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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): May 4, 1997
FORT HOWARD CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-20473 39-1090992
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification Number)
1919 South Broadway, Green Bay, Wisconsin 54304
(Address of principal executive offices including zip code)
Registrant's telephone number, including area code: (414) 435-8821
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<PAGE>
Item 5. Other Events
Fort Howard Corporation, a Delaware corporation (the "Company"), James
River Corporation of Virginia, a Virginia corporation ("James River") and James
River Delaware, Inc., a Delaware corporation and a wholly owned subsidiary of
James River ("Merger Sub"), entered into an Agreement and Plan of Merger, dated
as of May 4, 1997 (the "Merger Agreement"), pursuant to which, among other
things, Merger Sub will be merged with and into the Company, with the Company as
the surviving corporation in the merger (the "Merger"). The Merger Agreement is
attached hereto as Exhibit 10.1 and is incorporated herein by reference.
In connection with the Merger Agreement, on May 4, 1997, James River
entered into agreements with certain stockholders of the Company (the "Letter
Agreements"), pursuant to which, among other things, such stockholders agreed to
vote all of the shares of common stock of the Company that are beneficially
owned by them at the record date for any meeting of stockholders of the Company
called to consider and vote upon the Merger and the Merger Agreement in favor
thereof. The Letter Agreements are attached hereto as Exhibits 10.2, 10.3 and
10.4, and are incorporated herein by reference.
Item 7(c). Exhibits
10.1 Agreement and Plan of Merger, dated as of May 4, 1997, by and among
James River, Merger Sub and the Company.
10.2 Letter Agreement, dated as of May 4, 1997, among James River, The
Morgan Stanley Leveraged Equity Fund II, L.P., Morgan Stanley Group
Inc., Fort Howard Equity Investors, L.P., Fort Howard Equity Investors
II, L.P., Morgan Stanley Leveraged Equity Holdings, Inc., Morgan
Stanley Equity Investors, Inc. and Morgan Stanley Leveraged Equity Fund
II, Inc.
10.3 Letter Agreement, dated as of May 4, 1997, between James River and
Leeway & Co., as Nominee for the Long-Term Investment Trust.
10.4 Letter Agreement, dated as of May 4, 1997, between James River and
Mellon Bank, N.A., solely in its capacity as Trustee for FIRST PLAZA
GROUP TRUST, (as directed by General Motors Investment Management
Corporation), and not in its individual capacity.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FORT HOWARD CORPORATION
Registrant
By: /s/ James W. Nellen II
-------------------------------------
James W. Nellen II
Vice President and Secretary
Date: May 13, 1997
<PAGE>
Index to Exhibits
Exhibit No. Description
- ----------- -----------
10.1 Agreement and Plan of Merger, dated as of May 4, 1997, by and
among James River, Merger Sub and the Company.
10.2 Letter Agreement, dated as of May 4, 1997, among James
River, The Morgan Stanley Leveraged Equity Fund II, L.P.,
Morgan Stanley Group Inc., Fort Howard Equity Investors,
L.P., Fort Howard Equity Investors II, L.P., Morgan Stanley
Leveraged Equity Holdings, Inc., Morgan Stanley Equity
Investors, Inc. and Morgan Stanley Leveraged Equity Fund II,
Inc.
10.3 Letter Agreement, dated as of May 4, 1997, between James
River and Leeway & Co., as Nominee for the Long-Term
Investment Trust.
10.4 Letter Agreement, dated as of May 4, 1997, between James River
and Mellon Bank, N.A., solely in its capacity as Trustee for
FIRST PLAZA GROUP TRUST, (as directed by General Motors
Investment Management Corporation), and not in its individual
capacity.
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
JAMES RIVER CORPORATION OF VIRGINIA,
JAMES RIVER DELAWARE, INC.
and
FORT HOWARD CORPORATION
Dated as of May 4, 1997
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE I
THE MERGER
SECTION 1.01. The Merger................................................ 1
SECTION 1.02. Effective Time............................................ 2
SECTION 1.03. Effect of the Merger...................................... 2
SECTION 1.04. Certificate of Incorporation; By-laws..................... 2
SECTION 1.05. Directors and Officers.................................... 2
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Conversion of Securities.................................. 3
SECTION 2.02. Exchange of Certificates.................................. 4
SECTION 2.03. Stock Transfer Books...................................... 7
SECTION 2.04. Stock Options and Other Stock Awards...................... 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01. Organization and Qualification; Subsidiaries.............. 9
SECTION 3.02. Certificate of Incorporation and By-laws; Corporate Books
and Records......................................... 10
SECTION 3.03. Capitalization............................................ 10
SECTION 3.04. Authority Relative to This Agreement...................... 11
SECTION 3.05. No Conflict; Required Filings and Consents................ 12
SECTION 3.06. Permits; Compliance....................................... 13
SECTION 3.07. SEC Filings; Financial Statements......................... 13
SECTION 3.08. Absence of Certain Changes or Events...................... 14
SECTION 3.09. Employee Benefit Plans; Labor Matters..................... 14
SECTION 3.10. Accounting and Tax Matters................................ 17
SECTION 3.11. Contracts; Debt Instruments............................... 17
SECTION 3.12. Litigation................................................ 18
SECTION 3.13. Environmental Matters..................................... 18
SECTION 3.14. Trademarks, Patents and Copyrights........................ 20
SECTION 3.15. Taxes..................................................... 20
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ii
SECTION 3.16. Opinion of Financial Advisor.............................. 21
SECTION 3.17. Vote Required............................................. 21
SECTION 3.18. Brokers................................................... 21
SECTION 3.19. Insurance................................................. 22
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
SECTION 4.01. Organization and Qualification; Subsidiaries.............. 22
SECTION 4.02. Certificate of Incorporation and By-laws; Corporate Books
and Records......................................... 22
SECTION 4.03. Capitalization............................................ 23
SECTION 4.04. Authority Relative to This Agreement...................... 24
SECTION 4.05. No Conflict; Required Filings and Consents................ 25
SECTION 4.06. Permits; Compliance....................................... 26
SECTION 4.07. SEC Filings; Financial Statements......................... 26
SECTION 4.08. Absence of Certain Changes or Events...................... 27
SECTION 4.09. Employee Benefit Plans; Labor Matters..................... 27
SECTION 4.10. Accounting and Tax Matters................................ 29
SECTION 4.11. Contracts; Debt Instruments............................... 29
SECTION 4.12. Litigation................................................ 30
SECTION 4.13. Environmental Matters..................................... 31
SECTION 4.14. Trademarks, Patents and Copyrights........................ 31
SECTION 4.15. Taxes..................................................... 32
SECTION 4.16. Ownership of Merger Sub; No Prior Activities.............. 33
SECTION 4.17. Opinion of Financial Advisor.............................. 33
SECTION 4.18. Vote Required............................................. 33
SECTION 4.19. Brokers................................................... 33
SECTION 4.20. Insurance................................................. 33
ARTICLE V
COVENANTS
SECTION 5.01. Conduct of Business by the Company Pending the Closing.... 34
SECTION 5.02. Conduct of Business by Parent Pending the Closing......... 37
SECTION 5.03. Cooperation............................................... 39
SECTION 5.04. Notices of Certain Events................................. 39
SECTION 5.05. Contractual Consents...................................... 40
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iii
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Registration Statement; Proxy Statement................... 40
SECTION 6.02. Stockholders' Meetings.................................... 42
SECTION 6.03. Access to Information; Confidentiality.................... 42
SECTION 6.04. No Solicitation of Transactions........................... 42
SECTION 6.05. Appropriate Action; Consents; Filings..................... 44
SECTION 6.06. Pooling................................................... 46
SECTION 6.07. Letters of Accountants.................................... 46
SECTION 6.08. Update Disclosure; Breaches............................... 47
SECTION 6.09. Pooling Affiliates........................................ 47
SECTION 6.10. Public Announcements...................................... 48
SECTION 6.11. NYSE Listing.............................................. 48
SECTION 6.12. Employee Matters.......................................... 48
SECTION 6.13. [Intentionally Omitted]................................... 48
SECTION 6.14. Indemnification of Directors and Officers................. 48
SECTION 6.15. Plan of Reorganization.................................... 49
SECTION 6.16. Headquarters.............................................. 50
SECTION 6.17. Obligations of Merger Sub................................. 50
ARTICLE VII
CLOSING CONDITIONS
SECTION 7.01. Conditions to Obligations of Each Party Under This
Agreement........................................... 50
SECTION 7.02. Additional Conditions to Obligations of Parent
and Merger Sub...................................... 51
SECTION 7.03. Additional Conditions to Obligations of the Company....... 52
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination............................................... 54
SECTION 8.02. Effect of Termination..................................... 55
SECTION 8.03. Amendment................................................. 56
SECTION 8.04. Waiver.................................................... 56
SECTION 8.05. Fees and Expenses......................................... 57
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iv
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations and Warranties............ 57
SECTION 9.02. Notices................................................... 57
SECTION 9.03. Certain Definitions....................................... 58
SECTION 9.04. Headings.................................................. 59
SECTION 9.05. Severability.............................................. 59
SECTION 9.06. Entire Agreement.......................................... 59
SECTION 9.07. Assignment................................................ 60
SECTION 9.08. Parties in Interest....................................... 60
SECTION 9.09. Mutual Drafting........................................... 60
SECTION 9.10. Governing Law............................................. 60
SECTION 9.11. Counterparts.............................................. 60
ANNEX A EMPLOYEE BENEFITS
EXHIBITS 1(a), (b) and (c) FORMS OF SUPPORT LETTERS
EXHIBIT 6.09(a) FORM OF COMPANY AFFILIATE LETTER
EXHIBIT 6.09(b) FORM OF SOUTHFORK AFFILIATE LETTER
EXHIBIT 7.03(d) FORM OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT 7.03(e) FORM OF STOCKHOLDERS AGREEMENT
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v
Index of Defined Terms
Section
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affiliate Section 9.03(a)
Agreement Preamble
Articles Amendment Section 4.04
beneficial owner Section 9.03(b)
Blue Sky Laws Section 3.05(b)
Business Day Section 9.03(c)
CERCLA Section 3.13
Certificate of Merger Section 1.02
Certificates Section 2.02(b)
Code Preamble
Company Preamble
Company Benefit Plans Section 3.09(a)
Company Breakup Fee Section 8.02(b)
Company By-laws Section 3.02(a)
Company Certificate Section 3.02(a)
Company Change in Control Arrangements Section 3.09(e)
Company Common Stock Section 2.01(a)
Company Disclosure Schedule Article III Preamble
Company Material Adverse Effect Section 3.01
Company Material Contract Section 3.11
Company Meeting Section 6.02
Company Option Section 2.04
Company Permits Section 3.06
Company Preferred Stock Section 3.03
Company SEC Filings Section 3.07(a)
Company Stock Option Plans Section 2.04
Company Subsidiaries Section 3.01
Company Trigger Event Section 8.02(b)
Competing Transaction Section 6.04(c)
Confidentiality Agreements Section 6.03(b)
control Section 9.03(d)
DGCL Preamble
Effective Time Section 1.02
Environmental Laws Section 3.13
Environmental Permits Section 3.13
ERISA Section 3.09(a)
Excess Shares Section 2.02(e)(ii)
Exchange Act Section 3.05(b)
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vi
Exchange Agent Section 2.02(a)
Exchange Fund Section 2.02(a)
Exchange Ratio Section 2.01(a)
GAAP Section 3.07(b)
Governmental Entity Section 3.05(b)
Hazardous Materials Section 3.13
HSR Act Section 3.05(b)
Indemnified Parties Section 6.14(b)
Insurance Amount Section 6.14(c)
IRS Section 3.09(a)
knowledge Section 9.03(e)
Law Section 3.05(a)
Merger Preamble
Merger Consideration Section 2.01(d)
Merger Sub Preamble
Merger Sub Common Stock Section 2.01(c)
Merrill Lynch Section 4.17
Morgan Stanley Section 3.16
1995 Plan Section 2.04
NYSE Section 2.02(e)(ii)
Order Section 6.05(a)(ii)
Parent Preamble
Parent Benefit Plans Section 4.09(a)
Parent Breakup Fee Section 8.02(c)
Parent Common Stock Section 2.01(a)
Parent Disclosure Schedule Article IV Preamble
Parent Material Adverse Effect Section 4.01
Parent Material Contract Section 4.11
Parent Meeting Section 6.02
Parent Option Section 2.04
Parent Permits Section 4.06
Parent Preferred Stock Section 4.03
Parent SEC Filings Section 4.07(a)
Parent Stock Options Plans Section 4.03
Parent Subsidiaries Section 4.01
Parent Trigger Event Section 8.02(c)
person Section 9.03(f)
plan of reorganization Section 6.15
Pooling Affiliate Section 6.09(a)
Proprietary Rights Section 3.14
Proxy Statement Section 6.01(a)
Registration Statement Section 6.01(a)
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vii
Representatives Section 6.03(a)
Salomon Brothers Section 4.17
Securities Act Section 3.05(b)
Series D Preferred Stock Section 4.03
Series K Preferred Stock Section 4.03
Series L Preferred Stock Section 4.03
Series M Preferred Stock Section 4.03
Series N Preferred Stock Section 4.03
Series O Preferred Stock Section 4.03
Series P Preferred Stock Section 4.03
Share Issuance Section 4.04
Stock Plan Amendment Section 4.04
Stockholders' Meetings Section 6.02
subsidiary or subsidiaries Section 9.03(g)
Surviving Corporation Section 1.01
Taxes Section 3.15(a)
<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of May 4, 1997 (this
"Agreement"), among James River Corporation of Virginia, a Virginia corporation
("Parent"), James River Delaware, Inc., a Delaware corporation and a wholly
owned subsidiary of Parent ("Merger Sub"), and Fort Howard Corporation, a
Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, Merger
Sub and the Company have approved and declared advisable the merger of Merger
Sub with and into the Company (the "Merger") upon the terms and subject to the
conditions of this Agreement and in accordance with the General Corporation Law
of the State of Delaware (the "DGCL");
WHEREAS, the respective Boards of Directors of Parent and the
Company have determined that the Merger is in furtherance of and consistent with
their respective long-term business strategies and is in the best interest of
their respective stockholders and Parent has approved this Agreement and the
Merger as the sole stockholder of Merger Sub;
WHEREAS, for federal income tax purposes, it is intended that
the Merger shall qualify as a tax-free reorganization under the provisions of
section 368(a) of the United States Internal Revenue Code of 1986, as amended
(the "Code");
WHEREAS, as a condition to, and in connection with the
execution of this Agreement, Parent and each of Morgan Stanley Group, Inc.,
Mellon Bank, N.A., as Trustee for First Plaza Group Trust, and AT&T Investment
Management Co. will enter into Support Agreements in the form attached hereto as
Exhibits 1(a), 1(b) and 1(c), respectively; and
WHEREAS, for accounting purposes, it is intended that the
Merger shall be accounted for as a "pooling of interests";
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth in
this Agreement and intending to be legally bound hereby, the parties hereto
agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the DGCL, at the
Effective Time (as defined below), Merger Sub shall be merged with and into the
Company. As a result of the Merger, the separate corporate existence of Merger
Sub shall cease and the Company shall continue as the surviving corporation of
the Merger (the "Surviving Corporation").
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2
SECTION 1.02. Effective Time. No later than three business
days after the satisfaction or, if permissible, waiver of the conditions set
forth in Article VII, the parties hereto shall cause the Merger to be
consummated by filing a certificate of merger (the "Certificate of Merger") with
the Secretary of State of the State of Delaware, in such form as required by,
and executed in accordance with the relevant provisions of, the DGCL (the date
and time of such filing, or if another date and time is specified in such
filing, such specified date and time, being the "Effective Time").
SECTION 1.03. Effect of the Merger. At the Effective Time, the
effect of the Merger shall be as provided in the applicable provisions of the
DGCL. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time, except as otherwise provided herein, all the property,
rights, privileges, powers and franchises of the Company and Merger Sub shall
vest in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
SECTION 1.04. Certificate of Incorporation; By-laws. At the
Effective Time, the Certificate of Incorporation and the By-laws of Merger Sub,
as in effect immediately prior to the Effective Time, shall be the Certificate
of Incorporation and the Bylaws of the Surviving Corporation.
SECTION 1.05. Directors and Officers. (a) The directors of
Merger Sub immediately prior to the Effective Time shall be the initial
directors of the Surviving Corporation, each to hold office in accordance with
the Certificate of Incorporation and Bylaws of the Surviving Corporation. The
officers of the Company immediately prior to the Effective Time shall be the
initial officers of the Surviving Corporation, each to hold office in accordance
with the Certificate of Incorporation and By-laws of the Surviving Corporation.
(b) Parent shall take such action so that, upon the Effective
Time, the persons listed on Schedule 1.05(b), subject to availability, shall
hold the positions with Parent set forth on Schedule 1.05(b).
(c) Prior to the Effective Time, Parent shall (i) increase the
number of the members of the Board of Directors of Parent to 15 and (ii) take
such action as may be necessary such that the Board of Directors of Parent,
immediately following the Effective Time includes the four (4) persons listed on
Schedule 1.05(c) attached hereto and reasonably satisfactory to Parent (it being
understood that the names of the persons will be inserted on Schedule 1.05(c)
and such Schedule as so completed shall be delivered by the Company to Parent
within 30 days after the date of this Agreement).
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ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Conversion of Securities. At the Effective Time,
by virtue of the Merger and without any action on the part of Merger Sub, the
Company or the holders of any of the following securities:
(a) Each share of common stock, par value $0.01 per share, of
the Company ("Company Common Stock") issued and outstanding immediately
prior to the Effective Time (other than any shares of Company Common
Stock to be cancelled pursuant to Section 2.01(b)) shall be converted,
subject to Section 2.02(e), into the right to receive 1.375 shares of
common stock, par value $0.10 per share ("Parent Common Stock"), of
Parent (the "Exchange Ratio"), including the corresponding percentage
of a right to purchase shares of Series M Cumulative Participating
Preferred Stock of Parent pursuant to the Amended and Restated Rights
Agreement, dated May 12, 1992, as amended by Amendment No. 1, dated
June 8, 1992, between Parent and NationsBank of Virginia, N.A. and as
amended by Amendment No. 2, dated January 31, 1996, between Parent and
Wachovia Bank of North Carolina, N.A.; provided, however, that, in any
event, if between the date of this Agreement and the Effective Time the
outstanding shares of Parent Common Stock or Company Common Stock shall
have been changed into a different number of shares or a different
class, by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares, the
Exchange Ratio shall be correspondingly adjusted to reflect such stock
dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares. All such shares of Company Common
Stock shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each certificate
previously representing any such shares shall thereafter represent the
right to receive a certificate representing the shares of Parent Common
Stock into which such Company Common Stock was converted in the Merger.
