities to Parent and the Purchaser, pursuant to the Voting and
Indemnification Agreement, dated as of October 25, 1995, by and among Manville,
Parent and the Purchaser (the "Voting and Indemnification Agreement"). Manville
has also agreed to make certain tax payments, and to provide certain tax
indemnities to Parent and the Purchaser, pursuant to the Tax Matters Agreement,
dated as of October 25, 1995, by and among Manville, Riverwood, Parent and the
Purchaser.
The Board of Directors has received the opinion of J.P. Morgan Securities
Inc. ("J.P. Morgan") as to the fairness, from a financial point of view, of the
Exchange to the holders of Common Stock of Manville, exclusive of the PI Trust.
The full text of the opinion of J.P. Morgan relating to the Exchange, which is
dated October 25, 1995 and which sets forth the assumptions made, matters
considered and limits on review undertaken, is attached as Annex F to the
accompanying Proxy Statement. THE BOARD OF DIRECTORS, BY UNANIMOUS VOTE OF ALL
DIRECTORS PRESENT (OTHER THAN THE THREE DIRECTORS WHO ARE TRUSTEES OF THE PI
TRUST, WHO DID NOT VOTE), HAS APPROVED THE PROFIT SHARING EXCHANGE AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE EXCHANGE, HAS DETERMINED
THAT THE PROFIT SHARING EXCHANGE AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE EXCHANGE, ARE FAIR TO AND FOR THE BEST INTERESTS OF
MANVILLE AND ITS STOCKHOLDERS OTHER THAN THE PI TRUST AND RECOMMENDS THAT YOU
VOTE FOR APPROVAL OF THE PROFIT SHARING EXCHANGE AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE EXCHANGE.
The Board of Directors has received (i) the opinion of J.P. Morgan as to the
fairness, from a financial point of view, of the consideration to be received by
the holders of Riverwood Common Stock, including Manville, pursuant to the
Merger and (ii) the opinion of Goldman, Sachs & Co. ("Goldman Sachs") as to the
fairness of the consideration to be received by the holders of Riverwood Common
Stock, including Manville, pursuant to the Merger. The full text of the opinion
of each of J.P. Morgan and Goldman Sachs relating to the Merger, each of which
is dated October 25, 1995 and which sets forth the assumptions made, matters
considered and limits on review undertaken, is attached as Annex G and Annex H,
respectively, to the accompanying Proxy Statement. THE BOARD OF DIRECTORS, BY
UNANIMOUS VOTE OF ALL DIRECTORS PRESENT, HAS APPROVED THE RIVERWOOD DISPOSITION,
HAS DETERMINED THAT THE RIVERWOOD DISPOSITION IS EXPEDIENT, FAIR TO AND FOR THE
BEST INTERESTS OF MANVILLE AND ITS STOCKHOLDERS AND RECOMMENDS THAT YOU VOTE FOR
APPROVAL OF THE RIVERWOOD DISPOSITION.
Approval of the Profit Sharing Exchange Agreement and the transactions
contemplated thereby, including the Exchange, requires the affirmative vote of
the holders of a majority of the shares of Common Stock present at the Special
Meeting and entitled to vote thereon. Such approval will constitute stockholder
approval of the issuance of the Conversion Shares to the PI Trust pursuant to
the terms of the Profit Sharing Exchange Agreement. The PI Trust (which held
approximately 78% of the shares of Common Stock outstanding as of the Record
Date) has agreed, pursuant to the Profit Sharing Exchange Agreement, to vote its
shares of Common Stock in favor of the Profit Sharing Exchange Agreement and the
transactions contemplated thereby, including the Exchange. Therefore, sufficient
votes will be cast for approval of the Profit Sharing Exchange Agreement and the
transactions contemplated thereby, including the Exchange, to ensure their
approval at the Special Meeting without the vote of any stockholder other than
the PI Trust. Such agreement by the PI Trust to vote its shares of Common Stock
in favor of the Profit Sharing Exchange Agreement and the transactions
contemplated thereby, including the Exchange, does not constitute an agreement
by the PI Trust to vote in favor of, or otherwise consent to, the Riverwood
Disposition or any other Disposition. Giving effect to the Exchange, as of the
Record Date, the PI Trust would have held approximately 83% of the outstanding
shares of Common Stock, assuming no exercise of then outstanding options and
warrants (or approximately 79% of the fully diluted outstanding shares of Common
Stock, assuming exercise of all then outstanding options and warrants). The
Exchange will result in immediate and substantial dilution to stockholders other
than the PI Trust.
The Board of Directors has determined that it will proceed with the
Riverwood Disposition only upon, and Manville's obligation to vote its shares of
Riverwood Common Stock in favor of the Merger
2
<PAGE>
pursuant to the Voting and Indemnification Agreement is subject to, among other
things, approval of the Riverwood Disposition by the affirmative vote of the
holders of a majority of the outstanding shares of Common Stock entitled to vote
thereon. The PI Trust has not advised Manville as to how it intends to vote its
shares of Common Stock on the Riverwood Disposition or as to whether it intends
to grant the necessary consents or waivers. Furthermore, certain existing
agreements between Manville and the PI Trust prohibit Manville from effecting
the Riverwood Disposition without the prior consent or waiver of the PI Trust,
and the obligation of Manville to vote its shares of Riverwood Common Stock in
favor of the Merger pursuant to the Voting and Indemnification Agreement is
subject to, among other things, the receipt of such consents or waivers.
Approval of the Proposed Amendment requires the affirmative vote of the
holders of a majority of the outstanding shares of Common Stock entitled to vote
thereon. The Board may abandon the Proposed Amendment at any time prior to
filing the Certificate of Amendment with the Secretary of State of the State of
Delaware, whether or not the Proposed Amendment is approved at the Special
Meeting. The PI Trust has not advised Manville as to how it intends to vote its
shares of Common Stock on the Proposed Amendment. THE BOARD OF DIRECTORS HAS
UNANIMOUSLY APPROVED THE PROPOSED AMENDMENT, HAS DETERMINED THAT THE PROPOSED
AMENDMENT IS ADVISABLE AND RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE PROPOSED
AMENDMENT.
WE URGE YOU TO FILL IN, DATE AND SIGN THE ENCLOSED PROXY CARD AND PROMPTLY
RETURN IT IN THE ENCLOSED ENVELOPE SO THAT AS MANY SHARES AS POSSIBLE MAY BE
REPRESENTED AT THE SPECIAL MEETING. NO POSTAGE IS NEEDED IF THE PROXY CARD IS
MAILED IN THE UNITED STATES. PLEASE DO NOT SEND ANY STOCK CERTIFICATES WITH THE
ENCLOSED PROXY CARD.
If you plan to attend the Special Meeting, please check the appropriate box
on your proxy card. You may attend the Special Meeting whether or not you have
previously returned your proxy card.
Sincerely,
/s/ W.T. STEPHENS
W.T. STEPHENS
CHAIRMAN OF THE BOARD, PRESIDENT,
CHIEF EXECUTIVE OFFICER AND A DIRECTOR
3
<PAGE>
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Holders of Manville Corporation Common Stock:
A Special Meeting of Stockholders (together with any adjournment or
postponement thereof, the "Special Meeting") of Manville Corporation
("Manville") will be held on March 27, 1996 at 10:00 a.m., local time, at the
Rihga Royal Hotel, 151 West 54th Street, New York, New York for the following
purposes:
(i) To consider and vote upon the Profit Sharing Exchange Agreement,
dated October 25, 1995 (the "Profit Sharing Exchange Agreement"), between
Manville and Manville Personal Injury Settlement Trust (the "PI Trust") and
the transactions contemplated thereby, including the issuance by Manville to
the PI Trust of newly issued shares (the "Conversion Shares") of common
stock, par value $.01 per share, of Manville (the "Common Stock"),
representing 20% of the outstanding Common Stock on a fully diluted basis as
of the date of issuance (assuming exercise of all then outstanding options,
warrants and other rights to acquire Common Stock and after giving effect to
such issuance) in exchange for the elimination of the PI Trust's right to
receive annually 20% of Manville's adjusted net earnings and the elimination
of the PI Trust's right to receive, under certain circumstances, a portion
of the proceeds from certain asset sales by Manville (such transaction being
referred to as the "Exchange"). Approval of the Profit Sharing Exchange
Agreement and the transactions contemplated thereby constitutes approval of
the issuance of the Conversion Shares to the PI Trust pursuant to the terms
of the Profit Sharing Exchange Agreement.
(ii) To consider and vote upon the disposition by Manville of all of the
shares of common stock of Riverwood International Corporation ("Riverwood")
held by Manville as a result of the merger (the "Merger") of CDRO
Acquisition Corporation (the "Purchaser"), a wholly owned subsidiary of RIC
Holding, Inc., formerly named CDRO Holding Corporation ("Parent"), with and
into Riverwood, pursuant to the Agreement and Plan of Merger, dated as of
October 25, 1995, by and among Riverwood, Parent and the Purchaser (the
"Merger Agreement") (such disposition of the Riverwood shares held by
Manville in the Merger being referred to as the "Riverwood Disposition").
(iii) To consider and vote upon a proposed amendment to Manville's
Restated Certificate of Incorporation which would, following the Merger,
effect a change in the name of Manville to "Schuller Corporation" (the
"Proposed Amendment").
(iv) To transact such other business as may properly come before the
Special Meeting.
The Board of Directors has fixed the close of business on February 1, 1996
as the record date for determining the holders of Common Stock entitled to
notice of, and to vote at, the Special Meeting (the "Record Date"). Only holders
of record of Common Stock at the close of business on the Record Date are
entitled to notice of, and to vote at, the Special Meeting.
Pursuant to the terms of the Profit Sharing Exchange Agreement, the sale or
other disposition by Manville of all or a substantial portion of its investment
in Riverwood (a "Disposition") is a condition to consummation of the Exchange.
The Riverwood Disposition will constitute a Disposition. In addition, the Profit
Sharing Exchange Agreement contemplates that Manville will declare and pay, and
the Exchange will occur only following the declaration of, a dividend of the net
proceeds to Manville from a Disposition (after permitted discretionary
redemptions by Manville of certain debt and preferred stock of Manville), on a
PRO RATA basis to all holders of Common Stock, subject to certain conditions.
THERE CAN BE NO ASSURANCE, HOWEVER, THAT ANY DISPOSITION WILL OCCUR, THAT
MANVILLE WILL PAY ANY DIVIDEND PURSUANT TO THE PROFIT SHARING EXCHANGE AGREEMENT
OR OTHERWISE, OR THAT THE EXCHANGE WILL BE CONSUMMATED.
In the Merger, among other things, each share of common stock, par value
$.01 per share, of Riverwood (the "Riverwood Common Stock") would be converted
into the right to receive $20.25 per share in cash, without interest, or
approximately $1.08 billion in the aggregate for the approximately 81.3% of the
outstanding Riverwood Common Stock held by Manville as of February 1, 1996, the
record date for the special meeting of Riverwood stockholders called to consider
and vote upon the Merger. Approval and adoption of the Merger Agreement requires
the affirmative vote of the holders of a majority of the outstanding shares of
Riverwood Common Stock entitled to vote thereon. Accordingly, such approval and
adoption would require the affirmative vote of Manville. Manville has agreed to
vote its shares of Riverwood Common Stock in favor of the Merger, subject to
certain conditions (including, among other things, approval of the Riverwood
Disposition by Manville stockholders), and has agreed to provide certain
indemnities to Parent and the Purchaser, pursuant to the Voting and
Indemnification Agreement, dated as of October 25, 1995, by and among Manville,
Parent and the Purchaser (the "Voting and Indemnification Agreement"). Manville
has also agreed to make certain
<PAGE>
tax payments, and to provide certain tax indemnities to Parent and the
Purchaser, pursuant to the Tax Matters Agreement, dated as of October 25, 1995,
by and among Manville, Riverwood, Parent and the Purchaser.
Approval of the Profit Sharing Exchange Agreement and the transactions
contemplated thereby, including the Exchange, requires the affirmative vote of
the holders of a majority of the shares of the Common Stock present at the
Special Meeting and entitled to vote thereon. The PI Trust (which held
approximately 78% of the shares of Common Stock outstanding as of the Record
Date) has agreed, pursuant to the Profit Sharing Exchange Agreement, to vote its
shares of Common Stock in favor of the Profit Sharing Exchange Agreement and the
transactions contemplated thereby, including the Exchange. Therefore, sufficient
votes will be cast for approval of the Profit Sharing Exchange Agreement and the
transactions contemplated thereby, including the Exchange, to ensure their
approval at the Special Meeting without the vote of any stockholder other than
the PI Trust. Such agreement by the PI Trust to vote its shares of Common Stock
in favor of the Profit Sharing Exchange Agreement and the transactions
contemplated thereby, including the Exchange, does not constitute an agreement
by the PI Trust to vote in favor of, or otherwise consent to, the Riverwood
Disposition or any other Disposition. Giving effect to the Exchange, as of the
Record Date, the PI Trust would have held approximately 83% of the outstanding
shares of Common Stock, assuming no exercise of outstanding options and warrants
(or approximately 79% of the fully diluted outstanding shares of Common Stock,
assuming exercise of all outstanding options and warrants). The Exchange will
result in immediate and substantial dilution to stockholders other than the PI
Trust.
The Board of Directors has determined that it will proceed with the
Riverwood Disposition only upon, and Manville's obligation to vote its shares of
Riverwood Common Stock in favor of the Merger pursuant to the Voting and
Indemnification Agreement is subject to, among other things, approval of the
Riverwood Disposition by the affirmative vote of the holders of a majority of
the outstanding shares of Common Stock entitled to vote thereon. The PI Trust
has not advised Manville as to how it intends to vote its shares of Common Stock
on the Riverwood Disposition or as to whether it intends to grant the necessary
consents or waivers. Furthermore, certain existing agreements between Manville
and the PI Trust prohibit Manville from effecting the Riverwood Disposition
without the prior consent or waiver of the PI Trust, and the obligation of
Manville to vote its shares of Riverwood Common Stock in favor of the Merger
pursuant to the Voting and Indemnification Agreement is subject to, among other
things, the receipt of such consents or waivers.
Approval of the Proposed Amendment requires the affirmative vote of the
holders of a majority of the outstanding shares of Common Stock entitled to vote
thereon. The Board may abandon the Proposed Amendment at any time prior to
filing the Certificate of Amendment with the Secretary of State of the State of
Delaware, whether or not the Proposed Amendment is approved at the Special
Meeting. The PI Trust has not advised Manville as to how it intends to vote its
shares of Common Stock on the Proposed Amendment.
This Notice, the accompanying Proxy Statement and the enclosed proxy card
are sent to you by order of the Board of Directors. If you plan to attend the
Special Meeting, please check the appropriate box on your proxy card. You may
attend the Special Meeting whether or not you have previously returned your
proxy card.
February 26, 1996
Richard B. Von Wald
SENIOR VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
Manville Corporation
P.O. Box 5108
Denver, CO 80217-5108
------------------------
IT IS IMPORTANT THAT STOCKHOLDERS, WHETHER OR NOT THEY EXPECT TO
ATTEND THE SPECIAL MEETING, FILL IN, DATE AND SIGN THE ENCLOSED
PROXY CARD AND PROMPTLY RETURN IT IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS NEEDED IF THE PROXY CARD IS MAILED IN THE UNITED
STATES. PLEASE DO NOT SEND ANY STOCK CERTIFICATES WITH THE
ENCLOSED PROXY CARD.
------------------------
2
<PAGE>
MANVILLE CORPORATION
P.O. BOX 5108
717 17TH STREET (80202)
DENVER, CO 80217-5108
------------------------
PROXY STATEMENT
------------------------
INTRODUCTION
This Proxy Statement is being furnished to stockholders of Manville
Corporation, a Delaware corporation ("Manville" or the "Company"), in connection
with the solicitation of proxies by the Board of Directors of Manville (the
"Board") from the holders of shares of common stock, par value $.01 per share,
of Manville (the "Common Stock") for use at a Special Meeting of Stockholders of
Manville to be held on March 27, 1996 at 10:00 a.m., local time, at the Rihga
Royal Hotel, 151 West 54th Street, New York, New York and at any adjournment or
postponement thereof (the "Special Meeting"). This Proxy Statement and the
enclosed proxy card are first being mailed to holders of Common Stock on or
about February 27, 1996.
At the Special Meeting, holders of Common Stock will be asked to consider
and vote upon (i) the Profit Sharing Exchange Agreement, dated October 25, 1995
(the "Profit Sharing Exchange Agreement"), between Manville and Manville
Personal Injury Settlement Trust (the "PI Trust") and the transactions
contemplated thereby, including the issuance by Manville to the PI Trust of
newly issued shares (the "Conversion Shares") of Common Stock, representing 20%
of the outstanding Common Stock on a fully diluted basis as of the date of
issuance (assuming exercise of all then outstanding options, warrants and other
rights to acquire Common Stock and after giving effect to such issuance) in
exchange for the elimination of the PI Trust's right to receive annually 20% of
Manville's adjusted net earnings and the elimination of the PI Trust's right to
receive, under certain circumstances, a portion of the proceeds from certain
asset sales by Manville (such transaction being referred to as the "Exchange");
(ii) the disposition by Manville of all of the shares of common stock of
Riverwood International Corporation, a Delaware corporation ("Riverwood"), held
by Manville as a result of the merger (the "Merger") of CDRO Acquisition
Corporation (the "Purchaser"), a Delaware corporation and a wholly owned
subsidiary of RIC Holding, Inc., formerly named CDRO Holding Corporation
("Parent"), a Delaware corporation, with and into Riverwood, pursuant to the
Agreement and Plan of Merger, dated as of October 25, 1995, by and among
Riverwood, Parent and the Purchaser (the "Merger Agreement") (such disposition
of the Riverwood shares held by Manville in the Merger being referred to as the
"Riverwood Disposition"); and (iii) a proposed amendment to Manville's Restated
Certificate of Incorporation which would, following the Merger, effect a change
in the name of Manville to "Schuller Corporation" (the "Proposed Amendment").
Only holders of record of Common Stock at the close of business on February
1, 1996 (the "Record Date"), are entitled to notice of, and to vote at, the
Special Meeting. At the close of business on that date, 122,809,383 shares of
Common Stock were outstanding, which constituted the only outstanding class of
voting securities of the Company.
Pursuant to the terms of the Profit Sharing Exchange Agreement, the sale or
other disposition by Manville of all or a substantial portion of its investment
in Riverwood (a "Disposition") is a condition to consummation of the Exchange.
The Riverwood Disposition will constitute a Disposition. In addition, the Profit
Sharing Exchange Agreement contemplates that Manville will declare and pay, and
the Exchange will occur only following the declaration of, a dividend of the net
proceeds to Manville from a Disposition (after permitted discretionary
redemptions by Manville of certain debt and preferred stock of Manville), on a
PRO RATA basis to all holders of Common Stock, subject to certain conditions.
THERE CAN BE NO ASSURANCE, HOWEVER, THAT ANY DISPOSITION WILL OCCUR, THAT
MANVILLE WILL PAY ANY DIVIDEND PURSUANT TO THE PROFIT SHARING EXCHANGE AGREEMENT
OR OTHERWISE, OR THAT THE EXCHANGE WILL BE CONSUMMATED.
In the Merger, among other things, each share of common stock, par value
$.01 per share, of Riverwood (the "Riverwood Common Stock") would be converted
into the right to receive $20.25 per share in cash, without interest (the
"Merger Consideration"), or approximately $1.08 billion in the aggregate for the
approximately 81.3% of the outstanding Riverwood Common Stock held by Manville
as of February 1, 1996, the record date for the special meeting of Riverwood
stockholders called to consider and vote upon the Merger. See "THE RIVERWOOD
DISPOSITION -- The Merger Agreement."
THE DATE OF THIS PROXY STATEMENT IS FEBRUARY 26, 1996.
<PAGE>
Manville has agreed to vote its shares of Riverwood Common Stock in favor of
the Merger, subject to certain conditions (including, among other things,
approval of the Riverwood Disposition by Manville stockholders), and has agreed
to provide certain indemnities to Parent and the Purchaser, pursuant to the
Voting and Indemnification Agreement, dated as of October 25, 1995, by and among
Manville, Parent and the Purchaser (the "Voting and Indemnification Agreement").
See "THE RIVERWOOD DISPOSITION -- Voting and Indemnification Agreement."
Manville has also agreed to make certain tax payments, and to provide certain
tax indemnities to Parent and the Purchaser, pursuant to the Tax Matters
Agreement, dated as of October 25, 1995, by and among Manville, Riverwood,
Parent and the Purchaser (the "Tax Matters Agreement"). See "THE RIVERWOOD
DISPOSITION -- Tax Matters Agreement."
Riverwood will be the surviving corporation in the Merger (the "Surviving
Corporation") and will be a wholly owned subsidiary of Parent. Parent is a
wholly owned subsidiary of New River Holding, Inc., a Delaware corporation
("Holding"). Holding, Parent and the Purchaser are newly formed Delaware
corporations which were organized at the direction of Clayton, Dubilier & Rice,
Inc. in connection with the transactions contemplated by the Merger Agreement.
See "THE RIVERWOOD DISPOSITION -- Certain Information Concerning Holding, Parent
and the Purchaser." Parent has advised Manville that the day after the Merger,
Riverwood, as the Surviving Corporation, will be merged with and into Parent
(the "Subsequent Merger") with Parent to be the surviving corporation in the
Subsequent Merger. Parent has further advised Manville that New River Holding,
Inc. will change its name to "Riverwood Holding, Inc." following the Merger and
Riverwood International USA, Inc. ("RIUSA"), a wholly owned subsidiary of
Riverwood, will change its name to "Riverwood International Corporation"
following the Subsequent Merger.
The enclosed proxy provides that each stockholder of the Company may specify
that his or her shares of Common Stock be voted "for" or "against" approval of
the Profit Sharing Exchange Agreement and the transactions contemplated thereby,
including the Exchange, approval of the Riverwood Disposition and approval of
the Proposed Amendment, or that the designated proxy holders be directed to
abstain from voting with respect thereto. If properly executed and returned in
time for the Special Meeting, the enclosed proxy will be voted in accordance
with the choice specified. If a properly executed proxy is returned, but no
choice is specified, the shares of Common Stock will be voted FOR approval of
the Profit Sharing Exchange Agreement and the transactions contemplated thereby,
including the Exchange, FOR approval of the Riverwood Disposition and FOR
approval of the Proposed Amendment.
Any stockholder who executes and returns a proxy may revoke it at any time
before it is voted at the Special Meeting by (i) delivering to the Secretary of
the Company at the Company's principal offices before the Special Meeting an
instrument of revocation bearing a later date or time than the date or time of
the proxy being revoked; (ii) submitting a duly executed proxy bearing a later
date or time than the date or time of the proxy being revoked; or (iii) voting
in person at the Special Meeting. A stockholder's attendance at the Special
Meeting will not by itself revoke a proxy given by such stockholder. See "THE
SPECIAL MEETING -- Proxies." The Board knows of no additional matters that will
be presented for consideration at the Special Meeting. Execution of a proxy,
however, confers on the designated proxyholders discretionary authority to vote
the shares of Common Stock represented thereby in accordance with their best
judgment on such other business, if any, that may properly come before the
Special Meeting.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission" or "SEC"). Such reports,
proxy statements and other information can be inspected and copied at the public
reference facilities of the Commission at its principal office at Judiciary
Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at its
regional offices at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and at 7 World Trade Center, Suite 1300, New York, New
York 10048. Any interested party may obtain copies of such material at
prescribed rates from the Public Reference Section of the Commission at its
principal office at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549. In addition, the Common Stock is listed and traded on
the New York Stock Exchange, Inc. (the "NYSE"). Reports, proxy statements and
other information can also be inspected and copied at the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROXY STATEMENT INCORPORATES CERTAIN DOCUMENTS BY REFERENCE WHICH ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN EXHIBITS
TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED HEREIN BY
REFERENCE) ARE AVAILABLE TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM
THIS PROXY STATEMENT IS DELIVERED, WITHOUT CHARGE, ON WRITTEN OR ORAL REQUEST
DIRECTED TO MANVILLE CORPORATION C/O INVESTOR RELATIONS, P.O. BOX 5108, 717 17TH
STREET, DENVER, COLORADO 80217-5108, OR BY CALLING (303) 978-3882. IN ORDER TO
ENSURE TIMELY DELIVERY OF THE DOCUMENTS, REQUESTS SHOULD BE RECEIVED BY MARCH
20, 1996. COPIES OF DOCUMENTS SO REQUESTED WILL BE SENT BY FIRST CLASS MAIL,
POSTAGE PREPAID.
The following documents, previously filed with the Commission by Manville
(File No. 1-8247) pursuant to the Exchange Act, are hereby incorporated in this
Proxy Statement:
1. Manville's 1994 Annual Report to securityholders (the "1994 Annual
Report");
2. Manville's Annual Report on Form 10-K for the year ended December
31, 1994 (the "1994 Form 10-K");
3. Manville's Quarterly Report on Form 10-Q for the quarter ended March
31, 1995;
4. Manville's Quarterly Report on Form 10-Q for the quarter ended June
30, 1995;
5. Manville's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995 (the "Third Quarter 10-Q");
6. Manville Personal Injury Settlement Trust Agreement among
Johns-Manville Corporation et al., as Trustors and the persons listed
therein as Trustees of the PI Trust, dated November 28, 1988, filed as
Exhibit 10(a) to Manville's Annual Report on Form 10-K for the year ended
December 31, 1992 (the "1992 Form 10-K");
7. Second Amendment, dated as of November 15, 1990, to the Manville
Personal Injury Settlement Trust Agreement among Johns-Manville Corporation
et al., as Trustors, Donald M. Blinken et al., as Trustees of the PI Trust,
Exhibit C to the Master Agreement, dated as of November 15, 1990, between
Manville and the PI Trust, filed as Exhibit 1 to Manville's Current Report
on Form 8-K (File No. 1-8247) filed November 21, 1990;
8. Fourth Amendment, dated August 6, 1992, to the Manville Personal
Injury Settlement Trust Agreement among Johns-Manville Corporation et al.,
as Trustors, Donald M. Blinken et al., as Former Trustees, and Christian E.
Markey, Jr., as Trustee of the PI Trust, filed as Exhibit 10(c) to the 1992
Form 10-K;
9. Fifth Amendment, dated December 9, 1992, to the Manville Personal
Injury Settlement Trust Agreement among Johns-Manville Corporation et al.,
as Trustors, Donald M. Blinken et al., as Former Trustees, and Christian E.
Markey, Jr., as Trustee of the PI Trust, filed as Exhibit 10(d) to the 1992
Form 10-K;
10. Sixth Amendment, dated as of November 5, 1993, to the Manville
Personal Injury Settlement Trust Agreement among Johns-Manville Corporation
et al., as Trustors, Donald M. Blinken et al., as Former Trustees, and
Christian E. Markey, Jr., as Trustee of the PI Trust, filed as Exhibit
10(ab) to the 1994 Form 10-K;
11. Seventh Amendment, dated as of September 22, 1994, to the Manville
Personal Injury Settlement Trust Agreement among Johns-Manville Corporation
et al., as Trustors, Donald M. Blinken et al., as Former Trustees, and
Christian E. Markey, Jr., as Trustee of the PI Trust, filed as Exhibit 10(e)
to Manville's Quarterly Report on Form 10-Q for the quarter ended September
30, 1994;
12. Eighth Amendment, dated as of August 15, 1995, to the Manville
Personal Injury Settlement Trust Agreement among Johns-Manville Corporation
et al., as Trustors, Donald M. Blinken et al., as Former Trustees, and
Christian E. Markey, Jr., as Trustee of the PI Trust, filed as Exhibit 10(a)
to Manville's Quarterly Report on Form 10-Q for the quarter ended September
30, 1995;
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13. Tenth Amendment, dated as of November 21, 1995, to the Manville
Personal Injury Settlement Trust Agreement among Johns-Manville Corporation
et al., as Trustors, Donald M. Blinken et al., as Former Trustees, and
Christian E. Markey, Jr., as Trustee of the PI Trust, filed as Exhibit 10.1
to Manville's Current Report on Form 8-K filed December 7, 1995;
14. Amended and Restated Supplemental Agreement between Manville and the
PI Trust, dated as of November 15, 1990, filed as Exhibit 2 to Manville's
Current Report on Form 8-K (File No. 1-8247) filed November 21, 1990;
15. First Amendment to the Amended and Restated Supplemental Agreement
between Manville and the PI Trust, dated as of August 25, 1993, filed as
Exhibit 10.1 to Manville's Current Report on Form 8-K filed September 2,
1993;
16. Second Amendment to the Amended and Restated Supplemental Agreement
between Manville and the PI Trust, dated as of September 22, 1994, filed as
Exhibit 10(w) to the 1994 Form 10-K;
17. Manville's Registration Statement on Form 8-A (File No. 00108247)
filed September 23, 1988, and Amendment 1 thereto, filed October 3, 1988,
together with the description of Manville's Common Stock set forth in the
First Amended Disclosure Statement, filed on September 15, 1988, as part of
Exhibit T3E(1) to Manville's Application on Form T-3 (File No. 22-18809)
under the Trust Indenture Act of 1939; and
18. Manville's Current Report on Form 8-K filed November 1, 1995.
The following documents, previously filed with the Commission by Riverwood
(File No. 1-11113) pursuant to the Exchange Act, are hereby incorporated in this
Proxy Statement:
1. Riverwood's 1994 Annual Report to securityholders ("Riverwood's 1994
Annual Report");
2. Riverwood's Annual Report on Form 10-K for the year ended December
31, 1994;
3. Riverwood's Quarterly Report on Form 10-Q for the quarter ended
April 1, 1995;
4. Riverwood's Quarterly Report on Form 10-Q for the quarter ended July
1, 1995;
5. Riverwood's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995;
6. Riverwood's Current Report on Form 8-K filed November 1, 1995; and
7. Riverwood's Proxy Statement dated February 26, 1996 (the "Riverwood
Proxy Statement").
All documents filed by Manville pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Proxy Statement and prior to
the date of the Special Meeting shall be deemed to be incorporated by reference
in this Proxy Statement and to be a part hereof from the respective dates of
filing of such documents. Any statement contained herein or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Proxy Statement to the extent
that a statement contained in any subsequently filed document which also is or
is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Proxy
Statement.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED, OR INCORPORATED BY REFERENCE, IN
THIS PROXY STATEMENT IN CONNECTION WITH THE SOLICITATION OF PROXIES MADE HEREBY,
AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS SHOULD NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OTHER PERSON. ALL
INFORMATION CONTAINED IN THIS PROXY STATEMENT RELATING TO THE COMPANY HAS BEEN
SUPPLIED BY THE COMPANY, ALL INFORMATION CONTAINED IN THIS PROXY STATEMENT
RELATING TO HOLDING, PARENT, THE PURCHASER, EACH OF THEIR AFFILIATES, THE
FINANCING (AS DEFINED BELOW) AND THE PLANS FOR THE SURVIVING CORPORATION
FOLLOWING THE MERGER HAS BEEN SUPPLIED BY PARENT AND ALL INFORMATION CONTAINED
IN THIS PROXY STATEMENT RELATING TO RIVERWOOD HAS BEEN SUPPLIED BY RIVERWOOD.
THE DELIVERY OF THIS PROXY STATEMENT SHALL NOT, UNDER ANY CIRCUMSTANCES, CREATE
AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF MANVILLE,
HOLDING, PARENT, THE PURCHASER OR RIVERWOOD SINCE THE DATE HEREOF OR THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
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TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION..................................................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... 3
SUMMARY................................................................... 6
THE SPECIAL MEETING....................................................... 17
Date, Time and Place.................................................... 17
Purposes of the Special Meeting......................................... 17
Record Date, Voting Rights and Vote Required............................ 18
Proxies................................................................. 19
No Appraisal Rights..................................................... 20
THE EXCHANGE.............................................................. 20
General................................................................. 20
Recommendation of the Board; Reasons for the Exchange................... 22
Opinion of the Company's Financial Advisor.............................. 24
Profit Sharing Exchange Agreement....................................... 26
Accounting Treatment of the Exchange.................................... 31
Certain Federal Income Tax Consequences of the Dividend................. 31
Dilution................................................................ 34
Certain Approvals....................................................... 34
Certain Financial Considerations........................................ 34
THE RIVERWOOD DISPOSITION................................................. 36
General................................................................. 36
Background of the Riverwood Disposition................................. 36
Recommendation of the Board; Reasons for the Riverwood Disposition...... 44
Financial Advisors; Fairness Opinions................................... 47
Interests of Certain Persons in the Merger; Potential Conflicts
of Interest............................................................ 52
Certain Federal Income Tax Consequences to Manville of the Riverwood
Disposition............................................................ 58
Accounting Treatment of the Riverwood Disposition....................... 59
Certain Approvals....................................................... 59
The Merger Agreement.................................................... 60
Voting and Indemnification Agreement.................................... 71
Tax Matters Agreement................................................... 73
Certain Information Concerning Riverwood................................ 73
Certain Information Concerning CDR Fund V and CDR....................... 74
Certain Information Concerning Holding, Parent and the Purchaser........ 75
Certain Financial Considerations........................................ 79
Certain Projections..................................................... 80
Certain Events.......................................................... 83
Source and Amount of Funds.............................................. 83
AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION........................ 92
Name Change............................................................. 92
Reasons for the Proposed Amendment...................................... 92
Certain Effects of the Proposed Amendment............................... 92
Recommendation of the Board............................................. 92
SELECTED CONSOLIDATED FINANCIAL INFORMATION............................... 93
Manville Selected Consolidated Financial Data........................... 93
Riverwood Selected Consolidated Financial Data.......................... 95
MANVILLE CORPORATION UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
INFORMATION.............................................................. 97
MARKET PRICES AND DIVIDENDS............................................... 106
Market Prices........................................................... 106
Dividends............................................................... 107
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............ 108
Security Ownership of Certain Beneficial Owners......................... 108
Security Ownership of Management........................................ 109
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON................... 110
OTHER BUSINESS............................................................ 112
INDEPENDENT AUDITORS...................................................... 112
STOCKHOLDER PROPOSALS FOR 1996 ANNUAL MEETING............................. 112
ANNEX A -- Profit Sharing Exchange Agreement
ANNEX B -- Merger Agreement
ANNEX C -- Voting and Indemnification Agreement
ANNEX D -- Tax Matters Agreement
ANNEX E -- Proposed Certificate of Amendment to Restated Certificate of
Incorporation
ANNEX F -- Opinion of J.P. Morgan Relating to Profit Sharing Exchange
ANNEX G -- Opinion of J.P. Morgan Relating to Merger
ANNEX H -- Opinion of Goldman Sachs Relating to Merger
</TABLE>
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SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN
THIS PROXY STATEMENT AND IS PRESENTED HEREIN SOLELY TO FURNISH LIMITED
INTRODUCTORY INFORMATION REGARDING THE PROFIT SHARING EXCHANGE AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE EXCHANGE, THE RIVERWOOD
DISPOSITION AND THE PROPOSED AMENDMENT. THIS SUMMARY IS NOT INTENDED TO BE
COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION
CONTAINED, OR INCORPORATED BY REFERENCE, IN THIS PROXY STATEMENT AND THE ANNEXES
HERETO, TO WHICH REFERENCE IS MADE FOR A COMPLETE STATEMENT OF THE MATTERS
DISCUSSED BELOW. STOCKHOLDERS ARE URGED TO READ THIS PROXY STATEMENT, INCLUDING
THE ANNEXES HERETO, AND THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE, IN THEIR
ENTIRETY AND TO CONSIDER THEM CAREFULLY. UNLESS OTHERWISE DEFINED HEREIN,
CAPITALIZED TERMS USED IN THIS SUMMARY HAVE THE RESPECTIVE MEANINGS ASCRIBED TO
THEM ELSEWHERE IN THIS PROXY STATEMENT.
THE COMPANY
Manville Corporation (the "Company" or "Manville"), a Delaware corporation,
is an international holding company with two principal subsidiaries, wholly
owned Schuller International Group, Inc. ("Schuller") and 81.3% owned Riverwood
International Corporation ("Riverwood"). Products sold by Schuller include
insulation for buildings and equipment, commercial and industrial roofing
systems, high-efficiency air filtration media, and fibers and nonwoven mats used
as reinforcements in building and industrial applications. Riverwood is an
international packaging and paper products company that produces and markets
coated unbleached kraft paperboard, packaging products, such as beverage
carriers and folding cartons, containerboard, such as kraft paper and
linerboard, corrugated containers, lumber and plywood. Riverwood also designs,
manufactures and installs proprietary packaging machines for its customers.
THE SPECIAL MEETING
DATE, TIME AND PLACE. The Special Meeting of Stockholders of the Company
will be held on March 27, 1996 at 10:00 a.m., local time, at the Rihga Royal
Hotel, 151 West 54th Street, New York, New York, and at any adjournment or
postponement thereof (the "Special Meeting").
PURPOSE. At the Special Meeting, holders of common stock, par value $.01
per share, of the Company (the "Common Stock") will be asked to consider and
vote upon (i) the Profit Sharing Exchange Agreement, dated October 25, 1995 (the
"Profit Sharing Exchange Agreement"), between Manville and Manville Personal
Injury Settlement Trust (the "PI Trust") and the transactions contemplated
thereby, including the issuance by Manville to the PI Trust of newly issued
shares (the "Conversion Shares") of Common Stock representing 20% of the
outstanding Common Stock on a fully diluted basis as of the date of issuance
(assuming exercise of all then outstanding options, warrants and other rights to
acquire Common Stock and after giving effect to such issuance) in exchange for
the elimination of the PI Trust's right to receive annually 20% of Manville's
adjusted net earnings and the elimination of the PI Trust's right to receive,
under certain circumstances, a portion of the proceeds from certain asset sales
by Manville (such transaction being referred to as the "Exchange"); (ii) the
disposition by Manville of all of the shares of common stock of Riverwood held
by Manville as a result of the merger (the "Merger") of CDRO Acquisition
Corporation (the "Purchaser"), a wholly owned subsidiary of RIC Holding, Inc.,
formerly named CDRO Holding Corporation ("Parent"), with and into Riverwood,
pursuant to the Agreement and Plan of Merger, dated as of October 25, 1995, by
and among Riverwood, Parent and the Purchaser (the "Merger Agreement") (such
disposition of the Riverwood shares held by Manville in the Merger being
referred to as the "Riverwood Disposition"); and (iii) a proposed amendment to
Manville's Restated Certificate of Incorporation which would, following the
Merger, effect a change in the name of Manville to "Schuller Corporation" (the
"Proposed Amendment"). See "THE SPECIAL MEETING -- Date, Time and Place" and
"THE SPECIAL MEETING -- Purposes of the Special Meeting."
RECORD DATE; STOCKHOLDERS ENTITLED TO VOTE. Only holders of record of
Common Stock outstanding at the close of business on February 1, 1996 (the
"Record Date"), are entitled to notice of, and to vote at, the Special Meeting.
At the close of business on the Record Date, 122,809,383 shares of
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<PAGE>
Common Stock were outstanding and were held by approximately 14,408 holders of
record. The Common Stock is the only outstanding class of voting securities of
the Company, and each share of Common Stock is entitled to one vote on each
matter to be acted upon or which may come before the Special Meeting. See "THE
SPECIAL MEETING -- Record Date, Voting Rights and Vote Required."
QUORUM; VOTE REQUIRED. The presence at the Special Meeting, either in
person or by proxy, of the holders of a majority of the shares of Common Stock
entitled to vote will constitute a quorum at the Special Meeting. Approval of
the Profit Sharing Exchange Agreement and the transactions contemplated thereby,
including the Exchange, requires the affirmative vote of the holders of a
majority of the shares of Common Stock present at the Special Meeting and
entitled to vote thereon. The Board has determined that it will proceed with the
Riverwood Disposition only upon, and Manville's obligation to vote its shares of
common stock, par value $.01 per share, of Riverwood (the "Riverwood Common
Stock") in favor of the Merger pursuant to the Voting and Indemnification
Agreement (as defined below) is subject to, among other things, approval of the
Riverwood Disposition by the affirmative vote of the holders of a majority of
the outstanding shares of Common Stock entitled to vote thereon. Approval of the
Proposed Amendment requires the affirmative vote of the holders of a majority of
the outstanding shares of Common Stock entitled to vote thereon. See "THE
SPECIAL MEETING -- Record Date, Voting Rights and Vote Required."
The PI Trust (which, as of the Record Date, owned 96,000,000 shares of
Common Stock, or approximately 78% of the outstanding shares of Common Stock),
has agreed, pursuant to the Profit Sharing Exchange Agreement, to vote for the
Profit Sharing Exchange Agreement and the transactions contemplated thereby,
including the Exchange. Therefore, sufficient votes will be cast for approval of
the Profit Sharing Exchange Agreement and the transactions contemplated thereby,
including the Exchange, to ensure that the Profit Sharing Exchange Agreement and
the transactions contemplated thereby, including the Exchange, will be approved
at the Special Meeting without the vote of any other stockholder. Such agreement
by the PI Trust to vote its shares of Common Stock in favor of the Profit
Sharing Exchange Agreement and the transactions contemplated thereby, including
the Exchange, does not constitute an agreement by the PI Trust to vote in favor
of, or otherwise consent to, the Riverwood Disposition or any other Disposition.
The PI Trust has not advised Manville as to how it intends to vote its shares of
Common Stock on the Riverwood Disposition or the Proposed Amendment or whether
it intends to grant the necessary consents or waivers with respect to the
Riverwood Disposition. However, the vote of the PI Trust for or against the
Riverwood Disposition or the Proposed Amendment will, without the vote of any
other stockholder, determine whether the Riverwood Disposition or the Proposed
Amendment receive the required vote of stockholders.
PROXIES. The enclosed proxy provides that each stockholder of the Company
may specify that such stockholder's shares of Common Stock be voted "for" or
"against" approval of the Profit Sharing Exchange Agreement and the transactions
contemplated thereby, including the Exchange, approval of the Riverwood
Disposition and approval of the Proposed Amendment, or that the designated proxy
holders be directed to abstain from voting with respect thereto. If properly
executed and returned in time for the Special Meeting, the enclosed proxy will
be voted in accordance with the choice specified. If a properly executed proxy
is returned, but no choice is specified, the shares of Common Stock will be
voted FOR approval of the Profit Sharing Exchange Agreement and the transactions
contemplated thereby, including the Exchange, FOR approval of the Riverwood
Disposition and FOR approval of the Proposed Amendment.
Any stockholder who executes and returns a proxy may revoke it at any time
before it is voted at the Special Meeting by (i) delivering to the Secretary of
the Company at the Company's principal offices before the Special Meeting an
instrument of revocation bearing a later date or time than the date or time of
the proxy being revoked; (ii) submitting a duly executed proxy bearing a later
date or time than the date or time of the proxy being revoked; or (iii) voting
in person at the Special Meeting. A stockholder's attendance at the Special
Meeting will not by itself revoke a proxy given by such stockholder. See "THE
SPECIAL MEETING -- Proxies."
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<PAGE>
NO APPRAISAL RIGHTS
Delaware law does not provide stockholders of the Company, whether or not
they object to or vote against approval of the Profit Sharing Exchange Agreement
and the transactions contemplated thereby, including the Exchange, the Riverwood
Disposition or the Proposed Amendment, with dissenters' rights of appraisal in
connection with any of the matters to be voted upon at the Special Meeting. See
"THE SPECIAL MEETING -- No Appraisal Rights."
THE EXCHANGE
GENERAL. Manville and the PI Trust have entered into the Profit Sharing
Exchange Agreement, dated October 25, 1995, pursuant to which, among other
things, Manville agreed to issue the Conversion Shares in the Exchange in
exchange for the elimination of the PI Trust's right to receive annually 20% of
Manville's adjusted net earnings and the elimination of the PI Trust's right to
receive, under certain circumstances, a portion of the proceeds from certain
asset sales by Manville. Pursuant to the terms of the Profit Sharing Exchange
Agreement, the sale or other disposition by Manville of all or a substantial
portion of its investment in Riverwood (a "Disposition") is a condition to
consummation of the Exchange. The Riverwood Disposition will constitute a
Disposition. In addition, the Profit Sharing Exchange Agreement contemplates
that Manville will declare and pay, and the Exchange will occur only following
the declaration of, a dividend of the net proceeds to Manville from a
Disposition (after permitted discretionary redemptions by Manville of certain
debt and preferred stock of Manville), on a PRO RATA basis to all holders of
Common Stock, subject to certain conditions (the "Dividend"). In addition, the
Profit Sharing Exchange Agreement contemplates that there will be amendments to
certain of the affirmative and negative covenants contained in the Amended and
Restated Supplemental Agreement between the PI Trust and Manville. See "THE
EXCHANGE -- Profit Sharing Exchange Agreement."
DILUTION. The Exchange will result in immediate and substantial dilution to
stockholders other than the PI Trust. As of the Record Date, the PI Trust held
approximately 78% of the outstanding shares of Common Stock or approximately 74%
of the outstanding shares of Common Stock on a fully diluted basis (assuming
exercise of all then outstanding options and warrants). Consummation of the
Exchange will result in a substantial increase in the percentage of the
outstanding Common Stock held by the PI Trust and a corresponding decrease in
the percentage of outstanding Common Stock held by other stockholders. Giving
effect to the Exchange, as of the Record Date, the PI Trust would have held
approximately 83% of the outstanding shares of Common Stock, assuming no
exercise of then outstanding options and warrants (or approximately 79% of the
fully diluted outstanding shares, assuming exercise of all then outstanding
options and warrants).
The net tangible book value of the Company at September 30, 1995 was $839.6
million, or $6.84 per share of Common Stock. After giving effect to the issuance
of the Conversion Shares in the Exchange, the pro forma net tangible book value
at September 30, 1995 would have been $983.9 million, or $6.33 per share. This
represents an immediate dilution of $0.51 per share to the holders of Common
Stock. Net tangible book value per share is equal to the Company's total
tangible assets less its total liabilities and preferred stock liquidation
preference, divided by the total number of outstanding shares of Common Stock.
The above calculation excludes 7,631,172 shares of Common Stock issuable upon
exercise of options and warrants outstanding as of September 30, 1995. See "THE
EXCHANGE -- Dilution."
CONDITIONS TO CLOSING OF THE EXCHANGE. The consummation of the Exchange is
contingent upon the satisfaction or waiver, if permissible, of a number of
conditions, including the declaration of the Dividend. See "THE EXCHANGE --
Profit Sharing Exchange Agreement."
RECOMMENDATION OF THE BOARD OF DIRECTORS. At a meeting held on October 25,
1995, the Board of Directors of Manville (the "Board"), by unanimous vote of all
directors present (other than the three directors who are trustees of the PI
Trust, who did not vote), approved the Profit Sharing Exchange Agreement and the
transactions contemplated thereby, including the Exchange, determined that the
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<PAGE>
Profit Sharing Exchange Agreement and the transactions contemplated thereby,
including the Exchange, are fair to and for the best interests of Manville and
its stockholders other than the PI Trust and determined to recommend to
stockholders that they vote for approval of the Profit Sharing Exchange
Agreement and the transactions contemplated thereby, including the Exchange. The
three directors who are trustees of the PI Trust did not participate at the
October 25th meeting in the Board's deliberations with respect to the Profit
Sharing Exchange Agreement and the transactions contemplated thereby. Approval
by Manville's stockholders of the Profit Sharing Exchange Agreement and the
transactions contemplated thereby, including the Exchange, will constitute
stockholder approval of the issuance of the Conversion Shares to the PI Trust
pursuant to the terms of the Profit Sharing Exchange Agreement, which approval
is required to be obtained under the rules of the New York Stock Exchange, Inc.
(the "NYSE"). See "THE EXCHANGE -- Recommendation of the Board; Reasons for the
Exchange." For a discussion of certain of the factors the Board considered in
arriving at its determination that the Profit Sharing Exchange Agreement and the
transactions contemplated thereby, including the Exchange, are fair to and for
the best interests of the Company and its stockholders other than the PI Trust
and its determination to recommend to stockholders that they approve the Profit
Sharing Exchange Agreement and the transactions contemplated thereby, including
the Exchange, see "THE EXCHANGE -- Recommendation of the Board; Reasons for the
Exchange."
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE PROFIT
SHARING EXCHANGE AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING
THE EXCHANGE.
OPINION OF FINANCIAL ADVISOR. The Company engaged J.P. Morgan Securities
Inc. ("J.P. Morgan") to act as its financial advisor with respect to the
Exchange. At the October 25, 1995 meeting of the Board at which the Profit
Sharing Exchange Agreement and transactions contemplated thereby, including the
Exchange, were approved by the Board, J.P. Morgan delivered its oral opinion
(which it subsequently confirmed in writing) as to the fairness, from a
financial point of view, of the Exchange to the holders of Common Stock of the
Company, exclusive of the PI Trust. The full text of the opinion of J.P. Morgan
relating to the Exchange, which is dated October 25, 1995 and which sets forth
the assumptions made, matters considered and limits on review undertaken, is
attached as Annex F hereto and is incorporated herein by reference. STOCKHOLDERS
ARE URGED TO READ THE OPINION OF J.P. MORGAN IN ITS ENTIRETY AND TO CONSIDER IT
CAREFULLY. For a discussion of certain of the factors that J.P. Morgan
considered in reaching its opinion, see "THE EXCHANGE -- Opinion of the
Company's Financial Advisor."
VOTE REQUIRED. Approval of the Profit Sharing Exchange Agreement and the
transactions contemplated thereby, including the Exchange, requires the
affirmative vote of the holders of a majority of the shares of Common Stock
present at the Special Meeting and entitled to vote thereon. Approval by
Manville's stockholders of the Profit Sharing Exchange Agreement and the
transactions contemplated thereby, including the Exchange, will constitute
stockholder approval of the issuance of the Conversion Shares to the PI Trust
pursuant to the terms of the Profit Sharing Exchange Agreement, which approval
is required to be obtained under the rules of the NYSE.
FEDERAL INCOME TAX CONSEQUENCES. For a discussion of certain federal income
tax consequences of the Exchange, including the Dividend, see "THE EXCHANGE --
Certain Federal Income Tax Consequences of the Dividend."
PROFIT SHARING EXCHANGE AGREEMENT. For a discussion of the material
provisions of the Profit Sharing Exchange Agreement, see "THE EXCHANGE -- Profit
Sharing Exchange Agreement."
THE RIVERWOOD DISPOSITION
GENERAL. At the Special Meeting, holders of Common Stock will be asked to
consider and vote upon the Riverwood Disposition, which would occur as a result
of the Merger of the Purchaser, a wholly owned subsidiary of Parent, with and
into Riverwood. The Merger would be effected pursuant to the terms of the Merger
Agreement. In the Merger, among other things, each share of Riverwood Common
Stock would be converted into the right to receive $20.25 per share in cash,
without interest (the "Merger Consideration"), or approximately $1.08 billion in
the aggregate for the approximately
9
<PAGE>
81.3% of the outstanding Riverwood Common Stock held by Manville as of February
1, 1996, the record date for the special meeting of Riverwood stockholders
called to consider and vote upon the Merger.
Riverwood will be the surviving corporation in the Merger (the "Surviving
Corporation") and will be a wholly owned subsidiary of Parent. Parent is a
wholly owned subsidiary of New River Holding, Inc., a Delaware corporation
("Holding"). Holding, Parent and the Purchaser are newly formed Delaware
corporations which were organized at the direction of Clayton, Dubilier & Rice,
Inc. in connection with the transactions contemplated by the Merger Agreement.
See "THE RIVERWOOD DISPOSITION -- Certain Information Concerning Holding, Parent
and the Purchaser." Parent has advised Manville that the day after the Merger,
Riverwood, as the Surviving Corporation, will be merged with and into Parent
(the "Subsequent Merger") with Parent to be the surviving corporation in the
Subsequent Merger. Parent has further advised Manville that New River Holding,
Inc. will change its name to "Riverwood Holding, Inc." following the Merger and
Riverwood International USA, Inc. ("RIUSA"), a wholly owned subsidiary of
Riverwood, will change its name to "Riverwood International Corporation"
following the Subsequent Merger.
VOTE REQUIRED. The Company believes that approval of the Riverwood
Disposition by the Company's stockholders is not required by applicable law or
the Company's Restated Certificate of Incorporation or By-laws. However, given
the significance of the Riverwood Disposition to the Company and its
stockholders, the Company has determined to solicit stockholder approval thereof
at the Special Meeting. If the Riverwood Disposition is not approved by the
affirmative vote of the holders of a majority of the outstanding shares entitled
to vote thereon, the Company will not vote in favor of the Merger, and the
Merger would therefore not be effected because the affirmative vote by Manville
of its shares of Riverwood Common Stock (representing approximately 81.3% of the
outstanding Riverwood Common Stock held by Manville as of February 1, 1996, the
record date for the special meeting of Riverwood stockholders called to consider
and vote upon the Merger) is necessary to approve and adopt the Merger Agreement
under applicable Delaware law. The Company currently intends, and the Voting and
Indemnification Agreement requires, that if the Riverwood Disposition is
approved by the Company's stockholders, and if the required consents of the PI
Trust are obtained and certain other conditions to the consummation of the
Exchange are satisfied, the Company would vote in favor of the Merger, and the
Merger would therefore receive the approval of the stockholders of Riverwood
required as a condition to the Merger. The PI Trust has not advised Manville as
to how it intends to vote its shares of Common Stock on the Riverwood
Disposition or as to whether it intends to grant the necessary consents or
waivers. Furthermore, certain existing agreements between Manville and the PI
Trust prohibit Manville from effecting the Riverwood Disposition without the
prior consent or waiver of the PI Trust, and the obligation of Manville to vote
its shares of Riverwood Common Stock in favor of the Merger pursuant to the
Voting and Indemnification Agreement is subject to, among other things, the
receipt of such consents or waivers. Whether or not the Riverwood Disposition is
approved at the Special Meeting, there can be no assurance that the other
conditions to the Merger will be satisfied or, where permissible, waived or that
the Merger will be consummated. See "THE RIVERWOOD DISPOSITION -- The Merger
Agreement; CONDITIONS TO CONSUMMATION OF THE MERGER."
The Merger Agreement may be amended from time to time, although Manville's
obligation to vote its shares of Riverwood Common Stock in favor of such amended
Merger Agreement is subject to Manville's consent to such amendment. Approval of
the Riverwood Disposition by the stockholders of Manville will provide the Board
with the authority to vote for effectuation of the Riverwood Disposition
pursuant to an amended Merger Agreement; PROVIDED that following approval of the
Riverwood Disposition by the stockholders of Manville, Manville will not
consent, without obtaining approval from Manville's stockholders, to any such
amendment if such amendment changes the Merger Consideration or alters or
changes any of the other terms or conditions of the Merger Agreement if such
alteration or change would materially adversely affect the rights of Manville's
stockholders.
If the Merger Agreement is terminated under certain circumstances,
including, among other circumstances, because Manville were not to vote its
shares of Riverwood Common Stock for approval
10
<PAGE>
and adoption of the Merger Agreement or because Manville's stockholders were not
to approve the Riverwood Disposition, Riverwood may be required to pay
significant fees and expenses to Parent. See "THE RIVERWOOD DISPOSITION -- The
Merger Agreement."
CONSEQUENCES IF APPROVAL NOT OBTAINED. If the Riverwood Disposition is not
approved by the affirmative vote of the holders of a majority of the outstanding
shares of Common Stock, Manville will not vote its shares of Riverwood Common
Stock in favor of the Merger. As a result, the Merger would not be effected
because the affirmative vote of a majority of outstanding Riverwood Common Stock
is necessary to approve and adopt the Merger Agreement under applicable Delaware
law and Manville held approximately 81.3% of the outstanding Riverwood Common
Stock as of February 1, 1996, the record date for the special meeting of
Riverwood stockholders called to consider and vote upon the Merger. In addition,
pursuant to the terms of the Profit Sharing Exchange Agreement, a Disposition is
a condition to consummation of the Exchange. If the Riverwood Disposition does
not occur, there is a substantial likelihood that this condition to the Profit
Sharing Exchange Agreement would not be met, and therefore the Exchange would
not occur and the Dividend would not be declared pursuant to the Profit Sharing
Exchange Agreement.
BACKGROUND. For a description of the events leading to approval of the
Riverwood Disposition by the Board, see "THE RIVERWOOD DISPOSITION -- Background
of the Riverwood Disposition."
RECOMMENDATION OF THE BOARD OF DIRECTORS. At a meeting held on October 25,
1995, the Board, by unanimous vote of all directors present, after considering
the Merger Agreement and the transactions contemplated thereby, determined that
the Riverwood Disposition is expedient, fair to and for the best interests of
the Company and its stockholders, and determined to recommend to stockholders
that they vote for approval of the Riverwood Disposition. For a discussion of
certain of the factors the Board considered in arriving at its determination
that the Riverwood Disposition is expedient, fair to and for the best interests
of the Company and its stockholders and its determination to recommend to
stockholders that they vote for approval of the Riverwood Disposition, see "THE
RIVERWOOD DISPOSITION -- Recommendation of the Board of Directors; Reasons for
the Riverwood Disposition."
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE RIVERWOOD
DISPOSITION.
OPINION OF FINANCIAL ADVISORS. The Company and Riverwood jointly engaged
J.P. Morgan and Goldman, Sachs & Co. ("Goldman Sachs") to act as financial
advisors to assist in a review of strategic alternatives with respect to
Riverwood. At a joint meeting of the Board of Directors of Riverwood (the
"Riverwood Board") and the Board held on October 25, 1995, J.P. Morgan delivered
its oral opinion (which it subsequently confirmed in writing) as to the fairness
of the Merger Consideration, from a financial point of view, to the stockholders
of Riverwood, including Manville. At the same meeting, Goldman Sachs delivered
its oral opinion to the Riverwood Board and the Board (which it subsequently
confirmed in writing) as to the fairness of the Merger Consideration to the
stockholders of Riverwood, including Manville. The full text of the opinion of
each of J.P. Morgan and Goldman Sachs relating to the Merger, each of which is
dated October 25, 1995 and which sets forth the assumptions made, matters
considered and limits on review undertaken, is attached as Annex G and Annex H,
respectively, hereto and is incorporated herein by reference. STOCKHOLDERS ARE
URGED TO READ THE OPINIONS OF J.P. MORGAN AND GOLDMAN SACHS IN THEIR ENTIRETY
AND TO CONSIDER THEM CAREFULLY. For a discussion of certain of the factors that
J.P. Morgan and Goldman Sachs considered in reaching their respective opinions,
see "THE RIVERWOOD DISPOSITION -- Financial Advisors; Fairness Opinions."
FEDERAL INCOME TAX CONSEQUENCES. For a description of certain federal
income tax consequences to Manville of the Riverwood Disposition, see "THE
RIVERWOOD DISPOSITION -- Certain Federal Income Tax Consequences to Manville of
the Riverwood Disposition."
THE MERGER AGREEMENT. For a discussion of the material provisions of the
Merger Agreement, see "THE RIVERWOOD DISPOSITION -- The Merger Agreement."
VOTING AND INDEMNIFICATION AGREEMENT. Manville, Parent and the Purchaser
have entered into a Voting and Indemnification Agreement, dated as of October
25, 1995 (the "Voting and Indemnification Agreement"), which provides that from
and after the satisfaction of certain conditions (see "THE
11
<PAGE>
RIVERWOOD DISPOSITION -- Voting and Indemnification Agreement"), Manville will
vote, or cause to be voted, all shares of Riverwood Common Stock it beneficially
owns in favor of approval and adoption of the Merger Agreement and approval of
the Merger and the other transactions contemplated by the Merger Agreement;
PROVIDED, HOWEVER, that Manville will not be required to so vote, or cause to be
so voted, its shares of Riverwood Common Stock if the Board determines in its
good faith, reasonable judgment, after consultation with its counsel, that so
voting such shares could reasonably be expected to constitute a breach of the
Board's fiduciary duties under applicable law.
The Voting and Indemnification Agreement also provides that, subject to
certain limitations, from and after the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware or such later time as is
specified in such certificate (the "Effective Time"), Manville will indemnify
Parent, the Purchaser and their respective officers, directors and employees
against certain losses, resulting from or arising out of any breach of or
inaccuracy in certain representations and warranties of Riverwood, as set forth
in the Merger Agreement. See "THE RIVERWOOD DISPOSITION -- Voting and
Indemnification Agreement."
TAX MATTERS AGREEMENT. Manville, Riverwood, Parent and the Purchaser have
entered into a Tax Matters Agreement, dated as of October 25, 1995 (the "Tax
Matters Agreement"), pursuant to which, among other things, Manville and Parent
will take such actions as may be required (including making such elections under
Section 338(h)(10) of the Internal Revenue Code of 1986, as amended, and
corresponding provisions of state law) to treat the Merger as a taxable sale of
the assets of Riverwood and certain of its subsidiaries. Manville will include
the income of Riverwood and its domestic subsidiaries in its consolidated
federal and combined state income tax returns for all pre-closing tax periods of
Riverwood and its subsidiaries, including the taxable period that ends at the
Effective Time, and will bear the burden of any consolidated federal and
combined state income taxes associated with the gain on the deemed sale as
reflected in such returns. Parent and the Surviving Corporation will bear the
burden of any stand-alone state income taxes associated with the gain on the
deemed sale. The Tax Matters Agreement also provides that Manville will
indemnify the Surviving Corporation for income taxes for pre-closing tax periods
and income tax-related liabilities arising as a result of Riverwood's status,
prior to the Effective Time, as a member of Manville's combined or consolidated
group for federal or state tax purposes. See "THE RIVERWOOD DISPOSITION -- Tax
Matters Agreement."
AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION
GENERAL. The Proposed Amendment provides that the name of the Company will
be changed to "Schuller Corporation." The Board has unanimously approved the
Proposed Amendment in the form set forth in the Certificate of Amendment (the
"Certificate of Amendment") to the Company's Restated Certificate of
Incorporation attached as Annex E hereto. Subject to authorization by
stockholders, the Company intends that the Certificate of Amendment will be
filed with the Secretary of State of the State of Delaware and become effective
promptly following the Effective Time, PROVIDED that the Board may abandon the
Proposed Amendment at any time prior to filing, whether or not the Proposed
Amendment is approved at the Special Meeting.
RECOMMENDATION OF THE BOARD OF DIRECTORS. The Board has unanimously
approved the Proposed Amendment, has determined that the Proposed Amendment is
advisable and has determined to recommend to stockholders that they vote for
approval of the Proposed Amendment. See "AMENDMENT TO RESTATED CERTIFICATE OF
INCORPORATION -- Recommendation of the Board" and "AMENDMENT TO RESTATED
CERTIFICATE OF INCORPORATION -- Reasons for the Proposed Amendment."
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSED AMENDMENT.
VOTE REQUIRED. Approval of the Proposed Amendment requires the affirmative
vote of the holders of a majority of the outstanding shares of Common Stock
entitled to vote thereon.
12
<PAGE>
MARKET PRICES AND DIVIDENDS
MARKET PRICES. The principal market on which the Common Stock is traded is
the NYSE under the ticker symbol "MVL." The Common Stock began public trading
under such symbol on the NYSE on November 2, 1981. On February 23, 1996, the
last trading day before the printing of this Proxy Statement, the high and low
sales prices of the Common Stock were $13 and $12 3/4, respectively. On October
25, 1995, the last trading day before the public announcement of the execution
of the Profit Sharing Exchange Agreement and the execution of the Merger
Agreement by Riverwood, the high and low sales prices of the Common Stock were
$12 3/8 and $12 1/8, respectively. On April 13, 1995, the last trading day
before the public announcement that Manville was considering strategic
alternatives that may be available with respect to its investment in Riverwood,
the high and low sales prices of the Common Stock were $11 3/8 and $10 1/2,
respectively. For information relating to market prices of the Common Stock
during the current year and the past two years, see "MARKET PRICES AND DIVIDENDS
- -- Market Prices." STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION
FOR THE COMMON STOCK.
The principal market on which the Riverwood Common Stock is traded is the
NYSE under the ticker symbol "RVW." The Riverwood Common Stock began public
trading on the NYSE on June 17, 1992. On February 23, 1996, the last trading day
before the printing of this Proxy Statement, the high and low sales prices of
the Riverwood Common Stock were $19 7/8 and $19 3/4, respectively. On October
25, 1995, the last trading day before the public announcement of the execution
of the Merger Agreement, the high and low sales prices of the Riverwood Common
Stock were $20 and $19 1/4, respectively. On April 13, 1995, the last trading
day before the public announcement that Riverwood was considering strategic
alternatives that may be available to it and for the best interests of its
stockholders, the high and low sales prices of the Riverwood Common Stock were
$20 5/8 and $20 1/8, respectively. The highest price at which Riverwood Common
Stock has ever traded is $26 1/4, on September 8, 1995. For information relating
to market prices of the Riverwood Common Stock during the current year and the
past two years, see "MARKET PRICES AND DIVIDENDS -- Market Prices." STOCKHOLDERS
ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE RIVERWOOD COMMON STOCK.
DIVIDENDS. Manville has not declared a dividend on the Common Stock in
fiscal year 1995, nor did it declare a dividend on the Common Stock in fiscal
year 1994. Manville did declare a dividend of $1.04 per share of Common Stock on
June 30, 1993. If a Disposition, such as the Riverwood Disposition, is
consummated, then, pursuant to the terms of the Profit Sharing Exchange
Agreement and subject to certain conditions set forth therein, Manville will be
obligated to declare and pay a dividend of the net proceeds to Manville from a
Disposition (after permitted discretionary redemptions by Manville of certain
debt and preferred stock of Manville), on a PRO RATA basis to all holders of
Common Stock, subject to certain conditions. See "THE EXCHANGE -- Profit Sharing
Exchange Agreement" and "MARKET PRICES AND DIVIDENDS -- Dividends."
Riverwood paid a dividend of $.04 per share of Riverwood Common Stock for
each fiscal quarter of 1995 and 1994. Riverwood has agreed in the Merger
Agreement, subject to certain exceptions, that it will not declare, set aside,
or pay any dividend (other than regular quarterly dividends consistent with past
practice and in no event exceeding $.04 per share per quarter) or other
distributions payable in cash, stock or property with respect to the Riverwood
Common Stock. See "THE RIVERWOOD DISPOSITION -- The Merger Agreement; CONDUCT OF
BUSINESS PENDING THE CLOSING." For a description of certain other restrictions
on payments of dividends by Riverwood, see Note 10 of Notes to Consolidated
Financial Statements of Riverwood contained in the Riverwood Proxy Statement
incorporated herein by reference. In each of fiscal 1994 and fiscal 1995,
Manville, as a stockholder, received $8.5 million as a result of the payment of
PRO RATA dividends on the Riverwood Common Stock. See "MARKET PRICES AND
DIVIDENDS -- Dividends."
13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
MANVILLE SELECTED CONSOLIDATED FINANCIAL DATA. The following table sets
forth selected consolidated financial data of Manville and its subsidiaries for
each of the five fiscal years ended December 31, 1990 through 1994 and the nine
months ended September 30, 1995 and 1994. The year-end data have been derived
from, should be read in conjunction with, and are qualified in their entirety
by, the audited consolidated financial statements of Manville, including the
notes thereto, incorporated herein by reference. The quarterly data have been
derived from, should be read in conjunction with, and are qualified in their
entirety by, the unaudited quarterly consolidated financial statements of the
Company, including the notes thereto, incorporated herein by reference. See
"AVAILABLE INFORMATION," "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and
"SELECTED CONSOLIDATED FINANCIAL INFORMATION."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30 YEAR ENDED DECEMBER 31
---------------------- ----------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
INCOME (LOSS)
Net Sales (Note A)................. $2,067,206 $1,850,925 $2,560,343 $2,278,204 $2,205,664 $2,011,276 $2,133,271
Income from Operations (Note A).... 266,385 209,666 296,486 135,948 202,216 70,817 227,805
Income (Loss) before Extraordinary
Item and Cumulative Effect of
Accounting Changes................ 146,440 57,029 65,416 60,772 47,465 (12,697) 110,718
Net Income (Notes B, C, D and E)... 146,440 22,322 36,996 47,782 35,949 34,700 110,718
FINANCIAL POSITION
Total Assets....................... $4,025,160 $3,756,063 $3,799,611 $3,620,307 $3,630,363 $3,002,545 $2,795,916
Long-Term Debt, less current
portion........................... 1,452,883 1,481,745 1,423,995 1,390,988 1,191,061 822,632 870,289
Stockholders' Equity (Note B)...... 1,205,289 1,044,640 1,063,471 846,069 825,293 779,515 1,140,615
ADDITIONAL DATA
Additions to Property, Plant and
Equipment......................... $ 199,154 $ 237,459 $ 323,055 $ 351,494 $ 411,087 $ 179,407 $ 344,464
Research, Development and
Engineering (Note A).............. 29,709 29,115 39,094 36,743 33,873 35,988 40,791
PRIMARY EARNINGS (LOSS) PER COMMON
SHARE (NOTE F)
Income (Loss) before Extraordinary
Item and Cumulative Effect of
Accounting Changes................ $ 1.03 $ .31 $ .33 $ .31 $ .22 $ (.24) $ .79
Net Income (Notes B, C, D and E)... 1.03 .03 .10 .21 .13 .15 .79
FULLY DILUTED EARNINGS (LOSS) PER
COMMON SHARE (NOTE F)
Income (Loss) before Extraordinary
Item and Cumulative Effect of
Accounting Changes................ $ 1.01 $ .31 $ .33 $ .31 $ .22 $ (.24) $ .79
Net Income (Notes B, C, D and E)... 1.01 .03 .10 .21 .13 .15 .79
CASH DIVIDENDS PER COMMON SHARE.... -- -- -- $ 1.04 $ 1.04 -- --
</TABLE>
- ------------------------------
Notes:
(A) Excludes the operating results of Celite Corporation, which was sold in
1991. Accordingly, the operating results of the discontinued operations have
been excluded from the determination of income from continuing operations
for all periods presented. Income (loss) from continuing operations includes
interest income, interest expense, profit sharing expense and related income
taxes.
(B) In September 1993, Manville purchased an additional 3,448,276 shares of
Riverwood Common Stock, increasing Manville's ownership percentage to
approximately 81.5 percent from 80.5 percent. On June 24, 1992, Riverwood
completed an initial public offering of 12.1 million shares, or 19.5 percent
of Riverwood Common Stock. As a result of these transactions, the Company's
September 30, 1995 and 1994 and December 31, 1994, 1993 and 1992
Consolidated Balance Sheets reflect the minority stockholders' interest in
Riverwood's net assets of $104.9 million, $96.3 million, $95.6 million,
$92.4 million and
14
<PAGE>
$93.1 million, respectively. The Company's September 30, 1995 and 1994 and
December 31, 1994, 1993 and 1992 Consolidated Statements of Income reflect
the minority stockholders' interest in Riverwood's net earnings of $8.3
million, $2.6 million, $0.4 million, $0.3 million and $3.1 million,
respectively.
(C) In the third and fourth quarters of 1994, the Company completed two debt
refinancings that resulted in an aggregate extraordinary loss on early
extinguishments of debt of $28.4 million, net of related income taxes of $13
million. During the third quarter of 1993, the Company made a prepayment on
its outstanding bond obligations to the PI Trust. An extraordinary gain of
$0.9 million, net of related income taxes of $0.5 million, was recorded in
August 1993 to adjust the estimated extraordinary loss recorded in 1992. In
1992, the Company recorded an estimated extraordinary loss of $11.5 million,
net of related income taxes of $5.9 million, in anticipation of this
prepayment.
(D) Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits." As a result, the Company recorded a charge in 1993 of $13.9
million, net of taxes of $8.6 million, or $0.11 per common share, against
net income to reflect the accumulated postemployment benefit obligation.
(E) Effective January 1, 1991, the Company changed its method of accounting for
employee postretirement benefits other than pensions to comply with the
provisions of Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions." As
a result, the Company recorded a charge against net income in 1991 of $173.4
million, net of tax of $91.4 million, or $1.44 per common share, to reflect
the cumulative effect on prior years of the accounting change. In accordance
with the provisions of that statement, postretirement benefit information
for prior periods has not been restated. Previously, retiree medical and
life insurance benefits were expensed as incurred. Also effective January 1,
1991, the Company changed its method of accounting for income taxes to
comply with the provisions of Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes." As a result, the Company recorded a
credit in 1991 of $220.8 million, or $1.83 per common share, to net income
to reflect the cumulative effect on prior years of the accounting change.
Financial statements presented for 1990 reflect income taxes using the
method required at that time by Statement of Financial Accounting Standards
No. 96, "Accounting for Income Taxes."
(F) Primary and fully diluted earnings (loss) per common share amounts are based
on the weighted average number of common and common equivalent shares
outstanding during each year assuming the conversion of the Series A
Convertible Preferred Stock, which was converted in 1992. All earnings
(loss) per share amounts presented in the above table were calculated after
the deduction for preference stock dividends/accretion.
15
<PAGE>
RIVERWOOD SELECTED CONSOLIDATED FINANCIAL DATA. The following table sets
forth selected consolidated financial data of Riverwood and its subsidiaries for
each of the five fiscal years ended December 31, 1991 through 1995. The year-end
data have been derived from, should be read in conjunction with, and are
qualified in their entirety by, the audited consolidated financial statements of
Riverwood, including the notes thereto, incorporated herein by reference. See
"AVAILABLE INFORMATION," "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and
"SELECTED CONSOLIDATED FINANCIAL INFORMATION."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
INCOME
Net Sales............................................. $1,342,304 $1,282,788 $1,120,366 $1,118,227 $ 993,210 $ 887,029
Income from Operations (Note A)....................... 133,137 154,187 83,497 146,092 127,630 145,962
Income before Extraordinary Item and Cumulative Effect
of Accounting Changes................................ 45,538 10,249 3,234 43,787 46,787 61,817
Net Income (Notes B, C, D and E)...................... 45,538 2,377 1,071 43,787 89,334 61,817
FINANCIAL POSITION
Total Assets.......................................... $2,201,328 $2,102,292 $2,070,306 $1,904,039 $1,406,129 $1,328,933
Long-Term Debt........................................ 1,053,794 994,770 1,049,425 905,941 294,025 298,426
Stockholders' Equity.................................. 562,310 516,251 500,139 477,208 657,063 566,283
Book Value Per Common Share (Note F).................. $ 8.56 $ 7.88 $ 7.64 $ 7.69
ADDITIONAL DATA
Additions to Property, Plant and Equipment (Note G)... $ 170,085 $ 240,222 $ 288,851 $ 378,592 $ 123,624 $ 219,847
Research, Development and Engineering Expense......... 9,909 9,356 8,771 5,773 4,761 3,529
PRIMARY EARNINGS PER COMMON SHARE (NOTES H AND I)
Income before Extraordinary Item and Cumulative Effect
of Accounting Changes................................ $ 0.69 $ 0.16 $ 0.05 $ 0.78
Net Income (Notes B, C, D and E)...................... 0.69 0.04 0.02 0.78
Weighted Average Common Equivalent Shares
Outstanding.......................................... 65,788 65,607 63,036 56,266
FULLY DILUTED EARNINGS PER COMMON SHARE (NOTES H AND
I)
Income before Extraordinary Item and Cumulative Effect
of Accounting Changes................................ $ 0.69 $ 0.16 $ 0.05 $ 0.78
Net Income (Notes B, C, D and E)...................... 0.69 0.04 0.02 0.78
Weighted Average Common Equivalent Shares
Outstanding.......................................... 72,915 72,734 63,036 56,266
CASH DIVIDENDS PER COMMON SHARE....................... $ 0.16 $ 0.16 $ 0.16 $ 0.04
RATIO OF EARNINGS TO FIXED CHARGES (NOTE J)........... 1.37 1.35 -- 1.85 3.92 4.99
</TABLE>
- ----------------------------------
Notes:
(A) On December 29, 1994, Riverwood sold just under 50 percent of its investment
in its Brazilian operations (Igaras) after first spinning off a wholly owned
subsidiary to operate Riverwood's packaging machinery operations in Brazil.
Prior to that date, Riverwood included the results of operations of Igaras
in the Consolidated Financial Statements through the date of the sale.
Subsequent to December 29, 1994, Riverwood no longer consolidates Igaras,
but instead reports its investment in Igaras using the equity method of
accounting.
(B) Net Income for the year ended December 31, 1994, included the Extraordinary
Loss on Early Extinguishment of Debt described in Note 23 of the Notes to
Consolidated Financial Statements in the Riverwood Proxy Statement
incorporated herein by reference.
(C) Net Income for the year ended December 31, 1993, included the Cumulative
Effect of a Change in Accounting for Postemployment Benefits described in
Note 24 of the Notes to Consolidated Financial Statements in the Riverwood
Proxy Statement incorporated herein by reference.
(D) Net Income for the year ended December 31, 1992, included the effects of the
recapitalization and the acquisition of the Macon mill, each since its
respective date of incurrence.
(E) Net Income for the year ended December 31, 1991, included the Cumulative
Effect of Changes in Accounting for Income Taxes and Postretirement Benefits
Other Than Pensions.
(F) Book value per common share is based upon the number of common shares
outstanding at the relevant balance sheet dates. The number of shares of
Riverwood Common Stock outstanding at December 31, 1995, 1994, 1993 and 1992
was 65,698,021, 65,535,969, 65,499,558 and 62,051,282, respectively.
(G) Includes amounts invested in packaging machinery and capitalized interest.
Additions in 1995, 1994, 1992 and 1991 included $13,210,000, $7,750,000,
$201,455,000 and $21,705,000, respectively, related to the acquisition of
businesses.
(H) Primary earnings per common share are based on the weighted average number
of common equivalent shares outstanding during the period. Fully diluted
earnings per common share are computed as if the 6 3/4% Convertible
Subordinated Notes were converted as described in Note 10 of the Notes to
Consolidated Financial Statements in the Riverwood Proxy Statement. The
computation of fully diluted earnings per share was antidilutive for all
years presented.
(I) Earnings per common share computations for 1991 have not been presented
since the amount is not comparable as a result of the recapitalization of
Riverwood in 1992.
(J) Calculated by dividing (i) income before income taxes, equity in net
earnings of affiliate, extraordinary items and cumulative effect of
accounting changes (net of capitalized interest plus dividends from the
non-controlled affiliate) before fixed charges by (ii) fixed charges, which
consist of interest expense (including capitalized interest) and one-third
of rent expense, which is deemed to be equivalent to the interest expense
component. In 1993, earnings (as defined above) were insufficient to cover
fixed charges (as defined above) by $16.8 million.
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THE SPECIAL MEETING
DATE, TIME AND PLACE
The Special Meeting will be held on March 27, 1996 at 10:00 a.m., local
time, at the Rihga Royal Hotel, 151 West 54th Street, New York, New York.
Manville was incorporated in the State of Delaware in 1981 and has its principal
executive offices at 717 17th Street, Denver, Colorado 80217-5108. Manville's
telephone number at its principal executive offices is (303) 978-2000.
PURPOSES OF THE SPECIAL MEETING
THE EXCHANGE. At the Special Meeting, holders of Common Stock will be asked
to consider and vote upon approval of the Profit Sharing Exchange Agreement
between Manville and the PI Trust and the transactions contemplated thereby,
including the issuance by Manville to the PI Trust of the Conversion Shares,
representing 20% of the outstanding Common Stock on a fully diluted basis as of
the date of issuance (assuming exercise of all then outstanding options,
warrants and other rights to acquire Common Stock and after giving effect to
such issuance) in exchange for the elimination of the PI Trust's right to
receive annually 20% of Manville's adjusted net earnings and the elimination of
the PI Trust's right to receive, under certain circumstances, a portion of the
proceeds from certain asset sales by Manville. See "THE EXCHANGE." A copy of the
Profit Sharing Exchange Agreement (including exhibits thereto) is attached as
Annex A hereto and is incorporated herein by reference.
Pursuant to the terms of the Profit Sharing Exchange Agreement, a
Disposition is a condition to consummation of the Exchange. The Riverwood
Disposition will constitute a Disposition. In addition, the Profit Sharing
Exchange Agreement contemplates that Manville will declare and pay, and the
Exchange will occur only following the declaration of, a dividend of the net
proceeds to Manville from a Disposition (after permitted discretionary
redemptions by Manville of certain debt and preferred stock of Manville), on a
PRO RATA basis to all holders of Common Stock of Manville, subject to certain
conditions. See "THE EXCHANGE -- Profit Sharing Exchange Agreement." THERE CAN
BE NO ASSURANCE, HOWEVER, THAT ANY DISPOSITION WILL OCCUR, THAT MANVILLE WILL
PAY ANY DIVIDEND PURSUANT TO THE PROFIT SHARING EXCHANGE AGREEMENT OR OTHERWISE,
OR THAT THE EXCHANGE WILL BE CONSUMMATED.
THE RIVERWOOD DISPOSITION. At the Special Meeting, holders of Common Stock
also will be asked to consider and vote upon the Riverwood Disposition as a
result of the Merger of the Purchaser, a wholly owned subsidiary of Parent, with
and into Riverwood, pursuant to the terms of the Merger Agreement. As a result
of the Merger, among other things, each share of Riverwood Common Stock would be
converted into the right to receive the Merger Consideration, or approximately
$1.08 billion in the aggregate for the approximately 81.3% of the outstanding
Riverwood Common Stock held by Manville as of February 1, 1996, the record date
for the special meeting of Riverwood stockholders called to consider and vote
upon the Merger. See "THE RIVERWOOD DISPOSITION -- The Merger Agreement."
Manville has agreed to vote its shares of Riverwood Common Stock in favor of the
Merger, subject to certain conditions (including, among other things, approval
of the Riverwood Disposition by Manville stockholders), and has agreed to
provide certain indemnities to Parent and the Purchaser, pursuant to the Voting
and Indemnification Agreement. See "THE RIVERWOOD DISPOSITION -- Voting and
Indemnification Agreement." Manville has also agreed to make certain tax
payments, and to provide certain tax indemnities to Parent and the Purchaser,
pursuant to the Tax Matters Agreement. See "THE RIVERWOOD DISPOSITION -- Tax
Matters Agreement." A copy of the Merger Agreement is attached as Annex B hereto
and is incorporated herein by reference, a copy of the Voting and
Indemnification Agreement is attached as Annex C hereto and is incorporated
herein by reference, and a copy of the Tax Matters Agreement is attached as
Annex D hereto and is incorporated herein by reference.
The Merger Agreement may be amended from time to time, although Manville's
obligation to vote its shares of Riverwood Common Stock in favor of such amended
Merger Agreement is subject to Manville's consent to such amendment. Approval of
the Riverwood Disposition will provide the Board with the authority to vote for
effectuation of the Riverwood Disposition pursuant to an amended
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Merger Agreement; PROVIDED that following approval of the Riverwood Disposition
by the stockholders of Manville, Manville will not consent, without obtaining
approval from Manville's stockholders, to any such amendment if such amendment
changes the Merger Consideration or alters or changes any of the other terms or
conditions of the Merger Agreement if such alteration or change would materially
adversely affect the rights of Manville's stockholders.
AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION. At the Special Meeting,
holders of Common Stock will also be asked to consider and vote upon the
Proposed Amendment, which the Company intends to file with the Secretary of
State of the State of Delaware, and to become effective, following the Merger,
PROVIDED that the Board may abandon the Proposed Amendment at any time prior to
filing, whether or not the Proposed Amendment is approved at the Special
Meeting. See "AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION." A copy of the
proposed Certificate of Amendment (the "Certificate of Amendment") reflecting
the Proposed Amendment is attached as Annex E hereto and is incorporated herein
by reference.
OTHER MATTERS. The Company's stockholders also will consider and vote upon
such other matters as may properly come before the Special Meeting.
RECORD DATE, VOTING RIGHTS AND VOTE REQUIRED
The Board has fixed the close of business on February 1, 1996 as the Record
Date for determining the holders of Common Stock entitled to notice of, and to
vote at, the Special Meeting. Only holders of record of Common Stock at the
close of business on the Record Date will be entitled to notice of, and to vote
at, the Special Meeting. On the Record Date, 122,809,383 shares of Common Stock
were outstanding and were held by approximately 14,408 holders of record. THE PI
TRUST (WHICH, AS OF THE RECORD DATE, OWNED 96,000,000 SHARES OF COMMON STOCK, OR
APPROXIMATELY 78% OF THE OUTSTANDING SHARES OF COMMON STOCK), HAS AGREED,
PURSUANT TO THE PROFIT SHARING EXCHANGE AGREEMENT, TO VOTE FOR THE PROFIT
SHARING EXCHANGE AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING
THE EXCHANGE. THEREFORE, SUFFICIENT VOTES WILL BE CAST FOR APPROVAL OF THE
PROFIT SHARING EXCHANGE AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE EXCHANGE, TO ENSURE THAT THE PROFIT SHARING EXCHANGE AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE EXCHANGE, WILL BE APPROVED
AT THE SPECIAL MEETING WITHOUT THE VOTE OF ANY OTHER STOCKHOLDER. THE PI TRUST
HAS NOT ADVISED MANVILLE AS TO HOW IT INTENDS TO VOTE ITS SHARES OF COMMON STOCK
ON THE RIVERWOOD DISPOSITION OR THE PROPOSED AMENDMENT. HOWEVER, THE VOTE OF THE
PI TRUST FOR OR AGAINST THE RIVERWOOD DISPOSITION OR THE PROPOSED AMENDMENT
WILL, WITHOUT THE VOTE OF ANY OTHER STOCKHOLDER, DETERMINE WHETHER THE RIVERWOOD
DISPOSITION OR THE PROPOSED AMENDMENT RECEIVE THE REQUIRED VOTE OF STOCKHOLDERS.
The Common Stock is the only outstanding class of voting securities of Manville,
and each share of Common Stock is entitled to one vote on each matter to be
acted upon or which may come before the Special Meeting. Votes may be cast at
the Special Meeting in person or by properly executed proxy. See "-- Proxies."
The presence at the Special Meeting, either in person or by proxy, of the
holders of a majority of the shares of Common Stock entitled to vote is
necessary to constitute a quorum to transact business at the Special Meeting.
Abstentions of shares that are present at the Special Meeting and broker non-
votes (I.E., shares held by brokers in street name that are not entitled to vote
at the Special Meeting due to the absence of specific instructions from the
beneficial owners of such shares) are counted for the purpose of determining the
presence of a quorum for the transaction of business. If a quorum is not present
at the Special Meeting, the stockholders who are present and entitled to vote at
the Special Meeting may, by majority vote, adjourn the Special Meeting from time
to time without notice or other announcement until a quorum is present.
Approval of the the Profit Sharing Exchange Agreement and the transactions
contemplated thereby, including the Exchange, requires the affirmative vote of
the holders of a majority of the shares of Common Stock present at the Special
Meeting and entitled to vote thereon. Approval by Manville's stockholders of the
Profit Sharing Exchange Agreement and the transactions contemplated thereby,
including the Exchange, will constitute stockholder approval of the issuance of
the Conversion Shares to the PI Trust pursuant to the terms of the Profit
Sharing Exchange Agreement,
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which approval is required to be obtained under the rules of the NYSE. Because
consummation of the Profit Sharing Exchange Agreement and the transactions
contemplated thereby, including the Exchange, requires the affirmative vote of
the holders of a majority of the shares of Common Stock present at the Special
Meeting and entitled to vote thereon, under applicable Delaware law, in
determining whether the Profit Sharing Exchange Agreement and the transactions
contemplated thereby, including the Exchange, have received the requisite number
of affirmative votes, abstentions will be counted and will have the same effect
as a vote against the Profit Sharing Exchange Agreement and the transactions
contemplated thereby, including the Exchange; broker non-votes will be
disregarded and will have no effect on the outcome of the vote.
The Board has determined that it will proceed with the Riverwood Disposition
only upon, and Manville's obligation to vote its shares of Riverwood Common
Stock in favor of the Merger pursuant to the Voting and Indemnification
Agreement is subject to, among other things, approval by the affirmative vote of
the holders of a majority of the outstanding shares of Common Stock entitled to
vote thereon. Because consummation of the Riverwood Disposition requires the
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock, under applicable Delaware law, in determining whether the
Riverwood Disposition has received the requisite number of affirmative votes,
abstentions and broker non-votes will be counted and will have the same effect
as a vote against the Riverwood Disposition.
Approval of the Proposed Amendment requires the affirmative vote of the
holders of a majority of the outstanding Common Stock entitled to vote thereon.
Because approval of the Proposed Amendment requires the affirmative vote of the
holders of a majority of the outstanding shares of Common Stock, under
applicable Delaware law, in determining whether the Proposed Amendment has
received the requisite number of affirmative votes, abstentions and broker
non-votes will be counted and will have the same effect as a vote against the
Proposed Amendment.
As of the Record Date, Manville's directors and executive officers and their
affiliates (excluding the PI Trust and the directors who are trustees of the PI
Trust) owned 0.9% of the issued and outstanding Common Stock. All of the
directors and executive officers and their affiliates (other than the directors
who are trustees of the PI Trust and the PI Trust) have advised the Company that
they intend to vote all of such shares in favor of approval of the Profit
Sharing Exchange Agreement and the transactions contemplated thereby, including
the Exchange, the Riverwood Disposition and the Proposed Amendment.
PROXIES
This Proxy Statement is being furnished to holders of Common Stock at the
close of business on the Record Date in connection with the solicitation of
proxies by the Board for use at the Special Meeting. If a stockholder does not
return a properly executed proxy and does not attend the Special Meeting, such
stockholder's shares will not be voted, which will have the same effect as a
vote against the approval of the Riverwood Disposition and the Proposed
Amendment. If signed and returned, the proxy will authorize the persons named as
proxy to vote on the matters referred to therein. Shares of Common Stock
represented by properly executed proxies received prior to or at the Special
Meeting and not revoked will be voted in accordance with the instructions
indicated in such proxies. It is not expected that any matter other than those
referred to herein will be brought before the Special Meeting; however, if other
matters are properly presented, the persons named as proxies will vote in
accordance with their judgment with respect to such matters. EXECUTED PROXIES
THAT CONTAIN NO INSTRUCTIONS TO THE CONTRARY WILL BE VOTED FOR APPROVAL OF THE
PROFIT SHARING EXCHANGE AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE EXCHANGE, FOR APPROVAL OF THE RIVERWOOD DISPOSITION AND FOR
APPROVAL OF THE PROPOSED AMENDMENT. STOCKHOLDERS ARE URGED TO MARK THE RELEVANT
BOXES ON THE PROXY TO INDICATE HOW THEIR SHARES OF COMMON STOCK ARE TO BE VOTED.
Any stockholder who executes and returns a proxy may revoke it at any time
before it is voted at the Special Meeting by (i) delivering to the Secretary of
the Company at the Company's principal offices before the Special Meeting an
instrument of revocation bearing a later date or time than the
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date or time of the proxy being revoked; (ii) submitting a duly executed proxy
bearing a later date or time than the date or time of the proxy being revoked;
or (iii) voting in person at the Special Meeting. A stockholder's attendance at
the Special Meeting will not by itself revoke a proxy given by such stockholder.
The Special Meeting may be adjourned or postponed by the Company for any
reason. If a quorum is not obtained, or if fewer shares are likely to be voted
in favor of approval of the Profit Sharing Exchange Agreement and the
transactions contemplated thereby, including the Exchange, the Riverwood
Disposition or the Proposed Amendment than the number required for approval, the
Special Meeting may be adjourned for the purpose of obtaining additional proxies
or votes. The Special Meeting may also be adjourned or postponed in order to
obtain necessary regulatory approvals. At any subsequent reconvening of the
Special Meeting all proxies will be voted in the same manner as such proxies
would have been voted at the original convening of the meeting (except for any
proxies which theretofore have been effectively revoked or withdrawn),
notwithstanding that they may have been effectively voted on the same or any
other matter at a previous meeting.
The cost of soliciting proxies will be borne by the Company. In addition to
soliciting proxies by mail, proxies may be solicited by the Company's directors,
officers and other employees by personal interview, telephone or telegram. Such
persons will receive no additional compensation for such services. In addition,
the Company has retained MacKenzie Partners, Inc. to assist in soliciting
proxies for a fee estimated at $10,000 plus reimbursement of reasonable
out-of-pocket expenses. The Company requests that brokerage houses and other
custodians, nominees and fiduciaries forward solicitation materials to the
beneficial owners of shares of Common Stock held of record by such persons and
will reimburse such brokers and other fiduciaries for their reasonable
out-of-pocket expenses incurred when the solicitation materials are forwarded.
NO APPRAISAL RIGHTS
Delaware law does not provide stockholders of the Company, whether or not
they object to or vote against approval of the Profit Sharing Exchange Agreement
and the transactions contemplated thereby, including the Exchange, the Riverwood
Disposition or the Proposed Amendment, with dissenters' rights of appraisal in
connection with any of the matters to be voted upon at the Special Meeting.
THE EXCHANGE
(PROXY ITEM NO. 1)
GENERAL
Beginning in 1992, Manville became obligated under the Amended and Restated
Supplemental Agreement between the PI Trust and Manville (as amended, the
"Supplemental Agreement") to make an annual profit sharing payment to the PI
Trust. The PI Trust is an irrevocable trust formed under the laws of the State
of New York pursuant to the Manville Personal Injury Settlement Trust Agreement,
dated as of November 28, 1988 (as amended, the "PI Trust Agreement"), to
implement certain portions of Manville's Second Amended and Restated Plan of
Reorganization (the "Plan"), in particular, those relating to the settlement of
asbestos health claims against Manville and certain of its affiliates. Under the
terms of the Supplemental Agreement, Manville is obligated to pay to the PI
Trust with respect to each fiscal year so long as the PI Trust exists, an amount
equal to 20% of the sum of Profits (as defined in the Supplemental Agreement and
described below) and the proceeds of certain claims against the United States
("Government Proceeds"). For purposes of the Supplemental Agreement, the term
"Profits" means, generally, for any fiscal year, the Company's consolidated net
earnings for such fiscal year but not giving effect to (a) any profit or loss on
any sales or other dispositions of assets of the Company or any of its
consolidated subsidiaries not in the ordinary course of business or writedowns
for discontinuance of operations of any portion of the Company or any of its
consolidated subsidiaries, (b) any accruals or payments required in connection
with the Company's obligations to Manville Property Damage Settlement Trust (the
"PD Trust," and together with the PI Trust, the "Trusts") under the Amended and
Restated Property Damage Supplemental Agreement,
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dated as of November 15, 1990, among Manville, the PI Trust and the PD Trust
(the "PD Supplemental Agreement") or the Manville Settlement Trusts Second Bond
Due March 31, 2015, issued by Manville to the PI Trust and the PD Trust, as
amended (the "Second Bond"), or to the PI Trust under the Supplemental
Agreement, the Second Bond or certain other agreements, except to the extent
that payments of principal under the Second Bond or certain other payments are
treated as interest expense when determining net earnings under generally
accepted accounting principles, (c) any reserves or other contingencies with
respect to asbestos-related personal injury or property damage claims other than
reserves or contingencies resulting from annual accruals with respect to
workers' compensation performed on a basis consistent with the Company's past
practice, (d) any amortization of goodwill, (e) proceeds of certain claims
against the United States, and (f) any payments, accruals or accretions with
respect to the Company's outstanding Class 6 Interest Debentures (the "9%
Debentures"). Upon the occurrence of the Termination Date (as defined below) of
the PI Trust, the PI Trust's profit sharing right will terminate, and an
independent profit sharing obligation on the same terms will arise in favor of
the PD Trust, if the PD Trust is then in existence.
Based upon a review of the existing and potential claims facing the Trusts,
Manville believes that the profit sharing obligations discussed above, for all
practical purposes, will be payable for the foreseeable future unless Manville
and the Trusts agree to a restructuring or modification of these profit sharing
obligations. This conclusion is supported by decisions of the United States
District Courts for the Southern and Eastern Districts of New York, which have
concluded that the PI Trust's assets are "grossly inadequate" to pay existing
and potential claims. During 1994, the Company recorded $18.3 million of profit
sharing expense which was paid in April 1995. The corresponding liability is
included in other accrued liabilities at December 31, 1994. The amount of the
profit sharing payment to the PI Trust for 1995 will not be known until the
Company has calculated results of operations for 1995. The Company has accrued
$24.2 million in respect of its profit sharing obligation to the PI Trust for
the first nine months of 1995.
The Supplemental Agreement also provides that if, outside of the ordinary
course of business, Manville or its subsidiaries sell, convey or transfer assets
representing more than either 20% of the book value or 20% of the market value
of the total assets of Manville and its consolidated subsidiaries, then to the
extent that the proceeds thereof are not reinvested within two years in order to
repay preexisting long-term debt, to acquire new businesses or to develop
existing businesses through expenditures on plants, other facilities and major
capital assets, then, unless waived by the PI Trust, Manville would be obligated
to pay to the PI Trust 50% of such unutilized proceeds if such unutilized
proceeds (excluding certain illiquid proceeds) are in excess of 10% of the
original proceeds.
Under the Supplemental Agreement, Manville is also required, at the PI
Trust's request, to effect the registration under the Securities Act of 1933 of
the shares of Common Stock held by the PI Trust, which would include the
Conversion Shares. The registration rights conferred on the PI Trust by the
Supplemental Agreement may be exercised from time to time at the discretion of
the PI Trust with respect to all or any part of the shares of Common Stock held
by the PI Trust, subject to certain limitations. Additional covenants in the
Supplemental Agreement include (i) restrictions on the right of the Company,
without the prior written consent of the PI Trust, to enter into any joint
venture or similar arrangement, to sell, issue or otherwise dispose of less than
all of the stock or of any other securities of any subsidiary or to amend the
articles of incorporation or by-laws of any subsidiary, if any such action,
arrangement or any document relating to such action contains provisions which
would impair or otherwise limit the right of the PI Trust or any transferee of
the PI Trust to vote its shares of Common Stock or impose any penalty on the
Company or, as a stockholder of the Company, on the PI Trust or any transferee
of the PI Trust, upon a change in control of the Company, (ii) the requirement
that management's nominees for any election of directors of the Company will
include two nominees approved by the PI Trust and that the Company use its best
efforts, consistent with its efforts on behalf of its other nominees, to have
such nominees elected, (iii) the requirement that the Company will do or cause
to be done all things necessary to preserve and keep in full force and effect
the corporate existence, rights (charter and statutory) and franchises of the
Company and its subsidiaries, provided that the Company is not required to
preserve any right or franchise if the Board
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determines that the preservation thereof is no longer desirable in the conduct
of the business of the Company and its subsidiaries and that the loss thereof is
not disadvantageous in any material respect to the PI Trust, (iv) restrictions
on the right of the Company to secure or permit its subsidiaries to secure the
9% Debentures by any mortgage, pledge, charge, lien, security interest or other
encumbrance upon any of the present or future revenues or assets of the Company
or its subsidiaries without at the same time equally and ratably securing the
Second Bond so as to rank PARI PASSU with the 9% Debentures, (v) restrictions on
the right of the Company to enter into any amendment or supplemental indenture
to the indenture governing the 9% Debentures if such amendment or supplemental
indenture would impair any of the rights of the PI Trust under the Supplemental
Agreement, the Second Bond or other agreements, and (vi) the requirement that
the Company maintain a tangible net worth of not less than $150,000,000 at the
end of each quarterly fiscal period of each fiscal year.
Under the Supplemental Agreement, Manville is also required to indemnify the
PI Trust in respect of all costs, expenses, losses and damages (including,
subject to certain limitations, fees and expenses of counsel and other
litigation and settlement costs) when and as incurred by the PI Trust in
connection with any obligations or liabilities of Manville, and certain of its
subsidiaries and affiliates, not assumed by the PI Trust pursuant to the PI
Trust Agreement, any obligations or liabilities imposed upon the Company by the
terms of the Plan, any income taxes imposed upon the PI Trust at any time, or
any challenge to the Plan.
THE DESCRIPTION OF THE SUPPLEMENTAL AGREEMENT SET FORTH ABOVE IS NOT
INTENDED TO BE COMPLETE, BUT RATHER IS INTENDED ONLY TO PROVIDE A BRIEF SUMMARY
OF CERTAIN SIGNIFICANT PROVISIONS OF THE SUPPLEMENTAL AGREEMENT, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE COMPLETE TERMS OF THE SUPPLEMENTAL
AGREEMENT AND THE FIRST AND SECOND AMENDMENTS THERETO, WHICH ARE INCORPORATED
HEREIN BY REFERENCE.
As of October 25, 1995, Manville and the PI Trust entered into the Profit
Sharing Exchange Agreement pursuant to which, among other things, Manville
agreed to issue the Conversion Shares in exchange for the elimination of the PI
Trust's right to profit sharing and the elimination of the PI Trust's right,
under certain circumstances, to receive a portion of the proceeds from certain
asset sales by Manville. In addition, the Profit Sharing Exchange Agreement
contemplates that at the time of the Exchange there will be amendments to
certain of the affirmative and negative covenants contained in the Supplemental
Agreement. The Profit Sharing Exchange Agreement also contemplates that Manville
will declare and pay the Dividend (as defined below) if the conditions thereto
are satisfied or waived, and that the Exchange will occur only following the
declaration of the Dividend. See "-- Profit Sharing Exchange Agreement."
RECOMMENDATION OF THE BOARD; REASONS FOR THE EXCHANGE
At a meeting on October 25, 1995, the Board by unanimous vote of all
directors present (other than the three directors who are trustees of the PI
Trust, who did not vote) approved the Profit Sharing Exchange Agreement and the
transactions contemplated thereby, including the Exchange, and determined that
the Profit Sharing Exchange Agreement and the transactions contemplated thereby,
including the Exchange, are fair to and for the best interests of Manville and
its stockholders other than the PI Trust. The three directors who are trustees
of the PI Trust did not participate at the October 25th meeting in the Board's
deliberations with respect to the Profit Sharing Exchange Agreement and the
transactions contemplated thereby. The Board recommends that stockholders vote
FOR approval of the Profit Sharing Exchange Agreement and the transactions
contemplated thereby, including the Exchange. Approval of the Profit Sharing
Exchange Agreement and the transactions contemplated thereby, including the
Exchange, constitutes approval of the issuance of the Conversion Shares to the
PI Trust pursuant to the terms of the Profit Sharing Exchange Agreement.
In reaching its determination that the Profit Sharing Exchange Agreement and
the transactions contemplated thereby, including the Exchange, are fair to and
for the best interests of the Company and its stockholders other than the PI
Trust and its determination to recommend approval of the
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Profit Sharing Exchange Agreement and the transactions contemplated thereby,
including the Exchange, by stockholders, the Board consulted with the Company's
management, financial advisors and legal advisors. Set forth below are the
material factors that the Board considered in reaching this determination:
(i) the terms of the Profit Sharing Exchange Agreement, the Second
Supplemental Agreement (as defined below) and the Trust Agreement Amendment
(as defined below);
(ii) the elimination, pursuant to the Second Supplemental Agreement, of
the annual profit sharing right of the PI Trust currently set forth in the
Supplemental Agreement, which will reduce the Company's non-operating
expense and increase net income and will eliminate the requirement to make a
variable preferential payment to the PI Trust, which Manville believes will
provide it with increased financial strength and flexibility;
(iii) that the PI Trust's right to receive, under certain circumstances,
50% of the proceeds of certain asset sales, currently set forth in the
Supplemental Agreement will be eliminated, which, among other things, will
permit a Disposition to occur and the Dividend to be paid without incurring
an obligation to pay to the PI Trust 50% of the unutilized proceeds (as
described under "-- General") of such Disposition in addition to the PI
Trust's PRO RATA portion of such Dividend;
(iv) that the Company's financial statements will appear more consistent
with those of other public companies as a result of the elimination of the
PI Trust's right to receive annually 20% of Manville's adjusted net
earnings;
(v) the nature of the PI Trust's profit sharing right, which, as a
contractual right to a portion of the Company's net earnings, represents a
direct claim for cash against the Company (regardless of the Company's cash
position) which cannot be deferred or eliminated without the consent of the
PI Trust, and the nature of the rights represented by the Conversion Shares,
which, with respect to cash payments from earnings, represent only the right
to dividends, when, as and if declared by the Board;
(vi) that the Dividend contemplated by the Profit Sharing Exchange
Agreement, if paid, would confer a PRO RATA benefit to all holders of
outstanding Common Stock;
(vii) the estimated extraordinary pre-tax loss of approximately $417.3
million resulting from the Exchange, and the tax effect of the Dividend on
the Company described under "THE RIVERWOOD DISPOSITION -- Certain Federal
Income Tax Consequences to Manville of the Riverwood Disposition," including
the tax benefit to the Company of deductions for certain amounts paid to the
PI Trust as described in Note 3 to the Unaudited Pro Forma Condensed
Consolidated Financial Information set forth in "MANVILLE CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION;"
(viii) that, although the equity ownership interest and net book value per
share of the Company's existing stockholders will be diluted as a result of
the issuance of the Conversion Shares, the Company believes that the value
of the Common Stock should be positively impacted by the elimination of the
PI Trust's profit sharing right, although the Company is unable to quantify
the extent to which the value of the Common Stock would reflect such
matters, if at all;
(ix) the confirmation, pursuant to the Trust Agreement Amendment, of the
elimination of any reversion to Manville of any remaining PI Trust asbestos
liabilities upon the termination of the PI Trust consistent with the prior
settlement of certain class action claims against the PI Trust, which
Manville believes will eliminate the risk that such liabilities could in the
future become liabilities of Manville; and
(x) the financial presentation of J.P. Morgan Securities Inc. ("J.P.
Morgan"), the Company's financial advisor, and the opinion of J.P. Morgan as
to the fairness of the Exchange, as discussed below.