Certificates previously representing shares of Company Common Stock
shall be exchanged for certificates representing whole shares of Parent
Common Stock issued in consideration therefor upon the surrender of
such certificates in accordance with the provisions of Section 2.02,
without interest. No fractional share of Parent Common Stock shall be
issued, and, in lieu thereof, a cash payment shall be made pursuant to
Section 2.02(e) hereof.
(b) Each share of Company Common Stock held in the treasury of
the Company and each share of Company Common Stock owned by Parent or
any direct or indirect wholly owned subsidiary of Parent or of the
Company immediately prior to the Effective Time shall be cancelled and
extinguished without any conversion thereof and no payment shall be
made with respect thereto.
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4
(c) Each share of common stock, par value $0.01 per share, of
Merger Sub ("Merger Sub Common Stock") issued and outstanding
immediately prior to the Effective Time shall be converted into and
exchanged for one newly and validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation.
(d) Parent may, with the Company's consent (which will not be
unreasonably withheld), at any time change the method of effecting the
acquisition of the Company by Parent, and, upon providing such consent,
the Company shall cooperate in such efforts, if and to the extent
Parent deems such change to be desirable including, without limitation,
to provide for a merger of the Company with and into Parent or a wholly
owned subsidiary of Parent, or to provide for mergers among certain of
the Subsidiaries of Parent and the Company to occur substantially
simultaneously with the Effective Time; provided, however, that no such
change shall (i) alter or change the amount or kind of consideration to
be issued to holders of Company Common Stock as provided for in this
Agreement (the "Merger Consideration"), (ii) adversely affect the
proposed accounting treatment for the Merger or the proposed tax-free
treatment to the Company for the Merger and to the Company's
stockholders for receiving the Merger Consideration, (iii) be deemed to
cause a breach of the representations set forth in Sections 3.05 and
4.05 to the extent additional consents of third parties are thereby
required or (iv) materially delay receipt of any consent referred to in
Section 7.01(d) or the consummation of the transactions contemplated by
this Agreement.
SECTION 2.02. Exchange of Certificates. (a) Exchange Agent. As
of the Effective Time, Parent shall deposit, or shall cause to be deposited,
with a bank or trust company designated by Parent (the "Exchange Agent"), for
the benefit of the holders of shares of Company Common Stock, for exchange in
accordance with this Article II, through the Exchange Agent, certificates
representing the shares of Parent Common Stock (such certificates for shares of
Parent Common Stock, together with cash in lieu of fractional shares and any
dividends or distributions with respect thereto, being hereinafter referred to
as the "Exchange Fund") issuable pursuant to Section 2.01 in exchange for
outstanding shares of Company Common Stock. The Exchange Agent shall, pursuant
to irrevocable instructions, deliver the Parent Common Stock contemplated to be
issued pursuant to Section 2.01 out of the Exchange Fund. Except as contemplated
by Section 2.02(e) hereof, the Exchange Fund shall not be used for any other
purpose.
(b) Exchange Procedures. Promptly after the Effective Time,
Parent shall instruct the Exchange Agent to mail 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") (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 proper
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5
delivery of the Certificates to the Exchange Agent and shall be in customary
form) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of Parent Common
Stock. Upon surrender of a Certificate for cancellation to the Exchange Agent
together with such letter of transmittal, duly executed, and such other
documents as may be required pursuant to such instructions, the holder of such
Certificate shall be entitled to receive in exchange therefor a certificate
representing that number of whole shares of Parent Common Stock which such
holder has the right to receive in respect of the shares of Company Common Stock
formerly represented by such Certificate (after taking into account all shares
of Company Common Stock then held by such holder), cash in lieu of fractional
shares of Parent Common Stock to which such holder is entitled pursuant to
Section 2.02(e) and any dividends or other distributions to which such holder is
entitled pursuant to Section 2.02(c), and the Certificate so surrendered shall
forthwith be cancelled. No interest will be paid or accrued on any cash in lieu
of fractional shares or on any unpaid dividends and distributions payable to
holders of Certificates. Notwithstanding anything to the contrary contained
herein, no certificate representing Parent Common Stock or cash in lieu of a
fractional share interest shall be delivered to a person who is a Pooling
Affiliate (as defined in Section 6.09(a)) of the Company unless such affiliate
has theretofore executed and delivered to Parent the agreement referred to in
Section 6.09(a). In the event of a transfer of ownership of shares of Company
Common Stock which is not registered in the transfer records of the Company, a
certificate representing the proper number of shares of Parent Common Stock may
be issued to a transferee if the Certificate representing such shares of Company
Common Stock is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.02, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the certificate representing shares of Parent Common Stock, cash in
lieu of any fractional shares of Parent Common Stock to which such holder is
entitled pursuant to Section 2.02(e) and any dividends or other distributions to
which such holder is entitled pursuant to Section 2.02(c).
(c) Distributions with Respect to Unexchanged Shares of Parent
Common Stock. No dividends or other distributions declared or made after the
Effective Time with respect to Parent Common Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Common Stock represented thereby, and no cash
payment in lieu of fractional shares shall be paid to any such holder pursuant
to Section 2.02(e), until the holder of such Certificate shall surrender such
Certificate. Subject to the effect of escheat, tax or other applicable Laws (as
defined below), following surrender of any such Certificate, there shall be paid
to the holder of the certificates representing whole shares of Parent Common
Stock issued in exchange therefor, without interest, (i) promptly, the amount of
any cash payable with respect to a fractional share of Parent Common Stock to
which such holder is entitled pursuant to Section 2.02(e) and the amount of
dividends or other distributions with a record date after the
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6
Effective Time theretofore paid with respect to such whole shares of Parent
Common Stock and (ii) at the appropriate payment date, the amount of dividends
or other distributions, with a record date after the Effective Time but prior to
surrender and a payment date occurring after surrender, payable with respect to
such whole shares of Parent Common Stock.
(d) No Further Rights in Company Common Stock. All shares of
Parent Common Stock issued upon conversion of the shares of Company Common Stock
in accordance with the terms hereof (including any cash paid pursuant to Section
2.02(c) or (e)) shall be deemed to have been issued in full satisfaction of all
rights pertaining to such shares of Company Common Stock.
(e) No Fractional Shares. (i) No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of Certificates, no dividend or distribution with respect
to Parent Common Stock shall be payable on or with respect to any fractional
share and such fractional share interests will not entitle the owner thereof to
any rights of a stockholder of Parent.
(ii) As promptly as practicable following the Effective Time,
the Exchange Agent shall determine the excess of (x) the number of full shares
of Parent Common Stock delivered to the Exchange Agent by Parent pursuant to
Section 2.02(a) over (y) the aggregate number of full shares of Parent Common
Stock to be distributed to holders of Company Common Stock pursuant to Section
2.02(b) (such excess being herein called the "Excess Shares"). As soon after the
Effective Time as practicable, the Exchange Agent, as agent for such holders of
Parent Common Stock, shall sell the Excess Shares at then prevailing prices on
the New York Stock Exchange, Inc. (the "NYSE"), all in the manner provided in
paragraph (iii) of this Section 2.02(e).
(iii) The sale of the Excess Shares by the Exchange Agent
shall be executed on the NYSE through one or more member firms of the NYSE and
shall be executed in round lots to the extent practicable. Until the net
proceeds of any such sale or sales have been distributed to such holders of
Company Common Stock, the Exchange Agent will hold such proceeds in trust for
such holders of Company Common Stock as part of the Exchange Fund. Parent shall
pay all commissions, transfer taxes and other out-of-pocket transaction costs of
the Exchange Agent incurred in connection with such sale or sales of Excess
Shares. In addition, Parent shall pay the Exchange Agent's compensation and
expenses in connection with such sale or sales. The Exchange Agent shall
determine the portion of such net proceeds to which each holder of Company
Common Stock shall be entitled, if any, by multiplying the amount of the
aggregate net proceeds by a fraction the numerator of which is the amount of the
fractional share interest to which such holder of Company Common Stock is
entitled (after taking into account all shares of Company Common Stock then held
by such holder) and the denominator of which is the aggregate amount of
fractional share interests to which all holders of Certificates representing
Company Common Stock are entitled.
<PAGE>
7
(iv) As soon as practicable after the determination of the
amount of cash, if any, to be paid to holders of Company Common Stock with
respect to any fractional share interests, the Exchange Agent shall promptly pay
such amounts to such holders of Company Common Stock subject to and in
accordance with the terms of Section 2.02(c).
(f) Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the holders of Company Common Stock for one
year after the Effective Time shall be delivered to Parent, upon demand, and any
holders of Company Common Stock who have not theretofore complied with this
Article II shall thereafter look only to Parent for the shares of Parent Common
Stock, any cash in lieu of fractional shares of Parent Common Stock to which
they are entitled pursuant to Section 2.02(e) and any dividends or other
distributions with respect to Parent Common Stock to which they are entitled
pursuant to Section 2.02(c), in each case, without any interest thereon.
(g) No Liability. Neither Parent nor the Company shall be
liable to any holder of shares of Company Common Stock for any such shares of
Parent Common Stock (or dividends or distributions with respect thereto) or cash
from the Exchange Fund delivered to a public official pursuant to any abandoned
property, escheat or similar Law.
(h) Lost Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by Parent, the posting by such person of a bond, in such reasonable
amount as Parent may direct, as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate the shares of Parent
Common Stock, any cash in lieu of fractional shares of Parent Common Stock to
which the holders thereof are entitled pursuant to Section 2.02(e) and any
dividends or other distributions to which the holders thereof are entitled
pursuant to Section 2.02(c), in each case, without any interest thereon.
(i) Withholding. Parent or the Exchange Agent shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of Company Common Stock such amounts as
Parent or the Exchange Agent are required to deduct and withhold under the Code,
or any provision of state, local or foreign tax law, with respect to the making
of such payment. To the extent that amounts are so withheld by Parent or the
Exchange Agent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of Company Common Stock in respect
of whom such deduction and withholding was made by Parent or the Exchange Agent.
SECTION 2.03. Stock Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and there shall be no
further registration of
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8
transfers of shares of Company Common Stock thereafter on the records of the
Company. From and after the Effective Time, the holders of certificates
representing shares of Company Common Stock outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such shares of
Company Common Stock except as otherwise provided herein or by Law. On or after
the Effective Time, any Certificates presented to the Exchange Agent or Parent
for any reason shall be converted into the shares of Parent Common Stock, any
cash in lieu of fractional shares of Parent Common Stock to which the holders
thereof are entitled pursuant to Section 2.02(e) and any dividends or other
distributions to which the holders thereof are entitled pursuant to Section
2.02(c).
SECTION 2.04. Stock Options and Other Stock Awards. (a) Prior
to the Effective Time, the Company and Parent shall take such action as may be
necessary to cause each unexpired and unexercised option to purchase shares of
Company Common Stock (each, a "Company Option") under (i) the Company's
Management Equity Plan and 1995 Stock Incentive Plan (the "1995 Plan"), copies
of which (as amended through the date hereof) have heretofore been provided to
Parent by the Company and (ii) the Amended and Restated Management Equity
Participation Agreement, dated as of August 8, 1988, by and among the Company
and the other parties signatory thereto, as amended and supplemented from time
to time through the date hereof, a copy of which (in the form in effect as of
the date hereof) has heretofore been provided to Parent by the Company
(collectively, the "Company Stock Option Plans"), to be automatically converted
at the Effective Time into an option (a "Parent Option") to purchase a number of
shares of Parent Common Stock equal to the number of shares of Company Common
Stock that could have been purchased under such Company Option multiplied by the
Exchange Ratio (rounded to the nearest whole number of shares of Parent Common
Stock), at a price per share of Parent Common Stock equal to the per-share
option exercise price specified in the Company Option divided by the Exchange
Ratio (rounded down to the nearest whole cent). Such Parent Option shall
otherwise be subject to the same terms and conditions (including provisions
regarding vesting and the acceleration thereof) as such Company Option. The 1995
Plan provides that, without any further action on the part of the Company Board
of Directors, any Committee thereof, or otherwise, each Company Option granted
thereunder that is outstanding immediately prior to the Effective Time shall
become fully vested and exercisable as of the Effective Time. The date of grant
of the substituted Parent Option shall be the date on which the corresponding
Company Option was granted. At the Effective Time, (i) all references in the
Company Stock Option Plans and in the related stock option agreements to the
Company shall be deemed to refer to Parent; and (ii) Parent shall assume all of
the Company's obligations with respect to Company Options as so amended. As
promptly as reasonably practicable after the Effective Time, Parent shall issue
to each holder of an outstanding Company Option a document evidencing the
foregoing assumption by Parent. As soon as practicable after the Effective Time,
to the extent necessary to provide for registration of shares of Parent Common
Stock subject to such substituted Parent Options, Parent shall file a
registration statement on Form S-8 (or any successor form) with respect to such
shares of Parent Common Stock and shall
<PAGE>
9
use its best efforts to maintain such registration statement (or any successor
form), including the current status of any related prospectus or prospectuses,
for so long as the Parent Options remain outstanding. None of the Company
Options are "incentive stock options" within the meaning of Section 422 of the
Code.
(b) The 1995 Plan provides that, without any further action on
the part of the Company Board of Directors, any Committee thereof, or otherwise,
each share of Restricted Stock and each Stock Equivalent (as such terms are
defined in the 1995 Plan) that is outstanding immediately prior to the Effective
Time shall become fully vested as of the Effective Time.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Disclosure Schedule delivered by
the Company to Parent prior to the execution of this Agreement (the "Company
Disclosure Schedule"), which shall identify exceptions by specific Section
references, the Company hereby represents and warrants to Parent as follows:
SECTION 3.01. Organization and Qualification; Subsidiaries.
Each of the Company and each subsidiary of the Company (collectively, the
"Company Subsidiaries") has been duly organized, and is validly existing and in
good standing, under the laws of the jurisdiction of its incorporation or
organization, as the case may be, and has the requisite power and authority and
all necessary governmental approvals to own, lease and operate its properties
and to carry on its business as it is now being conducted, except where the
failure to be so organized, existing or in good standing or to have such power,
authority and governmental approvals would not, individually or in the
aggregate, have a Company Material Adverse Effect (as defined below). Each of
the Company and the Company Subsidiaries is duly qualified or licensed to do
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing or good standing necessary, except for
such failures to be so qualified or licensed and in good standing that would
not, individually or in the aggregate, have a Company Material Adverse Effect.
For purposes of this Agreement, "Company Material Adverse Effect" means any
change in or effect on the business of the Company and the Company Subsidiaries
that is, or is reasonably likely to be, materially adverse to the business,
financial condition, results of operations or prospects of the Company and the
Company Subsidiaries taken as a whole. Section 3.01 of the Company Disclosure
Schedule sets forth a complete and correct list of all of the Company
Subsidiaries. Except as set forth in Section 3.01(b) of the Company Disclosure
Schedule, neither the
<PAGE>
10
Company nor any Company Subsidiary holds any interest in a partnership or joint
venture of any kind.
SECTION 3.02. Certificate of Incorporation and By-laws;
Corporate Books and Records. (a) The copies of the Company's Restated
Certificate of Incorporation (the "Company's Certificate") and Restated By-laws
(the "Company's By-laws") that are set forth as exhibits to the Company's Form
10-K for the year ended December 31, 1996 are complete and correct copies
thereof. The Company's Certificate and the Company's By-laws are in full force
and effect. The Company is not in violation of any of the provisions of the
Company's Certificate or the Company's By-laws.
(b) In all material respects, the minute books of the Company
and the Company Subsidiaries through January 1, 1997 contain accurate records of
all meetings and accurately reflect all other actions taken by the stockholders,
the Boards of Directors and all committees of the Boards of Directors of the
Company and the Company Subsidiaries since January 1, 1995. Complete and
accurate copies of all such minute books and of the stock register of the
Company and each Company Subsidiary have been made available by the Company to
Parent.
SECTION 3.03. Capitalization. The authorized capital stock of
the Company consists of (a) 100,000,000 shares of Company Common Stock and (b)
50,000,000 shares of preferred stock, par value $0.01 per share (the "Company
Preferred Stock"). As of April 1, 1997, (i) 74,639,227 shares of Company Common
Stock were issued and outstanding, all of which were validly issued and fully
paid, nonassessable and free of preemptive rights, (ii) 3,678 shares of Company
Common Stock were held in the treasury of the Company or by the Company
Subsidiaries, (iii) 4,637,363 shares of Company Common Stock were reserved for
issuance upon exercise of Company Options heretofore granted pursuant to the
Company Stock Option Plans, (iv) 77,146 shares of Company Common Stock were
reserved for issuance pursuant to the Company's Directors' Stock Plan, (v)
263,751 shares of Company Common Stock reserved for issuance under the Company's
Employee Stock Purchase Plan and (vi) no shares of Company Preferred Stock were
issued or outstanding. Except for 4,637,363 Company Options, 12,000 shares of
Restricted Stock and 8,000 Stock Equivalents (as such terms are defined in the
Company Stock Option Plans) granted pursuant to the Company Stock Option Plans
or agreements or arrangements described in Section 3.03 or 3.09 of the Company
Disclosure Schedule (including, but not limited to, the Company's Employee Stock
Purchase Plan), there are no options, warrants or other rights, agreements,
arrangements or commitments of any character to which the Company or any Company
Subsidiary is a party or by which the Company or any Company Subsidiary is bound
relating to the issued or unissued capital stock of the Company or any Company
Subsidiary, or securities convertible into or exchangeable for such capital
stock, or obligating the Company or any Company Subsidiary to issue or sell any
shares of capital stock, or securities convertible into or exchangeable for such
capital stock, of, or other equity interests in, the
<PAGE>
11
Company or any Company Subsidiary. Since April 1, 1997, the Company has not
issued any shares of its capital stock, or securities convertible into or
exchangeable for such capital stock, other than (i) those shares of capital
stock reserved for issuance as set forth in this Section 3.03 or Section 3.03 of
the Company Disclosure Schedule and (ii) shares issued in the ordinary course
pursuant to the Company's Employee Stock Purchase Plan and the Company's Stock
Fund under the Company's Profit Sharing Plan in the ordinary course. The Company
has previously provided Parent with a list, as of the date hereof, of the prices
at which outstanding Company Options may be exercised under the applicable
Company Stock Option Plan and the number of Company Options outstanding at each
such price. All shares of Company Common Stock subject to issuance as aforesaid,
upon issuance prior to the Effective Time on the terms and conditions specified
in the instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid, nonassessable and free of preemptive rights. Except
as set forth in this Section 3.03 or Section 3.03 of the Company Disclosure
Schedule, there are no outstanding contractual obligations of the Company or any
Company Subsidiary (i) restricting the transfer of, (ii) affecting the voting
rights of, (iii) requiring the repurchase, redemption or disposition of, (iv)
requiring the registration for sale of, or (v) granting any preemptive or
antidilutive right with respect to, any shares of Company Common Stock or any
capital stock of any Company Subsidiary. Each outstanding share of capital stock
of each Company Subsidiary is duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights and is owned by the Company or
another Company Subsidiary is free and clear of all security interests, liens,
claims, pledges, options, rights of first refusal, agreements, limitations on
the Company's or such other Company Subsidiary's voting rights, charges and
other encumbrances of any nature whatsoever, except where failure to own such
shares free and clear would not, individually or in the aggregate, have a
Company Material Adverse Effect. Except as set forth in Section 3.03 of the
Company Disclosure Schedule, there are no material outstanding contractual
obligations of the Company or any Company Subsidiary to provide funds to, or
make any investment (in the form of a loan, capital contribution or otherwise)
in, any Company Subsidiary or any other person, other than guarantees by the
Company of any indebtedness of any Company Subsidiary.
SECTION 3.04. Authority Relative to This Agreement. The
Company has all necessary corporate power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated herein to be consummated by the Company. The execution
and delivery of this Agreement by the Company and the consummation by the
Company of such transactions have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of the
Company and no other stockholder votes are necessary to authorize this Agreement
or to consummate such transactions (other than, with respect to the Merger, the
adoption of this Agreement by the affirmative vote of a majority of the
outstanding shares of Company Common Stock entitled to vote thereon). The Board
of Directors of the Company has directed that this Agreement and the
transactions contemplated hereby be submitted to the
<PAGE>
12
Company's stockholders for approval at a meeting of such stockholders. This
Agreement has been duly authorized and validly executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms. The Company has
taken all appropriate actions so that the restrictions on business combinations
contained in Section 203 of the DGCL will not apply with respect to or as a
result of the Merger without any further action on the part of the stockholders
or the Board of Directors of the Company. To the Company's knowledge, no other
state takeover statute is applicable to the Merger.
SECTION 3.05. No Conflict; Required Filings and Consents. (a)
The execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement by the Company will not, (i) (assuming the
stockholder approval set forth in Section 3.04 is obtained) conflict with or
violate any provision of the Company's Certificate or the Company's By-laws or
any equivalent organizational documents of any Company Subsidiary, (ii) assuming
that all consents, approvals, authorizations and other actions described in
Section 3.05(b) have been obtained and all filings and obligations described in
Section 3.05(b) have been made, conflict with or violate any foreign or domestic
law, statute, code, ordinance, rule, regulation, order, judgment, writ,
stipulation, award, injunction or decree ("Law") applicable to the Company or
any Company Subsidiary or by which any property or asset of the Company or any
Company Subsidiary is bound or affected or (iii) except as set forth in Section
3.05(a) of the Company Disclosure Schedule, result in any breach of, any loss of
any benefit under or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any right
of termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of the Company
or any Company Subsidiary pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, Company Permit (as defined in Section 3.06)
or other instrument or obligation, except, with respect to clauses (ii) and
(iii), for any such conflicts, violations, breaches, defaults or other
occurrences which would neither, individually or in the aggregate, (A) have a
Company Material Adverse Effect nor (B) prevent or materially delay the
performance of this Agreement by the Company.
(b) Except as set forth in Section 3.05(b) of the Company
Disclosure Schedule, the execution and delivery of this Agreement by the Company
do not, and the performance of this Agreement by the Company will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any domestic or foreign governmental, administrative, judicial
or regulatory authority ("Governmental Entity"), except (i) for applicable
requirements of the Securities Exchange Act of 1934, as amended (together with
the rules and regulations promulgated thereunder, the "Exchange Act"), the
Securities Act of 1933, as amended (together with the rules and regulations
promulgated thereunder, the "Securities Act"), state securities or "blue sky"
laws ("Blue Sky Laws"), the NYSE, state takeover laws, premerger notification
requirements of the Hart-Scott-Rodino
<PAGE>
13
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
thereunder (the "HSR Act"), filing and recordation of the Certificate of Merger
as required by the DGCL and as otherwise set forth in Section 3.05(b) of the
Company Disclosure Schedule and (ii) where failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not (A) prevent or materially delay consummation of the Merger, (B)
otherwise prevent the Company from performing its material obligations under
this Agreement or (C) individually or in the aggregate, have a Company Material
Adverse Effect.
SECTION 3.06. Permits; Compliance. Each of the Company and the
Company Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals, clearances and orders of any Governmental Entity necessary for the
Company or any Company Subsidiary to own, lease and operate its properties or to
carry on their respective businesses substantially in the manner described in
the Company SEC Filings (as defined herein) and as it is now being conducted
(the "Company Permits"), and all such Company Permits are valid, and in full
force and effect, except where the failure to have, or the suspension or
cancellation of, any of the Company Permits would neither, individually or in
the aggregate, (a) have a Company Material Adverse Effect nor (b) prevent or
materially delay the performance of this Agreement by the Company, and, as of
the date of this Agreement, no suspension or cancellation of any of the Company
Permits is pending or, to the knowledge of the Company, threatened, except where
the failure to have, or the suspension or cancellation of, any of the Company
Permits would neither, individually or in the aggregate, (x) have a Company
Material Adverse Effect nor (y) prevent or materially delay the performance of
this Agreement by the Company. Neither the Company nor any Company Subsidiary is
in conflict with, or in default or violation of, (i) any Law applicable to the
Company or any Company Subsidiary or by which any property, asset or operation
of the Company or any Company Subsidiary is bound or affected or (ii) any
Company Permits, except for any such conflicts, defaults or violations that
would neither, individually or in the aggregate, (A) have a Company Material
Adverse Effect nor (B) prevent or materially delay the performance of this
Agreement by the Company.
SECTION 3.07. SEC Filings; Financial Statements. (a) The
Company has timely filed all registration statements, prospectuses, forms,
reports and documents required to be filed by it under the Securities Act or the
Exchange Act, as the case may be, since January 1, 1995 (collectively, the
"Company SEC Filings"). The Company SEC Filings (i) were prepared in accordance
with the requirements of the Securities Act or the Exchange Act, as the case may
be, and (ii) did not at the time they were filed 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 made therein, in the light of the
circumstances under which they were made, not misleading. No Company Subsidiary
is subject to the periodic reporting requirements of the Exchange Act.
<PAGE>
14
(b) Each of the consolidated financial statements (including,
in each case, any notes thereto) contained in the Company SEC Filings was
prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
indicated (except as may be indicated in the notes thereto) and each presented
fairly the consolidated financial position of the Company and the consolidated
Company Subsidiaries as of the respective dates thereof and for the respective
periods indicated therein, except as otherwise noted therein (subject, in the
case of unaudited statements, to normal and recurring year-end adjustments which
were not and are not expected, individually or in the aggregate, to have a
Company Material Adverse Effect). The books and records of the Company and its
Subsidiaries have been, and are being, maintained in accordance with GAAP and
any other applicable legal and accounting requirements.
(c) Except as and to the extent set forth on the consolidated
balance sheet of the Company and the consolidated Company Subsidiaries as of
December 31, 1996 included in the Company's Form 10-K for the year ended
December 31, 1996, including the notes thereto, neither the Company nor any
Company Subsidiary has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) that would be required to be
reflected on a balance sheet or in notes thereto prepared in accordance with
GAAP, except for liabilities or obligations incurred in the ordinary course of
business since December 31, 1996 that would neither, individually or in the
aggregate, (i) have a Company Material Adverse Effect nor (ii) prevent or
materially delay the performance of this Agreement by the Company.
SECTION 3.08. Absence of Certain Changes or Events. Since
December 31, 1996, except as contemplated by or as disclosed in this Agreement,
as set forth in Section 3.08 of the Company Disclosure Schedule or as disclosed
in any Company SEC Filing filed prior to the date hereof, the Company and the
Company Subsidiaries have conducted their businesses only in the ordinary course
and in a manner consistent with past practice and, since such date, there has
not been (a) any Company Material Adverse Effect or an event or development
(including in connection with the Merger) that would, individually or in the
aggregate, have a Company Material Adverse Effect, (b) any event that could
reasonably be expected to prevent or materially delay the performance of this
Agreement by the Company, or (c) any action taken by the Company or any of the
Company Subsidiaries during the period from January 1, 1997 through the date of
this Agreement that, if taken during the period from the date of this Agreement
through the Effective Time, would constitute a breach of Section 5.01.
SECTION 3.09. Employee Benefit Plans; Labor Matters. (a)
Section 3.09(a) of the Company Disclosure Schedule sets forth a true and
complete list as of the date hereof of each material employee benefit plan,
program, arrangement and contract (including, without limitation, any "employee
benefit plan", as defined in section 3(3) of the Employee
<PAGE>
15
Retirement Income Security Act of 1974, as amended ("ERISA")), maintained or
contributed to by the Company or any Company Subsidiary, or with respect to
which the Company or any Company Subsidiary could incur material liability under
section 4069, 4212(c) or 4204 of ERISA (the "Company Benefit Plans"). With
respect to each Company Benefit Plan which is a stock-based plan, the Company
has heretofore delivered to Parent a true and complete copy of such Company
Benefit Plan. With respect to each other Company Benefit Plan, the Company will
make available to Parent, promptly after the date hereof, a true and complete
copy of such Company Benefit Plan and (i) the most recent annual report (Form
5500) filed with the Internal Revenue Service (the "IRS"), (ii) the most recent
actuarial report or valuation (if any) relating to any Company Benefit Plan
subject to Title IV of ERISA and (iii) the most recent determination letter, if
any, issued by the IRS with respect to any Company Benefit Plan qualified under
Section 401(a) of the Code.
(b) With respect to each Company Benefit Plan which is subject
to Title IV of ERISA, (A) the present value of accrued benefits under such
Company Benefit Plan, based upon the actuarial assumptions used for funding
purposes in the most recent actuarial report prepared by such Company Benefit
Plan's actuary with respect to such Company Benefit Plan, did not, as of its
latest valuation date, exceed the then current value of the assets of such
Company Benefit Plan allocable to such accrued benefits, (B) no "reportable
event" (within the meaning of Section 4043 of ERISA) has occurred with respect
to any Company Benefit Plan for which the 30-day notice requirement has not been
waived, except where such reportable event would not have a Company Material
Adverse Effect, and (C) no condition exists which would subject the Company or
any Company Subsidiary to any fine under Section 4071 of ERISA, except where
such condition would not have a Company Material Adverse Effect. No Company
Benefit Plan is a "multiemployer pension plan" (as such term is defined in
section 3(37) of ERISA).
(c) With respect to the Company Benefit Plans, no event has
occurred and, to the knowledge of the Company, there exists no condition or set
of circumstances in connection with which the Company or any Company Subsidiary
could be subject to any liability under the terms of such Company Benefit Plans,
ERISA, the Code or any other applicable Law which, individually or in the
aggregate, would have a Company Material Adverse Effect. Each of the Company
Benefit Plans has been operated and administered in all material respects in
accordance with applicable laws and administrative or governmental rules and
regulations, including, but not limited to, ERISA and the Code, except where a
violation of any such law, rule or regulation would not have a Company Material
Adverse Effect. Each of the Company Benefit Plans intended to be "qualified"
within the meaning of Section 401(a) of the Code has received a favorable
determination letter as to such qualification from the IRS, and no event has
occurred, either by reason of any action or failure to act, which would cause
the loss of any such qualification, except where such loss of qualification
would not have a Company Material Adverse Effect. Except as set forth in Section
3.09(c) of the Company Disclosure Schedule, no Company Benefit Plan provides
<PAGE>
16
benefits, including, without limitation, death or medical benefits (whether or
not insured), with respect to current or former employees of the Company or any
Company Subsidiary beyond their retirement or other termination of service,
other than (i) coverage mandated by applicable law, (ii) death benefits or
retirement benefits under any "employee pension plan" (as such term is defined
in Section 3(2) of ERISA), (iii) deferred compensation benefits accrued as
liabilities on the books of the Company or any Company Subsidiary or (iv)
benefits the full cost of which is borne by the current or former employee (or
his beneficiary). All contributions or other amounts payable by the Company or
any Company Subsidiary as of the Effective Time with respect to each Company
Benefit Plan in respect of current or prior plan years have been paid or accrued
in accordance with GAAP and Section 412 of the Code.
(d) Except as set forth in Section 3.09(d) of the Company
Disclosure Schedule, neither the Company nor any Company Subsidiary is a party
to any collective bargaining or other labor union contract applicable to persons
employed by the Company or any Company Subsidiary and no collective bargaining
agreement or other labor union contract is being negotiated by the Company or
any Company Subsidiary that is material to the Company and the Company
Subsidiaries taken as a whole. As of the date of this Agreement, there is no
material labor dispute, strike, slowdown or work stoppage against the Company or
any Company Subsidiary pending or, to the knowledge of the Company, threatened
which may interfere with the respective business activities of the Company or
any Company Subsidiary, except where such dispute, strike, slowdown or work
stoppage would not have a Company Material Adverse Effect. As of the date of
this Agreement, to the knowledge of the Company, none of the Company, any
Company Subsidiary or their respective representatives or employees has
committed any unfair labor practices in connection with the operation of the
respective businesses of the Company or any Company Subsidiary, and there is no
charge or complaint against the Company or any Company Subsidiary by the
National Labor Relations Board or any comparable state or foreign agency pending
or, to the knowledge of the Company, threatened, except where such unfair labor
practice, charge or complaint would not have a Company Material Adverse Effect.
(e) The Company has identified in Section 3.09(e) of the
Company Disclosure Schedule and has made available to Parent true and complete
copies of (i) all severance and employment agreements with directors, executive
officers, key employees or material consultants of the Company; (ii) all
severance programs and policies of each of the Company and each Company
Subsidiary with or relating to its employees; and (iii) all plans, programs,
agreements and other arrangements of each of the Company and each Company
Subsidiary with or relating to its employees which contain change in control
provisions (the "Company Change in Control Arrangements"). Except as set forth
in Section 3.09(e) of the Company Disclosure Schedule, neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will (i) result in any material payment (including, without limitation,
severance, unemployment compensation, golden parachute or
<PAGE>
17
otherwise) becoming due to any director or any employee of the Company or any of
its affiliates from the Company or any of its affiliates under any Company
Benefit Plan or otherwise, (ii) materially increase any benefits otherwise
payable under any Company Benefit Plan or (iii) result in any acceleration of
the time of payment or vesting of any material benefits.
SECTION 3.10. Accounting and Tax Matters. Neither the Company
nor, to the knowledge of the Company, any of its affiliates has taken or agreed
to take any action that would prevent the Merger from qualifying for "pooling of
interests" accounting treatment under applicable U.S. accounting rules,
including, without limitation, GAAP and applicable SEC accounting standards, or
would prevent the Merger from constituting a transaction qualifying under
section 368(a) of the Code. The Company is not aware of any agreement, plan or
other circumstance that would prevent the Merger from so qualifying under the
accounting rules and section 368(a) of the Code and, as of the date of this
Agreement, the Company has no reason to believe that the Merger will not qualify
as a "pooling of interests" for accounting purposes.
SECTION 3.11. Contracts; Debt Instruments. Except as disclosed
in or attached as exhibits to the Company SEC Filings or as disclosed in Section
3.11 of the Company Disclosure Schedule, neither the Company nor any of the
Company Subsidiaries is a party to or bound by any contract, arrangement,
commitment or understanding (whether written or oral) (i) except as set forth in
Section 3.09(e) of the Company Disclosure Schedule, any of the benefits of which
will be increased, or the vesting of the benefits of which will be accelerated,
by the occurrence of any of the transactions contemplated by this Agreement, or
the value of any of the benefits of which will be calculated on the basis of any
of the transactions contemplated by this Agreement, (ii) as of the date hereof,
which is a "material contract" (as such term is defined in Item 601(b)(10) of
Regulation S-K of the SEC), which requires expenditures in excess of $25 million
or which requires annual expenditures in excess of $10 million and is not
cancelable within one year, that has not been filed or incorporated by reference
in the Company SEC Filings, (iii) which contains any material non-compete
provisions with respect to any line of business or geographic area in which
business is conducted with respect to the Company or any of the Company
Subsidiaries or which restricts the conduct of any line of business by the
Company or any of the Company Subsidiaries or any geographic area in which the
Company or any of the Company Subsidiaries may conduct business, in each case in
any material respect, or (iv) which would prohibit or materially delay the
consummation of the Merger or any of the transactions contemplated by this
Agreement. The Company has previously made available to Parent true and correct
copies of all employment and deferred compensation agreements with directors,
executive officers and key employees, and material agreements with consultants,
which are in writing and to which the Company or any of the Company Subsidiaries
is a party. Each contract, arrangement, commitment or understanding of the type
described in this Section 3.11, whether or not set forth in Section 3.11 of the
Company Disclosure
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18
Schedule, is referred to herein as a "Company Material Contract." Each Company
Material Contract is valid and binding on the Company or any of the Company
Subsidiaries, as applicable, and in full force and effect, and the Company and
each of the Company Subsidiaries have in all material respects performed all
obligations required to be performed by them to date under each Company Material
Contract, except where such noncompliance, individually or in the aggregate,
would not have a Company Material Adverse Effect. Neither the Company nor any
Company Subsidiary knows of, or has received notice of, any violation or default
under (nor does there exist any condition which with the passage of time or the
giving of notice would cause such a violation of or default under) any Company
Material Contract or any other loan or credit agreement, note, bond, mortgage,
indenture or lease, or any other contract, agreement, arrangement or
understanding to which it is a party or by which it or any of its properties or
assets is bound, except for violations or defaults that would not, individually
or in the aggregate, result in a Company Material Adverse Effect. Set forth in
Section 3.11 of the Company Disclosure Schedule is a description of any material
changes to the amount and terms of the indebtedness of the Company and the
Company Subsidiaries from that described in the notes to the financial
statements incorporated in the Company's Form 10-K for the year ended December
31, 1996.