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The foregoing discussion of the information and factors considered by the
Board is not intended to be exhaustive. The Board viewed its position and
recommendation as being based on the totality of the information presented and
considered by it.
OPINION OF THE COMPANY'S FINANCIAL ADVISOR
J.P. Morgan delivered to the Board on October 25, 1995 its oral opinion,
which was subsequently confirmed in writing in an opinion dated that same date.
The opinion is to the effect that, as of such date and based upon and subject to
certain matters as stated in the written opinion, the Exchange is fair, from a
financial point of view, to holders of Common Stock of the Company, exclusive of
the PI Trust. J.P. Morgan noted that the opinion does not address the Riverwood
Disposition or the use of the proceeds thereof. No limitations were placed on
J.P. Morgan by the Board with respect to the investigations made or the
procedures followed in preparing and rendering its opinion. The full text of the
written opinion of J.P. Morgan, which is dated October 25, 1995 and which sets
forth assumptions made, matters considered and limitations on the review
undertaken in connection with the opinion, is attached as Annex F hereto and is
incorporated herein by reference. Holders of Common Stock are urged to, and
should, read such opinion in its entirety and consider it carefully. The opinion
of J.P. Morgan is directed to the Board and does not constitute a recommendation
to any holders of Common Stock as to how such stockholders should vote at the
Special Meeting. The summary of the opinion of J.P. Morgan set forth in this
Proxy Statement is qualified in its entirety by reference to the full text of
such opinion.
In connection with its opinion, J.P. Morgan reviewed, among other things,
(i) the Profit Sharing Exchange Agreement; (ii) the Supplemental Agreement and
the form of Second Supplemental Agreement; (iii) the PI Trust Agreement and the
form of Trust Agreement Amendment thereto; (iv) certain publicly available
information concerning the business of the Company and of certain other
companies engaged in businesses comparable to the Company and the reported
market prices for certain other companies' securities deemed comparable; (v)
current and historical market prices of the Common Stock of the Company; (vi)
the audited financial statements of the Company for the five years ended
December 31, 1994, the unaudited financial statements of the Company for the
period ended June 30, 1995, and certain financial projections prepared by the
Company for the periods ended December 31, 1995 to December 31, 2000; and (vii)
certain other internal financial analyses and forecasts prepared by the Company
and its management.
In providing its opinion, J.P. Morgan assumed that the Exchange will
permanently terminate any profit sharing obligation to the PI Trust and that the
profit sharing obligation to the PD Trust will not arise. J.P. Morgan also
assumed that the Trust Claims (as defined below) will not be assumed by the
Company and that any obligations of the PI Trust that may be assumed by the
Company in the future pursuant to the PI Trust Agreement are not material. J.P.
Morgan further assumed that any obligations of the PD Trust which are assumed by
the Company will be limited to the assets of the PD Trust which revert back to
the Company.
J.P. Morgan relied, without independent verification, upon the accuracy and
completeness of all the financial information and other information reviewed by
it for the purposes of its opinion. In addition, J.P. Morgan did not make any
independent evaluation or appraisal of the assets and liabilities of the Company
or any of its subsidiaries and J.P. Morgan was not furnished with any such
evaluation or appraisal.
The following is a summary of certain financial analyses which were reviewed
by J.P. Morgan with the Board in connection with providing its opinion and does
not purport to be a complete description of the analyses conducted by J.P.
Morgan in arriving at its opinion. In arriving at its opinion, J.P. Morgan did
not attribute any particular weight to any analysis or factor considered by it,
but rather made qualitative judgments as to the significance and relevance of
each analysis and factor.
EVALUATION OF THE EXCHANGE RATIO. The Exchange is based on a value for
value exchange and provides for the PI Trust to receive 20% of the Common Stock
of the Company (assuming exercise of all then outstanding options, warrants and
other rights to acquire Common Stock and after giving
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effect to the Exchange) in exchange for the elimination of the right to receive
20% of Manville's adjusted net earnings and the elimination of the right to
receive under certain circumstances a portion of the proceeds from certain asset
sales. Since the Common Stock value is primarily a function of earnings and the
PI Trust is entitled to 20% of earnings, the profit sharing should represent 20%
of the value attributable to the Common Stock of the Company. To provide the PI
Trust with shares of Common Stock equivalent to 20% of Fully Diluted Shares (as
defined below), the Company grossed-up the 130.6 million Fully Diluted Shares
outstanding prior to the Exchange (123.6 million shares plus 7.0 million shares
from the exercise of the Company warrants) by 0.8 and multiplied the resulting
total number of shares (162.3 million) by 0.2. J.P. Morgan calculated the
implied value of the shares to be issued pursuant to the Exchange (32.6 million)
at prices ranging from $10.00-$16.00 per share resulting in implied values of
approximately $326-$522 million. J.P. Morgan also noted that as a result of the
Exchange, holders of Common Stock will benefit from a more simplified capital
structure and improved financial flexibility while eliminating a potential
impediment to realizing a control premium.
While the profit sharing obligation prior to the Exchange is senior to the
Series B Preference Stock and the 9% Debentures, the Common Stock to be issued
in the Exchange is subordinate to the Series B Preference Stock and the 9%
Debentures. This subordination resulting from the Exchange yields incremental
value to the holders of Common Stock other than the PI Trust of approximately
$65 million and implies an effective Exchange ratio of 17.1%-17.7% at prices
ranging from $10.00 to $16.00 per share.
DISCOUNTED CASH FLOW ANALYSIS. J.P. Morgan conducted discounted cash flow
analyses in order to determine whether the resulting range of values for the
profit sharing payments was comparable to the range of values implied by the
Exchange ratio. These analyses involved discounting to present value (i) the
profit sharing payments and (ii) 20% of the present value of the cash flows to
the common equity of the Company. J.P. Morgan evaluated the results of the two
analyses in relation to the implied value of the Exchange discussed herein. In
evaluating the present value of the profit sharing payments, J.P. Morgan
aggregated (i) the present value of the profit sharing payments from 1995-1999
with (ii) the present value of a range of terminal values based on terminal
value growth rates ranging from 1.0% to 3.5%. The terminal values as well as the
projected cash flows were then discounted to present value using a cost of
equity ranging from 12.0% to 13.0%. This analysis yielded a value for the profit
sharing payments of approximately $420-$505 million. In evaluating 20% of the
present value of the cash flow to common equity, J.P. Morgan estimated the
equity values of the Company's assets implied by discounted cash flow including
its interest in Riverwood and Schuller International Group, Inc., a wholly owned
subsidiary of the Company, plus the cash on hand less a reduction for the
Company's liabilities. In evaluating the present value of the cash flows, J.P.
Morgan aggregated (i) the present value of projected free cash flow (defined as
earnings before interest, depreciation, amortization and other non-cash
expenses, less capital expenditures plus or minus decreases or increases,
respectively, in net working capital) with (ii) the present value of a range of
terminal values based on terminal value free cash flow growth rates of
1.0%-3.5%. The terminal values as well as the projected cash flows were then
discounted to present value using a weighted average cost of capital ranging
from 10.0% to 11.0%. Twenty percent of the present value of the cash flow to
common equity yielded a value of approximately $370-$480 million. The discounted
cash flow analyses described herein were based on detailed financial projections
provided by the management of the Company.
DILUTION ANALYSIS. J.P. Morgan calculated the dilutive impact on reported
book earnings per share for 1995, 1996 and 1997. It is estimated that the
Exchange will be dilutive in these years by approximately 5.3%, 5.9% and 5.8%,
respectively. Although the increase in Fully Diluted Shares outstanding
resulting from the Exchange is mostly offset by an increase in earnings
resulting from the elimination of the profit sharing payments, the increase in
shares is not completely offset since the Company's consolidated net earnings
would benefit from the tax deduction of the profit sharing for financial
reporting purposes. J.P. Morgan estimated that the Exchange would not be
dilutive on a cash flow basis since profit sharing payments would not be
expected to have a tax benefit for the foreseeable future.
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The foregoing summary does not purport to be a complete description of the
analyses performed by J.P. Morgan. The preparation of a fairness opinion is a
complex process and is not susceptible to partial analysis or summary
description. Selecting portions of the J.P. Morgan analyses or any of the
factors considered by it, without considering the analyses as a whole, could
create an incomplete or incorrect view of the processes underlying its opinion.
In arriving at its opinion, J.P. Morgan considered the results of all such
analyses.
The analyses were prepared solely for the purposes of J.P. Morgan providing
its opinion as to the fairness of the Exchange and do not purport to be
appraisals or reflect the prices at which businesses or securities may actually
be sold. Analyses based on forecasts of future results are not necessarily
indicative of actual future results, which may be significantly more or less
favorable than suggested by such analyses. Because such analyses are inherently
subject to uncertainty, being based upon numerous factors or events beyond the
control of the parties or J.P. Morgan, none of the Company, J.P. Morgan, or any
other person assumes responsibility if future results are materially different
from those forecast.
J.P. Morgan is an internationally recognized investment banking firm and is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. J.P. Morgan
is familiar with the Company, it and its affiliates having provided certain
investment banking, commercial banking and financial advisory services to the
Company from time to time. The Company selected J.P. Morgan as its financial
advisor based on its familiarity with the Company and J.P. Morgan's substantial
experience in the valuation of securities and the firm's expertise and
reputation.
Pursuant to a letter agreement dated April 24, 1995 (the "Engagement
Letter"), the Company engaged J.P. Morgan to act as its financial advisor in
connection with the Exchange. Pursuant to the Engagement Letter, the Company has
agreed to pay J.P. Morgan for its services aggregate fees of 0.30% times the
fair market value of the consideration to be provided to the PI Trust in
exchange for the profit sharing payments, if the Exchange is consummated, plus a
fee of $1 million upon delivery of the opinion described herein. Whether or not
the Exchange is consummated, the Company has agreed to reimburse J.P. Morgan for
its out-of-pocket expenses including fees and disbursements of its attorneys,
and to indemnify J.P. Morgan and certain related persons against certain
liabilities relating to or arising out of its engagement, including certain
liabilities under the federal securities laws. J.P. Morgan has been engaged by
the Company and Riverwood to provide a separate opinion with respect to the
fairness of the Riverwood Disposition.
J.P. Morgan has acted as the Company's financial advisor since 1989. In the
ordinary course of their businesses, J.P. Morgan and its affiliates may actively
trade the securities of the Company for their own accounts or for the accounts
of their customers and, accordingly, may at any time hold a long or short
position in such securities.
J.P. Morgan did not recommend the Exchange ratio, which was determined
through arm's length negotiation.
PROFIT SHARING EXCHANGE AGREEMENT
THE FOLLOWING IS A SUMMARY OF THE MATERIAL PROVISIONS OF THE PROFIT SHARING
EXCHANGE AGREEMENT, THE SECOND SUPPLEMENTAL AGREEMENT AND THE TRUST AGREEMENT
AMENDMENT. THE FOLLOWING SUMMARY DOES NOT PURPORT TO BE COMPLETE, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE COMPLETE TEXTS OF SUCH AGREEMENTS,
WHICH ARE ATTACHED TO THIS PROXY STATEMENT AS ANNEX A (INCLUDING THE EXHIBITS
THERETO) AND ARE INCORPORATED HEREIN BY REFERENCE. STOCKHOLDERS ARE URGED TO
READ THE PROFIT SHARING EXCHANGE AGREEMENT, THE SECOND SUPPLEMENTAL AGREEMENT
AND THE TRUST AGREEMENT AMENDMENT IN THEIR ENTIRETY AND TO CONSIDER THEM
CAREFULLY.
SECOND SUPPLEMENTAL AGREEMENT. Under the terms of the Profit Sharing
Exchange Agreement, Manville and the PI Trust have agreed to enter into a Second
Amended and Restated Supplemental
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Agreement (the "Second Supplemental Agreement") as of the Exchange Closing Date
(as defined below, which will occur only following the satisfaction or waiver,
if permissible, of certain conditions, including, among others, the occurrence
of a Disposition and the declaration of the Dividend). The Second Supplemental
Agreement would, among other things, eliminate the PI Trust's right to receive
annually 20% of Manville's adjusted net earnings and the PI Trust's right, under
the conditions and circumstances discussed above, to receive 50% of any
unutilized proceeds from certain asset sales, in each case, pursuant to the
Supplemental Agreement. In addition, the Second Supplemental Agreement would
eliminate or amend certain affirmative and negative covenants binding upon the
Company and contained in the Supplemental Agreement. See "-- General." In the
event that any Disposition occurs, the Exchange Closing Date will be a date
selected by mutual agreement of the parties to the Profit Sharing Exchange
Agreement following the Declaration Date (as defined below), which date shall be
at least one business day before the Dividend Record Date (as defined below) and
no earlier than the third business day following receipt by the PI Trust of
written notice of the Declaration Date.
ISSUANCE OF CONVERSION SHARES. The Profit Sharing Exchange Agreement
provides for the issuance by Manville to the PI Trust of the Conversion Shares
on the Exchange Closing Date in an amount representing 20% of the Fully Diluted
Shares of Common Stock after giving effect to such issuance, determined as the
number of shares of Common Stock equal to the product of (A) the quotient of (i)
the Fully Diluted Shares as of the Exchange Closing Date divided by (ii) 0.8,
multiplied by (B) 0.2. "Fully Diluted Shares," as of a given date, means the
number of issued and outstanding shares of Common Stock as of such date together
with all shares of Common Stock issuable by the Company upon the exercise of all
options, warrants, calls, rights, agreements, convertible or exchangeable
securities or other commitments outstanding or in effect as of such date
pursuant to which the Company is obligated, or may, upon the satisfaction of
certain conditions, become obligated, to issue or sell shares of Common Stock or
securities or rights entitling the holder thereof to acquire Common Stock. As of
February 6, 1996, the number of shares of Common Stock issued as Conversion
Shares would have been approximately 32.6 million shares. Based on the February
6, 1996 trading price of $12.75 per share of the Common Stock, the issuance of
the Conversion Shares would have resulted in a pre-tax extraordinary loss of
approximately $417.3 million (including expenses) because the profit sharing
obligation, in accordance with generally accepted accounting principles, is not
reflected as a liability on the Company's financial statements.
PARTIAL-YEAR PROFIT SHARING. The Profit Sharing Exchange Agreement provides
for the payment by Manville to the PI Trust, within 30 days following the last
day of the month during which the Exchange Closing Date occurs, in an amount
equal to 20% of the sum of Profits (or zero if Profits is a negative number) and
Government Proceeds for the period beginning on the first day of the fiscal year
in which the Exchange Closing Date occurs and ending on the day prior to the
Exchange Closing Date, subject to certain adjustments to reflect the
partial-year nature of the calculation. The Company will remain obligated to
make the profit sharing payment required by the Supplemental Agreement with
respect to any fiscal year of the Company that ends prior to the fiscal year in
which the Exchange Closing Date occurs and for which such payment has not been
made as of the date of the Profit Sharing Exchange Agreement. For purposes of
determining the above described partial-year profit sharing payment, Profits are
determined by not giving effect to any Disposition or the transactions
contemplated by the Profit Sharing Exchange Agreement.
USE OF PROCEEDS OF DISPOSITION; DIVIDEND. The Profit Sharing Exchange
Agreement provides that if Manville sells or otherwise disposes of all or a
substantial portion of its investment in Riverwood, regardless of the form of
such disposition, then within 60 days following receipt by Manville of the
proceeds of such disposition (the "Proceeds") the Company shall apply the net
Proceeds after payment of, or reasonable provision for, all out-of-pocket fees,
expenses, taxes and other costs paid or incurred (including reasonable reserves
for out-of-pocket fees, expenses, taxes and costs accrued but not paid at such
time) reasonably related to the effectuation of such disposition, as follows:
(i) FIRST, to repayment, prepayment or redemption of the 9% Debentures
($26,000,000 principal amount), plus unpaid interest accrued thereon, to the
extent that the Board, by vote of a majority
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of the directors who are not trustees of the PI Trust or whose nomination for
election as members of the Board has not been approved by the PI Trust pursuant
to the Supplemental Agreement ("Non-Trust Directors"), determines that such
repayment, prepayment or redemption would be in the best interests of Manville
and authorizes and directs that such repayment, prepayment or redemption be
made, (ii) SECOND, to the repurchase or redemption of Series B Preference Stock
($231,000,000 liquidation preference plus accrued but unpaid dividends) to the
extent that the Board, by vote of a majority of the Non-Trust Directors,
determines that such repurchase or redemption would be in the best interests of
Manville and authorizes and directs that such repurchase or redemption be made,
and (iii) THIRD, to the extent of any remaining proceeds, subject to the
satisfaction of certain conditions, to the payment of the Dividend in the full
amount of such remaining balance. The term "Dividend" means the dividend on, or
other payment with respect to, the outstanding shares of Common Stock of the
Company on a PRO RATA basis in the full amount of the remaining balance of the
Proceeds after deduction of the amounts applied (or held for later application)
in accordance with clauses (i) and (ii) above; it being understood that, for all
purposes of the Profit Sharing Exchange Agreement (including, without
limitation, for purposes of determining whether or not the Company is obligated
to declare or pay any dividend or other payment pursuant to the the Profit
Sharing Exchange Agreement or whether the PI Trust's condition to consummation
of the Exchange that the Dividend shall have been declared has been met), the
term "Dividend" does not mean a dividend or other payment of less than the full
amount of such remaining balance.
Subject to the satisfaction or waiver of certain conditions, described
below, to the obligation to declare or pay the Dividend, Manville is required to
declare the Dividend within 46 days following Manville's receipt of the Proceeds
(the date of such declaration being referred to in the Profit Sharing Exchange
Agreement as the "Declaration Date"), with the record date for determining
stockholders entitled to receive the Dividend (the "Dividend Record Date") to be
not less than five nor more than 10 days following the Declaration Date (or such
greater minimum number of days following the Declaration Date as may then be
required pursuant to applicable laws and regulations and the rules of any stock
exchange on which the Common Stock is listed or traded).
Manville's obligation to declare the Dividend is subject to the
satisfaction, or, with respect to the conditions described in clauses (i) -
(vii) below, the waiver by Manville, of the following conditions: (i) the
receipt of all necessary governmental consents; (ii) the receipt of an opinion
of counsel substantially to the effect that the declaration and payment of the
Dividend are lawful under the Delaware General Corporation Law (the "DGCL"),
which opinion shall be in form and substance reasonably satisfactory to the
Board; (iii) the solvency and adequate capitalization of Manville, and if
requested by the Board, receipt of an opinion from American Appraisal
Associates, Inc. ("AAA") (which has been engaged by Manville), reasonably
satisfactory to the Board; (iv) the absence of litigation brought by a
Governmental Entity (as defined below) challenging the Dividend that is
determined to have a reasonable likelihood of success (as determined by
independent counsel selected by Manville and the PI Trust); (v) the absence of
an effective injunction or other court order prohibiting the payment of the
Dividend; (vi) the issuance and continued effectiveness of the Order (as defined
below) of the United States Bankruptcy Court for the Southern District of New
York (the "Bankruptcy Court") approving the Profit Sharing Exchange Agreement
and the transactions contemplated thereby; (vii) the execution and delivery of
the Ninth Amendment to the PI Trust Agreement (the "Trust Agreement Amendment"),
described below; and (viii) the satisfaction or waiver by the appropriate party
of all conditions to the closing of the Exchange other than the requirement that
Manville declare the Dividend, which condition may not be waived by Manville
without the express prior written consent of the PI Trust. See "-- CONDITIONS TO
THE CLOSING OF THE EXCHANGE." The Bankruptcy Court issued the Order on November
28, 1995, and an appeal with respect thereto has been filed. See "-- Certain
Approvals."
Subject to the condition described in the following sentence, Manville is
required to pay the Dividend within four business days after the Dividend Record
Date and no later than sixty days
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following the receipt by the Company of the Proceeds. Payment of the Dividend is
subject to the condition that no injunction or other court order prohibiting
payment, the violation of which would subject Manville to substantial cost,
exists.
AMENDMENT TO THE PI TRUST AGREEMENT. Under the PI Trust Agreement, as
currently in effect, on the Termination Date (as described below) of the PI
Trust, all of the PI Trust's liabilities will be assumed by Manville, certain of
the PI Trust's assets, if any, will be transferred and assigned to the PD Trust,
if then still in existence, and, if not, to Manville, and the injunction
prohibiting asbestos-related personal injury claims from being brought against
Manville will terminate. The Termination Date of the PI Trust will occur and the
PI Trust will automatically terminate, as more fully described in the PI Trust
Agreement, 90 days after the first to occur of the following events: (i) all
asbestos-related personal injury claims and contribution and indemnity claims by
asbestos manufacturer co-defendants and distributors ("Trust Claims," as defined
in the PI Trust Agreement) have been liquidated and paid in full, and twelve
consecutive months have elapsed during which no additional such claims have been
filed with the PI Trust; (ii) in the judgment of 80% of the trustees of the PI
Trust, after consultation with Selected Counsel for the Beneficiaries (as
defined in the PI Trust Agreement) and receipt of the consent of the
court-appointed representative of the future beneficiaries of the PI Trust, a DE
MINIMIS number of Trust Claims are then pending and new Trust Claims are being
filed at a DE MINIMIS rate and Manville shall have consented in writing to such
dissolution; (iii) Manville procures from one or more insurance companies
acceptable to the PI Trust trustees one or more irrevocable liability insurance
policies covering all Trust Claims; (iv) 21 years less 91 days pass after the
death of the last survivor of all the descendants of Joseph P. Kennedy living on
the date of the PI Trust Agreement; or (v) Manville and the PI Trust trustees,
after consultation with Selected Counsel for the Beneficiaries and receipt of
the consent of the court-appointed representative of the future beneficiaries of
the PI Trust, agree in writing to the termination of the PI Trust.
Under the terms of the Profit Sharing Exchange Agreement, immediately prior
to the declaration of the Dividend, and subject to the declaration of the
Dividend, Manville and the PI Trust shall enter into the Trust Agreement
Amendment. The Trust Agreement Amendment provides that on the Termination Date,
among other things: (i) all Trust Claims shall be extinguished, (ii) the PI
Trust shall be dissolved, (iii) Manville shall assume all of the PI Trust's
liabilities other than the Trust Claims, and (iv) subject to certain exceptions,
all of the PI Trust's assets shall be transferred and assigned to the PD Trust,
if the PD Trust is then still in existence, and if not, to Manville. The
remaining liabilities of the PI Trust that are not Trust Claims that will be
assumed by Manville on the Termination Date are not expected to be material in
amount.
On the Termination Date, the PI Trust will automatically terminate pursuant
to the terms of the PI Trust Agreement. Under the Trust Distribution Process,
which is part of a Stipulation of Settlement of a class action brought on behalf
of the beneficiaries of the PI Trust in the United States District Courts for
the Southern and Eastern Districts of New York and the Bankruptcy Court
(collectively, the "Courts") to restructure the manner in which the PI Trust
settles and pays Trust Claims, all Trust Claims shall be extinguished upon the
termination of the PI Trust in accordance with the provisions of the PI Trust
Agreement (and/or upon the distribution of all assets of the PI Trust). The
Courts approved the settlement on January 19, 1995; the order approving the
settlement was affirmed in all respects (except with respect to one issue among
certain beneficiaries, the resolution of which does not affect the obligations
of the PI Trust) by the United States Court of Appeals for the Second Circuit by
an opinion and orders issued on February 21, 1996. The Trust Agreement Amendment
is in conformity with the terms of the Trust Distribution Process with respect
to the extinguishment of Trust Claims.
PD SUPPLEMENTAL AGREEMENT. Under the terms of the Profit Sharing Exchange
Agreement, upon Manville's request, the PI Trust shall consent to the
termination or amendment of the PD Supplemental Agreement in such manner as
requested by the Company; PROVIDED, that in the good
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faith judgment of the PI Trust, the terms and conditions of any such amendment
or termination, or the consideration related thereto, would not adversely affect
the PI Trust. The amendment or termination of the PD Supplemental Agreement is
not a condition to the Exchange.
The PD Supplemental Agreement provides for an independent PD Trust profit
sharing right to arise following the termination of the PI Trust if the PD Trust
is then still in existence. Based on the determination of the United States
District Courts for the Southern and Eastern Districts of New York as to the
gross inadequacy of the PI Trust's assets to pay existing and potential claims,
the Company currently does not believe that an independent profit sharing right
of the PD Trust will arise in the foreseeable future. The Company, the PI Trust
and the PD Trust (which is presently in existence), are currently in discussions
with respect to an amendment and restatement of the PD Supplemental Agreement,
which, among other things, would eliminate the PD Trust's independent contingent
profit sharing right.
CONDITIONS TO THE CLOSING OF THE EXCHANGE. The consummation of the Exchange
is contingent upon the satisfaction or waiver, if permissible, of certain
conditions, including (i) the truth and correctness in all material respects of
representations and warranties of each of the PI Trust and Manville contained in
the Profit Sharing Exchange Agreement as of the date when made and as of the
Exchange Closing Date and the performance of all agreements contained in the
Profit Sharing Exchange Agreement in all material respects by both parties prior
to or on the Exchange Closing Date; (ii) concurrence by the Selected Counsel for
the Beneficiaries; (iii) receipt of an order of the Bankruptcy Court granting
the application of the trustees of the PI Trust to approve the execution and
performance of the Profit Sharing Exchange Agreement, the Second Supplemental
Agreement and the Trust Agreement Amendment and the transactions contemplated
therein (the "Order"), which Order need not be final; PROVIDED, HOWEVER, that if
upon its review of objections raised to the issuance of the Order, either party
believes in good faith, after consultation with the other party, that a final
Order should be obtained, then such party may require a final Order; (iv)
Manville stockholder approval of the Profit Sharing Exchange Agreement and the
transactions contemplated thereby; (v) receipt of necessary governmental
consents and the absence of any effective injunction, writ, preliminary
restraining order or any order of competent jurisdiction prohibiting the
consummation of the transactions contemplated by the Profit Sharing Exchange
Agreement unless the consequences to either party of failing to comply with such
injunction, writ, preliminary restraining order or other order or for being
subject to such conditions would not subject either party to substantial cost or
liability and would not subject any employee, officer, director or agent of the
Company or any employee, trustee or agent of the PI Trust to any civil or
criminal liability; (vi) as a condition to the PI Trust's obligations, the
receipt by Manville of the Proceeds of a Disposition and the declaration of the
Dividend; (vii) the approval (to the extent required) of the listing of the
Conversion Shares on any stock exchange on which the Common Stock is listed or
traded; and (viii) receipt by each party of a certificate signed as of the
Exchange Closing Date by an authorized representative of the other party
certifying as to the satisfaction of subsection (i) above and, in the case of
the PI Trust, a certificate signed by an authorized executive officer of the
Company certifying the number of Fully Diluted Shares on the Exchange Closing
Date together with a schedule detailing such computation. The Bankruptcy Court
issued the Order on November 28, 1995, and an appeal with respect thereto has
been filed. See "-- Certain Approvals."
CERTAIN ADDITIONAL COVENANTS. Under the terms of the Profit Sharing
Exchange Agreement, the PI Trust has agreed to use its reasonable best efforts
to obtain as soon as reasonably possible after October 25, 1995, (i) all
consents necessary for it to perform the terms of the Profit Sharing Exchange
Agreement, the Second Supplemental Agreement and the Trust Agreement Amendment,
and to consummate the transactions contemplated thereby, including without
limitation, the concurrence of the Selected Counsel for the Beneficiaries and
(ii) the Order. The consent of the Selected Counsel for the Beneficiaries has
been obtained and the Bankruptcy Court has issued the Order. See "-- Certain
Approvals." In addition, at any meeting of stockholders called to consider
approval of the Profit Sharing Exchange Agreement, and the transactions
contemplated thereby, the PI Trust has agreed to vote all of its shares of
Common Stock in favor of such approval; it being understood that nothing
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contained in the Profit Sharing Exchange Agreement constitutes a consent,
approval or waiver by the PI Trust, or an agreement by the PI Trust to consent,
approve or grant any waiver, with respect to any Disposition or other
transaction relating to Riverwood or the Company's investment in Riverwood. The
PI Trust has also agreed in the Profit Sharing Exchange Agreement not to take
any action voluntarily that would reasonably be expected to cause a termination
of the PI Trust other than pursuant to the PI Trust Agreement. The PI Trust has
further agreed in the Profit Sharing Exchange Agreement to cooperate in all
reasonable respects with the Company to obtain as soon as reasonably possible
the termination or amendment of the PD Supplemental Agreement on such terms and
conditions, and for such consideration, as to which the PI Trust has consented
pursuant to the Profit Sharing Exchange Agreement.
In addition, the Company has agreed to use its reasonable best efforts to
obtain all consents necessary for it to perform the terms of the Profit Sharing
Exchange Agreement, the Second Supplemental Agreement and the Trust Agreement
Amendment, and to consummate the transactions contemplated thereby, including,
without limitation, to obtain requisite stockholder approval of the Profit
Sharing Exchange Agreement and the transactions contemplated thereby.
TERMINATION; AMENDMENT; WAIVER. The Profit Sharing Exchange Agreement may
be terminated by either Manville or the PI Trust, upon written notice of
termination given to the other party, if the Exchange Closing Date has not
occurred on or prior to the later of (i) January 31, 1997 or (ii) the first
anniversary of the date on which the Company receives the Proceeds of a
Disposition if such Disposition shall have been consummated on or prior to
January 31, 1997, or if, on or prior to the Exchange Closing Date, the Order is
denied by the Bankruptcy Court upon the PI Trust's application therefor, or
vacated, reversed, modified or amended, in whole or in part, so as to eliminate
or materially limit the Bankruptcy Court's approval of the PI Trust's execution
and performance of the Profit Sharing Exchange Agreement, the Second
Supplemental Agreement, the Trust Agreement Amendment or the transactions
contemplated thereby.
The Profit Sharing Exchange Agreement may be modified, supplemented or
amended at any time and from time to time only by a writing signed by each party
thereto. Any waiver or consent granted in respect of any term or condition of
the Profit Sharing Exchange Agreement will be effective only if given in a
writing signed by the party giving same and expressly stating that it is a
waiver or consent, and any such waiver or consent will constitute a waiver or
consent only of the specific provision(s) and for the specific purpose(s) set
forth therein.
ACCOUNTING TREATMENT OF THE EXCHANGE
The Exchange will be accounted for in accordance with Accounting Principles
Board Opinion No. 9, "Reporting the Results of Operations," as amended by
Accounting Principles Board Opinion No. 30, "Reporting the Effects of Disposal
of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions." Because of the unusual nature of the
Exchange and the infrequency of occurrence, the accounting effects of the
Exchange will be recorded as an extraordinary item, net of taxes, based on the
fair value of the Conversion Shares issued in connection with the Exchange.
Based on the February 6, 1996 trading price of $12.75 per share of common
stock, the issuance of Conversion Shares in the Exchange would result in an
extraordinary loss of approximately $271.3 million, net of taxes, as more fully
described in Note 2 to the Unaudited Pro Forma Condensed Consolidated Financial
Information set forth in "MANVILLE CORPORATION UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE DIVIDEND
The following is a summary of the principal United States federal income tax
consequences to Manville stockholders of the Dividend contemplated by the Profit
Sharing Exchange Agreement. This summary is based on the Internal Revenue Code
of 1986, as amended (the "Code"), existing and
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proposed Treasury regulations, and judicial decisions and administrative
pronouncements now in effect, changes to which could materially affect the tax
consequences described herein and could be made on a retroactive basis.
This discussion does not address all the aspects of federal income taxation
that may be relevant to investors in light of their particular circumstances or
to certain types of investors subject to special treatment under the federal
income tax laws (including, but not limited to, dealers in securities or
currencies, tax-exempt organizations, life insurance companies, other financial
institutions, pass-through entities, regulated investment companies and
stockholders holding Common Stock as part of a conversion transaction or as a
position in a straddle for federal income tax purposes). No ruling as to any of
the matters discussed in this summary has been requested or received from the
Internal Revenue Service (the "IRS"). No information is provided herein with
respect to foreign, state or local tax laws or estate and gift tax
considerations.
For purposes of this summary, a "U.S. Holder" is any beneficial owner of
Common Stock ("Holder") that is (i) a citizen or resident of the United States,
(ii) a corporation or partnership created or organized in the United States or
under the laws of the United States or any state thereof, (iii) an estate or
trust whose income is includible in gross income for United States federal
income tax purposes regardless of source, or (iv) a person or entity that is
otherwise subject to United States federal income taxation on a net income basis
in respect of income derived from the Common Stock. A "Non-U.S. Holder" is any
Holder other than a U.S. Holder.
U.S. HOLDERS
GENERAL CONSEQUENCES OF RECEIPT OF THE DIVIDEND
The Dividend will be a taxable transaction for United States federal income
tax purposes (and may also be taxable under applicable state, local and foreign
tax laws). As described more fully below, Holders that are not Subchapter C
corporations (for this purpose any stock held by a partnership, estate or a
trust will be treated as if it were actually held proportionately by its
partners or beneficiaries) ("Noncorporate Stockholders") may be entitled to
treat some or all of the amount of the Dividend paid to them as an amount
received in exchange for a portion of their Common Stock, resulting in capital
gain or loss (rather than ordinary income) treatment. See "-- NONCORPORATE
STOCKHOLDERS," below. Corporate stockholders generally will be required to take
the Dividend into account for federal income tax purposes as a dividend to the
extent of Manville's earnings and profits, and such dividend generally will be
eligible for a dividends-received deduction and will be subject in whole or in
part to the "extraordinary dividend" provisions of the Code. See "-- CORPORATE
STOCKHOLDERS," below.
NONCORPORATE STOCKHOLDERS. The amount of the Dividend that does not
exceed Manville's share of the Proceeds of a Disposition, less all liabilities
attributable thereto (including taxes and expenses incurred in connection with a
Disposition and with the Dividend) (the "Partial Liquidation Amount") should be
treated for United States federal income tax purposes as a distribution in
"partial liquidation" of Manville under Section 302(b)(4) of the Code, and
Manville intends to report the transaction accordingly. If the total amount of
the Dividend exceeds the Partial Liquidation Amount, Manville will report such
excess as an ordinary dividend.
Under the Code, the distribution of the Partial Liquidation Amount will be
treated for United States federal income tax purposes as a distribution in
partial liquidation of Manville if such distribution is "not essentially
equivalent to a dividend," determined at the corporate level, and if the
distribution is pursuant to a plan and occurs within the taxable year in which
the plan is adopted or the succeeding taxable year. There is little authority
regarding the application of the partial liquidation rules and the "not
essentially equivalent to a dividend" standard to circumstances that are closely
analogous to those surrounding a Disposition and the Dividend. Accordingly,
there can be no assurance that the IRS would not assert that no amount of the
Dividend should be treated as a distribution in partial liquidation of Manville.
If the IRS were to prevail in such an assertion, the entire amount of the
Dividend would be treated for United States federal income tax purposes as a
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dividend, to the extent of Manville's earnings and profits, and would be
includible in a U.S. Holder's gross income as ordinary income. Noncorporate
Stockholders are urged to consult with their own tax advisors in this regard.
Assuming that the distribution of the Partial Liquidation Amount will
constitute a distribution in partial liquidation for United States federal
income tax purposes, each Noncorporate Stockholder will recognize gain or loss
equal to the difference between the portion of the Partial Liquidation Amount
distributed to such Holder and such Holder's adjusted tax basis in the Common
Stock deemed to be exchanged therefor. For this purpose, a Noncorporate
Stockholder will be deemed to have surrendered a number of shares of Common
Stock equal in value to the portion of the Partial Liquidation Amount
distributed to such Holder. Any such gain or loss will be capital gain or loss
and will be long-term capital gain or loss if such Holder's holding period for
the Common Stock exceeds one year as of the date of the Dividend. Such Holder
will be required to reduce its adjusted basis in the Common Stock it holds by
the amount of the adjusted basis used in determining gain or loss on the
distribution in partial liquidation. A Noncorporate Stockholder will generally
be treated as having received ordinary dividend income to the extent of any
distribution to such Holder in excess of the portion of the Partial Liquidation
Amount distributed to such Holder.
CORPORATE STOCKHOLDERS. Corporate U.S. Holders generally will be
required to treat the Dividend as a dividend for United States federal income
tax purposes to the extent of Manville's earnings and profits. Such dividend
generally will be eligible for a dividends-received deduction (subject to
applicable limitations) and will be subject to the "extraordinary dividend"
provisions of the Code to the extent that the Dividend constitutes a
distribution in partial liquidation for United States federal income tax
purposes, as described above under "NONCORPORATE STOCKHOLDERS." If the Dividend
does not constitute a distribution in partial liquidation for United States
federal income tax purposes, it will generally be subject to the extraordinary
dividend rules if the corporate U.S. Holder has not held the Common Stock for
more than two years before the Dividend announcement date. If the Dividend is
treated as an extraordinary dividend in whole or in part with respect to a
corporate U.S. Holder, such Holder will be required to reduce its basis in its
Common Stock (but not below zero) by the amount of the untaxed portion of the
extraordinary dividend. Any of the untaxed portion of such extraordinary
dividend that is not applied to reduce such Holder's basis in its Common Stock
will be recognized as capital gain upon the sale or other disposition of such
Holder's Common Stock.
Under proposed legislation, corporate U.S. Holders receiving an
extraordinary dividend would be required to recognize capital gain currently in
the amount of the untaxed portion of any such extraordinary dividend which is
not used to reduce such Holder's basis in its Common Stock. It cannot be
predicted with any degree of certainty whether or when any such legislation will
be adopted or what form such legislation will take if so adopted.
BACKUP WITHHOLDING
Certain noncorporate U.S. Holders may be subject to backup withholding at a
rate of 31% on cash received pursuant to the Dividend. Generally, backup
withholding applies only when the taxpayer fails to furnish or certify a proper
taxpayer identification number or when the taxpayer is notified by the IRS that
the taxpayer has failed to report payments of interest and dividends properly.
Each noncorporate U.S. Holder should consult its own tax advisor regarding its
qualification for exemption from backup withholding and the procedure for
obtaining any applicable exemption.
NON-U.S. HOLDERS
The Company will withhold United States federal income tax at the rate of
30% from cash distributed to Non-U.S. Holders pursuant to the Dividend, unless
the Company determines that a reduced rate of withholding is applicable pursuant
to a tax treaty or that an exemption from withholding is applicable because such
cash is effectively connected with the conduct of a trade or business in the
United States. A noncorporate Non-U.S. Holder may be able to obtain a refund of
some or all of such tax from the IRS on the grounds that the Dividend should be
treated as a distribution in partial
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liquidation (see "-- NONCORPORATE STOCKHOLDERS," above) or if certain other
conditions obtain. Non-U.S. Holders are urged to consult their United States tax
advisors concerning the United States federal income tax consequences, as well
as other tax consequences, of the Dividend.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY. MANVILLE STOCKHOLDERS ARE URGED TO CONSULT WITH
THEIR TAX ADVISORS TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO THEM
(INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL OR FOREIGN INCOME AND
OTHER TAX LAWS) OF THE DIVIDEND.
DILUTION
The Exchange will result in immediate and substantial dilution to
stockholders other than the PI Trust. As of the Record Date, the PI Trust held
approximately 78% of the outstanding shares of Common Stock or approximately 74%
of the outstanding shares of Common Stock on a fully diluted basis (assuming
exercise of all then outstanding options and warrants). Consummation of the
Exchange will result in a substantial increase in the percentage of the
outstanding Common Stock held by the PI Trust and a corresponding decrease in
the percentage of outstanding Common Stock held by other stockholders. Giving
effect to the Exchange, as of the Record Date, the PI Trust would have held
approximately 83% of the outstanding shares of Common Stock, assuming no
exercise of then outstanding options and warrants (or approximately 79% of the
fully diluted outstanding shares, assuming exercise of all then outstanding
options and warrants).
The net tangible book value of Manville at September 30, 1995 was $839.6
million, or $6.84 per share of Common Stock. After giving effect to the issuance
of the Conversion Shares in the Exchange, the pro forma net tangible book value
at September 30, 1995 would have been $983.9 million, or $6.33 per share. This
represents an immediate dilution of $0.51 per share to the holders of Common
Stock. Net tangible book value per share is equal to Manville's total tangible
assets less its total liabilities and preferred stock liquidation preference,
divided by the total number of outstanding shares of Common Stock. The above
calculation excludes 7,631,172 shares of Common Stock issuable upon exercise of
options and warrants outstanding as of September 30, 1995.
CERTAIN APPROVALS
The Company does not believe that the consummation of the Exchange requires
the consent of any governmental authority, other than the receipt of the Order
from the Bankruptcy Court, which the parties have agreed will be a condition to
the consummation of the transactions contemplated by the Profit Sharing Exchange
Agreement. On October 25, 1995, the PI Trust made application for the Order to
the Bankruptcy Court. On November 28, 1995, the Bankruptcy Court issued the
Order approving the PI Trust's application. On December 27, 1995, the PD Trust
filed an appeal to the Order.
On October 25, 1995, the Selected Counsel for the Beneficiaries executed a
written consent to the Exchange.
CERTAIN FINANCIAL CONSIDERATIONS
If a court in a suit by an unpaid creditor or representative of creditors of
Manville, such as a trustee in bankruptcy or Manville as debtor-in-possession in
a reorganization case under the bankruptcy laws, were to find that the payment
of the Dividend to Manville's stockholders was made with actual intent to
hinder, delay or defraud the creditors of Manville or that Manville received
less than fair consideration or reasonably equivalent value for the Dividend and
either (i) was insolvent at the time of the Dividend or rendered insolvent by
reason of the Dividend, (ii) was engaged in a business or transaction for which
its remaining assets constituted unreasonably small capital, or (iii) intended
to incur, or believed that it would incur, debts beyond its ability to pay as
such debts matured, the court could find that the Dividend constituted a
fraudulent transfer or conveyance under applicable federal or state law.
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If the Dividend were determined to be a fraudulent transfer or conveyance,
or if payment of the Dividend were determined under applicable law to be an
impermissible dividend or redemption, there is a risk that the stockholders of
Manville, as recipients of the Dividend, could be ordered by a court to turn
over to Manville, its creditors or its trustee in bankruptcy all or a portion of
the Dividend that they received. Furthermore, under certain circumstances,
Manville or stockholders of Manville, as recipients of the Dividend, could be
ordered to turn over to Riverwood, its creditors or a trustee in bankruptcy all
or a portion of the proceeds of the Riverwood Disposition received by Manville
or such stockholders of Manville. See "THE RIVERWOOD DISPOSITION -- Certain
Financial Considerations."
The measure of insolvency for purposes of the foregoing will vary depending
upon the law of the applicable jurisdiction. Generally, however, Manville would
be considered insolvent if the present fair saleable value of Manville's assets
is less than the amount that will be required to pay its probable liability on
its existing debts as they become absolute and matured, or if the sum of
Manville's debts (including any contingent liabilities) is greater than all of
Manville's property at a fair valuation. There can be no assurances as to what
standards a court would use to determine whether Manville was solvent at the
relevant time or whether, whatever standard was used, the Dividend would not be
avoided on another of the grounds set forth above. In addition, under Section
170 of the DGCL, which is applicable to the Company in connection with the
Dividend, a corporation generally may make distributions to its stockholders
only out of its surplus (net assets minus capital) and not out of capital, all
as defined under the DGCL, or in the case there is no surplus, out of net
profits for the fiscal year in which the distribution is declared and/or the
preceding fiscal year, subject to certain limitations.
The Company has engaged AAA to review, and render an opinion with respect
to, the solvency and adequate capitalization of Manville. The Company believes
that (a) the Company will be solvent at the time of the Dividend (in accordance
with the foregoing definitions), will be able to repay its
debts as they mature following the Dividend and will have sufficient capital to
carry on its businesses, and (b) the Dividend will be made entirely out of
surplus, as provided under Section 170 of the DGCL. In addition, the Company is
not making the payment of the Dividend to hinder, delay or defraud the creditors
of the Company.
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THE RIVERWOOD DISPOSITION
(PROXY ITEM NO. 2)
GENERAL
Manville believes that approval of the Riverwood Disposition by the
Company's stockholders is not required by applicable law or the Company's
Restated Certificate of Incorporation or By-laws. However, given the
significance of the Riverwood Disposition to the Company and its stockholders,
the Company has determined to solicit stockholder approval thereof at the
Special Meeting. If the Riverwood Disposition is not approved by the affirmative
vote of the holders of a majority of the outstanding shares entitled to vote
thereon, the Company will not vote in favor of the Merger, and the Merger would
therefore not be effected because the affirmative vote by Manville of its shares
of Riverwood Common Stock (representing approximately 81.3% of the shares of
Riverwood Common Stock outstanding on the record date for the special meeting of
Riverwood stockholders called to consider and vote upon the Merger) is necessary
to approve and adopt the Merger Agreement under applicable Delaware law. The
Company currently intends, and the Voting and Indemnification Agreement
requires, that if the Riverwood Disposition is approved by the Company's
stockholders, and if the required consents of the PI Trust are obtained, the
Company would vote in favor of the Merger, and the Merger would therefore
receive the approval of the stockholders of Riverwood required as a condition to
the Merger. The PI Trust has not advised Manville as to how it intends to vote
its shares of Common Stock on the Riverwood Disposition or as to whether it
intends to grant the necessary consents or waivers. Furthermore, certain
existing agreements between Manville and the PI Trust prohibit Manville from
effecting the Riverwood Disposition without the prior consent or waiver of the
PI Trust, and the obligation of Manville to vote its shares of Riverwood Common
Stock in favor of the Merger pursuant to the Voting and Indemnification
Agreement is subject to, among other things, the receipt of such consents or
waivers. Such agreement by the PI Trust to vote its shares of Common Stock in
favor of the Profit Sharing Exchange Agreement and the transactions contemplated
thereby, including the Exchange, does not constitute an agreement by the PI
Trust to vote in favor of, or otherwise consent to, the Riverwood Disposition or
any other Disposition. Whether or not the Riverwood Disposition is approved at
the Special Meeting, there can be no assurance that the Merger will be
consummated.
The Merger Agreement may be amended from time to time, although Manville's
obligation to vote its shares of Riverwood Common Stock in favor of such amended
Merger Agreement is subject to Manville's consent to such amendment. Approval of
the Riverwood Disposition will provide the Board with the authority to vote for
effectuation of the Riverwood Disposition pursuant to an amended Merger
Agreement; PROVIDED that following approval of the Riverwood Disposition by the
stockholders of Manville, Manville will not consent, without obtaining approval
from Manville's stockholders, to any such amendment if such amendment changes
the Merger Consideration or alters or changes any of the other terms or
conditions of the Merger Agreement if such alteration or change would materially
adversely affect the rights of Manville's stockholders.
BACKGROUND OF THE RIVERWOOD DISPOSITION
The Board of Directors of Riverwood (the "Riverwood Board") and the Board,
as part of their ongoing oversight and planning, have from time to time
considered various financial and other alternatives that might be available to
increase the value of the Company and Riverwood to the stockholders of each of
the Company and Riverwood. In late 1994, J.P. Morgan in connection with its
periodic review of Manville's strategic plans and presentations to the Board,
preliminarily reviewed strategic options that might be available with respect to
Riverwood, including the sale or merger of Riverwood. Also, in late 1994,
Goldman, Sachs & Co. ("Goldman Sachs," and together with J.P. Morgan, the
"Financial Advisors"), was asked to perform its own analysis of options. Goldman
Sachs has served in recent years (and continues to serve) as financial advisor
to the PI Trust.
At a joint meeting of the Riverwood Board and the Board held on March 2,
1995, the Riverwood Board and the Board considered various alternatives that
might be available with respect to
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Riverwood in order to enhance value to stockholders. The alternatives considered
included continuing the existing corporate and capital structure of Riverwood,
either with or without additional financing by Riverwood and selling the entire
company pursuant to a merger or acquisition transaction. In addition, it was
discussed that Manville could choose to sell some or all of its Riverwood Common
Stock to a third party or in the public market. The Riverwood Board and the
Board determined to further review available alternatives and asked management
of Riverwood and the Company, together with the Financial Advisors, to prepare a
more developed presentation for the Riverwood Board and the Board.
At meetings of the Riverwood Board and the Board held on April 6 and 7,
1995, each of J.P. Morgan and Goldman Sachs provided an update with respect to
its review and analysis of strategic alternatives available to Riverwood and
Manville. In particular, the Financial Advisors discussed (i) the trading value
of the Riverwood Common Stock as then implied by (A) the current price/earnings
multiples of certain companies within the paperboard peer group and the
packaging peer group (as those terms are defined in "-- Financial Advisors;
Fairness Opinions") and (B) the range of current price/earnings multiples of all
of the companies in the paperboard peer group and (ii) certain financial
characteristics of potential acquirors of Riverwood, should the Riverwood Board
determine to pursue the alternative of selling the entire company. In addition,
the Board reviewed alternatives in addition to a sale of Riverwood that might be
available to the Company, and thereafter, from time to time, reviewed various
alternatives available to the Company. The Riverwood Board and the Board
discussed the appropriateness of establishing a joint special committee to
provide oversight and guidance in connection with strategic alternatives
relating to Riverwood. The following directors of Riverwood or the Company were
named to the joint special committee (the "Special Committee"): Leo Benatar,
Robert A. Falise, Louis Klein, Jr., Stanley J. Levy, William E. Mayer, W. Thomas
Stephens and Raymond S. Troubh. Messrs. Mayer and Stephens were appointed
co-chairmen of the Special Committee. Following this meeting, the Riverwood
Board and the Board continued to meet regularly and to receive updates from the
Special Committee.
On April 10, 1995, the Riverwood Board and the Board jointly retained J.P.
Morgan and Goldman Sachs in connection with the review of strategic alternatives
with respect to Riverwood. This engagement was later confirmed in writing and
was ratified by the Riverwood Board and the Board on June 1, 1995. See "--
Financial Advisors; Fairness Opinions." On April 13, 1995, the Riverwood Board
met to update itself on the review of the Company's strategic alternatives.
On April 17, 1995, the Company issued a press release stating the following:
"Manville Corporation today announced that it is exploring strategic
alternatives which may be available to Manville in respect of its
investment in Riverwood International Corporation. These alternatives
may include the possible sale or other disposition of its investment.
Manville is being assisted in its review by Manville's and Riverwood's
longstanding financial advisor, J.P. Morgan & Co. Incorporated, and by
Goldman, Sachs & Co., which has served in recent years as financial
advisor to Manville Personal Injury Settlement Trust. No decision has
been made to enter into any transaction, or as to what form any such
transaction might take. Moreover, any sale by Manville of its investment
in Riverwood or any other transaction involving the sale or merger of
Riverwood would require, among other things, resolution of a number of
issues relating to contractual relationships between Manville and
Manville Personal Injury Settlement Trust, which holds approximately 78%
of the outstanding common stock of Manville."
Riverwood issued a press release, to similar effect, on the same date.
During late April and May 1995, the Special Committee met to review
potential strategic alternatives as discussed above. The Board advised the
Special Committee that Manville did not have a present intention to pursue a
transaction unless all of Riverwood's stockholders would be entitled to receive
the same consideration as Manville. Because one of the likely alternatives under
review was
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the possible sale or other disposition of Riverwood, Riverwood management and
the Financial Advisors were requested to prepare materials to be provided to
persons that might be interested in making a proposal for an acquisition of
Riverwood. While no decision had been made by either the Riverwood Board or the
Board as to whether to pursue a sale or merger of Riverwood or to pursue another
strategic alternative with respect to Riverwood, the Special Committee
determined that because a sale or other disposition was a likely alternative,
the interest of potential bidders should be explored.
In late May and early June 1995, the Financial Advisors were instructed to
contact a number of forest products companies in order to determine whether any
of those entities would be interested in considering an acquisition of
Riverwood. The Financial Advisors initially contacted twenty-six United States
and foreign companies. The companies selected to be contacted were chosen by the
Special Committee, with the advice of the Financial Advisors, based on factors
including perceived interest in the businesses in which Riverwood operates,
familiarity with the paper products field, financial position and ability to
consummate an acquisition of Riverwood. Of the entities contacted, sixteen
expressed interest in receiving, and were provided with, publicly available
information concerning Riverwood. Those entities expressing an interest in
further pursuing review of a possible transaction were asked to sign
confidentiality agreements. Confidentiality agreements were signed by ten
parties. Of these ten parties, four were United States forest products
companies, one was a United States industrial conglomerate with significant
packaging operations, four were foreign forest products companies and one was a
foreign industrial conglomerate with significant forest products operations.
At a joint meeting of the Riverwood Board and the Board held on June 2,
1995, the two Boards of Directors, with the Financial Advisors, reviewed the
information being prepared by Riverwood for distribution to interested parties.
In early June, parties that signed confidentiality agreements were provided with
a confidential memorandum prepared by Riverwood with the assistance of the
Financial Advisors, which included further information about Riverwood,
including certain historical financial data and the June Projections discussed
below. See "-- Certain Projections." Shortly thereafter, a series of oral
management presentations was held for the six parties continuing to express an
interest in a potential transaction, and written presentations were prepared for
such parties by Riverwood, with the assistance of the Financial Advisors.
On June 12, 1995, representatives of the Financial Advisors met with the
Special Committee and reviewed the parties that had expressed an interest in
pursuing an acquisition of Riverwood, the degree of interest expressed by such
parties, such parties' financial capacity and the timing of presentations by
Riverwood's management to such parties. Additional updates were provided to the
Special Committee throughout June 1995.
On June 19, 1995, the Financial Advisors sent a letter to the parties who
had received confidential information requesting that such parties provide to
the Financial Advisors written, non-binding preliminary indications of interest,
specifying the prices at which such parties believed they might pursue a
transaction and certain steps required to be taken by such persons in order to
consummate a transaction.
On June 28, 1995, the Financial Advisors received three non-binding
preliminary indications of interest with respect to the possible acquisition of
Riverwood; two of which were from forest products companies (together, the
"Strategic Bidders") and one of which was from a consortium led by a non-U.S.
forest products company, Companhia Suzano de Papel e Celulose, which consortium
later included Clayton, Dubilier & Rice, Inc. ("CDR") and Brown Brothers
Harriman & Co. (the "Consortium"). See "-- Certain Information Concerning CDR
Fund V and CDR." The Consortium's non-binding preliminary indication of interest
contemplated that, in a potential merger, Riverwood stockholders would receive
consideration with a stated value of between $24 and $25.50 per share consisting
of: (i) equity securities of the surviving corporation in the merger
representing ownership of between 27% and 30% of the surviving corporation and
(ii) cash of not less than $21 per share. The indication of interest
contemplated that Riverwood's existing indebtedness would be repaid, and that
new indebtedness of between $1.7 and $1.8 billion would be incurred to finance
the transaction. The
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remainder of the financing for the transaction would be provided by new equity
and through the issuance of equity securities to existing stockholders of
Riverwood. The Consortium's indication of interest was subject to, among other
things, a financing condition. The non-binding preliminary indications of
interest from both of the Strategic Bidders reflected all-cash transactions,
neither of which was subject to a financing condition. One Strategic Bidder,
Georgia-Pacific Corporation (the "First Strategic Bidder"), submitted a
non-binding preliminary indication of interest that contemplated a potential
transaction within a range of values from $21 to $26 per share, in connection
with which Riverwood would make an election under Section 338(h)(10) of the Code
to treat the transaction, for income tax purposes, as a sale of assets of
Riverwood and those of its subsidiaries to which such election applied. The
other Strategic Bidder, International Paper Company (the "Second Strategic
Bidder"), submitted a non-binding preliminary indication of interest that
contemplated a potential transaction within a range of values from $20 to $25
per share.
At a Special Committee meeting held on June 30, 1995, representatives of the
Financial Advisors presented a status report with respect to the three
non-binding preliminary indications of interest received from the Strategic
Bidders and the Consortium. In particular, the Financial Advisors discussed the
terms of the non-binding preliminary indications of interest, including price,
form of consideration, conditions, tax issues and other factors. The Financial
Advisors also discussed the status of discussions with other persons who had not
yet submitted a preliminary indication of interest. The Special Committee
reviewed the terms of such indications of interest, including price, form of
consideration, conditions, tax issues and other factors. The Special Committee
instructed the Financial Advisors to communicate with the three parties to
clarify certain aspects of their respective indications of interest.
On July 6, 1995, the Financial Advisors invited the Strategic Bidders and
the Consortium to commence a second phase of due diligence with respect to
Riverwood. In this second phase, these parties were provided with additional
access to confidential information, management and facilities of Riverwood. Such
parties were also provided with a draft merger agreement and draft tax
indemnification agreement reflecting the terms on which Riverwood and Manville
intended to pursue a transaction. The Special Committee and the Riverwood Board
held additional meetings in July and August 1995 at which updates were provided
with respect to the sale process.
An additional non-binding preliminary expression of interest was received
from a fourth forest products company on July 19, 1995, which contemplated
consideration in a potential transaction within a range of values from $18 to
$22 per share and subject to, among other things, a financing condition. This
party was invited to join in a second round of due diligence, but it ultimately
did not submit a proposal.
On August 17, 1995, the Financial Advisors distributed a letter to the four
parties participating in the second phase of due diligence requesting final bids
with respect to an acquisition of Riverwood by August 30, 1995. On the same
date, Thomas H. Johnson, President and Chief Executive Officer of Riverwood,
advised the Special Committee that the Consortium had agreed on equity
participation levels, for members of the Consortium, with CDR having the largest
expected equity position, and that CDR wanted to explore possible senior
management equity participation in a transaction. See "-- Certain Information
Concerning Holding, Parent and the Purchaser." The Special Committee determined
not to grant CDR additional access to Riverwood's management at that time.
On August 30, 1995, the Consortium submitted a proposal, subject to a number
of conditions, to pursue potential acquisition of Riverwood through a merger
transaction in which stockholders would receive total consideration of up to
$24.50 per share, payable in cash or in a combination of cash estimated at
between $21 and $22 per share, and unspecified equity or debt securities. The
proposal was subject to a number of conditions, including finalization of the
financing structure and completion of due diligence. The Special Committee met
on August 31 to discuss the Consortium's proposal and the status of the
Strategic Bidders that were expected to submit proposals. Following that
meeting, at the instruction of the Special Committee, Mr. Mayer sent a letter to
representatives of the Consortium
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seeking additional information as to the terms and status of its proposal.
Additional contacts between representatives of the Financial Advisors and
representatives of the Consortium, as well as the Strategic Bidders, continued
over the next week.
On September 6, 1995, the Special Committee met to receive an update from
the Financial Advisors as to discussions with the Consortium and to discuss a
proposal received from the First Strategic Bidder for the acquisition of
Riverwood at a price of $20 per share (or to purchase 30 million shares of
Riverwood Common Stock with common stock of the First Strategic Bidder valued at
approximately $19.67 per share and to purchase the remaining shares of Riverwood
Common Stock at $20 per share), assuming a Section 338(h)(10) election was made
and that the surviving corporation would not be responsible for stand-alone
taxes arising from such election (which would have had the effect of reducing
the per share value offered below $20 per share, assuming such taxes were borne
PRO RATA by all stockholders). In addition, the Special Committee discussed an
oral expression of interest made by the Second Strategic Bidder with respect to
a transaction at a price below the Merger Consideration. The Financial Advisors
advised the Special Committee that the Consortium had stated that it could not
make a more definitive proposal without additional access to members of
Riverwood's senior management and that it wanted the exclusive right to pursue a
proposal for the potential acquisition of Riverwood; however, the Special
Committee determined not to permit the Consortium additional access to members
of Riverwood's senior management or exclusivity at that time. The Special
Committee determined not to pursue any of the proposals before it at that time;
however, the Financial Advisors were instructed to continue contacts with
interested parties in an effort to obtain a more favorable proposal and to
report back to the Special Committee if a more favorable proposal was likely to
be made.
Following the September 6, 1995 meeting, the Special Committee was informed
by the Financial Advisors that the forest products company that had been a
member of the Consortium had determined not to continue to pursue a transaction,
but that the other members of the Consortium, including CDR, desired to remain
in the auction process. After further discussions among the members of the
Special Committee and discussions between the Financial Advisors and each of the
Strategic Bidders and the Consortium, on September 10, 1995, members of the
Special Committee, in response to the Consortium's request for additional access
to senior management as a condition to a more definitive proposal, advised Mr.
Johnson that senior management of Riverwood was authorized to discuss a
potential transaction with the now CDR-led Consortium (the "CDR Group"), in
which senior management would have equity participation. See "-- Interests of
Certain Persons in the Merger; Potential Conflicts of Interest," "-- Certain
Information Concerning Holding, Parent and the Purchaser; DIRECTORS AND OFFICERS
AFTER THE EFFECTIVE TIME" and "-- Certain Information Concerning Holding, Parent
and the Purchaser; OWNERSHIP OF HOLDING COMMON STOCK AT THE EFFECTIVE TIME." The
Special Committee authorized such access in order to induce the CDR Group to
present a more definitive proposal for the acquisition of Riverwood, in light of
the failure to have received any proposal from either Strategic Bidder which was
acceptable to the Special Committee at that time. Mr. Johnson, at the request of
the Special Committee, had previously been present at certain Special Committee
meetings in order to advise the Special Committee; however, Mr. Johnson did not
participate in the discussions among members of the Special Committee leading to
the September 10, 1995 authorization discussed above. Following such time, Mr.
Johnson ceased his attendance at meetings of the Special Committee and was not
furnished information by Riverwood concerning discussions with other prospective
buyers.
On September 21, 1995, the Special Committee met to receive an update from
the Financial Advisors with respect to certain contacts with the CDR Group. In
particular, the Financial Advisors described the structure of the previously
submitted proposal of the CDR Group with the Special Committee. Following a
review of that proposal, the Special Committee instructed the Financial Advisors
to arrange meetings with the two Strategic Bidders in order to attempt to obtain
more attractive proposals from such parties.
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On September 28, 1995, Messrs. Stephens and Falise, as representatives of
the Special Committee, together with representatives of the Financial Advisors,
met with representatives of the Second Strategic Bidder in order to explore the
possibility of consummating a transaction with such party. On September 29,
1995, Messrs. Stephens, Falise and Mayer, as representatives of the Special
Committee, together with representatives of the Financial Advisors, met with the
First Strategic Bidder. While both Strategic Bidders expressed a continued
willingness to consider a transaction, neither party expressed a willingness to
increase the consideration it had indicated it was willing to pay for Riverwood.
The Special Committee met on each of these dates to receive updates on the
meetings. In particular, the Financial Advisors summarized the discussions with
the Strategic Bidders and explained the details of a revised proposal received
from the CDR Group as discussed in the following paragraph.
On September 29, 1995, the CDR Group sent a letter to Mr. Mayer proposing to
acquire Riverwood in a transaction whereby stockholders other than the Company
would receive cash of $23.00 for each share of Riverwood Common Stock and the
Company would receive a lesser amount of cash plus an equity interest in an
entity formed to acquire Riverwood's timber assets.
On October 2, 1995, the Special Committee met to review the status of the
sale process and received reports regarding recent communications with the CDR
Group and the Strategic Bidders, including telephone calls that Special
Committee members had received from representatives of CDR. The Special
Committee compared the price and terms of the various proposals, tax effects,
conditions, likelihood of consummation and timing of consummation. The Special
Committee also received a presentation from Mr. Stephens with respect to
financial and operating alternatives available with respect to Riverwood if no
sale or merger occurred, including effecting additional cost reductions,
revising pricing policies and seeking additional financing from Manville or from
other persons to fund expansion.
Following the Special Committee meeting on October 2, 1995, the Riverwood
Board and the Board met jointly to discuss the status of the sale process. The
two Boards of Directors received an update from Mr. Mayer regarding the
deliberations of the Special Committee, as well as a review by the Financial
Advisors of the proposals that had been received with respect to Riverwood. The
two Boards of Directors also discussed the business and operations of Riverwood,
as well as the September Projections (as defined below), which generally
reflected, for 1995 and 1996 only, lower operating income in the Coated Board
System segment in 1995, marginally lower operating income in the Coated Board
System and Containerboard segments in 1996, and lower total operating income and
net income in 1995 and 1996. See "-- Certain Projections." The two Boards of
Directors reviewed the elements of the proposals that had been received from the
CDR Group and the First Strategic Bidder as well as the circumstances involving
the Second Strategic Bidder, which had not made a proposal. In response to the
CDR Group's September 29 proposal, the Riverwood Board determined that all of
Riverwood's stockholders should receive the same consideration in any
transaction and that all-cash consideration was preferable to consideration with
an equity or debt component. The two Boards of Directors also again considered
whether it was the right time to pursue a sale of Riverwood. Following their
deliberations, the Riverwood Board and the Board determined to pursue further
discussions with the First Strategic Bidder, which was advised of such
determination that evening.
On the afternoon of October 3, 1995, prior to representatives of Riverwood
meeting with representatives of the First Strategic Bidder, the Financial
Advisors received a letter from the CDR Group addressed to the Riverwood Board
and proposing a transaction at a price of $21 per share in cash for each
outstanding share of Riverwood Common Stock, based on an election being made
under Section 338(h)(10) of the Code to treat such transaction, for income tax
purposes, as a sale of assets of Riverwood and those of its subsidiaries to
which such election applies. Representatives of Riverwood advised
representatives of the First Strategic Bidder that a proposal with a higher
nominal value had been received from another party and that any discussion would
therefore need to be subject to the Riverwood Board's determination as to what
action was appropriate with respect to such proposal. Representatives of the
First Strategic Bidder then advised Riverwood's representatives that the First
Strategic Bidder was unwilling to negotiate with respect to its proposal at a
time when the Riverwood
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Board was still considering another proposal. Later that afternoon, the
Riverwood Board and the Board met jointly to discuss the CDR Group's revised
proposal and determined that the First Strategic Bidder's condition with respect
to exclusivity could not be met without further review of the CDR Group's higher
proposal, and instructed the Financial Advisors and counsel to meet with CDR to
clarify certain questions with respect to its proposal.
On the evening of October 3, 1995, representatives of the Financial Advisors
and Riverwood's legal counsel met with representatives of CDR and its legal
counsel to discuss and clarify the CDR Group's proposal. Among other things, CDR
clarified that the $21 per share consideration offered in the CDR Group's
proposal assumed that all taxes payable as a result of the proposed Section
338(h)(10) election would be paid by Manville, thereby reducing the actual
payment to Manville to some amount less than $21 per share but still in excess
of the First Strategic Bidder's proposal. CDR was requested to further clarify
certain elements of such proposal as soon as possible and to provide a copy of
any requested changes to the draft merger agreement and tax indemnification
agreement. Manville subsequently advised the Special Committee that it was
willing to pay federal and combined state taxes arising from the Section
338(h)(10) election, but expected all stockholders of Riverwood to bear the cost
of stand-alone state income taxes arising from such election on a PRO RATA
basis.
On October 5 and 6, 1995, the Special Committee met to receive reports from
the Financial Advisors on the clarification sought from the CDR Group with
respect to its proposal. The Financial Advisors reviewed a letter dated October
6, 1995, from the CDR Group, which clarified certain elements of its proposal,
and which was subsequently distributed to members of the Special Committee.
On the morning of October 9, 1995, the CDR Group provided to representatives
of the Special Committee a draft agreement and plan of merger and a draft tax
matters agreement. Later that day, the Special Committee met and received a
presentation from representatives of the Financial Advisors and legal counsel
regarding the terms of the CDR Group's proposal as reflected in the draft
agreements. The Financial Advisors discussed with the members of the Special
Committee the status of issues that had been discussed with the CDR Group
regarding its proposal, including per share consideration, payment of taxes and
indemnification. The Special Committee instructed its advisors to proceed with
the negotiation of documentation to determine whether an agreement could be
reached.
From October 10 through October 20, 1995, representatives of Riverwood and
the Company, including the Financial Advisors and legal counsel, and
representatives of the CDR Group and its financial and legal advisors met to
negotiate the terms of the draft transaction documents. In particular, on
October 11, 1995, the parties discussed a number of significant issues regarding
the transaction, including the structure of the transaction, conditions to
consummation of the transaction, due diligence, termination fees, and whether
and under what circumstances Manville would agree to vote for the Merger and to
what extent it would provide indemnification for breaches of representations and
warranties by Riverwood. No significant issues were resolved at this meeting. On
October 12 and 13, 1995, the parties discussed these and other issues and agreed
in principle to the $100 million level of indemnification as embodied in the
Voting and Indemnification Agreement. The parties met on October 17, 1995, to
discuss issues presented by the draft transaction documents, and resolved issues
regarding general transaction structure and the general nature of the
representations and warranties to be made. On October 20, 1995, the parties met
to negotiate the Tax Matters Agreement, and a number of issues relating to tax
indemnification were resolved as embodied in the Tax Matters Agreement. A number
of other contractual issues remained following the meeting on October 20,
including the amount of the consideration to be paid in the Merger, the manner
of calculation of indemnifiable losses that Manville would be obligated to pay,
whether Manville would be required to indemnify Riverwood for its state, local
and foreign taxes, the level of termination fees and the circumstances under
which such fees would be payable, and the terms under which environmental and
intellectual property due diligence would be performed. Meetings of the Special
Committee were
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held on October 12 and October 20 at which the Financial Advisors and legal
counsel updated the Special Committee regarding the status of negotiations
concerning the Merger Agreement and received instructions as to the negotiation
of various matters.
On October 22, 1995, Messrs. Mayer, Stephens and Falise, as representatives
of the Special Committee, together with the representatives of the Financial
Advisors and legal counsel, met with representatives of the CDR Group, including
its financial and legal advisors, to discuss continuing issues with respect to
the CDR Group's proposal. From October 23 through October 25, 1995,
representatives of the Special Committee held discussions with representatives
of the CDR Group with respect to the terms of the proposed transaction
documents.
On the afternoon of October 25, 1995, the Riverwood Board and the Board met
jointly to receive presentations from management of Riverwood and the Company,
the Financial Advisors and legal counsel with respect to the CDR Group's
proposal and the other alternatives available to Riverwood. All of the members
of both Boards of Directors were present. Materials had been delivered to the
members of the Riverwood Board and the Board prior to the meeting, which
materials included a draft copy of each of the proposed merger agreement and tax
matters agreement, a draft copy of the proposed voting and indemnification
agreement to be entered into by the Company, and summaries of the terms of the
proposed agreements. Mr. Johnson excused himself from the meeting due to his
expected position as an officer and director of Holding, Parent and the
Surviving Corporation and as a stockholder of Holding following the Merger. See
"-- Interests of Certain Persons in the Merger; Potential Conflicts of Interest"
and "-- Certain Information Concerning Holding, Parent and the Purchaser;
DIRECTORS AND EXECUTIVE OFFICERS AFTER THE EFFECTIVE TIME." Representatives from
the Financial Advisors then discussed certain financial information with respect
to Riverwood and the CDR Group's proposal. See "-- Financial Advisors; Fairness
Opinions."
Following the presentation by the Financial Advisors, legal counsel reviewed
the structure of the proposed transaction and certain significant terms of the
proposed acquisition agreements including, among others: (i) the Merger
Consideration of $20.25 per share, which was proposed by the Special Committee
to reflect the $21 per share consideration offered by the CDR Group in its
October 3 proposal reduced by $0.75 per share, which constituted an estimate of
the stand-alone state income taxes payable as a result of the proposed election
under Section 338(h)(10) of the Code to treat the Merger as a sale of assets,
and which the CDR Group agreed to cause Riverwood to pay, rather than Manville
as had been contemplated by the CDR Group's October 3 proposal; (ii) the
provision for "break-up fees" and expense reimbursement and the timing of that
reimbursement; (iii) restrictions on Riverwood's soliciting, responding to
inquiries from, negotiating with, or providing confidential information
concerning Riverwood to, third parties in connection with the consideration by
such parties of a possible transaction involving Riverwood; and (iv) that the
transaction contemplated by the draft merger agreement was subject to numerous
conditions, including the receipt of financing. In addition, the two Boards of
Directors jointly discussed and again reviewed in detail whether Riverwood
should be sold, the requested reimbursement of fees and expenses, the requested
termination fees and the other significant terms of the draft merger agreement.
The Financial Advisors then reviewed certain financial analyses and delivered to
the Board and the Riverwood Board their respective oral opinions as to the
fairness of the Merger Consideration to stockholders of Riverwood discussed
under "-- Financial Advisors; Fairness Opinions." The two Boards of Directors
were informed by the Financial Advisors that the Financial Advisors would be
rendering written opinions to the Riverwood Board and the Board as to the
fairness of the Merger Consideration.
After completion of the joint meeting, a meeting of the Special Committee
was held, at which the Special Committee reviewed the sale process and the CDR
Group's proposal. After its deliberations, the Special Committee determined to
present the CDR Group's proposal to the Riverwood Board and the Board.
Following the Special Committee meeting, the members of the Riverwood Board
who are not also members of the Board or officers of Riverwood (Messrs. Benatar,
Mayer, John H. Dasburg and
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Robert L. Ryan), met to discuss the CDR Group's proposal. These directors were
advised of the Special Committee's decision and received advice from separate
legal counsel and the Financial Advisors. Following the meeting of independent
directors of Riverwood, the Riverwood Board, excluding Mr. Johnson, who excused
himself, met to consider the CDR Group's proposal as embodied in the draft
merger agreement and related documents. Following its deliberations, the
Riverwood Board unanimously (other than Mr. Johnson, who did not vote)
determined that the Merger is fair to and in the best interests of, the
stockholders of Riverwood, approved the Merger Agreement and the transactions
contemplated thereby and the Tax Matters Agreement, and determined to recommend
to Riverwood stockholders that they approve and adopt the Merger Agreement. See
"-- Recommendation of the Board; Reasons for the Riverwood Disposition."
Following this meeting, the Board met to consider the CDR Group's proposal.
The Board was advised of the determinations of the Special Committee and the
Riverwood Board. Following its deliberations, the Board, by unanimous vote of
all directors present, approved the Riverwood Disposition, determined to execute
and deliver the Voting and Indemnification Agreement and the Tax Matters
Agreement, and determined to submit the Riverwood Disposition to a vote of the
Company's stockholders and to recommend that such stockholders approve the
Riverwood Disposition.
As discussed above, the Special Committee and the Board had considered
various alternative transactions. The Special Committee and the Board pursued
the Merger as opposed to continuing the existing corporate and capital structure
with no additional financing because such alternative would not deliver
additional current value to stockholders and would not allow Riverwood
flexibility to pursue its potential growth. The Special Committee and the Board
pursued the Merger as opposed to continuing the existing corporate and capital
structure with additional financing because given the relatively high levels of
debt currently existing and the restrictions contained in the agreements
governing Riverwood's indebtedness, it would likely be difficult for Riverwood
to obtain additional debt financing on acceptable terms and because of the
potential risk in connection with the incurrence of significant additional
indebtedness. The sale by Manville of some or all of its equity interest was not
pursued by the Special Committee or the Riverwood Board because it would not
deliver additional current value to all stockholders.
RECOMMENDATION OF THE BOARD; REASONS FOR THE RIVERWOOD DISPOSITION
In reaching its determination that the Riverwood Disposition is expedient,
fair to and for the best interests of the Company and its stockholders, the
Board consulted with the Company's management, the Financial Advisors and legal
counsel. Set forth below are the material factors that the Board considered in
reaching this determination:
(i) the Board's review and analysis of the Company's business,
operations, financial condition, earnings and prospects and the Board's
review and analysis of Riverwood's business, operations, financial
condition, earnings and prospects, as well as the economic and competitive
environments facing Riverwood, including management's reduced expectations
for near-term operating income since the June Projections (as defined below)
were prepared, as reflected in the September Projections (see "-- Certain
Projections"), all of which, as a whole, the Board believed supported its
decision to pursue the Riverwood Disposition;
(ii) Riverwood's anticipated capital investment requirements, the
likelihood that Riverwood would require significant additional financing to
fund such capital expenditures and the difficulty in obtaining such
financing;
(iii) a review of the possible alternatives to a sale of Riverwood,
including the prospects of continuing to operate Riverwood, the value to
stockholders of such alternatives and the timing and likelihood of actually
achieving additional value from these alternatives and including the
possibility that Riverwood's future performance might not lead to a stock
price having higher present value than the Merger Consideration;
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(iv) that, following the Merger, Riverwood stockholders (including
Manville) will no longer be able to participate in the potential growth of
Riverwood;
(v) that the Merger was agreed to by the Riverwood Board only after
issuance by Riverwood of a press release regarding its review of strategic
alternatives, significant publicity concerning the review by Riverwood of
its strategic alternatives and the possibility of Riverwood being sold, the
passage of a significant period of time between issuance of the press
release and approval of the Merger Agreement, and contact with a large
number of potential bidders over an extended period of time in a lengthy
"auction" process;
(vi) the financial terms of the Merger, including the proposed structure
of the Merger involving an all cash purchase price;
(vii) that the $20.25 per share consideration to be paid in the Merger
(A) represents a premium for the Riverwood Common Stock of approximately
5.2% over the closing price of $19.25 per share of Riverwood Common Stock on
October 25, 1995, the last trading day prior to the public announcement of
the execution of the Merger Agreement but (B) is less than the closing price
of (x) $20.625 per share of Riverwood Common Stock on April 13, 1995, the
last trading day prior to the public announcement that Riverwood was
considering strategic alternatives that may be available to it and in the
best interests of its stockholders and (y) $26.25 per share of Riverwood
Common Stock on September 8, 1995, the highest price at which Riverwood
Common Stock has ever traded;
(viii) the possibility that if the Merger were not consummated, the price
of the Riverwood Common Stock could decline significantly below the current
trading price;
(ix) the financial presentations of the Financial Advisors, and the
opinion of each of J.P. Morgan and Goldman Sachs as to the fairness of the
consideration to be received by holders of Riverwood Common Stock pursuant
to the Merger Agreement as discussed in "-- Financial Advisors; Fairness
Opinions;"
(x) the terms of the Merger Agreement that set forth the restrictions on
the conduct of Riverwood's business pending closing, conditions to closing
and the significant fees and expenses that would become payable in the event
of a termination of the Merger Agreement under certain circumstances;
(xi) that (A) the Merger Agreement permits Riverwood to consider
additional BONA FIDE third party offers to acquire Riverwood and permits
Riverwood to provide information to and negotiate with such parties and to
terminate the Merger Agreement, subject to the payment of significant fees
and expenses to Parent and the Purchaser, if prior to the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware
or such later time as is specified in such certificate (the "Effective
Time") the Riverwood Board withdraws or modifies in a manner adverse to
Parent or the Purchaser its recommendation in order to permit Riverwood to
execute a definitive agreement relating to a proposal for Riverwood that the
Riverwood Board determines is more favorable to its stockholders than the
transactions contemplated by the Merger Agreement (see "-- The Merger
Agreement; NO SOLICITATION OF PROPOSALS," "-- The Merger Agreement;
TERMINATION" "-- The Merger Agreement; MISCELLANEOUS") and (B) that the
Voting and Indemnification Agreement permits Manville to vote, or cause to
be voted, its shares of Riverwood Common Stock in favor of another
acquisition transaction or any other significant proposed corporate action
of Riverwood requiring stockholder approval that would materially impair or
delay the consummation of the transactions contemplated by the Voting and
Indemnification Agreement if the Board determines in its good faith,
reasonable judgment, after consultation with its counsel, that voting its
shares of Riverwood Common Stock against such actions could reasonably be
expected to constitute a breach of the Board's fiduciary duties under
applicable law;
(xii) the possible conflict of interest based on the expected equity
participation in Parent or its affiliates of certain members of senior
management of Riverwood including Mr. Johnson, the only
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member of the Riverwood Board anticipated to be an officer or director of,
or investor in, Parent or its affiliates (see "-- Interests of Certain
Persons in the Merger; Potential Conflicts of Interest," "-- Certain
Information Concerning Holding, Parent and the Purchaser; DIRECTORS AND
EXECUTIVE OFFICERS AFTER THE EFFECTIVE TIME" and "INTEREST OF CERTAIN
PERSONS IN MATTERS TO BE ACTED UPON");
(xiii) that the Merger Agreement was approved by the unanimous vote of the
Riverwood Board (other than Mr. Johnson, who did not vote due to his
expected position as an officer and director of Parent and the Surviving
Corporation and as a stockholder of Holding following the Merger);
(xiv) that the Merger will enable all holders of Riverwood Common Stock
(other than Riverwood, Parent, the Purchaser or any other subsidiary of
Parent and other than persons who perfect appraisal rights under the DGCL)
to receive an amount in cash at least equal to the amount per share received
by the Company;
(xv) the reputation of CDR, as well as the financing commitments,
expressions of interest and highly confident letters received by Parent and
the Purchaser, and the reputations of the institutions providing such
commitments and highly confident letters (see "-- Source and Amount of
Funds");
(xvi) the likelihood of consummation of the Merger, including the risks
associated with obtaining necessary approvals and the fact that, by reason
of certain conditions to the obligations of Parent and the Purchaser to
consummate the Merger, including conditions concerning financing and the
timing of the closing, it is possible that the Merger may not be consummated
even if approved by Riverwood stockholders (see "-- The Merger Agreement;
CONDITIONS TO CONSUMMATION OF THE MERGER");
(xvii) that, pursuant to the Voting and Indemnification Agreement,
Manville has agreed to provide certain indemnities to Parent and the
Purchaser against certain losses arising from breaches of, or inaccuracies
in, certain representations and warranties made by Riverwood in the Merger
Agreement (see "-- Voting and Indemnification Agreement" and "-- The Merger
Agreement; CERTAIN REPRESENTATIONS AND WARRANTIES"); and
(xviii) that, pursuant to the Tax Matters Agreement, Manville would agree
to provide to Parent, the Purchaser and the Surviving Corporation certain
indemnities in respect of certain United States federal, state and local
income taxes, as well as agreeing to pay all federal and certain state
income taxes of Riverwood and certain of its subsidiaries attributable to
the Merger and Section 338(h)(10) election (as described in "-- Tax Matters
Agreement").
The Board also considered the determination by the Riverwood Board that the
Merger is fair to and for the best interests of Riverwood stockholders, and the
factors considered by the Riverwood Board in coming to that determination.
The foregoing discussion of the information and factors considered by the
Board is not intended to be exhaustive. In view of the wide variety of factors
considered in connection with its evaluation of the proposed Merger, the Board
did not find it practicable to, and did not, quantify or otherwise attempt to
assign relative weights to the foregoing factors or determine that any factor
was of particular importance. Rather, the Board viewed its position and
recommendation as being based on the totality of the information presented to
and considered by it. On balance, however, the Board viewed the factors set
forth in items (i), (ii), (iii), (v), (vi), (vii) (A), (viii), (ix), (xi),
(xiii), (xiv) and (xv) as favorable to its decision, the matters set forth in
items (iv), (vii) (B), (x), (xvi), (xvii) and (xviii) as unfavorable to its
decision and the matters set forth in item (xii) as neutral to its decision.
With respect to the matters set forth in items (vii) and (viii) above, the
Board considered the historical per share trading price of the Riverwood Common
Stock since Riverwood went public in 1992. The Board believed that historical
stock prices only represented one of the various factors to be
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considered in connection with a determination as to the fairness of the
Riverwood Disposition. The Board considered that, during the 52 weeks preceding
the October 25, 1995 Board meeting, the trading price of the Riverwood Common
Stock had ranged from $15.00 to $26.25 per share and that there could be no
assurance that in the future the Riverwood Common Stock would trade at prices
near or in excess of the Merger Consideration. The historical prices were also
considered in light of an analysis prepared by the Finanicial Advisors that, as
set forth in "-- Financial Advisors; Fairness Opinions," indicated that, based
upon the relative stock performance of the paperboard and packaging peer groups,
the Riverwood Common Stock, had it continued to trade in a manner consistent
with that of Riverwood's paperboard and packaging peers, as it generally had
done from the date of Riverwood's initial public offering in 1992 through the
end of 1994, would have traded in a range of approximately $15 to $20 per share
during 1995, and, on October 13, 1995, the latest date on which this analysis
was performed, in a range of approximately $16.33 to $18.00 per share. See "--
Financial Advisors; Fairness Opinions."
THE BOARD, BY UNANIMOUS VOTE OF ALL DIRECTORS PRESENT, HAS APPROVED THE
RIVERWOOD DISPOSITION AND DETERMINED THAT THE RIVERWOOD DISPOSITION IS
EXPEDIENT, FAIR TO AND FOR THE BEST INTERESTS OF THE COMPANY AND ITS
STOCKHOLDERS AND RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY VOTE FOR THE
APPROVAL OF THE RIVERWOOD DISPOSITION.
FINANCIAL ADVISORS; FAIRNESS OPINIONS
J.P. Morgan and Goldman Sachs delivered to the Riverwood Board and the Board
their respective oral opinions on October 25, 1995, each of which was
subsequently confirmed in writing in opinions dated October 25, 1995. These
opinions are each to the effect that, as of such dates and based upon and
subject to certain matters as stated in the written opinions, in the case of
J.P. Morgan, the $20.25 per share to be received by the holders of Riverwood
Common Stock, including Manville, pursuant to the Merger Agreement is fair from
a financial point of view to such holders and, in the case of Goldman Sachs, the
$20.25 per share to be received by the holders of Riverwood Common Stock,
including Manville, pursuant to the Merger Agreement is fair to such holders. No
limitations were placed on J.P. Morgan or Goldman Sachs by the Riverwood Board
or the Board with respect to the investigations made or the procedures followed
in preparing and rendering their opinions. The full text of the written opinions
of J.P. Morgan and Goldman Sachs, which sets forth assumptions made, matters
considered and limitations on the review undertaken in connection with the
opinions, is attached as Annex G and Annex H, respectively, hereto, and is
incorporated herein by reference. Holders of Common Stock are urged to, and
should, read such opinions in their entirety and consider them carefully. The
opinions of J.P. Morgan and Goldman Sachs are directed to the Board and the
Riverwood Board and do not constitute a recommendation to any holders of Common
Stock as to how such stockholders should vote at the Special Meeting. The
summary of the opinions of J.P. Morgan and Goldman Sachs set forth in this Proxy
Statement is qualified in its entirety by reference to the full text of such
opinions.
In connection with their opinions, the Financial Advisors each reviewed,
among other things, (i) the Merger Agreement; (ii) the Tax Matters Agreement;
(iii) the Voting and Indemnification Agreement; (iv) Annual Reports to
Stockholders and Annual Reports on Form 10-K of Riverwood for the three years
ended December 31, 1994; (v) certain interim reports to stockholders and
Quarterly Reports on Form 10-Q; (vi) certain other communications from Riverwood
to its stockholders; and (vii) certain internal financial analyses and forecasts
for Riverwood prepared by its management as set forth in "-- Certain
Projections." The Financial Advisors also held discussions with members of the
senior management of Riverwood and Manville regarding the past and current
business operations, financial condition and future prospects of Riverwood. In
addition, the Financial Advisors reviewed the reported price and trading
activity of the Riverwood Common Stock, compared certain financial and stock
market information for Riverwood with similar information for certain other
companies with publicly traded securities, reviewed the financial terms of
certain recent business combinations in the paper, paperboard and forest
products industry, and performed such other studies and analyses as they
considered appropriate.
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The Financial Advisors relied without independent verification upon the
accuracy and completeness of all the financial information and other information
reviewed by them for the purposes of their opinions. In addition, the Financial
Advisors did not make any independent evaluation or appraisal of the assets and
liabilities of Riverwood or any of its subsidiaries and the Financial Advisors
were not furnished with any such evaluation or appraisal.
The following is a summary of certain financial analyses which were reviewed
jointly by the Financial Advisors with the Riverwood Board and the Board in
connection with providing their opinions and does not purport to be a complete
description of the analyses conducted by the Financial Advisors in arriving at
their respective opinions. In arriving at their respective opinions, neither of
the Financial Advisors attributed any particular weight to any analysis or
factor considered by it, but rather made a single judgment as to fairness based
on its experience and professional judgment and the analyses as a whole.
Although J.P. Morgan and Goldman Sachs performed independent analyses in
connection with providing their respective opinions, the presentation described
below was jointly presented by the Financial Advisors (except where otherwise
noted).
SELECTED COMPANY ANALYSIS. The Financial Advisors reviewed selected
financial, operating and stock market information for Riverwood in comparison
with corresponding information for selected companies in the paperboard and
packaging industries (collectively, the "Selected Companies"). The Financial
Advisors selected companies in each of these industries for this analysis
because, due to the mix of Riverwood's business, Riverwood shares certain
operating, financial and growth characteristics with each of these industries.
The particular companies selected in each industry were those the Financial
Advisors considered to have characteristics similar to those of Riverwood. The
Selected Companies in the paperboard peer group were: Federal Paperboard
Company, Inc., Georgia-Pacific Corporation, International Paper Co., The Mead
Corporation, Potlatch Corp., Stone Container Corp., Temple-Inland Inc., Union
Camp Corporation and Westvaco Corporation. The Selected Companies in the
packaging peer group were: Bemis Company, Inc., Crown Cork & Seal Company, Inc.,
Sonoco Products Co. and the West Co., Inc. The Financial Advisors advised the
Riverwood Board and the Board that there are no companies directly comparable to
Riverwood and that their analyses had to be considered in light of that
qualification. The purpose of these analyses was to show how shares of Riverwood
Common Stock compared to those of the paperboard and packaging peers in terms of
their relation to certain per share measures and other financial indicators. The
multiples and ratios for each of the Selected Companies were based on the most
recent publicly available information and selected analysts' earnings estimates.
With respect to the Selected Companies, the Financial Advisors considered Total
Entity Value (I.E., market value of common equity plus preferred equity and book
value of debt less cash and marketable securities) as a multiple of estimated
1995 and 1996 earnings before interest, taxes, depreciation and amortization
("EBITDA"). The analyses indicated Total Entity Value multiples of 1995 EBITDA
of 4.2x - 6.1x and 1996 EBITDA of 4.0x - 5.1x for the paperboard peer group. The
analyses also indicated Total Entity Value multiples of 1995 EBITDA of 5.6x -
9.7x and 1996 EBITDA of 4.7x - 7.7x for the packaging peer group. The Financial
Advisors also considered for the Selected Companies total equity value as a
multiple of estimated 1995 and of estimated 1996 fully diluted net income. The
analyses indicated total equity value multiples of 1995 fully diluted net income
of 3.9x - 11.3x and of 1996 fully diluted net income of 3.0x - 8.7x for the
paperboard peer group. The analyses also indicated total equity value multiples
of 1995 fully diluted net income of 13.6x - 22.1x and of 1996 fully diluted net
income of 11.0x - 14.6x for the packaging peer group. The implied Total Entity
Value multiple of the $20.25 per share to be received by holders of Riverwood
Common Stock is 7.5x 1995 EBITDA and 5.1x 1996 EBITDA based on the September
Projections (as defined below). The total equity value multiple implied by the
$20.25 per share is 17.6x 1995 fully diluted net income and 9.2x 1996 fully
diluted net income based on the September Projections. The implied Total Entity
Value multiple of the $20.25 per share to be received by holders of Riverwood
Common Stock, including Manville, of 7.5x 1995 EBITDA is above the range for the
paperboard peer group of 4.2x - 6.1x and is near the mid-point of the range for
the packaging peer group of 5.6x - 9.7x. The implied Total Entity Value multiple
of 5.1x 1996 EBITDA is equal to the high end of the range for the paperboard
peer group of 4.0x - 5.1x and is on the low end of the range for the
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packaging peer group of 4.7x - 7.7x. The implied total equity value multiple of
the $20.25 per share to be received by holders of Riverwood Common Stock of
17.6x 1995 fully diluted net income is above the range for the paperboard peer
group of 3.9x - 11.3x and is near the mid-point of the range for the packaging
peer group of 13.6x - 22.1x. The implied total equity value multiple of 9.2x
1996 fully diluted net income is above the range for the paperboard peer group
of 3.0x - 8.7x and is below the range for the packaging peer group of 11.0x -
14.6x. The Financial Advisors have advised the Company and Riverwood that, in
the Financial Advisors' opinion, the Total Entity Value multiples of EBITDA and
the total equity value multiples of fully diluted net income for the packaging
peer group typically are above the respective multiples for the paperboard peer
group and Riverwood because the packaging peer group's earnings growth rates and
profitability rates tend to be higher over the course of the business cycle.
DISCOUNTED CASH FLOW ANALYSIS. The Financial Advisors reviewed the
discounted cash flow analyses they had performed in order to evaluate the
present value of Riverwood's consolidated corporate cash flow. The Financial
Advisors aggregated (i) the present value of the projected free cash flow
(defined as earnings before interest, depreciation, amortization, and other
non-cash expenses, less capital expenditures plus or minus decreases or
increases, respectively, in net working capital) with (ii) the present value of
a range of terminal values based on multiples ranging from 6.0x - 8.0x projected
earnings before interest and taxes ("EBIT"). The terminal values as well as the
projected cash flows were then discounted to present value using discount rates
ranging from 10.0% - 14.0%. The discounted cash flow analyses were based on
detailed segment information which was provided by the management of Riverwood
as part of the June Projections and revised in the September Projections. In
response to changes in the outlook for Riverwood's business segments, management
reduced 1995 operating earnings, including equity income but excluding other
costs as set forth in Note A to the June Projections table and in Note A to the
September Projections table in "-- Certain Projections," from $228 million in
the June Projections to $211 million in the September Projections and 1996
operating earnings, including equity income but excluding other costs as set
forth in Note A to the June Projections table and in Note A to the September
Projections table in "-- Certain Projections," from $373 million in the June
Projections to $355 million in the September Projections. These adjustments
imply reductions in 1995 earnings per share from $1.30 in the June Projections
to $1.20 in the September Projections and 1996 earnings per share from $2.57 in
the June Projections to $2.36 in the September Projections. Based upon these
revisions as well as subsequent discussions with the management of Riverwood,
the Financial Advisors performed a series of sensitivity analyses for the
business. The summation of the foregoing discounted cash flow analyses yielded a
net present value per share of approximately $16.00 - $22.00 as compared to the
$20.25 per share to be received by holders of Riverwood Common Stock, including
Manville, in the Merger.
HISTORICAL STOCK TRADING ANALYSIS. The Financial Advisors reviewed the
history of the trading prices for Riverwood and the relationship between price
movements of Riverwood Common Stock and price movements of the common stocks of
the paperboard peer group and the packaging peer group (as outlined above) since
Riverwood's initial public offering. Such review indicated that, since
Riverwood's initial public offering in 1992, while the Riverwood Common Stock
has traded at values (i) in excess of the value of the common stocks of both the
paperboard peer group and the packaging peer group, (ii) less than the value of
the common stocks of both the paperboard peer group and the packaging peer
group, and (iii) between the values of the common stocks of the paperboard peer
group and the packaging peer group, the price of the Riverwood Common Stock
generally moved in the same direction as the price movements of the common
stocks of the paperboard peer group and the packaging peer group. Such review
also indicated that the $20.25 per share consideration to be paid in the Merger
represents a premium for the Riverwood Common Stock of approximately 5.2% over
the closing price of $19.25 per share of Riverwood Common Stock on October 25,
1995, the last trading day prior to the public announcement of the execution of
the Merger Agreement, but is less than the closing price of (i) $20.625 per
share of Riverwood Common Stock on April 13, 1995, the last trading day prior to
the public announcement that Riverwood was considering strategic alternatives
that may be available to it and in the best interests of its stockholders and
(ii) $26.25 per share of Riverwood
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Common Stock on September 8, 1995, the highest price at which the Riverwood
Common Stock has ever traded. Finally, the Financial Advisors noted that since
December 31, 1994, when the closing price was $15.625 per share, the trading
price of the Riverwood Common Stock has substantially exceeded the relative
stock performance of the paperboard and packaging peer groups. Based upon the
relative stock performance of the paperboard and packaging peer groups shown by
this analysis, this analysis indicated that the Riverwood Common Stock, had it
continued to trade in a manner consistent with that of Riverwood's paperboard
and packaging peers, as it generally had done from the date of Riverwood's
initial public offering in 1992 through the end of 1994, would have traded in a
range of approximately $15 to $20 per share during 1995, and, on October 13,
1995, the latest date on which this analysis was performed, in a range of
approximately $16.33 to $18.00 per share.
SELECTED COMBINATION ANALYSIS. The Financial Advisors performed analyses of
the financial terms of certain transactions in the paper, paperboard and forest
products industry (the "Selected Transactions"). Such analyses indicated that
for the Selected Transactions Total Entity Value as a multiple of (i) latest
twelve months ("LTM") sales ranged from 0.55x to 2.21x, with a median of 1.22x,
(ii) LTM EBITDA ranged from 4.3x to 28.4x, with a median of 8.2x and (iii) LTM
EBIT ranged from 4.9x to 22.6x, with a median of 12.3x. These analyses indicated
for the Selected Transactions total equity value as a multiple of LTM net income
ranging from 7.8x to 53.7x, with a median of 15.3x. It should be noted that, for
many of the specific transactions, the information with respect to the various
categories was not publicly available. Due to the cyclicality of the paper and
forest products industry and lack of an appropriate transaction which reflected
the specialty nature of Riverwood's business, the Financial Advisors did not
believe that there were transactions appropriate for direct comparison to the
potential sale of Riverwood and, accordingly, these analyses were not presented
to the Board or the Riverwood Board.
In rendering their respective opinions, the Financial Advisors, with the
consent of the Riverwood Board and the Board, did not take into account any
potential payment Manville may be required to make pursuant to the indemnity
obligations contained in the Voting and Indemnification Agreement and the Tax
Matters Agreement. However, they noted that any material liability incurred by
Manville by reason of such obligation would indicate a lower value of Riverwood.
In addition, in rendering their respective opinions, the Financial Advisors
did not consider the particular tax consequences of the Merger to the various
stockholders of Riverwood, including, in the case of Manville, the termination
of its existing tax sharing arrangement with Riverwood and any obligations
Manville may incur by reasons of the Tax Matters Agreement.
In rendering their respective opinions, the Financial Advisors did not take
into account the effect on Manville of the transactions contemplated in the
Profit Sharing Exchange Agreement. The Merger or an alternative disposition of
Riverwood is a condition precedent to the consummation of the transactions
contemplated by the Profit Sharing Exchange Agreement. J.P. Morgan has been
engaged by Manville to provide a separate opinion with respect to the fairness
of the transactions contemplated by the Profit Sharing Exchange Agreement and
Goldman Sachs is acting as a financial advisor in connection therewith to the PI
Trust. See "THE EXCHANGE -- Profit Sharing Exchange Agreement."
The Financial Advisors noted in their opinions that, while the cash price of
$20.25 per share to be received by all holders of Riverwood Common Stock
pursuant to the Merger Agreement is the same, by reason of the matters referred
to above, the Merger may affect Manville differently from Riverwood's other
stockholders. The Financial Advisors' respective opinions do not address the
treatment of the stockholders of Riverwood as among themselves.
The Financial Advisors' respective opinions represent the culmination of a
series of presentations made to both the Riverwood Board and the Board. Prior to
the sale process, the Financial Advisors made presentations to the Riverwood
Board and the Board regarding various alternatives that might be available to
increase shareholder value, including the sale of Riverwood. At the same time
the Financial Advisors presented a preliminary valuation for Riverwood. As the
process progressed, the Financial Advisors took into consideration changes in
the outlook for Riverwood and the industry in
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performing their analyses. During subsequent meetings of the Riverwood Board and
the Board, the Financial Advisors reviewed updated valuation parameters applying
similar methodologies to those applied in conjunction with the delivery of their
respective fairness opinions.
The foregoing summary does not purport to be a complete description of the
analyses performed by the Financial Advisors. The preparation of fairness
opinions is a complex process and is not susceptible to partial analysis or
summary description. Selecting portions of the Financial Advisors' analyses or
any of the factors considered by them, without considering the analyses as a
whole, could create an incomplete or incorrect view of the processes underlying
their respective opinions. In arriving at their opinions, the Financial Advisors
considered the results of all such analyses. No company or transaction used in
the analyses described above as a comparison is identical to Riverwood or the
proposed transaction. Accordingly, an analysis of the results of the foregoing
is not mathematical; rather it involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
companies and other factors that could affect the public trading values of the
companies or company to which they are being compared.
The analyses were prepared solely for the purposes of the Financial Advisors
providing their opinions as to the fairness of the Merger Consideration to be
received by the holders of Riverwood Common Stock and do not purport to be
appraisals or to reflect the prices at which businesses or securities may
actually be sold. Analyses based on forecasts of future results are not
necessarily indicative of actual future results, which may be significantly more
or less favorable than suggested by such analyses. Because such analyses are
inherently subject to uncertainty, being based upon numerous factors or events
beyond the control of the parties or their respective advisors, none of
Riverwood, Manville, the Financial Advisors, or any other person assumes
responsibility if future results are materially different from those forecast.
J.P. Morgan is an internationally recognized investment banking firm and is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. J.P. Morgan
is familiar with Riverwood and Manville, it and its affiliates having provided
certain investment banking, commercial banking and financial advisory services
to Riverwood and Manville from time to time, including having acted as lead
managing underwriter of Riverwood's initial public offering in June 1992 and
having acted as Riverwood's financial advisor in connection with, and having
participated in certain of the negotiations leading to, the Merger Agreement. In
addition, Morgan Guaranty Trust Company of New York, an affiliate of J.P.
Morgan, is a lender to Riverwood. Riverwood and Manville selected J.P. Morgan as
their financial advisor based on its familiarity with Riverwood and J.P.
Morgan's substantial experience in mergers and acquisitions and the firm's
expertise and reputation.
Pursuant to a letter agreement, dated April 10, 1995 (the "J.P. Morgan
Engagement Letter"), Riverwood and Manville jointly engaged J.P. Morgan to act
as their financial advisor in connection with the Merger. Pursuant to the J.P.
Morgan Engagement Letter, Riverwood and Manville have agreed to pay J.P. Morgan
for its services aggregate fees of $5.5 million if the Merger is consummated,
which fees will be paid by the Surviving Corporation. Whether or not the Merger
is consummated Riverwood and Manville have agreed to reimburse J.P. Morgan for
its out-of-pocket expenses including fees and disbursements of its attorneys,
and to indemnify J.P. Morgan and certain related persons against certain
liabilities relating to or arising out of its engagement, including certain
liabilities under the federal securities laws. J.P. Morgan has been engaged by
Manville to provide a separate opinion with respect to the fairness of the
transactions contemplated by the Profit Sharing Exchange Agreement, and will
receive a fee in connection therewith.
J.P. Morgan has acted as Riverwood's financial advisor since Riverwood's
initial public offering in 1992 and has been Manville's financial advisor since
1989. In the ordinary course of their businesses,
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J.P. Morgan and its affiliates may actively trade the securities of Riverwood
for their own accounts or for the accounts of their customers and, accordingly,
may at any time hold a long or short position in such securities.
An affiliate of J.P. Morgan is a lender to Lexmark International, Inc., an
affiliate of CDR.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes.
Goldman Sachs is familiar with Riverwood, having acted as sole underwriter
of a secondary bond offering of Riverwood's 10 3/4% bonds due 2000 and 11 1/4%
bonds due 2002 held by the PI Trust and as Riverwood's and the Company's
financial advisor in connection with, and having participated in certain of the
negotiations leading to, the Merger Agreement. In addition, Goldman Sachs is
familiar with Manville, Riverwood and the PI Trust, having acted as financial
advisor to the United States Bankruptcy Court in evaluating the assets and
liabilities of Manville and the PI Trust; having acted as lead underwriter of a
public offering of bonds for Schuller International Group, Inc. ("Schuller"), a
wholly owned subsidiary of Manville; and having acted as financial advisor to
the PI Trust generally and specifically in regard to the Profit Sharing Exchange
Agreement.
Goldman Sachs has also provided certain investment banking services to CDR,
an affiliate of Holding, Parent and the Purchaser, and certain affiliates of CDR
from time to time, including having acted as financial advisor in several
merger-related transactions; having acted as lead and co-underwriter of several
debt and equity securities offerings; and having recently acted as lead
underwriter of a public offering of equity securities for Lexmark International
Group, Inc., an affiliate of CDR, and may continue to provide investment banking
services to CDR and its affiliates in the future.
Pursuant to a letter agreement dated April 10, 1995 (the "Goldman Sachs
Engagement Letter"), Riverwood and Manville jointly engaged Goldman Sachs to act
as their financial advisor in connection with the Merger. Pursuant to the
Goldman Sachs Engagement Letter, Riverwood and Manville have agreed to pay
Goldman Sachs for its services aggregate fees of $5.5 million if the Merger is
consummated, which fees will be paid by the Surviving Corporation. Whether or
not the Merger is consummated, Riverwood and Manville have agreed to reimburse
Goldman Sachs for its out-of-pocket expenses including fees and disbursements of
its attorneys, and to indemnify Goldman Sachs and certain related persons
against certain liabilities relating to or arising out of its engagement,
including certain liabilities under the federal securities laws.
In the course of its trading activities, Goldman Sachs, as of the date of
its opinion, had accumulated a short position of $1 million principal amount of
Riverwood's 10 3/4% bonds due 2000 and $1 million principal amount of
Riverwood's 11 1/4% bonds due 2002. In addition, Goldman Sachs, as of such date,
had accumulated a long position of $510,000 principal amount of Schuller's
10 7/8% bonds due 2004.
Neither J.P. Morgan nor Goldman Sachs recommended the amount of
consideration to be paid in the Merger, which was determined through arm's
length negotiation.
INTERESTS OF CERTAIN PERSONS IN THE MERGER; POTENTIAL CONFLICTS OF INTEREST
OFFICERS AND DIRECTORS OF RIVERWOOD. Certain members of Riverwood's
management and the Riverwood Board may be deemed to have certain interests in
the Merger that are in addition to their interests as stockholders of Riverwood
generally. The Riverwood Board was aware of and discussed these interests in
connection with its consideration and approval of the Merger Agreement. In
addition, the Riverwood Board discussed and approved the Merger at a meeting at
which only directors who are not employees of Riverwood were present (except for
Mr. Stephens, who is Chairman of the Board and Chief Executive Officer of
Manville, who does not participate in any of Riverwood's executive compensation
or benefit plans and who will not be an officer or director of the Surviving
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Corporation). In considering the recommendation of the Board in respect of the
Riverwood Disposition, the stockholders of Manville should be aware of these
interests which may present actual or potential conflicts of interest with
respect to the Riverwood Disposition.
Mr. Johnson, currently President and Chief Executive Officer and a director
of Riverwood, will be named President and Chief Executive Officer and a director
of Holding, Parent and the Surviving Corporation following the Merger and,
shortly following the Merger, will be offered the opportunity to purchase shares
of Holding Common Stock, as well as the opportunity to receive a grant of
options to purchase shares of Holding Common Stock and a grant of deferred stock
unit awards covering shares of Holding Common Stock.
Pursuant to the Merger Agreement, except as described below, Riverwood has
agreed to take all actions necessary to provide that, upon the Effective Time,
(i) each Award (as defined below) outstanding under Riverwood's Option Plans (as
defined below) becomes fully vested and exercisable, (ii) each such Award then
outstanding be cancelled or repurchased and (iii) certain cash payments be made
to the holders of such Awards in consideration for such cancellation or
repurchase. See "-- The Merger Agreement; PAYMENTS UNDER CERTAIN AWARDS." The
chart below sets forth all Awards held by the executive officers of Riverwood
and the amounts receivable in respect of such Awards pursuant to the Merger
Agreement.
<TABLE>
<CAPTION>
1994 1993 RESTRICTED ESTIMATED
PREMIUM PREMIUM STOCK VALUE OF
NAME OF EXECUTIVE OFFICER (1) SARS (2) SARS (3) UNITS (4) AWARDS (5)
- ---------------------------------------------------------------- --------- ----------- --------- -------------
<S> <C> <C> <C> <C>
Thomas H. Johnson............................................... 67,500 0 46,443 $ 940,470
Robert C. Hart.................................................. 68,250 0 11,608 235,062
Octavio Orta.................................................... 117,000 43,600 9,830 309,345
Gary W. Pichon (6).............................................. 82,000 0 0 3,438
Frank R. McCauley............................................... 35,000 5,300 0 11,925
All current executive
officers as a group............................................ 575,550 48,900 95,180 2,053,045
</TABLE>
- ------------------------------
(1) Excludes Messrs. W.T. Stephens and R.B. Von Wald, each of whom is also an
executive officer of Manville and does not participate in any of
Riverwood's executive compensation or benefit plans.
(2) 1,624,000 1994 Premium SARs were awarded under the 1994 Long-Term Incentive
Plan ("1994 LTIP") to executive officers and are generally exercisable at
the following prices: 40% at $18, 25% at $20, 15% at $22, 10% at $24 and
10% at $26. In addition, 175,000 1994 Premium SARs were awarded to A. Kurt
Renick, an executive officer of Riverwood, under the 1994 LTIP and are
exercisable at the following prices: 40% at $24, 25% at $25 and 35% at $26.
All other outstanding Premium SARs held by executive officers (including
those granted under the 1992 Long-Term Incentive Plan (the "1992 LTIP"))
are exercisable at $26, except for 48,750 Premium SARs for Mr. Hart (60% at
$22 and 40% at $24), 141,000 Premium SARs for Mr. Orta (31% at $18, 34% at
$20, 21% at $22 and 14% at $24), 62,500 Premium SARs for Mr. Pichon (22% at
$20, 47% at $22, and 31% at $24), 26,300 Premium SARs for Mr. McCauley (20%
at $18 and 80% at $22) and 122,150 Premium SARs for all other current
executive officers as a group (64% at $24 and 36% at $25).
(3) 1993 Premium SARs were awarded under the 1992 LTIP and were exercisable at
$18 per Premium SAR. 1993 Premium SARs were fully vested upon grant and are
exercisable through March 5, 2003.
(4) Restricted Stock Units were awarded to executive officers under the 1992
LTIP as of March 12, 1993 and June 1, 1995. These units entitle the holder
to a payment in cash or stock, at the discretion of the Riverwood
Compensation Committee, equal to the number of such units granted times the
average of the high and low price of the Riverwood Common Stock as of the
payment date. All Restricted Stock Units are fully vested and were
originally payable in February 1996, except for those of two executive
officers. Except for executive officers, whose restricted stock did not
vest on January 1, 1996, and Messrs. Pichon and McCauley, all current
executive officers elected to defer payment of the value of the units until
the earlier of (i) May 1, 1996 and (ii) ten business days following the
Effective Time in connection with the opportunity to purchase shares of
Holding Common Stock, and to participate in all features of a new Holding
equity incentive plan as described below. It is currently contemplated that
the Restricted Stock Units held by such officers and others making the
deferral elections will be valued at the Merger Consideration for purposes
of acquiring Holding Common Stock, in lieu of the December 29, 1995 average
stock price of $19.0625 otherwise payable pursuant to the 1992 LTIP.
Messrs. Pichon and McCauley each received payments in February 1996 in
respect of all their outstanding Restricted Stock Units (including
immaterial cash credits with respect to 1995 dividend equivalents), of
$126,286 for 6,624 units and of $309,795 for 16,251 units, respectively,
based on the average stock price on December 29, 1995 of $19.0625.
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(5) Represents the value of the Awards at the Merger Consideration. The
accelerated vesting of, and cash payments made under, the Awards will be
accounted for in connection with the Merger.
(6) Mr. Pichon resigned as of February 9, 1996.
On August 16, 1995, Mr. Pichon exercised 50,600 1993 Premium SARs and on
September 21, 1995 he exercised 113,000 1994 Premium SARs for an aggregate cash
payment of $1,122,425. On September 21, 1995, Mr. Johnson exercised 113,500 1993
Premium SARs, 25,400 1993 Replacement SARs and 607,500 1994 Premium SARs for an
aggregate cash payment of $4,371,316. Mr. Hart exercised 39,800 1993 Premium
SARs, 9,400 1993 Replacement SARs and 50,000 1994 Premium SARs on September 21,
1995, and exercised 76,750 1994 Premium SARs on September 25, 1995 for a total
aggregate cash payment of $1,141,140. Mr. Orta exercised 78,000 1994 Premium
SARs on September 21, 1995 for an aggregate cash payment of $565,500. Mr.
McCauley exercised 15,800 Replacement SARs and 105,000 1994 Premium SARs on
September 21, 1995 for an aggregate cash payment of $788,618. Other executive
officers of Riverwood exercised 43,700 1993 Premium SARs and 145,600 1994
Premium SARs on September 21, 1995, 14,000 1994 Premium SARs on September 22,
1995, and 33,600 1994 Premium SARs on September 25, 1995 for a total aggregate
cash payment of $1,348,275.
Holding and Parent anticipate that certain executive officers currently
holding Awards are expected to forgo payment of a portion of the cash payments
from Riverwood upon the Effective Time under the Merger Agreement with respect
to such executive officer's Awards (see "-- The Merger Agreement; PAYMENTS UNDER
CERTAIN AWARDS") and to have the opportunity to participate at a higher level in
the equity grants expected to be made available by Holding shortly following the
Merger, as described below. Participating executive officers will receive a
deferred compensation commencement bonus and, shortly following the Merger, will
be given the opportunity to convert such bonus into a deferred stock award for a
number of shares of Holding Common Stock equal to the quotient obtained by
dividing the amount of such commencement bonus by the price per share of Holding
Common Stock paid by the members of the CDR Group in their initial purchase of
Holding Common Stock (the "Holding Deferred Stock"). The grant of Holding
Deferred Stock is subject to the negotiation and execution of definitive
agreements with respect thereto.
Each of the executive officers of Riverwood (other than Messrs. Stephens and
Von Wald) have in effect three-year employment agreements with Riverwood that
provide for lump sum separation payments upon any termination of employment
other than termination (i) for "cause" as defined in the employment agreements,
(ii) as a result of voluntary resignation without "good reason," as defined in
the employment agreements or (iii) as a result of death, disability or
retirement. For each executive officer, prior to a "change in control," as
defined in the employment agreements, separation payments under the agreements
generally would equal two times the officer's annual salary plus one full year's
bonus at target levels of performance under Riverwood's Annual Incentive
Compensation Plan and certain other benefits. Following a change in control, the
definitions of "cause" and "good reason" are liberalized and, upon termination
other than (i) for "cause," (ii) as a result of voluntary resignation without
"good reason," or (iii) as a result of death, disability or retirement, subject
to a cap in certain circumstances in connection with the "golden parachute" tax
rules, benefits and payments are increased and include two years' annual salary,
two years' target annual bonus, a PRO RATA portion of the target annual bonus
for the year of termination, two years' additional credit under Riverwood's
Supplemental Retirement Plan, a payment equal to the cost of 36 months of
welfare benefits and 24 months of continued perquisites. The Merger will
constitute a change in control for the foregoing purposes.
In addition, subject to certain limitations, if any of the executive
officers is determined to be subject to excise tax under Section 4999 of the
Code (the "Excise Tax") with respect to payments made pursuant to the foregoing
paragraph, Riverwood has agreed to pay such executive an amount which, after
taking into account any federal, state and local income tax, medicare payroll
deduction and excise tax upon such amount, shall be equal to the amount of the
Excise Tax. Riverwood does not expect any such payments to be required in
connection with the Merger.
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Pursuant to the Merger Agreement, Parent and the Purchaser have agreed to
cause the Surviving Corporation to honor the employment, severance and other
agreements of Riverwood or its subsidiaries in effect on the date of the Merger
Agreement with any employee, officer, director or executive or former employee,
officer or executive of Riverwood or any subsidiary thereof. Parent has also
agreed to cause the Surviving Corporation to continue to maintain, for a period
of one year after the Effective Time, employee benefit, incentive compensation
and welfare plans, programs and policies for the benefit of employees of
Riverwood and its subsidiaries, which in the aggregate provide benefits that are
substantially comparable to those provided to them under such plans on the date
of the Merger Agreement. Parent has also agreed to cause the Surviving
Corporation to continue to pay for one year following the Effective Time
salaried and nonunion hourly employees base salary or hourly rates of pay that
are substantially equivalent to those paid immediately prior to the Effective
Time and, in the event of any qualifying termination of employment within one
year following the Effective Time, to pay severance benefits that are generally
comparable to the severance benefits payable pursuant to the terms of the
Company's plans in effect on the date of the Merger Agreement. See "-- The
Merger Agreement; EMPLOYEE MATTERS."
Parent has advised Manville that it intends to negotiate new employment
agreements with each of Messrs. Johnson, Robert C. Hart, Octavio Orta and Frank
R. McCauley (each a "Senior Executive" and collectively, the "Senior
Executives") that will provide for an employment term of five years for Messrs.
Johnson and Orta and three years for the other Senior Executives. Each agreement
will provide the Senior Executive with the opportunity to purchase a specified
number of shares of Holding Common Stock and to receive a grant of options to
purchase additional shares of Holding Common Stock and a grant of a deferred
compensation bonus which each of the Senior Executives may, following the
closing of the Merger, elect to convert to Holding stock units. The employment
agreements will also provide that, in the event of a termination of any such
Senior Executive's employment by Riverwood without "cause" (as defined in the
employment agreements) or by the Senior Executive for "good reason" (as so
defined), the Senior Executive will be entitled to continued salary and welfare
benefits, for a period equal to the greatest of (x) one year, (y) the balance of
the employment term or (z) the expiration of the number of months equal to the
numbers of years of the completed service credited to the Senior Executives as
of the date of termination, and a PRO RATA incentive bonus for the year of
termination. The agreements will also contain certain noncompetition and
nonsolicitation provisions and will provide for the termination of the existing
employment agreements described above and the forfeiture of all or a portion of
the cash payments otherwise due upon the consummation of the Merger in respect
of the Restricted Stock Units currently held by the Senior Executives.
Pursuant to the Merger Agreement, Parent has agreed to indemnify present and
former employees, agents, directors and officers of Riverwood or any of its
subsidiaries against any claim, liability, loss, damage, cost or expense arising
out of any matter existing or occurring at or prior to the Effective Time to the
fullest extent permitted by applicable law. Parent has also agreed to, or cause
the Surviving Corporation to, maintain policies of directors' and officers'
liability insurance equivalent to current policies of Riverwood, subject to
certain limitations, for six years after the Effective Time.
Riverwood has adopted a retirement program for non-employee directors of
Riverwood (except for Mr. Stephens) which provides for continued payment of the
annual retainer in effect at the time of the director's retirement. If the
director has served as a director of Riverwood for five or more years and has
attained age 70, continued payment of the retainer is for life. If the retiring
director has served as a director for five or more years but has not attained
age 70, the retainer continues for a period of years equal to the number of
years of service or for life, whichever is less. No retirement benefits are paid
to any director retiring with less than five years of service, except in the
event of a change in control, which would occur at the Effective Time. None of
the directors of Riverwood has served as a director of Riverwood for five or
more years or has attained age 70. Mr. Markey has been a director since 1993 and
all other directors have been directors since 1992. As a result of the Merger,
each of the non-employee directors (other than Mr. Stephens) will be credited
with the number of years of service necessary to bring the total number of such
director's total number of years of service to five for the
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purposes of the retirement program. Accordingly, each of the non-employee
directors of Riverwood (other than Mr. Stephens and any director who becomes a
director of the Surviving Corporation) will, at the Effective Time, be entitled
to receive the annual retainer in effect at the Effective Time (currently
$25,000) for a five-year period or for life, whichever is less, which will
result in aggregate payments of up to $1,250,000. This expense will be
recognized by Riverwood in connection with the accounting for the Merger.
Holding and Parent have advised Manville that, in connection with the
Merger, Holding expects to adopt an equity incentive plan (the "Equity Incentive
Plan") providing for the sale of Holding Common Stock and the grant of options
and deferred stock units with respect to up to an aggregate of 690,000 shares of
Holding Common Stock. Approximately 15 members of Riverwood's senior executive
group (the "Senior Management Investors"), which includes Mr. Johnson, will be
given the opportunity to purchase up to an aggregate of 90,000 shares, or
approximately $9.0 million, of Holding Common Stock, reduced by the amount of
any Holding Deferred Stock granted to the Senior Management Investors, and will
receive options to purchase up to an aggregate additional amount of 270,000
shares, or approximately $27.0 million, of Holding Common Stock. It is also
expected that approximately 89 other key employees of Riverwood (together with
the Senior Management Investors, the "Management Investors") will have the
opportunity to purchase up to an aggregate of 110,000 shares, or approximately
$11.0 million of Holding Common Stock, reduced by the amount of any Holding
Deferred Stock granted to such other Management Investors, and will receive
options to purchase up to an aggregate additional amount of 220,000 shares, or
approximately $22.0 million, of Holding Common Stock. A portion of the options
granted under the plan (including one third of the options granted to the Senior
Executives) will provide for accelerated vesting if certain performance criteria
are met. It is also expected that deferred compensation bonuses in an aggregate
amount not exceeding approximately $7.2 million will be granted under the Equity
Incentive Plan to certain Management Investors (including the Senior Executives)
on the closing of the Merger and that, shortly following the closing of the
Merger, such Management Investors will have the opportunity to convert all or a
portion of such bonuses into Holding stock units. Holding and Parent have
advised Riverwood that the equity that the Management Investors will have the
opportunity to purchase or to receive in lieu of the Merger Consideration,
together with amounts which may be issued in the future to certain employee
benefit plans, will represent up to approximately 9% of the outstanding Holding
Common Stock on a fully diluted basis following the Merger. See "-- Certain
Information Concerning Holding, Parent and the Purchaser; OWNERSHIP OF HOLDING
COMMON STOCK AT THE EFFECTIVE TIME." All such Holding Common Stock will be
purchased by the Management Investors at a per share purchase price equal to the
per share price paid by the members of the CDR Group in their initial purchase
of Holding Common Stock. A portion of the cash purchase price to be paid for the
stock purchased by certain Management Investors may be financed by loans from
Chemical Bank on customary terms. To help those purchasers obtain a more
favorable rate and more favorable terms for such financing, the Surviving
Corporation may guarantee such indebtedness in an amount up to $10 million. The
vesting of all such options will generally be subject to the completion by each
Management Investor of a minimum period of service or attainment by Parent as
the surviving corporation in the Subsequent Merger of certain performance
objectives.
Certain Management Investors are also expected to have the opportunity to
convert all or a portion of deferred compensation bonuses granted to them on the
closing of the Merger into stock units with respect to Holding Common Stock
pursuant to separate deferred stock unit agreements. Parent has advised
Riverwood that participation by the Management Investors in the foregoing
Holding Equity Incentive Plan will be subject to negotiation and execution of
definitive agreements, including satisfactory employment agreements. The
subscription agreements and the deferred stock unit agreements are expected to
grant Holding successive rights to purchase shares or units held by each
Management Investor upon the termination of his or her employment for any
reason. In the event of death, disability, retirement at normal retirement age
or termination of employment without "cause" (as defined in the subscription
agreements) or, in the case of certain senior Management Investors, termination
of employment by such Management Investor for "good reason" (as defined in
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the subscription agreements), each Management Investor is expected to have the
right to require Holding to purchase all of his or her shares or units at the
fair market value of such shares (or the shares underlying units) generally as
of the date of termination, such fair market value to be determined by the Board
of Directors of Holding. In the event of the termination of employment for
"cause," Holding is expected to have the right to purchase the Management
Investors' shares or deferred stock units at a price equal to the lesser of cost
(or, in the case of deferred stock units, the amount of the deferred
compensation bonus converted) and fair market value, although the Management
Investor will have no option to require the purchase of the shares or deferred
stock units by Holding. Any purchase to be made by Holding pursuant to these
provisions will be deferred if Holding or any of its subsidiaries is in default
of any provisions under any financing arrangements, or if such purchase will
result in any such default or be prohibited by applicable law. Shares of Holding
Common Stock held by Management Investors will also be subject to certain
restrictions on transfer, including a right of refusal on the part of Holding in
the event of a proposed transfer, which must be pursuant to a BONA FIDE written
cash offer open by its terms for at last 60 days. All deferred stock units and
options will be nontransferable. The various sale rights and transfer
restrictions with respect to shares of Holding Common Stock and deferred stock
units held by Management Investors will terminate in the event of an
underwritten public offering of Holding Common Stock led by an underwriter of
national recognized standing.
Pursuant to a Registration and Participation Agreement to be entered into in
connection with the sale of Holding Common Stock (the "Registration and
Participation Agreement"), the equity investors and certain Management Investors
who are "accredited investors" will have the right to participate in subsequent
offerings of Holding Common Stock to any initial equity investor, including CDR
Fund V, and certain other investors on the same terms and conditions in order to
maintain their PRO RATA interests in Holding Common Stock.
MANVILLE CORPORATION. Pursuant to the Merger Agreement, Riverwood will pay
all amounts due and payable to Manville under certain intercompany agreements
for services performed or expenses incurred prior to the Effective Time in
accordance with past practice. In addition, a certain Promissory Note, dated
November 30, 1994, by Riverwood International, B.V., a subsidiary of Riverwood,
to Manville in the amount of $12,573,469 plus accrued interest will be repaid in
full on the closing date of the Merger.
Pursuant to the Merger Agreement, Manville has agreed to provide transition
services to the Surviving Corporation in the areas of auto leasing, internal
audit and telephone service pursuant to an agreement to be entered into between
Manville and Riverwood. Manville will provide these services for 90 days (180
days for the telephone service) following the Effective Time at Manville's fully
allocated cost, without markup.
The Merger Agreement provides that, at the Effective Time, the Purchaser
will pay to Manville, by wire transfer to an account designated by Manville, an
amount equal to the Merger Consideration multiplied by the number of shares of
Riverwood Common Stock beneficially owned by Manville, net of applicable
withholding taxes.
Each of the executive officers of Manville (including Messrs. Stephens and
Von Wald, who are also executive officers of Riverwood) has in effect a
three-year employment agreement with Manville that provides for lump sum
separation payments upon any termination of employment other than termination
(i) for "cause" as defined in the employment agreements, (ii) as a result of
voluntary resignation without "good reason," as defined in the employment
agreements or (iii) as a result of death, disability or retirement. For each
executive officer of Manville, prior to a "change in control," as defined in the
employment agreements, separation payments under the agreements generally would
equal two times the officer's annual salary plus one full year's bonus at target
levels of performance under Manville's Annual Incentive Compensation Plan and
certain other benefits. Following a change in control, the definitions of
"cause" and "good reason" are liberalized and, upon termination other than (i)
for "cause," (ii) as a result of voluntary resignation without "good reason," or
(iii) as a result
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of death, disability or retirement, subject to a cap in the case of Manville
executive officers (other than Messrs. Stephens and Von Wald) in certain
circumstances to limit any loss of tax deductions by Manville on account of the
"golden parachute" tax rules, benefits and payments are increased and include
two years' annual salary, two years' target annual bonus, a PRO RATA portion of
the target annual bonus for the year of termination, two years' additional
credit in certain cases under Manville's Supplemental Retirement Plan, a payment
equal to the cost of 36 months of welfare benefits and 24 months of continued
perquisites. The Merger will constitute a change in control and may result in
good reason for the foregoing purposes. Manville will be responsible for the
payment of any amounts required to be paid pursuant to the agreements between
Manville and its executive officers.
Manville has entered into supplemental retirement agreements with Messrs.
Stephens and Von Wald that provide for Manville to pay each upon termination of
employment a lump sum benefit (the "Supplemental Benefit") equal to the present
value of a single life annuity commencing at the time of such termination
ranging from 30% to 60% of his highest average base salary plus cash bonus for
three consecutive years during the preceding ten years ("Average Pay"), offset
by amounts payable under Manville's retirement plan plus certain other amounts,
including vested restricted stock awards made during 1994 of 340,000 shares and
150,000 shares, respectively, and cash payments made during 1994 of $1,300,000
and $500,000, respectively, and other payments previously made and to be made in
connection with the executives' retirement arrangements. The 1994 restricted
stock awards have a five-year vesting schedule, subject to accelerated vesting
upon a change in control, and had fair market values on the date of grant of
$3,099,100 and $1,367,250, respectively. The vesting of the restricted stock and
payment of dividends thereon are subject to a cap related to the supplemental
retirement arrangements. If termination occurs (i) after attaining age 62, (ii)
without cause, (iii) for "good reason," (iv) for death or "disability" or (v)
after the occurrence of a change in control, the Supplemental Benefit will be
60% of Average Pay, and will be increased to compensate for the impact of the
timing of taxation of the Supplemental Benefit (and the offsets thereto) as
compared with the tax treatment of a single life annuity. The Merger will
constitute a change in control and may result in good reason for the foregoing
purposes.
On October 3, 1995, Manville also entered into agreements with each of the
executive officers of Manville (including Messrs. Stephens and Von Wald, who are
also executive officers of Riverwood) relating to cancellation of their
performance units granted under Manville's Long-Term Cash Incentive Plan. In
consideration of the cancellation of the performance units, the Manville
executive officers are, subject to certain conditions, each entitled to payments
equal to the amount of any dividends paid with respect to the Common Stock, up
to $0.84 per unit. In connection with the Dividend, Messrs. Stephens and Von
Wald will be entitled to receive $403,200 and $70,560, respectively. A previous
accrual for the performance units for all executives, which totaled
approximately $620,000, was replaced by a comparable accrual for the
consideration for the cancellation of the performance units. Accordingly, there
is no net change in Manville's accrued compensation expense for 1995. See "THE
EXCHANGE -- Profit Sharing Exchange Agreement" and "INTEREST OF CERTAIN PERSONS
IN MATTERS TO BE ACTED UPON."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO MANVILLE OF THE RIVERWOOD DISPOSITION
Pursuant to the Tax Matters Agreement, Manville and Parent will take such
actions as may be required to treat the Merger as a taxable sale of the assets
of Riverwood and its subsidiaries under Section 338(h)(10) of the Code. As a
consequence, Manville will recognize no gain or loss on the sale of its shares
of Riverwood Common Stock but will be required to pay any consolidated federal
and combined (but not stand-alone) state income taxes associated with the gain
on the deemed sale of all of the assets of Riverwood and its subsidiaries.
Manville is generally entitled to deduct court-approved transfers to the PI
Trust and will be entitled to a deduction to the extent that it transfers funds
to the PI Trust pursuant to the Dividend. Any such deduction, and other
available tax attributes, may offset a significant portion of the consolidated
federal and combined state income taxes associated with the deemed sale of the
assets of Riverwood and its subsidiaries.
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ACCOUNTING TREATMENT OF THE RIVERWOOD DISPOSITION
The Riverwood Disposition will be accounted for in accordance with
Accounting Principles Board Opinion No. 30, "Reporting the Effects of Disposal
of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions" ("APB No. 30"). Pursuant to APB No. 30, operations of Riverwood
will be treated as discontinued operations and will be reported separately from
continuing operations as a component of income before extraordinary items in
Manville's consolidated statement of income. Additionally, the related gain from
the Riverwood Disposition at September 30, 1995, estimated to be $112.8 million,
net of taxes, will be reported in conjunction with such results of discontinued
operations when the Riverwood Disposition is consummated.
CERTAIN APPROVALS
Certain federal, state and foreign regulatory requirements must be complied
with before the Merger is consummated. The Company is not aware, and Riverwood
and Holding have advised the Company that they are not aware, of any other
governmental consents or approvals that are required prior to the parties'
consummation of the Merger other than those described below. It is presently
contemplated that if such additional governmental consents and approvals are
required, such consents and approvals will be sought. There can be no assurance,
however, that any such additional consents or approvals will be obtained.
HSR ACT. The formation of Holding is subject to the requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and the rules and regulations thereunder, which provide that certain
acquisition transactions may not be consummated until certain information has
been furnished to the Antitrust Division of the Department of Justice (the
"Antitrust Division") and the Federal Trade Commission (the "FTC") and until
certain waiting periods have been terminated or have expired. Certain investors
in Holding were therefore required to file Notification and Report Forms, which
forms were filed with the Antitrust Division and the FTC on January 31, 1996.
The waiting period under the HSR Act will expire on March 1, 1996, unless
earlier terminated or unless additional information is requested from the
investors.
The expiration or termination of the HSR waiting period does not preclude
the Antitrust Division, the FTC or any state from challenging the Merger on
antitrust grounds either before or after the waiting period has expired or been
terminated. Accordingly, at any time before or after the Effective Time, the
Antitrust Division, the FTC or any state could take such action under the
antitrust laws as it deems necessary or desirable in the public interest, or
certain other persons, including private parties, could take action under the
antitrust laws. Such action could include seeking to enjoin the Merger.
Riverwood and Holding have advised the Company that based on information
available to them, Parent and Riverwood believe that the Merger can be effected
in compliance with federal and state antitrust laws. There can be no assurance,
however, that a challenge to the Merger will not be made or that, if such a
challenge is made, Holding and Riverwood will prevail.
FOREIGN REGULATORY MATTERS. Riverwood, directly or through subsidiaries,
owns properties and conducts business operations in a number of foreign
countries. In connection with the Merger, the laws of certain of these foreign
countries may require the filing of information or documents with governmental
authorities therein. Riverwood, Holding, Parent and the Purchaser have informed
the Company that they intend to comply with all relevant filing requirements of
these jurisdictions. They have further advised that they do not expect such
foreign government approvals and notifications to affect the timing of or the
ability to effect the consummation of the Merger; however, there can be no
assurances with respect thereto.
OTHER APPROVALS. In addition to the regulatory approvals described above,
the Merger, and Manville's obligation to vote its shares of Riverwood Common
Stock in favor of the Merger Agreement pursuant to the terms of the Voting and
Indemnification Agreement, are conditioned on the receipt by Manville of the
consent or waiver, as the case may be, of the PI Trust under (i) the Agreement,
dated as
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of June 24, 1992, between Manville and the PI Trust, (ii) the Supplemental
Agreement and (iii) the PD Supplemental Agreement. The PI Trust has not advised
Manville as to whether it intends to grant such consents or waivers.
THE MERGER AGREEMENT
THE FOLLOWING IS A SUMMARY OF THE MATERIAL PROVISIONS OF THE MERGER
AGREEMENT NOT SUMMARIZED ELSEWHERE IN THIS PROXY STATEMENT. THE FOLLOWING
SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE MERGER AGREEMENT, WHICH IS ATTACHED AS ANNEX B TO THIS PROXY
STATEMENT AND IS INCORPORATED HEREIN BY REFERENCE. STOCKHOLDERS ARE URGED TO
READ THE MERGER AGREEMENT IN ITS ENTIRETY AND TO CONSIDER IT CAREFULLY.
EFFECTIVE TIME
The Merger will become effective, and the Effective Time will occur, upon
the filing of a Certificate of Merger with the Secretary of State of the State
of Delaware as required by the DGCL or at such later time as is agreed upon by
Parent, the Purchaser and Riverwood and specified in such certificate. Such
filing will be made on or as promptly as practicable following the closing date
under the Merger Agreement, which will take place not later than the second
business day after the satisfaction or waiver of all of the conditions set forth
in the Merger Agreement, or such other time as agreed to in writing by
Riverwood, Parent and the Purchaser (the "Merger Closing Date"). There can be no
assurance as to if or when the Merger will be consummated. If the Merger has not
been consummated on or prior to March 31, 1996, or such other date, if any, as
Parent and Riverwood shall agree upon, the Merger Agreement may be terminated by
either Riverwood or Parent and the Purchaser, unless the failure to consummate
the Merger by such date is due to the failure of the party seeking to terminate
the Merger Agreement to fulfill any obligation under the Merger Agreement. See
"-- CONDITIONS TO CONSUMMATION OF THE MERGER" and "-- TERMINATION."
MERGER CONSIDERATION; CONVERSION OF SHARES
At the Effective Time, each share of Riverwood Common Stock (other than
shares as to which dissenters' rights have been duly asserted and perfected
under the DGCL and shares held by Riverwood, Parent, the Purchaser or any other
subsidiary of Parent) will be converted into the right to receive the Merger
Consideration upon surrender of the certificate formerly representing such share
of Common Stock. All such shares of Riverwood Common Stock, when so converted,
will no longer be outstanding and will automatically be cancelled and retired
and will cease to exist, and each holder of a certificate representing any such
shares will cease to have any rights with respect thereto, except the right to
receive the Merger Consideration therefor upon the surrender of such
certificate.
All shares of Common Stock that are held by Riverwood as treasury stock and
any shares of Riverwood Common Stock owned by Parent, the Purchaser or any other
subsidiary of Parent will be cancelled and retired and will cease to exist and
no Merger Consideration will be delivered in exchange therefor.
PAYMENTS UNDER CERTAIN AWARDS
Except as Parent or the Purchaser and the holder of an Award (as defined
below) otherwise agree (including to the extent that the holder of an Award
receives from the Surviving Corporation a grant of Rollover Common Stock (see
"-- Interests of Certain Persons in the Merger; Potential Conflicts of
Interest")), Riverwood will take all actions necessary to provide that, upon the
Effective Time, (i) each outstanding restricted stock unit ("Restricted Stock
Units") or stock appreciation right (including any Premium, Option Replacement
or SAR Replacement stock appreciation right) ("SARs" and, together with the
Restricted Stock Units, the "Awards") outstanding under either Riverwood's 1992
Long-Term Incentive Plan or 1994 Long-Term Incentive Plan (together, the "Option
Plans"), whether or not then exercisable or vested, will become fully
exercisable and vested, (ii) each Award of an SAR which is then outstanding will
be cancelled and each Award of a Restricted Stock Unit which is then outstanding
will be repurchased and (iii) in consideration of such cancellation or
repurchase, as the case may be, Riverwood will pay to the holder of each such
Award an amount in respect thereof equal
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to the product of (A) the Applicable Amount, multiplied by (B) the number of
units subject thereto (such payment to be net of applicable withholding taxes).
The term "Applicable Amount" means (i) in the case of Awards of Restricted Stock
Units, the Merger Consideration or (ii) in the case of Awards of SARs, the
excess of (A) (1) with respect to Awards of SARs granted under the 1994
Long-Term Incentive Plan, the greater of the Merger Consideration or the highest
price of a share of Riverwood Common Stock (as determined by the committee
administering the 1994 Long-Term Incentive Plan) paid in a BONA FIDE transaction
during the 60-day period preceding and including the Effective Time or (2) with
respect to all Awards of SARs other than those specified in clause (ii)(A)(1),
the Merger Consideration, over (B) the applicable grant price of each such
Award.
CERTAIN REPRESENTATIONS AND WARRANTIES
RIVERWOOD. Pursuant to the Merger Agreement, Riverwood has made
representations and warranties regarding, among other things, (i) Riverwood's
organization, existence and qualification to do business and similar corporate
matters, (ii) Riverwood's capitalization, (iii) Riverwood's authority to enter
into and perform its obligations under the Merger Agreement, (iv) the absence of
conflict of the Merger Agreement and the transactions contemplated thereby with
Riverwood's Restated Certificate of Incorporation, By-Laws, certain agreements
and applicable laws, (v) certain governmental consents and approvals, (vi)
certain filings with the SEC and the financial statements contained therein,
(vii) the absence of material adverse changes, (viii) the absence of undisclosed
liabilities, (ix) the accuracy of information contained in the Riverwood Proxy
Statement and certain other SEC filings relating to the transactions
contemplated by the Merger Agreement, (x) employee benefits matters, (xi)
litigation and compliance with law, (xii) intellectual property, (xiii) certain
identified and material contracts, (xiv) taxes, (xv) environmental matters,
(xvi) the required vote of Riverwood's stockholders in connection with approval
of the Merger Agreement and the transactions contemplated thereby, (xvii)
brokers' fees, (xviii) opinions of Riverwood's financial advisors, (xix) assets,
(xx) real property, (xxi) insurance, (xxii) labor matters, (xxiii) the absence
of claims arising from Riverwood's affiliation with the Company and (xxiv)
transactions with the Company and its affiliates other than Riverwood and its
subsidiaries.
PARENT AND THE PURCHASER. Pursuant to the Merger Agreement, Parent and the
Purchaser have made representations and warranties regarding, among other
things, (i) Parent's and the Purchaser's organization, existence and
qualification to do business and similar corporate matters, (ii) Parent's and
the Purchaser's authority to enter into and perform their respective obligations
under the Merger Agreement, (iii) the absence of conflict of the Merger
Agreement and the transactions contemplated thereby with Parent's and the
Purchaser's respective certificates of incorporation, by-laws, certain
agreements and applicable laws, (iv) certain governmental consents and
approvals, (v) the accuracy of information, supplied by Parent and the
Purchaser, contained in the proxy statement distributed to holders of Riverwood
Common Stock in connection with the special meeting of Riverwood stockholders
called to consider and vote upon the Merger and certain other SEC filings
relating to the transactions contemplated by the Merger Agreement, (vi)
financing to pay the Merger Consideration and perform their obligations under
the Merger Agreement, (vii) Parent and the Purchaser not owning more than one
percent of Riverwood Common Stock, (viii) the Purchaser not having engaged in
any prior material business or activity or having material obligations or
liabilities, (ix) brokers' fees and (x) the solvency of the Surviving
Corporation after the Merger.
CONDUCT OF BUSINESS PENDING THE CLOSING
The Merger Agreement provides that, except as otherwise permitted or
required therein, required by applicable law or agreed to in writing by Parent,
after the date of the Merger Agreement and prior to the Effective Time:
(a) each of Riverwood and its subsidiaries will conduct its business
only in the ordinary course consistent with past practice and, to the extent
consistent therewith, each of Riverwood and its subsidiaries will use its
reasonable efforts to preserve its business organization and the business
organization of its subsidiaries intact and maintain existing relations with
customers, suppliers, employees and creditors;
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(b) Riverwood will not amend its Restated Certificate of Incorporation
or By-Laws;
(c) Riverwood will not, with certain exceptions, declare, set aside or
pay any dividend (other than regular quarterly dividends consistent with
past practice and in no event exceeding $0.04 per share per quarter) or
other distribution payable in cash, stock or property with respect to its
capital stock; and neither Riverwood nor any of its subsidiaries will (i)
issue, sell, transfer, pledge, dispose of or encumber any additional shares
of, or securities convertible into or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire, any shares of
capital stock of any class of Riverwood or any of its subsidiaries, other
than issuances of shares of Riverwood Common Stock pursuant to securities,
options, warrants, calls, commitments or rights existing at the date of the
Merger Agreement and previously disclosed to the Purchaser in writing
(including as disclosed in documents filed by Riverwood with the SEC); (ii)
incur any long-term indebtedness (whether evidenced by a note or other
instrument, pursuant to a financing lease, sale-leaseback transaction, or
otherwise) or incur short-term indebtedness other than under lines of credit
existing on the date of the Merger Agreement; (iii) redeem, purchase or
otherwise acquire directly or indirectly any of its capital stock or other
securities; or (iv) enter into or amend in any material respect certain
identified and material contracts, except in the ordinary course of business
consistent with past practice;
(d) neither Riverwood nor any of its subsidiaries will (i) except for
normal increases in the ordinary course of business consistent with past
practice, grant any increase in the compensation or benefits payable or to
become payable by Riverwood or any of its subsidiaries to any employee; (ii)
adopt, enter into, amend or otherwise increase, or accelerate the payment or
vesting of the amounts, benefits or rights payable or accrued or to become
payable or accrued under any bonus, incentive compensation, deferred
compensation, severance, termination, change in control, retention,
hospitalization or other medical, life, disability, insurance or other
welfare, profit sharing, stock option, stock appreciation right, restricted
stock or other equity-based, pension, retirement or other employee
compensation or benefit plan, program agreement or arrangement; or (iii)
enter into or amend in any material respect any employment or collective
bargaining agreement or, except in accordance with the existing written
policies of Riverwood or existing contracts or agreements, grant any
severance or termination pay to any officer, director or employee of
Riverwood or any of its subsidiaries;
(e) neither Riverwood nor any of its subsidiaries will change the
accounting principles used by it unless required by generally accepted
accounting principles (or, if applicable with respect to subsidiaries,
foreign generally accepted accounting principles);
(f) neither Riverwood nor any of its subsidiaries will acquire by
merging or consolidating with, by purchasing an equity interest in or a
portion of the assets of, or by any other manner, any business or any
corporation, partnership, association or other business organization or
division thereof, or otherwise acquire any assets of any other person (other
than the purchase of assets from suppliers or vendors in the ordinary course
of business consistent with past practice) for an amount that in the
aggregate is material, individually or in the aggregate, to Riverwood and
its subsidiaries, taken as a whole;
(g) neither Riverwood nor any of its subsidiaries will sell, lease,
exchange, transfer or otherwise dispose of, or agree to sell, lease,
exchange, transfer or otherwise dispose of, any of its properties and assets
(real, personal or mixed, tangible or intangible), necessary for the conduct
of, or otherwise material to, their business and operations as currently
conducted, except in the ordinary course of business consistent with past
practice;
(h) neither Riverwood nor any of its subsidiaries shall release any
third party from its obligations (i) under any existing standstill agreement
or arrangement relating to an Acquisition Transaction (as defined below),
unless the Riverwood Board determines in its good faith, reasonable
judgment, after consultation with its counsel, that the failure to do so
could reasonably be expected to constitute a breach of the Riverwood Board's
fiduciary duties under applicable law, or
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(ii) otherwise under any confidentiality or other similar agreement, except
for modifications of any such obligations under existing commercial
arrangements in the ordinary course of business consistent with past
practice;
(i) Riverwood and its subsidiaries will not mortgage, pledge,
hypothecate, grant any security interest in, or otherwise subject to any
other lien other than certain permitted liens, any of their assets;
(j) neither Riverwood nor any of its subsidiaries will, with certain
exceptions, compromise, settle, grant any waiver or release relating to or
otherwise adjust any litigation, except for any such compromise, settlement,
waiver, release or adjustment in the ordinary course of business consistent
with past practice, or involving a payment by Riverwood or any of its
subsidiaries not in excess of $2,000,000 in the aggregate; and
(k) neither Riverwood nor any of its subsidiaries will enter into an
agreement, contract, commitment or arrangement to do any of the foregoing.
NO SOLICITATION OF PROPOSALS
The Merger Agreement prohibits Riverwood and its subsidiaries from, directly
or indirectly through their respective officers, directors, employees or agents
or any investment banker, financial advisor, attorney, accountant or other
representative retained by Riverwood or any of its subsidiaries, (i) initiating
or soliciting from, or encouraging the making by, any third party of an
Acquisition Proposal (as defined below) or (ii) except as permitted below,
engaging in negotiations or discussions with, or furnishing any information or
data to, any third party relating to an Acquisition Proposal (other than the
transactions contemplated by the Merger Agreement). Notwithstanding clause (ii)
of the foregoing sentence, Riverwood and its subsidiaries and their respective
boards of directors and representatives (i) may participate in negotiations or
discussions (including, as a part thereof, making any counterproposal) with or
furnish information or data to any third party if the Riverwood Board determines
in its good faith, reasonable judgment, after consultation with its counsel,
that the failure to participate in such discussions or negotiations or to
furnish such information could reasonably be expected to constitute a breach of
the Riverwood Board's fiduciary duties under applicable law, and (ii) shall be
permitted to (A) take and disclose to Riverwood's stockholders a position with
respect to the Merger or another Acquisition Proposal, or amend or withdraw such
position, pursuant to Rules 14d-9 and 14e-2 under the Exchange Act or (B) make
disclosure to Riverwood's stockholders, if the Riverwood Board determines in its
good faith, reasonable judgment, after consultation with its counsel, that
failure to take such action could reasonably be expected to constitute a breach
of its fiduciary duties under applicable law.
Riverwood has agreed in the Merger Agreement to advise Parent immediately in
writing of the receipt of any inquiries or proposals relating to an Acquisition
Proposal and any actions taken pursuant to the preceding paragraph, specifying
the material terms and conditions of such Acquisition Proposal and identifying
the person making such Acquisition Proposal. If any such inquiry or proposal is
in writing, Riverwood will promptly deliver to Parent a copy of such inquiry or
proposal, unless the Riverwood Board determines in its good faith, reasonable
judgment, after consultation with its counsel, that taking such action could
reasonably be expected to constitute a breach of its fiduciary duties under
applicable law.
The term "Acquisition Proposal" means any inquiry or proposal made by a
third party relating to, or that could reasonably be expected to lead to, an
Acquisition Transaction, and (ii) "Acquisition Transaction" means (other than
the transactions contemplated by the Merger Agreement) (A) a merger,
consolidation or other business combination, share exchange, sale of shares of
capital stock, tender offer or exchange offer or similar transaction involving
Riverwood or any of its subsidiaries, (B) the acquisition in any manner,
directly or indirectly, of a material interest in any voting securities of, or a
material equity interest in a substantial portion of the assets of, Riverwood or
any of its subsidiaries, including any single or multi-step transaction or
series of related transactions which is
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structured to permit a third party to acquire beneficial ownership of a majority
or greater equity interest in Riverwood, or (C) the acquisition in any manner,
directly or indirectly, of any material portion of the business or assets of
Riverwood.
EMPLOYEE MATTERS
Parent and the Purchaser have agreed in the Merger Agreement to honor, and
have agreed to cause the Surviving Corporation to honor, and to make required
payments when due under, all contracts and agreements of Riverwood and its
subsidiaries in effect as of the date of the Merger Agreement with any employee,
officer, director or executive or former employee, officer or executive of
Riverwood or any subsidiary thereof, including any such compensation, employment
and employee or director agreements in existence as of the date of the Merger
Agreement.
In addition to the foregoing, Parent has agreed in the Merger Agreement that
for a period of one year immediately following the Effective Time, it will, or
will cause the Surviving Corporation to, continue to maintain employee benefit,
incentive compensation and welfare plans, programs and policies for the benefit
of employees of Riverwood and its subsidiaries, which in the aggregate provide
benefits that are substantially comparable to those provided to them under such
plans on the date of the Merger Agreement.
Parent and the Purchaser have agreed in the Merger Agreement that, with
respect to each plan under the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), that is intended to qualify under Section 401(a) of the
Code and that provides for a variable match, each such plan will be continued
until at least December 31, 1996, and the variable match in respect of 1996 will
be determined using the actual performance of Riverwood and its subsidiaries for
such year, but adjusted to exclude any extraordinary charges, expenses or other
adjustments which result from or arise out of the transactions contemplated by
the Merger Agreement.
Parent has also agreed in the Merger Agreement that with respect to each
incentive, bonus or profit sharing plan, program or arrangement that may be in
effect for calendar year 1995 or 1996, the awards thereunder will be determined
with respect to 1996 based upon the actual performance of Riverwood and its
subsidiaries for such year, but adjusted to exclude any extraordinary charges,
expenses or other adjustments which result from or arise out of the transactions
contemplated under the Merger Agreement. Unless otherwise required by the Merger
Agreement, payment to participating employees under any such plan, program or
arrangement shall be made in accordance with the terms of such plan, program or
arrangement.
To the extent required by applicable law or any applicable agreement, Parent
also will recognize any union recognized by Riverwood or its subsidiaries at the
Effective Time and will assume the terms of any collective bargaining agreement
in effect with such union, and will, or will cause the Surviving Corporation to,
honor without modification all collective bargaining agreements as in effect at
the Effective Time.
CERTAIN OTHER COVENANTS
CERTAIN REVIEWS. The Merger Agreement provides that until the Effective
Time, Parent, its authorized representatives, and Dames & Moore (the
"Environmental Consultant"), will have reasonable access to the operations,
properties, assets, books, records and personnel of Riverwood and each of its
subsidiaries for the purpose of conducting an evaluation and review, and related
written report thereon, concerning environmental aspects of the past and present
activities and operations of Riverwood and its subsidiaries and their respective
predecessors, including as to the use or condition of properties or assets of
any of them or of any other person and as to compliance with applicable
environmental laws (such evaluation and review, and the related written report
thereon, being referred to herein as the "Environmental Assessment"). The Merger
Agreement also provides that before January 3, 1996, Parent and its outside
patent counsel will have the right to perform legal due diligence with respect
to (i) the validity and enforceability of certain intellectual property of
Riverwood and its subsidiaries and (ii) whether the conduct of the business of
Riverwood and its subsidiaries may infringe or otherwise conflict with the
intellectual property of any other person (the "Patent Review"), in each case as
Parent shall deem appropriate.
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PUBLICITY. The Merger Agreement also provides that no party to the Merger
Agreement will issue or cause the publication of any press release or other
announcement with respect to the Merger, the Merger Agreement or the other
transactions contemplated thereby without the prior consultation of the other
parties, except as may be required by law or by any listing agreement with a
national securities exchange if all reasonable efforts have been made to consult
with the other parties.
CERTAIN AGREEMENTS. Pursuant to the Merger Agreement, Riverwood will pay
all amounts due and payable to Manville under certain intercompany agreements
for services performed or expenses incurred prior to the Effective Time in
accordance with past practice. In addition, a certain Promissory Note, dated
November 30, 1994, by Riverwood International, B.V., a subsidiary of Riverwood,
to Manville in the amount of $12,573,469 plus accrued interest will be repaid in
full on the Merger Closing Date.
Pursuant to the Merger Agreement, Manville has agreed to provide transition
services to the Surviving Corporation in the areas of auto leasing, internal
audit and telephone service pursuant to an agreement to be entered into between
Manville and the Surviving Corporation. Manville will provide these services for
90 days (180 days for the telephone service) following the Effective Time at
Manville's fully allocated cost, without markup.
The Merger Agreement provides that the Purchaser will pay to Manville, by
wire transfer to an account designated by Manville, an amount equal to the
Merger Consideration multiplied by the number of shares of Common Stock
beneficially owned by Manville, net of applicable withholding taxes.
OFFERS AND SOLICITATIONS OF CONSENT. Parent and the Purchaser have agreed
in the Merger Agreement to use reasonable efforts to make, at their expense,
tender offers (the "Offers") for all of the Outstanding Notes (as defined below)
of Riverwood upon terms and subject to conditions to be determined by Parent and
the Purchaser, and Riverwood has agreed to cooperate therewith. The Offers may
be accompanied by such solicitations of consents from the holders of the
Outstanding Notes as may be determined by the Purchaser to be necessary or
appropriate, relating to certain amendments to the indentures under which each
series of the Outstanding Notes was issued. In the event that any registration
statement is required in connection with the Offers or such solicitations,
Parent and the Purchaser will use reasonable efforts, at their expense, to
prepare, file and cause to become effective any such registration statement, and
Riverwood has agreed to cooperate therewith as the registrant thereunder. See
"-- Source and Amount of Funds."
On December 21, 1995, Riverwood, at the request of Parent, commenced tender
offers for the Outstanding Notes, and Parent commenced solicitations of consent
to amend the indentures that govern the Outstanding Notes to eliminate certain
covenants and to provide waivers to permit consummation of the transactions
contemplated by the Merger and the Subsequent Merger. Parent has advised
Manville that, as of February 7, 1996, sufficient valid and unrevoked consents
to effect the proposed amendments relating to the Outstanding Notes had been
received, and on February 13, 1996, supplemental indentures providing for such
proposed amendments with respect to each series of Outstanding Notes were
executed.
CONDITIONS TO CONSUMMATION OF THE MERGER
RIVERWOOD, PARENT AND THE PURCHASER. The Merger Agreement provides that the
obligation of each party to the Merger Agreement to effect the Merger is subject
to the satisfaction on or prior to the Merger Closing Date of the following
conditions (any or all of which may be waived by the parties thereto): (i) no
statute, rule, order, decree or regulation (whether temporary, preliminary or
permanent) shall have been enacted or promulgated by any federal, state, local
or foreign court, legislative, executive or regulatory authority or agency (a
"Governmental Entity") of competent jurisdiction which is in effect and has the
effect of prohibiting the consummation of the Merger or making the
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Merger illegal; (ii) no order or injunction (whether temporary, preliminary or
permanent) of a Governmental Entity of competent jurisdiction shall be in effect
precluding, restraining, enjoining or prohibiting consummation of the Merger and
there shall be no suit, action, proceeding or investigation by a Governmental
Entity seeking to restrain, enjoin or prohibit the Merger; (iii) the applicable
waiting period under the HSR Act with respect to the actions contemplated by the
Merger Agreement shall have expired or been terminated; (iv) other than filing
the Certificate of Merger in accordance with the DGCL, all authorizations,
consents and approvals of all Governmental Entities required to be obtained
prior to consummation of the Merger shall have been obtained; (v) the Merger
Agreement shall have been approved and adopted by the affirmative vote of the
holders of a majority of the outstanding shares of Riverwood Common Stock, the
Merger shall have been approved by the affirmative vote of the holders of a
majority of the outstanding shares of the Common Stock and all authorizations,
consents and approvals of the PI Trust and the PD Trust, if any, shall have been
obtained; (vi) the conditions to (A) the obligation of Manville to declare the
Dividend and (B) certain obligations of Manville and the PI Trust under the
Profit Sharing Exchange Agreement shall have each been satisfied or waived;
(vii) the Tax Matters Agreement shall be in full force and effect (see "-- Tax
Matters Agreement"); (viii) the representations and warranties of each of the
parties contained in the Merger Agreement shall be true and correct in all
material respects at and as of the Effective Time; and (ix) each of the parties
to the Merger Agreement shall have performed in all material respects its
obligations under the Merger Agreement required to be performed at or prior to
the Effective Time pursuant to the terms of the Merger Agreement.
RIVERWOOD. The obligation of Riverwood to effect the Merger is further
subject to the satisfaction at or prior to the Effective Time of the following
conditions: (i) the Riverwood Board shall have received a letter from an
appraisal firm engaged by Parent and the Purchaser relating to the solvency of
the Surviving Corporation (the "Solvency Letter"); (ii) Riverwood shall have
received (a) an opinion from counsel to Parent and the Purchaser, in form and
substance reasonably satisfactory to Riverwood and (b) a certificate executed by
a duly authorized officer of the Purchaser to the effect that the
representations and warranties of Parent and the Purchaser are true and correct
as of the Merger Closing Date and to the effect that each of Parent and the
Purchaser has performed in all material respects its obligations under the
Merger Agreement; and (iii) the terms and provisions of the definitive
agreements relating to the Financing shall not have caused the Riverwood Board
in the exercise of its good faith, reasonable judgment, after consultation with
its counsel and financial advisor, to conclude that, notwithstanding the
delivery of the Solvency Letter, Parent and the Purchaser's representation as to
the solvency of Riverwood after giving effect of the Merger, the Financing and
any other transaction contemplated in connection therewith is not true and
correct in all material respects at and as of the Effective Time.
PARENT AND THE PURCHASER. The obligations of Parent and the Purchaser to
effect the Merger are further subject to the satisfaction at or prior to the
Effective Time of the following conditions: (i) the representations and
warranties of Manville contained in the Voting and Indemnification Agreement
shall be true and correct in all material respects at and as of the Effective
Time as if made at and as of such time; Manville shall have performed in all
material respects each of its obligations under the Voting and Indemnification
Agreement required to be performed by it at or prior to the Effective Time
pursuant to the terms thereof and the Voting and Indemnification Agreement shall
be in full force and effect with respect to Manville (see "-- Voting and
Indemnification Agreement"); (ii) the Environmental Consultant shall have
completed the Environmental Assessment relating to the business and operations
of Riverwood and its subsidiaries and shall have submitted its report in respect
thereof, which Environmental Assessment and report shall be satisfactory in
scope and substance to Parent and the Purchaser in their reasonable judgment;
(iii) Parent and the Purchaser shall have completed financing arrangements, and
entered into definitive financing agreements on terms satisfactory to them in
their reasonable judgment, and shall have received funds thereunder sufficient
to pay the Merger Consideration, repay or redeem all of the existing
indebtedness (subject to certain exceptions) of Riverwood and its subsidiaries,
and otherwise enable Parent and the Purchaser to consummate the transactions
contemplated by the Merger Agreement; (iv) the Offers shall have been
satisfactorily
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completed; (v) certain other indebtedness of Riverwood and its subsidiaries
shall have been repaid in full (at the Purchaser's expense), on terms
satisfactory to Parent and the Purchaser in their reasonable judgment, and
Parent and the Purchaser shall have received evidence to such effect
satisfactory to them; (vi) the number of shares as to which dissenters' rights
of appraisal have been duly asserted and perfected under the DGCL shall not
exceed ten percent (10.0%) of the outstanding shares of Riverwood Common Stock;
(vii) no event, occurrence, fact, condition, change, development or effect shall
exist or have occurred since July 1, 1995, that, individually or in the
aggregate, has had or resulted in, or could reasonably be expected to become or
result in, a material adverse effect on the business, assets, liabilities,
results of operations or financial condition of Riverwood and its subsidiaries
taken as a whole ("Material Adverse Effect"); (viii) Parent and the Purchaser
shall have received (A) opinions from counsel to Riverwood and counsel to
Manville, in form and substance reasonably satisfactory to Parent and the
Purchaser and (B) a certificate executed by a duly authorized officer of
Riverwood to the effect that the representations and warranties of Riverwood are
true and correct and to the effect that Riverwood has performed in all material
respects its obligations under the Merger Agreement; (ix) certain
representations and warranties of Riverwood relating to taxes and the
information set forth in a certain tax letter given by Manville to Parent (the
"Tax Letter") shall be true and correct at and as of the Effective Time as if
made at and as of such time; and (x) the Patent Review shall not have revealed
any facts or circumstances that would reasonably be expected individually or in
the aggregate to result in (A) a Material Adverse Effect, (B) any costs, damages
or liabilities that would be material to Riverwood and its subsidiaries taken as
a whole, (C) equitable remedies against the operation of any material portion of
the business of Riverwood and its subsidiaries, or (D) the inability to enforce
certain intellectual property of Riverwood or any of its subsidiaries (except as
against improvements developed by any other person without infringement or
misappropriation of any such intellectual property) so as to impair materially
the competitive position of Riverwood and its subsidiaries taken as a whole. The
condition set forth in clause (x) above expired as a condition to the
obligations of Parent and the Purchaser on January 23, 1996.
TERMINATION
The Merger Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time, whether before or after stockholder
approval thereof:
(a) by the mutual consent of the Board of Directors of Parent and the
Riverwood Board;
(b) by either Riverwood, on the one hand, or Parent and the Purchaser,
on the other hand, if: (i) the Merger has not been consummated on or prior
to March 31, 1996, or such other date, if any, as Parent and Riverwood shall
agree upon (provided that this right to terminate the Merger Agreement will
not be available to a party whose failure to fulfill any obligation under
the Merger Agreement has been the cause of or resulted in the failure of the
Effective Time to occur on or before such date); or (ii) any Governmental
Entity has issued a statute, order, decree or regulation or taken any other
action (which statute, order, decree, regulation or other action the parties
to the Merger Agreement will use their best efforts to lift), in each case
permanently restraining, enjoining or otherwise prohibiting the Merger or
making the Merger illegal and such statute, order, decree, regulation or
other action shall have become final and non-appealable;
(c) by Riverwood if prior to the Effective Time the Riverwood Board
withdraws, or modifies or changes in a manner adverse to Parent or the
Purchaser its approval or recommendation of the Merger Agreement or the
Merger in order to approve and permit Riverwood to execute a definitive
agreement relating to a Superior Proposal (as defined below); PROVIDED that
such termination shall not be effective until Riverwood has made payment to
Parent of a termination fee of $37.5 million and has either paid to Parent
or deposited with a mutually acceptable escrow agent $6.7 million toward
reimbursement to Parent and the Purchaser of all their expenses incurred or
assumed in connection with the Merger Agreement or any of the transactions
contemplated thereby. The term "Superior Proposal" means any Acquisition
Proposal that the Riverwood
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Board determines in its good faith, reasonable judgment, after consultation
with its financial advisor, is more favorable to Riverwood or the holders of
Riverwood Common Stock than the transactions contemplated by the Merger
Agreement;
(d) by Riverwood in the event of a breach of or inaccuracy in any
representation, warranty, covenant or agreement on the part of Parent or the
Purchaser, which breach or inaccuracy is not cured within 30 days of written
notice thereof; PROVIDED that if such breach or inaccuracy is not curable,
Riverwood may terminate the Merger Agreement immediately;
(e) by Parent, if (i) the stockholders of Riverwood fail to approve and
adopt the Merger Agreement and the transactions contemplated thereby; (ii)
the Riverwood Board withdraws, modifies or changes its recommendation of the
Merger Agreement or the Merger in a manner adverse to Parent or the
Purchaser or is resolved to do any of the foregoing or the Riverwood Board
has recommended to the stockholders of Riverwood any Acquisition Transaction
or is resolved to do so; (iii) the stockholders of Manville fail to approve
the Merger Agreement and the consummation of the transactions contemplated
thereby; (iv) the Board withdraws, modifies or changes its recommendation of
the Merger or the transactions contemplated by the Merger Agreement in a
manner adverse to Parent or the Purchaser or is resolved to do any of the
foregoing, or the Board has recommended to the stockholders of Manville any
Acquisition Transaction or is resolved to do so; (v) any authorization,
consent or approval of the PI Trust or the PD Trust required to be obtained
in connection with the execution, delivery and performance of the Merger
Agreement, the Voting and Indemnification Agreement and the Tax Matters
Agreement, and the consummation of the transactions contemplated thereby,
has not been obtained prior to the date of the Special Meeting or the
special meeting of the stockholders of Riverwood, or if earlier, March 29,
1996 (provided that at the date of any termination of the Merger Agreement
as set forth in this clause (v), the following conditions have been met (1)
if such date were the Merger Closing Date and the time of such termination
were the Effective Time, (a) no statute, rule, order, decree, regulation or
injunction of a Governmental Entity prohibiting consummation of the Merger
or making the Merger illegal is in effect, (b) all necessary governmental
authorizations, consents and approvals (including expiration or termination
of the HSR waiting period) have been obtained, (c) certain conditions to the
obligations of the parties under the Profit Sharing Exchange Agreement have
been satisfied, (d) Parent and the Purchaser's representations and
warranties are true and correct and Parent and the Purchaser have performed
their obligations under the Merger Agreement in all material respects, and
(e) the Tax Matters Agreement is in full force and effect, (2) the Purchaser
has entered into definitive agreements for the Financing, (3) the Purchaser
has delivered to Riverwood the Solvency Letter, or an unsigned form of the
Solvency Letter with an accompanying letter from the Purchaser to the effect
that the Purchaser would be prepared to deliver a signed form thereof at the
closing of the Merger, and (4) Riverwood has not delivered written notice to
the Purchaser that the Riverwood Board in the exercise of its good faith,
reasonable judgment, after consultation with its counsel and its financial
advisor, has concluded that, notwithstanding the delivery of the Solvency
Letter, the representation as to the solvency of the Surviving Corporation
is not true and correct in all material respects at and as of the Effective
Time); or (vi) any person has acquired beneficial ownership or the right to
acquire beneficial ownership of, or any "group" (as such term is defined
under Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder) has been formed that beneficially owns, or has the
right to acquire beneficial ownership of, outstanding shares of capital
stock of Riverwood then representing 20% or more of the combined power to
vote generally for the election of directors;
(f) by Parent, in the event that (i) the Bankruptcy Court has denied the
application of the trustees of the PI Trust to approve the PI Trust's
execution of the Profit Sharing Exchange Agreement (see "THE EXCHANGE --
Profit Sharing Exchange Agreement") and certain related agreements (the
"Application"), or (ii) the conditions of the Profit Sharing Exchange
Agreement have otherwise not been satisfied prior to March 29, 1996;
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(g) by Parent in the event of a breach of or inaccuracy in any
representation, warranty, covenant or agreement on the part of Riverwood, or
in the event of a breach of or inaccuracy in any representation, warranty,
covenant or agreement on the part of Manville contained in the Voting and
Indemnification Agreement, or in the event that the information set forth in
the Tax Letter is found to be or becomes untrue or incorrect, which breach
or inaccuracy is not cured or such information is not made true and correct
within 30 days of written notice thereof; PROVIDED that if such breach or
inaccuracy or failure of such information to be true and correct is not
curable, Parent may terminate the Merger Agreement immediately; or
(h) by Parent, on or prior to January 23, 1996, in the event that the
Patent Review has revealed any facts or circumstances that would reasonably
be expected individually or in the aggregate to result in (i) a Material
Adverse Effect, (ii) any costs, damages or liabilities that would be
material to Riverwood and its subsidiaries taken as a whole, (iii) equitable
remedies against the operation of any material portion of the business of
Riverwood and its subsidiaries, or (iv) the inability to enforce certain
intellectual property of Riverwood or any of its subsidiaries (except as
against improvements developed by any other person without infringement or
misappropriation of any such intellectual property) so as to impair
materially the competitive position of Riverwood and its subsidiaries taken
as a whole.
Upon termination, the Merger Agreement will become null and void, without
liability on the part of any party thereto, except as described under "--
MISCELLANEOUS; FEES AND EXPENSES" and except for any liability resulting from
any willful breach of the Merger Agreement.
MISCELLANEOUS
FEES AND EXPENSES. The Merger Agreement provides that all costs and
Expenses (as defined below) incurred in connection with the Merger Agreement and
the consummation of the transactions contemplated thereby will be paid by the
party incurring such expenses, except as discussed in the following paragraphs.
The Merger Agreement provides that Riverwood will pay to Parent a $37.5
million termination fee in the event that the Merger Agreement is terminated (i)
by Riverwood because the Riverwood Board withdraws, modifies or changes its
recommendation of the Merger Agreement in order to approve and permit Riverwood
to enter into a definitive agreement relating to a Superior Proposal, (ii) by
Parent as described in clause (e) of "-- TERMINATION" or (iii) by Parent if the
Bankruptcy Court denies the Application or the conditions to the Profit Sharing
Exchange Agreement are not satisfied prior to March 29, 1996, and, with respect
to clause (iii) only, prior to the first anniversary date of such termination,
Riverwood enters into a different Acquisition Transaction.
The Merger Agreement provides further that Riverwood also will pay to Parent
an amount equal to all Parent's Expenses, subject to the limitation described
below, if the Merger Agreement is terminated (i) pursuant to an event described
in clause (i), (ii) or (iii) of the prior paragraph or (ii) by (A) the mutual
consent of Riverwood and Parent, (B) either Riverwood or Parent if the Merger is
not consummated prior to March 31, 1996, or (C) Parent in the event of a breach
of or inaccuracy in any representation or warranty of Riverwood in the Merger
Agreement or Manville in the Voting and Indemnification Agreement or the
information contained in the Tax Letter, and, in each case described in this
clause (ii), either (w) the Environmental Assessment has not been satisfactorily
completed and the environmental representation is not true and correct, (x) the
Patent Review reveals facts or circumstances that would reasonably be expected
individually or in the aggregate to result in the effects described in clause
(h) of "-- TERMINATION" above, (y) there exists a material breach of any
covenant of Riverwood contained in the Merger Agreement or of Manville contained
in the Voting and Indemnification Agreement, or (z) there exists any material
breach of or inaccuracy in any representation or warranty on the part of
Riverwood contained in the Merger Agreement, of Manville contained in the Voting
and Indemnification Agreement or the information contained in the Tax Letter,
other than with respect to this clause (z), any breach or inaccuracy (an
"Involuntary Breach") of any such representation or warranty (a) as to which, as
of the date of the Merger Agreement, Riverwood and
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Manville had no knowledge, after due inquiry, of any facts or circumstances that
would cause such representation or warranty not to be true and correct in all
material respects at and as of the date of the Merger Agreement, or that could
reasonably be expected to cause such representation or warranty not to be true
and correct at and as of the Effective Time, and (b) that shall not be a result
of any willful action or inaction on the part of Riverwood or Manville.
The aggregate amount of any termination fee and Expenses paid by Riverwood
as described in the preceding two paragraphs is limited to (i) $44.2 million in
the case of any termination of the Merger Agreement prior to January 15, 1996,
and (ii) thereafter, $44.2 million plus any fees Parent is obligated to pay to
its Lenders (as defined below) to secure the Financing.
The Merger Agreement further provides that Riverwood will pay all of
Parent's Expenses but no termination fee, subject to the limitations discussed
below, if the Merger Agreement is terminated (i) by Parent in the event of a
breach of or inaccuracy in any representation or warranty of Riverwood in the
Merger Agreement or Manville in the Voting and Indemnification Agreement or the
information contained in the Tax Letter that is an Involuntary Breach or (ii) by
(A) the mutual consent of Riverwood and Parent or (B) either Riverwood or Parent
if the Merger has not been consummated prior to March 31, 1996, and, in each
case of this clause (ii), either (v) a statute has been enacted or an injunction
has been issued which prohibits the Merger, (w) required governmental consents,
including expiration or termination of the HSR waiting period, have not been
obtained, (x) Riverwood has delivered written notice to the Purchaser that the
Riverwood Board in the exercise of its good faith, reasonable judgment, after
consultation with its counsel and its financial advisor, has concluded that,
notwithstanding the delivery of the Solvency Letter, the representation as to
the solvency of the Surviving Corporation is not true and correct in all
material respects at and as of the Effective Time, (y) the number of dissenting
shares exceeds 10% of the outstanding shares of Riverwood Common Stock, or (z) a
Material Adverse Effect has occurred in the operations of Riverwood.
The aggregate amount of any Expenses paid by Riverwood as described in the
immediately preceding paragraph is limited to (i) $10 million in the case of any
termination of the Merger Agreement prior to January 15, 1996, and (ii)
thereafter, $20 million plus any fees Parent pays to its Lenders to secure the
Financing.
As used in this section and "-- TERMINATION" above, the term "Expenses"
means all out-of-pocket fees, costs and other expenses incurred or assumed by
Parent or the Purchaser or incurred on their behalf in connection with the
Merger Agreement or any of the transactions contemplated thereby, including but
not limited to in connection with the negotiation, preparation, execution and
performance of the Merger Agreement, the structuring and financing of the Merger
and the other transactions contemplated thereby, or any commitments or
agreements relating to such financing, including, without limitation, fees and
expenses (other than fees that become payable solely as the result of the
termination of the Merger Agreement) payable to all banks, investment banking
firms, other financial institutions and other persons and their respective
agents and counsel for arranging, committing to provide or providing any
financing for the Merger and any other transactions contemplated by the Merger
Agreement or structuring such transactions or such financing (other than any
such fee payable to CDR or any affiliate thereof), and all fees and expenses of
counsel, accountants, experts and environmental, actuarial, insurance and other
consultants to Parent, the Purchaser or CDR.
AMENDMENT. The Merger Agreement may be amended by the parties thereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after approval by the stockholders of Riverwood of the matters
presented in connection with the Merger, but after any such approval no
amendment may be made without the approval of such stockholders if such
amendment changes the Merger Consideration or alters or changes any of the other
terms or conditions of the Merger Agreement if such alteration or change would
materially adversely affect the rights of such stockholders.
WAIVER. At any time prior to the Effective Time, the parties to the Merger
Agreement may (i) extend the time for the performance of any of the obligations
or other acts of the other parties
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thereto, (ii) waive any inaccuracies in the representations and warranties of
the other parties contained therein or in any document, certificate or writing
delivered pursuant thereto or (iii) waive compliance with any of the agreements
or conditions of the other parties thereto contained therein.
VOTING AND INDEMNIFICATION AGREEMENT
Manville, Parent and the Purchaser have entered into a Voting and
Indemnification Agreement, dated as of October 25, 1995, which provides that
from and after the Approval Date (as defined below), Manville will vote, or
cause to be voted, all shares of Riverwood Common Stock it beneficially owns at
the time of such vote in favor of approval and adoption of the Merger Agreement
and approval of the Merger and the other transactions contemplated by the Merger
Agreement; PROVIDED, HOWEVER, that Manville will not be required to vote, or
cause to be voted, its shares of Riverwood Common Stock as provided above if the
Board determines in its good faith, reasonable judgment, after consultation with
its counsel, that so voting such shares could reasonably be expected to
constitute a breach of the Board's fiduciary duties under applicable law.
Manville has also agreed in the Voting and Indemnification Agreement that
from October 25, 1995, it will vote, or cause to be voted, its shares of
Riverwood Common Stock against (i) any Acquisition Transaction for Riverwood
other than the Merger, (ii) any other significant proposed corporate action of
Riverwood that requires stockholder approval and that would materially impair or
delay consummation of the Merger or the transactions contemplated by the Merger
Agreement or (iii) any action that would result in a breach by Riverwood of
certain of its obligations under the Merger Agreement (see "-- The Merger
Agreement; CONDUCT OF BUSINESS PENDING THE CLOSING"); PROVIDED, HOWEVER, that
Manville shall be permitted to vote, or cause to be voted, its shares of
Riverwood Common Stock in favor of any such action described in clauses (i),
(ii) or (iii) above if the Board determines in its good faith, reasonable
judgment, after consultation with its counsel, that voting such shares against
such actions could reasonably be expected to constitute a breach of the Board's
fiduciary duties under applicable law.
Manville's obligation to vote its shares of Riverwood Common Stock as
described in the preceding paragraphs is subject to the following conditions:
(i) the satisfaction or waiver of (A) the conditions to the obligation of
Manville to declare the Dividend under the Profit Sharing Exchange Agreement and
(B) certain conditions to the obligations of Manville and the PI Trust to
consummate the closing under the Profit Sharing Exchange Agreement (see "THE
EXCHANGE -- Profit Sharing Exchange Agreement"), (ii) the holders of a majority
of Manville's Common Stock have approved the disposition by Manville of such
shares pursuant to the Merger and the other transactions contemplated by the
Merger Agreement and the PI Trust shall have consented to the Merger and the
transactions contemplated by the Merger Agreement and (iii) there shall be no
order or injunction (whether temporary, preliminary or permanent) of a
Governmental Entity of competent jurisdiction in effect precluding, restraining,
enjoining or prohibiting consummation of the Merger and the transactions
contemplated by the Merger Agreement. Under the Voting and Indemnification
Agreement, if the Merger Agreement is amended, Manville's obligation to vote its
shares of Riverwood Common Stock in favor of such amended Merger Agreement is
subject to Manville's consent to such amendment. The "Approval Date" means the
date of the later to occur of the conditions set forth in clause (i) of this
paragraph and the conditions set forth in clause (ii) of this paragraph,
provided that the condition set forth in clause (iii) of this paragraph is then
satisfied. Manville's obligations under the Voting and Indemnification
Agreement, as described in the first two paragraphs of this section, will expire
on the earliest to occur of (i) the Effective Time, (ii) the date on which the
Merger Agreement is terminated in accordance with its terms or (iii) March 31,
1996. See "-- The Merger Agreement; EFFECTIVE TIME" and "-- The Merger
Agreement; TERMINATION."
The Voting and Indemnification Agreement prohibits Manville from, directly
or indirectly through its officers, directors, employees or agents or any
investment banker, financial advisor,
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attorney, accountant or other representative retained by Manville, (i)
initiating, soliciting or encouraging the making of any Acquisition Proposal or
(ii) except as permitted below, engaging in negotiations or discussions with, or
furnishing any information or data to, any third party relating to, or agreeing
to, an Acquisition Proposal (other than the transactions contemplated by the
Merger Agreement). Notwithstanding clause (ii) above, Manville, the Board and
any of such representatives (i) may participate in negotiations or discussions
(including, as a part thereof, making any counterproposal) with or furnish
information or data to any third party if the Board determines in its good
faith, reasonable judgment, after consultation with its counsel, that the
failure to participate in such discussions or negotiations or to furnish such
information could reasonably be expected to constitute a breach of the Board's
fiduciary duties under applicable law and (ii) shall be permitted to (A) take
and disclose to Riverwood's and Manville's stockholders a position with respect
to the Merger or another Acquisition Proposal, or amend or withdraw such
position, pursuant to Rules 14d-9 and 14e-2 under the Exchange Act or (B) make
disclosure to Riverwood's and Manville's stockholders, in each case if the Board
determines in its good faith, reasonable judgment, after consultation with its
counsel, that the failure to take such action could reasonably be expected to
constitute a breach of its fiduciary duties under applicable law.
Manville has agreed in the Voting and Indemnification Agreement to advise
Parent immediately in writing of the receipt of any Acquisition Proposal
received by Manville, specifying the material terms and conditions of such
Acquisition Proposal and identifying the person making such Acquisition
Proposal. If any such inquiry or proposal is in writing, Manville will promptly
deliver to Parent a copy of such inquiry or proposal, unless the Board
determines in its good faith, reasonable judgment, after consultation with its
counsel, that taking such action could reasonably be expected to constitute a
breach of its fiduciary duties under applicable law. Manville will not release
any third party from its obligations under any existing standstill agreement or
arrangement relating to an Acquisition Transaction unless the Board determines
in its good faith, reasonable judgment, after consultation with its counsel,
that failure to release such third parties from such obligations could
reasonably be expected to constitute a breach of its fiduciary duties under
applicable law.
For purposes of the preceding two paragraphs, the terms "Acquisition
Proposal" and "Acquisition Transaction" do not refer to a transaction that
solely involves securities or assets other than the shares of Riverwood Common
Stock that Manville owns.
The Voting and Indemnification Agreement also provides that, subject to
certain limitations, from and after the Effective Time, Manville will indemnify
Parent, the Purchaser and their respective officers, directors and employees
against Losses (as defined below), whether or not resulting from third party
claims, including interest and penalties recovered by a third party with respect
thereto and out-of-pocket expenses and reasonable attorneys' and accountants'
fees and expenses incurred in the investigation or defense of any of the same or
in asserting, preserving or enforcing any of their respective rights under the
Voting and Indemnification Agreement, resulting from or arising out of any
breach of or inaccuracy in certain representations or warranties of Riverwood in
the Merger Agreement, with respect to certain filings with the SEC and the
financial statements contained therein (Section 3.5 of the Merger Agreement),
the absence of undisclosed liabilities (Section 3.7 of the Merger Agreement),
environmental matters (Section 3.14 of the Merger Agreement) and the absence of
any material, misleading statement or omission in the Merger Agreement (Section
3.24 of the Merger Agreement) with respect to the matters covered in the
preceding three representations. See "-- The Merger Agreement; CERTAIN
REPRESENTATIONS AND WARRANTIES" and ANNEX B. Notwithstanding the foregoing, (i)
Manville will not be required to indemnify unless and until the aggregate amount
of all Losses exceeds $20 million; (ii) the obligation to indemnify is limited
to any amount equal to 80% of the amount of Losses in excess of $20 million and
then only to the extent that the Losses exceed $20 million; and (iii) the
aggregate liability of Manville for indemnification will not exceed $100
million. Manville's obligation to indemnify expires on the date that is 30 days
after delivery of the independent auditor's opinion with respect to the annual
audit of the Surviving Corporation's financial statements
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for the fiscal year ended December 31, 1996, and in any event no later that May
31, 1997. The term "Losses" means any and all actual claims, demands,
liabilities, obligations, losses, fines, costs, expenses, deficiencies or
damages.
TAX MATTERS AGREEMENT
Manville, Riverwood, Parent and the Purchaser have entered into a Tax
Matters Agreement, dated as of October 25, 1995, pursuant to which, among other
things, Manville and Parent will take such actions as may be required (including
making such elections under Section 338(h)(10) of the Code and corresponding
provisions of state law) to treat the Merger as a taxable sale of the assets of
Riverwood and certain of its subsidiaries. Manville will include the income of
Riverwood and its domestic subsidiaries in its consolidated federal and combined
state income tax returns for all pre-closing tax periods of Riverwood and its
subsidiaries, including the taxable period that ends at the Effective Time, and
will bear the burden of any consolidated federal and combined state income taxes
associated with the gain on the deemed sale as reflected in such returns. Parent
and the Surviving Corporation will bear the burden of any stand-alone state
income taxes associated with the gain on the deemed sale.
The Tax Matters Agreement also provides that the tax sharing agreement
currently in effect between Manville and Riverwood (the "Tax Sharing
Agreement"), shall remain in full force and effect up to the Effective Time (at
which time it will be terminated) and shall not be amended without the consent
of Parent and Purchaser. The Tax Sharing Agreement requires, among other things,
that Riverwood make tax sharing payments to Manville (or that Manville make tax
sharing payments to Riverwood in certain cases in which Riverwood has losses)
with respect to Riverwood's share of consolidated federal and combined state
income tax liabilities (or tax assets), generally computed as if Riverwood were
the parent of a separate consolidated group of companies. The Tax Matters
Agreement further requires Riverwood to make tax sharing payments after the
Effective Time to Manville (or Manville to make tax sharing payments to
Riverwood in certain cases), calculated in a manner generally consistent with
past practices under the Tax Sharing Agreement, with respect to Riverwood's
share of consolidated federal and combined state income tax liabilities (or tax
assets) for all pre-closing periods, excluding taxes associated with the deemed
sale, to the extent such amounts have not previously been paid pursuant to the
Tax Sharing Agreement. The Tax Matters Agreement also provides that Riverwood
will be responsible for payment of any foreign or stand-alone state taxes,
including taxes associated with the deemed sale, as shown on stand-alone returns
filed for all pre-closing periods. Parent is responsible for any transfer taxes
incurred in connection with the Merger.
Finally, pursuant to the Tax Matters Agreement, Manville will be responsible
for and indemnify Riverwood and Parent against (i) federal, state and local, but
not foreign, income taxes arising from audit adjustments (or other changes to
tax liabilities as shown in the relevant returns as originally filed) for all
pre-closing periods, and (ii) any tax liability arising as a result of
Riverwood's status, prior to the Effective Time, as a member of Manville's
combined or consolidated group for federal or state tax purposes.
CERTAIN INFORMATION CONCERNING RIVERWOOD
Riverwood is an international packaging and paper products company that
produces and markets coated unbleached kraft paperboard, packaging products,
such as beverage carriers and folding cartons, containerboard, such as kraft
paper and linerboard, corrugated containers, lumber and plywood. Riverwood also
designs, manufactures and installs proprietary packaging machines for its
customers. The principal executive offices of Riverwood are located at 3350
Cumberland Circle, Suite 1400, Atlanta, Georgia 30339, and its telephone number
is (770) 644-3000.
Additional information concerning Riverwood and its subsidiaries is
contained in Riverwood's Annual Report on Form 10-K for the year ended December
31, 1994, its Quarterly Reports on Form 10-Q for the periods ended April 1,
1995, July 1, 1995 and September 30, 1995, its Proxy Statement
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dated April 5, 1995 in connection with the annual meeting of Riverwood's
stockholders held on June 1, 1995, its Current Report on Form 8-K dated October
25, 1995, its Proxy Statement dated February 26, 1996 and its other public
filings. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
CERTAIN INFORMATION CONCERNING CDR FUND V AND CDR
CDR FUND V
Clayton, Dubilier & Rice Fund V Limited Partnership ("CDR Fund V"), a
Connecticut limited partnership, which will be one of Holding's largest
stockholders of Holding, is a private investment fund managed by CDR. Amounts
contributed to CDR Fund V by its limited partners are invested at the discretion
of the general partner in equity or equity-related securities of entities formed
to effect leveraged acquisition transactions and in the equity of corporations
where the infusion of capital, coupled with the provision of managerial
assistance by CDR, can be expected to generate returns on investments comparable
to returns historically achieved in leveraged acquisition transactions. The
general partner of CDR Fund V is CD&R Associates V Limited Partnership, a
Connecticut limited partnership. The general partner of CD&R Associates V
Limited Partnership is CD&R Investment Associates, Inc., a Delaware corporation
("Associates Inc."). Mr. Alberto Cribiore, who is a principal and a President of
CDR and is Vice President, Treasurer and Secretary of Associates Inc. also
serves as Vice President, Treasurer and a director of Holding, Parent and the
Purchaser. After the Subsequent Merger, Mr. Hubbard C. Howe, who is a principal
of CDR and is Vice President of Associates Inc., will become a director of
Holding, Parent as the surviving corporation in the Subsequent Merger and RIUSA.
Pursuant to a Stockholders Agreement to be entered into in connection with the
sale of Holding Common Stock (the "Stockholder Agreement"), following the
Subsequent Merger, CDR Fund V will be entitled to nominate 5 persons to serve on
the Boards of Directors of Holding, Parent as the surviving corporation in the
Subsequent Merger and RIUSA. There is an understanding between Chemical Equity
Associates and CDR Fund V with respect to the nomination of CDR Fund V's fifth
nominee to each of these Boards. CDR Fund V currently intends to nominate a
designee of Chemical Equity Associates to such Boards following the Subsequent
Merger; however, Chemical Equity Associates does not have a legally enforceable
right to such directorship.
CDR Fund V has committed to purchase up to $200 million and expects to
purchase up to $225 million in equity of Holding in connection with the Merger.
In the event that $750 million of proceeds from the sale of Holding Common Stock
is not received at the closing of the Merger, certain equity investors,
including CDR Fund V, will provide a capital call commitment for the difference
between $750 million and the sum of (x) the amount of proceeds from the sale of
Holding Common Stock received at the closing of the Merger and (y) the amount of
proceeds received from the sale of Holding Common Stock to the Management
Investors within, together with the aggregate amount of deferred compensation
bonuses granted to the Mangement Investors that are converted into Holding stock
units, in each case, one year of the closing of the Merger, so that the
aggregate proceeds from the sale of Holding Common Stock received by the first
anniversary of the closing of the Merger will be at least $750 million.
The principal executive offices of CDR Fund V, CD&R Associates V Limited
Partnership and Associates Inc. are located at 270 Greenwich Avenue, Greenwich,
Connecticut 06830.
CDR
CDR is a private investment firm which is organized as a Delaware
corporation. CDR is the manager of a series of investment funds, including CDR
Fund V, formed to invest in equity or equity-related securities of entities
formed to effect leveraged acquisition transactions and in the equity of
corporations where the infusion of capital, coupled with the provision of
managerial assistance by CDR, can be expected to generate returns on investments
comparable to returns historically achieved in leveraged acquisition
transactions. CDR generally assists in structuring, arranging financing for and
negotiating the transactions in which the funds it manages invest. After the
consummation of such transactions, CDR generally provides management and
financial consulting services to the companies in which its investment funds
have invested during the period of such fund's investment.
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Such services include helping the company to establish effective banking, legal
and other business relationships and assisting management in developing and
implementing strategies for improving the operational, marketing and financial
performance of the company.
Pursuant to a consulting agreement, CDR will receive (i) an annual fee,
initially of $500,000, for providing such management and financial consulting
services to Holding and its subsidiaries and (ii) reimbursement of out-of-pocket
expenses it incurs after the closing of the Merger, for so long as CDR Fund V
has an investment in Holding and its subsidiaries. The Indentures will allow the
payment to CDR of annual fees for management and financial consulting services
of up to $1 million, although there is no current intention to increase the
amount of the annual fee to be received by CDR.
Mr. Kevin J. Conway, who is a principal of CDR, currently serves as
President and a director of Holding, Parent and the Purchaser, will, after the
Merger, be a director and Vice President of Holding, Parent, the Surviving
Corporation and RIUSA and after the Subsequent Merger, will be a director of
Holding, Parent as the surviving corporation in the Subsequent Merger and RIUSA.
Mr. Cribiore, who is a principal of CDR, currently serves as Vice President,
Treasurer and a director of Holding, Parent and the Purchaser, will, after the
Merger, be a director and Vice President of Holding, Parent, the Surviving
Corporation and RIUSA and after the Subsequent Merger, will be a director of
Holding, Parent as the surviving corporation in the Subsequent Merger and RIUSA.
Ms. Mary L. Pund, who is a professional employee of CDR, currently serves as
Vice President and Assistant Treasurer of Holding, Parent and the Purchaser and
after the Merger will be a Vice President and Assistant Treasurer of Holding,
Parent, the Surviving Corporation and RIUSA until after the Subsequent Merger
when she will resign. Mr. Michael G. Babiarz, who is a professional employee of
CDR, currently serves as Vice President, Secretary and a director and Vice
President of Holding, Parent and the Purchaser and, after the Merger, will be a
director, Vice President and Assistant Secretary of Holding, Parent, the
Surviving Corporation and RIUSA until the effective time of the Subsequent
Merger when he will resign. Mr. Howe is a principal of CDR and, after the
Subsequent Merger, will be a director of Holding, Parent as the surviving
corporation in the Subsequent Merger and RIUSA. Mr. Leon J. Hendrix, Jr., who is
a principal of CDR, will, following the Subsequent Merger, be Chairman of the
Board of Directors of each of Holding, Parent as the surviving corporation in
the Subsequent Merger and RIUSA.
CDR's principal executive offices are located at 375 Park Avenue, New York,
New York 10152.
CERTAIN INFORMATION CONCERNING HOLDING, PARENT AND THE PURCHASER
HOLDING, PARENT AND THE PURCHASER
Holding, Parent and the Purchaser are newly formed Delaware corporations
which were organized at the direction of CDR in connection with the transactions
contemplated by the Merger Agreement. The authorized capital stock of Holding
consists of 9 million shares of Class A Common Stock, par value $.01 per share
("Class A Common Stock"), and 3 million shares of Class B Common Stock, par
value $.01 per share (the "Class B Common Stock") (the Class A Common Stock and
the Class B Common Stock being referred to as "Holding Common Stock"), of which
no shares are currently outstanding. The authorized capital stock of Parent
consists of 1,000 shares of common stock, par value $.01 per share, all of which
are issued and outstanding and held by Holding. The authorized capital stock of
the Purchaser consists of 1,000 shares of common stock, par value $.01 per
share, all of which are issued and outstanding and held by Parent. None of
Holding, Parent or the Purchaser is expected to have any significant assets or
liabilities (other than those arising under the Merger Agreement or in
connection with the Merger or the Financing) or to engage in any activities
(other than those incident to their formation, the Merger and the Financing)
prior to the Effective Time. The principal executive offices of Holding, Parent
and the Purchaser are c/o Clayton, Dubilier & Rice Fund V Limited Partnership,
270 Greenwich Avenue, Greenwich, Connecticut 06830, and their telephone number
is (203) 661-3998.
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DIRECTORS AND EXECUTIVE OFFICERS PRIOR TO THE EFFECTIVE TIME
Set forth below are the name, age, business address, present principal
occupation or employment and five-year employment history of each director and
executive officer of Holding, Parent and the Purchaser. Each of the directors
and executive officers of Holding holds the same position with Parent and the
Purchaser. Unless otherwise indicated, the business address of each person
listed below is Clayton, Dubilier & Rice, Inc., 375 Park Avenue, New York, New
York 10152. Other than Mr. Cribiore, who is a citizen of Italy, each named
person is a citizen of the United States.
<TABLE>
<S> <C>
DIRECTORS
- -------------------------
Kevin J. Conway Mr. Conway became a Director and President of Holding, Parent and the
Director since 1995 Purchaser in 1995. He has been a professional employee of CDR since
Age: 37 December 1994 and a principal since January 1996. Prior to joining CDR,
Mr. Conway was a Vice President at Goldman, Sachs & Co.
Alberto Cribiore Mr. Cribiore became a Director and Vice President and Treasurer of
Director since 1995 Holding, Parent and the Purchaser in 1995. He has been a principal of CDR
Age: 50 since 1985 and a President since 1995 and is also Vice President,
Treasurer and Secretary of Associates Inc., the general partner of the
general partner of CDR Fund V. Mr. Cribiore also serves as a director of
Van Kampen American Capital, Inc. and WESCO Distribution, Inc.
Michael G. Babiarz Mr. Babiarz became a Director and Vice President and Secretary of
Director since 1995 Holding, Parent and the Purchaser in 1995. He has been a professional
Age: 29 employee of CDR since 1990.
</TABLE>
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS
- -------------------------
<S> <C> <C>
NAME AGE OFFICE
- ------------------------- --- --------------------------------------------------------------------
Kevin J. Conway 37 President
Alberto Cribiore 50 Vice President, Treasurer
Mary L. Pund 35 Vice President, Assistant Treasurer
Michael G. Babiarz 29 Vice President, Secretary
</TABLE>
Ms. Pund became a Vice President and Assistant Treasurer of Holding, Parent
and the Purchaser in 1995. Ms. Pund has been a professional employee of CDR
since 1994. Prior to 1994, she was employed for four years as a managing
director at Smith Barney Inc.
DIRECTORS AND EXECUTIVE OFFICERS AFTER THE EFFECTIVE TIME
Immediately following the Effective Time, the officers of Holding and Parent
will be Mr. Johnson, President and Chief Executive Officer; Mr. McCauley, Senior
Vice President, Finance and Treasurer; Mr. J. Steven Beabout, Vice President,
General Counsel and Secretary; Mr. Conway, Vice President; Mr. Cribiore, Vice
President; Ms. Pund, Vice President and Assistant Treasurer; and Mr. Babiarz,
Vice President and Assistant Secretary. The current officers of Riverwood and
RIUSA (other than any such officer who is an employee of Manville) will remain
officers of the Surviving Corporation and of RIUSA, respectively, following the
Effective Time; and Messrs. Conway, Cribiore and Babiarz and Ms. Pund will hold
the same positions as officers of the Surviving Corporation and RIUSA as with
Holding and Parent. Immediately following the Effective Time, the Boards of
Directors of Holding, Parent, the Surviving Corporation and RIUSA will consist
of the current directors of Holding. Following the Subsequent Merger, the
directors of Holding, the surviving corporation in the Subsequent Merger and
RIUSA will be Messrs. Conway, Cribiore, Hendrix, Howe, Johnson and Lawrence C.
Tucker. In addition, the Stockholders Agreement to be entered into in connection
with the sale of Holding Common Stock (the "Stockholders Agreement") will
provide that certain of the equity investors will have rights to nominate
persons to the Boards of Directors of Holding, Parent and
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RIUSA. The directors to be nominated pursuant to the Stockholders Agreement to
the Boards of Directors of each of those companies by Exor Group, S.A. and
Madison Dearborn Capital Partners, L.P. and the fifth director to be nominated
by CDR Fund V (which is expected to be a designee of Chemical Equity Associates)
have not yet been identified. See "-- ELECTION AND COMPENSATION OF DIRECTORS."
After the Subsequent Merger, Mr. Hendrix will become Chairman of the Board of
Holding, Parent and RIUSA and the officers of Holding and Parent will remain as
officers of those companies, and the current officers of RIUSA (other than any
officer who is an employee of Manville) will remain as officers of RIUSA, except
that Mr. Beabout will be Vice President, General Counsel and Secretary, and
Messrs. Conway, Cribiore and Babiarz and Ms. Pund will resign as officers of
Holding, Parent as the surviving corporation in the Subsequent Merger and RIUSA.
Set forth below are the name, age, business address, present principal
occupation or employment and five-year employment history of each director of
the surviving corporation in the Subsequent Merger not discussed under "--
DIRECTORS AND EXECUTIVE OFFICERS PRIOR TO THE EFFECTIVE TIME" above. Unless
otherwise indicated, following the Subsequent Merger, the business address of
the directors and executive officers of RIUSA will be Riverwood International
Corporation, 3350 Cumberland Circle, Suite 1400, Atlanta, Georgia 30339. Each
person listed below is a citizen of the United States.
<TABLE>
<S> <C>
Leon J. Hendrix, Jr. Mr. Hendrix is a principal of CDR. From 1973 until he joined CDR in 1993,
Age: 54 Mr. Hendrix was employed by Reliance Electric Company and served as chief
operating officer and as a member of its board of directors. He is a
member of the boards of directors of Keithley Instruments, Inc., National
City Bank, the Cleveland Chapter of the American Red Cross, WESCO
Distribution, Inc., the Clemson University Foundation, Nacco Industries
Incorporated and Cambrex Corporation and is a member of Clemson
University's President's Advisory Council.
Hubbard C. Howe Mr. Howe is a principal of and has been a professional employee of CDR
Age: 67 since 1991. Mr. Howe serves as Vice President of Associates Inc. He also
serves as a Chairman of APS, Inc. and Remington Arms Company, Inc. and as
Vice Chairman of Nu-kote International, Inc.
Lawrence C. Tucker Mr. Tucker has been a General Partner of Brown Brothers Harriman & Co., a
Age: 53 private banking firm, since 1979. He is a director of WorldCom, Inc.,
Blenheim Group PLC and WellCare Management Group, Inc. Mr. Tucker's
business address is c/o Brown Brothers Harriman & Co., 59 Wall Street,
New York, New York 10005.
</TABLE>
ELECTION AND COMPENSATION OF DIRECTORS
All directors of Holding, Parent as the surviving corporation in the
Subsequent Merger and RIUSA will be elected annually and hold office until their
successors are elected and qualified, or until their earlier removal or
resignation. The Stockholders Agreement to be entered into in connection with
the sale of Holding Common Stock will provide that certain of the equity
investors will have rights to nominate persons to the Boards of Directors of
Holding, Parent as the surviving corporation in the Subsequent Merger and RIUSA.
CDR Fund V will be entitled to nominate five persons, Exor Group, S.A. will be
entitled to nominate two persons. The 1818 Fund II, L.P. will be entitled to
nominate one person and Madison Dearborn Capital Partners, L.P. will be entitled
to nominate one person to serve on the Boards of Directors of each of Holding,
Parent as the surviving corporation in the Subsequent Merger and RIUSA. There is
also an understanding between Chemical Equity Associates and CDR Fund V with
respect to the nomination of CDR Fund V's fifth nominee to such Boards. CDR Fund
V currently intends to nominate a designee of Chemical Equity Associates as its
nominee to such Boards following the Subsequent Merger; however, Chemical Equity
Associates does not have a legally enforceable right to such directorship. See
"-- DIRECTORS AND EXECUTIVE OFFICERS AFTER THE EFFECTIVE TIME." The Chairman of
each of the Boards will be selected from one of the CDR Fund V
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<PAGE>
nominees. The Stockholders Agreement will further provide that so long as Mr.
Johnson remains Chief Executive Officer of RIUSA, he shall be a director on each
of the Boards. Initially, the Chairman of each of the Boards will be Mr.
Hendrix.
The current directors of Holding, Parent and the Purchaser do not receive
any direct compensation from Holding, Parent and the Purchaser. Following the
completion of the Merger and the Subsequent Merger, non-employee directors who
are not employed by or affiliated with CDR will receive $30,000 per year plus
$2,500 per board meeting attended. At least four of the directors of Holding,
Parent as the surviving corporation in the Subsequent Merger and RIUSA will be
employees of CDR, to which RIUSA will pay fees for advisory and management
consulting services. See "-- CERTAIN INFORMATION CONCERNING CDR FUND V AND CDR."
OWNERSHIP OF HOLDING COMMON STOCK AT THE EFFECTIVE TIME
At the Effective Time, Holding Common Stock is expected to be beneficially
owned as follows*:
<TABLE>
<CAPTION>
NO. OF
NAME AND ADDRESS SHARES PERCENTAGE
- ---------------------------------------- -------- ---------
<S> <C> <C>
Clayton, Dubilier & Rice Fund V......... 2,250,000 30.0%
Limited Partnership
270 Greenwich Avenue
Greenwich, CT 06830**
Exor Group, S.A......................... 2,250,000 30.0%
2, Boulevard Royale
L-2953 Luxembourg
The 1818 Fund II, L.P................... 750,000 10.0%
c/o Brown Brothers Harriman & Co.
59 Wall Street
New York, NY 10005
HWH Investment Pte Ltd.................. 700,000 9.3%
250 North Bridge Road
Singapore 179101
Republic of Singapore
Chemical Equity Associates.............. 500,000 6.7%***
270 Park Avenue
New York, NY 10017
First Plaza Group Trust................. 500,000 6.7%
Mellon Bank, N.A., as Trustee
c/o General Motors Investment
Management Corporation
767 Fifth Avenue
New York, NY 10153
Madison Dearborn Capital Partners,
L.P. .................................. 500,000 6.7%
Three First National Plaza
Chicago, IL 60602
Wolfensohn-River LLC.................... 50,000 0.6%
599 Lexington Avenue
New York, NY 10022
-------- ---------
7,500,000 100.0%
-------- ---------
-------- ---------
</TABLE>
- ------------------------------
* These numbers do not take into account the exercise of options for up to an
aggregate of 490,000 shares of Holding Common Stock that are expected to be
granted to the Management Investors within one year of the closing of the
Merger and up to an aggregate of 200,000 shares of Holding Common Stock
that are expected to be purchased by the Management Investors (or stock
units granted to the Management Investors in lieu of the sale of a portion
of such shares of Holding
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<PAGE>
Common Stock) within one year of the closing of the Merger. At least $725
million of proceeds from the sale of an aggregate of 7,250,000 shares of
Holding Common Stock will be received at the closing of the Merger through
the sale of Holding Common Stock. In the event that $750 million of
proceeds from the sale of Holding Common Stock is not received at the
closing of the Merger, certain equity investors, including CDR Fund V, will
provide a capital call commitment for the difference between $750 million
and the sum of (x) the amount of proceeds from the sale of Holding Common
Stock at the closing of the Merger and (y) the amount of proceeds received
from the sale of Holding Common Stock to the Management Investors, together
with the aggregate amount of deferred compensation bonuses granted to the
Management Investors that are converted into Holding stock units, in each
case, within one year of the closing of the Merger, so that the aggregate
proceeds from the sale of Holding Common Stock received by the first
anniversary of the closing of the Merger will be at least $750 million,
representing 7,500,000 shares of Holding Common Stock. See "-- Source and
Amount of Funds; SALE OF HOLDING COMMON STOCK."
** B. Charles Ames, William A. Barbe, Kevin J. Conway, Alberto Cribiore,
Donald J. Gogel, Leon J. Hendrix, Jr., Hubbard C. Howe, Andrall E. Pearson
and Joseph L. Rice, III may be deemed to share beneficial ownership of the
shares owned of record by CDR Fund V by virtue of their status as
stockholders of the general partner of the general partner of CDR Fund V,
but each expressly disclaims such beneficial ownership of the shares owned
by CDR Fund V. The stockholders of Associates Inc. share investment and
voting power with respect to securities owned by CDR Fund V. The business
address for each of them is 270 Greenwich Avenue, Greenwich, CT 06830.
*** Chemical Equity Associates intends to purchase Holding Common Stock in
shares of Class B Common Stock, which does not have voting rights.
CERTAIN FINANCIAL CONSIDERATIONS
If a court in a suit by an unpaid creditor or representative of creditors of
Riverwood, such as a trustee in bankruptcy or Riverwood as debtor-in-possession
in a reorganization case under the bankruptcy laws, were to find that (a) the
payment of the Merger Consideration to Riverwood's stockholders and the
incurrence of indebtedness (including any guarantees) by Holding or its
subsidiaries with respect to the Financing (such events being referred to herein
as a "Transfer") was made with actual intent to hinder, delay or defraud the
creditors of Riverwood or that (b) Riverwood received less than fair
consideration or reasonably equivalent value for a Transfer, and Riverwood
either (i) was insolvent at the time of a Transfer or rendered insolvent by
reason of a Transfer, (ii) was engaged in a business or transaction for which
its remaining assets constituted unreasonably small capital, or (iii) intended
to incur, or believed that it would incur, debts beyond its ability to pay as
such debts matured, the court could find that a Transfer constituted a
fraudulent transfer or conveyance under applicable federal or state law.
If a Transfer were determined to be a fraudulent transfer or conveyance, or
if payment of the Merger Consideration were determined under applicable law to
be an impermissible dividend or redemption, there is a risk that the
stockholders of Riverwood, including Manville (and persons receiving
distributions thereof from Manville), as recipients of the Merger Consideration,
could be ordered by a court to turn over to Riverwood, its creditors or its
trustee in bankruptcy all or a portion of the Merger Consideration that they
received.
The measure of insolvency for purposes of the foregoing will vary depending
upon the law of the applicable jurisdiction. Generally, however, Riverwood would
be considered insolvent if the present fair saleable value of Riverwood's assets
is less than the amount that will be required to pay its probable liability on
its existing debts as they become absolute and matured, or if the sum of
Riverwood's debts (including any contingent liabilities) is greater than all of
Riverwood's property at a fair valuation. There can be no assurance as to what
standards a court would use to determine whether Riverwood was solvent at the
relevant time or whether, whatever standard was used, the payment of the Merger
Consideration would not be avoided on another of the grounds set forth above.
Parent and the Purchaser have represented in the Merger Agreement that at
and immediately after the Effective Time, and after giving effect to the Merger,
the Financing and any other transactions contemplated in connection therewith
(and any changes in the Surviving Corporation's assets and liabilities as a
result thereof), the Surviving Corporation will not (i) be insolvent (either
because its financial condition is such that the sum of its debts (including
contingent liabilities) is greater than
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<PAGE>
the fair value of its assets or because the present fair saleable value of its
assets will be less than the amount required to pay its probable liabilities on
its existing debts as they become absolute and matured), (ii) have unreasonably
small capital with which to conduct its business or (iii) have incurred or plan
to incur debts beyond its ability to pay as they mature. See "-- The Merger
Agreement; CERTAIN REPRESENTATIONS AND WARRANTIES." Pursuant to the Merger
Agreement, Parent and the Purchaser have agreed to engage an appraisal firm to
deliver the Solvency Letter (as defined below) relating to these matters, the
addressees of which will include Riverwood and Manville, and on which Riverwood
and Manville will be entitled to rely. It is a condition to Riverwood's
obligation to effect the Merger that (x) the Riverwood Board receive a copy of
the Solvency Letter and (y) the terms and provisions of the definitive
agreements relating to the Financing shall not have caused the Riverwood Board,
in the exercise of its good faith, reasonable judgment, after consultation with
its counsel and its financial advisor, to conclude that, notwithstanding the
delivery of the Solvency Letter, the representation set forth in the first
sentence of this paragraph is not true and correct in all material respects at
and as of the Effective Time. See "-- The Merger Agreement; CONDITIONS TO
CONSUMMATION OF THE MERGER." In addition, Holding, Parent and the Purchaser have
advised the Company that it is a condition to the Lenders' obligations to fund
the Senior Secured Credit Facilities upon consummation of the Merger that the
Lenders receive an opinion as to the solvency, adequate capitalization and
ability to pay debts of Parent and its subsidiaries. No assurance, however, can
be given that any solvency opinion will be obtained.
Parent will incur significant indebtedness in connection with the Merger,
the Financing and the transactions contemplated thereby through the issuance of
the Notes (as defined below) and the indebtedness to be incurred under the
Senior Secured Credit Facilities (as defined below). As a result, after the
effective time of the Subsequent Merger, Holding and its subsidiaries will be
highly leveraged and subject to substantial repayment obligations beginning in
1997 under the Senior Secured Credit Facilities. The ability of Holding and its
subsidiaries to satisfy their financial obligations will depend upon the
operating performance of Holding and its subsidiaries, which is subject to
prevailing economic conditions, levels of interest rates and to financial,
business and other factors, many of which are beyond the control of Holding and
its subsidiaries. Holding, Parent and the Purchaser have advised Manville that
based on current projections and review to date of Riverwood's operations and
business, Holding, Parent and the Purchaser believe that, after and giving
effect to the Merger, the Financing, the Subsequent Merger and any other
transactions contemplated in connection therewith (and any changes in assets and
liabilities of Holding or any of its subsidiaries as a result thereof) none of
Holding or any of its subsidiaries incurring any indebtedness (including any
guarantees) with respect to the Financing will (i) be insolvent (either because
its financial condition is such that the sum of its debts (including contingent
liabilities) is greater than the fair value of its assets or because the present
fair saleable value of its assets will be less than the amount required to pay
its probable liabilities on its existing debts as they become absolute and
matured), (ii) have unreasonably small capital with which to conduct its
business or (iii) have incurred or plan to incur debts beyond its ability to pay
as they mature.
There can be no assurance, regardless of whether Holding and its
subsidiaries are solvent after the Merger, the Subsequent Merger and the
consummation of the transactions contemplated by the Merger Agreement, that a
court would not determine that a Transfer constituted a fraudulent transfer or
conveyance on another of the grounds set forth above.