SECTION 3.12. Litigation. Except as disclosed in the Company
SEC Filings or in Section 3.12 of the Company Disclosure Schedule, there is no
suit, claim, action, proceeding or investigation pending or, to the knowledge of
the Company, threatened in writing against the Company or any Company Subsidiary
by or before any Governmental Entity that (a) individually or in the aggregate,
is reasonably likely to have a Company Material Adverse Effect or (b) challenges
the validity or propriety, or seeks to prevent consummation of, the transactions
contemplated by this Agreement. Except as disclosed in the Company SEC Filings
or in Section 3.12 of the Company Disclosure Schedule, neither the Company nor
any Company Subsidiary is subject to any outstanding order, writ, injunction or
decree which has had or, insofar as can be reasonably foreseen, individually or
in the aggregate, would have a Company Material Adverse Effect.
SECTION 3.13. Environmental Matters. Except as disclosed in
the Company SEC Filings or in Section 3.13 of the Company Disclosure Schedule or
as would not, individually or in the aggregate, have a Company Material Adverse
Effect:
(a) the Company and the Company Subsidiaries (i) are in
compliance with all, and are not subject to any asserted liability or,
to the Company's knowledge, any liability, in each case with respect to
any, applicable Environmental Laws (as defined below), (ii) hold or
have applied for all Environmental Permits (as defined below) and (iii)
are in compliance with their respective Environmental Permits;
(b) neither the Company nor any Company Subsidiary has
received any written notice, demand, letter, claim or request for
information alleging that the
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19
Company or any of its Subsidiaries may be in violation of, or liable
under, any Environmental Law;
(c) neither the Company nor any Company Subsidiary (i) has
entered into or agreed to any consent decree or order or is subject to
any judgment, decree or judicial order relating to compliance with
Environmental Laws, Environmental Permits or the investigation,
sampling, monitoring, treatment, remediation, removal or cleanup of
Hazardous Materials (as defined below) and, to the knowledge of the
Company, no investigation, litigation or other proceeding is pending or
threatened in writing with respect thereto, or (ii) is an indemnitor in
connection with any threatened or asserted claim by any third-party
indemnitee for any liability under any Environmental Law or relating to
any Hazardous Materials; and
(d) none of the real property owned or leased by the Company
or any Company Subsidiary is listed or, to the knowledge of the
Company, proposed for listing on the "National Priorities List" under
CERCLA, as updated through the date hereof, or any similar state or
foreign list of sites requiring investigation or cleanup.
For purposes of this Agreement:
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended as of the date
hereof.
"Environmental Laws" means any federal, state, local or
foreign statute, law, ordinance, regulation, rule, code, treaty, writ
or order and any enforceable judicial or administrative interpretation
thereof, including any judicial or administrative order, consent
decree, judgment, stipulation, injunction, permit, authorization,
policy, opinion, or agency requirement, in each case having the force
and effect of law, relating to the pollution, protection, investigation
or restoration of the environment, health and safety or natural
resources, including, without limitation, those relating to the use,
handling, presence, transportation, treatment, storage, disposal,
release, threatened release or discharge of Hazardous Materials or
noise, odor, wetlands, pollution, contamination or any injury or threat
of injury to persons or property.
"Environmental Permits" means any permit, approval,
identification number, license and other authorization required under
any applicable Environmental Law.
"Hazardous Materials" means (a) any petroleum, petroleum
products, by-products or breakdown products, radioactive materials,
asbestos-containing materials or polychlorinated biphenyls or (b) any
chemical, material or other substance defined or regulated as toxic or
hazardous or as a pollutant or contaminant or waste under any
applicable Environmental Law.
<PAGE>
20
SECTION 3.14. Trademarks, Patents and Copyrights. Except as
set forth in Section 3.14 of the Company Disclosure Schedule, or to the extent
the inaccuracy of any of the following (or the circumstances giving rise to such
inaccuracy), individually or in the aggregate, would not have a Company Material
Adverse Effect, the Company and each of the Company Subsidiaries own or possess
adequate licenses or other legal rights to use all patents, patent rights,
trademarks, trademark rights, trade names, trade dress, trade name rights,
copyrights, service marks, trade secrets, software, mailing lists, mask works,
know-how and other proprietary rights and information, including all
applications with respect thereto (collectively, "Proprietary Rights") used or
held for use in connection with the business of the Company and the Company
Subsidiaries as currently conducted or as contemplated to be conducted, and the
Company is unaware of any assertion or claim challenging the validity of any of
the foregoing. The conduct of the business of the Company and the Company
Subsidiaries as currently conducted and as contemplated to be conducted did not,
does not and will not infringe in any way any Proprietary Rights of any third
party that, individually or in the aggregate, could have a Company Material
Adverse Effect. To the Company's knowledge, there are no infringements of any
Proprietary Rights owned by or licensed by or to the Company or any Company
Subsidiary that, individually or in the aggregate, could have a Company Material
Adverse Effect.
SECTION 3.15. Taxes. (a) Except for such matters as would not
have a Company Material Adverse Effect, (i) the Company and the Company
Subsidiaries have timely filed or will timely file all returns and reports
required to be filed by them with any taxing authority with respect to Taxes (as
defined below) for any period ending on or before the Effective Time, taking
into account any extension of time to file granted to or obtained on behalf of
the Company and the Company Subsidiaries, (ii) all Taxes that are due prior to
the Effective Time have been paid or will be paid (other than Taxes which (1)
are not yet delinquent or (2) are being contested in good faith and have not
been finally determined), (iii) as of the date hereof, no deficiency for any Tax
has been asserted or assessed by a taxing authority against the Company or any
of the Company Subsidiaries which deficiency has not been paid other than any
deficiency being contested in good faith and (iv) the Company and the Company
Subsidiaries have provided adequate reserves (in accordance with GAAP) in their
financial statements for any Taxes that have not been paid, whether or not shown
as being due on any returns. As used in this Agreement, "Taxes" shall mean any
and all taxes, fees, levies, duties, tariffs, imposts and other charges of any
kind (together with any and all interest, penalties, additions to tax and
additional amounts imposed with respect thereto) imposed by any Governmental
Entity or taxing authority, including, without limitation: taxes or other
charges on or with respect to income, franchise, windfall or other profits,
gross receipts, property, sales, use, capital stock, payroll, employment, social
security, workers' compensation, unemployment compensation or net worth; taxes
or other charges in the nature of excise, withholding, ad valorem, stamp,
transfer, value-added or gains taxes; license, registration and documentation
fees; and customers' duties, tariffs and similar charges.
<PAGE>
21
(b) To the best of the Company's knowledge, there are no
material disputes pending, or claims asserted in writing for, Taxes or
assessments upon the Company or any of its Subsidiaries, nor has the Company or
any of its Subsidiaries been requested in writing to give any currently
effective waivers extending the statutory period of limitation applicable to any
federal or state income tax return for any period which disputes, claims,
assessments or waivers are reasonably likely to have a Company Material Adverse
Effect.
(c) There are no Tax liens upon any property or assets of the
Company or any of the Company Subsidiaries except liens for current Taxes not
yet due and except for liens which have not had and are not reasonably likely to
have a Company Material Adverse Effect.
(d) Neither the Company nor any of its Subsidiaries has been
required to include in income any adjustment pursuant to Section 481 of the Code
by reason of a voluntary change in accounting method initiated by the Company or
any of its Subsidiaries, and the IRS has not initiated or proposed any such
adjustment or change in accounting method, in either case which adjustment or
change has had or is reasonably likely to have a Company Material Adverse
Effect.
(e) Except as set forth in the financial statements described
in Section 3.07, neither the Company nor any of its Subsidiaries has entered
into a transaction which is being accounted for under the installment method of
Section 453 of the Code, which would be reasonably likely to have a Company
Material Adverse Effect.
SECTION 3.16. Opinion of Financial Advisor. Morgan Stanley &
Co. Incorporated ("Morgan Stanley") has delivered to the Board of Directors of
the Company its written opinion dated May 4, 1997, a copy of which opinion has
been delivered to Parent, that, as of such date, the Exchange Ratio is fair from
a financial point of view to the holders of Company Common Stock.
SECTION 3.17. Vote Required. The affirmative vote of the
holders of a majority of the outstanding shares of Company Common Stock is the
only vote of the holders of any class or series of capital stock of the Company
necessary to approve the Merger.
SECTION 3.18. Brokers. No broker, finder or investment banker
(other than Morgan Stanley) is entitled to any brokerage, finder's or other fee
or commission in connection with the Merger based upon arrangements made by or
on behalf of the Company or any Company Subsidiary. The Company has heretofore
made available to Parent a complete and correct copy of all agreements between
the Company and Morgan Stanley pursuant to which such firm would be entitled to
any payment relating to the Merger.
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22
SECTION 3.19. Insurance. The Company maintains insurance
coverage with reputable insurers in such amounts and covering such risks as are
in accordance with normal industry practice for companies engaged in businesses
similar to that of the Company (taking into account the cost and availability of
such insurance).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Except as set forth in the Disclosure Schedule delivered by
Parent and Merger Sub to the Company prior to the execution of this Agreement
(the "Parent Disclosure Schedule"), which shall identify exceptions by specific
Section references, Parent and Merger Sub hereby jointly and severally represent
and warrant to the Company as follows:
SECTION 4.01. Organization and Qualification; Subsidiaries.
Each of Parent, Merger Sub and each other subsidiary of Parent (collectively,
the "Parent Subsidiaries") has been duly organized, and is validly existing and
in good standing, under the laws of the jurisdiction of its incorporation or
organization, as the case may be, and has the requisite power and authority and
all necessary governmental approvals to own, lease and operate its properties
and to carry on its business as it is now being conducted, except where the
failure to be so organized, existing or in good standing or to have such power,
authority and governmental approvals would not, individually or in the
aggregate, have a Parent Material Adverse Effect (as defined below). Each of
Parent, Merger Sub and the other Parent Subsidiaries is duly qualified or
licensed to do business, and is in good standing, in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
business makes such qualification or licensing or good standing necessary,
except for such failures to be so qualified or licensed and in good standing
that would not, individually or in the aggregate, have a Parent Material Adverse
Effect. For purposes of this Agreement, "Parent Material Adverse Effect" means
any change in or effect on the business of Parent, Merger Sub and the Parent
Subsidiaries that is, or is reasonably likely to be, materially adverse to the
business, financial condition, results of operations or prospects of Parent and
the Parent Subsidiaries taken as a whole. Section 4.01 of the Parent Disclosure
Schedule sets forth a complete and correct list of all of the Parent
Subsidiaries. Except as set forth in Section 4.01 of the Parent Disclosure
Schedule, neither Parent nor any Parent Subsidiary holds any interest in a
partnership or joint venture of any kind.
SECTION 4.02. Certificate of Incorporation and By-laws;
Corporate Books and Records. (a) The copies of Parent's Articles of
Incorporation and By-laws that are set forth as exhibits to Parent's Form 10-K
for the year ended December 29, 1996 are complete and correct copies thereof.
Parent has heretofore furnished to the Company a complete and
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23
correct copy of the Certificate of Incorporation and By-Laws, as amended or
restated, of Merger Sub. Such Articles of Incorporation, Certificate of
Incorporation and By-laws are in full force and effect. Neither Parent nor
Merger Sub is in violation of any of the provisions of its Articles or
Certificate of Incorporation or By-laws.
(b) In all material respects, the minute books of Parent and
the Parent Subsidiaries through January 1, 1997 contain accurate records of all
meetings and accurately reflect all other actions taken by the stockholders, the
Boards of Directors and all committees of the Boards of Directors of Parent and
the Parent Subsidiaries since January 1, 1995. Complete and accurate copies of
all such minute books (except for portions relating to deliberations regarding
the Merger, which were redacted), and of the stock register of Parent and each
Parent Subsidiary have been made available by Parent to the Company.
SECTION 4.03. Capitalization. The authorized capital stock of
Parent consists of (a) 150,000,000 shares of Parent Common Stock and (b)
5,000,000 shares of preferred stock, par value $10 per share (the "Parent
Preferred Stock"). As of February 20, 1997, (i) 86,305,095 shares of Parent
Common Stock were issued and outstanding, all of which were validly issued and
fully paid, nonassessable and free of preemptive rights and (ii) no shares of
Parent Common Stock were held in the treasury of Parent or by the Parent
Subsidiaries. As of December 29, 1996, (i) 30,963,114 shares of Parent Common
Stock were reserved for issuance upon exercise of current stock options granted
pursuant to the stock based plans set forth in Section 4.09(a) of the Parent
Disclosure Schedule (the "Parent Stock Option Plans"), upon exercise of future
grants of stock options and upon conversion or exchange of Parent Preferred
Stock and (ii) of the Parent Preferred Stock, (A) 39,574 shares were designated,
and no shares were issued and outstanding, as Series D Cumulative Preferred
Stock (the "Series D Cumulative Preferred Stock"), (B) 2,000,000 shares were
designated, and 1,999,895 shares were issued and outstanding, as Series K $3.375
Cumulative Convertible Exchangeable Preferred Stock (the "Series K Preferred
Stock"), (C) 1,000,000 shares were designated, and 1,000,000 shares (represented
by 4,000,000 depositary shares) were issued and outstanding as Series L $14.00
Cumulative Convertible Exchangeable Preferred Stock (the "Series L Preferred
Stock"), (D) 150,000 shares were designated, and no shares were issued and
outstanding, as Series M Cumulative Preferred Stock (to be increased to 250,000
shares in connection with this Agreement) (the "Series M Preferred Stock"), (E)
280,000 shares were designated, and 264,042 shares (represented by 1,056,168
depositary shares) were issued and outstanding, as Series N $14.00 Cumulative
Convertible Exchangeable Preferred Stock (the "Series N Preferred Stock"), (F)
230,000 shares were designated, and 196,230 shares (represented by 3,924,600
depositary shares) were issued and outstanding, as Series O 8-1/4% Cumulative
Preferred Stock (the "Series O Preferred Stock"), and (G) 166,667 shares were
designated, and 166,644 shares (represented by 166,644,366 depositary shares)
were issued and outstanding, as Series P 9% Cumulative Convertible Preferred
Stock (the "Series P Preferred Stock"), all of which were validly issued and
fully paid, nonassessable and free of preemptive rights. Except for Parent
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24
Options granted pursuant to the Parent Stock Option Plans, shares issuable upon
conversion of Parent Preferred Stock or agreements or arrangements described in
Section 4.03 or Section 4.09 of the Parent Disclosure Schedule, there are no
options, warrants or other rights, agreements, arrangements or commitments of
any character to which Parent or any Parent Subsidiary is a party or by which
Parent or any Parent Subsidiary is bound relating to the issued or unissued
capital stock of Parent or any Parent Subsidiary, or securities convertible into
or exchangeable for such capital stock or obligating Parent or any Parent
Subsidiary to issue or sell any shares of capital stock, or securities
convertible into or exchangeable for such capital stock of, or other equity
interests in, Parent or any Parent Subsidiary. Since February 20, 1997, Parent
has not issued any shares of its capital stock, or securities convertible into
or exchangeable for such capital stock, other than those shares of capital stock
reserved for issuance as set forth in this Section 4.03. All shares of Parent
Common Stock subject to issuance as aforesaid, upon issuance prior to the
Effective Time on the terms and conditions specified in the instruments pursuant
to which they are issuable, will be duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights. The shares of Parent Common Stock
to be issued in connection with the Merger, when issued as contemplated herein,
will be duly authorized, validly issued, fully paid and nonassessable and will
not be issued in violation of any preemptive rights. Except as set forth in
Section 4.03 of the Parent Disclosure Schedule, there are no outstanding
contractual obligations of Parent or any Parent Subsidiary (i) restricting the
transfer of, (ii) affecting the voting rights of, (iii) requiring the
repurchase, redemption or disposition of, (iv) requiring the registration for
sale of, or (v) granting any preemptive or antidilutive right with respect to,
any shares of Parent Common Stock or any capital stock of any Parent Subsidiary.
Each outstanding share of capital stock of each Parent Subsidiary is duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights and is owned by Parent or another Parent Subsidiary, is free and clear of
all security interests, liens, claims, pledges, options, rights of first
refusal, agreements, limitations on Parent's or such other Parent Subsidiary's
voting rights, charges and other encumbrances of any nature whatsoever, except
where failure to own such shares free and clear would not, individually or in
the aggregate, have a Parent Material Adverse Effect. Except as set forth in
Section 4.03 of the Parent Disclosure Schedule, there are no material
outstanding contractual obligations of Parent or any Parent Subsidiary to
provide funds to, or make any investment (in the form of a loan, capital
contribution or otherwise) in, any Parent Subsidiary or any other person, other
than guarantees by the Company of any indebtedness of any Parent Subsidiary.
SECTION 4.04. Authority Relative to This Agreement. Each of
Parent and Merger Sub has all necessary corporate power and authority to execute
and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated herein to be consummated by Parent.
Each of (i) the execution and delivery of this Agreement by each of Parent and
Merger Sub and the consummation by Parent and Merger Sub of such transactions,
(ii) an amendment to the Articles of Incorporation of Parent to increase the
number of authorized shares of Parent Common Stock to 500,000,000 and to
<PAGE>
25
change Parent's name, as of the Effective Time, to Fort James Corporation (the
"Articles Amendment"), (iii) the issuance (the "Share Issuance") of shares of
Parent Common Stock in accordance with the Merger and (iv) an amendment to the
Stock Incentive Plan of Parent to increase by 8,000,000 the number of shares
available for issuance thereunder (the "Stock Plan Amendment"), have been duly
and validly authorized by all necessary corporate action and no other corporate
proceedings on the part of Parent and Merger Sub are necessary to authorize this
Agreement or to consummate such transactions other than, with respect to (a) the
adoption of the Articles Amendment by the affirmative vote of a majority of the
votes entitled to be cast, and (b) the adoption of Share Issuance and the Stock
Plan Amendment by the affirmative vote of a majority of votes cast, in each
case, by the holders of outstanding shares of Parent Common Stock and Series P
Preferred Stock, voting together as a class (with the Series P Preferred Stock
voting on the basis of 85.47 votes per share). The Board of Directors of Parent
has directed that the Articles Amendment, the Share Issuance and the Stock Plan
Amendment be submitted to Parent's shareholders for approval at a meeting of
such shareholders. This Agreement has been duly authorized and validly executed
and delivered by Parent and Merger Sub and constitutes a legal, valid and
binding obligation of Parent and Merger Sub, enforceable against Parent and
Merger Sub in accordance with its terms.