For a discussion of the Financing, see "-- Source and Amount of Funds."
CERTAIN PROJECTIONS
Neither Manville nor Riverwood, as a matter of course, publicly discloses
projections as to future results of operations or financial condition. However,
in connection with Riverwood's solicitation of indications of interest from
potential bidders, such parties were provided with certain projected financial
information for Riverwood and its subsidiaries prepared by management.
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<PAGE>
The projected financial information provided to potential bidders also
included certain major underlying assumptions, including, but not limited to (i)
projected volume of shipments for major products, (ii) projected selling prices
for major product lines, (iii) projected manufacturing costs for major product
lines, (iv) projected operating expenses for each major business, and (v)
projected capital spending by each major business. In addition, such parties
were provided similar historical actual information for a five-year period.
Riverwood assumed no responsibility for the accuracy of these projections and
gave no assurance that these projections would be realized. Projections were
first provided to such persons in June 1995 (the "June Projections"), and in
September 1995 Riverwood updated portions of the June Projections with respect
to 1995 and 1996 (the "September Projections").
THE FOLLOWING PROJECTIONS WERE NOT PREPARED BY MANVILLE, AND MANVILLE MAKES
NO REPRESENTATION AS TO THE FORM OR CONTENT THEREOF. IN ADDITION, RIVERWOOD HAS
ADVISED MANVILLE THAT THE FOLLOWING PROJECTIONS WERE NOT PREPARED WITH A VIEW TO
PUBLIC DISCLOSURE AND ARE INCLUDED HEREIN ONLY BECAUSE SUCH INFORMATION WAS
PROVIDED TO VARIOUS THIRD PARTIES. IN ADDITION, RIVERWOOD HAS INFORMED MANVILLE
THAT THESE PROJECTIONS WERE NOT PREPARED WITH A VIEW TOWARD COMPLIANCE WITH
PUBLISHED GUIDELINES OF THE COMMISSION OR THE GUIDELINES ESTABLISHED BY THE
AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING PROJECTIONS AND
FORECASTS, NOR IS THE PROJECTED FINANCIAL INFORMATION INTENDED TO BE PRESENTED
IN A MANNER CONSISTENT WITH FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. WHILE PRESENTED WITH NUMERICAL
SPECIFICITY, THESE PROJECTIONS ARE BASED UPON A VARIETY OF ASSUMPTIONS, SOME OF
WHICH ARE SET FORTH BELOW, WITH RESPECT TO INDUSTRY PERFORMANCE, GENERAL
BUSINESS AND ECONOMIC CONDITIONS, TAXES, AND OTHER MATTERS, MOST OF WHICH ARE
BEYOND THE CONTROL OF MANVILLE, RIVERWOOD, HOLDING, PARENT AND THE PURCHASER.
NONE OF MANVILLE, RIVERWOOD, HOLDING, PARENT, THE PURCHASER OR ANY OF THEIR
FINANCIAL ADVISORS ASSUMES ANY RESPONSIBILITY FOR THE ACCURACY OF THESE
PROJECTIONS, AND THE PRESENTATION OF SUCH INFORMATION SHOULD NOT BE REGARDED AS
A REPRESENTATION BY MANVILLE, RIVERWOOD OR ANY OTHER PERSON THAT THESE RESULTS
WILL BE ACHIEVED. IN ADDITION, BECAUSE THE PROJECTIONS ARE BASED ON A NUMBER OF
ASSUMPTIONS AND ARE SUBJECT TO SIGNIFICANT ECONOMIC AND COMPETITIVE
UNCERTAINTIES, WHICH ARE BEYOND THE CONTROL OF MANVILLE, RIVERWOOD, HOLDING,
PARENT AND THE PURCHASER AND THEIR FINANCIAL ADVISORS, THERE CAN BE NO ASSURANCE
THAT THESE PROJECTIONS WILL BE REALIZED, AND ACTUAL RESULTS MAY BE HIGHER OR
LOWER THAN THOSE SHOWN, POSSIBLY BY MATERIAL AMOUNTS.
The projections should be read together with the information contained in
the consolidated financial statements of Riverwood which are incorporated herein
by reference to the Riverwood Proxy Statement. The projections set forth below
do not give effect to the Merger and the Financing described in "-- Source and
Amount of Funds."
The summary unaudited projected financial data set forth below are derived
from the June Projections:
<TABLE>
<CAPTION>
1995(A) 1996 1997 1998 1999
------ ------ ------ ------ ------
(DOLLAR AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Sales
Coated Board System..................... $1,028 $1,163 $1,317 $1,446 $1,545
Containerboard.......................... 247 260 161 126 98
US Timberlands/Wood Products............ 161 156 152 150 154
Intersegment eliminations............... (19) (19) (19) (19) (19)
------ ------ ------ ------ ------
Total Sales........................... $1,417 $1,560 $1,611 $1,703 $1,778
Operating Income (Note B)
Coated Board System..................... $ 142 $ 248 $ 333 $ 379 $ 414
Containerboard.......................... 71 113 64 51 36
US Timberlands/Wood Products............ 47 45 43 42 46
Intersegment eliminations............... (32) (33) (33) (34) (35)
------ ------ ------ ------ ------
Total operating income................ $ 228 $ 373 $ 407 $ 438 $ 461
</TABLE>
81
<PAGE>
<TABLE>
<CAPTION>
1995(A) 1996 1997 1998 1999
------ ------ ------ ------ ------
(DOLLAR AMOUNTS IN MILLIONS)
Net Income................................ $ 86 $ 169 $ 191 $ 210 $ 224
<S> <C> <C> <C> <C> <C>
EBITDA (Notes B and C)
Coated Board System..................... $ 210 $ 322 $ 423 $ 485 $ 529
Containerboard.......................... 93 132 78 60 42
US Timberlands/Wood Products............ 60 58 57 56 59
Intersegment eliminations............... (29) (30) (31) (32) (32)
------ ------ ------ ------ ------
Total EBITDA.......................... $ 334 $ 482 $ 527 $ 569 $ 598
</TABLE>
- ------------------------------
(A) 1995 excludes costs associated with the strategic alternatives process that
are included in Other Costs in Riverwood's historical financial statements,
which are included elsewhere in this Proxy Statement.
(B) Operating Income and EBITDA include the projected equity earnings of a 50%
interest in a Brazilian operation.
(C) "EBITDA," for purposes hereof, represents operating income plus
depreciation, amortization and the cost of timber harvested. EBITDA is
presented here not as a measure of projected operating results, but rather
as a measure of Riverwood's projected ability to service debt. EBITDA is not
a generally accepted accounting principles measure and should not be
construed as an alternative either to (i) net income (determined in
accordance with generally accepted accounting principles) or (ii) cash flows
from operating activities (determined in accordance with generally accepted
accounting principles).
The summary unaudited projected financial data set forth below are derived
from the September Projections:
<TABLE>
<CAPTION>
1995(A) 1996
----- -----
(DOLLAR
AMOUNTS IN
MILLIONS)
<S> <C> <C>
Operating Income (Note B)
Coated Board System.................................. $116 $ 245
Containerboard....................................... 74 84
US Timberlands/Wood Products......................... 49 56
Intersegment eliminations............................ (28 ) (30)
----- -----
Total operating income............................. $211 $ 355
Net Income............................................. $ 79 $ 155
</TABLE>
- ------------------------------
(A) 1995 excludes costs associated with the strategic alternatives process that
are included in Other Costs in Riverwood's historical financial statements,
which are included elsewhere in this Proxy Statement.
(B) Operating Income includes the projected equity earnings of a 50% interest in
a Brazilian operation.
The projections presented herein were based on a number of assumptions. The
following discussion outlines certain significant assumptions underlying these
projections.
VOLUME. Riverwood's U.S. coated unbleached kraft board ("CUK Board")
capacity was projected to increase to 1.3 million tons during the projection
period due to the conversion of one of Riverwood's paperboard machines at its
Macon, Georgia mill (the "Macon Machine") to CUK Board production. The
significant increase in capacity was forecasted to be sold in the open market
cartonboard segment and converted into packages and sold into beverage carton
and general folding carton markets.
Conversely, the projections reflect an assumed decline in linerboard
production as the Macon Machine is converted to CUK Board production.
Sales volume in the U.S. Timberlands/Wood Products segment was projected to
remain relatively stable during the projection period.
PRICING. Projected prices for CUK Board products reflect improvements in
1995 (principally in open market board sales) with moderate increases thereafter
for most product lines. For the containerboard markets, board pricing was
projected to increase in the 1995-1997 period in the June
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<PAGE>
Projections while the September Projections reflect declining prices through
1996, which remain flat thereafter. In the U.S. Timberlands/Wood Products
segment pricing was projected to remain relatively flat.
PRODUCTIVITY AND COST. Most cost components generally were indexed to
increase at a moderate rate except the delivered costs of old corrugated
containers which were assumed to decline from an average of $240 a ton in 1995.
Certain productivity and cost reductions relating to projected capital
expenditures were included in the projections.
OPERATING EXPENSES. Most operating expenses were projected to increase at a
moderate inflationary rate with the assumption that the 1995 sales, marketing
and other organizational infrastructure was sufficient to support the coated
board capacity increases.
CAPITAL EXPENDITURES. Projected capital expenditures, including
expenditures financed under lease arrangements, included in the June Projections
and the September Projections were as follows: $180 million in 1995, $217
million in 1996, $205 million in 1997, $151 million in 1998 and $149 million in
1999. The projected capital expenditures included significant amounts related to
expansion of the Coated Board System segment principally related to CUK Board
capacity, converting capacity and packaging machinery installations. The
projected capital expenditures also included estimated spending for productivity
projects, future environmental requirements and maintenance needs. Significant
financial benefits expected to result from this projected capital spending were
included in the June Projections and the September Projections.
OTHER AREAS. Projected interest expense was based on Riverwood's 1995 debt
structure and debt amortization schedule. Projected income tax expense was based
on existing tax laws in countries where Riverwood operates.
Following the date of the September Projections, projections were prepared
for use in connection with the Financing, which projections generally reflect
lower aggregate sales, operating income, EBITDA, net income and capital
expenditures than are reflected in the June Projections and the September
Projections.
CERTAIN EVENTS
On December 6, 1995, Forrest Kelly Clay, an alleged stockholder of
Riverwood, filed a purported class action lawsuit in the United States District
Court for the Northern District of Georgia, Atlanta Division, against Riverwood
and certain officers of Riverwood (the "Individual Defendants," and together
with Riverwood, the "Defendants"). The complaint generally alleges that the
Defendants violated the federal securities laws by disseminating misleading
statements and omissions concerning the strategic alternatives that Riverwood
was considering and that the Individual Defendants violated the federal
securities laws by trading in Riverwood's securities while in possession of
material, non-public information. The complaint generally seeks damages in an
unspecified amount, as well as other relief. The Defendants believe the
allegations contained in the complaint are without merit and intend to contest
them vigorously.
The Louisiana Department of Environmental Quality notified Riverwood, by
letter dated December 19, 1995, that Riverwood may be liable for the remediation
of the release or threat of release of hazardous substances at a wood treatment
site that Riverwood or its predecessor previously operated in Shreveport,
Louisiana and an oil refinery site in Caddo Parish, Louisiana that was never
operated by Riverwood. Riverwood is currently evaluating these claims.
SOURCE AND AMOUNT OF FUNDS
Holding, Parent and the Purchaser have advised Manville that approximately
$2,716 million will be required to (i) finance the payment of the Merger
Consideration, (ii) repay or refinance certain existing indebtedness of
Riverwood and certain of its subsidiaries and (iii) pay the fees, expenses and
taxes expected to be incurred in connection with the Merger, the Subsequent
Merger and the Financing (collectively, the "Transactions"). Holding, Parent and
the Purchaser have further advised
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<PAGE>
Manville that they anticipate that the Transactions will be financed with the
proceeds of the sale of up to approximately $750 million of Holding Common
Stock, together with (A) up to $1,277 million of bank borrowings by Parent
pursuant to senior secured credit facilities with a group of banks led by
Chemical Bank which provide for aggregate commitments of up to $1,550 million
(the "Senior Secured Credit Facilities"), (B) $39 million in initial borrowings
by Riverwood International Machinery, Inc. ("RIMI") under a $140 million,
five-year, secured revolving credit facility (the "Machinery Facility") for the
purpose of financing or refinancing packaging machinery and (C) the proceeds of
concurrent offerings by Parent of (x) $250 million of Senior Notes due 2006 (the
"Senior Notes") and (y) $400 million of Senior Subordinated Notes due 2008 (the
"Senior Subordinated Notes" and, together with the Senior Notes, the "Notes")
(collectively, the "Financing"). Holding, Parent and the Purchaser have advised
Manville that they are also preparing an offering (the "Timber Note Offering"),
the net proceeds of which are expected to be up to approximately $250 million,
which is expected to close after or, in certain circumstances, contemporaneously
with, the Merger, by RIUSA, indirectly through a special purpose entity, wholly
owned by RIUSA, of Timber Collateralized Notes (the "Timber Notes"), secured by
the U.S. timberlands presently owned and leased by RIUSA. The net proceeds from
the Timber Note Offering, if consummated, will be distributed by the special
purpose entity to RIUSA and applied by RIUSA to reduce the outstanding term
loans under the Senior Secured Credit Facilities.
Holding has advised Manville that it expects that the operating cash flow of
RIUSA and, if necessary, other available sources of cash will be sufficient to
make all principal and interest payments under the Senior Secured Credit
Facilities, the Senior Notes and the Senior Subordinated Notes.
The following table illustrates the estimated sources and uses of funds
necessary to consummate the Transactions as if the closing of such Transactions
had occurred on December 31, 1995:
SOURCES
<TABLE>
<CAPTION>
AMOUNTS
-------------------
(DOLLARS IN
MILLIONS)
<S> <C>
Senior Secured Credit Facilities:
Revolving Credit Facility (Note A)........................ $ 127
Tranche A Term Loan (Note B).............................. 725
Tranche B Term Loan (Note B).............................. 304
Tranche C Term Loan (Note B).............................. 121
Machinery Facility (Note C)................................. 39
Senior Notes................................................ 250
Senior Subordinated Notes................................... 400
Holding Common Stock (Note D)............................... 750
-------
Total Sources........................................... $ 2,716
-------
-------
</TABLE>
USES
<TABLE>
<S> <C>
Purchase of Riverwood Common Stock (Note E)................. $ 1,475
Refinance Existing Debt (Note F)............................ 966
Estimated Fees, Expenses and Tax Payments (Note G).......... 275
-------
Total Uses.............................................. $ 2,716
-------
-------
</TABLE>
- ------------------------
(A) This amount represents the drawn portion at the closing of the Merger under
the $400 million revolving portion of the Senior Secured Credit Facilities,
assuming that the full $750 million of Holding Common Stock is sold at the
closing of the Transactions (see Note D below) and each of the amounts
described in Notes E, F and G were paid at the closing of the Merger (see
Notes E, F and G below). This amount also assumes that approximately $39
million is drawn under the Machinery Facility at the closing of the Merger
in connection with the termination of RIMI's existing sale and leaseback
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<PAGE>
arrangements with respect to packaging machinery (see Note C below). In the
event that the Machinery Facility is not in place at the closing of the
Merger, it is expected that amounts drawn under the Revolving Credit
Facility will increase by $39 million.
(B) The net proceeds of the Timber Note Offering, expected to be up to
approximately $250 million, will be distributed by the special purpose
entity to RIUSA and applied by RIUSA to reduce the outstanding term loans
under the Term Loan Facility. The interest and repayment terms of the Timber
Notes have not been determined, and it is not yet known if such terms will
differ substantially from the terms of the Term Loan Facility. A
registration statement for the Timber Notes was filed with the Commission on
January 29, 1996. The Timber Note Offering, if consummated, is expected to
close after or, under certain circumstances, simultaneously with, the
Merger. There can be no assurance that the Timber Note Offering will be
completed. See "-- TIMBER NOTE OFFERING."
(C) In connection with the Merger, Holding expects that RIMI will enter into,
and make initial borrowings under, the $140 million Machinery Facility for
the purpose of financing or refinancing packaging machinery. The $39 million
amount represents the amount that is expected to be drawn under the
Machinery Facility at the closing of the Merger in connection with the
termination of RIMI's existing off-balance sheet sale and leaseback
arrangements with respect to packaging machinery, and assumes no additional
borrowings under the Machinery Facility at the closing of the Merger. In the
event that the Machinery Facility is not in place at the closing of the
Merger, it is expected that the amounts drawn under the Revolving Credit
Facility will increase by $39 million.
(D) At least $725 million of proceeds from the sale of Holding Common Stock will
be received at the closing of the Merger. In the event that $750 million of
proceeds from the sale of Holding Common Stock is not received at the
closing of the Transactions, one or more equity investors will provide a
capital call commitment for the difference between $750 million and sum of
(x) the amount of proceeds received from the sale of Holding Common Stock
received at the closing of the Merger and (y) the amount of proceeds
received from the sale of Holding Common Stock to the Management Investors,
together with the aggregate amount of deferred compensation bonuses granted
to the Management Investors that are converted into Holding stock units, in
each case, within one year of the closing of the Merger, so that the
aggregate proceeds from the sale of Holding Common Stock received by the
first anniversary of the closing of the Merger will be at least $750
million. See "-- SALE OF HOLDING COMMON STOCK."
(E) Assumes the full conversion of $125 million principal amount of Riverwood's
6 3/4% Convertible Subordinated Notes due 2003 (the "Convertible Notes") in
connection with the completion of the Merger.
(F) Assumes that substantially all existing indebtedness of Riverwood is repaid
at the closing of the Transactions, including the purchase of 100% of
Riverwood's outstanding 10 3/4% Senior Notes Due 2000, the 10 3/4% Senior
Notes II Due 2000, the 11 1/4% Senior Subordinated Notes Due 2002, the
11 1/4% Senior Subordinated Notes II Due 2002 and the 10 3/8 Senior
Subordinated Notes Due 2004 (collectively, the "Outstanding Notes") pursuant
to the Offers (as defined below). Includes $39 million to repurchase
packaging machinery under operating leases in connection with the
termination of RIMI's existing off-balance sheet sale and leaseback
arrangements with respect to packaging machinery. Riverwood expects to keep
in place certain existing debt and credit facilities, aggregating
approximately $63 million, following the closing of the Merger. See "-- The
Merger Agreement; CERTAIN OTHER COVENANTS."
(G) Estimated fees and expenses include underwriting discounts and commissions,
bank and financial advisory fees, legal and accounting expenses and tender
and make-whole premiums and related costs, relating to the Transactions.
Estimated tax payments include estimated stand-alone state and local income
tax payments related to the expected election under Section 338(h)(10) of
the Code in connection with the Merger, and exclude federal, local and
combined state income tax payments relating to such election, which
Riverwood's majority stockholder, Manville, has agreed to pay. See "-- Tax
Matters Agreement."
SENIOR SECURED CREDIT FACILITIES
Holding, Parent and the Purchaser have advised Manville that the credit
agreement expected to be entered into by Parent in connection with the Merger
will provide for aggregate maximum borrowings by Parent under a $1,150 million
term loan facility (the "Term Loan Facility") and a $400 million revolving
credit facility (the "Revolving Credit Facility," and together with the Term
Loan Facility, the "Facilities"). The initial borrowings under the Facilities
will be made by Parent immediately prior to the Effective Time and will be
guaranteed by Holding and the Purchaser. Following the Subsequent Merger, RIUSA
(currently a wholly owned subsidiary of Riverwood and, following the Subsequent
Merger, a wholly owned subsidiary of Parent as the surviving corporation in the
Subsequent Merger) will be assigned all of Parent's rights, as the surviving
corporation in the Subsequent Merger, under the Facilities and will assume all
of Parent's obligations, as the surviving corporation in the Subsequent Merger,
thereunder, including with respect to all of the loans made to finance the
Transactions. Parent, as the surviving corporation in the Subsequent Merger,
will guarantee all of RIUSA's obligations under the Facilities in exchange for
being released from its primary obligations thereunder. The
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following summary of certain provisions of the Facilities is a description of
currently expected terms of such provisions after giving effect to the
consummation of the Merger and the Subsequent Merger and the assumption by RIUSA
of Parent's obligations under the Facilities. Because the terms of the
Facilities remain under discussion with the Lenders, the terms of the definitive
agreements therefor may vary materially from those described in the following
summary.
Holding, Parent and the Purchaser have advised Manville that Chemical Bank
has committed to provide, or arrange for a syndicate of lenders (the "Lenders")
to provide, Parent and, after the Effective Time and the Subsequent Merger,
RIUSA and certain of its subsidiaries (the "Subsidiary Borrowers"), subject to
certain terms and conditions, the Senior Secured Credit Facilities in an
aggregate principal amount not to exceed $1,550 million (the term loan portion
of such commitment to be reduced by (i) the aggregate amount of the Outstanding
Notes remaining outstanding as of the close of the Offers and after any change
of control repurchases that is in excess of 15% of the current aggregate
principal amount of the Outstanding Notes (the "Commitment Reduction")). At the
closing of the Transactions (or shortly thereafter) (i) approximately $1,150
million is expected to be drawn under the Term Loan Facility described below and
(ii) $127 million is expected to be drawn under the Revolving Credit Facility
under which $400 million is available on a revolving credit basis for the
general corporate purposes of RIUSA and its subsidiaries.
STRUCTURE. The Senior Secured Credit Facilities are expected to consist of
(a) the Term Loan Facility in an aggregate principal amount of $1,150 million,
subject to the Commitment Reduction, consisting of three tranches in principal
amounts of $725 million, $304 million and $121 million (the "Tranche A Term
Loan," "Tranche B Term Loan" and "Tranche C Term Loan," respectively) and (b)
the Revolving Credit Facility providing for revolving loans to RIUSA and the
Subsidiary Borrowers and the issuance of letters of credit for the account of
RIUSA and the Subsidiary Borrowers in an aggregate principal amount (including
the aggregate stated amount of letters of credit and the aggregate reimbursement
and other obligations in respect thereof) at any time not to exceed $400
million. Prior to the closing of the Transactions, a portion of the Term Loan
Facility allocated to the Tranche A Term Loan may be reallocated to the Tranche
B Term Loan and the Tranche C Term Loan.
AVAILABILITY. The availability of the Senior Secured Credit Facilities is
expected to be subject to various conditions precedent typical of bank loans,
and Chemical Bank's commitment to provide the Senior Secured Credit Facilities
is also subject to, among other things, the completion of Chemical Bank's
financial and legal review of Parent, Riverwood and the Merger, and the absence
of any material adverse change with respect to Riverwood in particular or the
financial, banking or capital markets in general. It is expected that the full
amount of the Term Loan Facility will have to be drawn in not more than two
drawings, the first at the closing of the Transactions and the second within
ninety days thereafter, and amounts repaid or prepaid under the Term Loan
Facility may not be reborrowed. A portion of the Tranche A Term Loan and the
Revolving Credit Facility is expected to be available as a multicurrency
facility, and letters of credit may be issued to facilitate local currency
borrowing.
The Tranche A Term Loan and the Revolving Credit Facility are expected to
mature in March 2003. The Tranche B Term Loan is expected to mature in March
2004 and the Tranche C Term Loan is expected to mature in September 2004.
Amortization of the Term Loan Facility is expected to be in semi-annual
payments commencing in September 1997. Scheduled semi-annual payments on the
Tranche A Term Loans are expected to total approximately $23 million in 1997,
$68 million in 1998, $102 million in 1999, $125 million in 2000, $153 million in
2001, $170 million in 2002 and $85 million in 2003. Scheduled semi-annual
payments on the Tranche B Term Loans are expected to total approximately
$750,000 in 1997, $2 million in 1998, $3 million in 1999, $3 million in 2000,
$32 million in 2001, $61 million in 2002, $116 million in 2003 and $86 million
in 2004. Scheduled semi-annual payments on the Tranche C Term Loans are expected
to total approximately $300,000 in 1997, $1 million in 1998, $1 million in 1999,
$1 million in 2000, $1 million in 2001, $13 million in 2002, $25 million in 2003
and $80 million in
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2004. In addition, the Senior Secured Credit Facilities are subject to mandatory
prepayment and reductions (to be applied first to the Term Loan Facility) in an
amount equal to, subject to certain exceptions, (a) 50% of the net proceeds of
certain offerings of equity securities by Holding, (b) 100% of the net proceeds
of (i) certain debt offerings by Holding, RIUSA or any of their subsidiaries,
(ii) certain asset sales, leases or other dispositions and (iii) the sale of the
Timber Notes and (c) a percentage ranging between 50% and 75% of RIUSA's excess
operating cash flow, such percentage to be determined in accordance with the
terms of the definitive documentation. In the event of any receivables
securitization, the Revolving Credit Facility is expected to be permanently
reduced by an amount equal to the proceeds of such securitization.
SECURITY; GUARANTY. The obligations of RIUSA under the Senior Secured
Credit Facilities are expected to be unconditionally and irrevocably guaranteed
by Holding, Parent and certain domestic subsidiaries of RIUSA (other than any
subsidiaries created in connection with the issuance of the Timber Notes or to
implement any future receivables securitization). In addition, the Senior
Secured Credit Facilities and the guarantees thereunder will be secured by
security interests in and pledges of or liens on substantially all the material
tangible and intangible assets of RIUSA (other than assets pledged in connection
with the Timber Note Offering or any future receivables securitization),
including pledges of all the capital stock of, or other equity interests in,
each direct or indirect domestic subsidiary of RIUSA and, subject to limited
exceptions, 65% of the capital stock of, or other equity interests in, each
foreign subsidiary of RIUSA.
INTEREST. At RIUSA's election, the interest rates per annum applicable to
the loans under the Senior Secured Credit Facilities are expected to be at
fluctuating rates of interest measured by reference to either (a) an adjusted
London inter-bank offered rate ("LIBOR") plus a borrowing margin or (b) an
alternate base rate ("ABR") (equal to the highest of Chemical Bank's published
prime rate, a certificate of deposit rate plus 1% and the Federal Funds
effective rate plus 1/2 of 1%) plus a borrowing margin. The borrowing margins
applicable to Tranche A Term Loans and loans under the Revolving Credit Facility
are expected to be 1.50% for ABR loans and 2.50% for LIBOR loans. These margins
are expected to be subject to reduction after March 1997 if certain financial
performance thresholds are met. The interest rate borrowing margins applicable
to the Tranche B Term Loans and the Tranche C Term Loans will be 2.00% and
2.50%, respectively, for ABR loans and 3.00% and 3.50%, respectively, for LIBOR
loans and will not be subject to reduction. Amounts under the Senior Secured
Credit Facilities not paid when due bear interest at a default rate equal to
2.00% above the rate otherwise applicable to the Tranche C Term Loans.
FEES. RIUSA has agreed to pay certain fees with respect to the Senior
Secured Credit Facilities, including (i) fees on the unused commitments of the
Lenders equal to 1/2 of 1% on the undrawn portion of the commitments in respect
of the facilities; (ii) letter of credit fees on the aggregate face amount of
outstanding letters of credit equal to the then applicable borrowing margin for
LIBOR Revolving Loans plus a 1/4 of 1% per annum fronting bank fee for the
letter of credit issuing bank; (iii) annual administration fees; and (iv) agent,
arrangement and other similar fees.
COVENANTS. The Senior Secured Credit Facilities are expected to contain a
number of covenants that, among other things, will restrict the ability of
Holding, Parent, RIUSA and its subsidiaries to dispose of assets, incur
additional indebtedness, incur guarantee obligations, prepay other indebtedness
or amend other debt instruments, pay dividends, create liens on assets, make
investments, loans or advances, make acquisitions, create subsidiaries, engage
in mergers or consolidations, change the business conducted by RIUSA, make
capital expenditures, or engage in certain transactions with affiliates and
otherwise restrict certain corporate activities. In addition, under the Senior
Secured Credit Facilities, RIUSA is expected to be required to comply with
specified financial ratios and minimum tests, including minimum interest
coverage ratios, maximum leverage ratios and minimum net worth tests.
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The Senior Secured Credit Facilities are expected to contain provisions that
will prohibit any amendments or modification of the indentures adverse to the
Lenders under the Senior Secured Credit Facilities and that will limit RIUSA's
ability to prepay or refinance the Notes without the consent of such Lenders.
EVENTS OF DEFAULT. The Senior Secured Credit Facilities are expected to
contain customary events of default including non-payment of principal, interest
or fees, violation of covenants, inaccuracy of representations or warranties in
any material respect, cross default and cross acceleration to certain other
indebtedness, bankruptcy, material judgments and liabilities and a change in
control.
PACKAGING MACHINERY FINANCING FACILITY
Holding and Parent have advised Manville that Holding expects to receive a
commitment from Chemical Bank and certain other lenders (collectively, the
"Machinery Lenders") to provide RIMI, currently a wholly owned subsidiary of
Riverwood, up to $140 million through the Machinery Facility for the purpose of
financing or refinancing packaging machinery. This summary of certian provisions
of the Machinery Facility is a description of currently expected terms of such
provisions after giving effect to the consummation of the Merger. Because the
terms of the Machinery Facility remain under discussion with the Machinery
Lenders, the terms of the definitive agreement may vary materially from those
described in this summary.
Loans under the Machinery Facility will bear interest at the rates
applicable to the Revolving Credit Facility described above under "-- SENIOR
SECURED CREDIT FACILITIES" and will mature in March 2001. Advances under the
Machinery Facility will not exceed a formula to be applied against a borrowing
base consisting of substantially all of the packaging machinery owned by RIMI.
The advance rate formula will permit advances against machinery purchased after
the closing of the Merger in which the Machinery Lenders receive a perfected
security interest equal to 94% of the original purchase price paid by RIMI to
Riverwood for such machinery during the first year after purchase, decreasing to
81% in the second year, 68% in the third year, 55% in the fourth year and 42% in
the fifth year. The advance rate formula for machinery in which the Machinery
Lenders do not have a perfected security interest will be reduced to
approximately 65% of those amounts (which machinery cannot exceed 50% of the
total borrowing base). Packaging machinery purchased by RIMI prior to the
closing of the Merger may also be included in the borrowing base but will be
subject to a different advance rate formula to be determined in the definitive
documentation. RIMI will be required periodically to compute its borrowing
capacity by applying the advance rate formula to its borrowing base. If then
outstanding loans under the Machinery Facility exceed that capacity, RIMI will
be required to repay the excess amount of any such outstanding loans. RIMI will
also be obligated to pay a commitment fee of 0.50% per annum on the unused
portion of the Machinery Facility.
The Machinery Lenders will receive a perfected security interest in
substantially all of the machinery in the borrowing base which is located in the
United States. It is expected that the Machinery Lenders will also have a
perfected security interest in some of the borrowing base machinery that will be
located in foreign countries. In addition, all of the assets and guarantees that
secure Senior Secured Credit Facilities will secure all of RIMI's obligations
under the Machinery Facility and all of the borrowing base assets that secure
the Machinery Facility will also secure loans made under the Senior Secured
Credit Facilities. The covenants and defaults contained in the Machinery
Facility are expected to be substantially the same as the covenants and defaults
contained in the Senior Secured Credit Facilities.
At the closing of the Merger, RIMI expects to borrow approximately $38.9
million under the Machinery Facility for the purpose of repurchasing packaging
machinery with respect to existing sale and leaseback arrangements affecting a
portion of RIMI's existing packaging machinery.
SENIOR NOTES AND SENIOR SUBORDINATED NOTES
Parent has advised Manville that the Notes will be offered by Parent.
Immediately following the Subsequent Merger, RIUSA will assume all of Parent's
obligations under the Notes and Parent, as the
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surviving corporation in the Subsequent Merger, will guarantee the Notes in
exchange for being released from its primary obligations under the Notes. Parent
has advised Manville that the following summary of certain provisions of the
Notes and the indentures with respect thereto (each an "Indenture" and
collectively, the "Indentures") is a description of the currently expected terms
of such provisions after giving effect to the consummation of the Subsequent
Merger and the assumption of the Notes by RIUSA. The terms of the Notes and the
Indentures with respect thereto remain under discussion with the underwriters,
and accordingly their definitive terms may vary materially from those described
in the following summary.
The Senior Notes are expected to mature in 2006 and the Senior Subordinated
Notes are expected to mature in 2008. Except as described below, RIUSA may not
redeem the Notes prior to 2001. On or after such date, it is anticipated that
RIUSA may redeem such Notes, in whole or in part, at certain redemption prices,
together with accrued and unpaid interest, if any, to the date of redemption. In
addition, at any time and from time to time on or prior to 1999, it is
anticipated that RIUSA may, subject to certain requirements, redeem up to 40% of
the original aggregate principal amount of the Senior Notes and the Senior
Subordinated Notes with the net cash proceeds of one or more public equity
offerings at prices equal to stated percentages of the principal amount of the
Senior Notes and the Senior Subordinated Notes, as the case may be, to be
redeemed, together with accrued and unpaid interest, if any, to the date of
redemption, provided that at least 60% of the original aggregate principal
amount of each of the Senior Notes and the Senior Subordinated Notes remains
outstanding after each such redemption. The Notes will not be subject to any
sinking fund obligations.
Upon the occurrence of a Change of Control (as defined in the Indentures),
it is anticipated that (i) RIUSA may redeem the Notes, in whole or in part, at a
redemption price equal to 100% of the principal amount thereof plus an
applicable premium, together with accrued and unpaid interest, if any, to the
date of redemption, and (ii) if RIUSA does not so redeem the Notes, it may be
required to make an offer to repurchase the Notes at a price equal to 101% of
the principal amount thereof, together with accrued and unpaid interest, if any,
to the date of repurchase, PROVIDED that the holders of Senior Notes will have
the opportunity to have their Notes repurchased prior to holders of Senior
Subordinated Notes. The Senior Secured Credit Facilities, however, will prohibit
the purchase of the Notes by RIUSA in the event of a Change of Control, unless
and until such time as the indebtedness under the Senior Secured Credit
Facilities is paid in full.
The Senior Notes will be fully and unconditionally guaranteed on an
unsecured, senior basis, and the Senior Subordinated Notes will be fully and
unconditionally guaranteed on an unsecured, senior subordinated basis, by
Holding and, upon the assumption of the Notes, by Parent and by certain future
subsidiaries of RIUSA.
The Senior Notes are expected to be unsecured and to rank PARI PASSU in
right of payment with all existing and future Senior Indebtedness (as defined in
the Indentures) of RIUSA and to rank senior to all existing and future Senior
Subordinated Indebtedness (as defined in the applicable Indenture) of RIUSA and
all other subordinated indebtedness of RIUSA. The Senior Subordinated Notes are
expected to be unsecured and to be subordinated to all existing and future
Senior Indebtedness of the Surviving Corporation. The Senior Subordinated Notes
are expected to rank PARI PASSU with any future Senior Subordinated Indebtedness
of the Surviving Corporation and to rank senior to all other subordinated
indebtedness of RIUSA. The Notes are also expected to be effectively
subordinated to all existing and future secured indebtedness of RIUSA and its
subsidiaries to the extent of the value of the assets securing such
indebtedness.
TIMBER NOTE OFFERING
In addition to the other financing expected to be incurred by Parent in
connection with the Merger, Holding and Parent have advised Manville that, as
promptly as possible following, or in certain circumstances, contemporaneously
with, the Merger, RIUSA, indirectly through a special purpose, wholly owned
entity, intends to offer and sell the Timber Notes. New River Timber, LLC, to be
renamed Riverwood Timber, LLC (the "Timber Company"), has been organized as a
Delaware
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limited liability company to offer and sell the Timber Notes. The Timber
Company's issuance of the Timber Notes will be conditioned upon the consummation
of the Transactions and the obtaining of ratings for the Timber Notes of at
least investment grade by Moody's Investors Services, Inc. and Standard and
Poor's Ratings Group. It is expected that, promptly after consummation of the
Subsequent Merger, RIUSA will transfer its interest in approximately 530,000
acres of owned and 8,000 acres of leased timberlands (collectively, the "Subject
Timberlands") to the Timber Company, in which RIUSA will hold a 99% or greater
membership interest and New River Timber, Inc. (the "Special Purpose Member"), a
Delaware corporation which will be a wholly owned subsidiary of RIUSA, will hold
any remaining membership interest. The Timber Company will be structured as a
bankruptcy remote subsidiary of RIUSA and, therefore, in the event of a
bankruptcy proceeding of RIUSA, the assets of the Timber Company, including the
Subject Timberlands, will not necessarily be included in the bankruptcy estate
of RIUSA.
The proceeds of the Timber Notes are expected to be used by the Timber
Company to (i) fund the initial deposit of a liquidity account, (ii) establish
an expense reserve and (iii) make a distribution with the balance of the
proceeds to RIUSA and, if applicable, the Special Purpose Member, with the
Special Purpose Member then to make a further distribution to RIUSA. The net
proceeds of the Timber Notes distributed to RIUSA, currently expected to be up
to approximately $250 million, will be required to be applied to reduce the
outstanding balance of the Term Loan Facility under the Senior Secured Credit
Facilities. It is also expected that RIUSA's direct and indirect membership
interests in the Timber Company will be pledged to the banks under the Senior
Secured Credit Facilities.
The Transactions are not conditioned upon the issuance and sale of the
Timber Notes, and it is possible that the Timber Notes will be issued and sold
for a smaller amount of net proceeds, or that the closing of the issuance and
sale of the Timber Notes will be delayed, or that the Timber Notes will not be
issued at all. The provisions of the Timber Notes have not yet been finalized
with the underwriters.
SALE OF HOLDING COMMON STOCK
Holding and Parent have advised Manville that Holding will sell, immediately
prior to the Effective Time, for up to approximately $750 million in cash, up to
approximately an aggregate of 7,500,000 shares of its Class A Common Stock or
Class B Common Stock to certain equity investors. All of the Holding Common
Stock to be sold, including to the Management Investors, will be shares of Class
A Common Stock, except that Chemical Equity Associates will purchase shares of
Class B Common Stock. In the event that $750 million of proceeds from the sale
of Holding Common Stock is not received at the closing of the Merger, certain
equity investors, including CDR Fund V, will provide a capital call commitment
for the difference between $750 million and the sum of (x) the amount of
proceeds received from the sale of Holding Common Stock at the closing of the
Merger and (y) the amount of proceeds received from the sale of Holding Common
Stock to the Management Investors, together with the aggregate amount of
deferred compensation bonuses granted to the Management Investors that are
converted into Holding stock units, in each case, within one year of the closing
of the Merger, so that the aggregate proceeds from the sale of Holding Common
Stock received by the first anniversary of the closing of the Merger will be at
least $750 million, representing 7,500,000 shares of Holding Common Stock.
Approximately 200,000 shares of Holding Common Stock may be sold to the
Management Investors, including Mr. Johnson, within a year after the Effective
Time for cash and/or allocated for the benefit of the Management Investors in
lieu of the cash payment of certain deferred compensation bonuses awarded to the
Management Investors immediately after the Effective Time. See "-- Interests of
Certain Persons in the Merger; Potential Conflicts of Interest" and "-- Certain
Information Concerning Holding, Parent and the Purchaser; OWNERSHIP OF HOLDING
COMMON STOCK AT THE EFFECTIVE TIME." Each share of Holding Common Stock will
share equally and ratably in the receipt of dividends, when, if and as declared
by the Board of Directors of Holding from funds legally available therefor. The
declaration and payment of dividends on Holding Common Stock is expected to be
restricted by provisions of the Senior Secured Credit Facilities as well as by
the terms of the Senior Notes and the Senior Subordinated Notes. See "-- SENIOR
SECURED CREDIT FACILITIES" and "-- SENIOR NOTES AND SENIOR SUBORDINATED NOTES."
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The holders of Holding Common Stock at the Effective Time are expected to be
parties to separate subscription agreements between Holding and the various
equity investors and a Stockholders Agreement with respect to the election of
directors and pursuant to which they will have certain rights to participate in
private sales of Holding Common Stock by other equity investors and will be
subject to certain restrictions on transfer. Purchasers of Holding Common Stock,
including the equity investors and the Management Investors, are expected to be
parties to a Registration and Participation Agreement pursuant to which they
will have certain registration rights, together with certain rights to
participate in certain offerings of additional shares of Holding Common Stock by
Riverwood to any of the original equity investors, including CDR Fund V, and
certain other investors and certain sales or transfers of Holding Common Stock
by any other investor. In the event of liquidation, dissolution or winding up of
the affairs of Holding, the holders of Holding Common Stock will be entitled to
share equally in the assets available for distribution after payments to
creditors. The holders of Holding Common Stock will have no preemptive rights
with respect to securities of Holding, except as contemplated by the
Registration and Participation Agreement and the Stockholders Agreement. Each
share of Class A Common Stock will be entitled to one vote in the election of
directors and all other matters submitted to a vote of the stockholders of
Holding. Holders of Class A Common Stock will have no rights to cumulate their
votes in the election of directors.
The Class B Common Stock is identical to the Class A Common Stock in all
respects except as to voting and conversion rights. The holders of Class B
Common Stock will have no right to vote. Each holder of Class B Common Stock,
other than Chemical Equity Associates, will be entitled at its option to convert
any or all of such shares into the same number of shares of Class A Common
Stock, provided that such conversion would not result in such holder and its
affiliates, directly or indirectly, owning, controlling or having the power to
vote a greater quantity of Class A Common Stock than such holder and its
affiliates are permitted to own, control or have the power to vote under
applicable laws and regulations. While shares of Class B Common Stock will
convert automatically into shares of Class A Common Stock in connection with a
transfer of such Class B Common Stock, Chemical Equity Associates will not
otherwise be entitled to convert such shares into Class A Common Stock. The
Class B Common Stock is intended to meet the needs of Chemical Equity Associates
and several investors in CDR Fund V, which may be subject to regulatory
limitations on their ability to hold more than 5% of the voting stock of
Holding. At the Effective Time, approximately 500,000 shares of Class B Common
Stock are expected to be issued and outstanding. Additional shares of Class B
Common Stock may be issued in the future in exchange for Class A Common Stock in
connection with a stock distribution by CDR Fund V to its investors, if any.
Holding has advised Riverwood that CDR Fund V has no present plans to make any
such distributions.
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AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION
(PROXY ITEM NO. 3)
The Board has unanimously adopted a resolution approving the Proposed
Amendment in the form set forth in the Certificate of Amendment to the Company's
Restated Certificate of Incorporation attached as Annex E hereto and
incorporated herein by reference. The Company intends that the Certificate of
Amendment will be filed with the Secretary of State of the State of Delaware,
subject to authorization by stockholders, and become effective promptly
following the Effective Time, PROVIDED that the Board may abandon the Proposed
Amendment at any time prior to filing, whether or not the Proposed Amendment is
approved at the Special Meeting. The following summary is qualified in its
entirety by reference to the provisions of the Proposed Amendment, as set forth
in the form of Certificate of Amendment to the Company's Restated Certificate of
Incorporation, a copy of which is attached as Annex E hereto, and which is
incorporated herein by reference.
NAME CHANGE
The Proposed Amendment provides that the name of the Company will be changed
to "Schuller Corporation."
REASONS FOR THE PROPOSED AMENDMENT
Following the Disposition, Manville will conduct its operations primarily
through Schuller. The Company believes that the proposed name change will more
closely identify the Company with its primary business following the Riverwood
Disposition; I.E., the manufacture and sale of insulation for buildings and
equipment, commercial and industrial roofing systems, high-efficiency air
filtration media, and fibers and nonwoven mats used as reinforcements in
building and industrial applications.
CERTAIN EFFECTS OF THE PROPOSED AMENDMENT
The proposed name change will not affect the operations or businesses, or
the rights of stockholders, of the Company. As soon as practicable following
effectiveness of the Certificate of Amendment, the Company will cause
transmittal letters to be mailed to stockholders for use in forwarding their
stock certificates for surrender and exchange for new stock certificates.
STOCKHOLDERS SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH THEIR PROXY
CARDS.
RECOMMENDATION OF THE BOARD
The Board unanimously recommends that stockholders vote FOR approval of the
Proposed Amendment as proposed to be effected pursuant to the Certificate of
Amendment.
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SELECTED CONSOLIDATED FINANCIAL INFORMATION
MANVILLE SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data of
Manville and its subsidiaries for each of the five fiscal years ended December
31, 1990 through 1994 and the nine months ended September 30, 1995 and 1994. The
year-end data have been derived from, should be read in conjunction with, and
are qualified in their entirety by, the audited consolidated financial
statements of Manville, including the notes thereto, incorporated herein by
reference. The quarterly data have been derived from, should be read in
conjunction with, and are qualified in their entirety by, the unaudited
quarterly consolidated financial statements of the Company, including the notes
thereto, incorporated herein by reference. See "AVAILABLE INFORMATION" and
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30 YEAR ENDED DECEMBER 31
------------------------ ----------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
------------ ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
INCOME (LOSS)
Net Sales (Note A)................ $2,067,206 $1,850,925 $2,560,343 $2,278,204 $2,205,664 $2,011,276 $2,133,271
Income from Operations (Note A)... 266,385 209,666 296,486 135,948 202,216 70,817 227,805
Income (Loss) before Extraordinary
Item and Cumulative Effect of
Accounting Changes............... 146,440 57,029 65,416 60,772 47,465 (12,697) 110,718
Net Income (Notes B, C, D and E).. 146,440 22,322 36,996 47,782 35,949 34,700 110,718
FINANCIAL POSITION
Total Assets...................... $4,025,160 $3,756,063 $3,799,611 $3,620,307 $3,630,363 $3,002,545 $2,795,916
Long-Term Debt, less current
portion.......................... 1,452,883 1,481,745 1,423,995 1,390,988 1,191,061 822,632 870,289
Stockholders' Equity (Note B)..... 1,205,289 1,044,640 1,063,471 846,069 825,293 779,515 1,140,615
ADDITIONAL DATA
Additions to Property, Plant and
Equipment........................ $ 199,154 $ 237,459 $ 323,055 $ 351,494 $ 411,087 $ 179,407 $ 344,464
Research, Development and
Engineering (Note A)............. 29,709 29,115 39,094 36,743 33,873 35,988 40,791
PRIMARY EARNINGS (LOSS) PER COMMON
SHARE (NOTE F)
Income (Loss) before Extraordinary
Item and Cumulative Effect of
Accounting Changes............... $ 1.03 $ .31 $ .33 $ .31 $ .22 $ (.24) $ .79
Net Income (Notes B, C, D and E).. 1.03 .03 .10 .21 .13 .15 .79
FULLY DILUTED EARNINGS (LOSS) PER
COMMON SHARE (NOTE F)
Income (Loss) before Extraordinary
Item and Cumulative Effect of
Accounting Changes............... $ 1.01 $ .31 $ .33 $ .31 $ .22 $ (.24) $ .79
Net Income (Notes B, C, D and E).. 1.01 .03 .10 .21 .13 .15 .79
CASH DIVIDENDS PER COMMON SHARE... -- -- -- $ 1.04 $ 1.04 -- --
</TABLE>
- ------------------------------
Notes:
(A) Excludes the operating results of Celite Corporation, which was sold in
1991. Accordingly, the operating results of the discontinued operations have
been excluded from the determination of income from continuing operations
for all periods presented. Income (loss) from continuing operations includes
interest income, interest expense, profit sharing expense and related income
taxes.
(B) In September 1993, Manville purchased an additional 3,448,276 shares of
Riverwood's common stock, increasing Manville's ownership percentage to
approximately 81.5 percent from 80.5 percent. On June 24, 1992, Riverwood
completed an initial public offering of 12.1 million shares, or 19.5 percent
of Riverwood Common Stock. As a result of these transactions, the Company's
September 30, 1995 and 1994 and December 31, 1994, 1993 and 1992
Consolidated Balance
93
<PAGE>
Sheets reflect the minority stockholders' interest in Riverwood's net assets
of $104.9 million, $96.3 million, $95.6 million, $92.4 million and $93.1
million, respectively. The Company's September 30, 1995 and 1994 and
December 31, 1994, 1993 and 1992 Consolidated Statements of Income reflect
the minority stockholders' interest in Riverwood's net earnings of $8.3
million, $2.6 million, $0.4 million, $0.3 million and $3.1 million,
respectively.
(C) In the third and fourth quarters of 1994, the Company completed two debt
refinancings that resulted in an aggregate extraordinary loss on early
extinguishments of debt of $28.4 million, net of related income taxes of
$13.0 million. During the third quarter of 1993, the Company made a
prepayment on its outstanding bond obligations to the PI Trust. An
extraordinary gain of $0.9 million, net of related income taxes of $0.5
million, was recorded in August 1993 to adjust the estimated extraordinary
loss recorded in 1992. In 1992, the Company recorded an estimated
extraordinary loss of $11.5 million, net of related income taxes of $5.9
million, in anticipation of this prepayment.
(D) Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits." As a result, the Company recorded a charge in 1993 of $13.9
million, net of taxes of $8.6 million, or $0.11 per common share, against
net income to reflect the accumulated postemployment benefit obligation.
(E) Effective January 1, 1991, the Company changed its method of accounting for
employee postretirement benefits other than pensions to comply with the
provisions of Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions." As
a result, the Company recorded a charge against net income in 1991 of $173.4
million, net of tax of $91.4 million, or $1.44 per common share, to reflect
the cumulative effect on prior years of the accounting change. In accordance
with the provisions of that statement, postretirement benefit information
for prior periods has not been restated. Previously, retiree medical and
life insurance benefits were expensed as incurred. Also effective January 1,
1991, the Company changed its method of accounting for income taxes to
comply with the provisions of Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes." As a result, the Company recorded a
credit in 1991 of $220.8 million, or $1.83 per common share, to net income
to reflect the cumulative effect on prior years of the accounting change.
Financial statements presented for 1990 reflect income taxes using the
method required at that time by Statement of Financial Accounting Standards
No. 96, "Accounting for Income Taxes."
(F) Primary and fully diluted earnings (loss) per common share amounts are based
on the weighted average number of common and common equivalent shares
outstanding during each year assuming the conversion of the Series A
Convertible Preferred Stock, which was converted in 1992. All earnings
(loss) per share amounts presented in the above table were calculated after
the deduction for preference stock dividends/accretion.
94
<PAGE>
RIVERWOOD SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data of
Riverwood and its subsidiaries for each of the five fiscal years ended December
31, 1990 through 1995. The year-end data have been derived from, should be read
in conjunction with, and are qualified in their entirety by, the audited
consolidated financial statements of Riverwood, including the notes thereto,
incorporated herein by reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
INCOME
Net Sales.................................. $1,342,304 $1,282,788 $1,120,366 $1,118,227 $ 993,210 $ 887,029
Income from Operations (Note A)............ 133,137 154,187 83,497 146,092 127,630 145,962
Income before Extraordinary Item and
Cumulative Effect of Accounting Changes... 45,538 10,249 3,234 43,787 46,787 61,817
Net Income (Notes B, C, D and E)........... 45,538 2,377 1,071 43,787 89,334 61,817
FINANCIAL POSITION
Total Assets............................... $2,201,328 $2,102,292 $2,070,306 $1,904,039 $1,406,129 $1,328,933
Long-Term Debt............................. 1,053,794 994,770 1,049,425 905,941 294,025 298,426
Stockholders' Equity....................... 562,310 516,251 500,139 477,208 657,063 566,283
Book Value Per Common Share (Note F)....... $ 8.56 $ 7.88 $ 7.64 $ 7.69
ADDITIONAL DATA
Additions to Property, Plant and Equipment
(Note G).................................. $ 170,085 $ 240,222 $ 288,851 $ 378,592 $ 123,624 $ 219,847
Research, Development and Engineering
Expense................................... 9,909 9,356 8,771 5,773 4,761 3,529
PRIMARY EARNINGS PER COMMON SHARE (NOTES H
AND I)
Income before Extraordinary Item and
Cumulative Effect of Accounting Changes... $ 0.69 $ 0.16 $ 0.05 $ 0.78
Net Income (Notes B, C, D and E)........... 0.69 0.04 0.02 0.78
Weighted Average Common Equivalent Shares
Outstanding................................. 65,788 65,607 63,036 56,266
FULLY DILUTED EARNINGS PER COMMON SHARE
(NOTES H AND I)
Income before Extraordinary Item and
Cumulative Effect of Accounting Changes..... $ 0.69 $ 0.16 $ 0.05 $ 0.78
Net Income (Notes B, C, D and E)............. 0.69 0.04 0.02 0.78
Weighted Average Common Equivalent Shares
Outstanding................................. 72,915 72,734 63,036 56,266
CASH DIVIDENDS PER COMMON SHARE.............. $ 0.16 $ 0.16 $ 0.16 $ 0.04
RATIO OF EARNINGS TO FIXED CHARGES (NOTE
J).......................................... 1.37 1.35 -- 1.85 3.92 4.99
</TABLE>
- ------------------------
Notes:
(A) On December 29, 1994, Riverwood sold just under 50 percent of its investment
in its Brazilian operations (Igaras) after first spinning off a wholly owned
subsidiary to operate Riverwood's packaging machinery operations in Brazil.
Prior to that date, Riverwood included the results of operations of Igaras
in the Consolidated Financial Statements through the date of the sale.
Subsequent to December 29, 1994, Riverwood no longer consolidates Igaras,
but instead reports its investment in Igaras using the equity method of
accounting.
(B) Net Income for the year ended December 31, 1994, included the Extraordinary
Loss on Early Extinguishment of Debt described in Note 23 of the Notes to
Consolidated Financial Statements in the Riverwood Proxy Statement
incorporated herein by reference.
(C) Net Income for the year ended December 31, 1993, included the Cumulative
Effect of a Change in Accounting for Postemployment Benefits described in
Note 24 of the Notes to Consolidated Financial Statements in the Riverwood
Proxy Statement incorporated herein by reference.
(D) Net Income for the year ended December 31, 1992, included the effects of the
recapitalization and the acquisition of the Macon mill, each since its
respective date of incurrence.
(E) Net Income for the year ended December 31, 1991, included the Cumulative
Effect of Changes in Accounting for Income Taxes and Postretirement Benefits
Other Than Pensions.
(F) Book value per common share is based upon the number of common shares
outstanding at the relevant balance sheet dates. The number of shares of
Riverwood Common Stock outstanding at December 31, 1995, 1994, 1993 and 1992
was 65,698,021, 65,535,969, 65,499,558 and 62,051,282, respectively.
95
<PAGE>
(G) Includes amounts invested in packaging machinery and capitalized interest.
Additions in 1995, 1994, 1992 and 1991 included $13,210,000, $7,750,000,
$201,455,000 and $21,705,000, respectively, related to the acquisition of
businesses.
(H) Primary earnings per common share are based on the weighted average number
of common equivalent shares outstanding during the period. Fully diluted
earnings per common share are computed as if the 6 3/4% Convertible
Subordinated Notes were converted as described in Note 10 of the Notes to
Consolidated Financial Statements in the Riverwood Proxy Statement. The
computation of fully diluted earnings per share was antidilutive for all
years presented.
(I) Earnings per common share computations for 1991 have not been presented
since the amount is not comparable as a result of the recapitalization of
Riverwood in 1992.
(J) Calculated by dividing (i) income before income taxes, equity in net
earnings of affiliate, extraordinary items and cumulative effect of
accounting changes (net of capitalized interest plus dividends from the
non-controlled affiliate) before fixed charges by (ii) fixed charges, which
consist of interest expense (including capitalized interest) and one-third
of rent expense, which is deemed to be equivalent to the interest expense
component. In 1993, earnings (as defined above) were insufficient to cover
fixed charges (as defined above) by $16.8 million.
96
<PAGE>
MANVILLE CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
The accompanying unaudited pro forma condensed consolidated financial
information and per share financial data gives effect to (i) the Disposition and
(ii) the Exchange, including the issuance of the Conversion Shares. In addition,
the pro forma financial statements reflect certain related transactions (the
"Related Transactions") including, among other things, permitted discretionary
redemptions of certain debt and preferred stock, the Dividend, and the exercise
of outstanding warrants (the "Warrants") to purchase 7 million shares of Common
Stock. The unaudited pro forma condensed consolidated statements of income for
the year ended December 31, 1994 and the nine months ended September 30, 1995
give effect to the Disposition, the Exchange and the Related Transactions as if
they had occurred on January 1, 1994. The unaudited pro forma condensed
consolidated balance sheet as of September 30, 1995 gives effect to the
Disposition, the Exchange and the Related Transactions as if they had occurred
on September 30, 1995.
The unaudited pro forma condensed consolidated financial statements are
based upon and should be read in conjunction with the consolidated financial
statements, the related notes thereto and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included in the 1994 Annual
Report and the condensed consolidated financial statements, the related notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included in the Third Quarter 10-Q, which are
incorporated herein by reference.
The accompanying pro forma information is presented for illustrative
purposes only and is not necessarily indicative of Manville's operating results
or financial position that would have been reported had the transactions and
assumptions described in these notes been consummated on the dates indicated,
nor is it necessarily indicative of Manville's future operating results or
financial position. There can be no assurance that any Disposition, the Exchange
or any of the Related Transactions will occur.
97
<PAGE>
MANVILLE CORPORATION PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1995
(THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS (A)
-------------------------------------------------------------
RIVERWOOD DISPOSITION
---------------------------- PROFIT
RIVERWOOD RIVERWOOD SHARING RELATED
MANVILLE INTERNATIONAL DISPOSITION EXCHANGE TRANSACTIONS
CORPORATION CORP. (NOTE 1) (NOTE 2) (NOTE 3) PRO FORMA
------------ ------------- ------------ ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and equivalents............. $ 307,125 $ (42,515) $1,028,784(a) $ (1,797)(f) $ (947,643)(i) $ 343,954
Marketable securities, at cost
which approximates market....... 102,441 102,441
Receivables, net of allowances... 407,586 (192,055) 215,531
Inventories...................... 278,494 (198,914) 79,580
Prepaid expenses................. 29,252 (21,205) 8,047
Deferred tax assets.............. 40,723 (13,094) 27,629
------------ ------------- ------------ ------------- -------------- -------------
Total Current Assets........... 1,165,621 (467,783) 1,028,784 (1,797) (947,643) 777,182
Property, Plant and Equipment,
net............................... 2,155,513 (1,441,943) 713,570
Deferred Tax Assets................ 216,234 (3,661) (277,647)(b) 146,058(f) 81,714(k) 162,698
Other Assets....................... 487,792 (276,457) (1,871)(a)(b) 209,464
------------ ------------- ------------ ------------- -------------- -------------
Total Assets................... $ 4,025,160 $ (2,189,844) $749,266 $ 144,261 $ (865,929) $ 1,862,914
------------ ------------- ------------ ------------- -------------- -------------
------------ ------------- ------------ ------------- -------------- -------------
LIABILITIES
Current Liabilities
Accounts and notes payable....... $ 288,920 $ (198,383) $ (1,816)(j) $ 88,721
Compensation and employee
benefits........................ 154,813 (60,998) 93,815
Income taxes..................... 29,735 (8,226) $ 1,893(a) 23,402
Other accrued liabilities........ 159,194 (79,376) 4,652(a) (2,077)(i) 82,393
------------ ------------- ------------ ------------- -------------- -------------
Total Current Liabilities...... 632,662 (346,983) 6,545 (3,893) 288,331
Long-Term Debt, less current
portion........................... 1,452,883 (1,005,405) (23,741)(j) 423,737
Long-Term Debt to Affiliate........ (12,573) 12,573(a)
Postretirement Benefits Other than
Pensions.......................... 244,667 (35,927) 208,740
Deferred Income Taxes and Other
Noncurrent Liabilities............ 384,805 (227,996) 148,742(b) 305,551
------------ ------------- ------------ ------------- -------------- -------------
Total Liabilities.............. 2,715,017 (1,628,884) 167,860 (27,634) 1,226,359
Minority Interest in Consolidated
Subsidiary........................ 104,854 (104,854)(b)
------------ ------------
STOCKHOLDERS' EQUITY
Cumulative Preference Stock, Series
B................................. 178,638 (178,638)(i)
Common Stock....................... 1,228 (656) 656(b) $ 326(f) 70(i) 1,624
Treasury Stock, at cost............ (1,039) (1,039)
Capital in Excess of Par Value..... 1,012,387 (526,385) 526,385(b) 415,185(f) (737,123)(i) 690,449
Unearned Restricted Stock
Compensation...................... (3,906) (3,906)
(Accumulated Deficit)/Retained
Earnings.......................... (2,646) (46,997) 159,844(c) (271,250)(f) 77,396(l) (83,653)
Pension Liability Adjustment....... (435) (435)
Cumulative Currency Translation
Adjustment........................ 21,062 13,078 (625)(b) 33,515
------------ ------------- ------------ ------------- -------------- -------------
Total Stockholders' Equity..... 1,205,289 (560,960) 686,260 144,261 (838,295) 636,555
------------ ------------- ------------ ------------- -------------- -------------
Total Liabilities and
Stockholders' Equity........ $ 4,025,160 $ (2,189,844) $749,266 $ 144,261 $ (865,929) $ 1,862,914
------------ ------------- ------------ ------------- -------------- -------------
------------ ------------- ------------ ------------- -------------- -------------
</TABLE>
- ----------------------------------
(A) The balance sheet gives effect to the pro forma adjustments as if they had
occurred on September 30, 1995.
The accompanying notes are an integral part of the pro forma condensed
consolidated financial statements.
98
<PAGE>
MANVILLE CORPORATION PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS (A)
-------------------------------------------------------------
RIVERWOOD DISPOSITION
---------------------------- PROFIT
RIVERWOOD RIVERWOOD SHARING RELATED
MANVILLE INTERNATIONAL DISPOSITION EXCHANGE TRANSACTIONS
CORPORATION CORP. (NOTE 1) (NOTE 2) (NOTE 3) PRO FORMA
------------ ------------- ------------ ------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Sales.......................... $2,067,206 $(1,021,660) $1,045,546
Cost of Sales...................... 1,536,012 (790,495) 745,517
Selling, General and
Administrative.................... 226,172 (114,526) $ (3,750)(d) 107,896
Research, Development and
Engineering....................... 29,709 (8,226) 21,483
Other Income (Loss), net........... (8,928) 2,545 332(d) (6,051)
------------ ------------- ------------ ------------- ------- -----------
Income from Operations............. 266,385 (105,868) 4,082 164,599
Gain on Sale of Equity
Investment........................ 74,889 74,889
Interest Income.................... 13,856 (1,717) 12,139
Interest Expense................... 114,081 (78,011) 754(d) $ (2,477)(m) 34,347
Profit Sharing Expense............. 24,224 $ (24,224)(g)
------------ ------------- ------------ ------------- ------- -----------
Income from Continuing Operations
Before Income Taxes............... 216,825 (29,574) 3,328 24,224 2,477 217,280
Income Taxes....................... 90,086 (13,013) 1,049(d) 8,478(g) 867(m) 87,467
------------ ------------- ------------ ------------- ------- -----------
Income from Continuing Operations
(B)............................... $ 126,739 $ (16,561) $ 2,279 $ 15,746 $ 1,610 $ 129,813
------------ ------------- ------------ ------------- ------- -----------
------------ ------------- ------------ ------------- ------- -----------
Weighted Average Common Shares
Outstanding
Primary.......................... 124,310 162,581(D)
Fully Diluted.................... 125,389 162,682(D)
Earnings Per Common Share on Income
from Continuing Operations
Primary.......................... $ .87(C) $ .80
Fully Diluted.................... $ .86(C) $ .80
</TABLE>
- ------------------------------
(A) The statement of income gives effect to the pro forma adjustments as if they
had occurred on January 1, 1994.
(B) Income from continuing operations excludes equity in earnings of affiliate.
(C) Historical earnings per common share amounts are net of preference stock
dividends of $18.7 million.
(D) Pro forma weighted average common shares outstanding includes 32.6 million
shares issued for the Profit Sharing Exchange and 7 million shares for the
assumed exercise of all outstanding warrants.
The accompanying notes are an integral part of the pro forma condensed
consolidated financial statements.
99
<PAGE>
MANVILLE CORPORATION PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994
(THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS (A)
-------------------------------------------------------------
RIVERWOOD DISPOSITION
---------------------------- PROFIT
RIVERWOOD RIVERWOOD SHARING RELATED
MANVILLE INTERNATIONAL DISPOSITION EXCHANGE TRANSACTIONS
CORPORATION CORP. (NOTE 1) (NOTE 2) (NOTE 3) PRO FORMA
------------ ------------- ------------ ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Sales.......................... $2,560,343 $(1,282,788) $1,277,555
Cost of Sales...................... 1,930,926 (995,238) 935,688
Selling, General and
Administrative.................... 281,172 (132,375) $ (5,000)(e) 143,797
Research, Development and
Engineering....................... 39,094 (9,356) 29,738
Other Income (Loss), net........... (12,665) (8,368) 443(e) (20,590)
------------ ------------- ------------ ------------- ------- -------------
Income from Operations............. 296,486 (154,187) 5,443 147,742
Gain on Sale of Equity
Investment........................ 13,455 13,455
Interest Income.................... 10,707 (3,493) 7,214
Interest Expense................... 140,984 (93,243) 623(e) $ (3,482)(n) 44,882
Profit Sharing Expense............. 18,259 $ (18,259)(h)
------------ ------------- ------------ ------------- ------- -------------
Income from Continuing Operations
Before Income Taxes............... 161,405 (64,437) 4,820 18,259 3,482 123,529
Income Taxes....................... 95,550 (54,188) 1,532(e) 6,391(h) 1,219(n) 50,504
------------ ------------- ------------ ------------- ------- -------------
Income from Continuing
Operations........................ $ 65,855 $ (10,249) $ 3,288 $ 11,868 $ 2,263 $ 73,025
------------ ------------- ------------ ------------- ------- -------------
------------ ------------- ------------ ------------- ------- -------------
Weighted Average Common Shares
Outstanding
Primary.......................... 122,446 162,035(C)
Fully Diluted.................... 122,465 162,054(C)
Earnings Per Common Share on Income
from Continuing Operations
Primary.......................... $ .33(B) $ .45
Fully Diluted.................... $ .33(B) $ .45
</TABLE>
- ------------------------------
(A) The statement of income gives effect to the pro forma adjustments as if they
had occurred on January 1, 1994.
(B) Historical earnings per common share amounts are net of preference stock
dividends of $24.9 million.
(C) Pro forma weighted average common shares outstanding includes 32.6 million
shares issued for the Profit Sharing Exchange and 7 million shares for the
assumed exercise of all outstanding warrants.
The accompanying notes are an integral part of the pro forma condensed
consolidated financial statements.
100
<PAGE>
MANVILLE CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
NOTE 1 -- RIVERWOOD DISPOSITION
Assumptions and adjustments used to reflect the Riverwood Disposition in the
unaudited pro forma financial statements include:
Balance sheet -- pro forma adjustments (effective date September 30, 1995):
(a) To reflect the estimated net cash proceeds from the Riverwood
Disposition:
<TABLE>
<CAPTION>
(THOUSANDS
OF DOLLARS)
<S> <C>
- - Sale of Manville's entire interest in Riverwood of approximately
53.4 million shares of Riverwood Common Stock at a price of
$20.25 per share............................................... $ 1,081,341
- - Estimated cash taxes............................................ (25,000)
- - Estimated costs resulting directly from the Riverwood
Disposition including transaction fees, legal and accounting
fees, termination benefits and expenses related to the internal
reorganization of the Company.................................. (45,000)
- - Estimated cash settlement of intercompany balances:
Other Assets (intercompany payable to Riverwood).............. (1,675)
Income Taxes.................................................. 1,893
Other Accrued Liabilities..................................... 4,652
Long-Term Debt to Manville.................................... 12,573
------------
- - Net Estimated Cash Proceeds..................................... $ 1,028,784
------------
------------
</TABLE>
(b) To record the estimated net gain on disposition:
<TABLE>
<CAPTION>
(THOUSANDS
OF DOLLARS)
<S> <C>
- - Sale of Manville's entire interest in Riverwood of approximately
53.4 million shares of Riverwood Common Stock at a price of
$20.25 per share............................................... $ 1,081,341
- - Estimated costs resulting directly from the Riverwood
Disposition including transaction fees, legal and accounting
fees, termination benefits and expenses related to the internal
reorganization of the Company.................................. (45,000)
- - Basis in net investment of Riverwood:
Common Stock.................................................. (656)
Capital in Excess of Par Value................................ (526,385)
Retained Earnings............................................. (46,997)
Cumulative Currency Translation Adjustment.................... 625
Minority Interest............................................. 104,854
Goodwill (included in Other Assets)........................... (3,546)
Deferred Income Taxes......................................... (232,105)
------------
- - Estimated pretax financial reporting gain on Riverwood
Disposition.................................................... 332,131
------------
- - Estimated income taxes, assuming effective income tax rate of
66%:
Cash Taxes.................................................... (25,000)
Deferred Tax Assets........................................... (277,647)
Deferred Income Taxes......................................... 83,363
------------
Total Income Taxes............................................ (219,284)
------------
- - Estimated gain on Riverwood Disposition, net of taxes........... $ 112,847
------------
------------
</TABLE>
For purposes of these statements, there have been included in the estimated
costs resulting directly from the Riverwood Disposition nonrecurring expenses
that may arise in connection with: the vesting of certain supplemental
retirement plans ($6.8 million), the repurchase by the Company of vested stock
options ($1.1 million), and executive termination expenses ($6 million).
The estimated effective tax rate on the sale is higher than statutory tax
rates due to differences in the book and tax basis of the investment being sold
for which deferred taxes had not been previously provided in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS No. 109"). Additionally, in accordance with the Code, the Company
will be responsible for federal income taxes resulting from the election under
Section 338(h)(10) of the Code to treat the Riverwood Disposition as an asset
sale for tax purposes.
101
<PAGE>
MANVILLE CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION (CONTINUED)
NOTE 1 -- RIVERWOOD DISPOSITION (CONTINUED)
(c) Accumulated deficit:
<TABLE>
<CAPTION>
(THOUSANDS
OF DOLLARS)
<S> <C>
- - Riverwood retained earnings in consolidation.................... $ 46,997
- - Plus estimated gain on Riverwood Disposition, net of taxes...... 112,847
------------
- - Net estimated pro forma adjustment due to the disposition of
Riverwood on the consolidated accumulated deficit.............. $ 159,844
------------
------------
</TABLE>
Income statement -- pro forma adjustments (effective date January 1, 1994):
(d) To reflect adjustments to other costs and expenses for the nine months
ended September 30, 1995:
<TABLE>
<CAPTION>
(THOUSANDS
OF DOLLARS)
<S> <C>
- - Reduction of specific selling, general and administrative costs
related to Manville's management of its investment in
Riverwood...................................................... $ 3,750
- - Elimination of the amortization of goodwill related to
Riverwood...................................................... 332
- - Elimination of intercompany interest income..................... (754)
------------
3,328
- - Estimated income taxes.......................................... 1,049
------------
- - Estimated increase in income from continuing operations......... $ 2,279
------------
------------
</TABLE>
(e) To reflect adjustments to other costs and expenses for the twelve months
ended December 31, 1994:
<TABLE>
<CAPTION>
(THOUSANDS
OF DOLLARS)
<S> <C>
- - Reduction of specific selling, general and administrative costs
related to Manville's management of its investment in
Riverwood...................................................... $ 5,000
- - Elimination of the amortization of goodwill related to
Riverwood...................................................... 443
- - Elimination of intercompany interest income..................... (623)
------------
4,820
- - Estimated income taxes.......................................... 1,532
------------
- - Estimated increase in income from continuing operations......... $ 3,288
------------
------------
</TABLE>
NOTE 2 -- PROFIT SHARING EXCHANGE
Assumptions and adjustments used to reflect the Exchange include the
following:
Balance sheet -- pro forma adjustments (effective date September 30, 1995):
(f) To record the Exchange:
<TABLE>
<CAPTION>
(THOUSANDS
OF DOLLARS)
<S> <C>
- - To reflect the issuance of approximately 32.6 million shares of
Manville Common Stock, par value $0.01 with an assumed fair
market value of $12.75 per share:
Common Stock.................................................. $ 326
Capital in Excess of Par Value................................ 415,185
------------
415,511
- - Estimated cash expenses of the Exchange......................... 1,797
------------
417,308
- - Estimated income taxes.......................................... 146,058
------------
- - Estimated increase in accumulated deficit....................... $ 271,250
------------
------------
</TABLE>
102
<PAGE>
MANVILLE CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION (CONTINUED)
NOTE 2 -- PROFIT SHARING EXCHANGE (CONTINUED)
Income Statement -- pro forma adjustments (effective date January 1, 1994):
(g) To reflect the elimination of profit sharing expense for the nine months
ended September 30, 1995:
<TABLE>
<CAPTION>
(THOUSANDS
OF DOLLARS)
<S> <C>
- - Profit sharing expense.......................................... $ (24,224)
- - Estimated income taxes.......................................... 8,478
------------
- - Estimated increase in income from continuing operations......... $ 15,746
------------
------------
</TABLE>
(h) To reflect the elimination of profit sharing expense for the twelve
months ended December 31, 1994:
<TABLE>
<CAPTION>
(THOUSANDS
OF DOLLARS)
<S> <C>
- - Profit sharing expense.......................................... $ (18,259)
- - Estimated income taxes.......................................... 6,391
------------
- - Estimated increase in income from continuing operations......... $ 11,868
------------
------------
</TABLE>
Fair market value of the Common Stock at the date of issuance was assumed to
be $12.75 per share which was based on the NYSE closing sales price for Common
Stock on February 6, 1996. Based on these assumptions the Exchange would result
in an extraordinary loss of approximately $271.3 million, net of income taxes of
$146.1 million.
The Company will receive a tax deduction when the PI Trust sells some or all
of its shares of Common Stock and distributes the proceeds to its beneficiaries
or transfers the proceeds to a specific settlement fund. If the PI Trust were to
sell the stock at a price greater than the average carrying value, the Company
may receive a tax benefit in excess of the deferred tax asset reflected for
financial reporting purposes. Likewise, if the PI Trust were to sell the stock
at a price lower than the average carrying value, the Company would receive a
tax benefit less than the deferred tax asset reflected for financial reporting
purposes.
NOTE 3 -- RELATED TRANSACTIONS
The Profit Sharing Exchange Agreement permits the Company, at the discretion
of the Board, to redeem its Cumulative Preference Stock, Series B and prepay its
outstanding 9 percent Sinking Fund Debentures out of the proceeds of a
Disposition. In addition, the Profit Sharing Exchange Agreement contemplates
that Manville will declare and pay, and the Exchange will occur only in
connection with the declaration of the Dividend. However, any redemption,
prepayment or dividend amounts will be subject to the determination of and
approval by the Board. The Board has made no final determination as to any
redemptions or the payment of any dividend. The following assumptions and
adjustments were used to reflect the Related Transactions:
Balance sheet -- pro forma adjustments (effective date September 30, 1995):
(i) To record the net cash used for the Related Transactions:
<TABLE>
<CAPTION>
(THOUSANDS
OF DOLLARS)
<S> <C>
- - Redemption of 9.2 million shares of Cumulative Preference Stock,
Series B at a stated redemption price of $25 per share:
Cumulative Preference Stock, Series B......................... $ (178,638)
Capital in Excess of Par Value................................ (52,127)
------------
(230,765)
------------
- - Payment of Cumulative Preference Stock, Series B dividend
accrued through September 30, 1995............................. (2,077)
- - Prepayment of outstanding 9 percent Sinking Fund Debentures..... (29,875)
- - Payment of a required dividend of $4.62 per share on
approximately 162.3 million shares of Common Stock:
Capital in Excess of Par Value................................ (750,702)
- - Exercise of warrants for the purchase of seven million shares of
Common Stock, par value $0.01 at an exercise price of $9.40 per
share:
Common Stock.................................................. 70
Capital in Excess of Par Value................................ 65,706
------------
65,776
------------
- - Net Cash Used in Related Transactions........................... $ (947,643)
------------
------------
</TABLE>
103
<PAGE>
MANVILLE CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION (CONTINUED)
NOTE 3 -- RELATED TRANSACTIONS (CONTINUED)
(j) Prepayment of outstanding 9 percent Sinking Fund Debentures:
<TABLE>
<CAPTION>
(THOUSANDS
OF DOLLARS)
<S> <C>
- - Accounts and notes payable...................................... $ (1,816)
- - Long-Term Debt, less current portion............................ (23,741)
------------
- - Reduction in Debt............................................... (25,557)
- - Pretax extraordinary loss on early extinguishment of debt....... (4,318)
------------
- - Cash used for prepayment of outstanding 9 percent Sinking Fund
Debentures..................................................... $ (29,875)
------------
------------
</TABLE>
(k) To recognize tax benefits on the Related Transactions:
<TABLE>
<CAPTION>
(THOUSANDS
OF DOLLARS)
<S> <C>
- - Estimated tax benefit on the dividend........................... $ 80,203
- - Estimated tax benefit on the prepayment of the 9 percent Sinking
Fund Debentures................................................ 1,511
------------
- - Net increase in deferred tax assets............................. $ 81,714
------------
------------
</TABLE>
(l) To record the net effects on (accumulated deficit)/retained earnings of
the Related Transactions:
<TABLE>
<CAPTION>
(THOUSANDS
OF DOLLARS)
<S> <C>
- - Prepayment of outstanding 9 percent Sinking Fund Debentures:
Extraordinary loss on early extinguishment of debt, net of
estimated income taxes of $1.5 million....................... $ (2,807)
- - Estimated tax benefit on the dividend........................... 80,203
------------
- - Net increase in retained earnings............................... $ 77,396
------------
------------
</TABLE>
Income statement -- pro forma adjustments (effective date January 1, 1994):
(m) Elimination of interest expense on the 9 percent Sinking Fund Debentures
for the nine months ended September 30, 1995:
<TABLE>
<CAPTION>
(THOUSANDS
OF DOLLARS)
<S> <C>
- - Interest expense................................................ $ (2,477)
- - Estimated income taxes.......................................... 867
------------
- - Estimated increase in income from continuing operations......... $ 1,610
------------
------------
</TABLE>
(n) Elimination of interest expense on the 9 percent Sinking Fund Debentures
for the twelve months ended December 31, 1994:
<TABLE>
<CAPTION>
(THOUSANDS
OF DOLLARS)
<S> <C>
- - Interest expense................................................ $ (3,482)
- - Estimated income taxes.......................................... 1,219
------------
- - Estimated increase in income from continuing operations......... $ 2,263
------------
------------
</TABLE>
In addition to the effects of the redemption of 9.2 million shares of
Cumulative Preference Stock, Series B, the Company has also reflected the
elimination of related preference stock dividends paid in 1994 and 1995 from
income applicable to common stockholders for the purposes of computing pro forma
earnings per share. The excess of the redemption price over the carrying value
of the Cumulative Preference Stock, Series B, of approximately $52 million will
be charged directly to capital in excess of par value. Although not reflected in
the pro forma income statements, this $52 million charge to capital in excess of
par value will be deducted from net income at the time this transaction occurs
to compute earnings per share applicable to common stockholders. This change
will result in a reduction of approximately $0.32 per share in earnings per
share applicable to common stockholders.
104
<PAGE>
MANVILLE CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION (CONTINUED)
NOTE 3 -- RELATED TRANSACTIONS (CONTINUED)
The prepayment of outstanding 9 percent Sinking Fund Debentures will result
in an estimated extraordinary loss on early extinguishment of debt, net of taxes
of approximately $2.8 million using an effective income tax rate of 35 percent.
The 162.3 million shares of Common Stock used in computing the required
Dividend includes the estimated effects of the Exchange and the exercise of
outstanding warrants. Based on the estimates and computations set forth below,
$4.62 per share is the required Dividend that would be paid in accordance with
the terms of the Profit Sharing Exchange Agreement. There can be no assurance
that any Dividend will be paid. See "THE EXCHANGE -- Profit Sharing Exchange
Agreement."
<TABLE>
<CAPTION>
(THOUSANDS,
EXCEPT PER
SHARE
COMPUTATION OF REQUIRED DIVIDEND: AMOUNTS)
<S> <C>
- - Sale of Manville's entire interest in Riverwood of approximately
53.4 million shares of Riverwood Common Stock at a price of
$20.25 per share............................................... $ 1,081,341
- - Estimated cash taxes............................................ (25,000)
- - Estimated costs resulting directly from the Riverwood
Disposition including transaction fees, legal and accounting
fees, termination benefits and expenses related to the internal
reorganization of the Company.................................. (45,000)
- - Redemption of 9.2 million shares of Manville Cumulative
Preference Stock, Series B at a stated redemption price of $25
per share...................................................... (230,765)
- - Prepayment of Manville's outstanding 9 percent Sinking Fund
Debentures..................................................... (29,875)
------------
- - Minimum estimated net proceeds available for the required
Dividend....................................................... $ 750,701
------------
------------
- - Estimated number of shares outstanding.......................... 162,327
- - Estimated required Dividend per common share.................... $ 4.62
------------
------------
</TABLE>
As further described in the 1994 Annual Report, that portion of any dividend
payments made to the PI Trust represents a tax benefit to the Company that will
become a current deduction when and to the extent the PI Trust pays such amount
to claimants or transfers such amount to a specific settlement fund. The Company
expects the PI Trust to transfer its entire Dividend proceeds to the settlement
fund in the year of receipt which will result in a current tax deduction for the
Company. This current tax deduction will be utilized to shelter the tax gain on
the Riverwood Disposition which will result in cash tax payments to be made in
conjunction with the sale at rates significantly lower than normal statutory
cash tax rates.
The tax benefit for financial reporting purposes on the Dividend will be
realized at less than normal statutory rates. Due to the size of the Dividend in
relation to the Company's equity, the Company will make a corresponding pro rata
reduction in the carrying value of its deferred tax asset related to Common
Stock held by the PI Trust based on the percentage of Dividend paid to the fair
value of the Common Stock before the Dividend. The pro rata reduction in the
deferred tax asset related to Common Stock held by the PI Trust will partially
offset the tax benefit on the Dividend resulting in an effective tax rate
related to the portion of the Dividend paid to the PI Trust of approximately 14
percent.
At the time the Company recognizes the net tax benefit on the Dividend, the
Company expects to present this benefit as a tax benefit on continuing
operations in accordance with SFAS No. 109. Due to the magnitude and unusual
nature of this Dividend, the net tax benefit on the Dividend has been excluded
from the pro forma income statements to present the Company's income taxes on
continuing operations on a more representative basis of the Company's ongoing
effective tax rate.
The exercise of the Warrants is at the Warrant holder's option and not a
specific requirement of the transactions contemplated in these pro forma
financial statements. However, the Company has assumed that before the Dividend
is paid all Warrant holders would exercise their Warrants allowing them to
receive the Dividend. The outstanding Warrants would be exercised for the
purchase of seven million shares of the Common Stock, par value $0.01, at an
exercise price of $9.40 per share.
NOTE 4 -- STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("FAS 123"). The standard encourages, but does not require,
companies to recognize compensation expense for grants of stock, stock options
and other equity instruments to employees based on fair value accounting rules.
The standard requires companies that choose not to adopt the new fair value
accounting rules to disclose pro forma net income and earnings per share under
the new method. The standard is effective for fiscal years beginning after
December 15, 1995. Manville has not yet determined if it will adopt the
accounting provisions or only the disclosure provisions of FAS 123.
105
<PAGE>
MARKET PRICES AND DIVIDENDS
MARKET PRICES
The principal market on which the Common Stock is traded is the NYSE under
the ticker symbol "MVL." The Common Stock began public trading under such symbol
on the NYSE on November 2, 1981. On February 23, 1996, the last trading day
before the printing of this Proxy Statement, the high and low sales prices of
the Common Stock were $13 and $12 3/4, respectively. On October 25, 1995, the
last trading day before the public announcement of the execution of the Profit
Sharing Exchange Agreement and the execution of the Merger Agreement by
Riverwood, the high and low sales prices of the Common Stock were $12 3/8 and
$12 1/8, respectively. On April 13, 1995, the last trading day before the public
announcement that Manville was considering strategic alternatives that may be
available with respect to its investment in Riverwood, the high and low sales
prices of the Common Stock were $11 3/8 and $10 1/2, respectively. STOCKHOLDERS
ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE COMMON STOCK.
The following table sets forth, for the calendar quarters indicated, the
high and low sales prices per share of the Common Stock as reported on the NYSE
Composite Transactions Reporting System:
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
1994
First Quarter............................................. $10 7/8 $ 7 7/8
Second Quarter............................................ 8 5/8 7
Third Quarter............................................. 9 7 1/4
Fourth Quarter............................................ 9 5/8 8 1/8
1995
First Quarter............................................. $ 9 3/8 $ 8 1/4
Second Quarter............................................ 13 3/4 9 1/8
Third Quarter............................................. 15 1/4 12 1/2
Fourth Quarter............................................ 13 3/8 11
1996
First Quarter (through February 23)....................... $13 3/8 $12 1/2
</TABLE>
The principal market on which the Riverwood Common Stock is traded is the
NYSE under the ticker symbol "RVW." The Riverwood Common Stock began public
trading on the NYSE on June 17, 1992. On February 23, 1996, the last trading day
before the printing of this Proxy Statement, the high and low sales prices of
the Riverwood Common Stock were $19 7/8 and $19 3/4, respectively. On October
25, 1995, the last trading day before the public announcement of the execution
of the Merger Agreement, the high and low sales prices of the Riverwood Common
Stock were $20 and $19 1/4, respectively. On April 13, 1995, the last trading
day before the public announcement that Riverwood was considering strategic
alternatives that may be available to it and for the best interests of its
stockholders, the high and low sales prices of the Riverwood Common Stock were
$20 5/8 and $20 1/8, respectively. The highest price at which the Riverwood
Common Stock has ever traded is $26 1/4, on September 8, 1995. STOCKHOLDERS ARE
URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE RIVERWOOD COMMON STOCK.
106
<PAGE>
The following table sets forth, for the calendar quarters indicated, the
high and low sales prices per share of the Riverwood Common Stock as reported on
the NYSE Composite Transactions Reporting System:
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
1994
First Quarter............................................. $19 1/4 $16 3/4
Second Quarter............................................ 17 1/4 14
Third Quarter............................................. 18 5/8 15 7/8
Fourth Quarter............................................ 18 7/8 15
1995
First Quarter............................................. $19 1/8 $15 1/2
Second Quarter............................................ 24 5/8 19
Third Quarter............................................. 26 1/4 21 7/8
Fourth Quarter............................................ 23 1/2 18 1/8
1996
First Quarter (through February 23)....................... $ 20 $18 7/8
</TABLE>
DIVIDENDS
Manville has not declared a dividend on the Common Stock in fiscal year
1995, nor did it declare a dividend on the Common Stock in fiscal year 1994.
Manville did declare a dividend of $1.04 per share of Common Stock on June 30,
1993. If a Disposition, such as the Riverwood Disposition, is consummated, then,
pursuant to the terms of the Profit Sharing Exchange Agreement and subject to
certain conditions set forth therein, Manville will be obligated to declare and
pay the Dividend. See "THE EXCHANGE -- Profit Sharing Exchange Agreement."
Riverwood paid a dividend of $.04 per share of Riverwood Common Stock for
each fiscal quarter of 1995 and 1994. Riverwood has agreed in the Merger
Agreement that, subject to certain exceptions, it will not declare, set aside,
or pay any dividend (other than regular quarterly dividends consistent with past
practice and in no event exceeding $.04 per share per quarter) or other
distributions payable in cash, stock or property with respect to the Riverwood
Common Stock. See "THE RIVERWOOD DISPOSITION -- The Merger Agreement; CONDUCT OF
BUSINESS PENDING THE CLOSING." For a description of certain other restrictions
on payments of dividends by Riverwood, see Note 10 of Notes to Consolidated
Financial Statements of Riverwood contained in the Riverwood Proxy Statement
incorporated herein by reference. In each of fiscal 1994 and fiscal 1995,
Manville, as a stockholder, received $8.5 million as a result of the payment of
PRO RATA dividends on the Riverwood Common Stock.
107
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth the identity of beneficial owners believed by
the Company to own more than 5% of the outstanding shares of Common Stock as of
February 10, 1996. The Company knows of no holder of more than 5% of the Common
Stock other than as set forth below.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
TITLE OF NAME AND ADDRESS OF OF BENEFICIAL PERCENT
CLASS BENEFICIAL OWNER OWNERSHIP OF CLASS
- ------------- --------------------------------------------- ------------------ --------
<S> <C> <C> <C>
Common Stock Manville Personal Injury Settlement Trust (1) 96,000,000 shares 78%
8260 Willow Oaks Corporate Drive
Sixth Floor
P.O. Box 10415
Fairfax, Virginia 22031
</TABLE>
- ------------------------
(1) At February 10, 1996, the trustees of the Trust were: Robert A. Falise,
Chairman and Managing Trustee, Louis Klein, Jr., Frank J. Macchiarola and
Christian E. Markey, Jr. Messrs. Falise, Klein and Markey serve on the Board
and the Riverwood Board.
108
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the number of shares of Common Stock
beneficially owned by all directors and executive officers and all current
directors and executive officers as a group as of February 10, 1996. Each
director and executive officer has sole voting and investment power with respect
to such shares except that 560,034 shares owned by the current executive
officers as a group are restricted as to transfer pursuant to the Manville
Corporation Stock Incentive Plan. As of February 10, 1996, the percentage of
Common Stock beneficially owned by any director, or by all directors and
executive officers as a group, does not exceed more than 1.0% of the outstanding
shares of the Common Stock, excluding the 96,000,000 shares of Common Stock
owned by the PI Trust and attributed to certain directors who disclaim
beneficial ownership of such shares.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED
- -------------------------------------------------------------- ------------
<S> <C>
John C. Burton................................................ 1,000
Robert E. Cole................................................ 114,791(1)
Robert A. Falise.............................................. 96,000,000(2)
Robert E. Fowler, Jr.......................................... 4,000
Todd Goodwin.................................................. 19,100
Michael N. Hammes............................................. 0
John N. Hanson................................................ 1,000
Kathryn R. Harrigan........................................... 0
Louis Klein, Jr............................................... 96,000,000(2)
Stanley J. Levy............................................... 1,000
Christian E. Markey, Jr....................................... 96,000,000(2)
W. Thomas Stephens............................................ 735,905(3)
Will M. Storey................................................ 2,000
Raymond S. Troubh............................................. 5,000
Richard B. Von Wald........................................... 260,570(4)
All Directors and current executive officers as a group (15
persons)..................................................... 97,144,366(2,5)
</TABLE>
- ------------------------
(1) Includes options to purchase 53,200 shares of Common Stock.
(2) 96,000,000 of these shares are owned by the PI Trust, of which Mr. Falise is
the Chairman and Managing Trustee, and Messrs. Klein and Markey are
trustees. Voting power with respect to such shares is shared by all four
trustees of the PI Trust, and none of Messrs. Falise, Klein or Markey can
vote the shares alone. Each of Messrs. Falise, Klein and Markey disclaims
beneficial ownership of any shares of Common Stock. Pursuant to the PI Trust
Agreement, no trustee may individually own any securities of the Company or
its affiliates or have any other direct or indirect financial interest in
the Company or its affiliates.
(3) Includes options to purchase 137,333 shares of Common Stock.
(4) Includes options to purchase 67,400 shares of Common Stock.
(5) Includes options to purchase 257,933 shares of Common Stock.
109
<PAGE>
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
In considering the recommendations of the Board with respect to the Exchange
and the Disposition, stockholders should be aware that certain members of the
Board may be deemed to have certain interests in the Exchange that are in
addition to the interests of stockholders of the Company generally. The Board
was aware of these interests and considered them, among other things, when it
approved the Profit Sharing Exchange Agreement and the transactions contemplated
thereby, including the Exchange and the Disposition.
The PI Trust, as the owner of approximately 78% of the Common Stock
outstanding as of the Record Date, has effective voting control over Manville,
including the power to nominate and elect Manville directors as the trustees of
the PI Trust determine. In addition, the Supplemental Agreement gives the PI
Trust the right to approve two of the Company's nominees for director.
Currently, Robert A. Falise, Chairman and Managing Trustee of the PI Trust, and
Louis Klein, Jr. and Christian E. Markey, Jr., trustees of the PI Trust, are
members of the Board. At a meeting on October 25, 1995, the Board, by unanimous
vote (other than the three directors who are trustees of the PI Trust, who did
not vote), approved the Exchange, including the terms of the Profit Sharing
Exchange Agreement and the transactions contemplated thereby. The three
directors who are trustees of the PI Trust were not present during the Board's
deliberations on October 25, 1995 with respect to the Profit Sharing Exchange
Agreement and the transactions contemplated thereby, including the Exchange.
In furtherance of its purposes under the PI Trust Agreement of enhancing and
preserving its trust estate and providing compensation to BONA FIDE asbestos
health claimants, the PI Trust has an interest in maximizing the value of, and
at times increasing the liquidity of, its investment in the Company. The PI
Trust may from time to time consider and discuss with the Company's management
various means by which the Company might seek to maximize stockholder value and
enhance stockholder liquidity. The Company conducts all negotiations with the PI
Trust on an arm's length basis, with both parties being represented by their own
legal and financial advisors.
In accordance with the terms and conditions of the Profit Sharing Exchange
Agreement, upon consummation of the Exchange, as of the Record Date, the PI
Trust would receive the Conversion Shares, thereby increasing its ownership of
Common Stock to approximately 83% of the outstanding shares of Common Stock,
assuming no exercise of then outstanding options and warrants (or to
approximately 79% of the fully diluted outstanding shares of Common Stock,
assuming exercise of all then outstanding options and warrants). Because the
Profit Sharing Exchange Agreement contemplates that Manville will declare and
pay, and the Exchange will occur only in connection with the declaration of, the
Dividend, the PI Trust's increased ownership of Common Stock will result in the
receipt by the PI Trust of a larger percentage of the Dividend than it would
have had were such a dividend or other payment made in the absence of the
issuance of the Conversion Shares. Consummation of a Disposition is a condition
to consummation of the Exchange.
Each of the executive officers of Riverwood (other than Messrs. Stephens and
Von Wald) has entered into a three-year employment agreement with Riverwood that
provides for lump sum separation payments upon any termination of employment
other than termination (i) for "cause" as defined in the employment agreements,
(ii) as a result of voluntary resignation without "good reason," as defined in
the employment agreements or (iii) as a result of death, disability or
retirement. For each executive officer, prior to a "change in control,"
separation payments under the agreement generally would equal two times the
officer's annual salary plus one full year's bonus at target levels of
performance under Riverwood's Annual Incentive Compensation Plan and certain
other benefits. Following a change in control, the definitions of "cause" and
"good reason" are liberalized and, upon termination other than (i) for "cause,"
(ii) as a result of voluntary resignation without "good reason," or (iii) as a
result of death, disability or retirement, subject to a cap in certain
circumstances to limit any loss of tax deductions by Riverwood on account of the
"golden parachute" tax rules, benefits and payments are increased and include
two years' annual salary, two years' target annual bonus, a PRO RATA portion of
the target annual bonus for the year of termination, two years' additional
credit under
110
<PAGE>
Riverwood's Supplemental Retirement Plan, a payment equal to the cost of 36
months of welfare benefits and 24 months of continued perquisites. The Merger
will constitute a change in control for the foregoing purposes.
In addition, subject to certain limitations, if any of the executive
officers is determined to be subject to excise tax under Section 4999 of the
Code (the "Excise Tax") with respect to payments made pursuant to the foregoing
paragraph, Riverwood has agreed to pay such executive an amount which, after
taking into account any federal, state and local income tax, medicare payroll
deduction and excise tax upon such amount, shall be equal to the amount of the
Excise Tax.
Each of the executive officers of Manville (including Messrs. Stephens and
Von Wald, who are also executive officers of Riverwood) has entered into a
three-year employment agreement with Manville that provides for lump sum
separation payments upon any termination of employment other than termination
(i) for "cause" as defined in the employment agreements, (ii) as a result of
voluntary resignation without "good reason," as defined in the employment
agreements or (iii) as a result of death, disability or retirement. For each
executive officer of Manville, prior to a "change in control," separation
payments under the agreement generally would equal two times the officer's
annual salary plus one full year's bonus at target levels of performance under
Manville's Annual Incentive Compensation Plan and certain other benefits.
Following a change in control, the definitions of "cause" and "good reason" are
liberalized and, upon termination other than (i) for "cause," (ii) as a result
of voluntary resignation without "good reason," or (iii) as a result of death,
disability or retirement, subject to a cap in the case of Manville executive
officers (other than Messrs. Stephens and Von Wald) in certain circumstances to
limit any loss of tax deductions by Manville on account of the "golden
parachute" tax rules, benefits and payments are increased and include two years'
annual salary, two years' target annual bonus, a PRO RATA portion of the target
annual bonus for the year of termination, two years' additional credit in
certain cases under Manville's Supplemental Retirement Plan, a payment equal to
the cost of 36 months of welfare benefits and 24 months of continued
perquisites. The Merger will constitute a change in control and may result in
good reason for the foregoing purposes.
Manville has entered into supplemental retirement agreements with Messrs.
Stephens and Von Wald that provide for Manville to pay each upon termination of
employment a lump sum benefit (the "Supplemental Benefit") equal to the present
value of a single life annuity commencing at the time of such termination
ranging from 30% to 60% of his highest average base salary plus cash bonus for
three consecutive years during the preceding ten years ("Average Pay"), offset
by amounts payable under Manville's retirement plan plus certain other amounts,
including vested restricted stock awards made during 1994 of 340,000 shares and
150,000 shares respectively, and cash payments made during 1994 of $1,300,000
and $500,000, respectively, and other payments previously made and to be made in
connection with the executives' retirement arrangements. The 1994 restricted
stock awards have a five-year vesting schedule, subject to accelerated vesting
upon a change in control, and had fair market values on the date of grant of
$3,099,100 and $1,367,250, respectively. The vesting of the restricted stock and
payment of dividends thereon are subject to a cap related to the supplemental
retirement arrangements. If termination occurs (i) after attaining age 62, (ii)
without cause, (iii) for "good reason," (iv) for death or "disability" or (v)
after the occurrence of a change in control, the Supplemental Benefit will be
60% of Average Pay, and will be increased to compensate for the impact of the
timing of taxation of the Supplemental Benefit (and the offsets thereto) as
compared with the tax treatment of a single life annuity. The Merger will
constitute a change in control and may result in good reason for the foregoing
purposes.
On October 3, 1995, Manville also entered into agreements with each of the
executive officers of Manville (including Messrs. Stephens and Von Wald, who are
also executive officers of Riverwood) relating to cancellation of their
performance units granted under Manville's Long-Term Cash Incentive Plan. In
consideration of the cancellation of the performance units, the Manville
executive officers
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are, subject to certain conditions, each entitled to payments equal to the
amount of any dividends paid with respect to the Common Stock, up to $0.84 per
unit. In connection with the Dividend, Messrs. Stephens and Von Wald will be
entitled to receive $403,200 and $70,560, respectively.
OTHER BUSINESS
Management knows of no business that will be presented for consideration
other than the matters described in the Notice of Special Meeting. If other
matters are presented, it is the intention of the persons designated as Proxies
to vote in accordance with their judgment on such matters.
INDEPENDENT AUDITORS
The condensed consolidated financial statements of the Company and Riverwood
incorporated herein by reference to the 1994 Form 10-K have been audited by
Coopers & Lybrand L.L.P., independent auditors. In addition, the consolidated
financial statements of Riverwood for the year ended December 31, 1995, and
Igaras Papeis e Embalagens S.A. for the years ended December 31, 1995 and 1994,
November 30, 1993, and for the one month period ended December 31, 1993,
incorporated by reference to the concurrent Riverwood Proxy Statement have been
audited by Coopers & Lybrand L.L.P. and Coopers & Lybrand Biedermann, Bordasch,
respectively, independent auditors. Representatives of Coopers & Lybrand L.L.P.
are expected to be present at the Special Meeting. These representatives will
have an opportunity to make a statement if they so desire and will be available
to respond to appropriate questions.
STOCKHOLDER PROPOSALS FOR 1996 ANNUAL MEETING
Proposals of stockholders intended to be presented at the Company's 1996
Annual Meeting were required to be received by the Secretary of the Company no
later than December 18, 1995. Proposals received after that date may be excluded
from the Company's proxy materials. Stockholders will be advised as to the date
proposals must be received by the Secretary of the Company in order to be
presented at the 1997 Annual Meeting.
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ANNEX A
PROFIT SHARING EXCHANGE AGREEMENT
AGREEMENT dated October 25, 1995 between Manville Corporation, a Delaware
corporation (the "Company"), and Manville Personal Injury Settlement Trust (the
"Trust").
WHEREAS, the Trust was created pursuant to a Trust Agreement dated as of
November 28, 1988 to which the Company is a party (as amended, the "Trust
Agreement") to implement those provisions of the Second Amended and Restated
Plan of Reorganization of the Company and certain affiliated corporations (the
"Manville Plan") that relate to the settlement and payment of asbestos-related
health claims against the Company and such affiliated corporations;
WHEREAS, in connection with the Manville Plan and the Trust Agreement, the
Company and Manville entered into the Supplemental Agreement dated as of
November 28, 1988, which was amended and restated on November 15, 1990 and
further amended on August 25, 1993 and September 22, 1994 (as so amended and
restated, the "Supplemental Agreement");
WHEREAS, the purposes of the Trust as set forth in the Trust Agreement
include enhancing the Trust estate and using the assets in the Trust estate to
deliver fair, adequate and equitable compensation to bona fide beneficiaries of
the Trust;
WHEREAS, the Company is exploring various alternatives with respect to its
investment in Riverwood International Corporation ("RIC"), which alternatives
may include the disposition by the Company of all or a substantial portion of
such investment; and
WHEREAS, in furtherance of the Trust's purposes and to further the long-term
objectives of the Company, the Company and the Trust are willing, in connection
with any such disposition, on the terms and subject to the conditions of this
Agreement, to eliminate certain obligations and covenants of the Company
contained in the Supplemental Agreement in exchange for the issuance to the
Trust of a specified number of shares of the Company's common stock, par value
$.01 per share (the "Common Stock"), and the Company's payment, on the terms and
subject to the conditions of this Agreement, of a dividend on the Common Stock
of the net proceeds of any such disposition which remain after certain uses of
such proceeds specified herein.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and for other good and valuable consideration, the adequacy and receipt of which
are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. CERTAIN TERMS DEFINED. The following terms used herein have
the meanings ascribed to them in this Article I. The definitions of terms
indicated below as having the meaning set forth in the Supplemental Agreement
are incorporated by reference herein. The phrases "transactions contemplated by
this Agreement," "transactions contemplated hereby" and "transactions
contemplated hereby and thereby," as used in this Agreement, shall be understood
not to refer to or include the Disposition.
"BOARD" means the Board of Directors of the Company.
"CLASS 6 INTEREST DEBENTURES" shall have the meaning set forth in the
Supplemental Agreement.
"CLASS 6 INTEREST INDENTURE" shall have the meaning set forth in the
Supplemental Agreement.
"CLOSING" is defined in Section 4.01.
"CLOSING DATE" is defined in Section 4.01.
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"COMMON STOCK" is defined in the recitals to this Agreement.
"COMPANY" is defined in the heading of this Agreement.
"CONVERSION SHARES" means the number of shares of Common Stock equal to the
product of (A) the quotient of (i) the Fully Diluted Shares as of the Closing
Date divided by (ii) 0.8 multiplied by (B) 0.2.
"COURT" is defined in Section 4.02(c).
"DECLARATION DATE" is defined in Section 3.03(b).
"DISPOSITION" is defined in Section 3.03(a).
"DIVIDEND" means the dividend on, or other payment with respect to, the
outstanding shares of Common Stock of the Company on a PRO RATA basis in the
full amount of the remaining balance of the Transfer Proceeds after deduction of
the amounts applied in accordance with clauses (i) and (ii) of the first
sentence of Section 3.03(a); it being understood that, for all purposes under
this Agreement (including, without limitation, for purposes of determining
whether or not the Company is obligated to declare or pay any dividend or other
payment pursuant to Section 3.03 and whether or not the condition set forth in
Section 4.03(e)(ii) has been satisfied) the term "Dividend" shall not mean a
dividend or other payment of less than the full amount of such remaining
balance.
"FINAL ORDER" shall have the meaning set forth in the Supplemental
Agreement.
"FISCAL YEAR" shall have the meaning set forth in the Supplemental
Agreement.
"FULLY DILUTED SHARES" as of a given date means the number of issued and
outstanding shares of Common Stock of the Company as of such date together with
all shares of Common Stock issuable by the Company upon the exercise of all
options, warrants, calls, rights, agreements, convertible or exchangeable
securities or other commitments outstanding or in effect as of such date
pursuant to which the Company is obligated, or would upon the satisfaction of
certain conditions become obligated, to issue or sell shares of Common Stock or
securities or rights entitling the holder thereof to acquire Common Stock.
"GOVERNMENTAL AGENCY" means any domestic, foreign, supranational, national,
federal, state, regional or local government and any department, bureau, agency,
authority, commission, board, court, tribunal, or other legislative, executive,
judicial, regulatory or administrative body or instrumentality of any such
government or any official empowered to act on behalf of any of the foregoing,
or any arbitral tribunal acting within the proper scope of its jurisdiction.
"GOVERNMENT PROCEEDS" shall have the meaning set forth in the Supplemental
Agreement.
"INDEPENDENT" shall have the meaning set forth in the Supplemental
Agreement.
"MANVILLE PLAN" is defined in the recitals to this Agreement.
"NON-TRUST DIRECTORS" means the members of the Board (i) who are not
Trustees or (ii) whose nomination for election as members of the Board has not
been approved by the Trust pursuant to Section 4.02(j) of the Supplemental
Agreement.
"ORDER" is defined in Section 4.02(c).
"PD SUPPLEMENTAL AGREEMENT" means the Amended and Restated Property Damage
Supplemental Agreement dated as of November 15, 1990 among the Company, the
Trust and the PD Trust.
"PD TRUST" means Manville Property Damage Settlement Trust.
"PERMITTED DATE" is defined in Section 3.03(a).
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"PERSON" means any individual, corporation, partnership, joint venture,
association, trust, unincorporated organization or government or any agency or
political subdivision thereof, including any Governmental Agency.
"PROCEEDS" is defined in Section 3.03(a).
"PROFIT PERIOD" is defined in Section 3.02.
"PROFITS" shall have the meaning set forth in the Supplemental Agreement.
"RECORD DATE" is defined in Section 3.03(b).
"RIC" is defined in the recitals to this Agreement.
"SCB" means the Selected Counsel for the Beneficiaries appointed pursuant to
the Manville Plan.
"SECOND AMENDED AND RESTATED SUPPLEMENTAL AGREEMENT" is defined in Section
2.01.
"SERIES B PREFERENCE STOCK" shall have the meaning set forth in the
Supplemental Agreement.
"SUPPLEMENTAL AGREEMENT" is defined in the recitals to this Agreement.
"TRANSFER PROCEEDS" is defined in Section 3.03(a).
"TRUST" is defined in the heading of this Agreement.
"TRUST AGREEMENT" is defined in the recitals to this Agreement.
"TRUST AGREEMENT AMENDMENT" is defined in Section 2.03.
"TRUSTEES" shall have the meaning set forth in the Supplemental Agreement.
ARTICLE II
TERMINATION OF OBLIGATIONS AND COVENANTS
SECTION 2.01. SECOND AMENDED AND RESTATED SUPPLEMENTAL AGREEMENT. On the
Closing Date, the parties shall enter into the Second Amended and Restated
Supplemental Agreement substantially in the form attached as Exhibit A hereto
(the "Second Amended and Restated Supplemental Agreement"), whereupon the
Supplemental Agreement shall be amended and restated as set forth therein,
effective as of the Closing Date, and shall thereafter continue in full force
and effect as so amended.
SECTION 2.02. PD SUPPLEMENTAL AGREEMENT. From and after the date hereof,
upon the request of the Company, the Trust shall consent to the termination of
the PD Supplemental Agreement or the amendment of the PD Supplemental Agreement
in such manner as may be requested by the Company, PROVIDED that in the Trust's
good faith judgment the terms and conditions of any such amendment or
termination, or the consideration related thereto, would not, directly or
indirectly, adversely affect the Trust (it being understood and agreed that the
terms, conditions and consideration proposed jointly by the Company and the
Trust to the PD Trust prior to the date hereof shall not be deemed to adversely
affect the Trust for purposes of this Section 2.02 if the payment of such
consideration is shared by the Company and the Trust in the proportions agreed
by them prior to the date hereof).
SECTION 2.03. TRUST AGREEMENT AMENDMENT. On the Declaration Date,
immediately prior to the declaration of the Dividend, the parties shall enter
into an amendment to the Trust Agreement in the form attached as Exhibit B
hereto (the "Trust Agreement Amendment"), whereupon the Trust Agreement shall be
amended as set forth therein, effective as of the date thereof, and shall
thereafter continue in full force and effect as so amended (subject to the terms
of the Trust Agreement Amendment); PROVIDED, HOWEVER, that the obligation
hereunder of each of the parties to enter in the Trust
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Agreement Amendment shall be subject to the satisfaction, or waiver by such
party, of each of the conditions set forth in (i) Section 4.02(b) and Section
4.02(c) hereof, in the case of the Company, and (ii) Section 4.03(b) and Section
4.03(c) hereof, in the case of the Trust.
ARTICLE III
COMMON STOCK ISSUANCE AND PROFIT SHARING PAYMENT
SECTION 3.01. ISSUANCE OF COMMON STOCK. On the Closing Date, the Company
shall issue the Conversion Shares to the Trust, by delivering to the Trust one
or more certificates (as requested by the Trust) representing the Conversion
Shares duly registered in the name of the Trust, and the Company shall cause the
transfer agent to record the Trust as sole holder of record of the Conversion
Shares on and as of the Closing Date and shall provide the Trust with a
certificate of the transfer agent with respect to such recordation (or other
reasonably available written proof thereof) at the Closing. Prior to the
Closing, the Company shall apply for and take all necessary steps to obtain the
approval (to the extent required) of the listing of the Conversion Shares on any
stock exchange on which the Common Stock is listed or traded.
SECTION 3.02. PROFIT SHARING PAYMENT. The Company shall pay to the Trust
an amount equal to 20% of the sum of Profits (or zero if Profits is a negative
number) and Government Proceeds within 30 days following the last day of the
month during which the Closing Date occurs, for the period beginning on the
first day of the Fiscal Year in which the Closing Date occurs and ending on the
day prior to the Closing Date. Such amount shall be determined in good faith by
management of the Company based on the financial results of the Company and
reasonable assumptions and estimates, in each case determined in a manner
consistent with past practice for the determination of Profits for the Company's
Fiscal Years under the Supplemental Agreement. When the Company makes the
payment of Profits pursuant to this Section 3.02, it shall deliver to the Trust
a certificate signed by the chief executive officer, the chief financial officer
or the controller of the Company setting forth in reasonable detail the
computation of such Profits and explaining any material assumptions or estimates
used in such computation. If the Closing Date occurs on a day other than the
first day of a month, Profits for the period from the first day of such month to
the day prior to the Closing Date (the "Profit Period") shall be the product of
(A) Profits for such month multiplied by (B) the quotient of (i) the number of
days in the Profit Period divided by (ii) the number of days in such month.
Notwithstanding anything to the contrary contained in this Agreement or in the
Second Amended and Restated Supplemental Agreement, the Company shall remain
obligated to make the payment required by Section 2.03(a) of the Supplemental
Agreement with respect to any Fiscal Year of the Company which ends prior to the
Fiscal Year in which the Closing Date occurs and for which such payment has not
been made as of the date of this Agreement. The parties agree that Profits shall
be determined by not giving effect to any Disposition or the transactions
contemplated by this Agreement, including, without limitation, any payment of
Profits pursuant to this Section 3.02, the issuance of the Conversion Shares
pursuant to Section 3.01, the Dividend or any accounting or tax effects relating
to any of the foregoing.
SECTION 3.03. USE OF PROCEEDS OF DISPOSITION.
(a) If the Company, directly or indirectly, sells or otherwise disposes of
all or a substantial portion of its investment in RIC (a "Disposition"),
regardless of the form of such disposition (including, without limitation, any
sale or other disposition by RIC of all or substantially all of its assets),
then within 60 days following receipt by the Company of the proceeds of such
Disposition (the "Proceeds"), the Company shall apply the net Proceeds after
payment of, or reasonable provision for, all out-of-pocket fees, expenses, taxes
and other costs paid or incurred (including reasonable reserves for out-of-
pocket fees, expenses, taxes and costs accrued but not paid at such time)
reasonably related to the effectuation of such Disposition (the "Transfer
Proceeds") as follows: (i) FIRST, to repayment, prepayment or redemption of the
Class 6 Interest Debentures to the extent that the Board, by vote of a majority
of the Non-Trust Directors, determines that such repayment, prepayment or
redemption
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would be in the best interests of the Company and authorizes and directs that
such repayment, prepayment or redemption be made, (ii) SECOND, to the extent of
the balance of Transfer Proceeds after deduction of the amount applied in
accordance with clause (i), to the repurchase or redemption of Series B
Preference Stock to the extent that the Board, by vote of a majority of the
Non-Trust Directors, determines that such repurchase or redemption would be in
the best interests of the Company and authorizes and directs that such
repurchase or redemption be made, and (iii) THIRD, to the extent of the balance
of Transfer Proceeds after deduction of the amount applied in accordance with
clauses (i) and (ii), subject to the fourth sentence of Section 3.03(b) and the
second sentence of Section 3.03(c), to the payment of the Dividend in the full
amount of such remaining balance. The Company shall be deemed to have applied
Transfer Proceeds in accordance with (x) clause (i) or clause (ii) of this
Section 3.03(a) in the event that the Company shall have within 60 days of a
Disposition issued an irrevocable notice of redemption with respect to the Class
6 Interest Debentures or the Series B Preference Stock and shall have paid the
redemption price therefor within 60 days of such notice relating to the Class 6
Interest Debentures or within 90 days of such notice relating to the Series B
Preference Stock, and (y) clause (i) of this Section 3.03(a), in the event that
there is no June 30 or December 31 (a "Permitted Date") that is at least 30
days, but not more than 60 days, following the receipt by the Company of the
Proceeds, if the Board of Directors shall have authorized and directed within 60
days following a Disposition that such redemption be effected on the Permitted
Date next following the thirty-first day following the receipt by the Company of
the Proceeds and the Company shall have paid the redemption price therefor on
such Permitted Date. In the event that the Company should fail to apply Transfer
Proceeds in accordance with clause (i) or clause (ii) of this Section 3.03(a),
any amount of Transfer Proceeds reserved or deducted for such purpose from the
amount of the Dividend shall promptly be declared and paid as a further dividend
on, or other payment with respect to, the outstanding shares of Common Stock of
the Company subject to the fourth sentence of Section 3.03(b) and the second
sentence of Section 3.03(c). The Company shall not, without the express prior
written consent of the Trust, effect any Disposition pursuant to which the
Company receives any consideration other than cash payable in full upon
consummation thereof.
(b) The Company shall, subject to the fourth sentence of this Section
3.03(b), declare the Dividend within 46 days following the Company's receipt of
the Proceeds (the date of such declaration being referred to herein as the
"Declaration Date"). On the Declaration Date, the Company shall deliver to the
Trust written notice of the declaration of the Dividend and shall make a public
announcement in accordance with applicable law, regulations and the rules of any
securities exchange on which the Common Stock is then listed or traded, stating
that the Dividend has been declared and announcing the Record Date and the
payment date with respect to the Dividend. The record date for determining
stockholders entitled to receive the Dividend (the "Record Date") shall be not
less than five days following receipt by the Trust of written notice of the
declaration but in no event more than 10 days following the Declaration Date (or
such greater minimum number of days following the Declaration Date as may then
be required pursuant to applicable laws and regulations and the rules of any
stock exchange on which the Common Stock is listed or traded). Notwithstanding
anything in this Agreement to the contrary, the Company's obligation to declare
the Dividend shall be subject to the satisfaction, or the waiver by the Company,
of each of the following conditions precedent at the time of the declaration of
the Dividend:
(i) the Company shall have received with respect to the Dividend all
necessary licenses, permits, consents, approvals, authorizations,
qualifications and orders of Governmental Agencies (if any) becoming
necessary after the date hereof, on terms reasonably acceptable to the
Company;
(ii) the Company shall have received an opinion of counsel substantially
to the effect that the declaration and payment of the Dividend are lawful
under the Delaware General Corporation Law, which opinion shall be in form
and substance reasonably satisfactory to the Board;
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(iii) the Company shall be solvent and have reasonably adequate capital
under applicable law and if requested by the Board, shall have received an
opinion from American Appraisal Associates, pursuant to the engagement
letter dated August 16, 1995 and executed by the Company on August 22, 1995,
which opinion shall be reasonably satisfactory to the Board;
(iv) no suit, action or other proceeding by any Governmental Agency shall
be pending before any tribunal of competent authority which challenges the
validity or legality of the Dividend that has a reasonable likelihood of
success as determined by Independent counsel selected by the Company and the
Trust;
(v) there shall not be any effective injunction, writ, preliminary
restraining order or any order of any nature issued by a court of competent
jurisdiction directing that the payment of the Dividend not be made or
imposing any conditions on the payment unless the consequences to the
Company of failing to comply with such injunction, writ, preliminary
restraining order or other order or for being subject to such conditions
would not subject the Company to substantial cost or liability and would not
subject any employee, officer, director or agent of the Company to any civil
or criminal liability (for purposes hereof, "substantial" shall mean actual
or probable cost, liability or penalty (including any prepayment penalties)
in excess of $250,000 or any obligations to prepay principal in excess of
$20,000,000);
(vi) the Order shall be in full force and effect;
(vii) the Trust Agreement Amendment shall have been executed and
delivered, and shall be in full force and effect; and
(viii) all conditions to the Closing set forth in Sections 4.02 and 4.03
(other than Section 4.03(e)(ii)) shall have been satisfied, or shall have
been waived by the party entitled to waive such conditions; provided,
however, that, notwithstanding anything in this Agreement to the contrary,
the Company shall not have the power to waive the condition precedent set
forth in this paragraph (viii) without the express prior written consent of
the Trust.
(c) The Company shall, following the occurrence of the Declaration Date and
subject to the immediately following sentence, pay the Dividend within 4
business days after the Record Date and no later than 60 days following the
receipt by the Company of the Proceeds. Notwithstanding Section 3.03(a) or the
first sentence of this Section 3.03(c), the Company's obligation hereunder to
pay the Dividend shall be subject to the satisfaction, or the waiver by the
Company, of the condition precedent set forth in Section 3.03(b)(v) at the time
of payment of the Dividend; it being understood that the foregoing shall not
affect any rights (other than under this Agreement) that the Trust may have in
its capacity as a stockholder of Manville with respect to the Dividend.
(d) At least 5 days prior to any date on which the Company expects the Board
to vote on the declaration of the Dividend, the Company shall deliver to the
Trust a certificate signed by the chief executive officer, chief financial
officer or controller of the Company setting forth in reasonable detail the
computation of (x) the amount of Transfer Proceeds, (y) the amount applied (or,
if intended to be so applied after the date of such certificate, expected to be
applied) in accordance with Sections 3.03(a)(i) and (ii) and (z) the remainder
of (x) minus (y), certifying that, to the best of such person's knowledge, the
computations are true and accurate in all material respects and made in
accordance with Section 3.03(a).
(e) The Trust hereby consents to the application of Transfer Proceeds as
provided in Sections 3.03(a)(i) and (ii) (subject to approval of the Board, by
vote of a majority of the Non-Trust Directors, as set forth in Section 3.03(a))
and will evidence such consent in such appropriate instruments as may be
reasonably requested by the Company.
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SECTION 3.04. COMPUTATIONS. In the event the Trust takes exception to the
computation by the Company of any amount under this Agreement, the procedures
set forth in Section 4.03 of the Supplemental Agreement (which are incorporated
herein by reference, MUTATIS MUTANDIS) shall be followed in resolving any
dispute relating to the computation of such amount.
ARTICLE IV
CLOSING
SECTION 4.01. CLOSING. In the event that there is a Disposition, then the
transactions contemplated by Sections 2.01, 3.01 and 3.02 shall be consummated
(the "Closing") at the offices of Skadden, Arps, Slate, Meagher & Flom, 919
Third Avenue, New York, New York, at 10:00 A.M., on a date selected by mutual
agreement of the parties (the "Closing Date"), following the Declaration Date,
which date shall be at least one business day before the Record Date and no
earlier than the third business day following receipt by the Trust of written
notice of the declaration of the Dividend.
SECTION 4.02. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY. The
obligations of the Company to consummate the transactions contemplated by
Sections 2.01, 3.01 and 3.02 are subject to the satisfaction, or waiver by the
Company, of each of the following conditions:
(a) the representations and warranties of the Trust contained in this
Agreement are true and correct in all material respects as of the date when
made and as of the Closing Date and all agreements contained in this
Agreement to be performed by the Trust prior to or on the Closing Date shall
have been performed in all material respects;
(b) the SCB shall have given their concurrence to this Agreement, the
Second Amended and Restated Supplemental Agreement and the Trust Agreement
Amendment, and the transactions contemplated hereby and thereby, in a form
reasonably acceptable to the Company;
(c) the issuance of an order of the United States Bankruptcy Court for
the Southern District of New York (the "Court") granting the application of
the Trustees to approve the Trust's execution and performance of this
Agreement and the Second Amended and Restated Supplemental Agreement and the
transactions contemplated hereby and thereby and the Trustees' execution and
performance of the Trust Agreement Amendment and the transactions
contemplated thereby, after notice to all beneficiaries of the Trust (by
notice to the appropriate class and subclass representatives' counsel), the
legal representative for the future asbestos health claimants, the SCB, and
any additional persons who appeared in FINDLEY V. FALISE (the "Order"), in a
form reasonably acceptable to the Company, which Order shall be in full
force and effect but may be subject to appeal or discretionary review by
another court; PROVIDED, HOWEVER, that if upon its review of objections
raised to the issuance of the Order, the Company believes in good faith
after consultation with the Trust that, as a condition to the Company's
obligations referred to above in this Section 4.02 (or in Section 2.03 or
3.03(b), as the case may be), the Order should be a Final Order, then for
purposes of this condition the Company may require that the Order be a Final
Order;
(d) the approval of this Agreement and the transactions contemplated by
this Agreement by the common stockholders of the Company and the approval
(to the extent required) of the listing of the Conversion Shares on any
stock exchange on which the Common Stock is listed or traded;
(e) (i) the Company shall have received all necessary licenses, permits,
consents, approvals, authorizations, qualifications and orders of
Governmental Agencies (if any) becoming necessary after the date hereof, on
terms reasonably acceptable to the Company, and (ii) there shall not be any
effective injunction, writ, preliminary restraining order or any order of
any nature issued by a court of competent jurisdiction prohibiting the
consummation of the transactions contemplated hereby unless the consequences
to the Company of failing to comply with such injunction, writ, preliminary
restraining order or other order or for being subject to such conditions
would not
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subject the Company to substantial cost or liability and would not subject
any employee, officer, director or agent of the Company to any civil or
criminal liability ("substantial" being as defined in Section 3.03(b)(v));
and
(f) receipt by the Company of a certificate signed as of the Closing
Date by an authorized executive officer of the Trust certifying as to the
satisfaction of paragraph (a) above.
SECTION 4.03. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE TRUST. The
obligations of the Trust to consummate the transactions contemplated by Sections
2.01, 3.01 and 3.02 are subject to the satisfaction, or waiver by the Trust, of
each of the following conditions:
(a) the representations and warranties of the Company contained in this
Agreement are true and correct in all material respects as of the date when
made and as of the Closing Date and all agreements contained in this
Agreement to be performed by the Company prior to or on the Closing Date
shall have been performed in all material respects;
(b) the SCB shall have given their concurrence to this Agreement, the
Second Amended and Restated Supplemental Agreement and the Trust Agreement
Amendment, and the transactions contemplated hereby and thereby, in a form
reasonably acceptable to the Trust;
(c) the Order shall have been issued in a form reasonably acceptable to
the Trust, which Order shall be in full force and effect but may be subject
to appeal or discretionary review by another court; PROVIDED, HOWEVER, that
if upon its review of objections raised to the issuance of the Order, the
Trust believes in good faith after consultation with the Company that, as a
condition to the Trust's obligations referred to above in this Section 4.03
(or in Section 2.03, as the case may be), the Order should be a Final Order,
then for purposes of this condition the Trust may require that the Order be
a Final Order;
(d) (i) the Trust shall have received all necessary licenses, permits,
consents, approvals, authorizations, qualifications and orders of
Governmental Agencies (if any) becoming necessary after the date hereof, on
terms reasonably acceptable to the Trust and (ii) there shall not be any
effective injunction, writ, preliminary restraining order or any order of
any nature issued by a court of competent jurisdiction prohibiting the
consummation of the transactions contemplated hereby unless the consequences
to the Trust of failing to comply with such injunction, writ, preliminary
restraining order or other order or for being subject to such conditions
would not subject the Trust to substantial cost or liability and would not
subject any employee, trustee or agent of the Trust to any civil or criminal
liability ("substantial" being as defined in Section 3.03(b)(v));
(e) (i) receipt by the Company of the Proceeds of a Disposition and (ii)
the declaration of the Dividend;
(f) the approval (to the extent required) of the listing of the
Conversion Shares on any stock exchange on which the Common Stock is listed
or traded; and (g) receipt by the Trust of a certificate signed as of the
Closing Date (i) by an authorized executive officer of the Company
certifying as to the satisfaction of paragraph (a) above and (ii) by the
chief executive officer, chief financial officer or controller of the
Company certifying the number of Fully Diluted Shares on the Closing Date,
together with a schedule, in form similar to Exhibit C hereto, detailing
such computation.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Trust as of the date of this Agreement and as of
the Closing Date that:
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(a) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware.
(b) This Agreement has been duly authorized, executed and delivered by
the Company and constitutes a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms except to the
extent that such enforceability is limited by bankruptcy, insolvency,
moratorium or similar laws relating to the enforcement of creditors' rights
generally and by the availability of equitable remedies of general
applicability.
(c) Neither the execution and delivery by the Company of this Agreement,
the consummation by the Company of the transactions contemplated by it nor
compliance by the Company with its terms and conditions, will (A) conflict
with or result in a breach of, or constitute a default under, or require any
consent or waiver under, any of the terms, obligations, covenants,
conditions or provisions of (i) any indenture, mortgage, deed of trust,
pledge, bank loan or credit agreement, or other agreement or instrument to
which the Company is a party or by which it may be bound or (ii) the
certificate of incorporation or by-laws of the Company or (B) conflict with
or result in a breach of any of the terms, conditions or provisions of any
statute, judgment, order, writ, injunction, decree, rule or regulation of
any Governmental Agency; except for the approval of the Company's common
stockholders as provided in Section 4.02(d), consents that may be required
in connection with the redemption by the Company of its outstanding Class 6
Interest Debentures or Series B Preference Stock and, in the case of (A)(i)
or (B) for any such conflict, breach or default, that would not,
individually or in the aggregate, have a material adverse effect on the
Company and its Subsidiaries taken as a whole.
(d) Upon the issuance of the Conversion Shares on the Closing Date, the
Conversion Shares shall be duly authorized, validly issued, fully paid and
nonassessable.
(e) As of the date hereof, the number of Fully Diluted Shares is
130,402,483, as described in Exhibit C hereto.
SECTION 5.02. REPRESENTATIONS AND WARRANTIES OF THE TRUST.
(a) The Trust has been duly organized and is validly existing as a trust
under the laws of the State of New York.
(b) This Agreement has been duly authorized, executed and delivered by the
Trust and constitutes a valid and binding obligation of the Trust enforceable
against the Trust in accordance with its terms except to the extent that such
enforceability is limited by bankruptcy, insolvency, moratorium or similar laws
relating to the enforcement of creditors' rights generally and by the
availability of equitable remedies of general applicability.
(c) Neither the execution and delivery by the Trust of this Agreement, the
consummation by the Trust of the transactions contemplated by it nor compliance
by the Trust with its terms and conditions, will (A) conflict with or result in
a breach of, or constitute a default under, or require any consent or waiver
under, any of the terms, obligations, covenants, conditions or provisions of (i)
any indenture, mortgage, deed of trust, pledge, bank loan or credit agreement,
or other agreement or instrument to which the Trust is a party or by which it
may be bound or (ii) the Trust Agreement or (B) conflict with or result in a
breach of any of the terms, conditions or provisions of any statute, judgment,
order, writ, injunction, decree, rule or regulation of any Governmental Agency;
except, for the concurrence of the SCB as provided in Sections 4.02(b) and
4.03(b), the issuance and effectiveness of the Order in respect of the Trust's
execution, delivery and performance of the Trust Agreement Amendment, and in the
case of (A)(i) or (B) for any such conflict, breach or default that would not,
individually or in the aggregate, have a material adverse effect on the Trust.
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ARTICLE VI
MISCELLANEOUS
SECTION 6.01. BEST EFFORTS BY THE TRUST.
(a) The Trust shall use its reasonable best efforts to obtain as soon as
reasonably possible after the date hereof (i) all consents necessary for it to
perform the terms of this Agreement, the Second Amended and Restated
Supplemental Agreement and the Trust Agreement Amendment, and to consummate the
transactions contemplated hereby and thereby, including, without limitation, the
concurrence of the SCB as provided in Sections 4.02(b) and 4.03(b) and (ii) the
Order. At any meeting of stockholders called to consider approval of this
Agreement and the transactions contemplated by this Agreement, the Trust shall
vote all of its shares of Common Stock in favor of such approval; it being
understood that nothing contained in this Agreement shall constitute or be
deemed to constitute a consent, approval or waiver by the Trust, or an agreement
by the Trust to consent, approve or grant any waiver, with respect to any
Disposition or other transaction relating to RIC or the Company's investment in
RIC.
(b) The Trust will not voluntarily take any action that would reasonably be
expected to cause a termination of the Trust other than pursuant to Section
6.02(a)(i) or Section 6.02(a)(iv) of the Trust Agreement.
(c) The Trust shall cooperate in all reasonable respects with the Company to
obtain as soon as reasonably possible the termination or amendment of the PD
Supplemental Agreement on such terms and conditions, and for such consideration,
as to which the Trust shall have consented pursuant to Section 2.02.
SECTION 6.02. BEST EFFORTS BY THE COMPANY. The Company shall use its
reasonable best efforts to obtain as soon as reasonably possible after the date
hereof all consents necessary for it to perform the terms of this Agreement, the
Second Amended and Restated Supplemental Agreement and the Trust Agreement
Amendment, and to consummate the transactions contemplated hereby and thereby,
including, without limitation, to obtain requisite stockholder approval of this
Agreement and the transactions contemplated by this Agreement. Without limiting
the generality of the foregoing, the Company agrees after the date hereof, to
(i) prepare, file and distribute appropriate proxy solicitation material with
respect to such stockholder approval, in compliance with applicable securities
laws and regulations and the rules of any stock exchange on which the Common
Stock is listed or traded, (ii) call a special meeting of its common
stockholders for the purpose of voting upon such approval, (iii) use efforts
consistent with past practice to solicit proxies from its common stockholders
other than the Trust, and (iv) to the extent consistent with the exercise by the
Board of its fiduciary duties under applicable law, recommend in its proxy
solicitation material that stockholders vote in favor of such approval.
SECTION 6.03. TERMINATION. If the Closing Date shall not have occurred on
or prior to the later of (A) January 31, 1997, or (B) the first anniversary of
the date on which the Company receives the Proceeds of a Disposition if such
Disposition shall have been consummated on or prior to January 31, 1997, then
either party shall have the right to terminate this Agreement by giving written
notice of termination to the other party hereto. If the Order is denied by the
Court upon the Trust's application therefor in accordance with Section 4.02(c),
or if, on or prior to the Closing Date, the Order is vacated, reversed, modified
or amended, in whole or in part, so as to eliminate or materially limit the
Court's approval of the Trust's execution and performance of this Agreement, the
Second Amended and Restated Supplemental Agreement, the Trust Agreement
Amendment or the transactions contemplated hereby or thereby, either party shall
have the right to terminate this Agreement, by giving written notice of
termination to the other party. No termination of this Agreement pursuant to
this Section 6.03 shall in any way relieve either party of liability for any
willful breach of any of the provisions of this Agreement prior to termination
hereof.
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SECTION 6.04. AMENDMENTS; WAIVERS. This Agreement may be modified,
supplemented or amended at any time and from time to time only by a writing
signed by each party hereto. Any waiver or consent granted in respect of any
term or condition of this Agreement shall be effective only if given in a
writing signed by the party giving same and expressly stating that it is a
waiver or consent, and any such waiver or consent shall constitute a waiver or
consent only of the specific provision(s) and for the specific purpose(s) set
forth therein.
SECTION 6.05. NOTICES. All notices, requests and other communications to
any party hereunder shall be in writing (including facsimile transmission or
similar writing) and shall be given:
if to the Trust, to:
Manville Personal Injury Settlement Trust
8260 Willow Oaks Corporate Drive, Suite 600
P.O. Box 10415
Fairfax, Virginia 22031
Fax: (703) 205-6249
Attention: David T. Austern, Esq.
with a copy to:
Donovan Leisure Newton & Irvine
30 Rockefeller Plaza
New York, New York 10112
Fax: (212) 632-3321
Attention: Andrew J. Trubin, Esq.
if to the Company, to:
Manville Corporation
717 17th Street
Denver, Colorado 80202
Fax: (303) 978-4842
Attention: Richard B. Von Wald, Esq.
with copies to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Fax: (212) 735-2001
Attention: Franklin M. Gittes, Esq.
and
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Fax: (212) 450-4800
Attention: Stephen H. Case, Esq.
and
Kaye, Scholer, Fierman, Hays & Handler
425 Park Avenue
New York, New York 10022
Fax: (212) 836-8689
Attention: Herbert S. Edelman, Esq.
SECTION 6.06. COUNTERPARTS; INTEGRATION. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement together with its exhibits constitutes the
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entire agreement and understanding between the parties hereto relating to the
subject matter hereof and supersedes any and all prior agreements and
understandings, oral and written, relating to the subject matter hereof.
SECTION 6.07. SEVERABILITY. Should any provision in this Agreement be
determined to be invalid or unenforceable in any jurisdiction, such
determination shall in no way limit or affect the validity or enforceability and
operative effect of any of the provisions of this Agreement in any other
jurisdiction.
SECTION 6.08. HEADINGS. The headings used in this Agreement are inserted
for convenience only and neither constitute a portion of this Agreement nor in
any manner affect the construction of the provisions of this Agreement.
SECTION 6.09. SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns except that neither the Company nor the Trust
may assign or otherwise transfer any of its rights or delegate obligations under
this Agreement.
SECTION 6.10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the parties contained in this Agreement shall
survive the Closing Date for a period of 18 months from the Closing Date.
SECTION 6.11. EXPENSES. All costs and expenses incurred in connection with
this Agreement, including without limitation all brokers' fees, investment
banking fees and legal fees, shall be paid by the party incurring such cost or
expense. Nothing contained in this Section 6.11 shall be construed as creating
an obligation of the Company or the Trust to indemnify any Person.
SECTION 6.12. SPECIFIC PERFORMANCE. Each of the Company and the Trust
agrees that the other party would be irreparably damaged if for any reason the
Company or the Trust, as the case may be, failed to perform its obligations
under this Agreement and that such other party would not have an adequate remedy
at law for money damages in such event. Accordingly, the Company and the Trust
each agrees that the other party shall, to the maximum extent permitted, be
entitled to specific performance and injunctive and other relief to enforce the
performance of this Agreement. This provision is without prejudice to any other
rights that the Company or the Trust may have against the other party for any
failure of such other party to perform its obligations hereunder.
SECTION 6.13. THIRD PARTIES. This Agreement constitutes an agreement
solely between the parties hereto, and is not intended to and shall not confer
any rights, remedies, obligations or liabilities, legal or equitable, on any
Person other than the parties hereto and their respective successors or assigns,
or otherwise constitute any Person a third-party beneficiary under or by reason
of this Agreement.
SECTION 6.14. GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement
shall be governed by and construed in accordance with the laws of the State of
New York, without regard to choice of law principles applied in such
jurisdiction. The Company and the Trust hereby submit to the nonexclusive
jurisdiction of the United States Bankruptcy Court for the Southern District of
New York for purposes of all legal proceedings arising out of or relating to
this Agreement or the transactions contemplated hereby. Each of the Company and
the Trust irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
MANVILLE CORPORATION
By /s/ RICHARD B. VON WALD____________
Name: Richard B. Von Wald
Title:Senior Vice President, General
Counsel & Secretary
MANVILLE PERSONAL INJURY
SETTLEMENT TRUST
By /s/ ROBERT A. FALISE_______________
Name: Robert A. Falise
Title: Chairman and Managing Trustee
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EXHIBIT A
TO PROFIT SHARING
EXCHANGE AGREEMENT
FORM OF
MANVILLE PERSONAL INJURY
SETTLEMENT TRUST
SECOND AMENDED AND RESTATED
SUPPLEMENTAL AGREEMENT
DATED AS OF
, 199
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE I
DEFINITIONS
ARTICLE II
PAYMENTS
2.01. [Reserved]........................................................................................ 1
2.02. [Reserved]........................................................................................ 1
2.03. Certain Payment Obligations....................................................................... 1
2.04. Reimbursement Obligations......................................................................... 1
2.05. [Reserved]........................................................................................ 2
ARTICLE III
STOCK
3.01. [Reserved]........................................................................................ 2
3.02. [Reserved]........................................................................................ 2
3.03. Right of First Refusal............................................................................ 2
3.04. Registration Rights............................................................................... 5
ARTICLE IV
GENERAL COVENANTS
4.01. Covenants of the Trust............................................................................ 9
4.02. Covenants of the Company.......................................................................... 10
4.03. Computation Dispute Resolution.................................................................... 12
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
5.01. Organization, Etc................................................................................. 12
5.02. Authorization..................................................................................... 13
ARTICLE VI
MISCELLANEOUS
6.01. Termination....................................................................................... 13
6.02. Amendments; Waiver................................................................................ 13
6.03. Severability...................................................................................... 13
6.04. Notices........................................................................................... 13
6.05. Counterparts...................................................................................... 14
6.06. Successors and Assigns............................................................................ 14
6.07. Entire Agreement; No Waiver....................................................................... 14
6.08. Headings.......................................................................................... 14
6.09. Governing Law..................................................................................... 14
6.10. Third Parties..................................................................................... 14
6.11. Survival of Representations, Warranties, Covenants and Agreements................................. 15
6.12. [Reserved]........................................................................................ 15
6.13. Agreements of the Company and the Trust with Respect to Certain Liens............................. 15
6.14. Automatic Waivers under the PD Supplemental Agreement............................................. 15
6.15. Effective Date.................................................................................... 15
</TABLE>
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SECOND AMENDED AND RESTATED SUPPLEMENTAL AGREEMENT
Agreement dated as of , 199 between Manville Personal Injury
Settlement Trust (the "Trust") and Manville Corporation (the "Company").
WHEREAS, the Company and the Trust have heretofore entered into the
Supplemental Agreement dated November 28, 1988, which was amended and restated
as of November 15, 1990 and further amended on August 25, 1993 and September 22,
1994 (as so amended and restated, the "Supplemental Agreement");
WHEREAS, the Company and the Trust are parties to a Profit Sharing Exchange
Agreement, which, INTER ALIA, contemplates the execution of this Second Amended
and Restated Supplemental Agreement; and
WHEREAS, pursuant to Section 6.02 of the Supplemental Agreement the Company
and the Trust are empowered to modify, supplement or amend the Supplemental
Agreement (other than Section 6.13 thereof).
NOW, THEREFORE, the parties hereto agree to amend and restate the
Supplemental Agreement in its entirety as follows:
ARTICLE I
DEFINITIONS
Unless the context requires otherwise, all capitalized terms not otherwise
defined herein have the meanings assigned to them in Exhibit A hereto. Terms
defined in Exhibit A hereto are not intended to change any of the definitions
used in the Plan. All references to the Supplement Agreement hereinafter made or
made in any other document or instrument shall refer to the Supplemental
Agreement as amended and restated hereby.
ARTICLE II
PAYMENTS
2.01. [Reserved]
2.02. [Reserved]
2.03. CERTAIN PAYMENT OBLIGATIONS.
(a) [Reserved]
(b) The Company shall pay to the Trust for each Fiscal Year from and
including the Fiscal Year in which this Agreement enters into effect so long as
the Trust exists, on or before April 30 of the next Fiscal Year, an amount equal
to the Insurance Indemnification Amount for such Fiscal Year, PROVIDED that the
payment under this Section 2.03 with respect to any Fiscal Year shall not exceed
an amount equal to 30% of Profits for such Fiscal Year.
2.04. REIMBURSEMENT OBLIGATIONS. (a) The Trust shall indemnify the Company
in respect of all costs, expenses, losses and damages (including, except as
limited by Paragraph (c) below, fees and expenses of counsel and other
litigation and settlement costs) when and as incurred by the Company in
connection with any Trust Claim or Indemnification Liability asserted against
the Company, provided that the Company shall use its best efforts to cause such
Trust Claim or Indemnification Liability to be redirected against the Trust, as
contemplated by and in accordance with the Plan and the Trust Agreement.
(b) The Company shall indemnify the Trust in respect of all costs, expenses,
losses and damages (including, except as limited by Paragraph (c) below, fees
and expenses of counsel and other litigation and settlement costs) when and as
incurred by the Trust in connection with any obligations or
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liabilities of the Debtors not assumed by the Trust pursuant to the Trust
Agreement, any obligations or liabilities imposed upon the Company by the terms
of the Plan, any income taxes imposed upon the Trust at any time, or any
challenge to the Plan.
(c) Each party indemnified under the provisions of this Section 2.04, upon
receipt of written notice of any claim or the service of summons or other
initial legal process upon it in any action instituted against it, in respect of
which indemnity may be sought on account of any indemnity agreement contained in
this Section 2.04, shall promptly give written notice of such claim, or the
commencement of such action, or threat thereof, to the party from whom indemnity
shall be sought hereunder. Such indemnifying party shall be entitled at its own
expense to participate in the defense of such claim or action, or, if it shall
elect, to assume such defense, in which event (i) such defense shall be
conducted by counsel chosen by such indemnifying party, which counsel shall be
satisfactory to the indemnified party against whom such claim is asserted or who
is the defendant in such action, and (ii) such indemnified party may retain
additional counsel PROVIDED that such indemnified party shall bear the fees and
expenses of any additional counsel retained by it. If the indemnifying party
shall elect not to assume the defense of such claim or action, such indemnifying
party will reimburse such indemnified party for the reasonable fees and expenses
of any counsel retained by it, and shall be bound by the results obtained by the
indemnified party; PROVIDED that no such claim or action shall be settled
without the written consent of the indemnifying party.
2.05. [Reserved]
ARTICLE III
STOCK
3.01. [Reserved]
3.02. [Reserved]
3.03. RIGHT OF FIRST REFUSAL.
(a) SALES OTHER THAN BY TENDER OFFER. Prior to any sale by the Trust (other
than pursuant to a Tender Offer or pursuant to an underwritten public offering)
of any shares of Manville Common Stock to a Person or "group" (as defined in
Rule 13d-5(b) under the Exchange Act) which, to the knowledge of the Trust,
owns, or will own as a result of such purchase, of record or beneficially, more
than 15% of the shares of Manville Common Stock then outstanding, the Trust
shall give the Company (or its designee(s)) the opportunity to purchase such
shares in the following manner:
(i) The Trust shall give written notice (the "Offering Notice") to the
Company of such proposed sale, specifying the number of shares proposed to be
sold, the price per share, the identity of the purchaser and the form of the
transaction.
(ii) The Company shall have the right, exercisable by written notice (the
"Offering Exercise Notice") to the Trust given within 30 Business Days after the
date the Offering Notice is given, to purchase (or to cause its designee(s) to
purchase) all, but not less than all, of the shares specified in such Offering
Notice for cash at the price set forth therein.
(iii) The price per share to be paid by the Company (or its designee(s))
(the "Purchase Price") in a purchase pursuant to an Offering Exercise Notice
shall be the third party buyer's price, or shall be determined in the manner the
third party buyer's price was to be determined.
(iv) Upon delivery of the Offering Exercise Notice (and notwithstanding any
designation by the Company of a third person as purchaser), the Company shall be
legally obligated to consummate the purchase contemplated there-by, and shall be
liable in damages to the Trust if the purchase is not consummated for any reason
other than the fault of the Trust. The closing of the purchase of the shares of
Manville Common Stock pursuant to an Offering Exercise Notice shall take place
on a date designated by the Company, which date shall not be later than seven
Business Days after the date the
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Offering Exercise Notice is given. At such closing, an aggregate amount equal to
the Purchase Price times the number of shares proposed to be sold shall be paid
by the Company to the Trust and the certificate or certificates representing
such shares, accompanied by stock powers duly executed in blank or duly executed
instruments of transfer and any other documents that are necessary to transfer
good and marketable title to such shares, shall be delivered by the Trust to the
Company (or its designee(s)).
(v) If the Company does not timely give the Offering Exercise Notice
hereunder, the shares as to which the Offering Notice was given may be sold in
the transaction described in such Offering Notice within 30 days after the
expiration of the Company's right to give the Offering Exercise Notice.
(b) TENDER OFFERS. The Trust may tender shares of Manville Common Stock into
any Tender Offer PROVIDED that the Trust shall not tender shares of Manville
Common Stock prior to the date by which the Company is required to take a
position with respect to the Tender Offer pursuant to Rule 14e-2 under the
Exchange Act (or any successor provision), and PROVIDED, FURTHER, that prior to
any tender of shares by the Trust pursuant to any Tender Offer which the Company
has opposed in a Schedule 14D-9 filed with the Commission and in which, to the
knowledge of the Trust, the offeror, together with any "group" (as defined in
Rule 13d-5(b) under the Exchange Act) of which such offeror is a member, owns,
or would own if the offeror purchased the maximum number of shares sought
pursuant to the Tender Offer, of record or beneficially, more than 15% of the
shares of Manville Common Stock then outstanding, the Trust shall give the
Company (or its designee(s)) the opportunity to purchase such shares in the
following manner:
(i) Prior to tendering any shares of Manville Common Stock pursuant to any
such Tender Offer, the Trust shall give written notice (the "Tender Notice") to
the Company of its intention to tender, specifying the number of shares proposed
to be tendered (the "Tendered Shares"). A Tender Notice shall be deemed to
relate to any Tender Offer outstanding at the time such Tender Notice is given,
PROVIDED that a Tender Notice shall not be deemed to relate to a Tender Offer
outstanding at the time the Tender Notice is given if (x) the Tender Notice was
given less than five Business Days prior to the then scheduled expiration of
such Tender Offer and (y) such scheduled expiration was not subsequently changed
to a time more than five Business Days after the time when the Tender Notice was
given. A Tender Notice shall also be deemed to relate to any Tender Offer not
outstanding at the time such Tender Notice is given if such Tender Offer is
outstanding at any time prior to the Cutoff Time (as hereinafter defined) of any
other Tender Offer to which the Tender Notice relates. The "Cutoff Time" for any
Tender Offer shall mean the earlier of (x) two Business Days prior to the
earliest expiration of such Tender Offer (the term "expiration" as used herein
shall not be deemed to include termination by the offeror prior to the scheduled
expiration) and (y) two Business Days prior to the end of any proration period
relating to such Tender Offer (provided that this Clause (y) shall only apply if
the Tender Notice was given at least five Business Days prior to the end of such
proration period). If, after giving a Tender Notice, the Trust determines not to
tender into any Tender Offer to which the Tender Notice relates (which the Trust
may do at any time prior to receipt of a Tender Exer-cise Notice, as hereinafter
contemplated), the Trust shall promptly advise the Company thereof by giving
written notice rescinding such Tender Notice.
(ii) The Company shall have the right, exercisable by written notice to the
Trust (the "Tender Exercise Notice") actually received by the Trust prior to the
earliest Cutoff Time of any Tender Offer to which the Tender Notice relates (the
"Tender Exercise Deadline"), to purchase (or to cause its designee(s) to
purchase) all, but not less than all, of the Tendered Shares specified in such
Tender Notice, for cash, at the Purchase Price (as hereinafter defined with
respect to this Section 3.03(b)). No extension of the expiration date or
proration period under any Tender Offer, which extension occurs subsequent to
the Tender Exercise Deadline, shall be deemed to reinstate or extend beyond the
Tender Exercise Deadline the Company's right to give a valid Tender Exercise
Notice under this Section 3.03(b). The "Purchase Price" as used in this Section
3.03(b) shall mean the highest price per
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share of Manville Common Stock paid or payable (or if no price was paid or
payable, the highest price per share offered) at any time by any offeror
pursuant to any Tender Offer to which the Tender Notice relates.
(iii) Upon delivery of the Tender Exercise Notice (and notwithstanding any
designation by the Company of a third party as purchaser), the Company shall be
legally obligated to consummate the purchase contemplated thereby and shall be
liable in damages to the Trust if for any reason the purchase is not
consummated. An aggregate amount equal to the Purchase Price times the number of
Tendered Shares shall be paid by the Company to the Trust not more than ten
Business Days after the earlier of the date on which (x) all Tender Offers to
which the Tender Notice relates have expired or been terminated without any
shares of Manville Common Stock being purchased thereunder and (y) shares of
Manville Common Stock are first purchased by any offeror pursuant to a Tender
Offer to which the Tender Notice relates. The certificate or certificates
representing the Tendered Shares, accompanied by stock powers duly executed in
blank or duly executed instruments of transfer and any other documents that are
necessary to transfer good and marketable title to such Tendered Shares, shall
promptly be delivered by the Trust to the Company (or its designee(s)) upon the
Trust's receipt of such payment. If any Tender Offer to which the Tender Notice
relates remains outstanding at the date such payment is to be made by the
Company to the Trust, the amount of such payment shall be calculated as though
each such outstanding Tender Offer would expire without any increase in the
price being offered thereunder. If at any time shares of Manville Common Stock
are purchased by any offeror pursuant to any Tender Offer to which the Tender
Notice relates at a price per share which exceeds the per share amount
previously paid by the Company to the Trust with respect to Tendered Shares, the
Company shall pay to the Trust within three Business Days after such higher
price is paid or becomes payable an amount in cash equal to the product of the
number of Tendered Shares times such excess.
(iv) If the Company does not give a Tender Exercise Notice prior to the
Tender Exercise Deadline, the Tendered Shares may be sold to any offeror
pursuant to any Tender Offer to which the Tender Notice relates, PROVIDED that
if such Tendered Shares are not tendered pursuant to any such Tender Offer, the
Company shall again have a right of first refusal under the terms of this
Section 3.03(b) with respect to any shares of Manville Common Stock subsequently
proposed to be tendered by the Trust pursuant to any other Tender Offer.
(c) PURCHASE PRICE. For purposes of this Section 3.03, if the consideration
paid or offered by any third party consists of all cash, the price paid or
offered for purposes of determining the Purchase Price shall be the amount of
the cash paid or offered. If the consideration paid or offered by any third
party consists in whole or in part of property (including debt instruments)
other than cash, the price paid or offered for purposes of determining the
Purchase Price shall be the amount of cash paid or offered, if any, plus the
value of the property other than cash. If the Trust has a choice between cash
and property other than cash, the price paid or offered for purposes of
determining the Purchase Price shall be the higher of the cash or the value of
such property. The value of any property other than cash will be determined as
promptly as practicable by agreement between a nationally recognized investment
banker selected by the Company and a nationally recognized investment banker
selected by the Trust (or if such investment bankers have not agreed upon a
value for such property within three Business Days after appointment, by a third
nationally recognized investment banker selected by the investment bankers for
the Trust and the Company, or if such investment bankers cannot agree on a third
investment banker, by an investment banker selected by the President of the
Securities Industry Association). If either the Trust or the Company fails to
appoint an investment banker within two Business Days after the other's request,
the investment banker appointed by the other shall make the determinations
contemplated by this Section 3.03(c) in its sole professional judgment. The
value of any securities shall be the fair market value of such securities
determined on a fully distributed basis, and the value of any property other
than cash that does not consist of securities shall be the fair market value of
such property. In the event a determination of the value of property other than
cash under this Section 3.03(c), is required, the payment provided for in
Section 3.03(a) or (b) shall initially
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be made with respect to any cash that had been offered to the Trust and any
property to the extent to which its value has been agreed upon. Any additional
payment due to the Trust on account of property other than cash for which a
value determination is required hereunder shall be made immediately following,
and in accordance with, such value determination.
3.04. REGISTRATION RIGHTS.
(a) SHELF REGISTRATION. Whenever, from time to time, the Trust shall so
request in writing and to the extent permitted by law, the Company shall use its
best efforts to register all shares of Manville Common Stock held by the Trust
(or a portion of such shares, if so requested by the Trust) under Rule 415 under
the Securities Act (or an equivalent or successor provi-sion) (a "Shelf
Registration") and shall keep such registration in effect at all times that the
Trust holds any shares of Manville Common Stock or until the Trust notifies the
Company in writing that the registration no longer need remain effective. If
either the Trust or the Company deems it necessary to obtain a determination
from the appropriate regulatory authorities that a Shelf Registration is
permitted by law, the Company shall use its best efforts, in cooperation with
the Trust, to obtain such a determination.
(b) REGISTRATION UPON REQUEST. If at any time a Shelf Registration is not in
effect with respect to all shares of Manville Common Stock issued directly to
the Trust by Manville and held at such time by the Trust, and the Trust shall
request in writing that the Company effect the registration under the Securities
Act of any shares of Manville Common Stock held by it (which request shall
specify the aggregate number of shares intended to be offered and sold by the
Trust, shall describe the nature or method of the proposed offer and sale
thereof and shall contain an undertaking by the Trust to cooperate with the
Company in order to permit the Company to comply with all applicable re-
quirements of the Securities Act and the rules and regulations thereunder and to
obtain acceleration of the effective date of the registration statement), the
Company shall, as expeditiously as possible, use its best efforts to effect the
registration of the shares which the Trust has requested it to register on an
appropriate form under the Securities Act and to keep such registration in
effect for a period of nine months or for such lesser period as shall be
required to complete the distribution of all the shares covered thereby. The
registration rights contemplated by this Section 3.04(b) may be exercised from
time to time in the discretion of the Trust with respect to all or any part of
the shares of Manville Common Stock that the Trust is permitted under this
Agreement to sell at any such time, provided that the Company shall have no
obligation to file a registration statement in any January or earlier than two
months after the date on which any other registration statement filed pursuant
to Sections 3.04(a) or (b) of this Agreement ceases to be in effect.
(c) REGISTRATION PROCEDURES. At any time that the Company is obligated to
use its best efforts to effect the registration under the Securities Act of any
shares of Manville Common Stock held by the Trust pursuant to Sections 3.04(a)
or (b), the Company shall, as expeditiously as possible:
(i) prepare and file with the Commission a registration statement on the
appropriate form with respect to such shares and use its best efforts to cause
such registration statement to become effective;
(ii) before filing a registration statement or prospectus or any amendments
or supplements thereto, furnish to the Trust and its counsel (and to any Person
designated by the Trust or such counsel) copies of all documents proposed to be
filed with the Commission, which documents will be subject to the review and
comment of the Trust and such counsel, and, if requested by such counsel, to the
insertion of material that, in the judgment of such counsel, should be included
(subject, however, to the reasonable approval of counsel to the Company);
(iii) take such action (including filing with the Commission amendments and
supplements to the registration statement and the prospectus used in connection
therewith) as may be necessary to keep such registration statement effective for
the period of time required under Section 3.04(a) or (b);
(iv) furnish to the Trust and each underwriter of the shares being sold such
number of copies of (w) such registration statement (including all exhibits
thereto), (x) each amendment and supplement
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thereto (in each case including all exhibits thereto), (y) the prospectus
included in such registration statement (including each preliminary prospectus)
and (z) such other documents, as the Trust and each such underwriter may
reasonably request in order to facilitate the distribution of such shares;
(v) promptly deliver to the Trust, each managing underwriter of the shares,
and their respective counsel copies of all correspondence between the Commission
and the Company, its counsel or auditors and all memoranda relating to
discussions with the Commission with respect to any such registration statement;
(vi) furnish, at the request of the Trust, on each date that such shares are
delivered to underwriters for sale pursuant to such registration statement or,
if such shares are not being sold through underwriters, on each date the
registration statement with respect to such shares becomes effective (or, if the
shares are registered pursuant to a Shelf Registration, on the date such Shelf
Registration becomes effective and on each date a post-effective amendment of
such Shelf Registration becomes effective) (x) an opinion, dated such date, of
counsel representing the Company for the purposes of such registration,
addressed to the underwriters, if any, and to the Trust, substantially to the
effect that (A) the registration statement, related prospectus, and each
amendment or supplement thereto (including documents incorporated by reference
therein), complied, when declared effective with respect to registration
statements and otherwise when filed, as to form in all material respects with
the requirements of the Securities Act or the Exchange Act, as the case may be,
and the applicable rules and regulations of the Commission thereunder (except
that such counsel need express no opinion as to the financial statements and
other financial data contained therein), (B) such counsel believes that the
registration statement (and any amendment thereto or document incorporated by
reference therein), at the time such registration statement became effective (or
in the case of an amendment or document incorporated by reference, at the time
it was filed), did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading and that the prospectus as amended or
supplemented, if applicable (including documents incorporated by reference
therein), on the date of such opinion, does not contain any untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements, in the light of the circumstances under which they were made, not
misleading (except that such counsel need express no belief as to the financial
statements and other financial data contained in the registration statement or
the prospectus), (C) all of the shares of Manville Common Stock then outstanding
have been duly authorized, validly issued and are fully paid and nonassessable,
and (D) such other legal matters with respect to the registration statement and
the Company as the underwriters, if any, or the Trust may reasonably request and
(y) a letter, dated such date, from the Independent certified public accountants
of the Company, addressed to the underwriters, if any, and to the Trust, stating
that they are "independent" certified public accountants within the meaning of
the Securities Act and that the financial statements and other financial data of
the Company included in the registration statement or the prospectus, or any
amendment or supplement thereto (including, in each case, documents incorporated
by reference therein), comply as to form in all material respects with the
applicable accounting requirements of the Securities Act; such letter from the
accountants shall additionally cover such other financial matters (including
information as to the period ending not more than five Business Days prior to
the date of such letter) with respect to the registration statement that is of
the type ordinarily included in accountants' "comfort letters" to underwriters
as the underwriters, if any, or the Trust may reasonably request;
(vii) use its best efforts to register or qualify the shares covered by such
registration statement under the securities or blue sky laws of such
jurisdictions in the United States as the Trust shall reasonably request,
considering the nature and size of the offering, and do any and all other acts
and things which may be necessary or desirable to enable the Trust and any
underwriter of such shares to consummate the public sale or other disposition in
each such jurisdiction of such shares, provided that in connection therewith the
Company shall not be required to file a general consent to service of process in
any jurisdiction or to qualify to do business in any jurisdiction where it is
not then qualified;
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(viii) notify the Trust and any underwriter of such shares, at any time when
a prospectus relating to such shares is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and promptly
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such shares, such prospectus will not contain an
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading;
(ix) enter into such customary agreements (including an underwriting
agreement in customary form) and take all such other customary actions as the
Trust or the underwriters of such shares reasonably request in order to expedite
or facilitate the disposition of the shares;
(x) make available, upon reasonable notice and during business hours, for
inspection by the Trust, any underwriter participating in any distribution
pursuant to such registration statement and any attorney, accountant or other
agent retained by the Trust or any such underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate documents
and properties of the Company (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company and its officers, directors and employees
to supply all information reasonably requested by any such Inspector, in
connection with such registration statement; provided that none of such Records
shall be photocopied by the Inspectors and any such inspection shall be
conducted in a manner that does not unreasonably interfere with the normal
business operations of the Company. Records which the Company determines, in
good faith, to be confidential and which it notifies the Inspectors in writing
are confidential shall not be disclosed to the Inspectors and only may be
reviewed by counsel for the Trust and for any underwriter;
(xi) notify the Trust of any stop order issued or, to the knowledge of the
Company, threatened by the Commission and take all reasonable actions required
to prevent the entry of such stop order or to remove it if entered;
(xii) otherwise use its best efforts to comply with all applicable rules and
regulations of the Commission; and
(xiii) if the Trust has requested registration of shares pursuant to Section
3.04(b), notify the PD Trust that the Trust has requested a registration of
shares of Manville Common Stock pursuant to this Agreement and give the PD Trust
an opportunity to participate in such registration.
The Company may request that the Trust furnish to the Company information
regarding the Trust and the disposition of the Trust's shares, and the Trust
agrees to furnish such information to the Company and any other information as
the Company may reasonably request.
The Trust agrees that, upon receipt of any notice from the Company of any
event of the kind described in Paragraph (viii) of this Section 3.04(c), the
Trust will forthwith discontinue distribution of shares of Manville Common Stock
pursuant to the registration statement covering such shares until the Trust's
receipt of the copies of the supplemented or amended prospectus contemplated by
such Paragraph. If the Company shall give any such notice, the period stated in
Section 3.04(b) during which the Company must keep a registration statement in
effect, if applicable, shall be extended by the number of days during the period
from and including the date of the giving of such notice pursuant to Paragraph
(viii) of this Section 3.04(c) to and including the date when the Trust shall
have received the copies of the supplemented or amended prospectus contemplated
by Paragraph (viii) of this Section 3.04(c).
If any such registration statement refers to the Trust by name or otherwise
as the holder of any shares of Manville Common Stock, then the Trust shall have
the right to require the insertion therein of language, in form and substance
satisfactory to the Trust and the Company, to the effect that the
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holding by the Trust of such shares is not to be construed as a recommendation
by the Trust or any of the Trustees of the investment quality of the shares
covered thereby and that such holding does not imply that the Trust will assist
in meeting any future financial requirements of the Company.
(d) REGISTRATION EXPENSES. The Company agrees to pay all costs and expenses
in connection with any registration pursuant to this Section 3.04 (whether or
not any such registration shall become effective), including, without
limitation, all registration and filing fees, fees and expenses of compliance
with securities or blue sky laws (including reasonable fees and disbursements of
counsel for the underwriters in connection with blue sky qualifications of the
shares), printing and duplicating expenses, messenger and delivery expenses,
fees and disbursements of counsel for the Company and all independent certified
public accountants (including the expenses of any annual audit, special audit or
"cold comfort" letters required by or incident to such performance), securities
acts liability insurance (if the Company elects to obtain such insurance), the
reasonable fees and expenses of any special experts retained for the Company in
connection with such registration and fees and expenses of other Persons
retained by the Company; provided that costs and expenses to be paid by the
Company shall not include fees and expenses of counsel retained by the Trust and
other out-of-pocket expenses of the Trust (and any persons retained by the Trust
to act as Inspectors) incurred in connection with any registration and any
underwriting discounts or commissions attributable to the sale of the Trust's
shares of Manville Common Stock.
(e) INDEMNIFICATION.
(i) In each case of a registration of shares of Manville Common Stock under
the Securities Act pursuant to this Section 3.04, the Company will indemnify and
hold harmless the Trust, each Trustee, each officer of the Trust, each
underwriter for the Trust (as defined in the Securities Act) and each other
Person, if any, who controls the Trust or any such underwriter within the
meaning of the Securities Act or the Exchange Act from and against any and all
losses, claims, damages and liabilities (including the fees and expenses of
counsel in connection with any governmental or regulatory investigation or
proceeding), caused by an untrue statement or alleged untrue statement of a
material fact contained in any registration statement under which such shares of
Manville Common Stock were registered under the Securities Act and/or under the
securities or blue sky laws of any jurisdictions in the United States, any
prospectus or preliminary prospectus contained therein or any amendment or
supplement thereto (including, in each case, documents incorporated by reference
therein), or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except that the Company shall not be liable to indemnify
a party seeking indemnification insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information relating to the party
seeking indemnification and furnished to the Company in writing by such party
expressly for use therein; provided that the foregoing indemnification with
respect to a preliminary prospectus as then amended or supplemented shall not
inure to the benefit of any under-writer (or to the benefit of any Person
controlling such underwriter) from whom the Person asserting any such losses,
claims, damages or liabilities purchased shares of Manville Common Stock if a
copy of the final prospectus as then amended or supplemented had not been sent
or given to such Person at or prior to written confirmation of the sale of such
shares to such Person and the untrue statement or omission of a material fact
contained in such preliminary prospectus was corrected in the final prospectus
as then amended or supplemented.
(ii) In each case of a registration of shares of Manville Common Stock under
the Securities Act pursuant to this Section 3.04, the Trust will indemnify and
hold harmless the Company, its directors, its officers who sign the registration
statement and each Person, if any, who controls the Company within the meaning
of the Securities Act or the Exchange Act, to the same extent as the foregoing
indemnity from the Company to the Trust, but only with reference to information
relating to the Trust and furnished to the Company in writing by the Trust
expressly for use in the registration
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statement, any prospectus or preliminary prospectus contained therein or any
amendment or supplement thereto. The Trust will use best efforts to cause any
underwriters of shares of Manville Common Stock to be sold by the Trust to
indemnify the Company on the same terms as the Trust agrees to indemnify the
Company, but only with reference to information relating to such underwriters.
(iii) In case any proceeding (including any governmental investigation)
shall be instituted involving any Person in respect of which indemnity may be
sought pursuant to this Section 3.04, such Person (the "Indemnified Party")
shall promptly notify the Person against whom such indemnity may be sought (the
"Indemnifying Party") in writing and the Indemnifying Party, upon request of the
Indemnified Party, shall retain counsel reasonably satisfactory to the
Indemnified Party to represent the Indemnified Party and any others the
Indemnifying Party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any Indemnified Party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party unless (x) the Indemnifying Party has agreed to the
retention of such counsel at its expense or (y) the named parties to any such
proceeding (including any impleaded parties) include both the Indemnifying Party
and the Indemnified Party and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests between
them. It is understood that the Indemnifying Party shall not, in connection with
any proceeding or related proceedings in the same jurisdiction, be liable for
the fees and expenses of more than one separate firm qualified in such
jurisdiction to act as counsel for all such Indemnified Parties, except that, if
the Company is the Indemnifying Party, it shall be responsible for up to two
such firms, one for the Trust (and all of its affiliated Indemnified Parties)
and one for all of the underwriters as a group (and all of their affiliated
Indemnified Parties). Such firm shall be approved as satisfactory in writing by
the Trust in the case of parties indemnified pursuant to Paragraph (i) of
Section 3.04(e) and by the Company in the case of parties indemnified pursuant
to Paragraph (ii) of Section 3.04(e). The Indemnifying Party shall not be liable
for any settlement of any proceeding effected without its written consent but if
settled with such consent or if there be a final, nonappealable judgment for the
plaintiff, the Indemnifying Party agrees to indemnify the Indemnified Party from
and against any loss or liability by reason of such settlement or judgment.
(iv) The indemnification of any underwriter pursuant to Paragraphs (i) and
(ii) of Section 3.04(e) shall be on such other terms and conditions as are at
the time customary and reasonably required by underwriters in public offerings,
including providing for contribution in the event indemnification provided in
this Section 3.04 is unavailable or insufficient.
ARTICLE IV
GENERAL COVENANTS
4.01. COVENANTS OF THE TRUST.
(a) [Reserved]
(b) The Trust shall provide to the Company, as and when available, the
reports prepared pursuant to Section 3.02(d) of the Trust Agreement and the
budgets and projections prepared pursuant to Section 3.02(e) of the Trust
Agreement.
(c) The Trust shall provide all information to, and otherwise fully
cooperate with, the Company, to the extent necessary to permit the Company to
timely file such income tax and other returns or statements as required to
comply with applicable provisions of the Internal Revenue Code and of any state
law and the regulations promulgated thereunder and shall provide to the Company
all other information reasonably requested by the Company to enable it to
prepare and file any reports or other documents required by any governmental
agency.
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(d) The Company has the right to inspect the accounts of the Trust and to
discuss the affairs, finances and accounts of the Trust with, and to be advised
as to the same by, the Trustees and the officers of the Trust, all at such
reasonable times and intervals as the Company may desire and at the expense of
the Company.
4.02. COVENANTS OF THE COMPANY.
(a) [Reserved]
(b) [Reserved]
(c) MAINTENANCE OF CORPORATE EXISTENCE. The Company will do or cause to be
done all things necessary to preserve and keep in full force and effect the
corporate existence, rights (charter and statutory) and franchises of the
Company and its Subsidiaries; PROVIDED that the Company shall not be required to
preserve any right or franchise if its board of directors shall determine that
the preservation thereof is no longer desirable in the conduct of the business
of the Company and its Subsidiaries and that the loss thereof is not
disadvantageous in any material respect to the Trust.
(d) [Reserved]
(e) TO KEEP BOOKS; REPORTS TO THE TRUST. The Company and its Subsidiaries at
all times will keep on a consolidated basis true and complete books of record
and account, in accordance with generally accepted accounting principles, and
will furnish to the Trust:
(i) [Reserved]
(ii) [Reserved]
(iii) [Reserved]
(iv) [Reserved]
(v) within 100 days after the end of each Fiscal Year and within 55 days
after the end of the first, second and third quarterly periods of each Fiscal
Year, a certificate of any two responsible officers (for purposes of this
Agreement, a "responsible officer" shall mean any of the chief executive
officer, the chief financial officer, the general counsel, the Treasurer, the
Controller and the Vice-President Corporate Finance of the Company who is
knowledgeable as to the matters subject to certification) and (x) stating, to
the best of such officers' knowledge after reasonable inquiry, that the Company
has observed or performed all its covenants and other agreements under Sections
2.03, 2.04 and 4.02, and that the representations and warranties contained in
Article V are true in all material respects, or if in their opinion the Company
has failed in any such respect and the Company has not previously disclosed such
failure in writing to the Trust, specifying the nature and status of all such
failures and (y) stating that, to the best of such officers' knowledge after
reasonable inquiry, no Default or Event of Default exists under the Second Bond
or the Other Agreements or if in their opinion a Default or Event of Default
exists, specifying the nature and status thereof; and
(vi) [Reserved]
(vii) promptly, such other information as the Trust may, from time to time,
reasonably request.
(f) INSPECTION. The Trust has the right, except as to trade secrets and
similar confidential information, to visit and inspect any of the properties of
the Company and its Subsidiaries and to discuss the affairs, finances and
accounts of the Company and its Subsidiaries with, and to be advised as to the
same by, its and their officers, all at such reasonable times and intervals as
the Trust may desire, and the Company will use its best efforts to make such
right available to the Trust with respect to any Affiliate of the Company. All
out-of-pocket expenses of the Trust incurred in connection with the foregoing
shall be borne by the Trust.
(g) [Reserved]
(h) [Reserved]
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(i) [Reserved]
(j) TRUST DIRECTORS. Management's nominees for any election of the directors
of the Company will include two nominees approved by the Trust and the Company
shall use its best efforts, consistent with its efforts on behalf of its other
nominees, to have such nominees elected.
(k) [Reserved]
(l) [Reserved]
(m) [Reserved]
(n) CONFIDENTIALITY. The Company shall retain in strict confidence all
information supplied to it by the Trust pursuant to Section 4.01, except to the
extent that (i) the Company is compelled to disclose such information as a
result of court order, subpoena or similar legal duress or, in the opinion of
counsel to the Company, is otherwise required to disclose such information to
any governmental department, agency, authority, commission or other body, it
being understood that the Company shall consult with the Trust upon receiving
such an order or subpoena or in connection with obtaining such an opinion as
part of its good faith determination as to whether disclosure is required, (ii)
any such information is or becomes generally available to the public other than
as a result of a disclosure by the Company or its Subsidiaries or any of their
employees, representatives or agents or (iii) any such information is obtained
or developed by the employees, representatives or agents of the Company or any
of its Subsidiaries independently of, and without reference to or use of,
information supplied by the Trust pursuant to Section 4.01.
(o) [Reserved]
(p) [Reserved]
(q) AMENDMENT OF CLASS 6 INDENTURE. The Company shall not enter into any
amendments to the Class 6 Indenture or the Class 6 Interest Indenture or any
supplemental Class 6 Indentures or Class 6 Interest Indentures if such amendment
or supplemental indenture would impair any of the rights of the Trust under this
Agreement, the Second Bond or the Other Agreements.
(r) CERTAIN TRANSACTIONS RESTRICTED. So long as the Trust shall own more
than 20% of the then issued and outstanding shares of Manville Common Stock, the
Company shall not, without the prior written consent of the Trust:
(i) enter into any joint venture or similar arrangement,
(ii) sell, issue or otherwise dispose of less than all of the stock or of
any other securities of any Subsidiary, or
(iii) amend the articles of incorporation or by-laws of any Subsidiary,
if any such action, arrangement or any document relating to any of the
above, contains provisions which would (A) impair or otherwise limit the right
of the Trust or any transferee of the Trust to vote its shares of Manville
Common Stock or (B) impose any penalty on the Company or, as a stockholder of
the Company, on the Trust or any transferee of the Trust, upon a change in
control of the Company.
(s) LIMITATION ON LIENS. Until the date on which the Second Bond is paid,
prepaid or repurchased in full, at which time the provisions of this Section
4.02(s) shall automatically cease to have any force or effect, the Company shall
not secure, and shall not permit any of its Subsidiaries to secure, the Class 6
Interest Debentures by any mortgage, pledge, charge, lien, security interest or
other encumbrance upon any of the present or future revenues or assets of the
Company or its Subsidiaries without at the same time equally and ratably
securing the Second Bond so as to rank PARI PASSU with the Class 6 Interest
Debentures.
(t) ADJUSTED CONSOLIDATED TANGIBLE NET WORTH. Until the date on which the
Second Bond is paid, prepaid or repurchased in full, the Company's Adjusted
Consolidated Tangible Net Worth (as defined
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below) at the end of each quarterly fiscal period of each Fiscal Year shall not
be less than $150,000,000. "Adjusted Consolidated Tangible Net Worth" of the
Company, at the end of a quarterly fiscal period of a Fiscal Year, means total
stockholders' equity of the Company and its consolidated Subsidiaries as of such
date determined on a consolidated basis in accordance with generally accepted
accounting principles, less amounts (net of applicable deferred taxes relating
to such amounts) attributable to unamortized deferred charges, unamortized debt
discount and expense, goodwill, patents, trademarks, service marks, trade names,
copyrights, franchises, licenses and similar rights, organization,
reorganization or developmental expenses, increases in the book value of any
assets of the Company and its consolidated Subsidiaries as a result of any
revaluation of such assets (other than any such increases resulting from regular
periodic revaluations required under generally accepted accounting principles)
and other intangible items; it being understood that (x) deferred net tax assets
to the extent determined in accordance with generally accepted accounting
principles and included in the Company's consolidated financial statements for
such quarterly fiscal period, shall not be deducted in determining Adjusted
Consolidated Tangible Net Worth and (y) assets relating to the Company's pension
plans shall be deducted, net of applicable deferred taxes relating to such
assets, in determining Adjusted Consolidated Tangible Net Worth.
4.03. COMPUTATION DISPUTE RESOLUTION. The Company's computations of Adjusted
Consolidated Tangible Net Worth made pursuant to Section 4.02(t) shall be deemed
to be accepted by the Trust and shall be conclusive for the purposes of this
Agreement and the Second Bond unless the Trust, within 20 Business Days after
the date on which the computation in question was delivered to the Trust and the
work sheets and other documents prepared in connection therewith made available
for inspection by or delivered to the Trust, shall have delivered a written
notice to the Company stating each and every item to which it takes exception as
not being computed in accordance herewith or as having computation errors,
specifying in detail the nature and extent of any such exception. In the event
that the Trust gives written notice within such period of any such exception to
a computation made pursuant to Section 4.02(t), then the Company and the Trust,
or the Company's accountants and the Trust's accountants, respectively, shall
attempt to resolve all differences on a mutually acceptable basis. To the extent
that such differences are not so resolved within ten Business Days after the
delivery of the written exceptions to the disputed computation, the questions
giving rise to such differences shall be submitted as soon as practicable (and,
in any event, not later than 20 Business Days thereafter) to any nationally
recognized firm of Independent certified public accountants acceptable to both
the Company and the Trust (the "Accountants") for final determination. The
Company and the Trust each shall pay one-half of any fees charged by the
Accountants in connection with any such determination. Any agreement by the
Company and the Trust or by the Company's accountants and the Trust's
accountants, or any determination by the Accountants as to the proper resolution
of any item shall be conclusive and binding upon the Company and the Trust for
the purposes hereof; and the computation of Adjusted Consolidated Tangible Net
Worth referred to in Section 4.02(t) as so reconciled shall be deemed to be the
computation made pursuant to Section 4.02(t) for all purposes of this Agreement,
the Second Bond, the Plan and any Schedule, Annex or Exhibit to any of the
foregoing. Payments due under this Agreement, the Second Bond and the Other
Agreements shall be made on the dates required herein and therein to the extent
mandated by those portions of the computations which are undisputed on such
payment dates. Additional payments which are mandated by the binding
computations reached after dispute resolution pursuant to this Section 4.03
shall be made promptly following such dispute resolution, with interest on such
additional payments from the required payment date to the actual payment date at
a rate of 10% per annum.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
5.01. ORGANIZATION, ETC. The Company represents and warrants that it and
each of its Subsidiaries (a) is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation; and
(b) has all requisite corporate power and authority, licenses, permits
A-A-12
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and franchises to own or lease and operate its properties and carry on its
business as presently being conducted. The Company further represents and
warrants that it has all requisite corporate power and authority to execute and
deliver, and perform its obligations under, this Agreement.
5.02. AUTHORIZATION. The Company represents and warrants that (a) it has
taken all necessary corporate action to authorize the execution and delivery of,
and performance of its obligations under, this Agreement and (b) this Agreement
has been duly and validly authorized, executed and delivered by the Company and
constitutes the valid and binding obligation of the Company in accordance with
its terms.
ARTICLE VI
MISCELLANEOUS
6.01. TERMINATION. This Agreement shall terminate and the provisions hereof
be of no further force and effect as of the Termination Date; PROVIDED that this
Agreement may be terminated at any time, and the provisions hereof be thereupon
of no further force and effect, if the Company and the Trust so agree in
writing.
6.02. AMENDMENTS; WAIVER. This Agreement, other than Section 6.13, may be
modified, supplemented or amended, or the provisions hereof waived, at any time
and from time to time in writing signed by each party hereto. If either party
hereto shall request an amendment of the definition of "Fiscal Year" as it
applies to such party, the other party hereto shall agree thereto, PROVIDED that
if the definition of "Fiscal Year" is so amended, corresponding amendments shall
be made to this Agreement, the Second Bond and any other agreements between the
Trust and the Company so that payments from the Company to the Trust hereunder
and under the Second Bond and such other agreements (as so amended) shall be
substantially the same as those provided for in this Agreement, the Second Bond
and such other agreements as originally executed and delivered.
6.03. SEVERABILITY. Should any provision in this Agreement be determined to
be invalid or unenforceable in any jurisdiction, such determination shall in no
way limit or affect the validity or enforceability and operative effect of any
other provisions of this Agreement or affect the validity or enforceability of
any of the provisions of this Agreement in any other jurisdiction.
6.04. NOTICES. Any notices or other communications required or permitted in
connection with this Agreement shall be in writing and delivered at the
addresses designated below, or sent by telex or telecopy pursuant to the
instructions listed below, or mailed by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows, or to such other
address or addresses as may hereafter be furnished by one party to the other in
compliance with the terms hereof.
<TABLE>
<S> <C>
To the Trust: with a copy to:
Manville Personal Injury Settlement Trust Donovan Leisure Newton & Irvine
8260 Willow Oaks Corporate Drive 30 Rockefeller Plaza
Suite 600 New York, New York 10112
P.O. Box 10415 Fax: (212) 632-3315
Fairfax, VA 22031 Attention: ANDREW J. TRUBIN
Fax: (703) 205-6249
Attention: DAVID T. AUSTERN
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
To the Company: with a copy to:
Manville Corporation Davis Polk & Wardwell
717 17th Street 450 Lexington Avenue
Denver, Colorado 80202 New York, New York 10017
Fax: (303) 978-4842 Fax: (212) 450-4800
Attention: RICHARD B. VON WALD Attention: STEPHEN H. CASE
and and
Kaye, Scholer, Fierman, Hays & Handler Skadden, Arps, Slate, Meagher & Flom
425 Park Avenue 919 Third Avenue
New York, New York 10022 New York, New York 10022
Fax: (212) 836-8689 Fax: (212) 735-2001
Attention: HERBERT S. EDELMAN Attention: FRANKLIN M. GITTES
and
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Fax: (212) 558-3588
Attention: WILLIAM E. WILLIS
in each case, with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
1 New York Plaza
New York, New York 10004
Fax: (212) 747-1526
Attention: LEON SILVERMAN
</TABLE>
All such notices and communications shall be effective when delivered at the
designated addresses or when the telex or telecopy communication is received at
the designated addresses and confirmed by the recipient by return telex or
telecopy in conformity with the provisions hereof.
6.05. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall constitute an original, but such counterparts
shall together constitute but one and the same instrument.
6.06. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that neither the Trust nor the Company may assign
or otherwise transfer any of its rights or obligations under this Agreement
except, in the case of the Trust, as contemplated by Section 6.02 of the Trust
Agreement.
6.07. ENTIRE AGREEMENT; NO WAIVER. The entire agreement of the parties
relating to the subject matter of this Agreement, the Second Bond, and the Other
Agreements is contained herein and therein, and this Agreement, the Second Bond,
and the Other Agreements supersede any other prior oral or written agreements
concerning the subject matter hereof and thereof. No failure or delay to
exercise any right, power or privilege hereunder or thereunder shall operate as
a waiver thereof, nor shall any single or partial exercise of any right, power
or privilege hereunder or thereunder preclude any further exercise thereof or of
any other right, power or privilege. The rights and remedies herein and therein
provided are cumulative and not exclusive of rights under law or in equity.
6.08. HEADINGS. The headings used in this Agreement are inserted for
convenience only and neither constitute a portion of this Agreement nor in any
manner affect the construction of the provisions of this Agreement.
6.09. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.
6.10. THIRD PARTIES. This Agreement constitutes an agreement solely between
the parties hereto, and, except as provided in Section 3.04(e) and Section 6.13.
is not intended to and shall not confer any
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rights, remedies, obligations or liabilities, legal or equitable, on any person
other than the parties hereto and their respective successors or assigns, or
otherwise constitute any Person a third party beneficiary under or by reason of
this Agreement.
6.11. SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS. All
representations, warranties, covenants and agreements made in this Agreement or
in certificates delivered pursuant hereto shall be deemed to have been relied
upon by the party to whom made, notwithstanding any investigations heretofore or
hereafter made by such party or on such party's behalf. Unless clearly worded
otherwise, all such representations, warranties, covenants and agreements shall
continue in full force and effect so long as this Agreement is in effect.
6.12. [Reserved]
6.13. AGREEMENTS OF THE COMPANY AND THE TRUST WITH RESPECT TO CERTAIN LIENS.
For the express benefit of the holders of the Class 6 Notes, the indenture
trustee for the Class 6 Notes, the Class 6 Interest Debentures, the indenture
trustee for the Class 6 Interest Debentures and the Designated Debt, the Company
agrees that it will not grant, and the Trust agrees that it will not accept,
receive or hold any mortgage, pledge, charge, lien, security interest or other
encumbrance securing the Designated Debt to be received by the Trust under the
Plan if any instrument governing or relating to any of the Designated Debt, the
Class 6 Notes or the Class 6 Interest Debentures (i) prohibits the granting of
the same to secure such Designated Debt or (ii)(A) requires the same to equally
and ratably secure any of the Designated Debt, the Class 6 Notes or the Class 6
Interest Debentures and (B) such requirements for equal and ratable securing are
not complied with. The Company and the Trust hereby acknowledge that the
indenture trustee for the Class 6 Notes, the indenture trustee for the Class 6
Interest Debentures, any holder of any Class 6 Notes, Class 6 Interest Debenture
or any Designated Debt shall have standing and power to enforce this Section
6.13.
6.14. AUTOMATIC WAIVERS UNDER THE PD SUPPLEMENTAL AGREEMENT. To the extent
the Trust has the exclusive right under Section 6.02 of the PD Supplemental
Agreement to waive compliance by the Company and its Subsidiaries with any of
the covenants set forth in Article IV of the PD Supplemental Agreement, the
Trust hereby irrevocably waives such compliance to the extent the Company's
covenants thereunder are different than the Company's covenants under Article IV
hereof.
6.15. EFFECTIVE DATE. The amendment and restatement of the Supplemental
Agreement pursuant to this Agreement shall be effective as of the date first
above written, and from and after said date the Supplemental Agreement shall
continue in full force and effect as amended and restated hereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the day and year
first above written.
MANVILLE CORPORATION
By: __________________________________
Name:
Title:
MANVILLE PERSONAL INJURY
SETTLEMENT TRUST
By: __________________________________
Name:
Title:
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<PAGE>
GLOSSARY
EXHIBIT A TO
SECOND AMENDED AND RESTATED
SUPPLEMENTAL AGREEMENT
GLOSSARY OF DEFINED TERMS1
ADJUSTED CONSOLIDATED NET EARNINGS for any Fiscal Year means Consolidated
Net Earnings of the Company computed without giving effect to any accretion of,
or dividend payment on, the Series B Preference Stock and before giving effect
to any payments made pursuant to Section 2.03 of the Supplemental Agreement, in
each case whether or not in accordance with generally accepted accounting
principles.
AFFILIATE of a Person means (i) a Subsidiary of such Person, (ii) a Person
which owns, either alone or with or through one or more Affiliates, directly or
indirectly, securities or other ownership interests having ordinary voting power
to elect a majority of the board of directors or other persons performing
similar functions of such Person and (iii) a Subsidiary of any Affiliate of such
Person; PROVIDED that neither the Trust nor the PD Trust shall be deemed an
Affiliate of any of the Debtors.
AGGREGATE VALUE OF THE PD TRUST ESTATE as of any date, shall be equal to the
sum, on such date, of (i) all cash then held in the PD Trust Estate, (ii) all
Cash Settlement Proceeds payable to the PD Trust with respect to all Settlement
Agreements then in effect, (iii) the amount specified in clause (iv)(y) of the
definition of Aggregate Value of the Trust Estate, (iv) the excess of (x) the
aggregate value of the PD Insurance Coverage equal to the maximum amount of
Non-Cash Settlement Proceeds available with respect thereto (less any portion
thereof already utilized) to pay Property Claims and PD Trust Expenses as
determined by a Settlement Agreement or by Final Order, or, if there is no
Settlement Agreement or Final Order with respect to such PD Insurance Coverage,
to the amount of Non-Cash Settlement Proceeds estimated by agreement of the PD
Trustees and the Chief Financial Officer of the Company to be collectible from
the insurer with respect to such PD Insurance Coverage to pay Property Claims
under such Policy in respect of Property Claims and PD Trust Expenses, over (y)
any amount, which would be payable to the Trust pursuant to Section 2.06(e) of
the PD Supplemental Agreement with respect to such PD Insurance Coverage, as so
valued, (v) the aggregate Market Value of any securities then held by the PD
Trust and (vi) the fair market value, as determined by the PD Trustees on any
reasonable basis, of all other assets then held by the PD Trust (which assets
shall not be deemed to include the Second Bond or amounts payable under the PD
Supplemental Agreement). In valuing Cash Settlement Proceeds and Non-Cash
Settlement Proceeds under Clauses (ii) and (iv) above, no value shall be
assigned to any amount that is or may be payable by an insurance company whose
rating at the time of valuation by Best's Insurance Reports is lower than "A"
for any reason, unless such payment is secured by an irrevocable letter of
credit or comparable security arrangement acceptable to the PD Trust.
AGGREGATE VALUE OF THE TRUST ESTATE as of any date shall be equal to the
sum, on such date, of (i) all cash then held in the Trust Estate, (ii) all Cash
Settlement Proceeds payable to the Trust with respect to all Settlement
Agreements then in effect, (iii) the amount specified in clause (iv)(y) of the
definition of Aggregate Value of the PD Trust Estate, (iv) the excess of (x) the
aggregate value of Insurance Coverage equal to the maximum amount of Non-Cash
Settlement Proceeds available with respect thereto (less any portion thereof
already utilized) to pay Trust Claims and Trust Expenses, as determined by a
Settlement Agreement or by Final Order, or if there is no Settlement Agreement
or
- ------------------------
1 Unless the context requires otherwise, all capitalized terms used within these
definitions have the meanings assigned to them elsewhere in this Glossary.
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<PAGE>
Final Order with respect to such Insurance Coverage, to the amount of Non-Cash
Settlement Proceeds estimated by agreement of the Trustees and the Chief
Financial Officer of the Company to be collectible from the insurer with respect
to such Insurance Coverage to pay Trust Claims and Trust Expenses, over (y) any
amount which would be payable to the PD Trust pursuant to Section 2.06(d) of the
PD Supplemental Agreement with respect to such Insurance Coverage, as so valued,
(v) the aggregate Market Value of any securities then held by the Trust and (vi)
the fair market value, as determined by the Trustees on any reasonable basis, of
all other assets then held by the Trust (which assets shall not be deemed to
include the Second Bond or amounts payable under the Supplemental Agreement). In
valuing Cash Settlement Proceeds and Non-Cash Settlement Proceeds under Clauses
(ii) and (iv) above, no value shall be assigned to any amount that is or may be
payable by an insurance company whose rating at time of valuation by Best's
Insurance Reports is lower than "A" for any reason, unless such payment is
secured by an irrevocable letter of credit or comparable security arrangement
acceptable to the Trust. The Aggregate Value of the Trust Estate shall include
the value of any assets held in escrow pursuant to Section 3.05 of the PD
Supplemental Agreement.
AH CLAIMS means (a) all Claims (under any theory of law, equity or
admiralty) for death, personal injuries or personal damages (whether physical,
emotional or otherwise) to the extent caused or allegedly caused, directly or
indirectly, by exposure to asbestos (alone or as contained in asbestos-
containing products) and arising or allegedly arising, directly or indirectly,
from acts or omissions prior to the Confirmation Date of one or more of the
Debtors or the Canadian Companies including, without limitation, all Claims for
compensatory damages (such as loss of consortium, wrongful death, survivorship,
proximate, consequential, general and special damages) and punitive damages and
(b) all warranty, guarantee, indemnification or contribution liabilities or
obligations of any of the Debtors or Canadian Companies to any other Person to
the extent that such warranties, guarantees, indemnifications or contribution
responsibilities cover claims against such other Person that would, if such
claims had been made directly against any of the Debtors or Canadian Companies,
constitute AH Claims under Clause (a) above.
With respect to Claims for compensatory damages only, the substantive law
applicable to the settlement or trial of AH Claims against the Claims Resolution
Facility shall be the law which would have been applicable but for the pendency
of the Cases. In determining the applicable law, it will be assumed that the
action against the Claims Resolution Facility was (1) filed or commenced (if not
actually filed or commenced against any of the Debtors) at the same time as an
action by the Beneficiary asserting a claim that would have been an AH Claim if
asserted against any of the Debtors was filed against any other Person and (2)
tried or settled at the same time as the Beneficiary's action was tried or
settled (if actually tried or settled) with substantially all defendants
thereto, so that the law applicable will be the same as the law applicable to
the action against such other defendants. If the claim is against any of the
Debtors (or the Claims Resolution Facility) alone, it will be assumed that the
action against the Claims Resolution Facility was filed or commenced (if not
actually filed or commenced against any of the Debtors) at the earliest time
when the cause of action accrued and would have been reached for trial when a
similar action in the same venue on the same calendar would have been reached
for trial. All claims actually filed or commenced against any of the Debtors
shall be deemed to have been filed or commenced on such actual date of filing or
commencement. Notwithstanding and supplementing the foregoing, the Beneficiary
shall have the benefit of any revival statute enacted in any jurisdiction where
venue is proper which has the effect of removing or tolling the bar or extending
the period of the statute of limitations, irrespective of whether the statute is
deemed substantive or procedural.
ALLOWED means:
6.1. With respect to a Claim or that portion of a Claim that is liquidated
as to amount on the Consummation Date, a Claim or such a portion of a Claim (1)
that has been timely filed with the Clerk of the Court or such other party as
the Court may direct (or may have directed) and which has not been objected to
or which is listed by the Debtors as not contingent, unliquidated or disputed in
the Schedules, in each case within such time as may be prescribed by the
Bankruptcy Rules promulgated
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<PAGE>
by the Supreme Court of the United States which became effective on August 1,
1983, as heretofore or hereafter amended, or by a Final Order of the Court or
(2) that has been allowed by a Final Order of the Court;
6.2. With respect to a Claim or that portion of a Claim (other than a Claim
for contribution or indemnity which constitutes an AH Claim or Property Claim)
that is disputed, unliquidated as to amount or contingent on the Consummation
Date, a Claim or such portion of a Claim (1) that has been timely filed with the
Clerk of the Court or such other party as the Court may direct (or may have
directed) pursuant to a Final Order of the Court and (2)(a) has been liquidated
and fixed as to amount in accordance with the terms of the Trust Agreement or
the PD Trust Agreement, as the case may be, or (b) with respect to Claims or
portions of Claims other than AH Claims and Property Claims, has been allowed by
a Final Order of the Court; or
6.3. With respect to a Claim for contribution or indemnity which constitutes
an AH Claim or Property Claim and that is disputed, unliquidated as to amount or
contingent on the Consummation Date, a Claim which has been allowed and the
amount of which has been determined (1) if a Contribution Claim or an Indemnity
Claim, in accordance with the Co-Defendants Procedures, (2) if a Property Claim,
in accordance with the terms of the PD Trust Agreement and (3) otherwise, by a
Final Order of the Court or by a binding settlement agreement.
AMENDED AND RESTATED PD SUPPLEMENTAL AGREEMENT means the agreement dated as
of November 15, 1990, among the Company, the Trust and the PD Trust, as the same
may be amended from time to time in accordance with Section 6.02 thereof.
ANNUAL BOND CONTINGENT AMOUNT with respect to any Fiscal Year commencing
with Fiscal Year 2000 means (a) the aggregate dollar amount of Trust Claims
which became Liquidated during such Fiscal Year (whether or not actually paid
during such Fiscal Year) and all Trust Expenses other than Insurance
Indemnification Expenses paid by the Trust during such Fiscal Year plus (b) the
Bond Carryforward, if any, from the Prior Fiscal Year.
ANNUAL CONTINGENT AMOUNT means, for each Fiscal Year commencing with Fiscal
Year 1991 (i) the aggregate amount of Trust Claims which became Liquidated
during such Fiscal Year (whether or not actually paid during such Fiscal Year)
and all Trust Expenses, other than Insurance Indemnification Expenses, paid by
the Trust during such Fiscal Year plus (ii) the Carryforward, if any, from the
prior Fiscal Year minus (iii) (x) the amount, if any, required to be paid in
such Fiscal Year under the Second Bond and (y) with respect to Fiscal Year 1991
through Fiscal Year 2014 the Aggregate Value of the Trust Estate as of the end
of such Fiscal Year, divided by the number of Fiscal Years, if any, remaining
from the beginning of such Fiscal Year until the end of Fiscal Year 2014 (e.g.,
24 with respect to Fiscal Year 1991; one with respect to the Fiscal Year 2014).
ANNUAL PD BOND CONTINGENT AMOUNT with respect to any Fiscal Year commencing
with the later of 2000 or the Fiscal Year immediately prior to the First PD
Fiscal Year means (a) the aggregate dollar amount of Property Claims which
became Liquidated during such Fiscal Year (whether or not actually paid during
such Fiscal Year) and all PD Trust Expenses paid by the PD Trust during such
Fiscal Year plus (b) the PD Bond Carryforward, if any, from the prior Fiscal
Year.
ANNUAL PD CONTINGENT AMOUNT means, for each Fiscal Year commencing with
Fiscal Year 1991, (i) the aggregate amount of Property Claims which became
Liquidated during such Fiscal Year (whether or not actually paid during such
Fiscal Year) and all PD Trust Expenses paid by the PD Trust during such Fiscal
Year (less the amount of any payments to the PD Trust pursuant to Section 2.07
of the PD Supplemental Agreement) plus (ii) the PD Carryforward, if any, from
the prior Fiscal Year minus (iii) (x) the amount, if any, required to be paid to
the PD Trust in such Fiscal Year under the Second Bond and (y) with respect to
Fiscal Year 1991 through Fiscal Year 2014, the Aggregate Value of the PD Trust
Estate as of the end of such Fiscal Year, divided by the number of Fiscal Years,
if any, remaining from the beginning of such Fiscal Year until the end of Fiscal
Year 2014 (e.g., 24 with respect to Fiscal Year 1991; one with respect to the
Fiscal Year 2014).
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ASBESTOS COMMITTEE means the "Official Committee of Asbestos-Health Related
Litigants and/or Creditors" appointed in the Cases by the Acting United States
Trustee for the Southern District of New York pursuant to an Order of the Court
dated October 8, 1982, as amended.
BASIC PD TRUST FUND has the meaning assigned to it in Section 4.01 of the PD
Trust Agreement.
BASIC TRUST FUND has the meaning assigned to it in Section 4.01 of the Trust
Agreement.
BENEFICIARY means any Person holding a Trust Claim.
BOND CARRYFORWARD from any Fiscal Year commencing with Fiscal Year 2000
means the excess, if any, of the Annual Bond Contingent Amount for such Fiscal
Year (including the component thereof representing the Bond Carryforward from
the prior Fiscal Year) over the aggregate amount actually paid by the Company in
such Fiscal Year pursuant to Subsection 2.03(a) of the Supplemental Agreement as
in effect prior to , 199 , and the Second Bond, as the case may
be.
BONDS REPURCHASE AGREEMENT means the Bonds Repurchase Agreement dated
September 22, 1994 between the Company and the Trust, as amended from time to
time in accordance with the terms thereof.
BUSINESS DAY means any day except a Saturday, Sunday or other day on which
commercial banks in New York, New York are authorized or required by law to
close.
BYLAWS means the Bylaws of the Trust, substantially in the form of Annex A
to the Trust Agreement, as they may be amended from time to time.
CANADIAN COMPANIES means Johns-Manville Canada, Inc. and Johns-Manville
Amiante Canada, Inc.
CARRYFORWARD from any Fiscal Year commencing with Fiscal Year 1991 means the
excess, if any, of the Annual Contingent Amount for such Fiscal Year (including
the component thereof representing the Carryforward from the prior Fiscal Year)
over the amount actually paid by the Company with respect to such Fiscal Year
pursuant to Subsection 2.03(a) of the Supplemental Agreement as in effect prior
to , 199 .
CASES means the reorganization cases under Chapter 11 of the Code of the
Debtors, collectively, jointly administered pursuant to order of the Court dated
August 26, 1982 and presently captioned "In re Johns-Manville Corporation, ET
AL., Debtors" (Case Nos. 82 B 11656 through 82 B 11658, inclusive, 82 B 11660
through 82 B 11662, inclusive, and 82 B 11665 through 11676, inclusive).
CASH SETTLEMENT PROCEEDS means any and all amounts payable by the Settling
Insurance Company under any Settlement Agreement, other than amounts payable
pursuant to coverage in place provisions contained in such Settlement Agreement,
I.E. on the claims as made or expenses as incurred basis, and includes cash,
cash proceeds pursuant to a letter of credit or other security device or other
cash equivalent.
CHARTER means the Company's Restated Certificate of Incorporation as the
same may be amended from time to time in accordance with the provisions thereof
and the General Corporation Law of the State of Delaware.
CLAIM means a claim against one or more of the Debtors within the meaning of
Section 101(4) of the Code that arose prior to the Confirmation Date, excluding
current commercial payables incurred in the ordinary course of business existing
on the Confirmation Date.
CLAIMS RESOLUTION FACILITY means the Claims Resolution Facility set forth in
Annex B to the Trust Agreement.
CLASS ACTION LAWSUIT means an action to be commenced in United States
District Court, on behalf of all present and future beneficiaries of the Trust,
against each of the Trustees of the Trust, in their capacity as Trustees,
seeking an equitable distribution of the assets of the Trust among all the
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beneficiaries of the Trust and seeking entry of an order determining that the
present and anticipated liabilities of the Trust to its beneficiaries exceed the
present and expected future assets of the Trust, and declaring the
beneficiaries' rights and priorities with respect to those assets, and in which
certification as a class action on behalf of all beneficiaries of the Trust (who
shall be deemed members of the class with no right to opt out of the class) will
be sought pursuant to Rule 23(b)(1)(B) of the Federal Rules of Civil Procedure
and in respect of which, the Limited Fund Proceeding, the Trust is seeking a
determination, INTER ALIA, as to whether the Trust constitutes a limited fund
for purposes of Rule 23(b)(1)(B) of the Federal Rules of Civil Procedure.
CLASS 6 INDENTURE means the indenture dated as of the Consummation Date
between Manville and the trustee thereunder, substantially in the form of
Exhibit E to the Plan (subject to reasonable modifications requested by the
trustee thereunder that do not adversely affect any other party thereto, the
holders of the Class 6 Notes, the Trust or the PD Trust), as it may be modified
or amended from time to time.
CLASS 6 INTEREST DEBENTURES means the debentures evidencing indebtedness of
the Debtors to the holders of Class 6 Claims issued from time to time on or
after the Consummation Date in accordance with the Provisions of Subparagraph
3.6.B of the Plan, which are more fully described in the Class 6 Interest
Indenture.
CLASS 6 INTEREST INDENTURE means the indenture dated as of the Consummation
Date between Manville and the trustee thereunder, substantially in the form of
Exhibit G to the Plan (subject to reasonable modifications requested by the
trustee thereunder that do not adversely affect any other party thereto, the
holders of the Class 6 Interest Debentures, the Trust or the PD Trust), as it
may be modified or amended from time to time.
CLASS 6 NOTES means the notes evidencing indebtedness of the Debtors to the
holders of Class 6 Claims issued from time to time on or after the Consummation
Date in accordance with the provisions of Paragraph 3.6.B of the Plan, which are
more fully described in the Class 6 Indenture.
CODE means the Bankruptcy Code, 11 U.S.C. SectionSection101 et seq., as in
effect on the Filing Date, as it has been or may be amended from time to time to
the extent such amendments are applicable to the Cases.
CO-DEFENDANT means the holder of an Indemnity Claim or a Contribution Claim.
CO-DEFENDANTS' COMMITTEE means the "Official Committee of Asbestos
Litigation Co-Defendants" appointed in the Cases by the Acting United States
Trustee for the Southern District of New York pursuant to an order of the Court
dated March 19, 1984, as amended.
CO-DEFENDANTS' PROCEDURES means the procedures set forth in Annex F to the
Trust Agreement, as the same may be amended from time to time.
COMMISSION means the Securities and Exchange Commission.
COMPANY means Manville Corporation, a Delaware corporation.
COMPARABLE INDUSTRIES INDEX for any Fiscal Year means the sum, determined as
of April 15 of the following Fiscal Year, of (a) the average Return on Equity
for the most recently completed fiscal year for which audited financial
statements are publicly available of the five largest companies (based on net
sales) included in Standard & Poor's Index of Building Materials Companies
multiplied by a fraction, the numerator of which is the net sales of the Company
and its Subsidiaries or such Fiscal Year attributable to its building materials
businesses and the denominator of which is the aggregate net sales of the
Company and its Subsidiaries for such Fiscal Year attributable to its building
materials businesses and its forest products businesses and (b) the average
Return on Equity for the most recently completed fiscal year for which audited
financial statements are publicly available of the five largest companies (based
on net sales) included in Standard & Poor's Index of Forest Products Companies
multiplied by a fraction the numerator of which is the net sales of the Company
for such
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<PAGE>
Fiscal Year attributable to its forest products businesses and the denominator
of which is the aggregate net sales of the Company and its Subsidiaries for such
Fiscal Year attributable to its forest products businesses and its building
materials businesses.
CONFIRMATION DATE means the date on which the Confirmation Order becomes a
Final Order, unless, under mandatory provisions of law and as determined by a
Final Order of the Court, the Confirmation Date is required to be the date of
issuance of the Confirmation Order, in which case CONFIRMATION DATE means such
date of issuance.
CONFIRMATION ORDER means the order or orders of the Court confirming the
Plan.
CONSOLIDATED NET EARNINGS for any Fiscal Year means the Company's
consolidated net earnings (on an after tax basis) for such Fiscal Year as shown
on the audited consolidated statement of operations of the Company included in
the Form 10-K with respect to such Fiscal Year filed by the Company with the
Commission (or, if the Company is not required to file a Form 10-K with respect
to such Fiscal Year with the Commission, then as shown on the consolidated
statement of operations of the Company for such Fiscal Year prepared in
accordance with generally accepted accounting principles and examined in
accordance with generally accepted auditing standards by the Company's
independent auditors, which auditors shall be approved by the Trust and the PD
Trust (whose approval shall not be unreasonably withheld), so long as each of
them is in existence).
CONSOLIDATED NET WORTH of the Company, as of any date, means the total
stockholders' equity of the Company as of such date determined on a consolidated
basis in accordance with generally accepted accounting principles, less any
items of the following types that are included in the assets of the Company and
its consolidated Subsidiaries: (a) goodwill, (b) unamortized organization or
reorganization expense, (c) unamortized debt discount and expense, (d) patents,
trademarks, trade names, copyrights, franchises and similar rights, and (e)
increases in the book value of any assets of the Company and its consolidated
Subsidiaries above the book value thereof as of the Consummation Date as a
result of any revaluation of such assets (other than any such increases
resulting from regular periodic revaluations required under generally accepted
accounting principles).
CONSUMMATION DATE means November 28, 1988.
CONSUMMATION DATE VALUE means:
(1) with respect to the Cash Settlement Proceeds payable under the Travelers
Agreement, the stated amount thereof exclusive of any interest or other
income payable thereon;
(2) with respect to any other Cash Settlement Proceeds payable, and Non-Cash
Settlement Proceeds received other than pursuant to a Settlement
Agreement, on or before the date six months after the Consummation Date,
the stated amount thereof inclusive of any interest or other income
payable thereon under the terms of the applicable Settlement Agreement up
to the Consummation Date;
(3) with respect to any Cash Settlement Proceeds payable, and Non-Cash
Settlement Proceeds received other than pursuant to a Settlement
Agreement, more than six months following the Consummation Date, the
present value calculated by discounting the stated amount thereof from
the scheduled payment date (or date of receipt in the case of such
Non-Cash Settlement Proceeds) to the date six months after the
Consummation Date using an interest rate of 8.2% per annum; and
(4) with respect to any amount payable pursuant to coverage in place
provisions contained in a Settlement Agreement, the present value
calculated by discounting the stated amount thereof from the date 18
months after the Consummation Date to the Consummation Date using an
interest rate of 8.2% per annum;
PROVIDED, HOWEVER, that no Consummation Date Value shall be assigned to any Cash
Settlement Proceeds or amount payable pursuant to coverage in place provisions
which is payable by a Settling
A-A-A-6
<PAGE>
Insurance Company whose rating by Best's Insurance Reports shall be lower than
"A" for any reason, unless such payment is secured by an irrevocable letter of
credit or comparable security arrangement acceptable to the trust and the PD
Trust, PROVIDED FURTHER that, notwithstanding the foregoing, the Consummation
Date Value ascribed to the Midland Coverage at any date shall be equal to the
amount, if any, of Insurance Proceeds and/or PD Insurance Proceeds paid under
the Midland Coverage on or before such date discounted in the same manner as
provided in (c) if paid more than six months following the Consummation Date,
unless the Company, the Asbestos Committee, certain representatives of the PD
Beneficiaries and the Legal Representative agree on another Consummation Date
Value to be ascribed thereto solely for the purpose of meeting the condition set
forth in Paragraph 9.2.D of the Plan and PROVIDED FURTHER that if the condition
set forth in Paragraph 9.2.D of the Plan will not otherwise be met, the Company
may elect to pay an amount in cash equal to the shortfall to the Trust on the
Consummation Date, the amount of which payment will be deemed to be Consummation
Date Value for the purpose of meeting such condition.
CONTRIBUTION CLAIM means an AH Claim or Other Asbestos Obligation for
contribution, as that term is defined by the non-bankruptcy law of the relevant
jurisdiction, that is (i) held by (A) any Person (other than a past or present
officer, director or employee of any of the Debtors) who has been, is or may be
a defendant in an action seeking damages for asbestos-related personal injury,
or (B) any assignee or transferee of such Person and (ii) is asserted against
any of the Debtors or the Trust for reimbursement of a portion of any damages
such Person has paid or may pay to the plaintiff in such action.
COURT means the United States Bankruptcy Court for the Southern District of
New York (or such other court as may be administering the Cases) and, with
respect to any particular proceeding within a Case, any other court which may be
exercising jurisdiction over such proceeding.
DEBT means (a) all indebtedness for the repayment of money borrowed, whether
or not represented by bonds, debentures, notes or other securities, (b) all
other indebtedness represented by bonds, debentures, notes or other securities
(including the Schuller Notes transferred to the Trust in payment of certain
bond obligations (whether or not still held by the Trust) and the Second Bond),
(c) all deferred indebtedness for the payment of the purchase price of property
or assets purchased, (d) all Guarantees, endorsements, assumptions and other
contingent obligations in respect of, or to purchase or otherwise to acquire,
indebtedness of another Person (other than Guarantees of the Company's or any of
its Subsidiaries' indebtedness to a third party), (e) all indebtedness secured
by an encumbrance existing on property owned by the Person whose indebtedness is
being determined, whether or not the indebtedness secured thereby shall have
been assumed by such Person and (f) all obligations under capital leases
required to be recorded on the Company's consolidated financial statements in
accordance with generally accepted accounting principles.
A-A-A-7
<PAGE>
DEBTORS means the following corporations, each of which filed a petition for
reorganization under Chapter 11 of the Code with the Court on the Filing Date
and includes such corporations as reorganized after Consummation as well as
prior thereto:
<TABLE>
<S> <C>
Johns-Manville Corporation
Manville Corporation
Manville International Corporation
Manville Export Corporation
Johns-Manville International Corporation
Manville Sales Corporation (f/k/a Johns-Manville Sales Corporation,
successor by merger to Manville Building Materials Corporation, Manville
Products Corporation and Manville Service Corporation)
Manville International Canada, Inc.
Manville Canada, Inc.
Manville Investment Corporation
Manville Properties Corporation
Allan-Deane Corporation
Ken-Caryl Ranch Corporation
Johns-Manville Idaho, Inc.
Manville Canada Service, Inc.
Sunbelt Contractors Inc.
</TABLE>
DEFAULT, as used with respect to the Second Bond, means the occurrence and
continuance of an Event of Default or an event that, after notice or lapse of
time or both, would become an Event of Default.
DEFERRED AMOUNT, during 2014, shall mean the excess, if any, of $75,000,000
over the aggregate amount paid to the Trust and the PD Trust during 2013
pursuant to Section 2.1 of the Second Bond.
DESIGNATED DEBT means the Second Bond.
DISPUTED CLASS 6 CLAIM means a Class 6 Claim or any portion thereof which,
as of the Consummation Date or any date subsequent thereto, is not Allowed.