SECTION 4.05. No Conflict; Required Filings and Consents. (a)
The execution and delivery of this Agreement by Parent and Merger Sub do not,
and the performance of this Agreement by Parent and Merger Sub will not, (i)
(assuming the shareholder approval set forth in Section 4.04 is obtained)
conflict with or violate any provision of the Certificate of Incorporation or
By-laws of Parent or Merger Sub or any equivalent organizational documents of
any Parent Subsidiary, (ii) assuming that all consents, approvals,
authorizations and other actions described in Section 4.05(b) have been obtained
and all filings and obligations described in Section 4.05(b) have been made,
conflict with or violate any foreign or domestic Law applicable to Parent,
Merger Sub or any Parent Subsidiary or by which any property or asset of Parent,
Merger Sub or any Parent Subsidiary is bound or affected or (iii) except as set
forth in Section 4.05(a) of the Parent Disclosure Schedule, result in any breach
of, any loss of any benefit under or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any right of termination, amendment, acceleration or cancellation of, or
result in the creation of a lien or other encumbrance on any property or asset
of Parent, Merger Sub or any Parent Subsidiary pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, Parent Permit (as
defined in Section 4.06), other instrument or obligation, except, with respect
to clauses (ii) and (iii), for any such conflicts, violations, breaches,
defaults or other occurrences which would neither, individually or in the
aggregate, (A) have a Parent Material Adverse Effect nor (B) prevent or
materially delay the performance of this Agreement by Parent and Merger Sub.
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26
(b) Except as set forth in Section 4.05(b) of the Parent
Disclosure Schedule, the execution and delivery of this Agreement by Parent and
Merger Sub do not, and the performance of this Agreement by Parent and Merger
Sub will not, require any consent, approval, authorization or permit of, or
filing with or notification to, any domestic or foreign Governmental Entity,
except (i) for applicable requirements of the Exchange Act, the Securities Act,
Blue Sky Laws, the NYSE, state takeover laws, premerger notification
requirements of the HSR Act, filing and recordation of the Certificate of Merger
as required by the DGCL and as otherwise set forth in Section 4.05(b) of the
Parent Disclosure Schedule and (ii) where failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not (A) prevent or materially delay consummation of the Merger, (B)
otherwise prevent Parent from performing its material obligations under this
Agreement or (C) individually or in the aggregate, have a Parent Material
Adverse Effect.
SECTION 4.06. Permits; Compliance. Each of Parent and the
Parent Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals, clearances and orders of any Governmental Entity necessary for Parent
or any Parent Subsidiary to own, lease and operate its properties or to carry on
their respective businesses substantially in the manner described in the Parent
SEC Filings (as defined herein) and as it is now being conducted (the "Parent
Permits"), and all such Parent Permits are valid, and in full force and effect,
except where the failure to have, or the suspension or cancellation of, any of
the Parent Permits would neither, individually or in the aggregate, (a) have a
Parent Material Adverse Effect nor (b) prevent or materially delay the
performance of this Agreement by Parent, and, as of the date of this Agreement,
no suspension or cancellation of any of the Parent Permits is pending or, to the
knowledge of Parent, threatened, except where the failure to have, or the
suspension or cancellation of, any of the Parent Permits would neither,
individually or in the aggregate, (x) have a Parent Material Adverse Effect nor
(y) prevent or materially delay the performance of this Agreement by Parent.
Neither Parent nor any Parent Subsidiary is in conflict with, or in default or
violation of, (i) any Law applicable to Parent or any Parent Subsidiary or by
which any property, asset or operation of Parent or any Parent Subsidiary is
bound or affected or (ii) any Parent Permits, except for any such conflicts,
defaults or violations that would neither, individually or in the aggregate, (A)
have a Parent Material Adverse Effect nor (B) prevent or materially delay the
performance of this Agreement by Parent.
SECTION 4.07. SEC Filings; Financial Statements. (a) Parent
has timely filed all registration statements, prospectuses, forms, reports and
documents required to be filed by it under the Securities Act or the Exchange
Act, as the case may be, since January 1, 1995 (collectively, the "Parent SEC
Filings"). The Parent SEC Filings (i) were prepared in accordance with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
(ii) did not at the time they were filed contain any untrue statement of a
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27
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. No Parent Subsidiary
is subject to the periodic reporting requirements of the Exchange Act.
(b) Each of the consolidated financial statements (including,
in each case, any notes thereto) contained in the Parent SEC Filings was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods indicated (except as may be indicated in the notes thereto) and each
presented fairly the consolidated financial position of Parent and the
consolidated Parent Subsidiaries as at the respective dates thereof and for the
respective periods indicated therein, except as otherwise noted therein
(subject, in the case of unaudited statements, to normal and recurring year-end
adjustments which were not and are not expected, individually or in the
aggregate, to have a Parent Material Adverse Effect). The books and records of
Parent and its Subsidiaries have been, and are being, maintained in accordance
with GAAP and any other applicable legal and accounting requirements.
(c) Except as and to the extent set forth on the consolidated
balance sheet of Parent and the consolidated Parent Subsidiaries as of December
29, 1996 included in Parent's Form 10-K for the year ended December 29, 1996,
including the notes thereto, neither Parent nor any Parent Subsidiary has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) that would be required to be reflected on a balance sheet or in
notes thereto prepared in accordance with GAAP, except for liabilities or
obligations incurred in the ordinary course of business since December 29, 1996
that would neither, individually or in the aggregate, (i) have a Parent Material
Adverse Effect nor (ii) prevent or materially delay the performance of this
Agreement by Parent.
SECTION 4.08. Absence of Certain Changes or Events. Since
December 29, 1996, except as contemplated by or as disclosed in this Agreement,
as set forth in Section 4.08 of the Parent Disclosure Schedule or as disclosed
in any Parent SEC Filing filed prior to the date hereof, Parent and the Parent
Subsidiaries have conducted their businesses only in the ordinary course and in
a manner consistent with past practice and, since such date, there has not been
(a) any Parent Material Adverse Effect or an event or development (including in
connection with the Merger) that would, individually or in the aggregate, have a
Parent Material Adverse Effect, (b) any event that could reasonably be expected
to prevent or materially delay the performance of this Agreement by Parent or
(c) any action taken by Parent or any of the Parent Subsidiaries during the
period from December 30, 1996 through the date of this Agreement that, if taken
during the period from the date of this Agreement through the Effective Time,
would constitute a breach of Section 5.02.
SECTION 4.09. Employee Benefit Plans; Labor Matters. (a)
Section 4.09(a) of the Parent Disclosure Schedule sets forth a true and complete
list as of the date hereof of each material employee benefit plan, program,
arrangement and contract (including, without
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limitation, any "employee benefit plan", as defined in section 3(3) of ERISA,
maintained or contributed to by Parent or any Parent Subsidiary, or with respect
to which Parent or any Parent Subsidiary could incur material liability under
section 4069, 4212(c) or 4204 of ERISA (the "Parent Benefit Plans"). With
respect to each Parent Benefit Plan which is a stock-based plan, Parent has
heretofore delivered to the Company a true and complete copy of such Parent
Benefit Plan. With respect to each other Parent Benefit Plan, Parent will make
available to the Company, promptly after the date hereof, a true and complete
copy of such Parent Benefit Plan and (i) the most recent annual report (Form
5500) filed with the IRS, (ii) the most recent actuarial report or valuation (if
any) relating to any Parent Benefit Plan subject to Title IV of ERISA and (iii)
the most recent determination letter, if any, issued by the IRS with respect to
any Parent Benefit Plan qualified under Section 401(a) of the Code.
(b) Except as set forth in Schedule 4.09(b) of the Parent
Disclosure Schedule, with respect to each Parent Benefit Plan which is subject
to Title IV of ERISA, (A) the present value of accrued benefits under such
Parent Benefit Plan, based upon the actuarial assumptions used for funding
purposes in the most recent actuarial report prepared by such Parent Benefit
Plan's actuary with respect to such Parent Benefit Plan, did not, as of its
latest valuation date, exceed the then current value of the assets of such
Parent Benefit Plan allocable to such accrued benefits, (B) no "reportable
event" (within the meaning of Section 4043 of ERISA) has occurred with respect
to any Parent Benefit Plan for which the 30-day notice requirement has not been
waived, except where such reportable event would not have a Parent Material
Adverse Effect, and (C) no condition exists which would subject Parent or any
ERISA Affiliate to any fine under Section 4071 of ERISA, except where such
condition would not have a Parent Material Adverse Effect. Except as set forth
in Section 4.09(b) of the Parent Disclosure Schedule, no Parent Benefit Plan is
a "multiemployer pension plan" (as such term is defined in section 3(37) of
ERISA).
(c) With respect to the Parent Benefit Plans, no event has
occurred and, to the knowledge of Parent, there exists no condition or set of
circumstances in connection with which Parent or any Parent Subsidiary could be
subject to any liability under the terms of such Parent Benefit Plans, ERISA,
the Code or any other applicable Law which, individually or in the aggregate,
would have a Parent Material Adverse Effect. Each of the Parent Benefit Plans
has been operated and administered in all material respects in accordance with
applicable laws and administrative or governmental rules and regulations,
including, but not limited to, ERISA and the Code, except where a violation of
any such law, rule or regulation would not have a Parent Material Adverse
Effect. Each of the Parent Benefit Plans intended to be "qualified" within the
meaning of Section 401(a) of the Code has received a favorable determination
letter as to such qualification from the IRS, and no event has occurred, either
by reason of any action or failure to act, which would cause the loss of any
such qualification, except where such loss of qualification would not have a
Parent Material Adverse Effect. Except as set forth on Section 4.09(c) of the
Parent Disclosure Schedule, no
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29
Parent Benefit Plan provides benefits, including, without limitation, death or
medical benefits (whether or not insured), with respect to current or former
employees of Parent or any Parent Subsidiary beyond their retirement or other
termination of service, other than (i) coverage mandated by applicable law, (ii)
death benefits or retirement benefits under any "employee pension plan" (as such
term is defined in Section 3(2) of ERISA), (iii) deferred compensation benefits
accrued as liabilities on the books of Parent or any Parent Subsidiary, or (iv)
benefits the full cost of which is borne by the current or former employee (or
his beneficiary). All contributions or other amounts payable by Parent or any
Parent Subsidiary as of the Effective Time with respect to each Parent Benefit
Plan in respect of current or prior plan years have been paid or accrued in
accordance with GAAP and Section 412 of the Code.
(d) Parent and the Parent Subsidiaries have no obligations or
liabilities (whether accrued, absolute, contingent or otherwise) with respect to
any collective bargaining agreements that, individually or in the aggregate,
would have a Parent Material Adverse Effect.
(e) Except as set forth in Section 4.09(e) of the Parent
Disclosure Schedule, neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i) result in any
material payment (including, without limitation, severance, unemployment
compensation, golden parachute or otherwise) becoming due to any director or any
employee of Parent or any of its affiliates from Parent or any of its affiliates
under any Parent Benefit Plan or otherwise, (ii) materially increase any
benefits otherwise payable under any Parent Benefit Plan or (iii) result in any
acceleration of the time of payment or vesting of any material benefits.
SECTION 4.10. Accounting and Tax Matters. Neither Parent nor,
to the knowledge of Parent, any of its affiliates has taken or agreed to take
any action that would prevent the Merger from qualifying for "pooling of
interests" accounting treatment under applicable U.S. accounting rules,
including, without limitation, GAAP and applicable SEC accounting standards, or
would prevent the Merger from constituting a transaction qualifying under
section 368(a) of the Code. Parent is not aware of any agreement, plan or other
circumstance that would prevent the Merger from so qualifying under the
accounting rules and section 368(a) of the Code and, as of the date of this
Agreement, Parent has no reason to believe that the Merger will not qualify as a
"pooling of interests" for accounting purposes.
SECTION 4.11. Contracts; Debt Instruments. Except as disclosed
in or attached as exhibits to the Parent SEC Filings or as disclosed in Section
4.11 of the Parent Disclosure Schedule, neither Parent nor any of the Parent
Subsidiaries is a party to or bound by any contract, arrangement, commitment or
understanding (whether written or oral) (i) except as set forth in Section
4.09(e) of the Parent Disclosure Schedule, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the
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30
occurrence of any of the transactions contemplated by this Agreement, or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement, (ii) as of the date hereof,
which is a "material contract" (as such term is defined in Item 601(b)(10) of
Regulation S-K of the SEC), which requires expenditures in excess of $25 million
or which requires annual expenditures in excess of $10 million and is not
cancelable within one year, that has not been filed or incorporated by reference
in the Parent SEC Filings, (iii) which contains any material non-compete
provisions with respect to any line of business or geographic area in which
business is conducted with respect to Parent or any of the Parent Subsidiaries
or which restricts the conduct of any line of business by Parent or any of the
Parent Subsidiaries or any geographic area in which Parent or any of the Parent
Subsidiaries may conduct business, in each case in any material respect, or (iv)
which would prohibit or materially delay the consummation of the Merger or any
of the transactions contemplated by this Agreement. Parent has previously made
available to the Company true and correct copies of all employment and deferred
compensation agreements with directors, executive officers and key employees,
and material agreements with consultants, which are in writing and to which
Parent or any of the Parent Subsidiaries is a party. Each contract, arrangement,
commitment or understanding of the type described in this Section 4.11, whether
or not set forth in Section 4.11 of the Disclosure Schedule, is referred to
herein as a "Parent Material Contract." Each Parent Material Contract is valid
and binding on Parent or any of the Parent Subsidiaries, as applicable, and in
full force and effect, and Parent and each of the Parent Subsidiaries have in
all material respects performed all obligations required to be performed by them
to date under each Parent Material Contract, except where such noncompliance,
individually or in the aggregate, would not have a Parent Material Adverse
Effect. Neither Parent nor any Parent Subsidiary knows of, or has received
notice of, any violation or default under (nor does there exist any condition
which with the passage of time or the giving of notice would cause such a
violation of or default under) any Parent Material Contract or any other loan or
credit agreement, note, bond, mortgage, indenture or lease, or any other
contract, agreement, arrangement or understanding to which it is a party or by
which it or any of its properties or assets is bound, except for violations or
defaults that would not, individually or in the aggregate, result in a Parent
Material Adverse Effect. Set forth in Section 4.11 of the Parent Disclosure
Schedule is a description of any material changes to the amount and terms of the
indebtedness of Parent and the Parent Subsidiaries from that described in the
notes to the financial statements incorporated in Parent's Form 10- K for the
year ended December 29, 1996.
SECTION 4.12. Litigation. Except as disclosed in the Parent
SEC Filings or in Section 4.12 of the Parent Disclosure Schedule, there is no
suit, claim, action, proceeding or investigation pending or, to the knowledge of
Parent, threatened in writing against Parent or any Parent Subsidiary by or
before any Governmental Entity that (a) individually or in the aggregate, is
reasonably likely to have a Parent Material Adverse Effect or (b) challenges the
validity or propriety, or seeks to prevent consummation of, the transactions
contemplated by this Agreement. Except as disclosed in the Parent SEC Filings or
in Section 4.12 of the
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31
Parent Disclosure Schedule, neither Parent nor any Parent Subsidiary is subject
to any outstanding order, writ, injunction or decree which has had or, insofar
as can be reasonably foreseen, individually or in the aggregate, would have a
Parent Material Adverse Effect.
SECTION 4.13. Environmental Matters. Except as disclosed in
the Parent SEC Filings or in Section 4.13 of the Parent Disclosure Schedule or
as would not, individually or in the aggregate, have a Parent Material Adverse
Effect:
(a) Parent and the Parent Subsidiaries (i) are in compliance
with all, and are not subject to any asserted liability or, to Parent's
knowledge, any liability, in each case with respect to any, applicable
Environmental Laws, (ii) hold or have applied for all Environmental
Permits and (iii) are in compliance with their respective Environmental
Permits;
(b) neither Parent nor any Parent Subsidiary has received any
written notice, demand, letter, claim or request for information
alleging that Parent or any of its Subsidiaries may be in violation of,
or liable under, any Environmental Law;
(c) neither Parent nor any Parent Subsidiary (i) has entered
into or agreed to any consent decree or order or is subject to any
judgment, decree or judicial order relating to compliance with
Environmental Laws, Environmental Permits or the investigation,
sampling, monitoring, treatment, remediation, removal or cleanup of
Hazardous Materials and, to the knowledge of Parent, no investigation,
litigation or other proceeding is pending or threatened in writing with
respect thereto, or (ii) is an indemnitor in connection with any
threatened or asserted claim by any third-party indemnitee for any
liability under any Environmental Law or relating to any Hazardous
Materials; and
(d) none of the real property owned or leased by Parent or any
Parent Subsidiary is listed or, to the knowledge of Parent, proposed
for listing on the "National Priorities List" under CERCLA, as updated
through the date hereof, or any similar state or foreign list of sites
requiring investigation or cleanup.
SECTION 4.14. Trademarks, Patents and Copyrights. Except as
set forth in Section 4.14 of the Parent Disclosure Schedule, or to the extent
the inaccuracy of any of the following (or the circumstances giving rise to such
inaccuracy), individually or in the aggregate, would not have a Parent Material
Adverse Effect, Parent and each of the Parent Subsidiaries own or possess
adequate licenses or other legal rights to use all Proprietary Rights used or
held for use in connection with the business of Parent and the Parent
Subsidiaries as currently conducted or as contemplated to be conducted, and
Parent is unaware of any assertion or claim challenging the validity of any of
the foregoing. The conduct of the business of Parent and the Parent Subsidiaries
as currently conducted and as
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32
contemplated to be conducted did not, does not and will not infringe in any way
any Proprietary Rights of any third party that, individually or in the
aggregate, could have a Parent Material Adverse Effect. To Parent's knowledge,
there are no infringements of any Proprietary Rights owned by or licensed by or
to Parent or any Parent Subsidiary that, individually or in the aggregate, could
have a Parent Material Adverse Effect.
SECTION 4.15. Taxes. (a) Except for such matters as would not
have a Parent Material Adverse Effect, (i) Parent and the Parent Subsidiaries
have timely filed or will timely file all returns and reports required to be
filed by them with any taxing authority with respect to Taxes for any period
ending on or before the Effective Time, taking into account any extension of
time to file granted to or obtained on behalf of Parent and the Parent
Subsidiaries, (ii) all Taxes that are due prior to the Effective Time have been
paid or will be paid (other than Taxes which (1) are not yet delinquent or (2)
are being contested in good faith and have not been finally determined), (iii)
as of the date hereof, no deficiency for any Tax has been asserted or assessed
by a taxing authority against Parent or any of the Parent Subsidiaries which
deficiency has not been paid other than any deficiency being contested in good
faith and (iv) Parent and the Parent Subsidiaries have provided adequate
reserves (in accordance with GAAP) in their financial statements for any Taxes
that have not been paid, whether or not shown as being due on any returns.
(b) To the best of Parent's knowledge, there are no material
disputes pending, or claims asserted in writing for, Taxes or assessments upon
Parent, or any of the Parent Subsidiaries, nor has Parent or any of the Parent
Subsidiaries been requested in writing to give any currently effective waivers
extending the statutory period of limitation applicable to any federal or state
income tax return for any period which disputes, claims, assessments or waivers
are reasonably likely to have a Parent Material Adverse Effect.
(c) There are no Tax liens upon any property or assets of
Parent or any of the Parent Subsidiaries except liens for current Taxes not yet
due and except for liens which have not had and are not reasonably likely to
have a Parent Material Adverse Effect.
(d) Neither Parent nor any of the Parent Subsidiaries has been
required to include in income any adjustment pursuant to Section 481 of the Code
by reason of a voluntary change in accounting method initiated by Parent or any
of its Subsidiaries, and the IRS has not initiated or proposed any such
adjustment or change in accounting method, in either case which adjustment or
change has had or is reasonably likely to have a Parent Material Adverse Effect.
(e) Except as set forth in the financial statements described
in Section 3.07, neither Parent nor any of the Parent Subsidiaries has entered
into a transaction which is being accounted for under the installment method of
Section 453 of the Code, which would be reasonably likely to have a Parent
Material Adverse Effect.
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33
SECTION 4.16. Ownership of Merger Sub; No Prior Activities.
(a) Merger Sub was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement.
(b) As of the Effective Time, all of the outstanding capital
stock of Merger Sub will be owned directly by Parent. As of the Effective Time,
there will be no options, warrants or other rights (including registration
rights), agreements, arrangements or commitments to which Merger Sub is a party
of any character relating to the issued or unissued capital stock of, or other
equity interests in, Merger Sub or obligating Merger Sub to grant, issue or sell
any shares of the capital stock of, or other equity interests in, Merger Sub, by
sale, lease, license or otherwise. There are no obligations, contingent or
otherwise, of Merger Sub to repurchase, redeem or otherwise acquire any shares
of the capital stock of Merger Sub.
(c) As of the date hereof and the Effective Time, except for
obligations or liabilities incurred in connection with its incorporation or
organization and the transactions contemplated by this Agreement, Merger Sub has
not and will not have incurred, directly or indirectly, through any subsidiary
or affiliate, any obligations or liabilities or engaged in any business
activities of any type or kind whatsoever or entered into any agreements or
arrangements with any person.
SECTION 4.17. Opinion of Financial Advisor. Each of Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and Salomon
Brothers Inc ("Salomon Brothers") has delivered to the Board of Directors of
Parent its written opinion dated May 4, 1997 that, as of such date, the
Exchange Ratio is fair from a financial point of view to Parent.
SECTION 4.18. Vote Required. The votes described in Section
4.04 of this Agreement are the only votes of the holders of any class or series
of capital stock of Parent necessary to approve the transactions contemplated by
this Agreement.
SECTION 4.19. Brokers. No broker, finder or investment banker
(other than Merrill Lynch and Salomon Brothers) is entitled to any brokerage,
finder's or other fee or commission in connection with the Merger based upon
arrangements made by or on behalf of Parent or any Parent Subsidiary. Parent has
heretofore made available to the Company a complete and correct copy of all
agreements between Parent and each of Merrill Lynch and Salomon Brothers
pursuant to which such firms would be entitled to any payment relating to the
Merger.
SECTION 4.20. Insurance. Parent maintains insurance coverage
with reputable insurers in such amounts and covering such risks as are in
accordance with normal
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34
industry practice for companies engaged in businesses similar to that of Parent
(taking into account the cost and availability of such insurance).
ARTICLE V
COVENANTS
SECTION 5.01. Conduct of Business by the Company Pending the
Closing. The Company agrees that, between the date of this Agreement and the
Effective Time, except as set forth in Section 5.01 of the Company Disclosure
Schedule or as contemplated by any other provision of this Agreement, unless
Parent shall otherwise agree in writing, which agreement shall not be
unreasonably withheld or delayed, (1) the business of the Company and the
Company Subsidiaries shall be conducted only in, and the Company and the Company
Subsidiaries shall not take any action except in, the ordinary course of
business consistent with past practice and (2) the Company shall use its
reasonable best efforts to keep available the services of such of the current
officers, significant employees and consultants of the Company and the Company
Subsidiaries and to preserve the current relationships of the Company and the
Company Subsidiaries with such of the customers, suppliers and other persons
with which the Company or any Company Subsidiary has significant business
relations as the Company deems reasonably necessary in order to preserve
substantially intact its business organization. By way of amplification and not
limitation, except as set forth in Section 5.01 of the Company Disclosure
Schedule or as contemplated by any other provision of this Agreement, the Board
of Directors of the Company shall not (unless required by applicable Laws or
stock exchange regulations) cause or permit the Company or any Company
Subsidiary to, and shall neither cause nor permit any of the Company's
affiliates (over which it exercises control), or any of their officers,
directors, employees and agents to, between the date of this Agreement and the
Effective Time, directly or indirectly, do, or agree to do, any of the following
without the prior written consent of Parent, which consent shall not be
unreasonably withheld or delayed:
(a) amend or otherwise change its Certificate of Incorporation
or By-laws or equivalent organizational documents (other than to
increase the authorized shares of Company Common Stock to 200,000,000);
(b) issue, sell, pledge, dispose of, grant, transfer, lease,
license, guarantee, encumber, or authorize the issuance, sale, pledge,
disposition, grant, transfer, lease, license, guarantee or encumbrance
of, (i) any shares of capital stock of the Company or any Company
Subsidiary of any class, or securities convertible or exchangeable or
exercisable for any shares of such capital stock, or any options,
warrants or other rights of any kind to acquire any shares of such
capital stock or such convertible or exchangeable securities, or any
other ownership interest (including, without limitation,
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35
any phantom interest), of the Company or any Company Subsidiary or (ii)
except in the ordinary course of business and in a manner consistent
with past practice, any property or assets of the Company or any
Company Subsidiary, except (A) the issuance of Company Common Stock
upon the exercise of Company Options, (B) pursuant to contracts or
agreements in force at the date of this Agreement (C) sales, transfers
or dispositions of receivables in connection with the securitization of
such receivables or (D) in the ordinary course pursuant to the
Company's Employee Stock Purchase Plan or the stock fund under the
Company's Profit Sharing Plan;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock (other than dividends paid by
Company Subsidiaries to the Company or to other Company Subsidiaries in
the ordinary course) or enter into any agreement with respect to the
voting of its capital stock;
(d) reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its capital stock;
(e) except pursuant to the Company's 1997 capital plan, a copy
of which has been provided to Parent, (i) acquire (including, without
limitation, by merger, consolidation, or acquisition of stock or
assets) any interest in any corporation, partnership, other business
organization, person or any division thereof (other than a wholly-owned
Company Subsidiary) or any assets, other than acquisitions of assets in
the ordinary course of business consistent with past practice and any
other acquisitions for consideration that are not, in the aggregate, in
excess of $10,000,000; (ii) incur any indebtedness for borrowed money
or issue any debt securities or assume, guarantee or endorse, or
otherwise as an accommodation become responsible for, the obligations
of any person for borrowed money, except for indebtedness for borrowed
money incurred in the ordinary course of business and consistent with
past practice or other indebtedness for borrowed money with a maturity
of not more than one year in a principal amount not, in the aggregate,
in excess of $10,000,000; (iii) terminate, cancel or request any
material change in, or agree to any material change in, any Company
Material Contract or enter into any contract or agreement material to
the business, results of operations or financial condition of the
Company and the Company Subsidiaries taken as a whole, in either case
other than in the ordinary course of business, consistent with past
practice; (iv) make or authorize any capital expenditure, other than
capital expenditures that are not, in the aggregate, in excess of
$10,000,000 for the Company and the Company Subsidiaries taken as a
whole; or (v) enter into or amend any contract, agreement, commitment
or arrangement that, if fully performed, would not be permitted under
this Section 5.01(e);
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36
(f) except as set forth in Annex A hereto or as may be
required by contractual commitments or corporate policies with respect
to severance or termination pay in existence on the date hereof as
disclosed in Section 3.09 of the Company Disclosure Schedule or Annex A
hereto: (i) increase the compensation payable or to become payable to
its officers or employees (except for increases in accordance with past
practices in salaries or wages of employees of the Company or any
Company Subsidiary which are not across-the-board increases), (ii)
grant any rights to severance or termination pay to, or enter into any
employment or severance agreement with, any director, officer or other
employee of the Company or any Company Subsidiary, or establish, adopt,
enter into or amend any collective bargaining, bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance
or other plan, agreement, trust, fund, policy or arrangement for the
benefit of any director, officer or employee, except as contemplated by
this Agreement or to the extent required by applicable Law or the terms
of a collective bargaining agreement or (iii) take any affirmative
action to accelerate the vesting of any stock-based compensation;
(g) take any action with respect to accounting policies or
procedures, other than actions in the ordinary course of business and
consistent with past practice or except as required by changes in GAAP;
(h) waive, release, assign, settle or compromise any material
claims or litigation except in the ordinary course of business and
consistent with past practices;
(i) make any tax election or settle or compromise any material
federal, state, local or foreign income tax liability;
(j) take any action that would prevent or impede the Merger
from qualifying (A) for "pooling-of-interests" accounting treatment or
(B) as a reorganization within the meaning of Section 368 of the Code;
(k) take any action that is intended or may reasonably be
expected to result in any of its representations and warranties set
forth in this Agreement being or becoming untrue in any material
respect at any time prior to the Effective Time, or in any of the
conditions to the Merger set forth in Article VII not being satisfied
or in a violation of any provision of this Agreement, except, in every
case, as may be required by applicable law; or
(l) authorize or enter into any formal or informal agreement
or otherwise make any commitment to do any of the foregoing.
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37
SECTION 5.02. Conduct of Business by Parent Pending the
Closing. Parent agrees that, between the date of this Agreement and the
Effective Time, except as set forth in Section 5.02 of the Parent Disclosure
Schedule or as contemplated by any other provision of this Agreement, unless the
Company shall otherwise agree in writing, which agreement shall not be
unreasonably withheld or delayed, (1) the businesses of Parent and the Parent
Subsidiaries shall be conducted only in, and Parent and the Parent Subsidiaries
shall not take any action except in, the ordinary course of business consistent
with past practice and (2) Parent shall use its reasonable best efforts to keep
available the services of such of the current officers, significant employees
and consultants of Parent and the Parent Subsidiaries and to preserve the
current relationships of Parent and the Parent Subsidiaries with such of the
customers, suppliers and other persons with which Parent or any Parent
Subsidiary has significant business relations as Parent deems reasonably
necessary in order to preserve substantially intact its business organization.
By way of amplification and not limitation, except as set forth in Section 5.02
of the Parent Disclosure Schedule or as contemplated by any other provision of
this Agreement, the Board of Directors of Parent shall not (unless required by
applicable Laws or stock exchange regulations) cause or permit Parent or any
Parent Subsidiary to, and shall neither cause nor permit any of Parent's
affiliates (over which it exercises control), or any of their officers,
directors, employees and agents to, between the date of this Agreement and the
Effective Time, directly or indirectly, do, or agree to do, any of the
following, without the prior written consent of the Company, which consent shall
not be unreasonably withheld or delayed:
(a) amend or otherwise change its Certificate of Incorporation
or By-laws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, transfer, lease,
license, guarantee, encumber, or authorize the issuance, sale, pledge,
disposition, grant, transfer, lease, license, guarantee or encumbrance
of, (i) any shares of capital stock of Parent or any Parent Subsidiary
of any class, or securities convertible or exchangeable or exercisable
for any shares of such capital stock, or any options, warrants or other
rights of any kind to acquire any shares of such capital stock or such
convertible or exchangeable securities, or any other ownership interest
(including, without limitation, any phantom interest) of Parent or any
Parent Subsidiary or (ii) except in the ordinary course of business and
in a manner consistent with past practice, any property or assets of
Parent or any Parent Subsidiary, except (A) the issuance of Parent
Common Stock upon the exercise of Parent Options or the conversion or
exchange of Parent Preferred Stock, (B) the award of options in
connection with promotions and new employee hires in the ordinary
course of business and consistent with past practice, (C) pursuant to
contracts or agreements in force at the date of this Agreement or (D)
sales, transfers or dispositions of receivables in connection with the
securitization of such receivables;
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38
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock (except (i) for regular quarterly
cash dividends at a rate not in excess of $.15 per share of Parent
Common Stock, (ii) for cash dividends paid on Parent Preferred Stock in
accordance with its terms and (iii) for dividends paid by any Parent
Subsidiary to Parent or a Parent Subsidiary in the ordinary course) or
enter into any agreement with respect to the voting of its capital
stock;
(d) reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its capital
stock;
(e) except pursuant to the Parent's 1997 capital plan, a copy
of which has been provided to the Company (i) acquire (including,
without limitation, by merger, consolidation, or acquisition of stock
or assets) any interest in any corporation, partnership, other business
organization, person or any division thereof (other than a wholly owned
Parent Subsidiary) or any assets, other than acquisitions of assets in
the ordinary course of business consistent with past practice and any
other acquisitions for consideration that are not, in the aggregate, in
excess of $10,000,000; (ii) incur any indebtedness for borrowed money
or issue any debt securities or assume, guarantee or endorse, or
otherwise as an accommodation become responsible for, the obligations
of any person for borrowed money, except for (A) indebtedness for
borrowed money incurred in the ordinary course of business and
consistent with past practice or in connection with transactions
otherwise permitted under this Section 5.02, (B) indebtedness incurred
to refinance any existing indebtedness of Parent, the Company or any of
their respective subsidiaries in connection with the Merger or (C)
other indebtedness for borrowed money with a maturity of not more than
one year in a principal amount not, in the aggregate, in excess of
$10,000,000; (iii) terminate, cancel or request any material change in,
or agree to any material change in, any Parent Material Contract or,
except in connection with transactions permitted under this Section
5.02(e), enter into any contract or agreement material to the business,
results of operations or financial condition of Parent and the Parent
Subsidiaries taken as a whole, in either case other than in the
ordinary course of business, consistent with past practice; (iv) make
or authorize any capital expenditure, other than capital expenditures
that are not, in the aggregate, in excess of $10,000,000 for Parent and
the Parent Subsidiaries taken as a whole; or (v) enter into or amend
any contract, agreement, commitment or arrangement that, if fully
performed, would not be permitted under this Section 5.02(e);
(f) take any action with respect to accounting policies or
procedures, other than actions in the ordinary course of business and
consistent with past practice or except as required by changes in GAAP;
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39
(g) waive, release, assign, settle or compromise any material
claims or litigation except in the ordinary course of business and
consistent with past practice or where such settlement involves the
payment of amounts which are not material to Parent and the Parent
Subsidiaries taken as a whole;
(h) make any tax election or settle or compromise any material
federal, state, local or foreign income tax liability;
(i) take any action that would prevent or impede the Merger
from qualifying (A) for "pooling-of-interests" accounting treatment or
(B) as a reorganization within the meaning of Section 368 of the Code;
(j) take any action that is intended or may reasonably be
expected to result in any of its representations and warranties set
forth in this Agreement being or becoming untrue in any material
respect at any time prior to the Effective Time, or in any of the
conditions to the Merger set forth in Article VII not being satisfied
or in a violation of any provision of this Agreement, except, in every
case, as may be required by applicable law; or
(k) authorize or enter into any formal or informal agreement
or otherwise make any commitment to do any of the foregoing.
SECTION 5.03. Cooperation. The Company and Parent shall
coordinate and cooperate in connection with (i) the preparation of the
Registration Statement and the Proxy Statement, (ii) determining whether any
action by or in respect of, or filing with, any Governmental Entity is required,
or any actions, consents, approvals or waivers are required to be obtained from
parties to any Parent Material Contracts or Company Material Contracts, in
connection with the consummation of the Merger and (iii) seeking any such
actions, consents, approvals or waivers or making any such filings, furnishing
information required in connection therewith or with the Registration Statement
and the Proxy Statement and timely seeking to obtain any such actions, consents,
approvals or waivers.
SECTION 5.04. Notices of Certain Events. Each of the Company
and Parent shall give prompt notice to the other of (i) any notice or other
communication from any person alleging that the consent of such person is or may
be required in connection with the Merger; (ii) any notice or other
communication from any Governmental Entity in connection with the Merger; (iii)
any actions, suits, claims, investigations or proceedings commenced or
threatened in writing against, relating to or involving or otherwise affecting
the Company, any Company Subsidiary, Parent or any Parent Subsidiary that relate
to the consummation of the Merger; (iv) the occurrence of a default or event
that, with notice or lapse of time or both, will become a material default under
any Parent Material Contract or Company Material Contract; and (v) any change
that is reasonably likely to result in any Parent
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40
Material Adverse Effect or a Company Material Adverse Effect or is likely to
delay or impede the ability of either Parent or the Company to consummate the
transactions contemplated by this Agreement or to fulfill its obligations set
forth herein.