DISTRIBUTION RECORD DATE means the tenth Business Day preceding the
Consummation Date.
ENCUMBRANCE means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
EQUITY COMMITTEE means the "Official Committee of Equity Security Holders"
appointed in the Cases by the Acting United States Trustee for the Southern
District of New York pursuant to an order of the Court dated February 14, 1983,
as amended, which was disbanded pursuant to an order of the Court dated July 31,
1986.
EQUITY SUBSIDIARY means any Subsidiary of Manville or any other entity for
which Manville is entitled to account under principles of equity accounting and
with respect to which Manville has previously delivered to the Trust and the PD
Trust a certificate of Manville's chief financial officer stating that Manville
is entitled to use such accounting treatment.
EVENT OF DEFAULT, as used with respect to the Second Bond, has the meaning
assigned to it in Section 3.1 of the Second Bond.
EXCHANGE ACT means the Securities Exchange Act of 1934, as amended.
FILING DATE means August 26, 1982, the date on which each of the Debtors
filed a petition under Chapter 11 of the Code.
FINAL ORDER means (a) a judgment, order or other decree issued and entered
by the Court or by any state or other federal court or other tribunal located in
one of the states, territories or possessions
A-A-A-8
<PAGE>
of the United States or the District of Columbia, which judgment, order or
decree (x) has not been reversed or stayed and as to which the time to appeal
has expired and as to which no appeal or petition for review, rehearing or
certiorari is pending or (y) with respect to which any appeal has been finally
decided and no further appeal or petition for certiorari can be taken or
granted; or (b) stipulation or other agreement entered into which has the effect
of any such judgment, order or other decree.
FIRST AMENDED AND RESTATED SUPPLEMENTAL AGREEMENT means the Manville
Personal Injury Settlement Trust Amended and Restated Supplemental Agreement
dated as of November 15, 1990 between the Trust and the Company.
FIRST AMENDMENT TO THE TRUST AGREEMENT means the amendment to the Trust
Agreement dated as of February 14, 1989, between the Company, as successor to
the Trustors, and the Trustees.
FISCAL YEAR means the fiscal year of the Trust or the PD Trust or the
Company, as the case may be, which shall in each case be the calendar year.
GOVERNMENT PROCEEDS for any Fiscal Year means the net proceeds, if any,
received in such Fiscal Year by the Company or any of its Subsidiaries (or that
the Company or any such Subsidiary would have received but for any assignment or
other transfer of the proceeds thereof to another Person or any set-off by the
United States in respect of claims by the United States against the Company or
any such Subsidiary) with respect to claims made by the Company or any of its
Subsidiaries against the United States relating to claims against, or debts,
obligations or liabilities of, any of the Debtors (a) for death, personal
injuries or personal damages caused or allegedly caused, directly or indirectly,
by exposure to asbestos (alone or as contained in asbestos-containing products)
and arising or allegedly arising, directly or indirectly, from acts or omissions
prior to the Confirmation Date of one or more of the Debtors or (b) for other
damages arising or allegedly arising from the presence in buildings or other
structures of asbestos (alone or as contained in asbestos-containing products),
which was sold, supplied or produced, or allegedly sold, supplied or produced,
by one or more of the Debtors prior to the Confirmation Date, or for which one
or more of the Debtors is otherwise liable or allegedly liable due to the acts
or omissions of one or more of the Debtors prior to the Confirmation Date.
GOVERNMENTAL UNIT means any government or political subdivision or any
agency or instrumentality thereof.
GUARANTEE means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Debt of any other Person or in any
manner providing for the payment of any Debt of any other Person or otherwise
protecting the holder of such Debt against loss (by virtue of partnership
arrangements, by agreement to keep-well, to purchase assets, goods, securities
or services, or to take or pay otherwise), provided that the term Guarantee
shall not include endorsements for collection or deposit in the ordinary course
of business. The word Guarantee when used as a verb shall have a correlative
meaning.
INDEMNIFICATION LIABILITIES means (a) all liabilities of the "JM Responsible
Entity" to the "Settling Insurer" as defined in and pursuant to the Travelers
Agreement and (b) the obligation to indemnify any person who is or was a party
to any pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (including, without limitation, any action, suit
or proceeding by or in the right of the Trust, any of the Debtors, any of the
Debtors' Subsidiaries or any of the Canadian Companies) by reason of the fact
that he is or was a director, officer, employee or agent of any of the Debtors,
any of the Debtors' Subsidiaries or any of the Canadian Companies against all
expenses (including attorneys' fees and expenses), judgment, fines and amounts
paid with the Trust's consent to the fullest extent and in the manner that a
corporation organized under Delaware law is from time to time permitted to
indemnify its directors, officers, employees and agents if the Claim against
such person in such action, suit or proceeding would, if such Claim had been
made and timely filed against the Debtors or the Canadian Companies, have
constituted an AH Claim or an Other Asbestos Obligation under clause (a) of the
definition of either of such terms.
A-A-A-9
<PAGE>
INDEMNITY CLAIM means an AH Claim or Other Asbestos Obligation, whether
based in contract or tort, that is (i) held by (A) any Person (other than a past
or present officer, director or employee of any of the Debtors) who has been, is
or may be a defendant in an action seeking damages for asbestos-related personal
injury, or (B) any assignee or transferee of such Person and (ii) is asserted
against any of the Debtors or the Trust for indemnification of all damages and
costs such Person has or may suffer as a result of such action. INDEMNITY CLAIM
shall not include any Claim for Transferee Indemnification Liability.
INDEPENDENT means, when used with respect to any specified Person, a Person
who (a) is in fact independent, (b) does not have any direct financial interest
or any material indirect financial interest in the Trust, the PD Trust, the
Company or any Affiliate of the Company, and (c) is not connected with the
Company, any Affiliate of the Company, the Trust or the PD Trust as an officer,
employee, promoter, underwriter or person performing similar functions.
INDUSTRY-WIDE CLAIMS HANDLING FACILITY means an industry-wide arrangement
among subscribing insurers and subscribing past or current producers and
manufacturers of asbestos or asbestos-containing products established for the
purposes of resolving and discontinuing disputes concerning insurance coverage
for asbestos-related personal injury claims and establishing a method for the
liquidation and resolution of asbestos-related personal injury claims and the
insurance arrangements pertaining thereto. By way of example an arrangement
implementing the "Agreement Concerning Asbestos-Related Claims" dated May, 1985
known as the "Wellington Agreement" would constitute an Industry-Wide Claims
Handling Facility.
INSURANCE CARRYFORWARD from any Fiscal Year means the difference between the
Insurance Indemnification Amount for such Fiscal Year (including the component
thereof representing the Insurance Carryforward from the prior Fiscal Year) and
the amount actually paid by the Company with respect to such Fiscal Year
pursuant to Subsection 2.03(b) of the Supplemental Agreement.
INSURANCE COVERAGE means the insurance coverage, not reduced to Cash
Settlement Proceeds, available in respect of Trust Claims and/or Trust Expenses
(i) pursuant to any Settlement Agreement or (ii) under any Policy.
INSURANCE INDEMNIFICATION AMOUNT means for any Fiscal Year, (i) the
aggregate amount of all Insurance Indemnification Expenses paid by the Trust
during such Fiscal Year plus (ii) the Insurance Carryforward from the prior
Fiscal Year.
INSURANCE INDEMNIFICATION EXPENSES means those amounts paid by the Trust in
respect of liabilities of the "JM Responsible Entity" to the "Settling Insurer"
as defined in and pursuant to the Travelers Agreement.
INSURANCE PROCEEDS means (i) all Cash Settlement Proceeds paid or payable to
the Trust pursuant to Settlement Agreements and (ii) all Non-Cash Settlement
Proceeds of Insurance Coverage. Insurance Proceeds shall be deemed received by
the Trust when actually received by the Trust or when paid to another Person in
respect of a Liquidated Trust Claim or Trust Expense.
INTEREST means the rights of the owners and holders of issued and
outstanding shares of Old Preferred Stock or Old Common Stock.
INTERNAL REVENUE CODE means the Internal Revenue Code of 1986, as it may be
amended from time to time, and the regulations promulgated from time to time
thereunder.
LEGAL REPRESENTATIVE means the "Legal Representative for Future Asbestos
Health Claimants" or his successor appointed pursuant to an order of the Court
dated August 14, 1984.
LIMITED FUND PROCEEDING means the proceeding commenced by the Trust
captioned IN RE JOINT EASTERN AND SOUTHERN DISTRICT ASBESTOS LITIGATION, Index
No. 4000 (E.D.N.Y. and S.D.N.Y.), and IN RE
A-A-A-10
<PAGE>
JOHNS-MANVILLE CORPORATION, ET AL., Case Nos. 82B-11656 through 82B-11676 (BRL)
(Bankr. S.D.N.Y.), seeking a determination, INTER ALIA, as to whether the Trust
constitutes a limited fund for purposes of Rule 23(b)(1)(B) of the Federal Rules
of Civil Procedure.
LIQUIDATED AH CLAIMS means those AH Claims which, prior to the Filing Date,
were settled as to validity and amount (a) by one or more of the Trustors in
writing (by stipulation, settlement agreement or otherwise) or (b) by the order
of any court having jurisdiction with respect thereto to the extent such order
was a Final Order on the Filing Date or became a Final Order at any time
following the Filing Date, whether or not prior to the Consummation Date (to the
extent any such order is subsequently reversed by any appellate court or is
vacated by the court issuing it, the related AH Claim shall not be a LIQUIDATED
AH CLAIM).
LIQUIDATION occurs (i) with respect to any Property Claim or Trust Claim
which, as of the Consummation Date, the validity and amount thereof have been
acknowledged by one or more of the Trustors in writing (by stipulation or
settlement agreement approved by Final Order of the Court or by inclusion
thereof on schedules filed with the Court pursuant to Bankruptcy Rule 1007(b)),
on the date of such acknowledgment, (ii) with respect to any other Property
Claim or Trust Claim (other than as set forth in (iii) or (iv)), on the date on
which the validity and amount thereof is finally determined pursuant to the PD
Claims Resolution Facility or the Claims Resolution Facility, respectively,
(iii) with respect to a Claim for contribution which constitutes an AH Claim
(other than as set forth in (i) or (iv)), on the date on which the amount of
such Claim has been determined by a Final Order of the Court, (iv) with respect
to a Contribution Claim or an Indemnity Claim, on the date on which the
liability of the Co-Defendant to the plaintiff on the underlying
asbestos-related personal injury claim from which such Claim arises is finally
determined and (v) with respect to a Claim for contribution which constitutes a
Property Claim (other than as set forth in (i)), on the date on which the amount
of such Claim has been determined pursuant to the PD Trust Agreement. For
purposes of this definition, a Co-Defendant's liability to a plaintiff in an
underlying asbestos-related personal injury action is finally determined on the
date payment is made by the Co-Defendant pursuant to (a) an order of judgment of
a court of competent jurisdiction fixing the amount of damages to be paid by
such Co-Defendant to such plaintiff or (b) an acknowledgment in writing (whether
by stipulation, settlement agreement or otherwise) by such Co-Defendant and such
plaintiff of the amount of damages to be paid by such Co-Defendant to such
plaintiff in settlement of such action. The words LIQUIDATE and LIQUIDATED shall
have correlative meanings, except when used in the term LIQUIDATED AH CLAIMS.
MANVILLE COMMON STOCK means the Common Stock, $.01 par value per share, of
the Company issued under the Charter and outstanding from time to time on or
after the Consummation Date.
MARKET VALUE of any security on any date means the average of the daily
closing prices for the 20 consecutive Business Days ending on the Business Day
before the date in question. The closing price for each day shall be the last
reported sales price on the composite tape or, in case no such reported sale
takes place on such day, the average of the reported closing bid and asked
prices, in either case on the principal national securities exchange on which
such security is listed or admitted to trading or, if such security is not then
listed or admitted to trading on any national securities exchange, the average
of the closing bid and asked prices on the National Association of Securities
Dealers Automated Quotation System or, if such security is not then so quoted,
the market value of such security as determined by a nationally recognized
investment banking firm selected by the Trust or the PD Trust, as the case may
be, and reasonably acceptable to the Company.
MIDLAND COVERAGE means the Insurance Coverage and/or PD Insurance Coverage
to be provided by Midland Insurance Company under the terms of the Settlement
Agreement dated January 29, 1985 with Insurance Company of North America,
Midland Insurance Company, and Allstate Insurance Company.
MODIFICATION has the meaning assigned to it in Section 6.03 of the PD Trust
Agreement.
A-A-A-11
<PAGE>
NON-CASH SETTLEMENT PROCEEDS means any amounts payable under any Settlement
Agreement pursuant to coverage in place provisions contained in such Settlement
Agreement with respect to Trust Claims, Trust Expenses, Property Claims or PD
Trust Expenses, I.E. on a claims as made or expenses incurred basis, and any
other proceeds of Insurance Coverage or PD Insurance Coverage, as the case may
be, payable other than pursuant to a Settlement Agreement (E.G., pursuant to the
Policy itself or pursuant to a court order or decree in respect of the Policy).
OFFICIAL COMMITTEES means the Asbestos Committee, the Unsecured Creditors'
Committee and the Co-Defendants Committee, collectively.
OTHER AGREEMENTS means the Supplemental Agreement, the Bonds Repurchase
Agreement and the Trust Agreement.
OTHER ASBESTOS OBLIGATIONS means (a) all debts, obligations or liabilities
(under any theory of law, equity or admiralty), other than AH Claims, for death,
personal injuries or personal damages (whether physical, emotional or otherwise)
to the extent caused or allegedly caused, directly or indirectly, by exposure to
asbestos (alone or as contained in asbestos-containing products) and arising or
allegedly arising, directly or indirectly, from acts or omissions prior to the
Confirmation Date of one or more of the Debtors including, without limitation,
all obligations or liabilities for compensatory damages (such as loss of
consortium, wrongful death, survivorship, proximate, consequential, general and
special damages) and punitive damages and (b) all warranty, guarantee,
indemnification or contribution liabilities or obligations, if any, of any of
the Debtors to any other Person to the extent that such warranties, guarantees,
indemnifications or contribution responsibilities cover claims against such
other Person that would, if such claims had been made directly against any of
the Debtors, constitute Other Asbestos Obligations under Clause (a) above.
OUTSTANDING AMOUNT OF ANY DEBT at any time means the principal amount
outstanding of such Debt at such time, unless such Debt was issued at a
discount, in which case the OUTSTANDING AMOUNT of such Debt means the original
issue price of such Debt plus the accretion to such time of the original issue
discount and less all payments of principal on the Debt to such time, or unless
such Debt is represented by any debt instrument issued at a discount under the
Plan, the Supplemental Agreement or the PD Supplemental Agreement in which case
the OUTSTANDING AMOUNT of such Debt means the carrying amount of the Debt at
issuance (the difference between the principal amount and the original issue
discount reflected on the audited financial statements of the Company) plus the
accretion to such time of the original issue discount and less all payments of
principal on the Debt to such time.
PAYMENT DATE means August 31 and November 30 in each year.
PD BENEFICIARY means any Person holding a Property Claim.
PD BOND CARRYFORWARD from any Fiscal Year commencing with 2000 means the
excess, if any, of the Annual PD Bond Contingent Amount for such Fiscal Year
(including the component thereof representing the PD Bond Carryforward from the
prior Fiscal Year) over the aggregate amount actually paid by the Company with
respect to such Fiscal Year pursuant to Sections 2.02 and 2.07 of the PD
Supplemental Agreement or Section 2 of the Second Bond.
PD BYLAWS means the Bylaws of the PD Trust, substantially in the form of
Annex A to the PD Trust Agreement, as the same may be amended from time to time.
PD CARRYFORWARD from any Fiscal Year commencing with Fiscal Year 1991 means
the excess, if any, of the Annual PD Contingent Amount for such Fiscal Year
(including the component thereof representing the PD Carryforward from the prior
Fiscal Year) over the amount actually paid by the Company with respect to such
Fiscal Year pursuant to Section 2.02 of the PD Supplemental Agreement.
PD CLAIMS RESOLUTION FACILITY means the PD Claims Resolution Facility set
forth in Annex B to the PD Trust Agreement; it being understood that the PD
Trustees, by a majority vote after consultation with the Company, representative
counsel for the PD Beneficiaries selected by the PD Trustees
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<PAGE>
and any other interested parties whom the PD Trustees desire to consult, may
amend, delete or add to any of the procedural provisions with respect to the
operation of the PD Claims Resolution Facility except for Modifications,
provided that no such amendment, deletion or addition may affect any of the
substantive provisions set forth in such Annex B, including, without limitation,
the provisions relating to the standards and methods of asbestos hazard
abatement and the percentage of abatement costs to be borne by the PD Trust, and
PD CLAIMS RESOLUTION FACILITY shall thereafter mean the PD Claims Resolution
Facility as so amended, deleted from or added to.
PD DEFERRED AMOUNT at any time means the Deferred Amount at the Termination
Date, if earlier than the maturity of the Second Bond PROVIDED that, if the
Trust terminates on or prior to December 31, 2013, the PD Deferred Amount during
2014 shall mean the excess, if any, of $75,000,000 over the amount paid to the
Trust and the PD Trust during 2013 pursuant to Section 2.1 of the Second Bond.
PD INSURANCE COVERAGE means insurance coverage, not reduced to Cash
Settlement Proceeds, available in respect of Property Claims and/or PD Trust
Expenses (i) pursuant to any Settlement Agreement or (ii) under any Policy.
PD INSURANCE PROCEEDS means (i) all Cash Settlement Proceeds paid or payable
to the PD Trust pursuant to Settlement Agreements and (ii) all Non-Cash
Settlement Proceeds of PD Insurance Coverage. PD Insurance Proceeds shall be
deemed received by the PD Trust when actually received by the PD Trust or when
paid to another Person in respect of a Liquidated Property Claim or a PD Trust
Expense.
PD STOCK PROCEEDS FUND has the meaning assigned to it in Section 4.01 of the
PD Trust Agreement.
PD SUPPLEMENTAL AGREEMENT means the agreement dated as at the Consummation
Date between the Company, the PD Trust and the Trust substantially in the form
of Annex C to the PD Trust Agreement, as the same may be amended from time to
time in accordance with Section 6.02 thereof.
PD TERMINATION DATE has the meaning assigned to it in Section 6.02 of the PD
Trust Agreement.
PD TRANSFER AMOUNT and PD TRANSFER DISTRIBUTION have the meanings assigned
to them in Subsection 4.02(n) of the PD Supplemental Agreement.
PD TRUST means the Manville Property Damage Settlement Trust established
pursuant to Article II of the PD Trust Agreement.
PD TRUST AGREEMENT means the trust agreement between the Debtors and the PD
Trustees dated as at the Consummation Date substantially in the form of Exhibit
D to the Plan, as it may be amended or modified from time to time in accordance
with Section 6.03 thereof.
PD TRUST ASSETS means the assets of the PD Trust as more fully described in
Article II of the PD Trust Agreement.
PD TRUST ESTATE at any time means all assets of the PD Trust at such time.
PD TRUST EXPENSES means all expenses of the PD Trust determined on a cash
basis (including, without limitation, compensation, legal, accounting and other
professional fees, expenses relating to the operation of the PD Claims
Resolution Facility, disbursements and related expenses, corporate overhead and
reimbursement and indemnification payments) other than payments in respect of
Property Claims.
PD TRUSTEES means the Persons approved by the Court to act as trustees under
the PD Trust Agreement and their successors pursuant to Article V thereof.
PERSON, except when used in the Plan, means any individual, corporation,
partnership, joint venture, association, trust, unincorporated organization or
government or any agency or political subdivision thereof.
A-A-A-13
<PAGE>
PLAN means the Debtors' "Second Amended and Restated Plan of
Reorganization," as it may be amended or modified from time to time, which shall
be deemed to amend, modify and supersede in all respects the Debtors' "Joint
Plan of Reorganization" dated October 17, 1983 and filed with the Clerk of the
Court on November 21, 1983 and the Debtors' "First Amended and Restated Plan of
Reorganization" dated February 14, 1986 and filed with the Clerk of the Court on
February 14, 1986.
POLICY means any insurance policy covering any of the Debtors or any
predecessor thereto in effect at or prior to the Consummation Date under which
any claim may be made in respect of any AH Claim, Other Asbestos Obligation or
Property Claim, including, without limitation, any insurance policy listed in
Schedule II to the Plan and any other insurance policy which is at the
Consummation Date the subject of a Settlement Agreement listed on Schedule III
to the Plan if such Settlement Agreement subsequently terminates.
POSTPETITION INTEREST RATE means with respect to an Allowed Class 6 Claim
and at any time (i) the pre-default contractual interest rate applicable at the
Filing Date as provided for under the instrument or agreement giving rise to
such Allowed Class 6 Claim, or (ii) in the absence of any such contractual
interest rate, the rate of 9% per annum.
POSTPETITION INTEREST RATIO means with respect to an Allowed Class 6 Claim
the ratio obtained by dividing (i) the amount of interest on the amount of such
Allowed Class 6 Claim from the Filing Date to the Consummation Date, by (ii) the
aggregate amount of interest from the Filing Date to the Consummation Date on
all Allowed Class 6 Claims (other than Allowed Class 6 Claims paid in accordance
with Paragraph 3.6.A of the Plan), such amounts and aggregate amounts of
interest calculated in each case using the applicable Postpetition Interest
Rate; PROVIDED, that (w) if such Allowed Class 6 Claim (or any Allowed portion
thereof) was contingent or unliquidated as of the Filing Date and became fixed
or liquidated, as the case may be, after the Filing Date but before the
Consummation Date, the amount of interest shall be calculated on such claim (or
Allowed portion thereof) from the date such claim (or portion thereof) became
fixed or liquidated to the Consummation Date, (x) if such Allowed Class 6 Claim
(or any Allowed portion thereof) was contingent or unliquidated as of the Filing
Date and did not become fixed or liquidated, as the case may be, before the
Consummation Date, the amount of interest with respect to such Claim (or Allowed
portion thereof) shall be zero (y) any Allowed Class 6 Claim (or any Allowed
portion thereof) which is solely a Claim for damages shall be deemed to be
unliquidated for purposes of Clauses (w) and (x) hereof, and (z) with respect to
any Class 6 Claim (or any portion thereof) which is a Disputed Class 6 Claim as
of the Consummation Date, the amount of interest with respect to such Claim
shall be zero.
PROFITS for any Fiscal Year means the Company's Adjusted Consolidated Net
Earnings for such Fiscal Year (less dividends declared (unless not thereafter
paid) on Financing Preferred Stock in such Fiscal Year, PROVIDED that for
purposes only of the Supplemental Agreement, dividends on Financing Preferred
Stock shall only be deducted to the extent that the sum of such dividends plus
dividends declared (unless not thereafter paid) on Series B Preference Stock
exceeds $25 million in such Fiscal Year) adjusted (without double counting) by
not giving effect to (a) any profit or loss on any sales or other dispositions
of assets of the Company or any of its consolidated Subsidiaries (including
securities of any Subsidiary of the Company but not including any other
securities) not in the ordinary course of business or writedowns for
discontinuance of operations of any portion of the Company or any of its
consolidated Subsidiaries, (b) any accruals or payments required in connection
with the Company's obligations to the PD Trust under the PD Supplemental
Agreement, or the Second Bond or to the Trust under the Supplemental Agreement,
the Bonds Repurchase Agreement, the Second Bond, except to the extent that
accruals under the Bonds Repurchase Agreement or payments of principal under the
Second Bond are treated as interest expense when determining net earnings under
generally accepted accounting principles, (c) any reserves or other
contingencies with respect to asbestos related personal injury or property
damage claims other than reserves or contingencies resulting from annual
accruals with respect to workers' compensation performed on a basis consistent
with the Company's past practice, (d) any amortization of goodwill, (e)
Government Proceeds and (f) any payments, accruals or accretions with respect to
the Class 6 Interest Debentures.
A-A-A-14
<PAGE>
Property Claims means (a) all Claims timely filed in accordance with the
order of the Court issued on October 17, 1984, as amended and clarified by the
Court, against one or more of the Debtors (under any theory of law, equity or
admiralty), other than AH Claims and other Claims for death, personal injuries
or personal damages, for damages arising or allegedly arising from the presence
in buildings or other structures of asbestos (alone or as contained in
asbestos-containing products), which was sold, supplied or produced, or
allegedly sold, supplied or produced, by one or more of the Debtors prior to the
Confirmation Date, or for which one or more of the Debtors is otherwise liable
or allegedly liable due to the acts or omissions of one or more of the Debtors
prior to the Confirmation Date, including, without limitation, all Claims for
compensatory damages (such as proximate, consequential, general and special
damages) and punitive damages, (b) all Claims timely filed in accordance with
the order of the Court issued on October 17, 1984, as amended and clarified by
the Court, or in accordance with any subsequent applicable order of the Court,
against one or more of the Debtors in respect of warranty, guarantee,
indemnification or contribution liabilities or obligations of any of the Debtors
to any other Person to the extent that such warranties, guarantees,
indemnifications or contribution responsibilities cover claims against such
other Person that would, if such claims had been made directly against any of
the Debtors, constitute Property Claims under Clause (a) above and (c) all
Claims timely filed against one or more of the Canadian Companies where such
Claims, if made and timely filed against one or more of the Debtors instead,
would constitute Property Claims under Clause (a) or (b) above. Where the
context requires, PROPERTY CLAIMS shall also mean claims in respect of Property
Claims filed with the PD Claims Resolution Facility in accordance with the
provisions thereof.
REAFFIRMATION ORDER means an order of the Court (a) reaffirming the
injunctive provisions (PARA29) of the Confirmation Order and (b) declaring that
those injunctive provisions are not subject to revocation or modification
thereafter.
RELATED PARTY of any attorney means any other attorney who is or was a
partner of such attorney, or is or was a shareholder in a professional
corporation in which such attorney is or was also a shareholder.
RETURN ON EQUITY means, for any company for any year, the percentage
determined by dividing (a) the consolidated net income of such company for such
year, before extraordinary items and discontinued operations and after taxes and
less the amount of any preferred dividends paid during such year, by (b) the
average of the common stockholders' equity of such company at the end of such
year and at the end of the preceding year.
SCHEDULES means the schedules heretofore filed by the Debtors with the Clerk
of the Court pursuant to Bankruptcy Rule 1007, as they have been or may be
amended from time to time.
SCHULLER NOTES means the Senior Notes due 2004 of Schuller International
Group, Inc. (or any successor obligor under such notes) transferred by the
Company to the Trust pursuant to the Bonds Repurchase Agreement.
SECOND AMENDED AND RESTATED SUPPLEMENTAL AGREEMENT means the Second Amended
and Restated Supplemental Agreement dated as of , 199 , between
the Company and the Trust, as the same may be amended from time to time in
accordance with Section 6.02 thereof.
SECOND AMENDMENT TO THE TRUST AGREEMENT means the amendment to the Trust
Agreement dated as of November 15, 1990, between the Company, as successor to
the Trustors, and the Trustees.
SECOND BOND means the Manville Settlement Trusts Second Bond Due March 31,
2015, issued by the Company to the Trust and the PD Trust pursuant to Paragraph
4.1 of the Plan and substantially in the form of Annex E to the Trust Agreement,
as it may be amended from time to time.
SECURITIES ACT means the Securities Act of 1933, as amended.
A-A-A-15
<PAGE>
SELECTED COUNSEL FOR THE BENEFICIARIES means three lawyers to be designated
from time to time in a writing addressed to the Trustees with a copy to the
Company by the Board of Trustees of the Asbestos Litigation Group.
SELECTED REPRESENTATIVES FOR THE PD BENEFICIARIES means five (5) individuals
to be designated from time to time (in a writing addressed to the Company and to
the PD Trustees) as follows: one (1) Person selected by each of the National
Association of Attorneys General, National Association of School Boards,
American Hospital Association, National Association of College and University
Business Officers and National Institute of Municipal Law Officers, or their
respective successor organizations.
SERIES B PREFERENCE STOCK means the Cumulative Preference Stock, Series B,
par value $1.00 per share, of the Company.
SETTLEMENT AGREEMENT means (i) each settlement agreement listed in Schedule
III to the Plan and (ii) any other settlement agreement with respect to any
Policy or relating to claims against any insurance broker.
SETTLEMENT ORDER means an order of settlement that the class representatives
and the Trustees in the Class Action Lawsuit will propose and request the entry
of (after notice to all class members and a hearing) by the Court, which order
will (i) approve the actions of the Trustees in causing the Trust to commence
the Limited Fund Proceeding, (ii) approve the settlement of the Class Action
Lawsuit on terms and conditions satisfactory to the class representatives and
the Trustees, (iii) authorize and approve the execution, delivery and
performance by the Trustees and the Trust of a master agreement in the form
agreed to between the Company and the Trust and the agreements and actions
contemplated therein and of all documents and agreements necessary to effectuate
the settlement of the Class Action Lawsuit, (iv) direct the class
representatives to execute on behalf of themselves and all class members and to
deliver to the Trustees and the Company unconditional releases of the Company
and its former, present and future affiliates and successors and cognate
covenants not to sue in form and substance reasonably satisfactory to the
Company, (v) enjoin all class members from commencing or maintaining any action
or proceeding based on asbestos claims against the Trust, except as provided in
the Settlement Order, or against the Company or its former, present or future
affiliates or successors and (vi) reaffirm the injunctive provisions (PARA29) of
the Confirmation Order.
SETTLING INSURANCE COMPANY means any insurance company or insurance broker
which has entered into, or subsequently enters into, a Settlement Agreement.
SPECIAL FUND TRUST means the trust established pursuant to the Asbestos
Victims Special Fund Trust Agreement dated as of February 6, 1986 among Stanley
J. Levy, Frederick M. Baron, Thomas W. Henderson, Gene Locks and Ronald L.
Motley as trustors and as trustees, a copy of which is attached to the Plan as
Exhibit I. It is understood that the Trustees will be added as additional
trustees of the Special Fund Trust to serve effective as of the Consummation
Date.
STOCK PROCEEDS FUND has the meaning assigned to it in Section 4.01 of the
Trust Agreement.
SUPPLEMENTAL AGREEMENT means the Manville Personal Injury Settlement Trust
Supplemental Agreement dated as of November 28, 1988 between the Company and the
Trust, with respect to the period from November 28, 1988 to and November 14,
1990 (inclusive); the First Amended and Restated Supplemental Agreement, with
respect to the period from November 15, 1990 to 2, and from
and after *, the Second Amended and Restated Supplemental
Agreement, as the same may thereafter be amended, modified, or amended and
restated by the parties in accordance with the terms thereof.
- ------------------------
2 Effective date of Second Amended and Restated Supplemental Agreement to be
inserted.
A-A-A-16
<PAGE>
SUBSIDIARY means with respect to any Person any corporation or other entity
of which securities or other ownership interest having ordinary voting power to
elect a majority of the board of directors or other Persons performing similar
functions are at the time directly or indirectly owned by such Person.
TENDER OFFER means an offer to acquire shares of Manville Common Stock with
respect to which a Schedule 14D-1 is required to be filed with the Commission
pursuant to Rule 14d-3 under the Exchange Act.
TERMINATION DATE has the meaning assigned to it in Section 6.02 of the Trust
Agreement.
TRANSFER means, with respect to any share of Manville Common Stock, any
sale, transfer, assignment or exchange of, or pledge or other hypothecation of
or imposition of an Encumbrance on, or granting of an option to purchase with
respect to, or any donation or gifting of, or any other disposition of any type
whatsoever of any record or beneficial interest in such shares of Manville
Common Stock. The words TRANSFER when used as a verb and TRANSFEREE shall have
correlative meanings.
TRANSFEREE INDEMNIFICATION LIABILITY means a Claim arising from the sale
following the Filing Date of any of the Debtors' businesses that is asserted by
the purchaser of any of such businesses.
TRAVELERS AGREEMENT means the settlement agreement dated July 18, 1984, with
Travelers Insurance Co., Home Insurance Co. and the Lloyd's Syndicates and
British Companies named therein, providing for $314,415,000 in cash, plus
accrued interest thereon.
TRUST means the Manville Personal Injury Settlement Trust established
pursuant to Article II of the Trust Agreement.
TRUST AGREEMENT means the Manville Personal Injury Settlement Trust
Agreement between the Debtors and the Trustees dated as at the Consummation
Date, as it may be amended or modified from time to time in accordance with
Section 6.03 thereof.
TRUST ASSETS means the assets of the Trust as more fully described in
Article II of the Trust Agreement.
TRUST CLAIM means any claim asserting Trust Liabilities to a Beneficiary.
TRUST ESTATE at any time means all assets of the Trust at such time.
TRUST EXPENSES means all expenses of the Trust determined on a cash basis
(including, without limitation, compensation, legal, accounting and other
professional fees, expenses relating to the operation of the Claims Resolution
Facility, disbursements and related expenses, corporate overhead and
reimbursement and indemnification payments) other than payments in respect of
Trust Claims.
TRUST LIABILITIES means all Other Asbestos Obligations and Allowed AH
Claims.
TRUSTEES means the Persons approved by the Court to act as trustees under
the Trust Agreement and their successors pursuant to Article V thereof.
TRUSTORS means the Debtors and the Canadian Companies.
UNLIQUIDATED means, with respect to any Trust Claim or Property Claim, a
Trust Claim or Property Claim as to which Liquidation has not yet occurred.
UNSECURED CREDITORS' COMMITTEE means the "Official Committee of Unsecured
Creditors" consisting of those heretofore or hereafter appointed in the Cases by
the Acting United States Trustee for the Southern District of New York.
WARRANT AGREEMENT means the agreement, dated as of the Consummation Date,
between the Company and the Warrant Agent thereunder, substantially in the form
of Exhibit C to the Plan, as it may be modified or amended from time to time.
WARRANTS means the warrants to purchase shares of Manville Common Stock
issued pursuant to the Warrant Agreement.
A-A-A-17
<PAGE>
EXHIBIT B
TO PROFIT SHARING
EXCHANGE AGREEMENT
FORM OF
NINTH3 AMENDMENT TO
MANVILLE PERSONAL INJURY
SETTLEMENT TRUST AGREEMENT
NINTH AMENDMENT, dated as of , 199 (the "Ninth Amendment") to
the Trust Agreement, dated as of November 28, 1988 by and among Johns-Manville
Corporation, Manville Corporation (the "Company"), Manville Sales Corporation,
Manville Canada Inc., Manville Investment Corporation, Ken-Caryl Ranch
Corporation and SAL Contract & Supply, Inc. as Trustors (collectively, the
"Trustors") and Donald M. Blinken, Daniel Fogel, Francis H. Hare, Jr., John C.
Sawhill (the "Former Trustees") and Christian E. Markey, Jr., as trustees for
the Manville Personal Injury Settlement Trust (the "Trust"), as amended by the
First, Second and Third Amendments to the Trust Agreement dated as of February
14, 1989, November 15, 1990, and December 6, 1991, respectively between the
Company, Mr. Markey and the Former Trustees, and as further amended by the
Fourth, Fifth, Sixth, Seventh and Eighth Amendments to the Trust Agreement dated
as of August 6, 1992, December 9, 1992, November 5, 1993, September 22, 1994,
and , 1995, respectively between the Company, Mr. Markey, Robert
A. Falise, Louis Klein, Jr., and Frank J. Macchiarola, and, in the case of the
Seventh Amendment, Charles T. Hagel, as trustees of the Trust (the Trust
Agreement and all eight prior Amendments being collectively referred to herein
as the "Trust Agreement").
WHEREAS, Section 6.03(a) of the Trust Agreement provides for the amendment
of the Trust Agreement by the Company (as successor to the Trustors for such
purpose) and the Trustees of the Trust after consultation with Selected Counsel
for the Beneficiaries (as defined in Exhibit A to the Second Amended and
Restated Plan of Reorganization of the Company and the other Debtors (as therein
defined)(the "Plan of Reorganization")); and
WHEREAS, the Trustees of the Trust and the Company (as successor to the
Trustors for this purpose pursuant to Section 6.03(a) of the Trust Agreement)
wish to amend the Trust Agreement in the manner provided herein; and
WHEREAS, the Selected Counsel for the Beneficiaries have been consulted and
have given their concurrence with respect to the amendment to the Trust
Agreement effectuated hereby; and
WHEREAS, the Profit Sharing Exchange Agreement, dated , 1995,
between the Company and the Trust (the "Exchange Agreement") contemplates the
execution of this Ninth Amendment, and in accordance with such Profit Sharing
Exchange Agreement, the execution and performance by the Trustees of this Ninth
Amendment and the transactions contemplated hereby have been approved by order
of the United States Bankruptcy Court for the Southern District of New York
pursuant to the jurisdiction retained by such Court under the Plan of
Reorganization; and
WHEREAS, the execution, delivery and effectiveness of this Ninth Amendment
is a condition precedent to the Company's obligation to declare a dividend or
other payment from Proceeds (as defined in the Exchange Agreement) pursuant to
the terms of Section 3.03 of the Exchange Agreement, notice of the intended
declaration of which on the date hereof has been provided to the Trust (the
"Dividend").
- ------------------------
3 This Amendment shall be appropriately numbered at the time of its adoption.
A-B-1
<PAGE>
NOW THEREFORE, the parties hereto agree to amend the Trust Agreement as
follows:
1. Section 6.02(b) of the Trust Agreement is hereby amended to read in its
entirety as follows:
"(b) On the Termination Date, all Trust Claims shall be extinguished, the
Trust shall be dissolved, the Company shall assume all of the Trust's
liabilities other than Trust Claims and the injunction provided for in Paragraph
9.2.A.3 of the Plan shall be modified in accordance with the order issuing such
injunction, and all of the Trust's assets shall, except as provided in
Subsections (c) and (d) below, be transferred and assigned to (i) the PD Trust,
if the PD Trust is then in existence, or (ii) the Company or any designees of
the Company, if the PD Trust is not then in existence, and the Trustees and the
Company agree to execute and deliver, or cause to be executed and delivered,
such agreements, instruments and other documents as may be necessary or
advisable to implement the foregoing."
2. Except as specifically amended pursuant to Paragraph 1 above, the Trust
Agreement shall remain in full force and effect and is ratified and confirmed in
all respects.
3. This Ninth Amendment shall be governed by and construed in accordance
with the laws of the State of New York and for all purposes shall be governed by
and construed in accordance with the laws of such State applicable to contracts
to be made and performed entirely within such State.
4. This Ninth Amendment may be executed in any number of counterparts, each
of which shall be an original, but such counterparts shall together constitute
one and the same instrument. Terms not defined herein shall, unless the context
otherwise requires, have the meanings assigned to such terms in the Trust
Agreement.
5. The terms of this Ninth Amendment shall be effective as of the date
first above written; PROVIDED, HOWEVER, that if the Dividend is not declared by
the Company on the date first above written, then on the day immediately
following such date this Ninth Amendment shall terminate and be of no further
force and effect and Section 6.02(b) shall re-enter into effect as it read
immediately prior to the effectiveness of this Ninth Amendment.
A-B-2
<PAGE>
IN WITNESS WHEREOF, the Company as successor to the Trustors, has caused
this Ninth Amendment to be executed by its duly authorized officer and attested
by another duly authorized officer, and the Trustees of the Trust have executed
this Ninth Amendment, all as of the day and year first above written.
MANVILLE CORPORATION
By: _______________________________
Name:
Title:
Attest:
- --------------------------
TRUSTEES
___________________________ as Trustee
Robert A. Falise
___________________________ as Trustee
Louis Klein, Jr.
___________________________ as Trustee
Frank J. Macchiarola
___________________________ as Trustee
Christian E. Markey, Jr.
A-B-3
<PAGE>
EXHIBIT C
TO PROFIT SHARING
EXCHANGE AGREEMENT
CALCULATION OF
FULLY DILUTED SHARES
<TABLE>
<CAPTION>
NUMBER OF SHARES
-----------------
<S> <C>
Issued and outstanding shares of Common Stock as of October 25, 1995........................... 122,745,154
Shares of Common Stock issuable upon the exercise of stock options under the Company's Stock
Incentive Plan as of October 25, 1995......................................................... 633,700
Shares of Common Stock issuable upon the exercise of Warrants under the Warrant Agreement dated
as of November 28, 1988 as of October 25, 1995................................................ 6,977,472
Shares of Common Stock issuable upon the exercise of all options, warrants, calls, rights,
agreements, convertible or exchangeable securities or other commitments outstanding or in
effect as of October 25, 1995 (without duplication of shares accounted for above):............ 0
Warrants................................................................................... 0
Options.................................................................................... 0
-----------------
Total.................................................................................... 130,356,326
</TABLE>
A-C-1
<PAGE>
ANNEX B
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
RIVERWOOD INTERNATIONAL CORPORATION,
CDRO HOLDING CORPORATION
AND
CDRO ACQUISITION CORPORATION
DATED AS OF
OCTOBER 25, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C>
ARTICLE I.................................................................................................
THE MERGER B-1
Section 1.1 The Merger.......................................................................... B-1
Section 1.2 Effective Time...................................................................... B-1
Section 1.3 Closing............................................................................. B-1
Section 1.4 Certificate of Incorporation; By-Laws............................................... B-2
Section 1.5 Directors and Officers of the Surviving Corporation................................. B-2
ARTICLE II................................................................................................
CONVERSION OF SHARES B-2
Section 2.1 Conversion of Capital Stock......................................................... B-2
Section 2.2 Exchange of Certificates............................................................ B-3
Section 2.3 Company Option Plans................................................................ B-4
Section 2.4 Dissenter's Rights.................................................................. B-4
ARTICLE III...............................................................................................
REPRESENTATIONS AND WARRANTIES OF THE COMPANY B-5
Section 3.1 Organization........................................................................ B-5
Section 3.2 Capitalization...................................................................... B-5
Section 3.3 Authorization; Validity of Agreement................................................ B-6
Section 3.4 No Violations; Consents and Approvals............................................... B-6
Section 3.5 SEC Reports and Financial Statements................................................ B-7
Section 3.6 Absence of Certain Changes.......................................................... B-7
Section 3.7 Absence of Undisclosed Liabilities.................................................. B-7
Section 3.8 Proxy Statement; Schedule 13E-3; Offer Documents.................................... B-8
Section 3.9 Employee Benefit Plans; ERISA....................................................... B-8
Section 3.10 Litigation; Compliance with Law..................................................... B-10
Section 3.11 Intellectual Property............................................................... B-11
Section 3.12 Identified Contracts................................................................ B-11
Section 3.13 Taxes............................................................................... B-13
Section 3.14 Environmental Matters............................................................... B-14
Section 3.15 Required Vote by Company Stockholders............................................... B-16
Section 3.16 Brokers............................................................................. B-16
Section 3.17 Opinions of Financial Advisors...................................................... B-16
Section 3.18 Assets.............................................................................. B-16
Section 3.19 Real Property....................................................................... B-16
Section 3.20 Insurance........................................................................... B-17
Section 3.21 Labor Matters, etc.................................................................. B-17
Section 3.22 No Stockholder-Related Claims....................................................... B-18
Section 3.23 Affiliate Transactions.............................................................. B-18
Section 3.24 Disclosure; No Other Representations or Warranties.................................. B-18
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
AND THE PURCHASER......................................................................... B-19
Section 4.1 Organization........................................................................ B-19
Section 4.2 Authorization; Validity of Agreement................................................ B-19
Section 4.3 Consents and Approvals; No Violations............................................... B-19
Section 4.4 Information in Proxy Statement; Schedule 13E-3; Offer Documents..................... B-20
Section 4.5 Financing........................................................................... B-20
Section 4.6 Beneficial Ownership of Shares...................................................... B-21
Section 4.7 No Prior Activities................................................................. B-21
Section 4.8 Brokers............................................................................. B-21
Section 4.9 No Other Representations or Warranties.............................................. B-21
Section 4.10 Surviving Corporation After the Merger.............................................. B-21
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C>
ARTICLE V.................................................................................................
COVENANTS B-22
Section 5.1 Interim Operations of the Company................................................... B-22
Section 5.2 Acquisition Proposals............................................................... B-23
Section 5.3 Access to Information............................................................... B-24
Section 5.4 Further Action; Reasonable Efforts.................................................. B-25
Section 5.5 Employee Benefits................................................................... B-25
Section 5.6 Stockholders' Meeting; Proxy Statement.............................................. B-27
Section 5.7 Notification of Certain Matters..................................................... B-27
Section 5.8 Directors' and Officers' Insurance and Indemnification.............................. B-28
Section 5.9 Publicity........................................................................... B-29
Section 5.10 Certain Arrangements................................................................ B-29
Section 5.11 Offers and Solicitations of Consents................................................ B-29
Section 5.12 Certain Information................................................................. B-29
Section 5.13 Patent Review....................................................................... B-30
Section 5.14 Additional Consents................................................................. B-30
ARTICLE VI................................................................................................
CONDITIONS B-31
Section 6.1 Conditions to Each Party's Obligation To Effect the Merger.......................... B-31
Section 6.2 Conditions to the Obligation of the Company to Effect the Merger.................... B-31
Section 6.3 Conditions to Obligations of Parent and the Purchaser to Effect the Merger.......... B-32
ARTICLE VII...............................................................................................
TERMINATION B-33
Section 7.1 Termination......................................................................... B-33
Section 7.2 Effect of Termination............................................................... B-35
ARTICLE VIII..............................................................................................
MISCELLANEOUS B-35
Section 8.1 Fees and Expenses................................................................... B-35
Section 8.2 Amendment; Waiver................................................................... B-37
Section 8.3 Survival............................................................................ B-37
Section 8.4 Notices............................................................................. B-38
Section 8.5 Interpretation...................................................................... B-39
Section 8.6 Headings; Schedules................................................................. B-39
Section 8.7 Counterparts........................................................................ B-39
Section 8.8 Entire Agreement.................................................................... B-39
Section 8.9 Severability........................................................................ B-40
Section 8.10 Governing Law....................................................................... B-40
Section 8.11 Assignment.......................................................................... B-40
</TABLE>
ii
<PAGE>
TABLE OF DEFINED TERMS
<TABLE>
<CAPTION>
TERM SECTION
- --------------------------------------------------------------------------------------------------- -------------
<S> <C>
Acquisition Proposal............................................................................... 5.2(c)
Acquisition Transaction............................................................................ 5.2(c)
affiliates......................................................................................... 8.5
Antitrust Division................................................................................. 5.4(b)
Applicable Amount.................................................................................. 2.3
Assets............................................................................................. 3.18(a)
Awards............................................................................................. 2.3
Balance Sheet...................................................................................... 3.7
beneficial ownership............................................................................... 8.5
Board.............................................................................................. 3.3(a)
Certificate of Merger.............................................................................. 1.2
Certificates....................................................................................... 2.2(b)
Closing............................................................................................ 1.3
Closing Date....................................................................................... 1.3
Code............................................................................................... 3.9(b)(v)
Collective Bargaining Agreement.................................................................... 3.21
Commitment Fees.................................................................................... 8.1(c)
Company............................................................................................ Recitals
Company Common Stock............................................................................... 2.1
Company Intellectual Property...................................................................... 3.11
Company SEC Documents.............................................................................. 3.5
Competition Laws................................................................................... 5.4(b)
Confidentiality Agreement.......................................................................... 5.3(a)
Convertible Notes.................................................................................. 3.2(a)
DGCL............................................................................................... Recitals
Disclosure Schedule................................................................................ 3.1
Dissenting Shares.................................................................................. 2.4
Effective Time..................................................................................... 1.2
Employment and Withholding Taxes................................................................... 3.13(d)
Environmental Assessment........................................................................... 5.3(b)
Environmental Claim................................................................................ 3.14(e)(i)
Environmental Consultant........................................................................... 5.3(b)
Environmental Laws................................................................................. 3.14(e)(ii)
ERISA.............................................................................................. 3.9(a)
ERISA Affiliate.................................................................................... 3.9(a)
ERISA Plans........................................................................................ 3.9(a)
Exchange Act....................................................................................... 3.4(b)
Exchange Agreement................................................................................. 6.1(f)
Expense Cap........................................................................................ 8.1(d)
Expenses........................................................................................... 8.1(f)
Fee................................................................................................ 8.1(b)
Financing.......................................................................................... 4.5
FTC................................................................................................ 5.4(b)
Fund V............................................................................................. 4.5
GAAP............................................................................................... 3.5
Governmental Entity................................................................................ 3.4(b)
Hazardous Substance................................................................................ 3.14(e)(iii)
HSR Act............................................................................................ 5.4(b)
Identified Contracts............................................................................... 3.12(a)
Immaterial Subsidiaries............................................................................ 3.1
Indemnified Parties................................................................................ 5.8(a)
Indentures......................................................................................... 5.11
Intellectual Property.............................................................................. 3.11
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
TERM SECTION
- --------------------------------------------------------------------------------------------------- -------------
<S> <C>
Involuntary Breach................................................................................. 8.1(c)(v)
Laws............................................................................................... 3.4(a)
Leased Real Property............................................................................... 3.19(c)
Leases............................................................................................. 3.19(c)
Lien............................................................................................... 3.18(b)
Litigation......................................................................................... 3.10(a)
Material Adverse Effect............................................................................ 3.1
Material Contracts................................................................................. 3.12(a)
Merger............................................................................................. 1.1
Merger Consideration............................................................................... 2.1(a)
Minimum Tenders.................................................................................... 6.3(f)
Notes.............................................................................................. 5.11
Offers............................................................................................. 5.11
Option Plans....................................................................................... 2.3
Owned Real Property................................................................................ 3.19(c)
Parent............................................................................................. Recitals
Patent Review...................................................................................... 5.13
Paying Agent....................................................................................... 2.2(a)
PBGC............................................................................................... 3.9(c)
PD Trust........................................................................................... 6.1(e)
Permits............................................................................................ 3.10(c)
Permitted Lien..................................................................................... 3.18(c)
Person............................................................................................. 3.1
Plans.............................................................................................. 3.9(a)
Preferred Stock.................................................................................... 3.2(a)
Prepaid Policy..................................................................................... 5.8(b)
Proposed Amendments................................................................................ 5.11
Proxy Statement.................................................................................... 5.6(b)
Purchaser.......................................................................................... Recitals
Purchaser Common Stock............................................................................. 2.1
Purchaser Disclosure Schedule...................................................................... 4.3(b)
Real Property...................................................................................... 3.19(c)
Release............................................................................................ 3.14(e)(iv)
Restricted Stock Units............................................................................. 2.3
Return............................................................................................. 3.13(d)
RIUSA.............................................................................................. 3.22
SARs............................................................................................... 2.3
Stockholder........................................................................................ Recitals
Schedule Supplements............................................................................... 5.7(b)
Schedule 13E-3..................................................................................... 3.8(b)
Securities Act..................................................................................... 3.5
SEC................................................................................................ 3.5
Secretary of State................................................................................. 1.2
Shares............................................................................................. 2.1
Special Meeting.................................................................................... 5.6(a)
Subsidiary......................................................................................... 3.1
Superior Proposal.................................................................................. 7.1(c)
Supplemental Indenture............................................................................. 5.11
Surviving Corporation.............................................................................. 1.1
Tax................................................................................................ 3.13(d)
Tax Matters Agreement.............................................................................. Recitals
Technology......................................................................................... 3.11
Trust.............................................................................................. 6.1(e)
Trustee............................................................................................ 5.11
Voting Agreement................................................................................... Recitals
</TABLE>
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 25, 1995, by and among
Riverwood International Corporation, a Delaware corporation (the "Company"),
CDRO Holding Corporation, a Delaware corporation ("Parent"), and CDRO
Acquisition Corporation, a wholly owned subsidiary of Parent and a Delaware
corporation (the "Purchaser").
WHEREAS, the Boards of Directors of Parent, the Purchaser and the Company
have each approved, and deem it advisable and in the best interests of their
respective shareholders to consummate, the acquisition of the Company by Parent
upon the terms and subject to the conditions set forth herein; and
WHEREAS, in furtherance of such acquisition, (A) the Boards of Directors of
Parent, the Purchaser and the Company have each approved this Agreement and the
merger of the Purchaser with and into the Company in accordance with the terms
of this Agreement and the General Corporation Law of the State of Delaware (the
"DGCL"), and (B) in order to induce Parent and the Purchaser to enter into the
Merger Agreement, concurrently with the execution and delivery hereof, Parent,
the Purchaser and Manville Corporation, a Delaware corporation ("Stockholder"),
are entering into a Voting and Indemnification Agreement dated as of the date
hereof (the "Voting Agreement") among such parties, and Parent, the Purchaser,
Stockholder and the Company are entering into a Tax Matters Agreement dated as
of the date hereof (the "Tax Matters Agreement");
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 THE MERGER. Upon the terms and subject to conditions of this
Agreement and in accordance with the DGCL, at the Effective Time (as defined in
Section 1.2 hereof), (A) the Purchaser shall be merged with and into the Company
or (B) at the Purchaser's election, the Company shall be merged with and into
the Purchaser (either such merger, the "Merger") and the separate corporate
existence of the corporation being merged into the other corporation shall
cease. After the Merger, the Company, in the case of clause (a) above, or the
Purchaser, in the case of clause (b) above, shall continue as the surviving
corporation (sometimes hereinafter referred to as the "Surviving Corporation").
The Merger shall have the effect as provided in the applicable provisions of the
DGCL. Without limiting the generality of the foregoing, upon the Merger, all the
rights, privileges, immunities, powers and franchises of the Company and the
Purchaser shall vest in the Surviving Corporation and all obligations, duties,
debts and liabilities of the Company and the Purchaser shall be the obligations,
duties, debts and liabilities of the Surviving Corporation.
Section 1.2 EFFECTIVE TIME. On or as promptly as practicable following the
Closing Date (as defined in Section 1.3), the Purchaser and the Company will
cause an appropriate Certificate of Merger (the "Certificate of Merger") to be
executed and filed with the Secretary of State of the State of Delaware (the
"Secretary of State") in such form and executed as provided in the DGCL. The
Merger shall become effective on the date on which the Certificate of Merger has
been duly filed with the Secretary of State or such time as is agreed upon by
the parties and specified in the Certificate of Merger, and such time is
hereinafter referred to as the "Effective Time."
Section 1.3 CLOSING. The closing of the Merger (the "Closing") will take
place at 10:00 a.m., New York time, on a date to be specified by the parties,
which shall be no later than the second business day after satisfaction or
waiver of all of the conditions set forth in Article VI hereof (the "Closing
Date"), at the offices of Debevoise & Plimpton, 875 Third Avenue, New York, New
York 10022, unless another date or place is agreed to in writing by the parties
hereto.
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Section 1.4 CERTIFICATE OF INCORPORATION; BY-LAWS. Pursuant to the Merger,
(X) the Certificate of Incorporation of the Purchaser, as in effect immediately
prior to the Effective Time, shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter amended as provided by law and such
Certificate of Incorporation (except that the name of the Surviving Corporation
set forth in the Certificate of Incorporation shall be such name as may be
determined by the Purchaser prior to the Effective Time) and (Y) the By-laws of
the Purchaser, as in effect immediately prior to the Effective Time, shall be
the By-laws of the Surviving Corporation until thereafter amended as provided by
law, the Certificate of Incorporation and such By-laws.
Section 1.5 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION.
(a) The directors of the Purchaser immediately prior to the Effective Time
shall, from and after the Effective Time, be the directors of the Surviving
Corporation until their successors shall have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Certificate of Incorporation and By-laws.
(b) The officers of the Purchaser immediately prior to the Effective Time
shall be the initial officers of the Surviving Corporation and shall hold office
until their respective successors are duly elected and qualified, or their
earlier death, resignation or removal.
ARTICLE II
CONVERSION OF SHARES
Section 2.1 CONVERSION OF CAPITAL STOCK. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holders of any
shares of common stock, par value $.01 per share, of the Company (referred to
herein as "Shares" or "Company Common Stock") or the common stock, par value
$.01 per share, of the Purchaser (the "Purchaser Common Stock"):
(a) Each issued and outstanding share of Company Common Stock (other than
Shares to be cancelled in accordance with Section 2.1(c) and other than
Dissenting Shares covered by Section 2.4) shall be converted into the right to
receive $20.25 per share in cash, payable to the holder thereof, without
interest (the "Merger Consideration"), upon surrender of the certificate
formerly representing such share of Company Common Stock in the manner provided
in Section 2.2. All such shares of Company Common Stock, when so converted,
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 shall cease to have any rights with respect thereto, except the right to
receive the Merger Consideration therefor upon the surrender of such certificate
in accordance with Section 2.2. Any payment made pursuant to this Section 2.1(a)
shall be made net of applicable withholding taxes to the extent such withholding
is required by law; PROVIDED that, with respect to any such payment to be made
to any Person who (I) at any time during the shorter of the periods described in
section 897(c)(1)(A)(ii) of the Code and the Treasury Regulations thereunder,
beneficially owned more than five percent, taking into account the constructive
ownership rules described in section 897(c)(6)(C) of the Code and the Treasury
Regulations thereunder, of the fair market value of any class of stock of the
Company and (II) has not delivered to the Purchaser, prior to the time for
making such payment, a certificate, as contemplated under and meeting the
requirements of section 1.1445-2(b)(2)(i) of the Treasury Regulations, to the
effect that such Person is not a foreign person within the meaning of the Code
and applicable Treasury Regulations, the Purchaser shall withhold from such
payment an amount equal to 10% thereof and pay over such amount to the Internal
Revenue Service.
(b) Each issued and outstanding share of the Purchaser Common Stock shall be
converted into and become one fully paid and nonassessable share of common stock
of the Surviving Corporation.
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(c) All shares of Company Common Stock that are held by the Company as
treasury stock and any shares of Company Common Stock owned by Parent, the
Purchaser or any other subsidiary of Parent shall be cancelled and retired and
shall cease to exist and no Merger Consideration shall be delivered in exchange
therefor.
Section 2.2 EXCHANGE OF CERTIFICATES.
(a) Prior to the Effective Time, Parent shall designate the Company's
registrar and transfer agent, or Chemical Bank (or any successor thereto), or
such other bank or trust company as may be approved in writing by the Company
(which approval shall not be unreasonably withheld), to act as paying agent for
the holders of Shares in connection with the Merger, pursuant to an agreement
providing for the matters set forth in this Section 2.2 and such other matters
as may be appropriate and the terms of which shall be reasonably satisfactory to
the Company (the "Paying Agent"), to receive the funds to which holders of
Shares shall become entitled pursuant to Section 2.1(a). Immediately prior to
the Effective Time, Parent will cause to be deposited in trust with the Paying
Agent for the benefit of holders of Company Common Stock the funds necessary to
complete the payments contemplated by Section 2.1(a) with respect to shares of
Company Common Stock other than Stockholder Shares (as such term is defined in
the Voting Agreement (as defined below)) on a timely basis.
(b) At the Effective Time, Parent will instruct the Paying Agent to
promptly, and in any event not later than three business days following the
Effective Time, mail (and to make available for collection by hand) to each
holder of record of a certificate or certificates, which immediately prior to
the Effective Time represented outstanding shares of Company Common Stock (the
"Certificates"), whose Shares were converted pursuant to Section 2.1(a) into the
right to receive the Merger Consideration (I) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Paying
Agent and shall be in such form and have such other provisions as Parent and the
Company may reasonably specify) and (II) instructions for use in effecting the
surrender of the Certificates in exchange for payment of the Merger
Consideration (which shall provide that at the election of the surrendering
holder Certificates may be surrendered, and payment therefor collected, by hand
delivery). Upon surrender of a Certificate for cancellation to the Paying Agent
or to such other agent or agents as may be appointed by the Company, together
with such letter of transmittal, duly executed, the holder of such Certificate
shall be entitled to receive in exchange therefor the Merger Consideration for
each share of Company Common Stock formerly represented by such Certificate, to
be mailed (or made available for collection by hand if so elected by the
surrendering holder) within three business days of receipt thereof, and the
Certificate so surrendered shall forthwith be cancelled. If payment of the
Merger Consideration is to be made to a person other than the person in whose
name the surrendered Certificate is registered, it shall be a condition of
payment that the Certificate so surrendered shall be properly endorsed or shall
be otherwise in proper form for transfer and that the person requesting such
payment shall have paid any transfer and other taxes required by reason of the
payment of the Merger Consideration to a person other than the registered holder
of the Certificate surrendered or shall have established to the satisfaction of
the Surviving Corporation that such tax either has been paid or is not
applicable. Merger Consideration payable in respect of Certificates representing
Company Common Stock held by Stockholder shall be paid only to the person in
whose name the surrendered Certificate is registered. Until surrendered as
contemplated by this Section 2.2, each Certificate (other than Certificates
representing Company Common Stock held by Parent or the Purchaser, or any
subsidiary of Parent or the Purchaser, or Dissenting Shares (as defined in
Section 2.4)) shall be deemed at any time after the Effective Time to represent
only the right to receive the Merger Consideration in cash as contemplated by
this Section 2.2.
(c) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the Person (as defined in 3.1)
claiming such Certificate to be lost, stolen or destroyed, the Paying Agent will
issue in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration deliverable in respect thereof as determined in accordance with
this Article II, PROVIDED that the Person to whom the Merger Consideration is
paid shall, as a condition precedent to
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the payment thereof, give the Surviving Corporation a bond in such sum as it may
direct or otherwise indemnify the Surviving Corporation in a manner satisfactory
to it against any claim that may be made against the Surviving Corporation with
respect to the Certificate claimed to have been lost, stolen or destroyed.
(d) After the Effective Time, the stock transfer books of the Company shall
be closed and there shall be no transfers on the stock transfer books of the
Surviving Corporation of Shares which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation, they shall be cancelled and exchanged for the Merger
Consideration as provided in this Article II.
(e) Notwithstanding the provisions of this Section 2.2, at the Effective
Time, (I) the Purchaser shall pay to Stockholder by wire transfer an amount
equal to the Merger Consideration multiplied by the number of Stockholder Shares
to the account of the Stockholder designated at least two business days prior to
the Closing Date, net of applicable withholding taxes, and (II) the Stockholder
shall deliver to the Purchaser, free and clear of any Liens, one or more share
certificates representing all of the Stockholder Shares, duly endorsed in blank
or accompanied by stock powers or other instruments of transfer duly executed in
blank, and bearing or accompanied by all requisite stock transfer stamps.
Section 2.3 COMPANY OPTION PLANS. Except as Parent or the Purchaser and
the holder of an Award (as defined below) otherwise agree, the Company shall
take all actions necessary to provide that, upon the Effective Time, (I) each
outstanding restricted stock unit ("Restricted Stock Units") or stock
appreciation right (including any Premium, Option Replacement or SAR Replacement
stock appreciation right) ("SARs" and, together with the Restricted Stock Units,
the "Awards") outstanding under either of the Company's 1992 Long-Term Incentive
Plan or 1994 Long-Term Incentive Plan (together, the "Option Plans"), whether or
not then exercisable or vested, shall become fully exercisable and vested, (II)
each Award of an SAR which is then outstanding shall be cancelled and each Award
of a Restricted Stock Unit which is then outstanding shall be repurchased and
(III) in consideration of such cancellation or repurchase, as the case may be,
the Company shall pay to the holder of each such Award an amount in respect
thereof equal to the product of (A) the Applicable Amount, multiplied by (B) the
number of units subject thereto (such payment to be net of applicable
withholding taxes); and PROVIDED that the foregoing shall not require any action
which violates the Option Plans, the Awards or any agreement in effect in
respect thereof. The term "Applicable Amount" shall mean (I) in the case of
Awards of Restricted Stock Units, the Merger Consideration or (II) in the case
of Awards of SARS, the excess of (A)(1) with respect to Awards of SARS granted
under the 1994 Long Term Incentive Plan, the greater of the Merger Consideration
or the highest price of a Share (as determined by the Committee administering
the 1994 Long Term Incentive Plan) paid in a BONA FIDE transaction during the 60
day period preceding and including the Effective Time or (2) with respect to all
Awards of SARS other than those specified in clause (ii)(A)(1), the Merger
Consideration, over (B) the applicable grant price of each such Award.
Section 2.4 DISSENTER'S RIGHTS. Notwithstanding anything in this Agreement
to the contrary, Shares outstanding immediately prior to the Effective Time and
held by a holder who has not voted in favor of the Merger or consented thereto
in writing and who has delivered a written demand for appraisal of such shares
in accordance with Section 262 of the DGCL, if such Section 262 provides for
appraisal rights for such Shares in the Merger ("Dissenting Shares"), shall not
be converted into the right to receive the Merger Consideration, as provided in
Section 2.1(a) hereof, unless and until such holder fails to perfect or
effectively withdraws or otherwise loses his right to appraisal and payment
under the DGCL. If, after the Effective Time, any such holder fails to perfect
or effectively withdraws or loses his right to appraisal, such Dissenting Shares
shall thereupon be treated as if they had been converted as of the Effective
Time into the right to receive the Merger consideration to which such holder is
entitled, without interest or dividends thereon. The Company shall give the
Purchaser prompt notice of any demands received by the Company for appraisal of
Shares, and, prior to the Effective Time, the Purchaser shall have the right to
participate in all negotiations and proceedings
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with respect to such demands. Prior to the Effective Time, the Company shall
not, except with the prior written consent of the Purchaser, make any payment
with respect to or offer to settle, any such demands.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and the Purchaser, as of the
date hereof and as of the Closing Date, that:
Section 3.1 ORGANIZATION. Each of the Company and its Subsidiaries (as
hereinafter defined) is a corporation or other entity duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation or organization, and has all requisite corporate power and
authority to own, lease, use and operate its properties and to carry on its
business as it is now being conducted. Each of the Company and its Subsidiaries
is qualified or licensed to do business as a foreign corporation and is in good
standing in each jurisdiction in which it owns real property or in which the
nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so qualified or licensed individually
and in the aggregate would not have or result in a Material Adverse Effect. The
term "Material Adverse Effect" means a material adverse effect on the business,
assets, liabilities, results of operations or financial condition of the Company
and its Subsidiaries taken as a whole. None of the Company or any of its
Subsidiaries (other than any Immaterial Subsidiary) is in breach or violation of
any of its certificate of incorporation, by-laws or other organizational
documents. "Immaterial Subsidiaries" shall mean those inactive or otherwise
immaterial Subsidiaries of the Company indicated on Schedule 3.1 of the
Disclosure Schedule. The Company has previously delivered to Parent a complete
and correct copy of each of its Restated Certificate of Incorporation and
By-Laws, as currently in effect. Schedule 3.1 of the disclosure schedule
delivered by the Company to Parent on or prior to the date hereof (the
"Disclosure Schedule") sets forth a complete and correct list of the
Subsidiaries of the Company and their respective jurisdictions of incorporation
or organization. "Subsidiary" shall mean with respect to any Person, any
corporation or other entity of which 50% or more of the securities or other
interests having by their terms ordinary voting power for the election of
directors or others performing similar functions with respect to such entity is
directly or indirectly owned by such Person. "Person" shall mean any natural
person, firm, individual, partnership, joint venture, business trust, trust,
association, corporation, company, unincorporated entity or Governmental Entity
(as defined in Section 3.4(b)).
Section 3.2 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of 100,000,000
shares of Company Common Stock and 100,000,000 preferred shares, par value $1.00
per share (the "Preferred Stock"). The number of shares of Company Common Stock
issued and outstanding is 65,675,578 shares on the date hereof, and at the
Effective Time will be 65,675,578 shares plus not more than 150,000 shares
issued after the date hereof as required pursuant to the terms of the Riverwood
International Hourly Savings Plan and Riverwood International Savings Plan, as
each such plan is in effect on the date hereof. No shares of Company Common
Stock are issued and held in the treasury of the Company, and there are no
shares of Preferred Stock issued and outstanding. All the outstanding shares of
the Company's capital stock are duly authorized, validly issued, fully paid and
nonassessable. There is outstanding $125,000,000 principal amount of 6 3/4%
Convertible Subordinated Notes due 2003 (the "Convertible Notes") that upon
certain circumstances become convertible into Company Common Stock and 7,126,250
shares of Company Common Stock are reserved for issuance upon conversion of
Convertible Notes. Complete and correct copies of the indenture and any other
agreement or instrument to which the Company is a party governing the
Convertible Notes, including any and all amendments, modifications and
supplements thereto, have been made available by the Company to Parent and the
Purchaser. Other than the Convertible Notes, and except as set forth in Schedule
3.2(a) of the Disclosure Schedule, there are no existing (I) options, warrants,
calls, preemptive
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rights, subscriptions or other rights, convertible securities, agreements or
commitments of any character 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 securities convertible into or
exchangeable for such shares or equity interests, (II) contractual obligations
of the Company or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any capital stock of the Company or any Subsidiary of the Company or
(III) voting trusts or similar agreements to which the Company or any of its
Subsidiaries is a party with respect to the voting of the capital stock of the
Company or any of its Subsidiaries.
(b) Except as set forth in Schedule 3.2(b) of the Disclosure Schedule and
except for directors' qualifying shares (I) all of the outstanding shares of
capital stock (or equivalent equity interests of entities other than
corporations) of each of the Company's Subsidiaries are beneficially owned,
directly or indirectly, by the Company and (II) neither the Company nor any of
its Subsidiaries owns any shares of capital stock or other securities of, or
interest in, any other Person (other than any shares and interests that have a
market or other fair value not in excess of $2,000,000 in the aggregate), or is
obligated to make any capital contribution to or other investment in any other
Person.
Section 3.3 AUTHORIZATION; VALIDITY OF AGREEMENT.
(a) The Company has the requisite corporate power and authority to execute
and deliver this Agreement and, subject to approval of its stockholders as
contemplated by Section 5.6 hereof, to consummate the transactions contemplated
hereby. The execution, delivery and performance by the Company of this Agreement
and the consummation by the Company of the transactions contemplated hereby have
been duly authorized by the Board of Directors of the Company (the "Board") and,
other than approval and adoption of this Agreement by the holders of a majority
of the outstanding shares of Company Common Stock, no other corporate
proceedings on the part of the Company are necessary to authorize the execution,
delivery and performance of this Agreement by the Company and the consummation
of the transactions contemplated hereby. This Agreement has been duly executed
and delivered by the Company and, assuming due authorization, execution and
delivery of this Agreement by Parent and the Purchaser, is a valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except that such enforcement may be subject to or limited by (I)
bankruptcy, insolvency or other similar laws, now or hereafter in effect,
affecting creditors' rights generally, and (II) the effect of general principles
of equity (regardless of whether enforceability is considered in a proceeding at
law or in equity).
(b) The provisions of Section 203 of the DGCL are inapplicable to the
transactions contemplated by this Agreement.
Section 3.4 NO VIOLATIONS; CONSENTS AND APPROVALS.
(a) Neither the execution, delivery and performance of this Agreement by the
Company nor the consummation by the Company of the transactions contemplated
hereby will (I) violate any provision of the Restated Certificate of
Incorporation or By-Laws of the Company, (II) except as set forth in Schedule
3.4(a) of the Disclosure Schedule, conflict with, result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, amendment, cancellation or
acceleration, or to the imposition of any Lien (as defined in Section 3.18(b)))
under, or result in the acceleration or trigger of any payment, time of payment,
vesting or increase in the amount of any compensation or benefit payable
pursuant to, the terms, conditions or provisions of any note, bond, mortgage,
indenture, guarantee or other evidence of indebtedness, lease, license,
contract, agreement, plan or other instrument or obligation to which the Company
or any of its Subsidiaries is a party or by which any of them or any of their
assets may be bound or (III) conflict with or violate any federal, state, local
or foreign order, writ, injunction, judgment, award, decree, statute, law, rule
or regulation (collectively, "Laws") applicable to the Company, any of its
Subsidiaries or any of their properties or assets; except in the case of clauses
(ii) or
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(iii) for such conflicts, violations, breaches, defaults or Liens which
individually and in the aggregate would not have or result in a Material Adverse
Effect or materially impair or delay the consummation of the transactions
contemplated hereby.
(b) Except as disclosed in Schedule 3.4(b) of the Disclosure Schedule, no
filing or registration with, declaration or notification to, or order,
authorization, consent or approval of, any federal, state, local or foreign
court, legislative, executive or regulatory authority or agency (a "Governmental
Entity") or any other Person is required in connection with the execution,
delivery and performance of this Agreement by the Company or the consummation by
the Company of the transactions contemplated hereby, except (I) applicable
requirements under Competition Laws (as defined in Section 5.4(b)), (II)
applicable requirements under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), (III) the filing of the Certificate of Merger with the
Secretary of State, (IV) applicable requirements under "blue sky" laws of
various states, (V) applicable requirements under Environmental Laws (as defined
in Section 3.14(d)(ii)) relating to transfer or assumption of Permits (as
defined in Section 3.10(c)) required thereunder for the conduct of business by
the Company and its Subsidiaries and (VI) such other consents, approvals,
orders, authorizations, notifications, registrations, declarations and filings
the failure of which to be obtained or made individually and in the aggregate
would not have or result in a Material Adverse Effect or materially impair or
delay the consummation of the transactions contemplated hereby.
Section 3.5 SEC REPORTS AND FINANCIAL STATEMENTS. The Company has filed
with the Securities and Exchange Commission (the "SEC"), all forms and documents
required to be filed by it since January 1, 1992 under the Exchange Act and has
heretofore made available to Parent (I) its Annual Reports on Form 10-K for the
years ended December 31, 1992, December 31, 1993 and December 31, 1994,
respectively, (II) its Quarterly Reports on Form 10-Q for the periods ended
April 1 and July 1, 1995, (III) all proxy statements relating to meetings of
stockholders of the Company since January 1, 1993 (in the form mailed to
stockholders) and (IV) all other forms, reports and registration statements
filed by the Company with the SEC since January 1, 1992 (other than registration
statements on Form S-8 or Form 8-A, filings on Form T-1 or preliminary materials
and registration statements in forms not declared effective). The documents
described in clauses (i)-(iv) above (whether filed before, on or after the date
hereof, but in any event not after the Closing) are referred to in this
Agreement collectively as the "Company SEC Documents". As of their respective
dates, the Company SEC Documents (A) did not contain any untrue statement of a
material fact or omit 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 and (B) complied in all material
respects with the applicable requirements of the Exchange Act and the Securities
Act of 1933 (the "Securities Act"), as the case may be, and the applicable rules
and regulations of the SEC thereunder. The consolidated financial statements
included in the Company SEC Documents have been prepared in accordance with
United States generally accepted accounting principles ("GAAP") applied on a
consistent basis during the periods involved (except as otherwise noted therein
and except that the quarterly financial statements are subject to year end
adjustment and do not contain all footnote disclosures required by GAAP) and
fairly present in all material respects the consolidated financial position and
the consolidated results of operations and cash flows of the Company and its
consolidated Subsidiaries as at the dates thereof or for the periods presented
therein.
Section 3.6 ABSENCE OF CERTAIN CHANGES. Except as disclosed in the Company
SEC Documents filed prior to the date hereof or as disclosed in Schedule 3.6 to
the Disclosure Schedule, since July 1, 1995, (I) the Company and its
Subsidiaries (other than any Immaterial Subsidiary) have conducted their
respective operations only in the ordinary course consistent with past practice,
(II) there has not been a Material Adverse Effect and (III) the Company and the
Subsidiaries have not taken action that if taken after the date hereof would
constitute a violation of Section 5.1 (other than clause (a) thereof).
Section 3.7 ABSENCE OF UNDISCLOSED LIABILITIES. Except (A) as and to the
extent disclosed in the Company's SEC Documents filed prior to the date hereof,
including as reflected or reserved against in the balance sheet dated as of July
1, 1995 constituting a portion of the financial statements included
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therein (the "Balance Sheet") or in the notes thereto, (B) as and to the extent
disclosed in Schedules 3.7 and 3.14 of the Disclosure Schedule or (C) for
liabilities or obligations relating to environmental matters the existence of
which was not required to be disclosed pursuant to the representation set forth
in Section 3.14, neither the Company nor any of its Subsidiaries had as of that
date any liabilities or obligations (accrued, contingent or otherwise) which (X)
would be material to the Company and its Subsidiaries taken as a whole (except
for obligations under executory contracts incurred in the ordinary course of
business consistent with past practice that have yet to be performed and that
individually and in the aggregate would not have or result in a Material Adverse
Effect) or (Y) would be required to be set forth in the Balance Sheet or the
notes thereto in accordance with GAAP. Except as set forth in Schedules 3.7 and
3.14 to the Disclosure Schedule or for liabilities or obligations relating to
environmental matters the existence of which was not required to be disclosed
pursuant to the representation set forth in Section 3.14, since the date of the
Balance Sheet, neither the Company nor any of its Subsidiaries has incurred any
liabilities or obligations (accrued, contingent or otherwise) that would be
required to be reflected or reserved against in an audited consolidated balance
sheet of the Company and its Subsidiaries or the notes thereto prepared in
accordance with GAAP, or that would be material to the Company and its
Subsidiaries taken as a whole, except for such liabilities and obligations as
were incurred in the ordinary course of business consistent with past practice
and as individually and in the aggregate would not have or result in a Material
Adverse Effect and except for liabilities and obligations resulting from the
execution and delivery of this Agreement or relating to the transactions
contemplated hereby.
Section 3.8 PROXY STATEMENT; SCHEDULE 13E-3; OFFER DOCUMENTS.
(a) The Proxy Statement (as defined in Section 5.6(d)) (and any amendment
thereof or supplement thereto) at the date mailed to Company stockholders and at
the time of the Special Meeting (as defined in Section 5.6(a)), (I) will not
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
and (II) will comply in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder; except that no
representation is made by the Company with respect to statements made in the
Proxy Statement based on information supplied by Parent or the Purchaser
specifically for inclusion in the Proxy Statement.
(b) None of the information provided by the Company specifically for use in
any Rule 13e-3 Transaction Statement on Schedule 13E-3 required to be filed with
the SEC under the Exchange Act and/or mailed to the stockholders of the Company
in connection with the Merger (the "Schedule 13E-3") will at the time the
Schedule 13E-3 or any amendments thereto are so filed and/or mailed, 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.
(c) None of the information provided by the Company specifically for use in
the offers to purchase and consent solicitations and related letters of
transmittal (collectively, together with any amendments or supplements thereto,
the "Offer Documents") and any registration statement and any related schedules
(and any amendment or supplement to any of the foregoing), filed with the SEC
and/or mailed to the registered holders of the Notes (as defined in Section
5.11) of each series, as the case may be, in connection with the Offers (as
defined in Section 5.11) and solicitations of consents to the Proposed
Amendments (as defined in Section 5.11), at the date so filed and/or mailed (I)
will 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.
Section 3.9 EMPLOYEE BENEFIT PLANS; ERISA.
(a) Schedule 3.9(a) of the Disclosure Schedule contains a true and complete
list of each bonus, deferred compensation, incentive compensation, stock
purchase, stock option or other equity based,
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severance, termination, change in control, retention, employment,
hospitalization or other medical, life or insurance, disability, other welfare,
supplemental unemployment benefits, profit-sharing, pension, or retirement plan,
program, agreement or arrangement, and each other employee compensation or
benefit plan, program, agreement or arrangement, sponsored, maintained or
contributed to by the Company, any of its Subsidiaries or by any trade or
business, whether or not incorporated (an "ERISA Affiliate"), that together with
the Company or any of its Subsidiaries would be deemed a "single employer"
within the meaning of section 4001 of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), for the benefit of any employee, former
employee, director or former director of the Company, any of its Subsidiaries or
any ERISA Affiliate or with respect to which the Company or any of its
Subsidiaries has or could reasonably be expected to have any material liability
(matured or unmatured, absolute or contingent) (the "Plans"). Schedule 3.9(a)
identifies each of the Plans that is an "employee benefit plan," subject to
ERISA (the "ERISA Plans").
(b) With respect to each Plan, the Company has heretofore delivered or made
available to the Purchaser true and complete copies of each of the following
documents (including all amendments to such documents):
(i) the Plan or a written description of any Plan not in writing;
(ii) the most recent annual report and actuarial report if required
under ERISA;
(iii) the most recent Summary Plan Description with respect thereto if
required under ERISA;
(iv) if the Plan or any obligations thereunder are funded through a trust
or any other funding vehicle, the trust or other funding agreement and the
latest financial statements thereof;
(v) the most recent determination letter received from the Internal
Revenue Service with respect to each Plan intended to qualify under section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code"); and
(vi) communications that the Company or any of its ERISA Affiliates or
Subsidiaries has received from or sent to the PBGC, the Department of Labor,
the Internal Revenue Service or any comparable agency of any foreign
governmental entity concerning any termination of, withdrawal from or
appointment of a trustee to administer any plan or the failure or alleged
failure to comply with any provision of ERISA, the Code or comparable
legislation of a foreign jurisdiction with respect to any plan, including
any existing written description of any such oral communication.
(c) No liability under Title I or IV of ERISA, the penalty or excise tax
provisions of the Code relating to employee plans or equivalent legislation of a
foreign jurisdiction has been incurred by the Company or any of its Subsidiaries
or ERISA Affiliates that has not been satisfied in full, and no condition exists
or event has occurred that presents a material risk to the Company or any of its
Subsidiaries or ERISA Affiliates of incurring any such liability, other than (I)
liability for contributions due in the ordinary course and premiums due the
Pension Benefit Guaranty Corporation ("PBGC") (which contributions and premiums
have been paid when due) and (II) such liabilities that individually and in the
aggregate would not have or result in a Material Adverse Effect.
(d) Except as disclosed in Schedule 3.9(d), no ERISA Plan is a
"multiemployer plan," as defined in section 3(37) of ERISA, nor is any ERISA
Plan a plan described in section 4063(a) of ERISA.
(e) No ERISA 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. Each ERISA Plan intended to be
"qualified" within the meaning of section 401(a) of the Code has been determined
by the Internal Revenue Service to be so qualified; timely application has been
made for an updated determination of the Internal Revenue Service as to the
continued qualification of such ERISA Plan under section 401(a) of the Code as
currently in effect; no condition exists or event has occurred since the date of
such initial determination that would adversely affect the qualified status of
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any such ERISA Plan; and each trust maintained thereunder has been determined by
the Internal Revenue Service to be exempt from taxation under section 501(a) of
the Code. Each Plan has been operated and administered in all respects in
accordance with its terms and applicable Law, including but not limited to
ERISA, the Code and equivalent legislation of a foreign jurisdiction, except any
such failures to so operate or administer that individually and in the aggregate
would not have or result in a Material Adverse Effect. There are no pending, or
to the best knowledge of the Company, threatened, material claims by or on
behalf of any Plan, by any employee or beneficiary covered under any such Plan
or otherwise involving any such Plan or the assets thereof (other than routine
claims for benefits).
(f) Neither the Company nor any of the Company's Subsidiaries or ERISA
Affiliates would be liable for any amount pursuant to section 4062, 4063 or 4064
of ERISA if any ERISA Plan were to terminate that individually or in the
aggregate would have or result in a Material Adverse Effect. All contributions
required to be made to each Plan under the terms of such Plan, applicable Law or
any applicable collective bargaining agreement have been paid in full when due
except where such failure individually and in the aggregate would not be
material to the Company and its Subsidiaries taken as a whole.
Section 3.10 LITIGATION; COMPLIANCE WITH LAW.
(a) Except as disclosed in the Company SEC Documents filed prior to the date
hereof or as set forth in Schedule 3.10(a) of the Disclosure Schedule, and
except for Environmental Claims (which are the subject of Section 3.14), (I)
there is no Litigation (as defined below) pending or, to the actual knowledge of
the Company, threatened, against the Company or any of its Subsidiaries or any
of their properties or assets which, individually or in the aggregate, if
determined adversely to the Company or such Subsidiaries would reasonably be
expected to have or result in a Material Adverse Effect, and (II) neither the
Company nor any of its Subsidiaries is subject to any settlement or similar
agreement with any Governmental Entity, or to any order, judgment, decree,
injunction or award of any Governmental Entity or arbitrator, that individually
or in the aggregate would have or result in a Material Adverse Effect.
"Litigation" means any action, claim, suit, proceeding, citation, summons,
subpoena, inquiry or investigation of any nature, civil, criminal or regulatory,
in law or in equity, by or before any Governmental Entity or arbitrator
(including worker's compensation claims).
(b) Except as disclosed in the Company SEC Documents filed prior to the date
hereof, and except for violations of Environmental Laws (which are the subject
of Section 3.14), the operations of the Company and its Subsidiaries have not
been and are not being conducted, and no Real Property is, in violation of any
Law or any Permit (as defined below), except where such violations individually
and in the aggregate would not have or result in a Material Adverse Effect.
Except as set forth in Schedule 3.10(b) of the Disclosure Schedule, none of the
Company or any of its Subsidiaries has received any notice, or has knowledge of
any claim, alleging any such violation, except for such violations that
individually and in the aggregate would not have or result in a Material Adverse
Effect.
(c) The Company and its Subsidiaries hold all licenses, permits, variances,
consents, authorizations, waivers, grants, franchises, concessions, exemptions,
orders, registrations and approvals of Governmental Entities or other Persons
necessary for the ownership, leasing, operation, occupancy and use of the Real
Property (as defined in Section 3.19(c)) and the conduct of their respective
businesses as currently conducted ("Permits"), except for Permits under
Environmental Laws (which are the subject of Section 3.14) and except where the
failure to hold such Permits individually and in the aggregate would not have or
result in a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries has received notice that any Permit will be terminated or modified
or cannot be renewed in the ordinary course of business, and the Company has no
knowledge of any reasonable basis for any such termination, modification or
nonrenewal, except for such terminations, modifications or nonrenewals as
individually and in the aggregate would not have or result in a Material Adverse
Effect. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby do not and will not violate
any Permit, or result in any
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termination, modification or nonrenewals thereof, except for such violations,
terminations, modifications or nonrenewals thereof as individually and in the
aggregate would not have or result in a Material Adverse Effect.
Section 3.11 INTELLECTUAL PROPERTY. The Company and its Subsidiaries own,
or possess sufficient and legally enforceable licenses or other sufficient and
legally enforceable rights to use, any and all United States and foreign
patents, patent applications, patent disclosures, mask works, computer software,
trademarks, trade dress, trade names, copyrights and service marks, including
applications to register and registrations for any of the foregoing, as well as
trade secrets, know-how and other proprietary rights and information (all of the
foregoing, other than trademarks, trade names and service marks, referred to as
"Technology" and together with trademarks, trade names and service marks,
referred to as "Intellectual Property") necessary for the conduct of, or
otherwise material to, the business and operations of the Company and its
Subsidiaries as currently conducted ("Company Intellectual Property"), free and
clear of any Liens (except for any Permitted Liens). Schedule 3.11 of the
Disclosure Schedule lists as of the date hereof, all patents, patent
applications, patent disclosures, trademarks, trade dress and service marks and
any registrations and applications therefor, trade names, copyrights, mask works
and computer software owned by or licensed to the Company or any Subsidiary and
any material licenses thereof to or from the Company or any Subsidiary. Except
as disclosed in Schedule 3.11 of the Disclosure Schedule, the conduct of the
business of the Company and its Subsidiaries as currently conducted does not
infringe or conflict with any Intellectual Property of any Person, and none of
the Company or any of its Subsidiaries has received notice or has actual
knowledge of any such infringement or conflict except such infringements and
conflicts as individually and in the aggregate would not have or result in a
Material Adverse Effect. Except as set forth on Schedule 3.11 of the Disclosure
Schedule, to the actual knowledge of the Company, no Person is infringing any
Intellectual Property of the Company or its Subsidiaries except such
infringements as individually and in the aggregate would not have or result in a
Material Adverse Effect. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not result in the loss
of, or any Lien on, the rights of the Company or any Subsidiary with respect to
the Intellectual Property owned or used by them, except where such losses and
such Liens as individually and in the aggregate would not have or result in a
Material Adverse Effect. Each patent, patent application, trademark, trade dress
or service mark and any registration or application therefor, mask work,
copyright registration or application therefor included in any Company
Intellectual Property owned by the Company or any of its Subsidiaries is in
proper form, not disclaimed and has been properly maintained and has otherwise
been duly registered with, filed in or issued by, as the case may be, the United
States Patent and Trademark Office, United States Copyright Office or such other
filing offices, domestic or foreign, and the Company has taken such other
actions necessary to ensure full protection under any applicable laws, and such
registrations, filings, issuances and other actions remain in full force and
effect; and except as set forth in Schedule 3.11 of the Disclosure Schedule
there are no proceedings pending by or before any Governmental Entity relating
to any material Company Intellectual Property.
Section 3.12 IDENTIFIED CONTRACTS.
(a) Other than the contracts or agreements of the Company included as
exhibits to the Company's Annual Report on Form 10-K for the year ended December
31, 1994 (the "Material Contracts") and contracts or agreements between the
Company and its wholly owned Subsidiaries or between wholly owned Subsidiaries
of the Company, Schedule 3.12(a) of the Disclosure Schedule lists each of the
following contracts and agreements to which the Company or any of its
Subsidiaries is a party or by which any of them is bound (contracts and
agreements of the types described below being "Identified Contracts"), in each
case as such Identified Contract is in effect on the date hereof:
(i) contracts and agreements for the purchase of inventories, goods or
other materials by, or for the furnishing of services to, the Company or any
of its Subsidiaries that (A) require payments
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by the Company or any of its Subsidiaries in excess of $2,000,000 and (B)
have a term of one year or more and are not terminable by the Company or
Subsidiary party thereto, as the case may be, on notice of six months or
less without penalty;
(ii) contracts and agreements for the sale of inventories, goods or
other materials, or for the furnishing of services, by the Company or any of
its Subsidiaries that (A) require payments to the Company or any of its
Subsidiaries in excess of $2,000,000 and (B) have a term of one year or more
and are not terminable by the Company or Subsidiary party thereto, as the
case may be, on notice of six months or less without penalty;
(iii) manufacturer's representative, sales agency and distribution
contracts and agreements that (A) have a term of one year or more and are
not terminable by the Company or Subsidiary party thereto, as the case may
be, on notice of six months or less without penalty, or (B) are otherwise
material;
(iv) contracts and agreements (A) governing the terms of indebtedness, or
guarantees of indebtedness, of, or secured by assets of, the Company or any
of its Subsidiaries in excess of $2,000,000 principal amount in the
aggregate, or (B) governing the terms of "synthetic" or capital leases
pursuant to which the Company or any of its Subsidiaries has financial
obligations in excess of $2,000,000, or (C) providing for all obligations of
the Company and its Subsidiaries in respect of interest rate swap or similar
agreements, commodity swaps or options or similar agreements or foreign
currency hedge, exchange or similar agreements or any other derivative
instrument (other than any such agreement involving a notional amount of
less than $50,000);
(v) contracts and agreements for the direct or indirect benefit of (X)
Stockholder other than contracts and agreements that benefit all
stockholders of the Company ratably, or (Y) any of the affiliates of
Stockholder (other than the Company and its Subsidiaries and their
respective officers and directors in their capacities as such);
(vi) shareholder, voting trust or similar contracts and agreements
relating to the voting of shares or other equity or debt interests of the
Company or any of its Subsidiaries;
(vii) contracts and agreements entered into since January 1, 1990
providing for the acquisition or disposition of assets having a value in
excess of $5,000,000, other than sales or purchases of inventories in the
ordinary course of business and sales of obsolete equipment;
(viii) all of the Leases, and other leases, subleases, licenses and other
agreements relating to or constituting real property, each with a term of
one year or more and an annual payment obligation in excess of $250,000;
(ix) joint venture agreements, partnership agreements and other similar
contracts and agreements involving a sharing of profits and expenses;
(x) contracts and agreements governing the terms of indebtedness of
third parties (X) owed to the Company or any of its Subsidiaries, other than
receivables arising from the sale of goods or services, or loans or advances
not exceeding $250,000 in the aggregate made to employees of the Company or
any of its Subsidiaries, by the Company or such Subsidiary in the ordinary
course of business consistent with past practice, or (Y) to or guaranteed by
the Company or any of its Subsidiaries;
(xi) contracts and agreements prohibiting or materially restricting the
ability of the Company or any of its Subsidiaries to conduct its business,
to engage in any business or operate in any geographical area or to compete
with any Person, other than (X) distribution (including independent sales
representative) contracts and agreements listed on Schedule 3.12(a) of the
Disclosure Schedule or that have a term of less than one year or are
terminable by the Company or any Subsidiary of the Company party thereto, as
the case may be, on notice of six months or less without penalty, and, in
each case, which are not material to the Company and its Subsidiaries
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taken as a whole and (Y) supplier and customer agreements relating to
non-disclosure of confidential information of the other party which are not
material to the Company and its Subsidiaries taken as a whole.
(xii) contracts and agreements providing for future payments that are
conditioned, in whole or in part, on a change in control of the Company or
any of its Subsidiaries (other than contracts and agreements providing for
payments of less than $250,000 in the aggregate); and
(xiii) contracts and agreements that are material to the business,
operations, results of operations, condition (financial or otherwise),
assets or properties of the Company and its Subsidiaries taken as a whole.
(b) Each contract or agreement to which the Company or any of its
Subsidiaries is a party or by which any of them is bound is in full force and
effect, and neither the Company nor any of its Subsidiaries, nor, to the actual
knowledge of the Company, any other Person, is in breach of, or default under,
any such contract or agreement, and no event has occurred that with notice or
passage of time or both would constitute such a breach or default thereunder by
the Company or any of its Subsidiaries, or, to the actual knowledge of the
Company, any other Person, except for such failures to be in full force and
effect and such breaches and defaults as individually and in the aggregate would
not have or result in a Material Adverse Effect.
Section 3.13 TAXES.
(a) Except as set forth on Schedule 3.13(a) of the Disclosure Schedule, (I)
all Returns required to be filed with any taxing authority on or before the
Closing Date by, or with respect to, the Company, its United States Subsidiaries
and its non-United States Subsidiaries (since the date such non-United States
Subsidiaries became Subsidiaries of the Company) have (or by the Closing Date
will have) been filed in accordance with all applicable laws; (II) the Company
and its Subsidiaries have (or by the Closing Date will have) paid all Taxes
shown as due and payable on the Returns that have (or will have) been so filed,
and as of the time of filing such Returns correctly reflected the facts
regarding the income, business, assets, operations, activities and the status of
the Company and its Subsidiaries in all material respects; (III) the Company and
its Subsidiaries have (or by the Closing Date will have) made provision for all
material Taxes that are or may become payable by the Company and its
Subsidiaries relating to periods on or prior to the Closing Date for which no
Return has (or will have) been filed or in respect of which a final
determination has been made; (IV) all Employment and Withholding Taxes have been
either duly and timely paid to the proper governmental authority or properly set
aside in accounts for such purpose; (V) the charges, accruals and reserves for
Taxes with respect to the Company and its Subsidiaries reflected in the Balance
Sheet are adequate under GAAP to cover the Tax liabilities accruing through the
date thereof; and (VI) as of the Closing Date, there is no action, suit,
proceeding, investigation, audit or claim pending or, to the actual knowledge of
the Seller or the Company, threatened, against or with respect to the Company or
any of its Subsidiaries in respect of any Tax where there is a reasonable
possibility of a determination or decision against the Company or any of its
Subsidiaries that individually or in the aggregate would have or result in a
Material Adverse Effect.
(b) (I) The Company is (and will as of the Closing be) and has been since
January 1, 1979 a member of an affiliated group of corporations, of which
Stockholder is the common parent, eligible to file and filing a consolidated
Return for federal income Tax purposes; (II) the entire issue of the Convertible
Notes is (and will as of the Closing be) and has been since December 1, 1993
traded on or listed on and subject to the rules of the New York Stock Exchange;
(III) Schedule 3.13(b) of the Disclosure Schedule sets forth all outstanding (X)
call options, warrants, convertible obligations, convertible stock, redemption
agreements (including rights to cause the redemption of stock) and other
instruments and agreements that provide, provided or will provide for the right
(whether currently existing or contingent) to issue, acquire, redeem or transfer
stock (including an option on an option) and (Y) cash settlement options,
phantom stock, stock appreciation rights and other similar interests (except for
stock), in each case with respect to the capital stock of the Company and each
of
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its United States Subsidiaries; and (IV) in determining the terms of the
Executive Compensation Plans set forth on such Schedule 3.13(b), the Company
reviewed the terms of comparable executive compensation arrangements of other
companies, and based on its review, the Company was not and is not of the view
that the terms of such plans were excessive by reference to the services
performed by the employees to whom the rights under such plans were granted.
(c) Schedule 3.13(c) of the Disclosure Schedule sets forth each Person who,
to the actual knowledge of the Company after review of all relevant Schedules
13D and 13G filed with the SEC, at any time during the shorter of the periods
described in section 897(c)(1)(A)(ii) of the Code and the Treasury Regulations
thereunder, beneficially owned more than five percent, taking into account the
constructive ownership rules described in section 897(c)(6)(C) of the Code and
the Treasury Regulations thereunder, of the fair market value of any class of
stock of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended. "Employment
and Withholding Taxes" mean any federal, state, local, foreign or other
employment, unemployment, insurance, social security, disability, workers'
compensation, payroll, health care or other similar tax, duty or other
governmental charge or assessment or deficiencies thereof and all taxes required
to be withheld by or on behalf of each of the Company and any of its
Subsidiaries in connection with amounts paid or owing to any employee,
independent contractor, creditor or other party, in each case, on or in respect
of the business or assets thereof (including, but not limited to, all interest
and penalties thereon and additions thereto whether disputed or not). "Return"
means any return, report, declaration, form, claim for refund or information
statement relating to Taxes, including any schedule or attachment thereto, and
including any amendment thereof, that relates to the business or assets of the
Company and its Subsidiaries. "Tax" means any federal, state, local, foreign or
other income, alternative, minimum, accumulated earnings, personal holding
company, franchise, capital stock, net worth, capital, profits, windfall
profits, gross receipts, value added, sales, use, excise, custom duties,
transfer, conveyance, mortgage, registration, stamp, documentary, recording,
premium, severance, environmental, real and personal property, ad valorem,
intangibles, rent, occupancy, license, occupational, employment, unemployment
insurance, social security, disability, workers' compensation, payroll, health
care, withholding, estimated or other similar tax, duty or other governmental
charge or assessment or deficiencies thereof (including but not limited to all
interest and penalties thereon and additions thereto).
Section 3.14 ENVIRONMENTAL MATTERS.
(a) Except as disclosed in the Company SEC Documents filed prior to the date
hereof or as disclosed on Schedule 3.14(a) of the Disclosure Schedule and except
for those noncompliance matters that have been and are resolved, the Company and
its Subsidiaries have complied throughout the past five years, and are in
compliance, in all material respects with all applicable Environmental Laws (as
hereinafter defined), which compliance includes the possession of all Permits
required under applicable Environmental Laws and compliance with the terms and
conditions thereof and the making and filing with all applicable Governmental
Entities of all reports, forms and documents and the maintenance of all records
required to be made, filed or maintained by it under any Environmental Law.
(b) Except as disclosed in the Company SEC Documents filed prior to the date
hereof or as disclosed on Schedule 3.14(b) of the Disclosure Schedule, there are
no Environmental Claims (as hereinafter defined) pending or, to the actual
knowledge of the Company, threatened, against the Company or any of its
Subsidiaries that individually or in the aggregate would have or result in a
Material Adverse Effect.
(c) Except as disclosed in Schedule 3.14(a) or 3.14(b) of the Disclosure
Schedule, none of the Company and its Subsidiaries is subject to, any liability
or obligation (accrued, contingent or otherwise) on the part of any of the
Company and its Subsidiaries, including the obligation to cleanup or to take any
response action in accordance with applicable or relevant and appropriate
cleanup standards under Environmental Laws, relating to (X) the environmental
conditions on, under, or about any of the properties or assets owned, leased,
operated or used by the Company or any of its Subsidiaries or any
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predecessor thereto at the present time or in the past, including the air, soil
and groundwater conditions at such properties, or (Y) the past or present use,
management, handling, transport, treatment, generation, storage, disposal or
Release (as defined below) of any Hazardous Substances (as defined below), in
either case other than liabilities or obligations that individually and in the
aggregate would not have or result in a Material Adverse Effect. The Company has
disclosed and, where requested, made available to Parent and the Purchaser all
material information, including such studies, analyses and test results, in the
possession, custody or control of or otherwise known and available to the
Company or any of its Subsidiaries relating to (1) the environmental conditions
on, under or about any of the properties or assets owned, leased, operated or
used by any of the Company and its Subsidiaries or any predecessor in interest
thereto at the present time or in the past, and (2) any Hazardous Substances
used, managed, handled, transported, treated, generated, stored or Released by
any Person on, under, about or from, or otherwise in connection with the use or
operation of, any of the properties, assets and businesses of the Company or any
of its Subsidiaries.
(d) The records referred to in Section 3.14(a) comply, and as of their
respective dates, the reports, forms and documents referred to in Section
3.14(a) complied, in all material respects with the applicable requirements of
any Environmental Law and the applicable rules and regulations of any
Governmental Entity thereunder.
(e) As used in this Agreement:
(i) the term "Environmental Claim" means any written claim, demand,
suit, action, proceeding, investigation or notice to the Company or any of
its Subsidiaries by any Person or entity alleging any potential liability
(including, without limitation, potential liability for investigatory costs,
cleanup costs, governmental response costs, natural resource damages,
personal injuries, or penalties) arising out of, based on, or resulting from
(A) the presence, or Release into the environment, of any Hazardous
Substance (as hereinafter defined) at any location, whether or not owned,
leased, operated or used by the Company or its Subsidiaries, or (B)
circumstances forming the basis of any violation, or alleged violation, of
any applicable Environmental Law;
(ii) the term "Environmental Laws" means all Laws, relating to
pollution, cleanup, restoration or protection of the environment or to the
protection of flora or fauna or their habitat or to human or public health
or safety, including without limitation, (1) Laws relating to emissions,
discharges, Releases or threatened Releases of Hazardous Substances, or
otherwise relating to the manufacture, generation, processing, distribution,
use, sale, treatment, receipt, storage, disposal, transport or handling of
Hazardous Substances, including the Comprehensive Environmental Response,
Compensation and Liability Act and the Resource Conservation and Recovery
Act, and (2) the Occupational Safety and Health Act;
(iii) the term "Hazardous Substance" means (1) chemicals, pollutants,
contaminants, hazardous wastes, toxic substances, and oil and petroleum
products, (2) any substance that is or contains friable asbestos, urea
formaldehyde foam insulation, polychlorinated biphenyls, petroleum or
petroleum-derived substances or wastes, radon gas or related materials, (3)
any substance that requires removal or remediation under any Environmental
Law, or is defined, listed or identified as a "hazardous waste" or
"hazardous substance" thereunder, or (4) any substance that is toxic,
explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic, or otherwise hazardous; in each case in clauses (1)-(4) above
which is regulated under any Environmental Law; and
(iv) the term "Release" means any releasing, disposing, discharging,
injecting, spilling, leaking, pumping, dumping, emitting, escaping,
emptying, dispersal, leaching, migration, transporting, placing and the
like, including into or upon, any land, soil, surface water, ground water or
air, or otherwise entering into the environment.
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Section 3.15 REQUIRED VOTE BY COMPANY STOCKHOLDERS. The affirmative vote
of the holders of a majority of the outstanding Shares entitled to vote hereon
is the only vote of any class of capital stock of the Company required by the
DGCL or the Restated Certificate of Incorporation or the By-Laws of the Company
to adopt this Agreement and approve the transactions contemplated hereby.
Section 3.16 BROKERS. Except for J.P. Morgan & Co. Incorporated and
Goldman Sachs & Co., no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company or any of its Subsidiaries, that is or will be payable
by the Company or any of its Subsidiaries. The Company is solely responsible for
the fees and expenses of J.P. Morgan & Co. Incorporated and Goldman Sachs & Co.
as and to the extent set forth in the engagement letters dated April 10, 1995.
The Company has previously delivered to the Purchaser complete and correct
copies of such engagement letters.
Section 3.17 OPINIONS OF FINANCIAL ADVISORS. The Company has received (A)
an opinion of J.P. Morgan & Co. Incorporated to the effect that, as of the date
hereof, the Merger Consideration to be received by the holders of Shares in the
Merger is fair, from a financial point of view, to such holders, and (B) an
opinion of Goldman, Sachs & Co. to the effect that, as of the date hereof, the
Merger Consideration to be received by the holders of Shares is fair.
Section 3.18 ASSETS.
(a) The Company and its Subsidiaries own, or otherwise have sufficient and
legally enforceable rights to use, all of the properties and assets (real,
personal or mixed, tangible or intangible), necessary for the conduct of, or
otherwise material to, their business and operations as it is currently
conducted (the "Assets"), other than Intellectual Property (which is the subject
of Section 3.11). The Company and its Subsidiaries have valid title to, or in
the case of leased property have valid leasehold interests in, all such Assets
(other than Intellectual Property), including all such Assets (other than
Intellectual Property) reflected in the Balance Sheet or acquired since the date
thereof (except as may have been disposed of since July 1, 1995 or may be
disposed of after the date hereof in accordance herewith in either case in the
ordinary course of business consistent with past practice), in each case free
and clear of any Lien (as defined below), except Permitted Liens (as defined
below). Schedule 3.18(a) of the Disclosure Schedule sets forth a complete and
correct list of each of the countries in which Assets are located.
(b) "Lien" means any mortgage, pledge, deed of trust, hypothecation, right
of others, claim, security interest, encumbrance, burden, title defect, title
retention agreement, lease, sublease, license, occupancy agreement, easement,
covenant, condition, encroachment, voting trust agreement, interest, option,
right of first offer, negotiation or refusal, proxy, lien, charge or other
restrictions or limitations of any nature whatsoever.
(c) "Permitted Liens" means (A) Liens reserved against or reflected in the
Balance Sheet, to the extent so reserved or reflected or described in the notes
thereto, (B) Liens for Taxes not yet due and payable or which are being
contested in good faith and by appropriate proceedings if adequate reserves with
respect thereto are maintained on the Company's books in accordance with GAAP,
(C) those Liens set forth in Schedule 3.18(c) of the Disclosure Schedule and (D)
those Liens that, individually and in the aggregate with all other Permitted
Liens, do not and will not materially interfere with the use of the properties
or assets of the Company and its Subsidiaries taken as a whole as currently
used, or otherwise have or result in a Material Adverse Effect.
Section 3.19 REAL PROPERTY.
(a) Schedule 3.19(a) of the Disclosure Schedule contains a complete and
correct list of all Owned Real Property (as defined in Section 3.19(c)) setting
forth information sufficient to specifically identify such Owned Real Property
and the legal owner thereof. The Company and its Subsidiaries have good, valid
and marketable fee simple title to the Owned Real Property, free and clear of
any Liens other than Permitted Liens. There are no outstanding options or rights
of first refusal to purchase the
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Owned Real Property (as defined in Section 3.19(c)), or any material portion
thereof or interest therein. Each Lease (as defined in Section 3.19(c)) grants
the lessee under the Lease the exclusive right to use and occupy the premises
and rights demised thereunder free and clear of any Lien other than Permitted
Liens. Each of the Company and its Subsidiaries has good and valid title to the
leasehold estate or other interest created under its respective Leases free and
clear of any Liens other than Permitted Liens. Each of the Company and its
Subsidiaries enjoys peaceful and undisturbed possession under its respective
Leases of its respective Leased Real Property (as defined in Section 3.19(c))
free and clear of any Lien other than Permitted Liens.
(b) The Real Property constitutes all the fee, leasehold and other interests
in real property held by the Company and its Subsidiaries, and constitutes all
of the fee, leasehold and other interests in real property, necessary for the
conduct of, or otherwise material to, the business of the Company and its
Subsidiaries as it is currently conducted, except for any fee, leasehold or
other interest acquired or disposed of in the ordinary course of business after
the date hereof and in accordance with this Agreement. The use and operation of
the Real Property in the conduct of the business of the Company and its
Subsidiaries does not violate any instrument of record or agreement affecting
the Real Property, except for such violations as individually and in the
aggregate would not have or result in a Material Adverse Effect. No current use
by the Company and its Subsidiaries of the Real Property is dependent on a
nonconforming use or other Governmental Approval, the absence of which
individually or in the aggregate would have or result in a Material Adverse
Effect.
(c) "Leases" means the real property leases, subleases, licenses and use or
occupancy agreements pursuant to which the Company or any of its Subsidiaries is
the lessee, sublessee, licensee, user or occupant of real property, or interests
therein, necessary for the conduct of, or otherwise material to, the business of
the Company and its Subsidiaries as it is currently conducted, including,
without limitation, timber deeds, cutting rights or other timbering interests to
the extent they constitute non-fee interests in real property. "Leased Real
Property" means all interests in real property pursuant to the Leases. "Owned
Real Property" means the real property owned by the Company and its Subsidiaries
necessary for the conduct of, or otherwise material to, the business of the
Company and its Subsidiaries as it is currently conducted. "Real Property" means
the Owned Real Property and the Leased Real Property.
(d) Except as set forth in Schedule 3.19(d) of the Disclosure Schedule,
since January 1, 1995 the Company's timber business has been operated in the
ordinary course of business consistent with past practice. As of January 1,
1995, the Company owned, leased or held cutting rights with respect to
timberlands aggregating not less than 540,000 acres of land containing not less
than 500 million board feet of pine sawlogs, 2.7 million cords of pine pulp
wood, 95 million board feet of hardwood sawlogs and one million cords of
hardwood pulp wood.
Section 3.20 INSURANCE. Schedule 3.20 of the Disclosure Schedule contains
a complete and correct list and summary description of all insurance policies
maintained by or on behalf of any of the Company and its Subsidiaries as of the
date hereof. Such policies are in full force and effect, and all premiums due
thereon have been paid. The Company and its Subsidiaries have complied in all
material respects with the terms and provisions of such policies. The insurance
coverage provided by such policies is believed by the Company to be suitable for
the business and operations of the Company and its Subsidiaries.
Section 3.21 LABOR MATTERS, ETC. Except as set forth on Schedule 3.21 of
the Disclosure Schedule, none of the Company and its Subsidiaries is a party to
or bound by and none of their employees is subject to any collective bargaining
agreement relating to the terms and conditions of employment for any group of
employees (any such agreement, memorandum or document, a "Collective Bargaining
Agreement"), and there are no labor unions or other organizations representing
or, to the actual knowledge of the Company purporting to represent, any
employees employed by any of the Company and its Subsidiaries. No labor union is
currently engaged in or, to the actual knowledge of the Company, threatening,
organizational efforts with respect to any employees of the Company or any of
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its Subsidiaries. The Company and its Subsidiaries are not in material breach of
or default under any Collective Bargaining Agreement. Except as set forth on
Schedule 3.21 of the Disclosure Schedule, since January 1, 1992, there has not
occurred or been threatened, any strike, slowdown, picketing, work stoppage,
concerted refusal to work overtime or other similar labor activity with respect
to any employees of the Company or any of its Subsidiaries. Except as set forth
on Schedule 3.21 of the Disclosure Schedule, there are no labor disputes
currently subject to any pending grievance procedure, arbitration or litigation
and there is no representation petition pending or, to the actual knowledge of
the Company, threatened with respect to any employee of the Company or any of
its Subsidiaries. The Company and its Subsidiaries have complied with all
applicable Laws pertaining to the employment or termination of employment of
their respective employees, including, without limitation, all such Laws
relating to labor relations, equal employment opportunities, fair employment
practices, prohibited discrimination or distinction and other similar employment
activities, except for any failures so to comply that individually and in the
aggregate would not have or result in a Material Adverse Effect or any material
liability or obligation of the Company or any of its Subsidiaries.
Section 3.22 NO STOCKHOLDER-RELATED CLAIMS. Neither the Company nor any of
its Subsidiaries was ever engaged in the business of mining asbestos or
manufacturing or selling asbestos-containing products. The Company's Subsidiary
Riverwood International USA, Inc. ("RIUSA") was discharged and released from all
debts that arose before the date of confirmation of RIUSA's plan of
reorganization under Chapter 11 of the Bankruptcy Code, including, without
limitation, claims for damages relating to personal injuries caused by asbestos.
There is no reasonable basis for subjecting the Company or any of its
Subsidiaries or any of their respective assets to liability for any claim
relating to the mining, processing, manufacturing, distribution or sale of
asbestos or any other product containing asbestos for which Stockholder or any
of its affiliates may be liable.
Section 3.23 AFFILIATE TRANSACTIONS. Schedule 3.23 of the Disclosure
Schedule contains a complete and correct list of all agreements, contracts,
transfers of assets or liabilities or other commitments or transactions, whether
or not entered into in the ordinary course of business, to or by which the
Company or any of its Subsidiaries, on the one hand, and Stockholder or any of
its affiliates (other than the Company or any of its Subsidiaries), on the other
hand, are or have been a party or otherwise bound or affected, and that (I) are
currently pending or in effect or (II) involve continuing liabilities and
obligations that, individually or in the aggregate, have been, are or will be
material to the Company and its Subsidiaries taken as a whole.
Section 3.24 DISCLOSURE; NO OTHER REPRESENTATIONS OR WARRANTIES. (a) To
the actual knowledge of the Company, this Agreement and each certificate or
other instrument required to be furnished by or on behalf of the Company to
Parent or the Purchaser pursuant hereto at or prior to the Closing, taken as a
whole, do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated herein or therein or necessary to make the
statements contained herein or therein in light of the circumstances under which
they were made, not misleading.
(b) Except for the representations and warranties contained in this Article
III, neither the Company nor any other Person makes any other express or implied
representation or warranty on behalf of the Company or any of its affiliates,
and for the avoidance of doubt, neither the Company nor any of its affiliates
makes any express or implied representation or warranty with respect to
information contained in the confidential memoranda dated May, 1995, and June,
1995, respectively, including any projections set forth therein, or any
projections otherwise provided to Parent or the Purchaser.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER
Parent and the Purchaser represent and warrant to the Company, as of the
date hereof and as of the Closing Date, as follows:
Section 4.1 ORGANIZATION. Each of Parent and the Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware. Each of Parent and the Purchaser has all requisite corporate power
and authority to own, lease, operate or use its properties and to carry on its
business as now being conducted and is qualified or licensed to do business as a
foreign corporation and is in good standing in each jurisdiction in which it
owns real property or in which the nature of the business conducted by it makes
such qualification or licensing necessary, except where the failure to be so
qualified or licensed individually and in the aggregate would not have or result
in a material adverse effect on the business, assets, liabilities, results of
operations or financial or other condition of Parent and its Subsidiaries, taken
as a whole. Parent has previously delivered to the Company complete and correct
copies of its certificate of incorporation and by-laws and the certificate of
incorporation and by-laws of the Purchaser, in each case as currently in effect.
Section 4.2 AUTHORIZATION; VALIDITY OF AGREEMENT. Each of Parent and the
Purchaser has the requisite corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance by Parent and the Purchaser of this
Agreement and the consummation by Parent and the Purchaser of the transactions
contemplated hereby have been duly authorized by the respective Boards of
Directors of Parent and the Purchaser and no other corporate proceedings on the
part of Parent or the Purchaser are necessary to authorize the execution,
delivery and performance of this Agreement by Parent and the Purchaser and the
consummation of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Parent and the Purchaser and, assuming due
authorization, execution and delivery of this Agreement by the Seller and the
Company, is a valid and binding obligation of each of Parent and the Purchaser
enforceable against each of them in accordance with its terms, except that such
enforcement may be subject to or limited by (I) bankruptcy, insolvency or other
similar laws, now or hereafter in effect, affecting creditors rights generally,
and (II) the effect of general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
Section 4.3 CONSENTS AND APPROVALS; NO VIOLATIONS.
(a) Neither the execution, delivery and performance of this Agreement by
Parent and the Purchaser nor the consummation by Parent and the Purchaser of the
transactions contemplated hereby will (I) violate any provision of the
respective certificate of incorporation or by-laws of Parent or the Purchaser,
(II) conflict with, result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration) under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
guarantee or other evidence of indebtedness, license, lease, contract,
agreement, plan or other instrument or obligation to which Parent or any of its
Subsidiaries is a party or by which any of them or any of their assets may be
bound or (III) conflict with or violate any Laws applicable to Parent, any of
its Subsidiaries or any of their properties or assets; except in the case of
clauses (ii) and (iii) for conflicts, violations, breaches, defaults or Liens
which individually and in the aggregate would not have or result in a material
adverse effect on the business, results of operations or financial condition of
Parent and its Subsidiaries, taken as a whole, or materially impair or delay the
consummation of the transactions contemplated by this Agreement.
(b) Except as set forth in Schedule 4.3(b) of the disclosure schedule
delivered by Parent and the Purchaser to the Seller and the Company on or prior
to the date hereof (the "Purchaser Disclosure Schedule") and assuming that the
representations and warranties of the Company set forth in Section 3.4(b) and of
Stockholder set forth in Section 2(e) of the Voting Agreement are true and
correct, no filing or registration with, declaration or notification to, or
order, authorization, consent or
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approval of, any Governmental Entity is required in connection with the
execution and delivery of this Agreement by Parent or the Purchaser or the
consummation by Parent or the Purchaser of the transactions contemplated hereby,
except (I) applicable requirements under Competition Laws, (II) applicable
requirements under the Exchange Act, (III) the filing of the Certificate of
Merger with the Secretary of State, (IV) applicable requirements under "blue
sky" laws of various states, (V) applicable requirements under Environmental
Laws and (VI) such other consents, approvals, orders, authorizations,
notifications, registrations, declarations and filings (X) required to be
obtained or made by the Seller, the Company or any of its Subsidiaries or (Y)
the failure of which to be obtained or made individually and in the aggregate
would not have a material adverse effect on the business, results of operations
or financial condition of Parent and its Subsidiaries, taken as a whole, or
materially impair or delay the consummation of the transactions contemplated by
this Agreement.
Section 4.4 INFORMATION IN PROXY STATEMENT; SCHEDULE 13E-3; OFFER
DOCUMENTS.
(a) None of the information supplied in writing by Parent or the Purchaser
specifically for inclusion in the Proxy Statement (including any amendments or
supplements thereto) will, at the date mailed to stockholders and at the time of
the Special Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading.
(b) The Offer Documents (and any amendment or supplement to any of the
foregoing) in connection with the Offers (I) will not, at the date such
documents are filed with the SEC and/or mailed to the registered holders of the
Notes of each series, as the case may be, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading and (II) will comply in
all material respects with the provisions of the Exchange Act and the rules and
regulations thereunder; except that no representation is made by Parent and the
Purchaser with respect to statements made in any such document based on
information supplied by the Company specifically for inclusion therein.
(c) The Schedule 13E-3 (and any amendment or supplement thereto) (I) will
not, at the date such Schedule 13E-3 is filed with the SEC and/or mailed to the
stockholders of the Company contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading and (II) will comply in all material respects
with the provisions of the Exchange Act and the rules and regulations
thereunder; except that no representation is made by Parent or the Purchaser
with respect to statements made in the Schedule 13E-3 based on information
supplied by the Company specifically for inclusion therein.
Section 4.5 FINANCING. The Purchaser has received (I) a commitment letter
from Chemical Bank and Chemical Securities Inc., whereby such financial
institutions have committed, upon the terms and subject to the conditions set
forth therein, to provide debt financing in the amount of $1,550,000,000, (II) a
letter from Chemical Securities Inc. expressing confidence in its ability to
place an additional $650,000,000 in debt financing and (III) letters from each
of Clayton, Dubilier & Rice Fund V Limited Partnership ("Fund V") and The 1818
Fund II, whereby such investors have committed, upon the terms and subject to
the conditions set forth therein, to provide equity financing of not less than
$275,000,000, and preliminary indications of interest from other investors to
provide additional equity financing, for an aggregate amount of equity financing
of not less than $750,000,000 (less the amount of any equity not to exceed
$25,000,000 to be provided by employees and members of management of the Company
and its Subsidiaries, which to the extent not provided at the Closing shall be
subject to a back-up capital commitment by Fund V or one or more other equity
investors). The Purchaser has delivered a complete and correct copy of each
letter referred to in this Section 4.5 as in effect on the date hereof to the
Company, and the Purchaser will deliver to the Company correct and complete
copies of the definitive agreements for the financing of the Merger (the
"Financing"). As
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of the date hereof, the Purchaser believes that the aggregate proceeds of the
Financing will be sufficient to (I) pay the Merger Consideration and to perform
the obligations of Parent and the Purchaser hereunder, including the payment of
all of the expenses of Parent and Purchaser, (II) refinance any indebtedness of
the Company or its Subsidiaries which is required to be prepaid by virtue of any
of the transactions contemplated hereby or otherwise contemplated to be
refinanced in connection with the transactions contemplated hereby, including
the indebtedness set forth in Schedule 4.5 of the Purchaser Disclosure Schedule,
together with all related premia, fees and expenses and (III) together with cash
available to the Surviving Corporation, perform the obligations of the Surviving
Corporation under this Agreement. The Purchaser knows of no fact or circumstance
that it believes will prevent it from obtaining the Financing.
Section 4.6 BENEFICIAL OWNERSHIP OF SHARES. None of Parent or the
Purchaser "beneficially owns" (as defined in Rule 13d-3 under the Exchange Act)
more than 1% of the outstanding shares of Company Common Stock or any securities
convertible into or exchangeable for Company Common Stock.
Section 4.7 NO PRIOR ACTIVITIES. Except for obligations or liabilities
incurred, and business and activities arising, in connection with its
incorporation or organization or the negotiation and consummation of this
Agreement, the Voting Agreement and the Tax Matters Agreement and the
transactions contemplated hereby and thereby, including the Financing, the
Purchaser has neither incurred any material obligations or liabilities nor
engaged in any material business or activities of any type or kind whatsoever or
entered into any material agreements or arrangements with any person or entity.
Section 4.8 BROKERS. Except for James D. Wolfensohn Incorporated, no
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Parent and the
Purchaser, that is or will be payable by the Company or any of its Subsidiaries
other than following the occurrence of the Effective Time. Parent and the
Purchaser are solely responsible for the fees and expenses of James D.
Wolfensohn Incorporated.
Section 4.9 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the
representations and warranties contained in this Article IV, neither Parent, the
Purchaser nor any other Person makes any other express or implied representation
or warranty on behalf of Parent, the Purchaser or any of their affiliates.
Section 4.10 SURVIVING CORPORATION AFTER THE MERGER. (a) At and
immediately after the Effective Time, and after giving effect to the Merger, the
Financing and any other transactions contemplated in connection therewith (and
any changes in the Surviving Corporation's assets and liabilities as a result
thereof), the Surviving Corporation will not (I) be insolvent (either because
its financial condition is such that the sum of its debts is greater than the
fair value of its assets or because the present fair saleable value of its
assets will be less than the amount required to pay its probable liabilities on
its debts as they mature), (II) have unreasonably small capital with which to
engage in its business or (III) have incurred or plan to incur in debts beyond
its ability to pay as they mature.
(b) Parent and the Purchaser have engaged or will engage an appraisal firm
to deliver a letter relating to the matters set forth in Section 4.10(a), the
addressees of which will include the Company, and on which the Company will be
entitled to rely.
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ARTICLE V
COVENANTS
Section 5.1 INTERIM OPERATIONS OF THE COMPANY. The Company covenants and
agrees that, except as (I) permitted or required by this Agreement, (II)
required by applicable law or (III) agreed to in writing by Parent (which
agreement shall not be unreasonably withheld), after the date hereof and prior
to the Effective Time:
(a) the business of the Company and its Subsidiaries shall be conducted only
in the ordinary course consistent with past practice and, to the extent
consistent therewith, each of the Company and its Subsidiaries shall use its
reasonable efforts to preserve its business organization and the business
organization of its Subsidiaries intact and maintain existing relations with
customers, suppliers, employees and creditors;
(b) the Company shall not amend its Restated Certificate of Incorporation or
By-Laws;
(c) except as set forth in Schedule 5.1(c) of the Disclosure Schedule, the
Company shall not declare, set aside or pay any dividend (other than regular
quarterly dividends consistent with past practice and in no event exceeding
$0.04 per share per quarter) or other distribution payable in cash, stock or
property with respect to its capital stock; and neither the Company nor any of
its Subsidiaries shall (I) issue, sell, transfer, pledge, dispose of or encumber
any additional shares of, or securities convertible into or exchangeable for, or
options, warrants, calls, commitments or rights of any kind to acquire, any
shares of capital stock of any class of the Company or any of its Subsidiaries,
other than issuances of shares of Company Common Stock pursuant to securities,
options, warrants, calls, commitments or rights existing at the date hereof and
previously disclosed to the Purchaser in writing (including as disclosed in the
Company SEC Documents); (II) incur any long-term indebtedness (whether evidenced
by a note or other instrument, pursuant to a financing lease, sale-leaseback
transaction, or otherwise) or incur short-term indebtedness other than under
lines of credit existing on the date hereof; (III) redeem, purchase or otherwise
acquire directly or indirectly any of its capital stock or other securities; or
(IV) enter into or amend in any material respect any (X) Material Contract or
(Y) Identified Contract except in the ordinary course of business consistent
with past practice;
(d) except as set forth in Schedule 5.1(d) of the Disclosure Schedule,
neither the Company nor any of its Subsidiaries shall (I) except for normal
increases in the ordinary course of business consistent with past practice,
grant any increase in the compensation or benefits payable or to become payable
by the Company or any of its Subsidiaries to any employee; (II) adopt, enter
into, amend or otherwise increase, or accelerate the payment or vesting of the
amounts, benefits or rights payable or accrued or to become payable or accrued
under any bonus, incentive compensation, deferred compensation, severance,
termination, change in control, retention, hospitalization or other medical,
life, disability, insurance or other welfare, profit sharing, stock option,
stock appreciation right, restricted stock or other equity based, pension,
retirement or other employee compensation or benefit plan, program agreement or
arrangement; or (III) enter into or amend in any material respect any employment
or collective bargaining agreement or, except in accordance with the existing
written policies of the Company or existing contracts or agreements, grant any
severance or termination pay to any officer, director or employee of the Company
or any of its Subsidiaries;
(e) neither the Company nor its Subsidiaries shall change the accounting
principles used by it unless required by GAAP (or, if applicable with respect to
Subsidiaries, foreign generally accepted accounting principles);
(f) except as set forth in Schedule 5.1(f) of the Disclosure Schedule,
neither the Company nor any of its Subsidiaries shall acquire by merging or
consolidating with, by purchasing an equity interest in or a portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or otherwise
acquire any assets of any
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other Person (other than the purchase of assets from suppliers or vendors in the
ordinary course of business consistent with past practice) for an amount that in
the aggregate is material, individually or in the aggregate, to the Company and
its Subsidiaries, taken as a whole;
(g) except as set forth in Schedule 5.1(g) of the Disclosure Schedule,
neither the Company nor any of its Subsidiaries shall sell, lease, exchange,
transfer or otherwise dispose of, or agree to sell, lease, exchange, transfer or
otherwise dispose of, any of its Assets, except in the ordinary course of
business consistent with past practice;
(h) neither the Company nor any of its Subsidiaries shall release any third
party from its obligations (I) under any existing standstill agreement or
arrangement relating to an Acquisition Transaction (as defined in Section
5.2(c)), unless the Board determines in its good faith, reasonable judgment,
after consultation with its counsel, that the failure to do so could reasonably
be expected to constitute a breach of the Board's fiduciary duties under
applicable law, or (II) otherwise under any confidentiality or other similar
agreement, except for modifications of any such obligations under existing
commercial arrangements in the ordinary course of business consistent with past
practice;
(i) except as set forth on Schedule 5.1(i) of the Disclosure Schedule, the
Company and its Subsidiaries shall not mortgage, pledge, hypothecate, grant any
security interest in, or otherwise subject to any other Lien other than
Permitted Liens, any of the Assets;
(j) neither the Company nor its Subsidiaries shall compromise, settle,
grant any waiver or release relating to or otherwise adjust any Litigation,
except for any such compromise, settlement, waiver, release or adjustment (X) in
the ordinary course of business consistent with past practice, or involving a
payment by the Company or any of its Subsidiaries not in excess of $2,000,000 in
the aggregate, or (Y) set forth in Schedule 5.1(j) of the Disclosure Schedule,
following prior notice to and consultation with the Purchaser; and
(k) neither the Company nor any of its Subsidiaries will enter into an
agreement, contract, commitment or arrangement to do any of the foregoing.
Section 5.2 ACQUISITION PROPOSALS.
(a) The Company and its Subsidiaries shall not, directly or indirectly
through their respective officers, directors, employees or agents or any
investment banker, financial advisor, attorney, accountant or other
representative retained by the Company or any of its Subsidiaries, (I) initiate,
solicit or encourage the making of any Acquisition Proposal (as hereinafter
defined) or (II) except as permitted below, engage in negotiations or
discussions with, or furnish any information or data to, any third party
relating to, or agree to an Acquisition Proposal (other than the transactions
contemplated by this Agreement). Notwithstanding clause (ii) of the foregoing
sentence, the Company and its Subsidiaries and their respective boards of
directors and representatives (I) may participate in negotiations or discussions
(including, as a part thereof, making any counterproposal) with or furnish
information or data to any third party if the Board determines in its good
faith, reasonable judgment, after consultation with its counsel that the failure
to participate in such discussions or negotiations or to furnish such
information could reasonably be expected to constitute a breach of the Board's
fiduciary duties under applicable law, and (II) shall be permitted to (X) take
and disclose to the Company's stockholders a position with respect to the Merger
or another Acquisition Proposal, or amend or withdraw such position, pursuant to
Rules 14d-9 and 14e-2 under the Exchange Act or (Y) make disclosure to the
Company's stockholders, if the Board determines in its good faith, reasonable
judgment, after consultation with its counsel, that failure to take such action
could reasonably be expected to constitute a breach of the Board's fiduciary
duties under applicable law. The actions of any officer or director of the
Company who is also a director and/or officer of Stockholder shall be governed
by the provisions of Section 7 of the Voting Agreement and not by this Section
5.2(a) solely to the extent that such actions are taken in their capacity as an
officer or director of Stockholder.
(b) The Company shall immediately advise Parent in writing of the receipt of
any inquiries or proposals relating to an Acquisition Proposal and any actions
taken pursuant to Section 5.2(a),
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specifying the material terms and conditions of such Acquisition Proposal and
identifying the person making such Acquisition Proposal. If any such inquiry or
proposal is in writing, the Company shall promptly deliver to Parent a copy of
such inquiry or proposal, unless the Board determines in its good faith,
reasonable judgment, after consultation with its counsel, that taking such
action could reasonably be expected to constitute a breach of its fiduciary
duties under applicable law.
(c) For purposes of this Agreement, (I) "Acquisition Proposal" shall mean
any inquiry or proposal made by a third party relating to, or that could
reasonably be expected to lead to, an Acquisition Transaction, and (II)
"Acquisition Transaction" shall mean (other than the transactions contemplated
by this Agreement) (X) a merger, consolidation or other business combination,
share exchange, sale of shares of capital stock, tender offer or exchange offer
or similar transaction involving the Company or any of its Subsidiaries, (Y)
acquisition in any manner, directly or indirectly, of a material interest in any
voting securities of, or a material equity interest in a substantial portion of
the assets of, the Company or any of its Subsidiaries, including any single or
multi-step transaction or series of related transactions which is structured to
permit a third party to acquire beneficial ownership of a majority or greater
equity interest in the Company, or (Z) the acquisition in any manner, directly
or indirectly, of any material portion of the business or assets of the Company.
Section 5.3 ACCESS TO INFORMATION.
(a) From the date of this Agreement until the Effective Time, the Company
shall, and shall cause each of its Subsidiaries to, (I) afford to Parent and its
authorized representatives reasonable access during normal business hours upon
reasonable prior notice to all of its premises, properties, contracts,
commitments, data, books and records and personnel; PROVIDED, HOWEVER, that any
such access for purposes of any environmental review shall be provided pursuant
to the terms of Section 5.3(b), and (II) shall use its reasonable efforts to
cause its customers, suppliers, lenders and other creditors to be available to
Parent and the Purchaser. In addition, during such period, the Company shall,
and shall cause each of its Subsidiaries to, furnish promptly to Parent (A) a
copy of each report, schedule, registration statement and other document filed
or received by it during such period pursuant to the requirements of the
Exchange Act and (B) such other information concerning its business, properties
and personnel as Parent may reasonably request. Parent and its authorized
representatives will use all reasonable efforts to conduct all such inspections
in a manner which will minimize disruptions of the business and operations of
the Company and its Subsidiaries. Until the Effective Time, Parent and the
Purchaser will hold any such information in accordance with the provisions of
the confidentiality agreement between the Company, Stockholder and Clayton,
Dubilier & Rice, Inc., dated as of September 12, 1995 (the "Confidentiality
Agreement"), and will cause such information to be so held by their
Representatives (as defined in the Confidentiality Agreement) of Parent and the
Purchaser. Upon a termination of this Agreement pursuant to Section 7.1, Parent,
the Purchaser and their respective Representatives shall return or destroy (and
hold confidential) all information provided pursuant to this Section 5.3 and all
other Evaluation Material (as defined in the Confidentiality Agreement) pursuant
to the procedures set forth in the Confidentiality Agreement.
(b) From the date of this Agreement until the Effective Time, Parent, its
authorized representatives, and Dames & Moore (the "Environmental Consultant"),
shall have reasonable access, upon reasonable notice and during normal business
hours, to the operations, properties, assets, books, records and personnel of
the Company and each of its Subsidiaries for the purpose of conducting the
Environmental Assessment (as defined below). The scope of the Environmental
Assessment shall be agreed upon by the parties within one month of the date
hereof, and it shall include, at Parent's option, an inspection of the
facilities of the Company and its Subsidiaries, a compliance review of the
operations of the Company and its Subsidiaries, review of relevant records,
audits and internal reports, review of relevant agency records, and interviews
with personnel, of the Company and its Subsidiaries. The Company shall, and
shall cause its Subsidiaries to, offer all reasonable assistance and cooperation
to Parent, its representatives and the Environmental Consultant in connection
with the Environmental Assessment. The Environmental Consultant shall maintain
insurance reasonably
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satisfactory to the Company. Parent and the Purchaser shall be liable for, and
shall cause the Environmental Consultant to repair, any damage to the properties
of the Company and its Subsidiaries to the extent such damage is caused by the
gross negligence or willful misconduct of the Environmental Consultant. In no
event shall Parent or the Purchaser be liable for any other costs or losses
incurred by the Company or any of its Subsidiaries as a result of the
Environmental Assessment. The term "Environmental Assessment" means the
evaluation and review, and related written report thereon, prepared by the
Environmental Consultant for counsel to Parent and the Purchaser, concerning
environmental aspects of the past and present activities and operations of the
Company and its Subsidiaries and their respective predecessors, including as to
the use or condition of properties or assets of any of them or of any other
Person and as to compliance with applicable Environmental Laws.
Section 5.4 FURTHER ACTION; REASONABLE EFFORTS.
(a) Upon the terms and subject to the conditions herein provided, each of
the parties hereto agrees to use its reasonable efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including using
reasonable efforts to satisfy the conditions precedent to the obligations of any
of the parties hereto, to obtain all necessary authorizations, consents and
approvals, and to effect all necessary registrations and filings and in the case
of Parent and the Purchaser to obtain the Financing and consummate the Offers.
Each of the parties hereto will furnish to the other parties such necessary
information and reasonable assistance as such other parties may reasonably
request in connection with the foregoing and will provide the other parties with
copies of all filings made by such party with any Governmental Entity or any
other information supplied by such party to a Governmental Entity in connection
with this Agreement and the transactions contemplated hereby.
(b) Parent, the Purchaser and the Company shall use their respective
reasonable efforts to resolve such objections, if any, as may be asserted with
respect to the transactions contemplated hereby under the laws, rules,
guidelines or regulations of any Governmental Entity. Without limiting the
foregoing, each of the Company and Parent shall, as soon as practicable, file
(or cause its respective "ultimate parent entity" within the meaning of the HSR
Act to file) Notification and Report Forms under the HSR Act (as defined below)
with the Federal Trade Commission (the "FTC") and Antitrust Division of the
Department of Justice (the "Antitrust Division") and shall use reasonable
efforts to respond as promptly as practicable to all inquiries received from the
FTC or the Antitrust Division for additional information or documentation. Each
party hereto shall use its reasonable efforts to take or cause to be taken all
actions necessary, proper or advisable to obtain any consent, waiver, approval
or authorization relating to any Competition Law that is required for the
consummation of the transactions contemplated by this Agreement. "Competition
Laws" means statutes, rules, regulations, orders, decrees, administrative and
judicial doctrines, and other laws that are designed or intended to prohibit,
restrict or regulate actions having the purpose or effect of monopolization,
lessening of competition or restraint of trade, and includes the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
and, to the extent applicable, equivalent laws of the European Union or the
Member States thereof, Australia and Brazil.
Section 5.5 EMPLOYEE BENEFITS.
(a) Parent and the Purchaser hereby agree to honor, and agree to cause the
Surviving Corporation to honor, and to make required payments when due under,
all contracts and agreements of the Company and its Subsidiaries in effect as of
the date hereof with any employee, officer, director or executive or former
employee, officer, or executive of the Company or any Subsidiary thereof,
including any such compensation, employment and employee or director agreements
in existence as of the date hereof (or as modified to the extent permitted by
Section 5.1 or by agreement of the parties thereto).
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(b) In addition to the foregoing, Parent hereby agrees that for a period of
one year immediately following the Effective Time, it shall, or shall cause the
Surviving Corporation to, continue to maintain employee benefit, incentive
compensation and welfare plans, programs and policies (each referred to for
purposes of this subsection as a "plan") for the benefit of employees of the
Company and its Subsidiaries which in the aggregate provide benefits that are
substantially comparable to those provided to them under the Plans on the date
hereof. Without limiting the foregoing, for a period of one year following the
Effective Time, Parent and the Purchaser also shall, or shall cause the
Surviving Corporation to, provide as follows:
(i) that salaried and nonunion hourly employees shall generally be paid
total base salary compensation or hourly rates that are substantially
equivalent to the total base salary compensation or hourly rates applicable
to such employees immediately prior to the Effective Time;
(ii) that the relocation plan of the Company as in effect on the date
hereof shall be continued generally in accordance with its current terms and
any employee whose relocation is initiated by Parent, the Purchaser or the
Surviving Corporation within twelve months following the Effective Time will
receive benefits under such relocation package;
(iii) that any employee terminated by Parent, the Company or its
Subsidiaries within twelve months after the Effective Time will be entitled
to benefits under a severance policy, policies or agreements (including any
career assistance) that are generally comparable to the policy, policies or
agreements in effect on the date hereof for such employee; and
(iv) that any employee terminated by Parent, the Company or its
Subsidiaries within twelve months after the Effective Time shall be 100
percent vested in any defined benefit or defined contribution retirement
Plan in which such employee was participating at the time of such
termination, and each such Plan shall be amended, effective as of the
Effective Time, to provide for such vesting.
(c) If the Effective Time occurs prior to January 1, 1996, with respect to
each ERISA Plan that is intended to qualify under Section 401(a) of the Code and
that provides for a variable match, Parent and the Purchaser shall cause to be
contributed the full amount of the variable match that would have been made
thereunder in respect of the 1995 Plan year as if all performance or similar
targets specified thereunder had been achieved. If the Effective Time is after
December 31, 1995, each such Plan shall be continued until at least December 31,
1996 and the variable match in respect of the 1996 Plan Year shall be determined
using the actual performance of the Company and its subsidiaries for such year,
but adjusted to exclude any extraordinary charges, expenses or other adjustments
which result from or arise out of the transactions contemplated by this
Agreement.
(d) With respect to each incentive, bonus or profit sharing plan, program or
arrangement that may be in effect for calendar year 1995 or 1996, the awards
thereunder shall be determined with respect to 1996 and, if the Effective Time
occurs prior to January 1, 1996, with respect to 1995, based upon the actual
performance of the Company and its Subsidiaries for such year, but adjusted to
exclude any extraordinary charges, expenses or other adjustments which result
from or arise out of the transactions contemplated under this Agreement. Unless
otherwise required by this Agreement, payment to participating employees under
any such plan, program or arrangement shall be made in accordance with the terms
of such plan, program or arrangement.
(e) Parent and the Purchaser acknowledge that for purposes of those of the
Company's Plans listed on Schedule 5.5(e) of the Disclosure Schedule the
consummation of the Merger will constitute a "Change in Control" of the Company
(as that term is defined in such plans, agreements and arrangements).
(f) To the extent required by applicable law or the terms of any contract or
agreement disclosed on Schedule 3.12(a) of the Disclosure Schedule, Parent shall
recognize any union recognized by the
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Company or its Subsidiaries at the Effective Time and assume the terms of any
collective bargaining agreement in effect with such union, and shall, or shall
cause the Surviving Corporation to, honor without modification all collective
bargaining agreements as in effect at the Effective Time.
Section 5.6 STOCKHOLDERS' MEETING; PROXY STATEMENT.
(a) The Company shall in accordance with applicable law and the Restated
Certificate of Incorporation and the By-laws of the Company, duly call, set a
record date for, give notice of, convene and hold a special meeting of its
stockholders as promptly as practicable after the date hereof for the purpose of
considering and taking action upon this Agreement and such other matters as may
be appropriate at the Special Meeting (which meeting may be adjourned or
postponed as reasonably necessary to permit the satisfaction of conditions to
this Agreement or the Voting Agreement) (such meeting, as so adjourned or
postponed, being referred to as the "Special Meeting").
(b) As promptly as practicable after the date hereof, the Company shall
prepare and file with the SEC, and Parent and the Purchaser shall cooperate with
the Company in such preparation and filing, a preliminary proxy statement
relating to this Agreement and the transactions contemplated hereby and use its
best efforts to furnish the information required to be included by the SEC in
the Proxy Statement (as hereinafter defined) and, after consultation with
Parent, to respond promptly to any comments made by the SEC with respect to the
preliminary proxy statement and cause a definitive proxy statement (the "Proxy
Statement") to be mailed to its stockholders. Subject to the fiduciary duties of
the Board under applicable law, the Board shall recommend, and the Company shall
include in the Proxy Statement the recommendation of the Board, that
stockholders of the Company approve and adopt this Agreement and approve the
Merger and the other transactions contemplated hereby, and the Company shall use
all reasonable efforts to solicit from stockholders of the Company proxies in
favor of the approval and adoption of this Agreement, approval of the Merger and
the transactions contemplated hereby.
(c) Parent agrees that (I) it will provide the Company with all information
concerning Parent or the Purchaser necessary or reasonably appropriate to be
included in the Proxy Statement and (II) at the Special Meeting, if held, or any
postponement or adjournment thereof (or at any other meeting at which the Merger
or this Agreement are considered by stockholders), it will vote, or cause to be
voted, all of the Shares then owned by it, the Purchaser or any of its other
Subsidiaries, if any, in favor of the approval and adoption of this Agreement
and the transactions contemplated hereby.
(d) The Company, Parent and Purchaser shall cooperate with one another in
the preparation and filing of the Schedule 13E-3 and shall use all reasonable
efforts to promptly obtain and furnish the information required to be included
in the Schedule 13E-3 and to respond promptly to any comments or requests made
by the SEC with respect to the Schedule 13E-3. Each party hereto shall promptly
notify the other parties of the receipt of comments of, or any requests by, the
SEC with respect to the Schedule 13E-3, and shall promptly supply the other
parties with copies of all correspondence between such party (or its
representatives) and the SEC (or its staff) relating thereto. The Company,
Parent and Purchaser each agrees to correct any information provided by it for
use in the Schedule 13E-3 which shall have become, or is false or misleading.
Section 5.7 NOTIFICATION OF CERTAIN MATTERS.
(a) The Company shall give prompt notice to Parent and Parent shall give
prompt notice to the Company, of (I) the occurrence or nonoccurrence of any
event the occurrence or nonoccurrence of which would cause any representation or
warranty of the Company, or of Parent and the Purchaser, as the case may be,
contained in this Agreement to be untrue or inaccurate in any material respect
at the Effective Time and (II) any material failure of the Company, or Parent or
the Purchaser, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder. The
Company shall give prompt notice to Parent of the occurrence or nonoccurrence of
any event the occurrence or nonoccurrence of which would cause any information
set forth in the Tax Letter to be or become untrue or incorrect, such that the
condition set forth in Section 6.3(l)(ii) would not be satisfied as of the
Effective Time.
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(b) The Company may supplement any of the Schedules to the Disclosure
Schedule by delivering to Parent and the Purchaser a written supplement to such
Schedule or Schedules ("Schedule Supplements") at any time prior to the day that
is ten days prior to the Closing Date, PROVIDED that no such supplement shall be
effective unless (I) the information contained therein (X) is necessary, in the
good faith judgment of such party, to make the information set forth on the
applicable Schedule to be supplemented true and correct and (Y) relates solely
to events occurring or conditions arising subsequent to the date of this
Agreement or facts, circumstances or conditions coming to the attention of the
Company after the date hereof, and such supplement is accompanied by an
officer's certificate, signed by an officer of the Company, so certifying, and
(II) the Closing shall have occurred. From and after the Closing, the Schedule
Supplements shall form a part of this Agreement, and, to the extent the
representations and warranties of the Company contained in Article III are
qualified by reference to any such Schedule Supplement, any such Schedule
Supplements thereto shall have the effect of modifying the representation and
warranty so qualified as if it had been set forth on the corresponding Schedule
of the Disclosure Schedule delivered by the Company to the Purchaser on the date
hereof.
(c) If at any time prior to the Special Meeting any event or circumstance
relating to the Company or any of its Subsidiaries or affiliates, or its or
their respective officers or directors, should be discovered by the Company that
is required to be set forth in a supplement to the Proxy Statement, the Company
shall promptly inform Parent and the Purchaser, so supplement the Proxy
Statement and mail such supplement to its stockholders. If at any time prior to
the Special Meeting any event or circumstance relating to Parent or any of its
Subsidiaries or affiliates, or its or their respective officers or directors,
should be discovered by Parent that is required to be set forth in a supplement
to the Proxy Statement, Parent shall promptly inform the Company; and upon
receipt of such information the Company shall promptly supplement the Proxy
Statement and mail such supplement to its stockholders.
Section 5.8 DIRECTORS' AND OFFICERS' INSURANCE AND INDEMNIFICATION.
(a) The Surviving Corporation shall indemnify, defend and hold harmless the
present and former officers, directors, employees and agents of the Company and
its Subsidiaries in such capacities ("Indemnified Parties") to the fullest
extent permitted by Law against all losses, damages, expenses or liabilities
resulting from any claim, suit, action, proceeding or investigation to the
extent that it was based on the fact that such Indemnified Party is or was a
director, officer or employee of the Company or any of its Subsidiaries and
arising out of actions or omissions or alleged actions or omissions occurring at
or prior to the Effective Time.
(b) For a period of six years after the Effective Time, Parent and the
Surviving Corporation shall maintain in effect directors' and officers'
liability insurance covering the directors and officers of the Company and its
Subsidiaries who are currently covered by the Company's existing directors' and
officers' liability insurance with respect to claims arising from facts or
events which occurred before the Effective Time, on terms and conditions no less
favorable to such directors and officers than those in effect on the date
hereof; PROVIDED that notwithstanding the foregoing, Parent and the Surviving
Corporation shall be entitled to maintain such insurance pursuant to a six-year
pre-paid insurance policy with a limit of liability of $90 million in the
aggregate for such six-year period (the "Prepaid Policy") that provides for the
payment of a single premium payment at the commencement of such policy covering
the entire life thereof; PROVIDED, FURTHER that, if Parent and the Purchaser do
not so maintain such Prepaid Policy, in no event shall Parent or the Surviving
Corporation be required to make annual premium payments for such insurance to
the extent such premiums exceed $1,750,000. Parent and the Surviving Corporation
shall provide Stockholder with 30 days prior written notice of any reductions in
the level of insurance resulting from the proviso to the second sentence of this
Section 5.8(b).
(c) The Certificate of Incorporation and By-Laws of the Surviving
Corporation shall contain provisions with respect to indemnification identical
to those set forth in Article X of the Company's Restated Certificate of
Incorporation and Article VI of the Company's By-Laws on the date of this
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Agreement, which provisions shall not be amended, repealed or otherwise modified
(except as required by applicable Law) for a period of six years after the
Effective Time in any manner that would adversely affect the rights thereunder
of individuals who at any time prior to the Effective Time were directors or
officers of the Company in respect of actions or omissions occurring at or prior
to the Effective Time.
(d) The provisions of this Section 5.8 are intended for the benefit of, and
shall be enforceable by, the respective Indemnified Parties.
Section 5.9 PUBLICITY. Neither the Company, Parent nor any of their
respective affiliates (other than the Stockholder) shall issue or cause the
publication of any press release or other announcement with respect to the
Merger, this Agreement or the other transactions contemplated hereby without the
prior consultation of the other party, except as may be required by law or by
any listing agreement with a national securities exchange if all reasonable
efforts have been made to consult with the other party.
Section 5.10 CERTAIN ARRANGEMENTS. The Company shall cause all accounts
payable, accounts receivable, contracts, agreements, plans, instruments,
commitments, claims and other obligations pursuant to which the Company or any
of its Subsidiaries has made or is obligated to make payments or incur expenses
to or for the benefit of Stockholder or any of its affiliates (other than the
Company or any of its Subsidiaries) to be canceled, terminated, waived and
released at or prior to the Effective Time without any consideration being paid
or payable in respect thereof, pursuant to appropriate agreements and
instruments in form and substance mutually satisfactory to Parent and
Stockholder in their reasonable judgment; PROVIDED that the accounts payable,
accounts receivable, contracts, agreements, plans, instruments, commitments,
claims and other obligations set forth in Schedule 5.10 of the Disclosure
Schedule shall be treated in the manner expressly set forth in such Schedule.
Section 5.11 OFFERS AND SOLICITATIONS OF CONSENTS. Parent and the
Purchaser shall use reasonable efforts to make, at their expense, tender offers
(the "Offers") for all of the Notes (as defined below) upon terms and subject to
conditions to be determined by Parent and the Purchaser, and the Company shall
cooperate therewith. The Offers may be accompanied by such solicitations of
consents from the holders of the Notes as may be determined by the Purchaser to
be necessary or appropriate, relating to certain amendments (the "Proposed
Amendments") to the indentures under which each series of Notes was issued (the
"Indentures"). In the event that any registration statement is required in
connection with the Offers or such solicitations, Parent and the Purchaser shall
use reasonable efforts, at their expense, to prepare, file and cause to become
effective any such registration statement, and the Company shall cooperate
therewith as the registrant thereunder. At the Closing (provided that the
requisite consents of Note holders necessary to effect the Proposed Amendments
to any Indenture are received) the Company shall execute and deliver a
supplemental indenture (each, a "Supplemental Indenture") with the relevant
indenture trustee party to such Indenture (each, a "Trustee") to so amend the
Indenture. The term "Notes" means the indebtedness of the Company listed in
Schedule 5.11 of the Purchaser Disclosure Schedule.
Section 5.12 CERTAIN INFORMATION. From and after the date of this
Agreement, Parent and the Purchaser shall at the request of the Company advise
the Company as to the status of negotiations to obtain the Financing and shall
advise the Company promptly upon becoming aware of any event, circumstance or
condition that it believes could reasonably be expected to prevent the
availability to the Purchaser of such Financing in a timely manner. Parent and
the Purchaser shall provide the Company's financial advisors with such
information regarding the financing plans and capital structure of the Surviving
Corporation after giving effect to the Merger and the Financing as may be
reasonably requested by the Company's financial advisors for the purpose of
reviewing the matters referred to in Section 4.10 and any appraisal report
referred to therein, subject to appropriate confidentiality undertakings by such
advisors. At or prior to the Closing, Parent and the Purchaser shall provide to
the Company the letter referred to in Section 4.10(b). In the event that this
Agreement shall be terminated pursuant to Section 7.1, at the request of the
Company, Parent and the Purchaser
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shall provide to the Company a copy of each of the Environmental Assessment and
the Patent Review, but in no event shall Parent or the Purchaser be liable for
any costs or losses incurred by the Company or any of its Subsidiaries as a
result of its receipt or use of the Environmental Assessment or the Patent
Review.
Section 5.13 PATENT REVIEW. Within 70 days following the date hereof,
Parent and its outside patent counsel shall have the right to perform legal due
diligence with respect to (A) the validity and enforceability of the Company's
and its Subsidiaries' Technology and (B) whether the conduct of the business of
the Company and its Subsidiaries may infringe or otherwise conflict with the
Technology of any other Person, in each case as Parent shall reasonably deem
appropriate (the "Patent Review").
Section 5.14 ADDITIONAL CONSENTS. (a) In the event that the Purchaser
wishes to exercise its option to have the Company merge with and into the
Purchaser in the Merger, as provided in Section 1.1(b), the Purchaser shall
notify the Company of its desire to do so not later than 45 days after the date
hereof. The Company thereupon may propose a supplement to one or more Schedules
of the Disclosure Schedule by delivering to Parent and the Purchaser a proposed
written supplement thereto not later than 15 days after receipt of such notice
from the Purchaser and in no event more than 10 days prior to the Closing;
PROVIDED that no such supplement shall be effective unless (I) the information
contained therein (X) is necessary, in the good faith judgment of the Company,
to make the information set forth on such Schedule true and correct and (Y)
relates solely to the fact that the Company will not be the Surviving
Corporation following the Merger, and such supplement is accompanied by an
officer's certificate, signed by an officer of the Company, so certifying, and
(II) the Purchaser shall agree in its sole discretion to the contents of such
supplement. In the event that such supplement is acceptable to the Purchaser,
the Purchaser shall so notify the Company, and the Schedules of the Disclosure
Schedule to be so supplemented shall be deemed modified by such supplement. In
the event that such supplement is not acceptable to the Purchaser, the Purchaser
shall so notify the Company, and if the Purchaser and the Company are not able
to agree upon another form of such supplement that is acceptable to the
Purchaser within 15 days of the Company's receipt of such notice from the
Purchaser, such Schedules shall not be deemed so modified, and the Purchaser's
election pursuant to Section 1.1(b) shall accordingly be deemed rescinded. The
Purchaser shall be entitled to supplement Schedule 4.3(b) of the Purchaser
Disclosure Schedule by delivering to the Company a written supplement thereto in
no event more than 10 days prior to the Closing; PROVIDED that no such
supplement shall be effective unless the information contained therein (X) is
necessary, in the good faith judgment of the Purchaser, to make the information
set forth on such Schedule true and correct and (Y) relates solely to the fact
that the Company will not be the Surviving Corporation following the Merger, and
such supplement is accompanied by an officer's certificate, signed by an officer
of the Purchaser, so certifying. Upon delivery of such supplement, such Schedule
shall be deemed modified thereby.
(b) Each of the Company and the Purchaser shall use its reasonable efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations or
otherwise to obtain all necessary authorizations, consents and approvals, and to
effect all necessary registrations and filings, set forth on its respective
supplement to such Schedules. The Purchaser may rescind its election pursuant to
Section 1.1(b) at any time prior to 10 days before the Special Meeting. Any
additional costs incurred by the Company solely as a result of the Purchaser's
election pursuant to Section 1.1(b) shall be borne by the Purchaser, provided
that the Company shall provide the Purchaser with reasonably detailed evidence
of such costs.
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ARTICLE VI
CONDITIONS
Section 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligation of each party to effect the Merger shall be
subject to the satisfaction on or prior to the Closing Date of each of the
following conditions (any or all of which may be waived by the parties hereto in
writing, in whole or in part, to the extent permitted by applicable law):
(a) No statute, rule, order, decree or regulation shall have been enacted or
promulgated by any Governmental Entity of competent jurisdiction (whether
temporary, preliminary or permanent) which is in effect and has the effect of
prohibiting the consummation of the Merger or making the Merger illegal;
(b) There shall be no order or injunction of a Governmental Entity of
competent jurisdiction (whether temporary, preliminary or permanent) in effect
precluding, restraining, enjoining or prohibiting consummation of the Merger and
there shall be no suit, action, proceeding or investigation by a Governmental
Entity seeking to restrain, enjoin or prohibit the Merger;
(c) The applicable waiting period under the HSR Act with respect to the
actions contemplated by this Agreement shall have expired or been terminated;
(d) Other than filing the Certificate of Merger in accordance with the DGCL,
all authorizations, consents and approvals of all Governmental Entities required
to be obtained prior to consummation of the Merger shall have been obtained,
except for such authorizations, consents, and approvals the failure of which to
be obtained individually and in the aggregate would not have or result in a
Material Adverse Effect; all authorizations, consents and approvals of other
Persons set forth on Schedule 6.1(d) of the Disclosure Schedule shall have been
obtained;
(e) This Agreement shall have been approved and adopted by the affirmative
vote of the holders of a majority of the outstanding shares of Company Common
Stock, and the Merger shall have been approved by the affirmative vote of the
holders of a majority of the outstanding shares of the common stock of the
Stockholder; and all authorizations, consents and approvals of the Manville
Personal Injury Settlement Trust (the "Trust") and the Manville Property Damage
Settlement Trust (the "PD Trust") required to be obtained in connection with the
execution, delivery and performance of this Agreement, the Voting Agreement and
the Tax Matters Agreement, and the consummation of the transactions contemplated
hereby and thereby, shall have been obtained; and
(f) (I) The conditions to (X) the obligation of Stockholder to declare the
Dividend under Section 3.03(b) of the Profit Sharing Exchange Agreement, dated
October 25, 1995, between Stockholder and the Trust (the "Exchange Agreement"),
and (Y) the obligations of Stockholder and the Trust under Section 4.02 and
Section 4.03, respectively, of the Exchange Agreement, other than the condition
set forth in Section 4.03(e) thereof, shall have been satisfied or waived or
(II) the parties to the Exchange Agreement shall have determined and shall have
provided evidence of such determination that the conditions to the obligations
described in clauses (i) (x) and (y) of this Section 6.1(f) are not conditions
to the obligations of the Company to effect the Merger hereunder.
Section 6.2 CONDITIONS TO THE OBLIGATION OF THE COMPANY TO EFFECT THE
MERGER. The obligation of the Company to effect the Merger is further subject
to the satisfaction or waiver at or prior to the Effective Time of the following
conditions:
(a) The representations and warranties of Parent and the Purchaser contained
in this Agreement shall be true and correct in all material respects at and as
of the date hereof, and true and correct in all material respects at and as of
the Effective Time as if made at and as of such time; and
(b) Each of Parent and the Purchaser shall have performed in all material
respects its obligations under this Agreement required to be performed by it at
or prior to the Effective Time pursuant to the terms hereof.
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(c) The Board shall have received the letter referred to in Section 4.10(b).
(d) The Tax Matters Agreement shall be in full force and effect with respect
to Parent and the Purchaser;
(e) The Company shall have received (I) an opinion, addressed to it and
dated the Closing Date from Debevoise & Plimpton, special counsel to Parent and
the Purchaser, in form and substance reasonably satisfactory to the Company, and
(II) a certificate executed by a duly authorized officer of the Purchaser to be
delivered at the Closing and dated the Closing Date to the effect that the
conditions set forth in Sections 6.2(a) and 6.2(b) have been satisfied; and
(f) The terms and provisions of the definitive agreements relating to the
Financing shall not cause the Board in the exercise of its good faith,
reasonable judgment, after consultation with its counsel and its financial
advisor, to conclude that, notwithstanding the delivery of the letter
contemplated by Section 4.10(b), the representation set forth in Section 4.10(a)
is not true and correct in all material respects at and as of the Effective
Time.
Section 6.3 CONDITIONS TO OBLIGATIONS OF PARENT AND THE PURCHASER TO EFFECT
THE MERGER. The obligations of Parent and the Purchaser to effect the Merger
are further subject to the satisfaction or waiver at or prior to the Effective
Time of the following conditions:
(a) The representations and warranties of the Company contained in this
Agreement shall be true and correct in all material respects at and as of the
date hereof, and true and correct in all material respects at and as of the
Effective Time as if made at and as such time;
(b) The Company shall have performed in all material respects each of its
obligations under this Agreement required to be performed by it at or prior to
the Effective Time pursuant to the terms hereof;
(c) The representations and warranties of Stockholder contained in the
Voting Agreement shall be true and correct in all material respects at and as of
the date hereof, and true and correct in all material respects at and as of the
Effective Time as if made at and as such time; Stockholder shall have performed
in all material respects each of its obligations under the Voting Agreement
required to be performed by it at or prior to the Effective Time pursuant to the
terms thereof and the Voting Agreement shall be in full force and effect with
respect to Stockholder;
(d) The Environmental Consultant shall have completed the Environmental
Assessment relating to the business and operations of the Company and its
Subsidiaries and shall have submitted its report in respect thereof, which
Environmental Assessment and report shall be satisfactory in scope and substance
to Parent and the Purchaser in their reasonable judgment;
(e) Parent and the Purchaser shall have completed financing arrangements,
and entered into definitive financing agreements on terms satisfactory to them
in their reasonable judgment, and shall have received funds thereunder
sufficient to pay the Merger Consideration, repay or redeem all of the existing
indebtedness of the Company and its Subsidiaries (except for the indebtedness,
if any, set forth on Schedule 6.3(e) of the Purchaser Disclosure Schedule), and
otherwise enable Parent and the Purchaser to consummate the transactions
contemplated hereby;
(f) At least 51% in aggregate principal amount of the outstanding Notes of
each series shall have been validly tendered and not withdrawn pursuant to the
Offers prior to the Expiration Date (the "Minimum Tenders"); and the Purchaser
or the Company, as the case may be, shall have accepted for payment and paid for
all Notes validly tendered pursuant to the Offers, PROVIDED that for purposes of
satisfying this condition, such acceptance and payment by the Purchaser shall be
deemed to have occurred if the Purchaser fails to accept for payment and pay for
any Notes tendered pursuant to the Offers in violation of the terms of the
Offers and the Solicitation; and the Company and the applicable Trustee shall
have executed the Supplemental Indentures with respect to the Notes of each
series implementing the Proposed Amendments to the Indentures;
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(g) The indebtedness of the Company and its Subsidiaries set forth on
Schedule 6.3(g) of the Purchaser Disclosure Schedule shall have been repaid in
full (at the Purchaser's expense), on terms satisfactory to Parent and the
Purchaser in their reasonable judgment, and Parent and the Purchaser shall have
received evidence to such effect satisfactory to them;
(h) The number of Dissenting Shares shall not exceed ten percent (10.0%) of
the outstanding shares of Company Common Stock;
(i) No event, occurrence, fact, condition, change, development or effect
shall exist or have occurred since the date of the Balance Sheet that,
individually or in the aggregate, has had or resulted in, or could reasonably be
expected to become or result in, a Material Adverse Effect;
(j) The Tax Matters Agreement shall be in full force and effect with
respect to Stockholder and the Company;
(k) Parent and the Purchaser shall have received (I) opinions, addressed to
them and dated the Closing Date, from each of (X) Skadden, Arps, Slate, Meagher
& Flom, counsel to the Company, in form and substance reasonably satisfactory to
Parent and the Purchaser, which opinion shall state among other things that each
lender, underwriter and investor providing any portion of the Financing shall be
entitled to rely thereon, and (Y) counsel to Stockholder, in form and substance
reasonably satisfactory to Parent and Purchaser, which opinion shall be from
such counsel as is reasonably satisfactory to Parent and the Purchaser, and
shall state among other things that each lender, underwriter and investor
providing any portion of the Financing shall be entitled to rely thereon, and
(II) a certificate executed by a duly authorized officer of the Company to be
delivered at the Closing and dated the Closing Date to the effect that the
conditions set forth in Sections 6.3(a) and 6.3(b) have been satisfied;
(l) Each of (I) the representations and warranties of the Company set forth
in Section 3.13(b) and (II) the information set forth in the letter dated the
date hereof from Robert E. Cole, Senior Vice President, Corporate Finance and
Chief Financial Officer of Stockholder, addressed to Parent and the Purchaser
(the "Tax Letter") shall be true and correct at and as of the date hereof, and
at and as of the Effective Time as if made at and as of such time;
(m) The Patent Review shall not have revealed any facts or circumstances
that would reasonably be expected individually or in the aggregate to result in
(I) a Material Adverse Effect, (II) any costs, damages or liabilities that would
be material to the Company and its Subsidiaries taken as a whole, (III)
equitable remedies against the operation of any material portion of the business
of the Company and its Subsidiaries, or (IV) the inability to enforce the
Company's or any of its Subsidiaries' Technology (except as against improvements
developed by any other Person without infringement or misappropriation of any
such Technology) so as to materially impair the competitive position of the
Company and its Subsidiaries taken as a whole; PROVIDED, HOWEVER, that this
Section 6.3(m) shall no longer be a condition to the obligations of Parent or
the Purchaser hereunder if this Agreement shall not have been terminated on or
prior to the 90th day following the date hereof; and
(n) The Schedule Supplements referred to in Section 5.7(b) shall be in form
and substance satisfactory to the Purchaser in its sole discretion.
ARTICLE VII
TERMINATION
Section 7.1 TERMINATION. Notwithstanding anything herein to the contrary,
this Agreement may be terminated and the Merger may be abandoned at any time
prior to the Effective Time, whether before or after stockholder approval
thereof:
(a) By the mutual consent of the Board of Directors of Parent and the Board
of Directors of the Company.
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(b) By either the Company, on the one hand, or Parent and the Purchaser, on
the other hand, if: (I) the Merger has not been consummated on or prior to March
31, 1996, or such other date, if any, as Parent and the Company shall agree upon
(provided that the right to terminate this Agreement under this Section
7.1(b)(i) shall not be available to a 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 such date); or (II) any Governmental
Entity shall have issued a statute, order, decree or regulation or taken any
other action (which statute, order, decree, regulation or other action the
parties hereto shall use their best efforts to lift), in each case permanently
restraining, enjoining or otherwise prohibiting the Merger or making the Merger
illegal and such statute, order, decree, regulation or other action shall have
become final and non-appealable.
(c) By the Company, upon 10 days' prior written notice after Parent has
received from the Company written notice of the Company's receipt of a Superior
Proposal (as defined below) in accordance with Section 5.2, if prior to the
Effective Time the Board of Directors of the Company shall have withdrawn, or
modified or changed in a manner adverse to Parent or the Purchaser its approval
or recommendation of this Agreement or the Merger in order to approve and permit
the Company to execute a definitive agreement relating to such Superior
Proposal; PROVIDED that such termination shall not be effective until the
Company has made payment to Parent of the Fee (as defined in Section 8.1(b)) and
has either paid to Parent or deposited with a mutually acceptable escrow agent
$6,700,000 toward reimbursement to Parent and the Purchaser of Expenses (as
defined in Section 8.1(e)), in each case in accordance with Section 8.1. The
term "Superior Proposal" shall mean any Acquisition Proposal that the Board
determines in its good faith, reasonable judgment, after consultation with its
financial advisor, is more favorable to the Company or the holders of Company
Common Stock than the transactions contemplated hereby.
(d) By the Company, upon 30 days' prior written notice, in the event of a
breach of or inaccuracy in any representation, warranty, covenant or agreement
on the part of Parent or the Purchaser such that any conditions set forth in
Section 6.2(a) or 6.2(b) would not be satisfied as of the Effective Time, which
breach or inaccuracy is not cured prior to the expiration of such 30 day period;
provided that if such breach or inaccuracy is not curable, the Company may
terminate this Agreement immediately under this Section 7.1(d).
(e) By Parent, if (I) the stockholders of the Company fail to approve and
adopt this Agreement and the transactions contemplated hereby at the Special
Meeting (including any postponement or adjournment thereof); (II) the Board of
Directors of the Company withdraws, modifies or changes its recommendation of
this Agreement or the Merger in a manner adverse to Parent or the Purchaser or
shall have resolved to do any of the foregoing or the Board of Directors of the
Company shall have recommended to the stockholders of the Company any
Acquisition Transaction or resolved to do so; (III) the stockholders of
Stockholder fail to approve this Agreement and the consummation of the
transactions contemplated hereby at the Stockholder Special Meeting (as defined
in the Voting Agreement) (including any postponement or adjournment thereof);
(IV) the Board of Directors of Stockholder withdraws, modifies or changes its
recommendation of the Merger or the transactions contemplated hereby in a manner
adverse to Parent or the Purchaser or shall have resolved to do any of the
foregoing or the Board of Directors of Stockholder shall have recommended to the
stockholders of Stockholder any Acquisition Transaction or resolved to do so;
(V) any authorization, consent or approval of the Trust or the PD Trust required
to be obtained in connection with the execution, delivery and performance of
this Agreement, the Voting Agreement and the Tax Matters Agreement, and the
consummation of the transactions contemplated hereby and thereby, shall not have
been obtained prior to the date of the Special Meeting or the Stockholder
Special Meeting, or if earlier March 29, 1996 (provided that at the date of any
termination hereof pursuant to this Section 7.1(e), (1) if such date were the
Closing Date and the time of such termination were the Effective Time, the
conditions set forth in Sections 6.1(a), 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.2(a),
6.2(b) and 6.2(d) would be satisfied or waived, (2) the Purchaser shall have
entered into definitive agreements for the Financing, (3) the Purchaser shall
have delivered to the Company the letter referred to in Section 4.10(b), or an
unsigned form of such letter with an accompanying letter from
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the Purchaser to the effect that the Purchaser would be prepared to deliver a
signed form thereof at the Closing, and (4) the Company shall not have delivered
written notice to the Purchaser that the Board has made the determination
referred to in Section 6.2(f)); or (VI) any Person shall have acquired
beneficial ownership or right to acquire beneficial ownership of, or any "group"
(as such term is defined under Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder), shall have been formed that
beneficially owns, or has the right to acquire beneficial ownership of,
outstanding shares of capital stock of the Company then representing 20% or more
of the combined power to vote generally for the election of directors.
(f) By Parent, in the event that (I) the Court (as defined in the Exchange
Agreement) shall have denied the application of the Trustees (as defined in the
Exchange Agreement) referred to in Section 4.02(c) of the Exchange Agreement, or
(II) the condition set forth in Section 6.1(f) shall otherwise not have been
satisfied prior to March 29, 1996.
(g) By Parent, upon 30 days' prior written notice, in the event of a breach
of or inaccuracy in any representation, warranty, covenant or agreement on the
part of the Company such that the conditions set forth in Section 6.3(a), 6.3(b)
or 6.3(l)(i) would not be satisfied as of the Effective Time, or in the event of
a breach of or inaccuracy in any representation, warranty, covenant or agreement
on the part of Stockholder contained in the Voting Agreement such that the
condition set forth in Section 6.3(c) would not be satisfied as of the Effective
Time, or in the event that the information set forth in the Tax Letter shall be
found to be or become untrue or incorrect, such that the condition set forth in
Section 6.3(l)(ii) would not be satisfied as of the Effective Time, which breach
or inaccuracy is not cured or such information is not made true and correct
prior to the expiration of such 30 day period; PROVIDED that if such breach or
inaccuracy or failure of such information to be true and correct is not curable,
Parent may terminate this Agreement immediately under this Section 7.1(g).
(h) By Parent, on or prior to the 90th day after the date hereof, in the
event that the Patent Review shall have revealed any facts or circumstances that
would reasonably be expected individually or in the aggregate to result in (I) a
Material Adverse Effect, (II) any costs, damages or liabilities that would be
material to the Company and its Subsidiaries taken as a whole, (III) equitable
remedies against the operation of any material portion of the business of the
Company and its Subsidiaries, or (IV) the inability to enforce the Company's or
any of its Subsidiaries' Technology (except as against improvements developed by
any other Person without infringement or misappropriation of any such
Technology) so as to materially impair the competitive position of the Company
and its Subsidiaries taken as a whole.
Section 7.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement as provided in Section 7.1, written notice thereof shall forthwith be
given by the terminating party or parties to the other party or parties
specifying the provision hereof pursuant to which such termination is made, and
this Agreement shall forthwith become null and void, and there shall be no
liability on the part of Parent, the Purchaser or the Company, except as set
forth in Section 8.1 hereof and except with respect to the requirement to comply
with the Confidentiality Agreement and return, destroy or hold Evaluation
Material pursuant to the procedures set forth therein set forth in Section 5.3;
PROVIDED that nothing herein shall relieve any party from any liability or
obligation with respect to any wilful breach of this Agreement.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 FEES AND EXPENSES.
(a) Except as contemplated by this Agreement, all costs and expenses
incurred in connection with this Agreement and the consummation of the
transactions contemplated hereby shall be paid by the party incurring such
expenses.
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(b) The Company shall promptly pay to Parent a termination fee of
$37,500,000 (the "Fee") in the event that (I) this Agreement is terminated
pursuant to Section 7.1(c) or 7.1(e), or (II) (X) this Agreement is terminated
pursuant to Section 7.1(f) and (Y) prior to the first anniversary of such
termination an Acquisition Transaction is consummated (other than an Acquisition
Transaction that solely involves securities or assets of the Stockholder, other
than Company Common Stock or other securities of the Company).
(c) Subject to the final sentence of this Section 8.1(c), the Company shall
promptly pay to Parent an amount equal to all Expenses (as defined below) in the
event that:
(i) this Agreement is terminated pursuant to Section 7.1(c), 7.1(e) or
7.1(f),
(ii) this Agreement is terminated pursuant to Section 7.1(a), 7.1(b)(i)
or 7.1(g) and (X) at that time the condition set forth in Section 6.3(d)
shall not have been satisfied and (Y) the representation and warranty set
forth in Section 3.14 shall not have been true and correct at and as of the
date hereof, or at and as of the date of such termination as if made at and
as of such date,
(iii) this Agreement is terminated pursuant to Section 7.1(a), 7.1(b)(i)
or 7.1(g) and at that time the condition set forth in Section 6.3(m) shall
not have been satisfied, or is terminated pursuant to Section 7.1(h),
(iv) this Agreement is terminated pursuant to Section 7.1(a) or 7.1(b)(i)
and at that time there shall exist, or pursuant to Section 7.1(g) in the
event of, any material breach of any covenant or agreement on the part of
the Company contained in this Agreement or the Stockholder contained in the
Voting Agreement, or
(v) this Agreement is terminated pursuant to Section 7.1(a) or 7.1(b)(i)
and at that time there shall exist, or pursuant to Section 7.1(g) in the
event of, any material breach or inaccuracy of any representation or
warranty on the part of the Company contained in this Agreement or the
Stockholder contained in the Voting Agreement, or any failure of the
information set forth in the Tax Letter to be true and correct, other than
any breach or inaccuracy (an "Involuntary Breach") of any such
representation or warranty (X) as to which, as of the date hereof, the
Company and the Stockholder have no knowledge, after due inquiry, of any
facts or circumstances that cause such representation or warranty not to be
true and correct in all material respects at and as of the date hereof, or
that could reasonably be expected to cause such representation or warranty
not to be true and correct at and as of the Effective Time, and (Y) that
shall not be a result of any wilful action or inaction on the part of the
Company or the Stockholder.
Notwithstanding the foregoing sentence, (A) the aggregate amount of any payment
required to be made by the Company in respect of the Fee pursuant to Section
8.1(b) and any Expenses pursuant to this Section 8.1(c) shall be limited to (I)
in the case of a termination of this Agreement prior to January 15, 1996,
$44,200,000, and (II) in the case of a termination of this Agreement on or after
such date, $44,200,000 plus, in the event that prior to such termination the
Purchaser shall have become obligated to pay commitment fees to any of its
lenders in respect of the Financing ("Commitment Fees") upon any such
termination, the aggregate amount of such Commitment Fees, and (B) if, at the
time of any termination of this Agreement that but for this clause (B) would
result in payment of Expenses pursuant to this Section 8.1(c), there is in
effect an order or injunction of the type referred to in Section 6.1(b), then
Expenses shall be payable by the Company under Section 8.1(d) and not this
Section 8.1(c).
(d) Except in any case in which the Company has made any payment in respect
of Expenses pursuant to Section 8.1(c), the Company shall promptly pay to Parent
an amount equal to the lesser of the Expense Cap and all Expenses in the event
that (I) this Agreement is terminated pursuant to Section 7.1(a) or 7.1(b) and
at the time one or more of the conditions in Sections 6.1(a), 6.1(b), 6.1(c),
6.1(d), 6.2(f), 6.3(h) and 6.3(i) shall not have been satisfied or (II) this
Agreement is terminated pursuant to Section 7.1(g) solely in the event of any
Involuntary Breach. The term "Expense Cap"
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means (X) with respect to any termination of this Agreement prior to January 15,
1996, $10,000,000, and (Y) with respect to any termination of this Agreement on
or after such date, $20,000,000 plus the aggregate amount of any Commitment Fees
payable upon any such termination.
(e) All payments pursuant to this Section 8.1 shall be in immediately
available funds. In the event that the Company shall pay Parent an amount in
respect of Expenses as contemplated by the proviso to Section 7.1(c), and such
amount shall subsequently prove to exceed the amount of Expenses actually
incurred, Parent shall refund the excess to the Company. In the event that the
Company shall pay Parent an amount in respect of Expenses as contemplated by the
proviso to Section 7.1(c), and such amount shall subsequently prove to be less
than the amount of Expenses actually incurred, the Company shall remain liable
to reimburse Parent for such remaining Expenses as and to the extent set forth
in Section 8.1(c). The term "Expenses" means all out-of-pocket fees, costs and
other expenses incurred or assumed by Parent or the Purchaser or incurred on
their behalf in connection with this Agreement or any of the transactions
contemplated hereby, including but not limited to in connection with the
negotiation, preparation, execution and performance of this Agreement, the
structuring and financing of the Merger and the other transactions contemplated
hereby, or any commitments or agreements relating to such financing, including,
without limitation, fees and expenses (other than fees that become payable
solely as the result of the termination of this Agreement) payable to all banks,
investment banking firms, other financial institutions and other Persons and
their respective agents and counsel for arranging, committing to provide or
providing any financing for the Merger and any other transactions contemplated
hereby or structuring such transactions or such financing (other than any such
fee payable to Clayton, Dubilier & Rice, Inc. or any affiliate thereof), and all
fees and expenses of counsel, accountants, experts and environmental, actuarial,
insurance and other consultants to Parent, the Purchaser or Clayton, Dubilier &
Rice, Inc.
(f) This Section 8.1 shall survive any termination of this Agreement.
Section 8.2 AMENDMENT; WAIVER.
(a) This Agreement may be amended by the parties hereto, by action taken or
authorized by their respective Boards of Directors, at any time before or after
approval by the stockholders of the Company of the matters presented in
connection with the Merger, but after any such approval no amendment shall be
made without the approval of such stockholders if such amendment changes the
Merger Consideration or alters or changes any of the other terms or conditions
of this Agreement if such alteration or change would materially adversely affect
the rights of such stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
(b) At any time prior to the Effective Time, the parties may (I) extend the
time for the performance of any of the obligations or other acts of the other
parties hereto, (II) waive any inaccuracies in the representations and
warranties of the other parties contained herein or in any document, certificate
or writing delivered pursuant hereto or (III) waive compliance with any of the
agreements or conditions of the other parties hereto contained herein. Any
agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party. Any such waiver shall constitute a waiver only with respect to the
specific matter described in such writing and shall in no way impair the rights
of the party granting such waiver in any other respect or at any other time.
Neither the waiver by any of the parties hereto of a breach of or a default
under any of the provisions of this Agreement, nor the failure by any of the
parties, on one or more occasions, to enforce any of the provisions of this
Agreement or to exercise any right or privilege hereunder, shall be construed as
a waiver of any other breach or default of a similar nature, or as a waiver of
any of such provisions, rights or privileges hereunder. The rights and remedies
herein provided are cumulative and none is exclusive of any other, or of any
rights or remedies that any party may otherwise have at law or in equity.
Section 8.3 SURVIVAL.
(a) The respective representations and warranties of Parent, the Purchaser
and (except as provided in Section 8.3(b)) the Company contained herein or in
any certificates or other documents
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delivered prior to or as of the Effective Time shall not survive beyond the
Effective Time. The covenants and agreements of the parties hereto (including
the Surviving Corporation after the Merger) shall survive the Effective Time
without limitation (except for those which, by their terms, contemplate a
shorter survival period).
(b) The representations and warranties of the Company contained in Sections
3.5, 3.7, 3.14 and (solely as it relates to the foregoing Sections) 3.24 shall
survive the Effective Time until the date that is 30 days after the delivery of
the opinion with respect to the annual audit by the Surviving Corporation's
independent auditors of the financial statements of the Surviving Corporation
for the fiscal year ended December 31, 1996, and in any event no later than May
31, 1997.
Section 8.4 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given upon (A) transmitter's confirmation of a
receipt of a facsimile transmission, (B) confirmed delivery by a standard
overnight carrier or when delivered by hand, (C) the expiration of five business
days after the day when mailed in the United States by certified or registered
mail, postage prepaid, or (D) delivery in person, addressed at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Stockholder, to:
Manville Corporation
717 17th Street
Denver, Colorado 80202
Telephone: (303) 978-4911
Facsimile: (303) 978-4842
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Telephone: (212) 735-3000
Facsimile: (212) 735-2001
Attention: Franklin M. Gittes, Esq.
(b) if to the Company, to:
Riverwood International Corporation
3350 Cumberland Circle
Suite 1600
Atlanta, Georgia 30339
Telephone: (404) 644-3000
Facsimile: (404) 644-2929
Attention: General Counsel
and
Attention: J. Steven Beabout, Esq.
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Telephone: (212) 735-3000
Facsimile: (212) 735-2001
Attention: Franklin M. Gittes, Esq.
and
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(c) if to Parent or the Purchaser, to:
CDRO Holding Corporation
CDRO Acquisition Corporation
c/o Clayton, Dubilier & Rice
Fund V Limited Partnership
270 Greenwich Avenue
Greenwich, Connecticut 06830
Facsimile: (203) 661-0544
Telephone: (203) 661-3998
Attention: Alberto Cribiore
with a copy to:
Clayton, Dubilier & Rice, Inc.
126 East 56th Street
New York, New York 10022
Facsimile: (212) 407-5252
Telephone: (212) 407-5200
Attention: Kevin J. Conway
and with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Telephone: (212) 909-6000
Facsimile: (212) 909-6836
Attention: David A. Brittenham, Esq.
Section 8.5 INTERPRETATION. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. Whenever the words "include", "includes" or "including" are
used in this Agreement they shall be deemed to be followed by the words "without
limitation". The phrase "made available" when used in this Agreement shall mean
that the information referred to has been made available to the party to whom
such information is to be made available. The word "affiliates" when used in
this Agreement shall have the respective meanings ascribed to them in Rule 12b-2
under the Exchange Act. The phrase "beneficial ownership" and words of similar
import when used in this Agreement shall have the meaning ascribed to it in Rule
13d-3 under the Exchange Act.
Section 8.6 HEADINGS; SCHEDULES. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Disclosure of any matter pursuant to any
Schedule to the Disclosure Schedule shall not be deemed to be an admission or
representation as to the materiality of the item so disclosed.
Section 8.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
be considered one and the same agreement.
Section 8.8 ENTIRE AGREEMENT. This Agreement, together with the
Confidentiality Agreement, the Tax Matters Agreement and the Tax Letter,
constitutes the entire agreement, and supersedes all prior agreements and
understandings (written and oral), among the parties with respect to the subject
matter hereof. The parties understand that in order to induce Parent and the
Purchaser to enter into this Agreement, the Stockholder has entered into the
Voting Agreement and the Tax Matters Agreement as of the date hereof with Parent
and the Purchaser.
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<PAGE>
Section 8.9 SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void, unenforceable or against its regulatory policy,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
Section 8.10 GOVERNING LAW. This Agreement shall be governed, construed
and enforced in accordance with the laws of the State of Delaware without giving
effect to the principles of conflicts of law thereof.
Section 8.11 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties; PROVIDED, that Parent or the Purchaser may assign
this Agreement to any Subsidiary of Parent or the Purchaser, or to any lender to
Parent or the Purchaser or any Subsidiary or Affiliate thereof as security for
obligations to such lender, and PROVIDED, FURTHER, that no assignment to any
such lender shall in any way affect Parent's or the Purchaser's obligations or
liabilities 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 hereto and their respective successors and assigns, and except for
the provisions of Section 5.8 with respect to indemnification of Indemnified
Parties, the provisions of this Agreement are not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.
IN WITNESS WHEREOF, Parent, the Purchaser and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
RIVERWOOD INTERNATIONAL CORPORATION
By: /s/_THOMAS H. JOHNSON_____________
Name: Thomas H. Johnson
Title: President and
Chief Executive Officer
CDRO HOLDING CORPORATION
By: /s/_KEVIN J. CONWAY_______________
Name: Kevin J. Conway
Title: President
CDRO ACQUISITION CORPORATION
By: /s/_KEVIN J. CONWAY_______________
Name: Kevin J. Conway
Title: President
B-40
<PAGE>
ANNEX C
VOTING AND INDEMNIFICATION AGREEMENT
BY AND AMONG
MANVILLE CORPORATION,
CDRO HOLDING CORPORATION
AND
CDRO ACQUISITION CORPORATION
DATED AS OF
OCTOBER 25, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
ARTICLE I
Section 1. Certain Definitions....................................................................... C-1
Section 2. Representations and Warranties of the Stockholder......................................... C-1
Section 3. Representations and Warranties of Parent and the Purchaser................................ C-4
ARTICLE II
Section 4. Voting Agreement.......................................................................... C-5
Section 5. Adjustments; Additional Shares............................................................ C-6
Section 6. Restrictions on Transfer, Etc............................................................. C-6
Section 7. No Solicitation........................................................................... C-6
Section 8. Conditions................................................................................ C-7
ARTICLE III
Section 9. Indemnification........................................................................... C-7
ARTICLE IV
Section 10. Certain Deliveries of Parent and the Purchaser............................................ C-9
Section 11. Access to Information..................................................................... C-9
Section 12. Hart-Scott-Rodino Filing.................................................................. C-10
Section 13. Insurance................................................................................. C-10
Section 14. Publicity................................................................................. C-10
Section 15. Certain Arrangements...................................................................... C-11
ARTICLE V
Section 16. Reasonable Efforts, etc................................................................... C-11
Section 17. Non-survival of Representations and Warranties............................................ C-13
Section 18. Expenses.................................................................................. C-13
Section 19. Amendment; Waiver; Assignment............................................................. C-13
Section 20. Parties in Interest....................................................................... C-13
Section 21. Notices................................................................................... C-13
Section 22. Governing Law............................................................................. C-14
Section 23. Termination............................................................................... C-14
Section 24. Entire Agreement.......................................................................... C-14
Section 25. Descriptive Headings...................................................................... C-14
Section 26. Counterparts.............................................................................. C-15
Section 27. Post-Closing Confidentiality.............................................................. C-15
Section 28. Rights and Remedies....................................................................... C-15
Section 29. Merger Agreement.......................................................................... C-15
</TABLE>
i
<PAGE>
VOTING AND INDEMNIFICATION AGREEMENT, dated as of October 25, 1995 (this
"Agreement"), by and among Manville Corporation, a Delaware corporation (the
"Stockholder"), CDRO Holding Corporation, a Delaware corporation ("Parent"), and
CDRO Acquisition Corporation, a wholly owned subsidiary of Parent and a Delaware
corporation (the "Purchaser").
WHEREAS, Riverwood International Corporation, a Delaware corporation (the
"Company"), Parent and the Purchaser have entered into an Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), which provides, among
other things, that upon the terms and subject to the conditions set forth
therein (i) the Purchaser will be merged with and into the Company in accordance
with the General Corporation Law of the State of Delaware (the "Merger") and
(ii) each share of common stock, par value $.01 per share, of the Company
(referred to herein as "Company Common Stock") issued and outstanding
immediately prior to the Effective Time (as defined in the Merger Agreement)
will, except as otherwise expressly provided in the Merger Agreement, be
cancelled and retired and converted into the right to receive the Merger
Consideration (as defined in the Merger Agreement);
WHEREAS, as of the date hereof, the Stockholder is the record and beneficial
owner of, and has the sole right to vote and dispose of, 53,399,558 shares (the
"Shares") of Company Common Stock; and
WHEREAS, in order to induce Parent, the Purchaser and the Company to enter
into the Merger Agreement, the Stockholder has agreed to enter into this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties hereto agree as follows:
ARTICLE I
Section 1. CERTAIN DEFINITIONS. Capitalized terms used but not otherwise
defined herein shall have the meanings assigned to such terms in the Merger
Agreement.
Section 2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. The
Stockholder represents and warrants to Parent and the Purchaser, as of the date
hereof and as of the Closing Date, as follows:
(a) The Stockholder is a corporation duly organized, validly existing
and in good standing under the laws of Delaware. The Stockholder has made
available to Parent and the Purchaser its Restated Certificate of
Incorporation and By-laws as currently in effect.
(b) The Stockholder has the requisite corporate power and authority to
execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby.
(c) The execution, delivery and performance by the Stockholder of this
Agreement and the consummation by the Stockholder of the transactions
contemplated hereby have been duly authorized by the Board of Directors of
the Stockholder (the "Stockholder's Board") and, except for obtaining the
approval of the Merger and the transactions contemplated by the Merger
Agreement by the Stockholder's stockholders, no other corporate proceedings
on the part of the Stockholder are necessary to authorize the execution,
delivery and performance of this Agreement by the Stockholder and the
consummation by the Stockholder of the transactions contemplated hereby or
the consummation by the Company of the transactions contemplated by the
Merger Agreement.
(d) This Agreement has been duly executed and delivered by the
Stockholder and, assuming due authorization, execution and delivery of this
Agreement by Parent and the Purchaser, is a valid and binding obligation of
the Stockholder enforceable against the Stockholder in accordance with its
terms, except that such enforcement may be subject to or limited by (i)
bankruptcy, insolvency or other similar laws, now or hereafter in effect,
affecting creditors' rights generally and (ii) the effect of general
principles of equity (regardless of whether enforceability is considered in
a proceeding at law or in equity).
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(e) Neither the execution, delivery and performance of this Agreement by
the Stockholder nor, assuming the receipt of the approval of the Merger and
the transactions contemplated by the Merger Agreement by the Stockholder's
stockholders, the consummation by the Stockholder of the transactions
contemplated hereby will (i) violate any provision of the Restated
Certificate of Incorporation or By-Laws of the Stockholder; (ii) assuming
the receipt of the approvals described in Schedule 2(e) to this Agreement,
conflict with, result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration or to the
imposition of any Lien (as defined in Section 2(g)) on the Shares) under any
of the terms, conditions or provisions of any note, bond, mortgage,
indenture, guarantee or other evidence of indebtedness, lease, license,
contract, agreement, plan or other instrument or obligation to which the
Stockholder is a party or by which it or any of its assets may be bound or
(iii) conflict with or violate any Laws applicable to the Stockholder or any
of its properties or assets; except in the case of clauses (ii) or (iii) for
such conflicts, violations, breaches or defaults which would not
individually or in the aggregate be reasonably expected to prevent or
materially impair or delay the consummation by the Stockholder of the
transactions contemplated hereby.
(f) Except as set forth in Schedule 2(f) to this Agreement, no filing or
registration with, declaration or notification to, or order, authorization,
consent or approval of, any Governmental Entity or any other Person is
required in connection with the execution, delivery and performance of this
Agreement by the Stockholder or the consummation by the Stockholder of the
transactions contemplated hereby, except (i) applicable requirements under
Competition Laws, (ii) applicable requirements under the Exchange Act and
(iii) such other consents, approvals, orders, authorizations, notifications,
registrations, declarations and filings the failure of which to be obtained
or made individually and in the aggregate would not materially impair or
delay the consummation of the transactions contemplated hereby. Except as
disclosed in Schedule 2(f) to this Agreement, no filing or registration
with, declaration or notification to, or order, authorization, consent or
approval of, Manville Personal Injury Settlement Trust (the "Trust") or
Manville Property Damage Settlement Trust is required in connection with the
execution, delivery and performance of this Agreement by the Stockholder or
the Merger Agreement by the Company or the consummation by the Stockholder
and the Company, respectively, of the transactions contemplated hereby and
thereby. The Stockholder is the "ultimate parent entity" of the Company
within the meaning of the HSR Act.
(g) The Stockholder is the sole record and beneficial owner of
53,399,558 shares of Company Common Stock free and clear of any mortgage,
pledge, hypothecation, rights of others, claim, security interest,
encumbrance, title defect, title retention agreement, voting trust
agreement, interest, option, lien, charge or similar restrictions or
limitations (each, a "Lien") (including any restriction on the right to
vote, sell or otherwise dispose of the Shares), except as set forth in this
Agreement or Schedule 2(e) to this Agreement. There are no options or rights
to acquire, or any agreements to which the Stockholder is a party relating
to the ownership or voting of, the Stockholder's Shares, other than this
Agreement and the agreements set forth in Schedule 2(e) to this Agreement.
The Stockholder holds exclusive power to vote the Shares, subject to the
limitations set forth in this Agreement or Schedule 2(e) to this Agreement.
(h) All agreements, contracts, transfers of assets or liabilities or
other commitments or transactions, whether or not entered into in the
ordinary course of business, to or by which the Company or any of its
Subsidiaries, on the one hand, and the Stockholder or any of its affiliates
(other than the Company or any of its Subsidiaries), on the other hand, are
or have been a party or otherwise bound or affected, that (i) are currently
pending or in effect or (ii) involve continuing liabilities and obligations
that, individually or in the aggregate, have been, are or will be material
to the Company or any of its Subsidiaries taken as a whole, have either been
disclosed in the Company SEC Reports or are set forth in Schedule 3.23(a) of
the Disclosure Schedule referred to in the Merger Agreement.
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<PAGE>
(i) None of the information provided by the Stockholder specifically for
use in the Schedule 13E-3 will at the time the Schedule 13E-3 or any
amendments thereto are filed with the SEC and/or mailed to stockholders of
the Company, 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.
(j) None of the information provided by the Stockholder specifically
for use in the Offer Documents and any related schedules (and any amendment
or supplement to any of the foregoing), mailed to the registered holders of
the Notes of each series, as the case may be, in connection with the Offers,
at the date mailed will 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.
(k) The affirmative vote of the holders of a majority of the outstanding
shares of the common stock, par value $.01 per share, of the Stockholder
(the "Stockholder Common Stock") entitled to vote on the disposition of the
Stockholder Shares pursuant to the Merger at the Stockholder Special Meeting
(as defined in Section 16(b)) is the only vote of any class of capital stock
of the Stockholder that will be required to approve the Merger and the other
transactions contemplated by the Merger Agreement. Except as set forth in
the preceding sentence, no vote of any class of capital stock of the
Stockholder is required to adopt this Agreement or approve the transactions
contemplated hereby.
(l) Except as set forth in Section 3.16 of the Merger Agreement, no
broker, finder or investment banker is entitled to any brokerage, finder's
or other fee or commission in connection with the transactions contemplated
by this Agreement or the Merger Agreement based upon arrangements made by or
on behalf of the Stockholder or any of its Subsidiaries (other than the
Company or any of its Subsidiaries), that is or will be payable by the
Company or any of its Subsidiaries.
(m) There is no Litigation pending or, to the actual knowledge of the
Stockholder, threatened, against the Stockholder or any of its Subsidiaries
(other than the Company or any of its Subsidiaries) or any of their
properties or assets which, individually or in the aggregate, if determined
adversely to the Stockholder or such Subsidiary, would reasonably be
expected to materially impair or delay the consummation of the transactions
contemplated hereby and by the Merger Agreement; and neither the Stockholder
nor any of such Subsidiaries is subject to any settlement or similar
agreement with any Governmental Entity, or to any order, judgment, decree,
injunction or award of any Governmental Entity or arbitrator, that
individually or in the aggregate would materially impair or delay the
consummation of the transactions contemplated hereby and by the Merger
Agreement.
(n) The Stockholder has received a copy of a written consent of the
Selected Counsel to the Beneficiaries to the Exchange Agreement, the Second
Amended and Restated Supplemental Agreement and the Ninth Amendment to the
Trust Agreement and the consummation of the transactions contemplated
thereby. Such consent, if not amended, modified or revoked prior to the
Effective Time, would be sufficient to satisfy the condition set forth in
Section 4.02(b) of the Exchange Agreement.
(o) The Stockholder Common Stock is the only class of capital stock of
the Stockholder that will be entitled to vote at the Stockholder Special
Meeting with respect to the disposition of the Shares pursuant to the Merger
and the matters contemplated by this Agreement. There are 175,000,000 shares
of Stockholder Common Stock authorized, of which not more than 123,000,000
are outstanding as of the date hereof. All of the outstanding shares of
Stockholder Common Stock are duly authorized, validly issued, fully paid and
nonassessable.
C-3
<PAGE>
Section 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND THE
PURCHASER. Parent and the Purchaser represent and warrant to the Stockholder,
as of the date hereof and as of the Closing Date as follows:
(a) Each of Parent and the Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware.
(b) Each of Parent and the Purchaser has the requisite corporate power
and authority to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby.
(c) The execution, delivery and performance by Parent and the Purchaser
of this Agreement and the consummation by Parent and the Purchaser of the
transactions contemplated hereby have been duly authorized by the respective
Boards of Directors of Parent and the Purchaser and no other corporate
proceedings on the part of Parent or the Purchaser are necessary to
authorize the execution, delivery and performance of this Agreement by
Parent or the Purchaser and the consummation of the transactions
contemplated hereby.
(d) This Agreement has been duly executed and delivered by Parent and
the Purchaser and, assuming due authorization, execution and delivery of
this Agreement by the Stockholder, is a valid and binding obligation of each
of Parent and the Purchaser enforceable against each of them in accordance
with its terms, except that such enforcement may be subject to or limited by
(i) bankruptcy, insolvency or other similar laws, now or hereafter in
effect, affecting creditors' rights generally, and (ii) the effect of
general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity).
(e) Neither the execution, delivery and performance of this Agreement by
Parent and the Purchaser nor the consummation by Parent and the Purchaser of
the transactions contemplated hereby will (i) violate any provision of the
respective certificates of incorporation or by-laws of Parent or the
Purchaser; (ii) conflict with, result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, amendment, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, guarantee or other evidence of indebtedness,
license, lease, contract, agreement, plan or other instrument or obligation
to which Parent or the Purchaser is a party or by which either of them or
any of their assets may be bound or (iii) conflict with or violate any Laws
applicable to Parent or Purchaser or any of their properties or assets;
except in the case of clauses (ii) and (iii) for conflicts, violations,
breaches or defaults which would not individually or in the aggregate be
reasonably expected to prevent or materially impair or delay the
consummation by Parent or the Purchaser of the transactions contemplated
hereby.
(f) At and immediately after the Effective Time, and after giving effect
to the Merger, the Financing and any other transactions contemplated in
connection therewith (and any changes in the Surviving Corporation's assets
and liabilities as a result thereof), the Surviving Corporation will not (i)
be insolvent (either because its financial condition is such that the sum of
its debts is greater than the fair value of its assets or because the
present fair saleable value of its assets will be less than the amount
required to pay its probable liabilities on its debts as they mature), (ii)
have unreasonably small capital with which to engage in its business or
(iii) have incurred or plan to incur debts beyond its ability to pay as they
mature.
(g) Parent and the Purchaser have been advised as of the date hereof by
representatives of the Company that the members of management of the Company
identified on Schedule 3(g) hereto, solely in their capacity as such, have
reviewed the Company's representations and warranties set forth in Article
III of the Merger Agreement. Parent and the Purchaser have been further
advised as of the date hereof by representatives of the Company that, based
on such review by management and as of the date hereof, the Company has no
knowledge of (i) any breach
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of or inaccuracy in any representation or warranty set forth in Article III
of the Merger Agreement or (ii) any fact or circumstance that it believes is
reasonably likely to result in a breach of or inaccuracy in any
representation or warranty set forth in Article III of the Merger Agreement
which, in the case of each of clauses (i) and (ii), would constitute a
failure to satisfy any of the closing conditions set forth in Sections
6.3(a) and 6.3(i) of the Merger Agreement.
(h) None of the information supplied in writing by Parent or the
Purchaser specifically for inclusion in the Stockholder Proxy Statement (as
defined in Section 16(c)) (including any amendments or supplements thereto)
will, at the date mailed to stockholders and at the time of the Stockholder
Special 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.
(i) No filing or registration with, declaration or notification to, or
order, authorization, consent or approval of, any Governmental Entity or any
other Person is required in connection with the execution, delivery and
performance of this Agreement by Parent or the Purchaser or the consummation
by Parent or the Purchaser of the transactions contemplated hereby, except
(i) applicable requirements under Competition Laws, (ii) applicable
requirements under the Exchange Act and (iii) such other consents,
approvals, orders, authorizations, notifications, registrations,
declarations and filings the failure of which to be obtained or made
individually and in the aggregate would not materially impair or delay the
consummation of the transactions contemplated hereby.
(j) No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement or the Merger Agreement based
upon arrangements made by or on behalf of Parent and the Purchaser, that is
or will be payable by the Stockholder or, except as set forth in Section 4.8
of the Merger Agreement following the occurrence of the Effective Time, the
Company or any of its Subsidiaries.
ARTICLE II
Section 4. VOTING AGREEMENT.
(a) The Stockholder hereby agrees that from and after the Approval Date (as
defined in Section 8) and until the earliest of (i) the Effective Time, (ii) the
date on which the Merger Agreement is terminated in accordance with its terms,
or (iii) March 31, 1996 (the earliest thereof referred to herein as the
"Expiration Date"), at the Stockholder Special Meeting, the Stockholder shall
vote, or cause to be voted, all of the shares of Company Common Stock it
beneficially owns at the time of such vote, including without limitation the
Shares (the "Stockholder Shares"), in favor of the approval and adoption of the
Merger Agreement, and approval of the Merger and the other transactions
contemplated thereby; PROVIDED, HOWEVER, that the Stockholder shall not be
required to vote, or cause to be voted, Stockholder Shares pursuant to this
Section 4 if the Stockholder's Board determines in its good faith, reasonable
judgment, after consultation with its counsel, that voting the Stockholder's
Shares, as provided in this Section 4(a), could reasonably be expected to
constitute a breach of the Stockholder's Board's fiduciary duties under
applicable law.
(b) The Stockholder hereby agrees that from the date hereof until the
Expiration Date, at any special or annual meeting of stockholders of the Company
(including any adjournment or postponement thereof), or in connection with any
written consent of the stockholders of the Company, the Stockholder shall vote,
or cause to be voted, all of the Stockholder Shares against (i) any Acquisition
Transaction, or (ii) any other significant proposed corporate action of the
Company requiring stockholder approval that would materially impair or delay the
consummation of the transactions contemplated hereby and by the Merger Agreement
or (iii) any action or agreement that would result in the breach by the Company
of Section 5.1 of the Merger Agreement; PROVIDED, HOWEVER, that the Stockholder
shall be permitted to vote, or cause to be voted, the Stockholder Shares in
favor of any such
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action described in clause (i), (ii) or (iii) above if the Stockholder's Board
determines in its good faith, reasonable judgment, after consultation with its
counsel, that voting the Stockholder Shares against such actions described in
clause (i), (ii) or (iii) above could reasonably be expected to constitute a
breach of the Stockholder's Board's fiduciary duties under applicable law.
Section 5. ADJUSTMENTS; ADDITIONAL SHARES.
(a) In the event (i) of any stock dividend, stock split, recapitalization,
reclassification, combination or exchange of shares of capital stock of the
Company on, of or affecting the Shares or (ii) the Stockholder shall become the
beneficial owner of any additional shares of Company Common Stock or other
securities entitling the holder thereof to vote or give consent with respect to
the matters set forth in Section 4 hereof, then the terms of this Agreement
shall apply to the shares of capital stock held by the Stockholder immediately
following the effectiveness of the events described in clause (i) or the
Stockholder becoming the beneficial owner thereof, as described in clause (ii),
as though they were Shares hereunder.
(b) The Stockholder hereby agrees, while this Agreement is in effect, to
promptly notify Parent of the number of any new shares of the Company Common
Stock acquired by the Stockholder, if any, after the date hereof.
Section 6. RESTRICTIONS ON TRANSFER, ETC. Except as provided for herein,
the Stockholder agrees, from the date hereof until the Expiration Date, not to
(i) tender into any tender or exchange offer or otherwise sell, transfer,
pledge, assign, hypothecate or otherwise dispose of, or enter into any contract,
option or other arrangement or understanding with respect to the sale, transfer,
pledge, assignment, hypothecation or other disposition of the Stockholder Shares
(including, without limitation, through the disposition or transfer of control
of another Person) or (ii) grant any proxies with respect to the Stockholder
Shares, deposit the Stockholder Shares into a voting trust, enter into a voting
agreement with respect to any of the Stockholder Shares or otherwise restrict
the ability of the Stockholder freely to exercise all voting rights with respect
thereto, PROVIDED, HOWEVER, that the Stockholder may take any action otherwise
prohibited by clause (i) or (ii) above if the Stockholder's Board determines in
its good faith, reasonable judgment, after consultation with its counsel, that
not taking any such action could reasonably be expected to constitute a breach
of the Stockholder's Board's fiduciary duties under applicable law.
Section 7. NO SOLICITATION.
(a) The Stockholder shall not, from the date hereof until the Expiration
Date, directly or indirectly through its officers, directors, employees or
agents or any investment banker, financial advisor, attorney, accountant or
other representative retained by the Stockholder (i) initiate, solicit or
encourage the making of any Acquisition Proposal or (ii) engage in negotiations
or discussions with, or furnish any information or data to, any third party
relating to, or agree to, an Acquisition Proposal (other than the transactions
contemplated by the Merger Agreement). Notwithstanding clause (ii) above, the
Stockholder, the Stockholder's Board and any of such representatives (i) may
participate in negotiations or discussions (including, as a part thereof, making
any counterproposal) with or furnish information or data to any third party if
the Stockholder's Board determines in its good faith, reasonable judgment, after
consultation with its counsel, that the failure to participate in such
discussions or negotiations or to furnish such information could reasonably be
expected to constitute a breach of the Stockholder's Board's fiduciary duties
under applicable law and (ii) shall be permitted to (x) take and disclose to the
Company's and the Stockholder's stockholders a position with respect to the
Merger or another Acquisition Proposal, or amend or withdraw such position,
pursuant to Rules 14d-9 and 14e-2 under the Exchange Act or (y) make disclosure
to the Company's and the Stockholder's stockholders, in each case if the
Stockholder's Board determines in its good faith, reasonable judgment, after
consultation with its counsel, that the failure to take such action could
reasonably be expected to constitute a breach of the Stockholder Board's
fiduciary duties under applicable law.
(b) The Stockholder shall immediately advise Parent in writing of the
receipt of any Acquisition Proposal received by the Stockholder, and any actions
undertaken pursuant to the second sentence of
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Section 7(a), specifying the material terms and conditions of such Acquisition
Proposal and identifying the person making such Acquisition Proposal. If any
such inquiry or proposal is in writing, the Stockholder shall promptly deliver
to Parent a copy of such inquiry or proposal, unless the Stockholder's Board
determines in its good faith, reasonable judgment, after consultation with its
counsel, that taking such action could reasonably be expected to constitute a
breach of its fiduciary duties under applicable law. The Stockholder shall not
release any third party from its obligations under any existing standstill
agreement or arrangement relating to an Acquisition Transaction unless the
Stockholder's Board determines in its good faith, reasonable judgment, after
consultation with its counsel, that failure to so release could reasonably be
expected to constitute a breach of its fiduciary duties under applicable law.
(c) For purposes of this Section 7, the terms "Acquisition Proposal" and
"Acquisition Transaction" shall not refer to a transaction that solely involves
securities or assets of the Stockholder other than Company Common Stock.
Section 8. CONDITIONS. The obligation of the Stockholder to vote the
Stockholder Shares as provided in Section 4 shall be subject to the satisfaction
of the following conditions:
(a) The conditions to (i) the obligation of the Stockholder to declare
the Dividend under Section 3.03(b) of the Profit Sharing Exchange Agreement,
dated October 25, 1995 (the "Exchange Agreement"), a copy of which is
attached hereto as Annex A, between the Stockholder and the Trust and (ii)
the obligations of the Stockholder and the Trust under Section 4.02 and
Section 4.03, respectively, of the Exchange Agreement, other than the
condition set forth in Section 4.03(e) thereof, shall have been satisfied or
waived;
(b) The holders of a majority of the outstanding shares of the
Stockholder Common Stock shall have approved the disposition by the
Stockholder of the Stockholder Shares pursuant to the Merger and the other
transactions contemplated by the Merger Agreement, and the Trust shall have
consented to the Merger and the transactions contemplated by the Merger
Agreement under the agreements set forth in Schedule 2(e) to this Agreement;
and
(c) There shall be no order or injunction (whether temporary,
preliminary or permanent) of a Governmental Entity of competent jurisdiction
in effect precluding, restraining, enjoining or prohibiting consummation of
the Merger or the transactions contemplated by the Merger Agreement.
The date of the later to occur of the condition set forth in clause (a)
above and the condition set forth in clause (b) above is sometimes referred to
herein as the "Approval Date," provided that the condition set forth in clause
(c) above shall be satisfied.
ARTICLE III
Section 9. INDEMNIFICATION.
(a) The Stockholder covenants and agrees, from and after the Effective Time,
to defend, indemnify and hold harmless each of Parent, the Purchaser and their
respective affiliates and their respective officers, directors and employees
(collectively, the "Indemnitees") from and against, and pay or reimburse the
Indemnitees for, any and all actual claims, demands, liabilities, obligations,
losses, fines, costs, expenses, deficiencies or damages (collectively,
"Losses"), whether or not resulting from third party claims, including interest
and penalties recovered by a third party with respect thereto and out-of-pocket
expenses and reasonable attorneys' and accountants' fees and expenses incurred
in the investigation or defense of any of the same or in asserting, preserving
or enforcing any of their respective rights hereunder, in each case (A)
resulting from or arising out of any breach of or inaccuracy in, as of the date
hereof or as of the Closing Date (subject to Section 9(f)), any representation
or warranty of the Company set forth in Sections 3.5, 3.7 and 3.14 of the Merger
Agreement other than any such breach of or inaccuracy in any such representation
or warranty as it relates to Excluded Taxes (as defined below) or (B) resulting
from or arising out of any breach of or inaccuracy in, as of the
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date hereof or as of the Closing Date (subject to Section 9(f)), any
representation or warranty of the Company set forth in Section 3.24 of the
Merger Agreement other than any such breach of or inaccuracy in any such
representation or warranty as it relates to Excluded Taxes (as defined below)
solely to the extent that it relates specifically to Sections 3.5, 3.7 and 3.14
of the Merger Agreement; PROVIDED, HOWEVER, that in connection with clause (B)
above, in determining whether a breach of or inaccuracy in such representations
and warranties set forth in Section 3.24 of the Merger Agreement exists or has
occurred, the reference to "the actual knowledge of the Company" contained in
Section 3.24 of the Merger Agreement shall be interpreted, for purposes of this
Agreement, as referring to the actual knowledge of the Stockholder. The term
"Excluded Taxes" means Taxes, OTHER THAN (x) United States federal, state and
local Taxes other than Income Taxes (as such term is defined in the Tax Matters
Agreement) and (y) impositions in respect of matters that are the subject of
Section 3.14 of the Merger Agreement that are denominated as taxes.