SECTION 5.05. Contractual Consents. Prior to or at the
Effective Time, each of the Company and Parent shall use its reasonable best
efforts to obtain any consents necessary such that the Merger will not
constitute a change of control, or any similar event, which constitutes a
default (or an event which with notice or lapse of time or both would become a
default) under any material contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which it or any of its
subsidiaries is a party.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Registration Statement; Proxy Statement. (a) As
promptly as practicable after the execution of this Agreement, (i) Parent and
the Company shall prepare and file with the SEC a joint proxy statement relating
to the meetings of the Company's stockholders and Parent's stockholders to be
held in connection with the Merger (together with any amendments thereof or
supplements thereto, the "Proxy Statement") and (ii) Parent shall prepare and
file with the SEC a registration statement on Form S-4 (together with all
amendments thereto, the "Registration Statement") in which the Proxy Statement
shall be included as a prospectus, in connection with the registration under the
Securities Act of the shares of Parent Common Stock to be issued to the
stockholders of the Company pursuant to the Merger. Each of Parent and the
Company will use all reasonable efforts to cause the Registration Statement to
become effective as promptly as practicable, and, prior to the effective date of
the Registration Statement, Parent shall take all or any action required under
any applicable federal or state securities laws in connection with the issuance
of shares of Parent Common Stock in the Merger. Each of Parent and the Company
shall furnish all information concerning it and the holders of its capital stock
as the other may reasonably request in connection with such actions and the
preparation of the Registration Statement and Proxy Statement. As promptly as
practicable after the Registration Statement shall have become effective, each
of Parent and the Company shall mail the Proxy Statement to its respective
stockholders. The Proxy Statement shall include the recommendation of the Board
of Directors of each of Parent and the Company in favor of the Merger, unless
otherwise required by the applicable fiduciary duties of the respective
directors of Parent and the Company, as determined by such directors in good
faith after consultation with independent legal counsel (who may be such party's
regularly engaged independent legal counsel). No modification or withdrawal of
such recommendation shall relieve either party of its obligation to submit this
Agreement and the transactions contemplated hereby to their respective
stockholders in accordance with applicable law.
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No amendment or supplement to the Proxy Statement or the
Registration Statement will be made by Parent or the Company without the
approval of the other party (which approval shall not be unreasonably withheld
or delayed). Parent and the Company each will advise the other, promptly after
it receives notice thereof, of the time when the Registration Statement has
become effective or any supplement or amendment has been filed, the issuance of
any stop order, the suspension of the qualification of the Parent Common Stock
issuable in connection with the Merger for offering or sale in any jurisdiction,
or any request by the SEC for amendment of the Proxy Statement or the
Registration Statement or comments thereon and responses thereto or requests by
the SEC for additional information.
(b) The information supplied by Parent for inclusion in the
Registration Statement and the Proxy Statement shall not, at (i) the time the
Registration Statement is declared effective, (ii) the time the Proxy Statement
(or any amendment thereof or supplement thereto) is first mailed to the
stockholders of Parent and the Company, (iii) the time of each of the
Stockholders' Meetings (as defined below), and (iv) the Effective Time, 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 not misleading. If at any time prior to the Effective Time any event or
circumstance relating to Parent or any Parent Subsidiary, or their respective
officers or directors, should be discovered by Parent which should be set forth
in an amendment or a supplement to the Registration Statement or Proxy
Statement, Parent shall promptly inform the Company. All documents that the
Company is responsible for filing with the SEC in connection with the
transactions contemplated herein will comply as to form and substance in all
material aspects with the applicable requirements of the Securities Act and the
rules and regulations thereunder and the Exchange Act and the rules and
regulations thereunder.
(c) The information supplied by the Company for inclusion in
the Registration Statement and the Proxy Statement shall not, at (i) the time
the Registration Statement is declared effective, (ii) the time the Proxy
Statement (or any amendment thereof or supplement thereto) is first mailed to
the stockholders of the Company and Parent, (iii) the time of each of the
Stockholders' Meetings, and (iv) the Effective Time, 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 not
misleading. If at any time prior to the Effective Time any event or circumstance
relating to the Company or any Company Subsidiary, or their respective officers
or directors, should be discovered by the Company which should be set forth in
an amendment or a supplement to the Registration Statement or Proxy Statement,
the Company shall promptly inform Parent. All documents that Parent is
responsible for filing with the SEC in connection with the transactions
contemplated herein will comply as to form and substance in all material
respects with the applicable requirements of the Securities Act and the rules
and regulations thereunder and the Exchange Act and the rules and regulations
thereunder.
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SECTION 6.02. Stockholders' Meetings. The Company shall call
and hold a meeting of its stockholders (the "Company Meeting") and Parent shall
call and hold a meeting of its stockholders (the "Parent Meeting" and, together
with the Company Meeting, the "Stockholders' Meetings") as promptly as
practicable for the purpose of voting upon the approval of the Merger, and
Parent and the Company shall use their best efforts to hold the Stockholders'
Meetings on the same day and as soon as practicable after the date on which the
Registration Statement becomes effective.
SECTION 6.03. Access to Information; Confidentiality. (a)
Except as required pursuant to any confidentiality agreement or similar
agreement or arrangement to which the Company or Parent or any of their
respective subsidiaries is a party or pursuant to applicable Law or the
regulations or requirements of any stock exchange or other regulatory
organization with whose rules the parties are required to comply, from the date
of this Agreement to the Effective Time, the Company and Parent shall (and shall
cause their respective subsidiaries to): (i) provide to the other (and its
officers, directors, employees, accountants, consultants, legal counsel, agents
and other representatives, collectively, "Representatives") access at reasonable
times upon prior notice to the officers, employees, agents, properties, offices
and other facilities of the other and its subsidiaries and to the books and
records thereof and (ii) furnish promptly such information concerning the
business, properties, contracts, assets, liabilities, personnel and other
aspects of the other party and its subsidiaries as the other party or its
Representatives may reasonably request. No investigation conducted pursuant to
this Section 6.03 shall affect or be deemed to modify any representation or
warranty made in this Agreement.
(b) The parties shall comply with, and shall cause their
respective Representatives to comply with, all of their respective obligations
under the Confidentiality Agreement dated March 24, 1997 between the Company and
Parent and the Confidentiality Agreement dated March 24, 1997 between Parent and
the Company (collectively, the "Confidentiality Agreements") with respect to the
information disclosed pursuant to this Section 6.03.
SECTION 6.04. No Solicitation of Transactions. (a) Each of the
Company and Parent will not, directly or indirectly, and will instruct its
officers, directors, employees, subsidiaries, affiliates, agents or advisors or
other representatives (including, without limitation, any investment banker,
attorney or accountant retained by it) not to, directly or indirectly, take any
action to (i) solicit, initiate or knowingly encourage (including by way of
furnishing nonpublic information), or take any other action knowingly to
facilitate, any inquiries or the making of any proposal or offer (including,
without limitation, any proposal or offer to its stockholders or shareholders,
as the case may be) that constitutes, or may reasonably be expected to lead to,
any Competing Transaction, (ii) enter into or maintain or participate in any way
in discussions or negotiate with any person or entity in furtherance of such
inquiries or to obtain a Competing Transaction, or (iii) agree to or approve,
recommend
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43
or endorse any Competing Transaction, or authorize or permit any of the
officers, directors, employees or affiliates of such party or any of its
subsidiaries, or any investment banker, financial advisor, attorney, accountant
or other representative retained by such party or any of such party's
subsidiaries, to take any such action. The Company shall notify Parent and
Parent shall notify the Company promptly if any proposal or offer, or any
inquiry or contact with any person with respect thereto, regarding a Competing
Transaction is made. The Company and Parent shall cease immediately and cause to
be terminated any and all existing discussions or negotiations with any parties
conducted heretofore with respect to a Competing Transaction and promptly
request that all confidential information furnished on behalf of the Company or
Parent be returned. Each of the Company and Parent agrees not to release any
third party from, or waive any provision of, any confidentiality or standstill
agreement to which it is a party.
(b) Notwithstanding anything to the contrary in Section
6.04(a), the Board of Directors of each of the Company and Parent may cause
Parent or the Company to furnish, pursuant to a customary confidentiality
agreement the terms of which, if more favorable to the other party to such
confidentiality agreement than those in place with the other party hereto shall
be extended to the other party hereto, information to, and may participate in
discussions or negotiations with, any person that, unsolicited by it after the
day of the signing of this Agreement, has submitted a written proposal to it
relating to a Competing Transaction which was not solicited by it or which did
not otherwise result from a breach of Section 6.05(a), to the extent that (i)
such proposal is received prior to the obtaining of the approval of the
Company's stockholders, in the case of the Company, or the shareholders of
Parent, in the case of Parent, and (ii) the Board of the Company or Parent (as
applicable) determines in good faith that the failure to do so would cause it to
breach its fiduciary duties to the Company or its stockholders or Parent or its
shareholders under applicable Laws after receipt of advice to such effect from
independent legal counsel (who may be such party's regularly engaged independent
legal counsel). Such furnishing of information and participation in discussions
or negotiations in accordance with this Section 6.05(b) shall not constitute a
breach of this Agreement by such party; provided that neither the Company nor
Parent shall have any right to terminate this Agreement or otherwise cease
performance of its obligations hereunder except pursuant to Article VIII hereof.
(c) A "Competing Transaction" with respect to the Company or
Parent, respectively, means any of the following involving the Company or
Parent, respectively, other than the Merger any proposed (i) merger,
consolidation, share exchange, business combination or other similar transaction
involving such party (ii) sale, lease, exchange transfer or other disposition
directly or indirectly of 25% or more of the consolidated assets of such party
and its subsidiaries, taken as a whole, or (iii) transaction in which any person
shall acquire beneficial ownership (as such term is defined in Rule 13d-3 under
the Exchange Act), or the right to acquire beneficial ownership of, or any
"group" (as such term is defined under the Exchange Act) shall have been formed
which beneficially owns or has the right to
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44
acquire beneficial ownership of, 25% or more of the outstanding voting capital
stock of the Company or Parent, respectively.
SECTION 6.05. Appropriate Action; Consents; Filings. (a) (i)
The Company and Parent shall use their best efforts to (A) take, or cause to be
taken, all appropriate action, and do, or cause to be done, all things
necessary, proper or advisable under applicable Law or otherwise to consummate
and make effective the transactions contemplated by this Agreement as promptly
as practicable, (B) obtain from any Governmental Entities any consents,
licenses, permits, waivers, approvals, authorizations or orders required to be
obtained or made by Parent or the Company or any of their subsidiaries, or to
avoid any action or proceeding by any Governmental Entity (including, without
limitation, those in connection with the HSR Act), in connection with the
authorization, execution and delivery of this Agreement and the consummation of
the transactions contemplated herein, including, without limitation, the Merger,
and (iii) make all necessary filings, and thereafter make any other required
submissions, with respect to this Agreement and the Merger required under (x)
the Securities Act and the Exchange Act, and any other applicable federal or
state securities Laws, (y) the HSR Act and (z) any other applicable Law;
provided that Parent and the Company shall cooperate with each other in
connection with the making of all such filings, including providing copies of
all such documents to the non-filing party and its advisors prior to filing and,
if requested, to accept all reasonable additions, deletions or changes suggested
in connection therewith. The Company and Parent shall furnish to each other all
information required for any application or other filing to be made pursuant to
the rules and regulations of any applicable Law (including all information
required to be included in the Proxy Statement and the Registration Statement)
in connection with the transactions contemplated by this Agreement. The Company
and Parent shall not take any action, or refrain from taking any action, the
effect of which would be to delay or impede the ability of the Company and
Parent to consummate the transactions contemplated by this Agreement.
(ii) Each of the parties hereto agrees, and shall cause each
of its respective subsidiaries to cooperate and to use their respective best
efforts to obtain any government clearances required for completion of the
transactions (including through compliance with the HSR Act and any applicable
foreign governmental reporting requirements), to respond to any government
requests for information, and to contest and resist any action, including any
legislative, administrative or judicial action, and to have vacated, lifted,
reversed or overturned any decree, judgment, injunction or other order (whether
temporary, preliminary or permanent) (an "Order") that restricts, prevents or
prohibits the consummation of the Merger or any other transactions contemplated
by this Agreement, including, without limitation, by vigorously pursuing all
available avenues of administrative and judicial appeal and all available
legislative action. Each of the parties hereto also agrees to take any and all
of the following actions to the extent necessary to obtain the approval of any
Governmental Entity with jurisdiction over the enforcement of any applicable
laws regarding the Merger:
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entering into negotiations; providing information; substantially complying with
any second request for information pursuant to the HSR Act; making proposals;
entering into and performing agreements or submitting to judicial or
administrative orders; selling or otherwise disposing of, or holding separate
(through the establishment of a trust or otherwise) particular assets or
categories of assets, or businesses of Parent, the Company or any of their
respective subsidiaries; and withdrawing from doing business in a particular
jurisdiction. The parties hereto will consult and cooperate with one another,
and consider in good faith the views of one another, in connection with any
analyses, appearances, presentations, memoranda, briefs, arguments, opinions and
proposals made or submitted by or in behalf of any party hereto in connection
with proceedings under or relating to the HSR Act or any other federal, state or
foreign antitrust or fair trade law. Each party shall promptly notify the other
party of any communication to that party from any Governmental Entity in
connection with any required filing with, or approval or review by, such
Governmental Entity in connection with the Merger and permit the other party to
review in advance any such proposed communication to any Governmental Entity.
Neither party shall agree to participate in any meeting with any Governmental
Entity in respect of any such filings, investigation or other inquiry unless it
consults with the other party in advance and, to the extent permitted by such
Governmental Entity, gives the other party the opportunity to attend and
participate thereat. Notwithstanding any other provision of this Agreement, in
connection with seeking any such approval of a Governmental Entity, neither
party shall, without the other party's prior written consent (which shall not be
unreasonably withheld), commit to any divestiture transaction and neither party
shall be required to agree to sell or hold separate and agree to sell, before or
after the Effective Time, any of the Company's or Parent's businesses, product
lines, properties or assets, or agree to any changes or restrictions in the
operation of such businesses, product lines, properties or assets, if such
divestiture or such restrictions would, individually or in the aggregate,
materially adversely affect the financial condition or results of operations of
the Surviving Corporation.
(b) (i) The Company and Parent shall give (or shall cause
their respective subsidiaries to give) any notices to third parties, and use,
and cause their respective subsidiaries to use, all reasonable efforts to obtain
any third party consents, (A) necessary, proper or advisable to consummate the
transactions contemplated in this Agreement, (B) disclosed or required to be
disclosed in the Company Disclosure Schedule or the Parent Disclosure Schedule,
as the case may be, or (C) required to prevent a Company Material Adverse Effect
from occurring prior to or after the Effective Time or a Parent Material Adverse
Effect from occurring after the Effective Time.
(ii) In the event that either party shall fail to obtain any
third party consent described in subsection (b)(i) above, such party shall use
all reasonable efforts, and shall take any such actions reasonably requested by
the other party hereto, to minimize any adverse effect upon the Company and
Parent, their respective subsidiaries, and their respective
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46
businesses resulting, or which could reasonably be expected to result after the
Effective Time, from the failure to obtain such consent.
(c) From the date of this Agreement until the Effective Time,
the Company shall promptly notify Parent in writing of any pending or, to the
knowledge of the Company, threatened action, proceeding or investigation by any
Governmental Entity or any other person (i) challenging or seeking material
damages in connection with the Merger or the conversion of Company Common Stock
into Parent Common Stock pursuant to the Merger or (ii) seeking to restrain or
prohibit the consummation of the Merger or otherwise limit the right of Parent
or, to the knowledge of the Company, its subsidiaries to own or operate all or
any portion of the businesses or assets of the Company or its subsidiaries,
which in either case is reasonably likely to have a Company Material Adverse
Effect prior to or after the Effective Time, or a Parent Material Adverse Effect
after the Effective Time.
SECTION 6.06. Pooling. (a) From and after the date hereof and
until the Effective Time, none of Parent, Merger Sub, the Company, or any of
their respective subsidiaries or other affiliates over which they exercise
control, shall knowingly take any action, or knowingly fail to take any action,
that is reasonably likely to jeopardize the treatment of the Merger as a
"pooling of interests" for accounting purposes. Between the date of this
Agreement and the Effective Time, each of Parent, Merger Sub and the Company
shall take all reasonable actions necessary to cause the Merger to be
characterized as a pooling of interests for accounting purposes if such a
characterization shall be jeopardized by action taken by Parent, Merger Sub or
the Company prior to the Effective Time.
(b) Parent shall cause financial results covering the first
full month of post-Merger combined operations to be published within 90 days
after the Effective Time.
SECTION 6.07. Letters of Accountants. (a) The Company shall
use its best efforts to cause to be delivered to Parent "cold comfort" letters
of Arthur Andersen, LLP, its independent public accountant, dated the date on
which the Registration Statement shall become effective and as of the Effective
Time, respectively, and addressed to Parent, in form and substance reasonably
satisfactory to Parent and reasonably customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement and transactions
such as those contemplated by this Agreement.
(b) Parent shall use its best efforts to cause to be delivered
to the Company "cold comfort" letters of Coopers & Lybrand, L.L.P., its
independent public accountant, dated the date on which the Registration
Statement shall become effective and as of the Effective Time, respectively, and
addressed to the Company, in form and substance reasonably satisfactory to the
Company and reasonably customary in scope and substance for
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47
letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement and transactions
such as those contemplated by this Agreement.
SECTION 6.08. Update Disclosure; Breaches. From and after the
date of this Agreement until the Effective Time, each party hereto shall
promptly notify the other party hereto by written update to its Disclosure
Schedule of (i) the occurrence, or non-occurrence, of any event that would be
likely to cause any condition to the obligations of any party to effect the
Merger and the other transactions contemplated by this Agreement not to be
satisfied, or (ii) the failure of the Company or Parent, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it pursuant to this Agreement which would be likely to result in
any condition to the obligations of any party to effect the Merger and the other
transactions contemplated by this Agreement not to be satisfied; provided,
however, that the delivery of any notice pursuant to this Section 6.08 shall not
cure any breach of any representation or warranty requiring disclosure of such
matter prior to the date of this Agreement or otherwise limit or affect the
remedies available hereunder to the party receiving such notice.
SECTION 6.09. Pooling Affiliates. (a) Not less than 45 days
prior to the Effective Time, the Company shall deliver to Parent a list of names
and addresses of each person who, in the Company's reasonable judgment is an
affiliate within the meaning of Rule 145 of the rules and regulations
promulgated under the Securities Act or otherwise applicable SEC accounting
releases with respect to pooling-of-interests accounting treatment (each such
person, a "Pooling Affiliate") of the Company. The Company shall provide Parent
such information and documents as Parent shall reasonably request for purposes
of reviewing such list. The Company shall deliver or cause to be delivered to
Parent, not later than 30 days prior to the Effective Time, an affiliate letter
in the form attached hereto as Exhibit 6.09(a), executed by each of the Pooling
Affiliates of the Company identified in the foregoing list. Parent shall be
entitled to place legends as specified in such affiliate letters on the
certificates evidencing any of the Parent Common Stock to be received by such
Pooling Affiliates pursuant to the terms of this Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for the Parent
Common Stock, consistent with the terms of such Letters.