Notwithstanding the foregoing, (i) the Stockholder shall not be required to
indemnify the Indemnitees with respect to Losses unless and until the aggregate
amount of all Losses exceeds $20,000,000 and then only to the extent the Losses
therefrom exceed $20,000,000; (ii) the obligation of the Stockholder to
indemnify and hold harmless the Indemnitees shall be limited to an amount equal
to 80% of the amount of Losses in excess of $20,000,000; and (iii) the aggregate
liability of the Stockholder for indemnification under this Section 9 shall not
in any event or circumstance exceed $100,000,000.
(b) Any claim for indemnification under this Section 9 must be asserted on
or prior to the date that is 30 days after the delivery of the opinion with
respect to the annual audit by the Surviving Corporation's independent auditors
of the financial statements of the Surviving Corporation for the fiscal year
ended December 31, 1996, and in any event no later than May 31, 1997. Such a
claim may be made whether or not any Losses in respect thereof then have
accrued; PROVIDED that, to the extent reasonably practicable, the notice of
claim shall include a reasonably detailed description of the anticipated Loss.
(c) The Indemnitee shall give written notice to the Stockholder promptly
after such Indemnitee has actual knowledge of any claim as to which indemnity
may be sought (which notice shall state the basis of the claim and the
representations and warranties in the Merger Agreement alleged to have been
breached), and the Indemnitee, with respect to a third party claim, shall permit
the Stockholder (at the expense of the Stockholder) to assume the defense of any
claim or any Litigation resulting therefrom, PROVIDED, that counsel for the
Stockholder who shall conduct the defense of such claim or litigation shall be
reasonably satisfactory to the Indemnitee, and the Indemnitee may participate in
such defense at such Indemnitee's sole expense. Should the Stockholder elect to
assume the defense of a third party claim, it shall notify the Indemnitee of its
election and the Stockholder shall not be liable to the Indemnitee for legal
expenses subsequently incurred by the Indemnitee in connection with the defense
thereof. The failure of any Indemnitee to give notice as provided in this
Section 9(c) shall not relieve the Stockholder of its indemnification obligation
under this Agreement except to the extent the Stockholder is materially
prejudiced as a result of such failure to give notice by the Indemnitee. The
Indemnitee shall promptly deliver to the Stockholder copies of all notices and
documents (including court papers) received by the Indemnitee relating to the
third party claim.
(d) If the Stockholder notifies an Indemnitee in writing that the
Stockholder does not believe that it is required to indemnify such Indemnitee in
respect of any claim asserted thereby (which notice shall state the basis for
the Stockholder's belief, such notice being referred to as the "Non-Indemnity
Notice"), the Stockholder or the Indemnitee shall, at the request of the other,
meet with the other to discuss the claim made and the Stockholder's reason for
not believing that it is required to indemnify therefor. The Stockholder and the
Indemnitee shall use their reasonable efforts to attempt in good faith to
resolve any dispute remaining following such meeting within 150 days following
the date of the Non-Indemnity Notice. If the Stockholder and the Indemnitee are
unable to resolve such claim to their mutual satisfaction, then any Litigation
seeking to enforce such claim for indemnification must be commenced by the
Indemnitee on or prior to the date that is 180 days after the date of delivery
of the Non-Indemnity Notice.
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(e) Except with the prior written consent of the Indemnitee, the
Stockholder, in the defense of any such claim or Litigation, shall not consent
to entry of any judgment or enter into any settlement (x) that provides for
injunctive or other nonmonetary relief affecting the Indemnitee, or (y) that
does not include as an unconditional term thereof the giving by each claimant or
plaintiff to such Indemnitee of a release from all liability with respect to
such claim or Litigation. In the event that the Indemnitee shall in good faith
determine, based upon the advice of counsel, that the Indemnitee may have
available to it one or more defenses or counterclaims that are inconsistent with
one or more of those that may be available to the Stockholder in respect of such
claim or any Litigation relating thereto, the Indemnitee shall have the right to
participate in the defense thereof, in which case the Stockholder shall be
responsible for the reasonable fees and expenses of one separate counsel for all
Indemnitees asserting claims for indemnification with respect to such claim or
Litigation. In the event that the Stockholder does not accept the defense of any
matter as above provided, the Indemnitee shall have the full right to defend
against any such claim or demand, and shall be entitled to settle or agree to
pay in full such claim or demand. In any event, the Stockholder and the
Purchaser shall cooperate in the defense of any claim or litigation subject to
this Section 9 and the records and relevant personnel of each party shall be
available to the other with respect to such defense.
(f) In determining whether there has occurred a breach of or inaccuracy in a
representation or warranty made under the Merger Agreement that is indemnifiable
hereunder, to the extent that the Disclosure Schedule referred to in the Merger
Agreement is supplemented pursuant to Section 5.7(b) of the Merger Agreement,
such determination shall be made after giving effect to the supplementing of
such Disclosure Schedule by the Schedule Supplements as set forth in Section
5.7(b) of the Merger Agreement.
(g) Unless otherwise required by law, each of Parent and the Purchaser
agrees to treat and to cause their respective affiliates to treat, for all Tax
purposes, any indemnification payment made pursuant to this Section 9 as an
adjustment to the Merger Consideration paid to the Stockholder (or, if
applicable, as the satisfaction of a liability of the Company and its
Subsidiaries assumed by the Stockholder, the assumption of which was a
contribution by the Stockholder to the capital of the Company) or as a
reimbursement for or a payment of a liability that was properly an obligation of
the Stockholder, and not of Parent, the Purchaser, the Company or any of its
Subsidiaries. Any payment made by the Stockholder to an Indemnitee in respect of
any claim for which indemnification is provided under this Section 9 shall be
net of any net amounts recovered by the Indemnitee under insurance policies with
respect to such claim; and if such recovery is received following the date of
payment of indemnity hereunder with respect to such claim, then the Indemnitee
shall refund a portion of the indemnity, in the net amount of such insurance
recovery, to the Stockholder.
ARTICLE IV
Section 10. CERTAIN DELIVERIES OF PARENT AND THE PURCHASER. Parent and the
Purchaser shall provide to the Stockholder when available, and in any event
prior to the Effective Time, (i) the letter referred to in Section 4.10(b) of
the Merger Agreement, addressed to the Stockholder, who shall be entitled to
rely thereon, (ii) any other solvency letters or similar opinions relating to
the solvency and capitalization of the Surviving Corporation that are given on
behalf of Parent or the Purchaser to any banks or lenders in connection with the
Financing, (iii) any appraisal reports referred to in any such solvency letters
and (iv) a certificate of an executive officer of Parent and an executive
officer of the Purchaser, as to the representations and warranties set forth in
Section 3(g).
Section 11. ACCESS TO INFORMATION. From the date of this Agreement until
the Effective Time, the Stockholder shall afford to Parent and its authorized
representatives reasonable access during normal business hours upon reasonable
prior notice to all of its books and records relating primarily to, and
personnel providing services to, the Company and its Subsidiaries. Parent and
its authorized representatives will use all reasonable efforts to conduct all
such inspections in a manner which will minimize disruptions of the business and
operations of the Stockholder. Parent and the Purchaser will hold any such
information in accordance with the provisions of the Confidentiality Agreement,
and
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will cause such information to be so held by their Representatives (as defined
in the Confidentiality Agreement). Upon a termination of this Agreement pursuant
to Section 23, Parent, the Purchaser and their respective Representatives shall
return or destroy (and hold confidential) all information provided pursuant to
this Section 11 pursuant to the procedures set forth in the Confidentiality
Agreement.
Section 12. HART-SCOTT-RODINO FILING. Each of the Stockholder and Parent
shall, as soon as practicable, file (or, in the case of Parent, cause its
"ultimate parent entity" within the meaning of the HSR Act to file) Notification
and Report Forms under the HSR Act with the FTC and the Antitrust Division, if
required under applicable law, and shall use reasonable efforts to respond as
promptly as practicable to all inquiries received from the FTC or the Antitrust
Division for additional information or documentation. Each party hereto shall
use its reasonable efforts to take or cause to be taken all actions necessary,
proper or advisable to obtain any consent, waiver, approval or authorization
relating to any Competition Law that is required for the consummation of the
transactions contemplated by this Agreement.
Section 13. INSURANCE.
(a) In the event that, after the Effective Time, the Company or any of its
Subsidiaries (or any successor thereto) (an "Insured Party") shall suffer any
loss that would be covered by any insurance policy maintained by the Stockholder
for the benefit of the Company or any of its Subsidiaries (but not any policy
under which an Insured Party is entitled directly as a named insured to present
a claim) (an "Insured Claim"), the Stockholder shall, at the expense (to the
extent not paid or reimbursed by the insurers) of the Insured Party promptly
reimbursed to the Stockholder upon its written request, present and diligently
prosecute any reasonable claim for payment under such policy in respect of such
loss, and pay to such Insured Party the proceeds of such claim under such policy
as reimbursement in respect of the amount of such loss, subject to the
provisions of this Section 13.
(b) The Stockholder shall not be obligated to, or to cause any of its
affiliates to, present or prosecute any claim under any such insurance policy
with respect to any Insured Claim unless (i) such Insured Claim is based upon a
condition or event that arose or occurred (as determined under the applicable
insurance policy) prior to the Effective Time and (ii) the relevant Insured
Party cooperates fully at its expense (to the extent not paid or reimbursed by
the insurers) with the Stockholder's insurers in the investigation and handling
of such Insured Claim and (in the case of any Insured Claim arising out of a
third party claim) the defense thereof.
(c) With respect to any Insured Claim, the amount of proceeds of any such
insurance claim to be paid over to the Insured Party shall be limited to the
amount actually received by the Stockholder and its affiliates from its insurers
with respect to such claim (net of any unpaid deductible amount or other unpaid
amount that the Stockholder is required to reimburse its insurers under its
contractual agreements with them, in each case with respect to such claim.
Notwithstanding the foregoing, the amount of proceeds of any insurance claim in
respect of domestic primary liability insurance or insured workers compensation
insurance shall be paid to or on behalf of an Insured Party on a "first-dollar"
basis and such amount shall include all self-insured retention amounts paid or
required to be paid by the Stockholder.
(d) Nothing contained in this Section 13 shall (i) prevent any Insured Party
from presenting a claim for payment in respect of any loss under any insurance
policy under which such Insured Party is entitled directly as a named insured to
present such a claim or (ii) prejudice in any way the rights of any Insured
Party in respect of any insurance policy maintained by the Stockholder for the
benefit of the Company or any of its Subsidiaries on a "guaranteed cost" basis.
Nothing contained in this Section 13 shall require the Stockholder or any of its
affiliates to keep in force and effect after the Closing any insurance coverage
in effect prior to or at the Effective Time.
Section 14. PUBLICITY. Neither the Stockholder, Parent nor any of their
respective affiliates (other than the Company or any of its Subsidiaries and
their respective officers and directors) shall
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issue or cause the publication of any press release or other announcement with
respect to this Agreement or the Merger Agreement or the other transactions
contemplated hereby or thereby without prior consultation with the other party,
except as may be required by law, a court filing or by any listing agreement
with a national securities exchange if all reasonable efforts have been made to
consult with the other party.
Section 15. CERTAIN ARRANGEMENTS. The Stockholder shall cause all accounts
payable, accounts receivable, contracts, agreements, plans, instruments,
commitments, claims and other obligations pursuant to which the Company or any
of its Subsidiaries has made, or is obligated to make, payments or incur
expenses to or for the benefit of the Stockholder or any of its affiliates
(other than the Company or any of its Subsidiaries) to be cancelled, terminated,
waived and released at or prior to the Effective Time without any consideration
being paid or payable in respect thereof, pursuant to appropriate agreements and
instruments in form and substance mutually satisfactory to Parent and the
Stockholder in their reasonable judgment; PROVIDED that the accounts payable,
accounts receivable, contracts, agreements, plans, instruments, commitments,
claims and other obligations set forth in Schedule 5.10 of the Disclosure
Schedule referred to in the Merger Agreement shall be treated in the manner
expressly set forth in such Schedule.
ARTICLE V
Section 16. REASONABLE EFFORTS, ETC.
(a) Upon the terms and subject to the conditions herein provided, each of
the parties hereto agrees to use its reasonable efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations or otherwise to consummate
and make effective the transactions contemplated by this Agreement. Without
limiting the generality of the foregoing, the Stockholder agrees after the date
hereof, to (i) use its reasonable efforts to obtain approval of the Merger and
the other transactions contemplated by the Merger Agreement by its stockholders,
(ii) prepare, file and distribute to its stockholders a proxy statement with
respect to such stockholder approval, in compliance with applicable securities
laws and regulations and the rules of any stock exchange on which the
Stockholder Common Stock is listed or traded, (iii) call a special meeting of
stockholders for the purpose of voting upon such approval, (iv) use efforts
consistent with past practice to solicit proxies from its stockholders, (v) to
the extent consistent with the exercise by the Board of its fiduciary duties
under applicable law, recommend in its proxy solicitation material that
stockholders vote in favor of such approval, and (vi) use reasonable efforts to
satisfy the conditions set forth in Sections 3.03(b), 4.02 and 4.03 of the
Exchange Agreement, including receipt of the Order (as defined in the Exchange
Agreement).
(b) The Stockholder shall, in accordance with applicable law and the
Restated Certificate of Incorporation and the By-laws of the Stockholder, duly
call, set a record date for, give notice of, convene and hold a special meeting
of its stockholders as promptly as practicable (it being understood that such
meeting may be adjourned or postponed as reasonably necessary to permit the
occurrence of the Approval Date) after the date hereof for the purpose of
considering and taking action upon this Agreement and the Merger and such other
matters as may be appropriate at such special meeting (such meeting, as so
adjourned or postponed, being referred to as the "Stockholder Special Meeting").
(c) As promptly as practicable after the date hereof, the Stockholder shall
prepare and file with the SEC, and Parent and the Purchaser shall cooperate with
the Stockholder in such preparation and filing, a preliminary proxy statement
relating to this Agreement and the Merger and the transactions contemplated
hereby and by the Merger Agreement and use its best efforts to furnish the
information required to be included by the SEC in the Stockholder Proxy
Statement (as hereinafter defined) and, after consultation with Parent, to
respond promptly to any comments made by the SEC with respect to the preliminary
proxy statement and cause a definitive proxy statement (the "Stockholder Proxy
Statement") to be mailed to its stockholders. Subject to the fiduciary duties of
the Stockholder's Board
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under applicable law, the Stockholder shall include in the Stockholder Proxy
Statement the recommendation of the Stockholder's Board that stockholders of the
Stockholder approve and adopt this Agreement and approve the Merger and the
other transactions contemplated by the Merger Agreement and shall use all
reasonable efforts to solicit from stockholders of the Stockholder proxies in
favor of the approval and adoption of the Merger and the transactions
contemplated by the Merger Agreement.
(d) Parent agrees that it will provide the Stockholder with all necessary
information concerning Parent or the Purchaser necessary or reasonably
appropriate to be included in the Stockholder Proxy Statement.
(e) The Stockholder shall cooperate with Parent and the Purchaser in the
preparation and filing of the Schedule 13E-3 and shall use all reasonable
efforts to promptly obtain and furnish the information required to be included
in the Schedule 13E-3 and to respond promptly to any comments or requests made
by the SEC with respect to the Schedule 13E-3. The Stockholder agrees to correct
any information provided by it for use in the Schedule 13E-3 which shall have
become, or is, false or misleading.
(f) The Stockholder shall give prompt notice to Parent and Parent shall give
prompt notice to the Stockholder, of (i) the occurrence or nonoccurrence of any
event the occurrence or nonoccurrence of which would cause any representation or
warranty of the Stockholder, or of Parent and the Purchaser, as the case may be,
contained in this Agreement to be untrue or inaccurate in any material respect
at the Effective Time and (ii) any material failure of the Stockholder, or
Parent or the Purchaser, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder.
(g) If at any time prior to the Stockholder Special Meeting any event or
circumstance relating to the Stockholder or any of its Subsidiaries or
affiliates, or its or their respective officers or directors, should be
discovered by the Stockholder that is required to be set forth in a supplement
to the Stockholder Proxy Statement, the Stockholder shall promptly inform the
Parent and the Purchaser, so supplement the Stockholder Proxy Statement and mail
such supplement to its stockholders. If at any time prior to the Stockholder
Special Meeting any event or circumstance relating to Parent or any of its
Subsidiaries or affiliates, or its or their respective officers or directors,
should be discovered by Parent that is required to be set forth in a supplement
to the Stockholder Proxy Statement, Parent shall promptly inform the
Stockholder; and upon receipt of such information the Stockholder shall promptly
supplement the Stockholder Proxy Statement and mail such supplement to its
stockholders.
(h) From and after the date of this Agreement, Parent and the Purchaser
shall, at the request of the Stockholder, advise the Stockholder as to the
status of negotiations to obtain the Financing and shall advise the Stockholder
promptly upon becoming aware of any event, circumstance or condition that Parent
or the Purchaser believes could reasonably be expected to prevent the
availability to the Purchaser of such Financing in a timely manner. Parent and
the Purchaser shall provide the Stockholder's financial advisors with such
information regarding the financing plans and capital structure of the Surviving
Corporation after giving effect to the Merger and the Financing as may be
reasonably requested by the Stockholder's financial advisors for the purpose of
reviewing the matters referred to in Section 3(f), subject to appropriate
confidentiality undertakings by such advisors. In the event that the Merger
Agreement shall be terminated pursuant to Section 7.1 thereof, at the request of
the Stockholder, Parent and the Purchaser shall provide to the Stockholder a
copy of each of the Environmental Assessment and the Patent Review, but in no
event shall Parent or the Purchaser be liable for any costs or losses incurred
by the Stockholder or any of its Subsidiaries as a result of its receipt or use
of the Environmental Assessment or the Patent Review. In the event that a claim
for indemnification is made pursuant to Section 9 in respect of a breach of or
inaccuracy in Section 3.14 of the Merger Agreement or Section 3.24 of the Merger
Agreement to the extent it relates to Section 3.14 of the
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Merger Agreement, Parent and the Purchaser shall provide to the Stockholder a
copy of the Environmental Assessment to the extent that it relates to the facts,
circumstances or conditions upon which such claim is based.
(i) Following the Closing Date, the Stockholder shall, and shall cause each
of its affiliates to, from time to time, execute and deliver such additional
instruments, documents, conveyances or assurances and take such other actions as
shall be necessary, or otherwise reasonably be requested by Parent, to confirm
and assure the rights and obligations provided for in this Agreement and render
effective the consummation of the transactions contemplated hereby and by the
Merger Agreement, or otherwise to carry out the intent and purposes of this
Agreement and the Merger Agreement other than pursuant to Article III of this
Agreement.
Section 17. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties made by the Stockholder, Parent or the Purchaser
in this Agreement shall survive the Effective Time. The covenants and agreements
made herein shall survive in accordance with their respective terms.
Section 18. EXPENSES. Each party shall bear its own expenses and costs in
connection with this Agreement and the transactions contemplated hereby.
Section 19. AMENDMENT; WAIVER; ASSIGNMENT. This Agreement may not be
modified, amended, altered or supplemented except by an instrument in writing
signed on behalf of each of the parties hereto. No failure by any party to
insist upon the strict performance of any covenant, duty or agreement of this
Agreement or to exercise any right or remedy consequent upon a breach thereof
shall constitute a waiver of any such breach or of any other covenant, duty or
agreement, any such waiver being made only by a written instrument executed and
delivered by the waiving party. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties; PROVIDED, that Parent or the Purchaser may assign
this Agreement to any Subsidiary of Parent or the Purchaser, or to any lender to
Parent or the Purchaser or any Subsidiary or affiliate thereof as security for
obligations to such lender, and PROVIDED, FURTHER, that no assignment to any
such lender shall in any way affect Parent's or the Purchaser's obligations or
liabilities under this Agreement. Parent shall promptly notify the Stockholder
of any assignment (whether by operation of law or otherwise) permitted by the
immediately preceding sentence.
Section 20. PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and its successors and
permitted assigns, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other person any rights, benefits or
remedies of any nature whatsoever, except as provided in Section 9 with respect
to indemnification of Indemnitees.
Section 21. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by facsimile
or by registered or certified mail (postage prepaid, return receipt requested),
to the other party as follows:
(a) If to Parent or the Purchaser, to:
CDRO Holding Corporation
CDRO Acquisition Corporation
c/o Clayton, Dubilier & Rice
Fund V Limited Partnership
270 Greenwich Avenue
Greenwich, Connecticut 06830
Telephone: (203) 661-3998
Facsimile: (203) 661-0544
Attention: Alberto Cribiore
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with a copy to:
Clayton, Dubilier & Rice, Inc.
126 Each 56th Street
New York, New York 10022
Telephone: (212) 407-5200
Facsimile: (212) 407-5252
Attention: Kevin J. Conway
and with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Telephone: (212) 909-6000
Facsimile: (212) 909-6836
Attention: David A. Brittenham, Esq.
(b) If to the Stockholder, to:
Manville Corporation
717 17th Street
Denver, Colorado 80202
Telephone: (303) 978-4911
Facsimile: (303) 978-4842
Attention: Richard B. Von Wald, Esq.
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Telephone: 212-735-3000
Facsimile: 212-735-2000
Attention: Franklin M. Gittes, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above.
Section 22. GOVERNING LAW. This Agreement shall be governed by, construed
and enforced in accordance with the law of the State of Delaware, without regard
to the principles of conflicts of law thereof.
Section 23. TERMINATION. This Agreement shall be terminable (i) by the
Stockholder or Parent upon the termination of the Merger Agreement in accordance
with its terms or (ii) by the mutual consent of the Board of Directors of Parent
and the Board of Directors of the Stockholder. No such termination shall relieve
any party from liability for any breach of this Agreement.
Section 24. ENTIRE AGREEMENT. This Agreement, together with the Tax
Matters Agreement, constitutes the entire agreement among the parties hereto
with respect to the subject matter hereof and supersedes all other prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof. The parties hereto also acknowledge that
the Chief Financial Officer of the Stockholder has delivered to Parent and the
Purchaser the Tax letter.
Section 25. DESCRIPTIVE HEADINGS. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
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Section 26. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
Section 27. POST-CLOSING CONFIDENTIALITY. (a) From and after the Effective
Time and until the fifth anniversary thereof, the Stockholder shall keep
confidential and shall use reasonable efforts to cause its affiliates, agents,
advisors and representatives, and their respective officers, directors or
employees (the "Representatives) to keep confidential all information of Parent,
the Purchaser, the Company or their respective Subsidiaries that has been
acquired by the Stockholder through activities carried out by it on behalf of
the Company or otherwise, including but not limited to information relating to
pricing, technologies, trade secrets, processes, customers, suppliers, financial
data, statistics, or research and development (collectively, "Information");
PROVIDED, that the foregoing shall not apply to information that (i) is or
hereafter becomes generally available to the public other than as a result of a
disclosure by the Stockholder or any Representative, (ii) is hereafter disclosed
to the Stockholder or its Representatives by a third party who is not in default
of any confidentiality obligation to Parent or the Company, (iii) is reasonably
required to be submitted by the Stockholder or any Representative to any
Governmental Entity, including in connection with any action, suit or
proceeding, (iv) is provided by the Stockholder under confidentiality terms and
conditions for the benefit of the Company, substantially similar to those
confidentiality arrangements set forth in the Confidentiality Agreement and with
a term of at least five years from the date hereof, (x) to third parties for
consulting, accounting, legal and similar purposes, or (y) to prospective
purchasers of the Stockholder or of all or any portion of the securities or
assets of the Stockholder to the extent considered reasonably necessary by the
Stockholder to facilitate such purchase, (v) is necessary, in the Stockholder's
reasonable judgment, to disclose in order to assert or defend any claim against
(or made by) any insurer or other Person, provided that prior notice of such
disclosure is provided to Parent, (vi) is or was independently developed by the
Stockholder or any of its Subsidiaries (other than the Company and its
Subsidiaries) or Representatives without any use or knowledge of any
Information, or (vii) is required to be disclosed by the Stockholder or any
Representative in compliance with applicable laws or regulations or order by a
Governmental Entity, provided that in the event that the Stockholder or any
Representative is requested by any Governmental Entity to disclose any such
Information, the Stockholder shall give, or shall use reasonable efforts to
cause the Representative to give, Parent prompt written notice of such request
so that Parent or its relevant Subsidiary may seek an appropriate protective
order and in the absence of a protective order the Stockholder or any
Representative shall use reasonable efforts to obtain assurances that
confidential treatment will be accorded to such information.
(b) The Stockholder acknowledges that the Purchaser and its affiliates would
be irreparably damaged in the event of a breach or a threatened breach of any of
the Stockholder's obligations under this Section 27, and agrees (and shall use
reasonable efforts to cause each other Representative to agree) that, in the
event of a breach or a threatened breach of any such obligation, each of Parent
and its Subsidiaries shall, in addition to any other rights and remedies
available to it in respect of such breach, be entitled to an injunction from a
court of competent jurisdiction granting it specific performance of the
provisions of this Section 27.
Section 28. RIGHTS AND REMEDIES. The rights and remedies herein provided
are not exclusive of any other rights or remedies that any party may otherwise
have at law or in equity.
Section 29. MERGER AGREEMENT. The term "Merger Agreement" as used herein
shall mean the Merger Agreement as it may be amended or modified from time to
time, but only to the extent that the Stockholder has provided to Parent prior
written consent to such amendment or modification.
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<PAGE>
IN WITNESS WHEREOF, Parent, the Purchaser and the Stockholder have caused
this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
CDRO HOLDING CORPORATION
By: /s/_KEVIN J. CONWAY_______________
Name: Kevin J. Conway
Title: President
CDRO ACQUISITION CORPORATION
By: /s/_KEVIN J. CONWAY_______________
Name: Kevin J. Conway
Title: President
MANVILLE CORPORATION
By: /s/_RICHARD B. VON WALD___________
Name: Richard B. Von Wald
Title: Senior Vice President,
General
Counsel and Secretary
C-16
<PAGE>
ANNEX D
TAX MATTERS AGREEMENT
BY AND AMONG
MANVILLE CORPORATION
RIVERWOOD INTERNATIONAL CORPORATION
CDRO HOLDING CORPORATION
AND
CDRO ACQUISITION CORPORATION
DATED AS OF
OCTOBER 25, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section PAGE
- -------------------------------------------------------------------------------------------------------- ----
<S> <C>
1. Definitions......................................................................................... D-1
2. Termination of Existing Tax Sharing Agreements; Tax Sharing Payments; Indemnifiable Separate D-3
Taxes..............................................................................................
3. Payments............................................................................................ D-6
4. Returns............................................................................................. D-7
5. Refunds............................................................................................. D-7
6. Audits.............................................................................................. D-8
7. Conduct of Tax Affairs.............................................................................. D-8
8. Section 338(h)(10) Election......................................................................... D-9
9. Transfer Taxes...................................................................................... D-10
10. Tax Dispute Resolution Mechanism.................................................................... D-11
11. Cooperation on Tax Matters.......................................................................... D-11
12. Indemnification..................................................................................... D-12
13. Confidentiality..................................................................................... D-13
14. Notices............................................................................................. D-14
15. Governing Law....................................................................................... D-16
16. Counterparts........................................................................................ D-16
17. Severability........................................................................................ D-16
18. Assignment; Binding Effect.......................................................................... D-16
19. No Third Party Beneficiaries........................................................................ D-16
20. Waivers............................................................................................. D-16
21. Amendments.......................................................................................... D-17
22. Termination; Survival............................................................................... D-17
23. Headings............................................................................................ D-17
24. Entire Agreement.................................................................................... D-17
</TABLE>
i
<PAGE>
TAX MATTERS AGREEMENT
TAX MATTERS AGREEMENT, dated as of October 25, 1995, by and among Manville
Corporation, a Delaware corporation ("STOCKHOLDER"), Riverwood International
Corporation, a Delaware corporation (the "COMPANY"), CDRO Holding Corporation, a
Delaware corporation ("PURCHASER"), and CDRO Acquisition Corporation, a Delaware
corporation ("NEWCO").
WHEREAS Stockholder currently owns more than 80% of the outstanding capital
stock of the Company;
WHEREAS the Company, Purchaser and Newco have entered into an Agreement and
Plan of Merger dated as of the date hereof (the "MERGER AGREEMENT"), pursuant to
which Newco will be merged with the Company, as a result of which Purchaser will
become the owner of all of the outstanding capital stock of the survivor of the
merger, and Stockholder and the other shareholders of the Company will receive
cash in exchange for their capital stock of the Company;
WHEREAS Stockholder, Purchaser and Newco have entered into a Voting and
Indemnification Agreement dated as of the date hereof (the "INDEMNIFICATION
AGREEMENT") as contemplated by the Merger Agreement; and
WHEREAS the Company, Stockholder and Purchaser wish to set forth their
agreement with respect to certain tax matters as set forth below.
NOW THEREFORE, in consideration of the premises and the mutual agreements
set forth herein, the parties hereto agree as follows:
1. DEFINITIONS. Except as specifically set forth herein, capitalized terms
as used herein have the meanings set forth in the Merger Agreement. The
following terms as used herein have the following meanings:
"ADDITIONAL SECTION 338 FORM": as defined in Section 8.2(c).
"AFFILIATE": of any Person means any other Person that, directly or
indirectly through one or more intermediaries, Controls, is Controlled by or is
under common Control with the first Person, including but not limited to a
Subsidiary of the first Person, a Person of which the first Person is a
Subsidiary, or another Subsidiary of a Person of which the first Person is also
a Subsidiary.
"CODE": the Internal Revenue Code of 1986, as amended.
"COMBINED STATE TAX RETURN": any Return relating to Combined State Taxes.
"COMBINED STATE TAXES": any state or local Income Taxes with respect to
which the Company or any of its Subsidiaries has filed or is required to file
pursuant to Section 4.1(b) a state or local Income Tax Return with a member of
the Stockholder's Group on a consolidated, combined, or unitary basis.
"CONTROL": the possession, directly or indirectly, of the power to direct or
cause the direction of the management policies of a Person, whether through the
ownership of securities, by contract or otherwise.
"FEDERAL INCOME TAXES": any federal Income Taxes with respect to which the
Company or any of its Subsidiaries has filed or is required to file pursuant to
Section 4.1(a) a consolidated federal Income Tax Return with the Stockholder's
Consolidated Group.
"FINAL ALLOCATION": as defined in Section 8.3.
"FORM 8023": as defined in Section 8.2(a).
"INCOME TAX": any federal, state, local, provincial, foreign or other
income, alternative, minimum, accumulated earnings, personal holding company,
franchise, capital stock, net worth, capital,
D-1
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profits or windfall profits tax or other similar tax, estimated tax, duty or
other governmental charge or assessment or deficiencies thereof (including but
not limited to all interest and penalties thereon and additions thereto).
"INDEMNIFIABLE SEPARATE TAXES": all state and local Income Taxes (excluding
Combined State Taxes) with respect to the Company and its Subsidiaries for all
Pre-Closing Tax Periods, other than (i) any such Taxes shown on Returns relating
to such Taxes as originally filed with the applicable Taxing Authorities (as
amended pursuant to Section 10(e)) and (ii) any Taxes described in Section
8.6(b) or Section 8.6(c).
"INDEMNIFIED PARTY": as defined in Section 12.3.
"INDEMNIFYING PARTY": as defined in Section 12.3.
"IRS": the Internal Revenue Service.
"LOSSES": as defined in Section 12.1.
"NON-COMPANY AFFILIATE": any Affiliate of Stockholder other than the Company
and its Subsidiaries.
"OBLIGATED PARTY": as defined in Section 13.
"PERSON": any natural person, firm, partnership, joint venture, association,
corporation, company, trust, business trust, governmental authority or other
entity.
"PRE-CLOSING TAX PERIOD": any taxable period with respect to the Company or
any of its Subsidiaries ending on or before the close of business on the Closing
Date.
"PRO FORMA COMBINED STATE RETURN": as defined in Section 2.2(b).
"PRO FORMA FEDERAL RETURN": as defined in Section 2.2(b).
"PRO FORMA RETURNS": as defined in Section 2.2(c).
"PURCHASER INDEMNITEES": as defined in Section 12.1.
"REPRESENTATIVES": as defined in Section 13.
"RETURN": any return, report, declaration, form, claim for refund or
information statement relating to Taxes, including any schedule or attachment
thereto, and including any amendment thereof.
"SECTION 338 ELECTION": an election pursuant to section 338 of the Code
other than such an election made in conjunction with an election pursuant to
section 338(h)(10) of the Code, and any comparable or corresponding election
with respect to state or local Income Taxes, as applicable to the Company and
each of its Subsidiaries.
"SECTION 338 FORMS": as defined in Section 8.2(a).
"SECTION 338(H)(10) ELECTION": an election pursuant to section 338(h)(10) of
the Code, and any comparable or corresponding election with respect to Combined
State Taxes, as applicable to the Company and each of its Subsidiaries.
"STOCKHOLDER INDEMNITEES": as defined in Section 12.2.
"STOCKHOLDER'S CONSOLIDATED GROUP": with respect to Federal Income Taxes,
any affiliated group of corporations for purposes of filing consolidated Returns
of which Stockholder (or any predecessor thereof or successor thereto) is a
member.
"STOCKHOLDER'S GROUP": with respect to Combined State Taxes, any
consolidated, combined, or unitary group of Persons of which Stockholder or any
Non-Company Affiliate (or any predecessor thereof or successor thereto) is a
member.
D-2
<PAGE>
"SUBSIDIARY": of any Person means any other Person in which the first Person
owns or controls, directly or indirectly, capital stock or other equity
interests representing more than 50% of the outstanding voting power (including
but not limited to the ability to elect a majority of the board of directors or
other body performing similar functions for such other Person) or more than 50%
of the equity interests in such other Person.
"TAX": any federal, state, local, provincial, foreign or other income,
alternative, minimum, accumulated earnings, personal holding company, franchise,
capital stock, net worth, capital, profits, windfall profits, gross receipts,
value added, sales, use, excise, custom duties, transfer, conveyance, mortgage,
registration, stamp, documentary, recording, premium, severance, environmental,
real and personal property, ad valorem, intangibles, rent, occupancy, license,
occupational, employment, unemployment insurance, social security, disability,
workers' compensation, payroll, health care, withholding, estimated or other
similar tax, duty or other governmental charge or assessment or deficiencies
thereof (including but not limited to all interest and penalties thereon and
additions thereto).
"TAX DISPUTE ACCOUNTANTS": as defined in Section 10.
"TAX DISPUTE RESOLUTION MECHANISM": as defined in Section 10.
"TAX SHARING AGREEMENT": the Tax Sharing Agreement dated as of June 17, 1992
between Stockholder and the Company, as amended to the date of this Agreement.
"TAXING AUTHORITY": any federal, state, local or foreign governmental
authority responsible for any Tax.
2. TERMINATION OF EXISTING TAX SHARING AGREEMENTS; TAX SHARING PAYMENTS;
INDEMNIFIABLE SEPARATE TAXES.
2.1 TAX SHARING AGREEMENTS. From the date hereof through the Closing, the
Tax Sharing Agreement shall remain in full force and effect and shall not be
amended without the consent of Purchaser and Newco, and the parties thereto
shall make all payments required thereunder. Any and all existing Tax sharing
agreements and arrangements (including but not limited to the Tax Sharing
Agreement) between the Company or any of its Subsidiaries on the one side, and
Stockholder or any Non-Company Affiliate, on the other side (copies of which,
together with all amendments thereto through the date hereof, have been provided
to Purchaser), shall be terminated effective upon the Closing, and no additional
payments shall be made thereunder. After the Closing neither the Company, any of
its Subsidiaries, Stockholder nor any Non-Company Affiliate shall have any
further rights or liabilities thereunder for any taxable year (whether the
current year, a future year, or a past year).
2.2 TAX SHARING PAYMENTS. The provisions of this Section 2.2 shall become
effective upon the Closing:
a. The Company shall pay to Stockholder an amount equal to the
estimated Federal Income Taxes and estimated Combined State Taxes with
respect to the Company and its Subsidiaries for all Pre-Closing Tax Periods,
for which Taxes Stockholder is responsible pursuant to Section 3.1(a) or
Section 3.1(b), and shall make each such payment no later than 5 business
days prior to the due date for the payment of such estimated Taxes to the
applicable Taxing Authority. The amount of such payment in respect of such
estimated Taxes shall be calculated in accordance with past practices
pursuant to the provisions of Article III of the Tax Sharing Agreement,
based on Stockholder's reasonable estimates of the income of the Company and
its Subsidiaries and reduced by the amount of any payments on account of
such Taxes previously paid to Stockholder.
b. Stockholder shall deliver to Purchaser a pro forma Federal Income
Tax Return (each a "PRO FORMA FEDERAL RETURN") of the Company and its
Subsidiaries (i) for the period beginning January 1, 1995 and ending on
December 31, 1995, which Return shall be delivered no later than July 17,
1996, and (ii) for the period beginning January 1, 1996 and ending at the
close of business on the Closing Date, which Return shall be delivered no
later than July 17, 1997, in each case
D-3
<PAGE>
calculated in accordance with the principles of Section 2.2(e). Stockholder
shall deliver to Purchaser a pro forma Combined State Tax Return (each a
"PRO FORMA COMBINED STATE RETURN") for each jurisdiction in which a Combined
State Tax Return is filed no later than 60 days prior to the due date for
the applicable Return (including all extensions thereof) for the period
beginning January 1, 1995 and ending on December 31, 1995 and for the period
beginning January 1, 1996 and ending at the close of business on the Closing
Date, in each case calculated in accordance with the principles of Section
2.2(e). Purchaser will and will cause the Company and its Subsidiaries to
furnish Tax information to Stockholder for preparation of the Pro Forma
Returns in a timely manner.
c. Purchaser shall have the right at Purchaser's expense to review all
work papers and procedures used to prepare each of the Pro Forma Federal
Returns and the Pro Forma Combined State Returns (together, the "PRO FORMA
RETURNS"). Unless Purchaser timely objects as specified in this Section
2.2(c), the Pro Forma Returns shall be final and binding on the parties
without further adjustment. If Purchaser objects to any item on any Pro
Forma Return, it shall, within 30 days after delivery of such Pro Forma
Return, notify Stockholder in writing that it so objects, specifying any
such item and stating the factual or legal basis for any such objection. If
a notice of objection shall be duly delivered, disputed items shall be
resolved pursuant to the Tax Dispute Resolution Mechanism. Upon resolution
of all disputed items, the Pro Forma Returns shall be adjusted to reflect
such resolution and shall be final and binding on the parties without
further adjustment.
d. Purchaser shall cause the Company to pay to Stockholder, or
Stockholder shall pay to the Company, as appropriate, together with interest
calculated in accordance with past practices pursuant to the provisions of
the Tax Sharing Agreement, an amount reflecting the difference between (i)
the sum of the liabilities shown on the final Pro Forma Returns for each
period and (ii) the aggregate of all amounts previously paid by the Company
or any of its Subsidiaries with respect thereto. The payment for the period
beginning January 1, 1995 and ending on December 31, 1995 shall be made at
the time Stockholder's Consolidated Group files its consolidated federal
Income Tax Return for the taxable year ending December 31, 1995, and the
payment for the period beginning January 1, 1996 and ending at the close of
business on the Closing Date shall be made at the time Stockholder's
Consolidated Group files its consolidated federal Income Tax Return for the
taxable year ending December 31, 1996. If a Pro Forma Return for Federal
Income Taxes or for a Combined State Tax reflects a net operating loss, net
capital loss, excess tax credit or other similar tax attribute, then
Stockholder shall pay to the Company, within 45 days after Stockholder's
Consolidated Group files its consolidated federal Income Tax Return for the
relevant taxable year, together with interest calculated in accordance with
past practices pursuant to the provisions of the Tax Sharing Agreement, an
amount equal to the refund that the Company and its Subsidiaries would have
received as a result of the carryback of such attribute to the relevant Pro
Forma Return (or Pro Forma Riverwood Return, as such term is defined in the
Tax Sharing Agreement) previously prepared with respect to Federal Income
Taxes or the same Combined State Tax, as the case may be (whether or not
such attribute is actually carried back with respect to the relevant Federal
Income Tax Returns or Combined State Tax Returns). All such payments shall
be calculated in accordance with the principles of Section 2.2(e).
e. The calculation of the amount of Tax liabilities and attributes set
forth on the Pro Forma Returns shall be made as if the Company were filing
its own consolidated, combined or unitary Income Tax Returns including those
of its Subsidiaries that are members of Stockholder's Consolidated Group or
the applicable group for which a Combined State Tax Return is filed (with
the Company as the common parent) for all Pre-Closing Tax Periods (assuming
that the Company and its Subsidiaries had not been in existence before
January 1, 1992), PROVIDED that (i) income, gains, deductions, losses,
credits and recapture of credits shall be computed, and relevant Tax
elections shall be given effect, in a manner consistent with past practices
pursuant to the provisions of Article III of the Tax Sharing Agreement
(including but not limited to the concept
D-4
<PAGE>
that the Pro Forma Returns shall not include any deductions, losses or
credits of the Company and its Subsidiaries arising from the payment of
certain expenses by Stockholder that have not been and will not be
reimbursed by the Company or any of its Subsidiaries) and (ii) the
applicable Tax rates shall be the appropriate statutory rates in effect
during the relevant taxable period. Stockholder and Purchaser agree that the
Pro Forma Federal Return for the period beginning January 1, 1996 and ending
at the close of business on the Closing Date will be prepared on the basis
of a closing of the books of the Company and its Subsidiaries as of the
close of business on the Closing Date, as adjusted to reflect income, gains,
deductions, losses, credits and recapture of credits shown on the Company's
permanent records (including work papers) pursuant to Treas. Reg. section
1.1502-76(b)(2)(i) and not on the basis of proration pursuant to Treas. Reg.
section 1.1502-76(b)(2)(ii). The calculation of the liability for Combined
State Tax set forth on each Pro Forma Combined State Return for the period
beginning January 1, 1996 and ending at the close of business on the Closing
Date shall be made in accordance with comparable provisions under applicable
law in accordance with past practices pursuant to the provisions of Article
III of the Tax Sharing Agreement. Except as set forth to the contrary in
this Section 2.2, the Pro Forma Returns shall be prepared consistently with
the applicable Returns as originally filed with the applicable Taxing
Authority, except for such inconsistencies as are consistent with past
practices pursuant to the provisions of Article III of the Tax Sharing
Agreement, and the Pro Forma Returns shall not be amended or otherwise
reflect any changes in or audit adjustments with respect to such applicable
Returns.
f. Notwithstanding anything in this Section 2.2 to the contrary, the
Pro Forma Returns shall not include any amounts arising from (i) the
restoration of gain or loss on any deferred intercompany transaction (x)
between any of the Company and its Subsidiaries, on the one hand, and any of
Stockholder or any Non-Company Affiliate, on the other hand, that has
previously been taken into account in a Pro Forma Riverwood Return (as such
term is defined in the Tax Sharing Agreement) or (y) between any of the
Company and its Subsidiaries, or the inclusion in income of any excess loss
account with respect to the stock of the Company or any of its Subsidiaries,
or (ii) any income, gains, deductions, losses, credits or recapture of
credits resulting from the deemed sale of assets and other deemed
transactions arising from the Section 338(h)(10) Elections.
2.3 PAYMENTS AND RETURNS WITH RESPECT TO INDEMNIFIABLE SEPARATE TAXES. The
provisions of this Section 2.3 shall become effective upon the Closing:
(a) No later than 5 business days prior to the date on which any
Indemnifiable Separate Tax will actually be paid by the Company or any of
its Subsidiaries to the applicable Taxing Authority, Stockholder shall pay
to the Company the amount of such Tax. If the taxable period covered by any
Return with respect to Indemnifiable Separate Taxes shall include any period
ending after the Closing Date, then such Indemnifiable Separate Taxes shall
be determined as if such taxable period ended on the Closing Date, based on
a closing of the books of the Company and its Subsidiaries as of the close
of business on the Closing Date.
(b) The Company shall pay to Stockholder the amount of any actual
reduction in the amount of Income Taxes paid by the Company and its
Subsidiaries for any period beginning after the Closing Date that results
from any deduction of (i) the payment or accrual of Indemnifiable Separate
Taxes by the Company or any of its Subsidiaries or (ii) the payment or
accrual of any amount pursuant to this Section 2.3(b), in each case other
than any such payment or accrual that increases the purchase price for the
deemed sale of assets resulting from the making of the Section 338(h)(10)
Elections or any Section 338 Election. Each payment pursuant to this Section
2.3(b) shall be made within 5 business days after the filing of the Return
for such Income Taxes (other than a Return for estimated Taxes) that
reflects such reduction (or in the case of a refund reflecting such
reduction, after the receipt of such refund).
D-5
<PAGE>
(c) Stockholder shall pay to the Company the amount of any actual
increase in the amount of Income Taxes paid by the Company and its
Subsidiaries for any period beginning after the Closing Date that results
from any inclusion in income of the receipt or accrual of any amount
pursuant to Section 2.3(a) or this Section 2.3(c) other than any such
receipt or accrual that reduces the purchase price for the deemed sale of
assets resulting from the making of the Section 338(h)(10) Elections or any
Section 338 Election. Each payment pursuant to this Section 2.3(c) shall be
made within 5 business days after the filing of the Return for such Income
Taxes (other than a Return for estimated Taxes) that reflects such increase.
(d) Upon the making of any payment pursuant to Section 2.3(a),
Stockholder and the Company will in good faith attempt to negotiate a single
payment covering the net amount of the payments to be made pursuant to
Section 2.3(b) and Section 2.3(c) relating to the Indemnifiable Separate
Taxes covered by such payment pursuant to Section 2.3(a), taking into
account the tax position of the Company and its Subsidiaries. If Stockholder
and the Company are able to negotiate such a single payment, then the making
of such payment shall discharge the obligations of each with respect to
Section 2.3(b) and Section 2.3(c) covered by such single payment.
(e) Notwithstanding the other provisions of this Section 2.3, (i) if
Purchaser shall fail to provide notice to Stockholder with respect to an
Indemnifiable Separate Tax as provided in Section 6, Stockholder shall not
be required to pay to the Company pursuant to Section 2.3(a) any portion of
such Indemnifiable Separate Tax to the extent that such failure to give
notice results in a lack of actual notice to Stockholder and Stockholder is
materially prejudiced as a result of such failure, (ii) if the Company shall
file any Return (including amended Returns) relating to an Indemnifiable
Separate Tax without complying with the provisions of Section 2.3(f),
Stockholder shall not be required to pay to the Company pursuant to Section
2.3(a) any portion of such Indemnifiable Separate Tax to the extent that
Stockholder is materially prejudiced as a result of such failure to comply,
and (iii) in any such case, and to such extent, the provisions of Section
2.3(b), Section 2.3(c) and Section 2.3(d) relating to such Indemnifiable
Separate Tax shall not apply.
(f) The Company shall not file any Return (including amended Returns)
relating to Indemnifiable Separate Taxes without first providing Stockholder
the opportunity to prepare a draft of such Return. The Company shall furnish
Tax information to Stockholder for preparation of a draft of each such
Return in a timely manner. Stockholder shall deliver to the Company a draft
of each such Return to be filed at any time after the Closing Date no later
than the date that is 60 days prior to date on which such Return is to be
filed. The Company shall have the right at its expense to review all work
papers and procedures used to prepare each such draft Return. Unless the
Company timely objects as specified in this Section 2.3(f), each such draft
Return shall be final and binding on the parties without further adjustment.
If the Company objects to any item on any such draft Return, it shall,
within 30 days after delivery of such draft Return, notify Stockholder in
writing that it so objects, specifying any such item and stating the factual
or legal basis for any such objection. If a notice of objection shall be
duly delivered, disputed items shall be resolved pursuant to the Tax Dispute
Resolution Mechanism. Upon resolution of all disputed items, such Return
shall be adjusted to reflect such resolution and shall be final and binding
on the parties without further adjustment. If the Company shall provide
Stockholder the opportunity to prepare a draft of any such Return and shall
furnish Tax information to Stockholder for preparation of a draft of such
Return, and if Stockholder shall fail to provide a draft of such Return, in
each case as provided in this Section 2.3(f), the Company shall prepare the
Return with respect to such Indemnifiable Separate Tax in its sole
discretion in accordance with the provisions of Section 4.2.
3. PAYMENTS.
3.1 STOCKHOLDER'S RESPONSIBILITY. As between Stockholder and the
Non-Company Affiliates, on the one hand, and the Company and its Subsidiaries,
Purchaser, Newco and their respective Affiliates, on the other hand, Stockholder
shall pay or cause to be paid to the applicable Taxing Authority (a) all
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Federal Income Taxes payable with respect to the Company and its Subsidiaries
for all Pre-Closing Tax Periods, (b) all Combined State Taxes payable with
respect to the Company and such Subsidiaries for all Pre-Closing Tax Periods and
(c) all Income Taxes for which the Company or any of its Subsidiaries may be
held liable, pursuant to section 1.1502-6(a) of the Treasury Regulations, or any
state or local law with respect to Income Taxes, as a member of Stockholder's
Consolidated Group or any Stockholder's Group.
3.2 PURCHASER'S RESPONSIBILITY. As between Stockholder and the Non-Company
Affiliates, on the one hand, and the Company and its Subsidiaries, Purchaser,
Newco and their respective Affiliates, on the other hand, Purchaser shall pay or
cause to be paid to the applicable Taxing Authority all Taxes payable with
respect to the Company or any of its Subsidiaries that are not described as
being the responsibility of Stockholder in Section 3.1.
4. RETURNS.
4.1 STOCKHOLDER'S RESPONSIBILITY. Stockholder and Purchaser shall cause
the Company and its Subsidiaries, to the extent permitted by law, to join, for
all Pre-Closing Tax Periods, in (a) the consolidated federal Income Tax Returns
of Stockholder's Consolidated Group, (b) the combined, consolidated or unitary
Returns for state and local Income Taxes of Stockholder's Group with respect to
which the Company or any of its Subsidiaries (i) filed such a Return for the
most recent taxable period for which a Return has been filed prior to the
Closing and may file such a Return for subsequent taxable periods or (ii) is
required by the applicable Taxing Authority to file such a Return. Stockholder
shall file or cause to be filed all Returns set forth in the immedi-ately
preceding sentence. The income, gains, deductions, losses, credits and recapture
of credits of the Company and such Subsidiaries for Pre-Closing Tax Periods
shall be included in the consolidated federal Income Tax Re-turns of
Stockholder's Consolidated Group and in the Combined State Tax Returns, where
applicable. Stockholder shall file, or shall cause the Company to file or cause
to be filed, all other Returns relating to the business or assets of the Company
and its Subsidiaries required to be filed on or prior to the Closing Date. Any
such Returns shall, to the extent permitted by applicable Tax law, be filed on a
basis consistent with the last previous such Returns filed in respect of the
Compa-ny and its Subsidiaries.
4.2 PURCHASER'S RESPONSIBILITY. Purchaser shall file, or cause to be
filed, all Returns relating to the business or assets of the Company and its
Subsidiaries other than those Returns described in Section 4.1 (including but
not limited to any federal Income Tax Return filed by the consolidated group of
which Purchaser is a member with respect to any taxable period ending after the
Closing Date). The income, gains, deductions, losses, credits and recapture of
credits of the Company and its Subsidiaries, other than those required to be
included in the Returns described in Section 4.1, shall be included in the
Returns described in the immediately preceding sentence, including but not
limited to all items for periods after the Closing Date. Any such Returns shall,
insofar as they relate to items for periods ended on or prior to the Closing
Date and to the extent permitted by applicable Tax law, be filed on a basis
consistent with the last previous such Returns filed in respect of the Company
and its Subsidiaries.
5. REFUNDS. Subject to the provisions of this Section 5, (a) Stockholder
or the Non-Company Affiliates shall be entitled to retain, or Stockholder shall
be entitled to receive immediate payment from the Company or Purchaser of, any
refund or credit with respect to (i) Taxes (including but not limited to refunds
and credits arising by reason of amended Returns filed after the Closing Date),
plus any interest received with respect thereto from the applicable Taxing
Authorities, relating to the Company or any of its Subsidiaries that are
described as being the responsibility of Stockholder in Section 3.1, and (ii)
Indemnifiable Separate Taxes for which Stockholder shall have made a payment to
the Company pursuant to Section 2.3, plus any interest received with respect
thereto from the applicable Taxing Authorities, and (b) Purchaser, the Company
or its Subsidiaries shall be entitled to retain, or Purchaser shall be entitled
to receive immediate payment from Stockholder of, any refund or credit with
respect to Taxes (other than Indemnifiable Separate Taxes for which Stockholder
shall have made a payment to the Company pursuant to Section 2.3), plus any
interest received with respect
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thereto from the applicable Taxing Authorities, relating to the Company or any
of its Subsidiaries that are described as being the responsibility of Purchaser
in Section 3.2, PROVIDED that neither the Company nor any of its Subsidiaries
shall carry back any item of loss, deduction or credit from a Return described
as being the responsibility of Purchaser in Section 4.2, to a Return described
as being the responsibility of Stockholder in Section 4.1 (other than the next
to last sentence thereof). Purchaser and Stockholder shall cooperate, and shall
cause the Company and its Subsidiaries to cooperate with Stockholder, with
respect to claiming any refund or credit with respect to Taxes referred to in
this Section 5. Such cooperation shall include providing all relevant
information available to Stockholder or Purchaser (through the Company or
otherwise), as the case may be, with respect to any such claim; filing and
diligently pursuing such claim (including by litigation, if appropriate); paying
over to Stockholder or Purchaser, as the case may be, and in accordance with
this provision, any amount received by Purchaser (or the Company or any of its
Subsidiaries) or Stockholder (or the Non-Company Affiliates), as the case may
be, with respect to such claim; and, in the case of the party filing such a
claim, consulting with the other party prior to agreeing to any disposition of
such claim, provided that the foregoing shall be done in a manner so as not to
interfere unreasonably with the conduct of the business of the parties. The
party that is to enjoy the economic benefit of a refund under this Section 5
shall bear the reasonable out-of-pocket expenses of the other party incurred in
seeking such refund. If one party is to enjoy the economic benefit of a refund
under this Section 5 but the refund involves an issue that reasonably could be
expected to have a material adverse effect on the other party, the party that
would enjoy the economic benefit shall give notice to the other party of such
issue, with respect to which the parties, each at its own expense, shall jointly
pursue such issue, and any disagreement between them as to such issue shall be
resolved pursuant to the Tax Dispute Resolution Mechanism.
6. AUDITS. Each of Purchaser and Stockholder shall promptly notify the
other in writing within 10 business days from its receipt of notice of (a) any
pending or threatened Tax audits or assessments of the Company or any of its
Subsidiaries, as long as any taxable periods ending on or prior to the Closing
Date remain open, and (b) any pending or threatened Tax audits or assessments of
Purchaser or Stockholder, or any of the Affiliates thereof, that reasonably
could be expected to affect the Tax liabilities of the Company or any of its
Subsidiaries, in each case for taxable periods ending on or prior to the Closing
Date. Stockholder shall have the right to represent the interests of the Company
and its Subsidiaries in any Tax audit or administrative or court proceeding to
the extent relating to Indemnifiable Separate Taxes or to Taxes that are
described as being the responsibility of Stockholder in Section 3.1, and to
employ counsel of its choice at its expense, PROVIDED that Stockholder shall
give notice to Purchaser, keep Purchaser reasonably informed and consult with
Purchaser with respect to any issue relating to such audit or proceeding that
reasonably could be expected to have a material adverse effect on Purchaser, the
Company or any of its Subsidiaries. Purchaser shall have the right to represent
the interests of the Company and its Subsidiaries in any Tax audit or
administrative or court proceeding not described in the immediately preceding
sentence and to employ counsel of its choice at its expense. Purchaser and
Stockholder shall cooperate, and Purchaser shall cause the Company and its
Subsidiaries to cooperate with Stockholder, with respect to any Tax audit or
administrative or court proceeding relating to Taxes referred to in this Section
6. Such cooperation shall include providing all relevant information available
to Stockholder or Purchaser (through the Company or otherwise), as the case may
be, with respect to any such audit or proceeding and making personnel available
at and for reasonable times, including, without limitation, to prepare responses
to requests for information, PROVIDED that the foregoing shall be done in a
manner so as not to interfere unreasonably with the conduct of the business of
the parties.
7. CONDUCT OF TAX AFFAIRS. (a) Through the Closing, Stockholder, the
Company and its Subsidiaries will conduct all Tax affairs relating to the
Company and its Subsidiaries only in the ordinary course, in substantially the
same manner as heretofore conducted and in good faith in substantially the same
manner as such affairs would have been conducted if this Agreement had not been
entered into.
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(b) Notwithstanding any other provision of this Agreement, Purchaser shall
be responsible for, and neither Stockholder nor any of the Non-Company
Affiliates shall bear, any Taxes that arise due to the failure, following the
Closing, of Purchaser to cause the Company and its Subsidiaries to carry on
their business on the Closing Date in the ordinary course and in substantially
the same manner as heretofore conducted, taking into account the Merger, the
other transactions contemplated by the Merger Agreement and the making of the
Section 338(h)(10) Elections.
8. SECTION 338(H)(10) ELECTION.
8.1 ELECTION. Purchaser shall, and Stockholder shall, or shall cause the
proper Non-Company Affiliate to, join in all Section 338(h)(10) Elections.
8.2 FORMS. (a) Purchaser shall be responsible for the preparation of all
forms and schedules re-quired to be filed in connection with the Section
338(h)(10) Elections ("SECTION 338 FORMS"), including IRS Form 8023-A and all
attachments required to be filed therewith pursuant to applicable Treasury
Regulations ("FORM 8023"). Stockholder and Purchaser shall cooperate in drafting
and making final the Section 338 Forms. Purchaser shall be responsible for
filing the Section 338 Forms with the proper Taxing Authorities, provided that
Stockholder shall be responsible for filing any Section 338 Form that must be
filed with a Return described in Section 4.1.
(b) At least 15 days prior to the Closing Date, Purchaser shall furnish
Stockholder with four copies (three for Purchaser and one for Stockholder) of
Form 8023 prepared by Purchaser. On or before the Closing Date, Purchaser and
Stockholder shall agree upon the form and content of Form 8023 to be filed on
the Closing Date. At the Closing, Stockholder shall deliver to Purchaser three
copies of such Form 8023 executed by the proper party on behalf of Stockholder.
On the Closing Date, Purchaser shall cause such Form 8023 to be executed by the
proper party on behalf of Purchaser, and shall file such Form 8023 with the IRS.
(c) Purchaser shall prepare (i) any corrections, amendments or supplements
to the Form 8023 as executed by Purchaser and Stockholder pursuant to Section
8.2(b) and (ii) any state or local reports or forms that are necessary or
appropriate for purposes of complying with the requirements for making the
Section 338(h)(10) Elections (each an "Additional Section 338 Form").
Stockholder and Purchaser shall cooperate in drafting and making final each
Additional Section 338 Form. At least 30 days prior to the latest date for the
filing of each Additional Section 338 Form, Purchaser shall furnish Stockholder
with four copies of such Additional Section 338 Form (three for Purchaser and
one for Stockholder) prepared by Purchaser. At least 15 days prior to the latest
date for the filing of each Additional Section 338 Form, Purchaser and
Stockholder shall agree upon the final form and content of such Additional
Section 338 Form, and Stockholder shall deliver to Purchaser three copies of
such Additional Section 338 Form executed by the proper party on behalf of
Stockholder. Purchaser shall cause each Additional Section 338 Form to be
executed by the proper party on behalf of Purchaser, and shall file such
Additional Section 338 Form with the applicable Taxing Authority.
8.3 ALLOCATION. On or before the last day of the seventh month beginning
after the month that includes the Closing Date, Purchaser shall provide to
Stockholder a proposed allocation of the purchase price for the deemed sale of
assets resulting from the making of the Section 338(h)(10) Elections, together
with a report or reports in support of such allocation prepared by the valuation
services group of Deloitte & Touche LLP or of Coopers & Lybrand L.L.P. or any
other firm or firms of independent appraisers of nationally recognized
reputation selected by Purchaser, the fees and expenses of which shall be borne
by Purchaser, setting forth the estimated fair market values of the assets of
the Company and, to the extent relevant to such deemed sale, its Subsidiaries.
Stockholder and Purchaser shall cooperate in determining the amount of the
purchase price for the deemed sale of assets resulting from the making of the
Section 338(h)(10) Elections (including the liabilities on the Closing Date of
the Company and those of its Subsidiaries to which the Section 338(h)(10)
Elections apply) and the final allocation thereof (the "FINAL ALLOCATION"). The
determination of the Final Allocation (other than the determination of such
liabilities) shall be at the sole discretion of Purchaser. Any dispute with
respect to the determination of such liabilities shall be
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resolved pursuant to the Tax Dispute Resolution Mechanism. The liabilities on
the Closing Date of the Company and each of its Subsidiaries to which the
Section 338(h)(10) Elections apply and the Final Allocation shall be reflected
in an Additional Section 338 Form filed with the IRS on or before the fifteenth
day of the ninth month beginning after the month that includes the Closing Date.
8.4 MODIFICATION; REVOCATION. Purchaser and Stockholder agree that none of
them shall, or shall permit any of their Affiliates to, take any action to
modify the Section 338 Forms following the execution thereof, or to modify or
revoke the Section 338(h)(10) Elections following the filing of the Section 338
Forms, without the written consent of Stockholder and Purchaser, as the case may
be.
8.5 CONSISTENT TREATMENT. Purchaser and Stockholder shall, and shall cause
their respective Affiliates to, file all Returns in a manner consistent with the
information contained in the Section 338 Forms and the Additional Section 338
Forms as filed and the Final Allocation.
8.6 TAXES AND EXPENSES RESULTING FROM ELECTIONS. Notwithstanding any other
provision of this Agreement, (a) Stockholder shall bear all federal Income Taxes
and Combined State Taxes resulting from the making of the Section 338(h)(10)
Elections (including but not limited to any effect on such Taxes of the making
of a Section 338 Election with respect to any non-United States Subsidiary of
the Company), (b) the Company shall bear all other Taxes resulting from the
making of the Section 338(h)(10) Elections (including but not limited to any
effect on such Taxes of the making of a Section 338 Election with respect to any
non-United States Subsidiary of the Company), (c) the Company shall bear all
Taxes resulting from the making of a Section 338 Election with respect to the
Company or any United States Subsidiary of the Company (including but not
limited to any effect on such Taxes of the making of a Section 338 Election with
respect to any non-United States Subsidiary of the Company), (d) Purchaser and
its Affiliates (including the Company and its Subsidiaries following the
Closing), on the one side, and Stockholder and the Non-Company Affiliates, on
the other side, shall bear their respective administrative, appraisal, legal,
accounting and similar expenses resulting from the making of the Section
338(h)(10) Elections, and (e) Purchaser and its Affiliates (including the
Company and its Subsidiaries following the Closing) shall bear all
administrative, appraisal, legal, accounting and similar expenses resulting from
the making of any Section 338 Elections.
8.7 DEEMED SALE OF ASSETS IF NEWCO IS SURVIVOR OF MERGER. If Newco is the
survivor of the merger of Newco and the Company pursuant to the Merger
Agreement, the parties hereto shall treat such merger for all Income Tax
purposes as a sale of all of the Company's assets for the sum of the Merger
Consideration and the liabilities of the Company on the Closing Date, and as a
complete liquidation of the Company to which the provisions of section 332 of
the Code apply and a distribution of the Merger Consideration to its
shareholders. In such case, the Section 338(h)(10) Elections will be applicable
only to the applicable Subsidiaries of the Company; IRS Form 8594 with respect
to such deemed sale and all comparable or corresponding forms under applicable
state and local Income Tax law relating to Combined State Taxes shall be treated
as Section 338 Forms and, as applicable, Additional Section 338 Forms; the
provisions of Sections 2.2(f)(ii), 2.3(b), 2.3(c), 8.3, 8.6(a), 8.6(b), 8.6(d)
and 11(d) and the definition of the term Indemnifiable Separate Taxes shall be
applied as if such deemed sale were a part of the deemed sale of assets
resulting from the making of the Section 338(h)(10) Elections if those elections
were applicable to the Company as well as the applicable Subsidiaries of the
Company; and the provisions of Sections 2.3(b), 2.3(c), 8.6(c) and 8.6(e) and
the definition of the term Indemnifiable Separate Taxes shall be applied as if
such deemed sale were a deemed sale of assets resulting from the making of a
Section 338 Election if that election were applicable to the Company.
9. TRANSFER TAXES. Notwithstanding any other provision of this Agreement,
all transfer, documentary, sales, use, stamp, registration and other such Taxes
and fees incurred in connection with the transactions contemplated by the Merger
Agreement (including but not limited to any New York State Gains Tax, any New
York City Transfer Tax and any similar Tax imposed in other jurisdictions) shall
be borne and paid by Purchaser, and Purchaser will, at its own expense, file all
necessary Returns and other documentation with respect to all such Taxes and
fees.
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10. TAX DISPUTE RESOLUTION MECHANISM. Wherever in this Agreement it shall
be provided that a dispute shall be resolved pursuant to the "TAX DISPUTE
RESOLUTION MECHANISM," such dispute shall be resolved as follows: (a) the
parties will in good faith attempt to negotiate a prompt settlement of the
dispute; (b) if the parties are unable to negotiate a resolution of the dispute
within 30 days, the dispute will be submitted to the New York office of a firm
of independent accountants of nationally recognized standing reasonably
satisfactory to Stockholder and Purchaser (or, if Stockholder and Purchaser do
not agree on such a firm, then a firm chosen by the Arbitration and Mediation
Committee of the New York Society of Certified Public Accountants) (the "TAX
DISPUTE ACCOUNTANTS"); (c) the parties will present their arguments and submit
the proposed amount of each item in dispute to the Tax Dispute Accountants
within 15 days after submission of the dispute to the Tax Dispute Accountants;
(d) the Tax Dispute Accountants shall resolve the dispute, in a fair and
equitable manner and in accordance with applicable Tax law and the provisions of
this Agreement, by selecting, for each item in dispute, the proposed amount for
such item submitted by one party or the other party within 30 days after the
parties have presented their arguments to the Tax Dispute Accountants, whose
decision shall be final, conclusive and binding on the parties; (e)
notwithstanding any other provision of this Agreement, any payment to be made as
a result of the resolution of a dispute shall be made, and any other action to
be taken as a result of the resolution of a dispute shall be taken, on or before
the later of (i) the date on which such payment or action would otherwise be
required or (ii) the third business day following the date on which the dispute
is resolved (in the case of a dispute resolved by the Tax Dispute Accountants,
such date being the date on which the parties receive written notice from the
Tax Dispute Accountants of their resolution), provided that if a dispute with
respect to an item in a Return shall not be resolved on or before the date that
is three business days prior to the latest date on which such Return may be
filed under applicable Tax law, then the party having the responsibility for
filing such Return pursuant to Section 4 shall file such Return reflecting all
disputed items that have been resolved in the manner so resolved, and reflecting
all unresolved disputed items in the manner proposed by such party, and shall,
upon the resolution of all such unresolved disputed items, file an amended
Return reflecting the resolution thereof in the manner so resolved; and (f) the
fees and expenses of the Tax Dispute Accountants in resolving a dispute will be
borne equally by Stockholder and Purchaser.
11. COOPERATION ON TAX MATTERS. (a) Purchaser and Stockholder agree to
furnish or cause to be furnished to each other, upon request, as promptly as
practicable, such information (including access to books and records) relating
to the Company and its Subsidiaries as is reasonably necessary for the
preparation of the Pro Forma Returns, for the filing of all other relevant
Returns, for the preparation for any audit, and for the prosecution or defense
of any claim, suit or proceeding relating to any proposed adjustment and any
claim subject to Section 12.3.
(b) The parties agree to use their reasonable good faith efforts to
cooperate in connection with the transition from the performance of tax
compliance services relating to the Company and its Subsidiaries by Stockholder
prior to the Closing to the performance of such services by the Company after
the Closing, taking into account the need to minimize both the cost of such
transition and the disruption to the ongoing business activities of the parties.
(c) Purchaser and Stockholder agree to retain or cause to be retained all
books, records, Returns, schedules, documents, work papers and other material
items of information relating to Taxes with respect to the Company and its
Subsidiaries for periods prior to or ending on the Closing Date for the longer
of (i) the seven-year period beginning on the Closing Date or (ii) the full
period of the applicable statute of limitations, including any extension
thereof, and to abide by all record retention agreements entered into with any
Taxing Authority. Purchaser and Stockholder agree to give each other reasonable
notice prior to transferring, discarding or destroying any such materials
relating to Taxes with respect to the Company and its Subsidiaries, and, if the
other party so requests, to allow the other party to take possession of such
materials.
(d) Purchaser and Stockholder shall cooperate, and Purchaser shall cause the
Company and its Subsidiaries to cooperate with Stockholder, with respect to the
preparation and filing of any Return
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for which the other is responsible pursuant to Section 4 (including but not
limited to providing work papers and schedules). Except as otherwise provided
with respect to items relating to the allocation of the purchase price for the
deemed sale of assets resulting from the making of the Section 338(h)(10)
Elections, Purchaser shall prepare or cause the Company to prepare, in a manner
and at such time or times as is consistent with past practice, the Tax work
paper preparation package or packages necessary to enable Stockholder to prepare
consolidated federal and combined, unitary or consolidated state, local and
foreign Income Tax Returns, and to prepare drafts of Returns (including amended
Returns) relating to Indemnifiable Separate Taxes pursuant to Section 2.3(f),
for all taxable periods from January 1, 1995 through the Closing Date.
12. INDEMNIFICATION.
12.1 INDEMNIFICATION BY STOCKHOLDER. Stockholder covenants and agrees,
from and after the Effective Time, to defend, indemnify and hold harmless each
of Purchaser, Newco, their respective Affiliates, the Company and its
Subsidiaries (collectively, the "PURCHASER INDEMNITEES") from and against, and
pay or reimburse the Purchaser Indemnitees for, any and all actual claims,
demands, liabilities, obligations, losses, fines, costs, expenses, deficiencies
or damages (collectively, "Losses"), whether or not resulting from third party
claims, including interest, additions and penalties with respect thereto and
out-of-pocket expenses and reasonable attorneys' and accountants' fees and
expenses incurred in the investigation or defense of any of the same or in
asserting, preserving or enforcing any of their respective rights under this
Agreement, in each case resulting from or arising out of any failure of
Stockholder to perform any agreement or covenant under Sections 2.1, 2.2, 2.3,
3.1, 4.1, 5, 6, 7(a), 8, 10, 11, 12.1, 12.3, 12.4, 13, 14 and 18 or fulfill any
other obligation in respect thereof. Stockholder shall not have any liability
under any provision of this Agreement for any Losses to the extent that any such
Losses arise from actions taken by Purchaser, any of its Affiliates, the Company
or any of its Subsidiaries after the Closing, or from the failure of any thereof
to take any required action, except for failure to give notice as provided in
Section 12.3. Purchaser shall take and cause its Affiliates, the Company and its
Subsidiaries to take all reasonable steps to mitigate any Losses with respect to
which Stockholder could have an indemnification obligation under this Section
12.1 upon any of the Purchaser Indemnitees' becoming aware of any event which
could reasonably be expected to give rise thereto.
12.2 INDEMNIFICATION BY PURCHASER. Purchaser covenants and agrees, from
and after the Effective Time, to defend, indemnify and hold harmless each of
Stockholder and the Non-Company Affiliates (collectively, the "STOCKHOLDER
INDEMNITEES") from and against, and pay or reimburse the Stockholder Indemnitees
for, any and all Losses, in each case resulting from or arising out of any
failure of Purchaser to perform any agreement or covenant under Sections 2.1,
2.2, 2.3, 3.2, 4.2, 5, 6, 7(b), 8, 9, 10, 11, 12.2, 12.3, 12.4, 13, 14 and 18 or
fulfill any other obligation in respect thereof. Purchaser shall not have any
liability under any provision of this Agreement for any Losses to the extent
that any such Losses arise from actions taken by Stockholder or any of the
Non-Company Affiliates after the Closing, or from the failure of any thereof to
take any required action, except for failure to give notice as provided in
Section 12.3. Stockholder shall take and cause its Affiliates to take all
reasonable steps to mitigate any Losses with respect to which Purchaser could
have an indemnification obligation under this Section 12.2 upon any of the
Stockholder Indemnitees' becoming aware of any event which could reasonably be
expected to give rise thereto.
12.3 INDEMNIFICATION PROCEDURES. In the case of any claim asserted by a
third party against a party entitled to indemnification under this Section 12
(the "INDEMNIFIED PARTY"), notice shall be given by the Indemnified Party to the
party required to provide indemnification (the "INDEMNIFYING PARTY") promptly
after such Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought (which notice shall state the basis of the claim and the
agreement or covenant alleged not to have been performed), and the Indemnified
Party shall permit the Indemnifying Party (at the expense of such Indemnifying
Party) to assume the defense of any claim or any litigation resulting therefrom,
PROVIDED that (a) the failure of any Indemnified Party to give notice as
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provided in this Section 12.3 shall not relieve the Indemnifying Party of its
indemnification obligations under this Section 12 except to the extent that such
failure results in a lack of actual notice to the Indemnifying Party and such
Indemnifying Party is materially prejudiced as a result of such failure to give
notice and (b) in the case of any such claim against any of Purchaser, Newco,
their respective Affiliates, the Company or any of its Subsidiaries relating to
Taxes other than those set forth in clauses (a) and (b) of Section 3.1, counsel
for Stockholder who shall conduct the defense of such claim or litigation shall
be reasonably satisfactory to Purchaser, and Purchaser may participate in such
defense at Purchaser's expense. The Indemnified Party shall promptly deliver to
the Indemnifying Party copies of all notices and documents (including court
papers) received by the Indemnified Party relating to the third party claim.
Except with the prior written consent of the Indemnified Party, no Indemnifying
Party, in the defense of any such claim or litigation, shall consent to entry of
any judgment or enter into any settlement (i) that provides for injunctive or
other nonmonetary relief affecting the Indemnified Party, (ii) that reasonably
could be expected to affect adversely any Tax liability of any Indemnified Party
with respect to which the Indemnifying Party has no indemnification obligation
under this Section 12 or (iii) that does not include as an unconditional term
thereof the giving by each claimant or plaintiff to such Indemnified Party of a
release from all liability with respect to such claim or litigation. In the
event that the Indemnifying Party does not accept the defense of any matter as
above provided, the Indemnified Party shall have the full right to defend
against any such claim or demand, and shall be entitled to settle or agree to
pay in full such claim or demand.
12.4 TAX TREATMENT OF INDEMNIFICATION PAYMENTS. Unless otherwise required
by law, each of Purchaser and Stockholder agrees to treat and to cause their
respective Affiliates to treat, for all Tax purposes, any indemnification
payment made pursuant to this Section 12 as an adjustment to the Merger
Consideration paid to Stockholder (or, if applicable, in the case of a payment
by Stockholder, as the satisfaction of a liability of the Company and its
Subsidiaries assumed by Stockholder, the assumption of which was a contribution
by Stockholder to the capital of the Company) or as a reimbursement for or a
payment of a liability that was properly an obligation of the Indemnifying
Party, and not of the Indemnified Party.
13. CONFIDENTIALITY. Each of Purchaser, Newco and the Company, on the one
hand, and Stockholder, on the other hand, shall, and shall use reasonable
efforts to cause its respective Affiliates, agents, advisors and representatives
and its and their respective officers, directors or employees (the
"REPRESENTATIVES," neither party being treated as a Representative of the other)
to, keep confidential and not disclose to others or use in any way except to
further the purposes of this Agreement, without the written consent of
Stockholder or the Company, respectively, all information of the other party and
their respective Affiliates that has been acquired in connection with this
Agreement, PROVIDED that the foregoing shall not apply to information that (a)
is or hereafter becomes generally available to the public other than as a result
of a disclosure by the party that would otherwise have an obligation of
confidentiality hereunder (the "OBLIGATED PARTY") or any Representative thereof,
(b) is hereafter disclosed to the Obligated Party or any Representative thereof
by a third party who is not in default of any confidentiality obligation to the
other party, (c) is reasonably required to be submitted by the Obligated Party
or any Representative thereof to any Governmental Entity, including in
connection with any action, suit or proceeding, (d) is provided by Stockholder
under confidentiality terms and conditions for the benefit of the Company,
substantially similar to those confidentiality arrangements set forth in the
Confidentiality Agreement and with a term of at least five years from the date
hereof, (i) to third parties for consulting, accounting, legal and similar
purposes or (ii) to prospective purchasers of Stockholder or of all or any
portion of the securities or assets of Stockholder to the extent considered
reasonably necessary by Stockholder to facilitate such purchase, (e) is
necessary, in the reasonable judgment of the Obligated Party, to disclose in
order to assert or defend any claim against (or made by) any insurer or other
Person, PROVIDED that prior notice of such disclosure is provided to the other
party, (f) is or was independently developed by the Obligated Party or any
Representative thereof, or (g) is required to be disclosed by the Obligated
Party or any Representative thereof in compliance with applicable laws or
regulations or
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order by a Governmental Entity, PROVIDED that in the event that the Obligated
Party or any Representative thereof is requested by any Governmental Entity to
disclose any such information, the Obligated Party shall give, or shall use
reasonable efforts to cause such Representative to give, the other party prompt
written notice of such request so that the other party or its relevant Affiliate
may seek an appropriate protective order, and in the absence of a protective
order, the Obligated Party or such Representative shall use reasonable efforts
to obtain assurances that confidential treatment will be accorded to such
information. This obligation of confidentiality shall apply to all information
which (x) either party has reason to know is confidential or (y) is marked
confidential (or, if provided orally, is confirmed in writing as confidential
within 30 days of the date of disclosure to the other party), and this
obligation of confidentiality with respect to each matter disclosed to the other
party shall continue for a period of seven years after such disclosure. Each of
Purchaser, Newco and the Company, on the one hand, and Stockholder, on the other
hand, acknowledges that the other party and its Affiliates would be irreparably
damaged in the event of a breach or threatened breach of any of the Obligated
Party's obligations under this Section 13, and agrees (and shall use reasonable
efforts to cause each of its Representatives to agree) that, in the event of a
breach or threatened breach of any such obligation, the other party and its
Affiliates shall, in addition to any other rights and remedies available to it
in respect of such breach, be entitled to an injunction from a court of
competent jurisdiction granting it specific performance of the provisions of
this Section 13.
14. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given upon (a) transmitter's confirmation of a
receipt of a facsimile transmission, (b) confirmed delivery by a standard
overnight carrier or when delivered by hand or (c) the expiration of five
business days after the day when mailed in the United States by certified or
registered mail, postage prepaid, addressed at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a) if to Stockholder, to:
Manville Corporation
717 17th Street
Denver, Colorado 80202
Telephone: (303) 978-4911
Facsimile: (303) 978-4842
Attention: Richard B. Von Wald, Esq.
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Telephone: (212) 735-3000
Facsimile: (212) 735-2000
Attention: Franklin M. Gittes, Esq.
and with a copy to:
Davis Polk & Wardwell
1300 "I" Street, N.W.
Washington, D.C. 20005
Telephone: (202) 962-7000
Facsimile: (202) 962-7111
Attention: Kathleen L. Ferrell, Esq.
D-14
<PAGE>
(b) if to the Company, to:
Riverwood International Corporation
3350 Cumberland Circle
Suite 1400
Atlanta, Georgia 30339
Telephone: (770) 644-3000
Facsimile: (770) 644-2929
Attention: General Counsel
with a copy to:
[ON OR BEFORE THE CLOSING DATE]
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Telephone: (212) 735-3000
Facsimile: (212) 735-2000
Attention: Franklin M. Gittes, Esq.
and with a copy to:
[ON OR BEFORE THE CLOSING DATE]
Davis Polk & Wardwell
1300 "I" Street, N.W.
Washington, D.C. 20005
Telephone: (202) 962-7000
Facsimile: (202) 962-7111
Attention: Kathleen L. Ferrell, Esq.
or with a copy to:
[AFTER THE CLOSING DATE]
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Telephone: (212) 909-6000
Facsimile: (212) 909-6836
Attention: Robert J. Cubitto, Esq.
and
(c) if to Purchaser or Newco, to:
CDRO Holding Corporation
CDRO Acquisition Corporation
c/o Clayton, Dubilier & Rice Fund V
Limited Partnership
270 Greenwich Avenue
Greenwich, Connecticut 06830
Telephone: (203) 661-3998
Facsimile: (203) 661-0544
Attention: CD&R Associates V
Limited Partnership
Attention: CD&R Investment
Associates, Inc.
D-15
<PAGE>
Attention: Alberto Cribiore,
Vice President,
Treasurer and
Secretary
with a copy to
Clayton, Dubilier & Rice, Inc.
126 East 56th Street
New York, New York 10022
Telephone: (212) 407-5200
Facsimile: (212) 407-5252
Attention: Kevin J. Conway
and with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Telephone: (212) 909-6000
Facsimile: (212) 909-6836
Attention: Robert J. Cubitto, Esq.
15. GOVERNING LAW. Except to the extent federal, state, local or foreign
Tax laws, rules, or regulations govern the filing of Returns or the positions
taken with respect to Taxes in Returns, and regardless of the law that might
otherwise be applied under principles of conflicts of laws, this Agreement shall
be governed by and construed and enforced in accordance with the internal laws
of the State of New York.
16. COUNTERPARTS. This Agreement may be executed in more than one
counterpart, each of which shall be deemed an original, but all such
counterparts when executed shall constitute one and the same agreement.
17. SEVERABILITY. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or other authority to be
invalid, void, unenforceable or against its regulatory policy, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated.
18. ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law of otherwise) without the prior
written consent of the other parties, provided that Purchaser or Newco may
assign this Agreement to any Subsidiary of Purchaser or Newco, or to any lender
to Purchaser or Newco or any Subsidiary or Affiliate thereof as security for
obligations to such lender, and provided, further, that no such assignment to
any such lender shall in any way affect the assigning party's obligations or
liabilities 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 hereto and their respective successors and permitted assigns.
Purchaser shall promptly notify Stockholder of any assignment (whether by
operation of law or otherwise) permitted by the provisions of this Section 18.
19. NO THIRD PARTY BENEFICIARIES. Except as provided in Section 12 with
respect to indemnification of Indemnified Parties hereunder, nothing in this
Agreement, express or implied, is intended to or shall confer any rights,
benefits or remedies of any nature whatsoever upon any Person other than the
parties hereto and their respective successors and permitted assigns.
20. WAIVERS. Any party hereto may by written notice to the other parties
(a) extend the time for the performance of any of the obligations or other
actions of the other parties under this Agreement, (b) waive compliance with any
of the conditions or covenants of the other parties contained in this Agreement
and (c) waive or modify performance of any of the obligations of the other
parties
D-16
<PAGE>
under this Agreement. Except as provided in the preceding sentence, no action
taken pursuant to this Agreement shall be deemed to constitute a waiver by the
party taking such action of compliance with any covenants or agreements
contained herein. The waiver by any party hereto of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any preceding or
succeeding breach, and no failure by a party to exercise any right or privilege
hereunder shall be deemed a waiver of such party's rights or privileges
hereunder or shall be deemed a waiver of such party's rights to exercise the
same at any subsequent time or times hereunder.
21. AMENDMENTS. This Agreement may not be modified, amended, altered or
supplemented except by an instrument in writing executed on behalf of each of
the parties hereto.
22. TERMINATION; SURVIVAL. This Agreement shall be terminated upon the
termination of the Merger Agreement in accordance with the terms thereof. This
Agreement shall survive the consummation of the Merger pursuant to the Merger
Agreement.
23. HEADINGS. The headings contained in this Agreement are for convenience
of reference only and shall not be deemed for any purpose to constitute a part
of or to affect in any way the meaning or interpretation of this Agreement.
24. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
supersedes all prior agreements and understandings (excluding the Merger
Agreement and the Indemnification Agreement), both written and oral, between the
parties with respect to the subject matter hereof. The parties hereto also
acknowledge that the Chief Financial Officer of Stockholder has delivered to
Purchaser and Newco the Tax Letter.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the date
first written above.
MANVILLE CORPORATION
By: ____/s/ RICHARD B. VON WALD_______
Name: Richard B. Von Wald
Title:Senior Vice President,
General Counsel & Secretary
RIVERWOOD INTERNATIONAL CORPORATION
By: ____/s/ THOMAS H. JOHNSON_________
Name: Thomas H. Johnson
Title:President and Chief Executive
Officer
CDRO HOLDING CORPORATION
By: ____/s/ KEVIN J. CONWAY___________
Name: Kevin J. Conway
Title: President
CDRO ACQUISITION CORPORATION
By: ____/s/ KEVIN J. CONWAY___________
Name: Kevin J. Conway
Title: President
D-17
<PAGE>
ANNEX E
PROPOSED CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
MANVILLE CORPORATION
------------------------
PURSUANT TO SECTION 103 AND SECTION 242 OF THE GENERAL CORPORATION LAW OF
THE STATE OF DELAWARE
------------------------
The undersigned, W. Thomas Stephens and Richard B. Von Wald, certify that
they are the President and Secretary, respectively, of Manville Corporation, a
corporation organized and existing under the laws of the State of Delaware (the
"Company"), and do hereby further certify as follows:
1. The name of the Company is Manville Corporation.
2. This Certificate of Amendment was unanimously approved by the Board of
Directors of the Company and thereafter duly adopted by the stockholders
thereof, in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
3. Article FIRST of the Restated Certificate of Incorporation of the
Company is hereby amended to read in its entirety as follows:
FIRST: The name of the corporation is Schuller Corporation (hereinafter
the "Company").
IN WITNESS WHEREOF, Manville Corporation has caused this Certificate of
Amendment to be signed by W. Thomas Stephens, its President, and attested by
Richard B. Von Wald, its Secretary, this day of , 1996.
MANVILLE CORPORATION
By:
______________________________________
W. Thomas Stephens
Attest:
______________________________________
Richard B. Von Wald
E-1
<PAGE>
ANNEX F
[LETTERHEAD OF J.P. MORGAN SECURITIES INC.]
October 25, 1995
The Board of Directors
Manville Corporation
717 17th Street
Denver, Colorado 80202
Gentlemen and Madame:
You have requested our opinion as to the fairness of a proposed transaction
whereby Manville Corporation (the "Company") would issue common shares of the
Company to the Manville Personal Injury Settlement Trust (the "Trust") in
exchange for the Trust giving up its Profit Sharing interest in the Company as
contemplated in the Profit Sharing Exchange Agreement (the "Agreement"). The
opinion has been prepared to assess the fairness of the proposed transaction to
the common shareholders of the Company, exclusive of the Trust. This opinion
only addresses the proposed exchange and does not address the potential
disposition of Riverwood International Corporation or the use of proceeds
thereof.
It is our understanding based on the review of the Agreement that the Trust
will exchange its right to receive annually 20% of the Company's "Profits" (as
such term is used in the Amended and Restated Supplemental Agreement between the
Company and the Trust) pursuant to the Amended and Restated Supplemental
Agreement for 20% of the common stock of the Company assuming exercise of all
outstanding options and warrants and after giving effect to such exchange (the
"Exchange"). The Exchange would occur in connection with a pro rata dividend to
all shareholders of the net proceeds, after repayment of outstanding Manville
indebtedness and preferred stock (in the discretion of the Board), to the
Company from a disposition of Riverwood International Corporation. The Exchange
would occur after the declaration of the contemplated dividend, but prior to the
record date.
Please be advised that while certain provisions of the Exchange are
summarized above, the terms of the Exchange are more fully described in the
Agreement. As a result, the description of the Exchange and certain other
information contained herein is qualified in its entirety by reference to the
more detailed information appearing or incorporated by reference in the
Agreement. In providing the opinion we have assumed that the Exchange will
permanently terminate any Profit Sharing obligation to the Trust and that the
Profit Sharing obligation under the Manville Property Damage Settlement Trust
(the "PD Trust") will not arise. We have also assumed that the "Trust Claims"
(as such term is used in the Amended and Restated Supplemental Agreement) will
not be assumed by the Company and that any obligations of the Trust that may be
assumed by the Company in the future pursuant to the Trust Agreement are not
material. We have further assumed that any obligations of the PD Trust which are
assumed by the Company will be limited to the assets of the PD Trust which
revert back to the Company.
In arriving at our opinion, we have reviewed among other things (i) the
Agreement; (ii) the Amended and
F-1
<PAGE>
Restated Supplemental Agreement and the form of Second Amended and Restated
Supplemental Agreement; (iii) the Manville Personal Injury Settlement Trust
Agreement and the form of Ninth Amendment thereto; (iv) certain publicly
available information concerning the business of the Company and of certain
other companies engaged in business comparable to the Company and the reported
market prices for certain other companies' securities deemed comparable; (v)
current and historical market prices of the common stock of the Company; (vi)
the audited financial statements of the Company for the fiscal year ended
December 31, 1994, the unaudited financial statements of the Company for the
period ended September 30, 1995, and certain unaudited financial projections
prepared by the Company for the periods ended December 31, 1995 to December 31,
2000; and (vii) certain other internal financial analyses and forecasts prepared
by the Company and its management.
In addition, we have held discussions with members of the management of the
Company with respect to certain aspects of the Exchange and the past and current
business operations of the Company, the financial condition and future prospects
and operations of the Company, the effects of the Exchange on the financial
condition and future prospects of the Company, and certain other matters we
believe necessary or appropriate to our inquiry. We have reviewed certain
financial studies and analyses and considered such other information as we
deemed appropriate for the purposes of this opinion.
In performing such analysis, we have used such valuation methodologies as we
have deemed necessary or appropriate for the purposes of this opinion. Our view
is based on (i) our consideration of the information the Company has supplied to
us to date, (ii) our understanding of the terms upon which the Company and the
Trust intend to consummate the Exchange, (iii) the currently contemplated
capital structure of the Company and its subsidiaries upon consummation of the
Exchange, (iv) our analysis of the long-term value of the Company upon
consummation of the Exchange, and (v) the consummation of the Exchange within
the time periods contemplated by the Agreement.
In giving our opinion, we have relied upon and assumed, without independent
verification, the accuracy and completeness of all information that was publicly
available or was furnished to us by the Company or otherwise reviewed by J.P.
Morgan, and we have not assumed any responsibility or liability therefore. We
have not conducted any valuation or appraisal of any assets or liabilities, nor
have any valuations or appraisals been provided to us. In relying on financial
analyses and forecasts provided to us, we have assumed that they have been
reasonably prepared based on assumptions reflecting the best currently available
estimates and judgments by management as to the expected future results of
operations and financial condition of the Company to which such analyses or
forecasts relate.
Our opinion is necessarily based on economic, market and other conditions as
in effect on, and the information made available to us as of, the date hereof.
It should be understood that subsequent developments may affect this opinion and
that we do not have any obligation to update, revise, or reaffirm this opinion.
We are expressing no opinion herein as to the price at which the Company's stock
will trade upon the consummation of the Exchange.
Each of the assumptions set forth in this opinion has been made with your
permission and without independent verification. We are not passing upon any
matters of law. To the extent
F-2
<PAGE>
that evaluation of the Exchange requires analysis of legal matters, we have
relied on the views of Manville with respect to such matters.
J.P. Morgan as part of its investment banking services, is regularly engaged
in the valuation of businesses and securities in connection with mergers,
acquisitions, underwritings, sales and distributions of listed and unlisted
securities, private placements and valuations for estate, corporate and other
purposes. J.P Morgan has performed and continues to perform investment banking
services and other services for Manville and its affiliates and is compensated
for such services.
This opinion is provided to the Board of Directors of the Company and does
not constitute a recommendation to any holder of common stock of the Company as
to how such holder should vote with respect to the Exchange.
On the basis of and subject to the foregoing, it is our opinion as of the
date hereof that the Exchange as described herein is fair, from a financial
point of view, to the common stockholders of the Company, exclusive of the
Trust.
Very truly yours,
J.P. MORGAN SECURITIES INC.
By: ____/s/ JOSEPH A. WALKER__________
Name: Joseph A. Walker
Title: Managing Director
F-3
<PAGE>
ANNEX G
[LETTERHEAD OF J.P. MORGAN SECURITIES INC.]
October 25, 1995
Board of Directors
Riverwood International Corporation
3350 Cumberland Circle
Suite 1400
Atlanta, Georgia 30339
Board of Directors
Manville Corporation
717 17th Street
Denver, Colorado 80202
Gentlemen and Madame:
You have requested our opinion as to the fairness to the holders of the
outstanding shares of Common Stock, par value $0.01 per share (the "Shares"), of
Riverwood International Corporation (the "Company") of the $20.25 per Share in
cash to be received by such holders, including Manville Corporation
("Manville"), the owner of approximately 81.3% of the outstanding Shares,
pursuant to the merger ("Merger") contemplated by the Agreement and Plan of
Merger dated as of October 25, 1995 by and among CDRO Holding Corporation
("Parent"), CDRO Acquisition Corporation, a wholly-owned subsidiary of Parent
("Purchaser"), and the Company (the "Agreement").
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Tax Matters Agreement, dated as of October 25, 1995 by and among
Manville, the Company, Parent and Purchaser (the "Tax Matters Agreement"); the
Voting and Indemnification Agreement, dated as of October 25, 1995 by and among
Manville, Parent and Purchaser (the "Indemnification Agreement"); Annual Reports
to Stockholders and Annual Reports on Form 10-K of the Company for the three
years ended December 31, 1994; certain interim reports to stockholders and
Quarterly Reports on Form 10-Q; certain other communications from the Company to
its stockholders; and certain internal financial analyses and forecasts for the
Company prepared by its management. We also have held discussions with members
of the senior management of the Company and Manville regarding the past and
current business operations, financial condition and future prospects of the
Company. In addition, we have reviewed the reported price and trading activity
for the Shares, compared certain financial and stock market information for the
Company with similar information for certain other companies the securities of
which are publicly traded, reviewed the financial terms of certain recent
business combinations in the paper, paperboard and forest products industry, and
performed such other studies and analyses as we considered appropriate.
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes of this opinion. In addition, we have not made an independent
evaluation or appraisal of the assets and liabilities of the Company and were
not furnished with any such evaluation or appraisal.
G-1
<PAGE>
We understand that pursuant to the Indemnification Agreement, Manville has
agreed to indemnify Parent and the Purchaser against breaches of certain
representations and warranties of the Company in the Agreement. We also
understand that Manville's potential liability thereunder applies to 80% of any
indemnifiable losses in excess of $20 million, up to a maximum payment by
Manville of $100 million (the "general indemnity obligation"). In addition, we
understand that Manville has agreed to indemnify the Parent and the Purchaser
under the Tax Matters Agreement for certain tax liabilities of the Company for
periods ending on or before the closing date of the Merger (the "tax indemnity
obligation"). In rendering this opinion, we have, with your consent, not taken
into account any potential payment Manville may be required to make pursuant to
the general indemnity obligation or the tax indemnity obligation. However, we
note that any material liability incurred by Manville by reason of such
obligation would indicate a lower value of the Company.
In addition, in rendering this opinion, we have not considered the
particular tax consequences of the Merger to the various stockholders of the
Company, including, in the case of Manville, the termination of its existing tax
sharing arrangement with the Company and any obligations Manville may incur by
reason of the Tax Matters Agreement.
In rendering our opinion, we have not taken into account the effect on
Manville of the transaction contemplated by the Profit Sharing Exchange
Agreement dated October 25, 1995, between Manville and Manville Personal Injury
Settlement Trust. The Merger or an alternative disposition of the Company is a
condition precedent to the consummation of the transaction contemplated by such
Profit Sharing Exchange Agreement. We have been engaged by Manville to provide a
separate opinion with respect to the fairness of the transactions contemplated
by such Profit Sharing Exchange Agreement and will receive a fee in connection
therewith.
While the cash price of $20.25 per Share to be received by all stockholders
of the Company pursuant to the Agreement is the same, by reason of the matters
referred to above the Merger may affect Manville differently from the Company's
other stockholders. Our opinion does not address the treatment of the
stockholders of the Company as among themselves.
Our opinion is necessarily based on economic, market and other conditions as
in effect on, and the information made available to us as of, the date hereof.
It should be understood that subsequent developments may affect this opinion and
that we do not have any obligation to update, revise, or reaffirm this opinion.
We have acted as financial advisor to the Boards of Directors of the Company
and Manville with respect to the proposed Merger and we have been and will be
compensated for our services according to our engagement letter with the Company
and Manville dated April 10, 1995. We and our affiliates have performed and
continue to perform investment banking services and other services for
G-2
<PAGE>
and have made commercial loans to Manville, the Company and their affiliates and
are compensated therefor. In the ordinary course of business, we and our
affiliates may actively trade the debt and equity securities of Manville or the
Company for our or their own account or for the accounts of our or their
customers, and accordingly, we or they may at any time hold long or short
positions in such securities.
This opinion is provided to the Boards of Directors of the Company and
Manville and does not constitute a recommendation to any holder of Shares as to
how such holder should vote with respect to the Merger.
Based upon and subject to the foregoing and based upon such other matters as
we consider relevant, it is our opinion that as of the date hereof the $20.25
per Share to be received by the holders of Shares (including Manville) pursuant
to the Agreement is fair to such holders from a financial point of view.
Very truly yours,
J.P. MORGAN SECURITIES INC.
By: ____/s/ JOSEPH A. WALKER______
Name: Joseph A. Walker
Title: Managing Director
G-3
<PAGE>
ANNEX H
[LETTERHEAD OF GOLDMAN, SACHS & CO.]
October 25, 1995
Board of Directors
Riverwood International Corporation
3350 Cumberland Circle
Suite 1400
Atlanta, Georgia 30339
Board of Directors
Manville Corporation
717 17th Street
Denver, Colorado 80202
Gentlemen and Madame:
You have requested our opinion as to the fairness to the holders of the
outstanding shares of Common Stock, par value $0.01 per share (the "Shares"), of
Riverwood International Corporation (the "Company") of the $20.25 per Share in
cash to be received by such holders, including Manville Corporation
("Manville"), the owner of approximately 81.3% of the outstanding Shares,
pursuant to the merger ("Merger") contemplated by the Agreement and Plan of
Merger dated as of October 25, 1995 by and among CDRO Holding Corporation
("Parent"), CDRO Acquisition Corporation, a wholly-owned subsidiary of Parent
("Purchaser"), and the Company (the "Agreement").
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes.
We are familiar with the Company having acted as sole underwriter of a
secondary bond offering of the Company's 10 3/4% bonds due 2000 and 11 1/4%
bonds due 2002 held by Manville Personal Injury Settlement Trust (the "PI
Trust") and as the Company's and Manville's financial advisor in connection
with, and having participated in certain of the negotiations leading to, the
Agreement. In addition, we are familiar with Manville, the Company and the PI
Trust having acted as financial advisor to the United States Bankruptcy Court in
evaluating the assets and liabilities of Manville and the PI Trust; having acted
as lead underwriter of a public offering of bonds for Schuller International
Group, Inc. ("Schuller"), a wholly-owned subsidiary of Manville; and having
acted as financial advisor to the PI Trust generally and specifically in regard
to the Profit Sharing Exchange Agreement, dated as of October 25, 1995 (the
"Profit Sharing Exchange Agreement"), between Manville and the PI Trust.
H-1
<PAGE>
We have also provided certain investment banking services to Clayton,
Dubilier & Rice, Inc. ("CDR"), an affiliate of Parent and Purchaser, and certain
affiliates of CDR from time to time, including having acted as financial advisor
in several merger-related transactions; having acted as lead and co-underwriter
of several debt and equity securities offerings; and currently acting as lead
underwriter of a public offering of equity securities for Lexmark International
Group, an affiliate of CDR, and may continue to provide investment banking
services to CDR and its affiliates in the future.
In the course of our trading activities, we, as of the date hereof, have
accumulated a short position of $1 million principal amount of the Company's
10 3/4% bonds due 2000 and $1 million principal amount of the Company's 11 1/4%
bonds due 2002. In addition, as of the date hereof, we have accumulated a long
position of $510,000 principal amount of Schuller's 10 7/8 bonds due 2004.
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Tax Matters Agreement, dated as of October 25, 1995 by and among
Manville, the Company, Parent and Purchaser (the "Tax Matters Agreement"); the
Voting and Indemnification Agreement, dated as of October 25, 1995 by and among
Manville, Parent and Purchaser (the "Indemnification Agreement"); Annual Reports
to Stockholders and Annual Reports on Form 10-K of the Company for the three
years ended December 31, 1994; certain interim reports to stockholders and
Quarterly Reports of the Company on Form 10-Q; certain other communications from
the Company to its stockholders; and certain internal financial analyses and
forecasts for the Company prepared by its management. We also have held
discussions with members of the senior management of the Company and Manville
regarding the past and current business operations, financial condition and
future prospects of the Company. In addition, we have reviewed the reported
price and trading activity for the Shares, compared certain financial and stock
market information for the Company with similar information for certain other
companies the securities of which are publicly traded, reviewed the financial
terms of certain recent business combinations in the paper, paperboard and
forest products industry and performed such other studies and analyses as we
considered appropriate.
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes of this opinion. In addition, we have not made an independent
evaluation or appraisal of the assets and liabilities of the Company or any of
its subsidiaries as we have not been furnished with any such evaluation or
appraisal.
We understand that, pursuant to the Indemnification Agreement, Manville has
agreed to indemnify Parent and the Purchaser against breaches of certain
representations and warranties of the Company in the Agreement. We also
understand that Manville's potential liability thereunder applies to 80% of any
indemnifiable losses in excess of $20 million, up to a maximum payment by
manville of $100 million (the "general indemnity obligation"). In addition, we
understand that Manville has agreed to indemnify Parent and the Purchaser under
the Tax Matters Agreement for certain tax
H-2
<PAGE>
liabilities of the Company for periods ending on or before the closing date of
the Merger (the "tax indemnity obligation"). In rendering this opinion, we have,
with your consent, not taken into account any potential payment Manville may be
required to make pursuant to the general indemnity obligation or the tax
indemnity obligation. However, we note that any material liability incurred by
Manville by reason of such obligation would indicate a lower value of the
Company.
In addition, in rendering this opinion, we have not considered the
particular tax consequences of the Merger to the various stockholders of the
Company, including, in the case of Manville, the termination of its existing tax
sharing arrangement with the Company and any obligations Manville may incur by
reason of the Tax Matters Agreement.
In rendering our opinion, we have not taken into account the effect on
Manville of the transactions contemplated by the Profit Sharing Exchange
Agreement. The Merger or an alternative disposition of the Company is a
condition precedent to the consummation of the transactions contemplated by the
Profit Sharing Exchange Agreement. J.P. Morgan Securities Inc. has been engaged
by Manville to provide a separate opinion with respect to the fairness of the
transactions contemplated by the Profit Sharing Exchange Agreement and we are
acting as a financial advisor in connection therewith to the PI Trust.
While the cash price of $20.25 per Share to be received by all stockholders
of the Company pursuant to the Agreement is the same, by reason of the matters
referred to above, the Merger may affect Manville differently from the Company's
other stockholders. Our opinion does not address the treatment of the
stockholders of the Company as among themselves.
Based upon and subject to the foregoing and based upon such other matters as
we consider relevant, it is our opinion that as of the date hereof the $20.25
per Share to be received by the holders of Shares (including Manville) pursuant
to the Agreement is fair to such holders.
Very truly yours,
/s/ GOLDMAN, SACHS & CO.
H-3
<PAGE>
[FORM OF PROXY]
MANVILLE CORPORATION
P.O. BOX 5108, DENVER, CO 80217-5108
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Will M. Storey, Raymond S. Troubh and W. Thomas
Stephens or any of them as Proxies, each with the power to appoint a substitute,
and hereby authorizes them to represent and to vote as designated below, all the
shares of common stock of Manville Corporation ("Manville") held of record by
the undersigned on February 1, 1996, at the Special Meeting of Stockholders to
be held on March 27, 1996 or at any adjournment or postponement thereof.
In their discretion, the Proxies are authorized to vote upon such other business
as may properly be brought before the Special Meeting or any adjournment or
postponement thereof.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES ON
THE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. PLEASE SIGN AND DATE
THIS CARD ON THE REVERSE SIDE. A RETURN ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE IN RETURNING THIS CARD.
SEE REVERSE SIDE
<PAGE>
/X/ Please mark your votes as in this example.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BELOW. IF
NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ITEMS 1, 2 AND 3.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3.
1. Approval of the Profit Sharing Agreement and the transactions contemplated
thereby, including the Exchange, as more fully described in the proxy statement.
Approval of the Profit Sharing Exchange Agreement and the transactions
contemplated thereby, including the Exchange, constitutes approval of the
issuance of the Conversion Shares to Manville Personal Injury Settlement Trust
pursuant to the terms of the Profit Sharing Exchange Agreement.
/ / FOR / / AGAINST / / ABSTAIN
2. Approval of the disposition by Manville of all of the shares of common stock
of Riverwood International Corporation ("Riverwood") held by Manville as a
result of the merger (the "Merger") of CDRO Acquisition Corporation (the
"Purchaser"), a wholly owned subsidiary of RIC Holding, Inc., formerly named
CDRO Holding Corporation ("Parent"), with and into Riverwood, pursuant to the
Agreement and Plan of Merger, dated as of October 25, 1995, by and among
Riverwood, Parent and the Purchaser.
/ / FOR / / AGAINST / / ABSTAIN
3. Approval of a proposed amendment to Manville's Restated Certificate of
Incorporation which would effect a change in the name of Manville, following the
Merger, to "Schuller Corporation."
/ / FOR / / AGAINST / / ABSTAIN
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. JOINT OWNERS SHOULD EACH SIGN. WHEN
SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE
FULL TITLE AS SUCH.
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SIGNATURE(S) DATE