(b) Not less than 45 days prior to the Effective Time, Parent
shall deliver to the Company a list of names and addresses of each person who,
in Parent's reasonable judgment is a Pooling Affiliate of Parent. Parent shall
provide the Company such information and documents as the Company shall
reasonably request for purposes of reviewing such list. Parent shall deliver or
cause to be delivered to the Company, not later than 30 days prior to the
Effective Time, an affiliate letter in the form attached hereto as Exhibit
6.09(b), executed by each of the Pooling Affiliates of Parent identified in the
foregoing list.
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SECTION 6.10. Public Announcements. Parent and the Company
shall consult with each other before issuing any press release or otherwise
making any public statements with respect to the Merger and shall not issue any
such press release or make any such public statement prior to such consultation,
except as may be required by Law or any listing agreement with the NYSE or the
National Association of Securities Dealers, Inc.
SECTION 6.11. NYSE Listing. Parent shall promptly prepare and
submit to the NYSE a listing application covering the shares of Parent Common
Stock to be issued in the Merger, and shall use all reasonable efforts to cause
such shares to be approved for listing on the NYSE, subject to official notice
of issuance, prior to the Effective Time.
SECTION 6.12. Employee Matters. Annex A hereto sets forth
certain additional agreements among the parties hereto with respect to employee
benefit matters and is hereby incorporated herein by reference.
SECTION 6.13. [Intentionally Omitted]
SECTION 6.14. Indemnification of Directors and Officers. (a)
Parent and the Surviving Corporation agree that the indemnification obligations
set forth in the Company's Certificate and the Company's By-laws, in each case
as of the date of this Agreement, shall survive the Merger (and, prior to the
Effective Time, Parent shall cause the Certificate of Incorporation and By-laws
of Merger Sub to reflect such provisions) and shall not be amended, repealed or
otherwise modified for a period of six years after the Effective Time in any
manner that would adversely affect the rights thereunder of the individuals who
on or prior to the Effective Time were directors, officers, employees or agents
of the Company or its subsidiaries.
(b) The Company shall, to the fullest extent permitted under
applicable Law and regardless of whether the Merger becomes effective, indemnify
and hold harmless, and, after the Effective Time, Parent and the Surviving
Corporation shall, to the fullest extent permitted under applicable Law,
indemnify and hold harmless, each present and former director, officer, trustee,
fiduciary, employee or agent of the Company and each Company Subsidiary and each
such person who served at the request of the Company or any Company Subsidiary
as a director, officer, trustee, partner, fiduciary, employee or agent of
another corporation, partnership, joint venture, trust, pension or other
employee benefit plan or enterprise (collectively, the "Indemnified Parties")
against all costs and expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages, liabilities and settlement amounts
paid in connection with any claim, action, suit, proceeding or investigation
(whether arising before or after the Effective Time), whether civil,
administrative or investigative, arising out of or pertaining to any action or
omission in their capacity as an officer or director, in each case occurring
before the Effective Time (including the transactions contemplated by this
Agreement). Without limiting the foregoing, in the
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49
event of any such claim, action, suit, proceeding or investigation, (i) the
Company or Parent and the Surviving Corporation, as the case may be, shall pay
the fees and expenses of counsel selected by any Indemnified Party, which
counsel shall be reasonably satisfactory to the Company or to Parent and the
Surviving Corporation, as the case may be, promptly after statements therefor
are received (unless the Surviving Corporation shall elect to defend such
action) and (ii) the Company and Parent and the Surviving Corporation shall
cooperate in the defense of any such matter.
(c) For six years from the Effective Time, the Surviving
Corporation shall use its best efforts to provide to the Company's current
directors and officers liability insurance protection of the same kind and scope
as that provided by the Company's directors' and officers' liability insurance
policies (copies of which have been made available to Parent); provided,
however, that in no event shall Parent be required to expend more than 200% of
the current amount expended by the Company (the "Insurance Amount") to maintain
or procure insurance coverage pursuant hereto and further provided that if
Parent is unable to maintain or obtain the insurance called for by this Section
6.14(c), Parent shall use its best efforts to obtain as much comparable
insurance as available for the Insurance Amount.
(d) In the event the Company or the Surviving Corporation or
any of their respective successors or assigns (i) consolidates with or merges
into any other person or shall not be the continuing or surviving corporation or
entity in such consolidation or merger or (ii) transfers all or substantially
all its properties and assets to any person, then, and in each case, proper
provision shall be made so that the successors and assigns of the Company or the
Surviving Corporation, as the case may be, honor the indemnification obligations
set forth in this Section 6.14.
(e) The obligations of the Company, the Surviving Corporation,
and Parent under this Section 6.14 shall not be terminated or modified in such a
manner as to adversely affect any director, officer, employee, agent or other
person to whom this Section 6.14 applies without the consent of such affected
director, officer, employees, agents or other persons (it being expressly agreed
that each such director, officer, employee, agent or other person to whom this
Section 6.14 applies shall be third-party beneficiaries of this Section 6.14).
SECTION 6.15. Plan of Reorganization. The Agreement is
intended to constitute a "plan of reorganization" within the meaning of section
1.368-2(g) of the income tax regulations promulgated under the Code. From and
after the date hereof and until the Effective Time, each party hereto shall use
its reasonable best efforts to cause the Merger to qualify, and will not
knowingly take any actions or cause any actions to be taken which could prevent
the Merger from qualifying, as a reorganization under the provisions of section
368(a) of the Code. Following the Effective Time, neither the Surviving
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50
Corporation, Parent nor any of their affiliates shall knowingly take any action
or knowingly cause any action to be taken which would cause the Merger to fail
to qualify as a reorganization under section 368(a) of the Code.
SECTION 6.16. Headquarters. As promptly as reasonably
practicable after the Effective Time, Parent shall cause its executive
headquarters to be relocated to the Chicago, Illinois area.
SECTION 6.17. Obligations of Merger Sub. Parent shall take all
action necessary to cause Merger Sub to perform its obligations under this
Agreement and to consummate the Merger on the terms and conditions set forth in
this Agreement.
ARTICLE VII
CLOSING CONDITIONS
SECTION 7.01. Conditions to Obligations of Each Party Under
This Agreement. The respective obligations of each party to effect the Merger
and the other transactions contemplated herein shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions, any
or all of which may be waived, in whole or in part, to the extent permitted by
applicable Law:
(a) Effectiveness of the Registration Statement. The
Registration Statement shall have been declared effective by the SEC
under the Securities Act. No stop order suspending the effectiveness of
the Registration Statement shall have been issued by the SEC and no
proceedings for that purpose shall have been initiated or, to the
knowledge of Parent or the Company, threatened by the SEC.
(b) Stockholder Approval. This Agreement and the Merger shall
have been approved and adopted by the requisite vote of the
stockholders of the Company and the matters specified in Section 4.04
shall have been approved by the requisite affirmative vote of the
Parent Common Stock and the Series P Preferred Stock.
(c) No Order. No Governmental Entity or federal or state court
of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive order,
decree, judgment, injunction or other order (whether temporary,
preliminary or permanent), in any case which is in effect and which
prevents or prohibits consummation of the Merger or any other
transactions contemplated in this Agreement; provided, however, that
the parties shall use their best efforts to cause any such decree,
judgment, injunction or other order to be vacated or lifted.
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51
(d) Consents and Approvals. All consents, approvals and
authorizations set forth in Section 3.05 or 4.05 or the related
sections of the Company Disclosure Schedule or the Parent Disclosure
Schedule required to be obtained to consummate the Merger shall have
been obtained, except for such consents, approvals and authorizations
the failure of which to obtain would not have a Company Material
Adverse Effect or a Parent Material Adverse Effect after the Effective
Time.
(e) HSR Act. The applicable waiting period, together with any
extensions thereof, under the HSR Act shall have expired or been
terminated.
(f) NYSE. The shares of Parent Common Stock issuable to the
Company's stockholders in the Merger shall have been approved for
listing on the NYSE, subject to official notice of issuance.
SECTION 7.02. Additional Conditions to Obligations of Parent
and Merger Sub. The obligations of Parent and Merger Sub to effect the Merger
and the other transactions contemplated herein are also subject to the following
conditions:
(a) Representations and Warranties. Each of the
representations and warranties of the Company contained in this
Agreement, without giving effect to any update to the Company
Disclosure Schedule under Section 6.08, shall be true and correct in
all material respects (except that where any statement in a
representation or warranty expressly includes a standard of
materiality, such statement shall be true and correct in all respects
giving effect to such standard) as of the Effective Time as though made
on and as of the Effective Time, except that those representations and
warranties which address matters only as of a particular date shall
remain true and correct in all material respects (except that where any
statement in a representation or warranty expressly includes a standard
of materiality, such statement shall be true and correct in all
respects giving effect to such standard) as of such date. Parent shall
have received a certificate of the Chief Executive Officer or Chief
Financial Officer of the Company to that effect.
(b) Agreements and Covenants. The Company shall have performed
or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or
prior to the Effective Time. Parent shall have received a certificate
of the Chief Executive Officer or Chief Financial Officer of the
Company to that effect.
(c) Tax Opinion. Parent shall have received the opinion of
Wachtell, Lipton, Rosen & Katz, special counsel to Parent, in form and
substance reasonably satisfactory to Parent, based upon facts,
representations and assumptions set forth in such opinion which are
consistent with the state of facts existing at the Effective
<PAGE>
52
Time, to the effect that (i) the Merger will be treated for federal
income tax purposes as a reorganization qualifying under the provisions
of Section 368(a) of the Code, and Parent, Merger Sub and the Company
will each be a party to the reorganization, (ii) no gain or loss will
be recognized by Parent, Merger Sub or the Company as a result of the
Merger, and (iii) no gain or loss will be recognized by the
stockholders of the Company who exchange their Company Common Stock
solely for Parent Common Stock pursuant to the Merger (except with
respect to cash received in lieu of a fractional share interest), dated
the date of the Effective Time, which opinion shall be reasonably
satisfactory in form and substance to the Parent. In rendering such
opinion, counsel may require and rely upon representations contained in
certificates of officers of Parent, the Company and certain
stockholders of Parent and the Company.
(d) Accountant Letters. Parent shall have received from the
Company "cold comfort" letters of Arthur Andersen, LLP, dated the date
on which the Registration Statement shall become effective and the
Effective Time, respectively, and addressed to Parent, in form and
substance satisfactory to Parent, and reasonably customary in scope and
substance for letters delivered by independent public accountants in
connection with registration statements similar to the Registration
Statement and transactions such as those contemplated by this
Agreement.
(e) Pooling Opinion. Parent shall have received the opinion of
Coopers & Lybrand, L.L.P., dated as of the date on which the
Registration Statement shall become effective and the Effective Time,
to the effect that the Merger qualifies for pooling-of-interests
accounting treatment if consummated in accordance with this Agreement.
SECTION 7.03. Additional Conditions to Obligations of the
Company. The obligation of the Company to effect the Merger and the other
transactions contemplated in this Agreement is also subject to the following
conditions:
(a) Representations and Warranties. Each of the
representations and warranties of Parent contained in this Agreement,
without giving effect to any update to the Parent Disclosure Schedule
under Section 6.08, shall be true and correct in all material respects
(except that where any statement in a representation or warranty
expressly includes a standard of materiality, such statement shall be
true and correct in all respects giving effect to such standard) as of
the Effective Time as though made on and as of the Effective Time,
except that those representations and warranties which address matters
only as of a particular date shall remain true and correct in all
material respects (except that where any statement in a representation
or warranty expressly includes a standard of materiality, such
statement shall be true and correct in all respects giving effect to
such standard) as of such date. The Company shall
<PAGE>
53
have received a certificate of the Chief Executive Officer or Chief
Financial Officer of Parent to that effect.
(b) Agreements and Covenants. Parent shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or
prior to the Effective Time. The Company shall have received a
certificate of the Chief Executive Officer or Chief Financial Officer
of Parent to that effect.
(c) Employment Agreements. Parent shall have proffered
executed employment agreements to (i) Michael T. Riordan substantially
in the form attached to Annex A as Exhibit A and (ii) each of the
individuals listed on Schedule I to Exhibit B to Annex A substantially
in the form attached as Exhibit C to Annex A or, if applicable,
substantially on the terms described on Exhibit B to Annex A.
(d) Registration Rights Agreement. Parent shall have executed
and delivered a Registration Rights Agreement substantially in the form
of Exhibit 7.03(d) attached hereto with such changes thereto as the
Stockholders (as defined therein) shall reasonably request, which
changes shall be reasonably satisfactory to Parent.
(e) Stockholders Agreement. Parent shall have executed and
delivered a Stockholders Agreement substantially in the form of
Exhibit 7.03(e) attached hereto.
(f) Tax Opinion. The Company shall have received the opinion
of Shearman & Sterling, in form and substance reasonably satisfactory
to the Company based upon facts, representations and assumptions set
forth in such opinion which are consistent with the state of facts
existing at the Effective Time, to the effect that (i) the Merger will
be treated for federal income tax purposes as a reorganization
qualifying under the provisions of section 368(a) of the Code, and
Parent, Merger Sub and the Company will each be a party to the
reorganization, (ii) no gain or loss will be recognized by Parent,
Merger Sub or the Company as a result of the Merger, and (iii) no gain
or loss will be recognized by the stockholders of the Company who
exchange their Company Common Stock solely for Parent Common Stock
pursuant to the Merger (except with respect to cash received in lieu of
a fractional share interest), dated the date of the Effective Time. In
rendering such opinion, counsel may require and rely upon
representations contained in certificates of officers of Parent, the
Company and certain stockholders of Parent and the Company.
(g) Accountant Letters. The Company shall have received from
Parent "cold comfort" letters of Coopers & Lybrand, L.L.P., dated the
date on which the Registration Statement shall become effective and the
Effective Time, respectively, and addressed to the Company, in form and
substance satisfactory to the Company,
<PAGE>
54
and reasonably customary in scope and substance for letters delivered
by independent public accountants in connection with registration
statements similar to the Registration Statement and transactions such
as those contemplated by this Agreement.
(h) Pooling Opinion. The Company shall have received the
opinion of Arthur Andersen LLP, dated as of the date on which the
Registration Statement shall become effective and the Effective Time,
to the effect that the Merger qualifies for pooling-of-interests
accounting treatment if consummated in accordance with this Agreement.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated at
any time prior to the Effective Time, whether before or after approval of this
Agreement and the Merger by the stockholders of the Company and Parent:
(a) by mutual consent of Parent and the Company;
(b) (i) by Parent (provided that Parent is not then in
material breach of any representation, warranty, covenant or other
agreement contained herein), if there has been a breach by the Company
of any of its representations, warranties, covenants or agreements
contained in this Agreement, or any such representation and warranty
shall have become untrue, in any such case such that Section 7.02(a) or
Section 7.02(b) will not be satisfied and such breach or condition has
not been promptly cured within 30 days following receipt by the Company
of written notice of such breach;
(ii) by the Company (provided that the Company is not then in
material breach of any representation, warranty, covenant or other
agreement contained herein), if there has been a breach by Parent of
any of its representations, warranties, covenants or agreements
contained in this Agreement, or any such representation and warranty
shall have become untrue, in any such case such that Section 7.03(a) or
Section 7.03(b) will not be satisfied and such breach or condition has
not been promptly cured within 30 days following receipt by Parent of
written notice of such breach;
(c) by either Parent or the Company if any decree, permanent
injunction, judgment, order or other action by any court of competent
jurisdiction or any Governmental Entity preventing or prohibiting
consummation of the Merger shall have become final and nonappealable;
<PAGE>
55
(d) by either Parent or the Company if the Merger shall not
have been consummated before December 31, 1997, unless the failure of
the Closing to occur by such date shall be due to the failure of the
party seeking to terminate this Agreement to perform or observe in all
material respects the covenants and agreements of such party set forth
herein; provided, however, that this Agreement may be extended not more
than 60 days by Parent or the Company by written notice to the other
party if the Merger shall not have been consummated as a direct result
of (i) the Company or Parent having failed to receive all regulatory
approvals or consents required to be obtained by the Company or Parent
with respect to the Merger or (ii) the existence of litigation or any
governmental proceeding seeking to prevent or prohibit consummation of
the Merger; or
(e) by either Parent or the Company if the Agreement shall
fail to receive the requisite vote for approval and adoption by the
stockholders of the Company or the stockholders of Parent at the
Stockholders' Meetings or any adjournment or postponement thereof.
SECTION 8.02. Effect of Termination. (a) In the event of the
termination of this Agreement by either the Company or Parent pursuant to
Section 8.01, this Agreement shall forthwith become void, there shall be no
liability under this Agreement on the part of Parent or the Company, other than
the provisions of Section 6.03, this Section 8.02 and Section 8.05, and except
to the extent that such termination results from the wilful and material breach
by a party of any of its representations, warranties, covenants or agreements
set forth in this Agreement.
(b) In the event of termination of this Agreement without
consummation of the transactions contemplated hereby by either party pursuant to
Section 8.01(d) or (e) based upon the Company having failed to receive the
requisite stockholder vote to approve and adopt this Agreement and (i) so long
as at the time of such termination Parent is not in material breach of any
representation, warranty or material covenant contained herein and (ii) if a
Company Trigger Event (as defined herein) shall occur, the Company shall make
payment to Parent (within two business days after notice of demand for payment
following the Company Trigger Event) by wire transfer of immediately available
funds of a breakup fee in the amount of $95,000,000 (the "Company Breakup Fee").
A "Company Trigger Event" shall be deemed to have occurred if, (i) prior to a
vote of the Company's stockholders with respect to this Agreement an Acquisition
Proposal with respect to the Company shall have been made, and (ii) within one
year of termination of this Agreement, (A) the Company shall have entered into a
definitive agreement with a third party providing for the acquisition of the
Company or a majority of the Company's assets or voting securities by such third
party or the consolidation or merger of the Company pursuant to which the
Company's stockholders will hold less than 60% of the outstanding voting
securities of the resulting corporation immediately following consummation of
such transaction or (B) any
<PAGE>
56
third party shall have acquired beneficial ownership of more than 50% of the
outstanding voting securities of the Company.
(c) In the event of termination of this Agreement without
consummation of the transactions contemplated hereby by either party pursuant to
Section 8.01(d) or (e) based upon Parent having failed to receive the requisite
shareholder vote to approve the matters set forth in Section 4.04 and (i) so
long as at the time of such termination the Company is not in material breach of
any representation, warranty or material covenant contained herein and (ii) if a
Parent Trigger Event (as defined herein) shall occur, Parent shall make payment
to the Company (within two business of notice of demand for payment following
the Parent Trigger Event by wire transfer of immediately available funds of a
breakup fee in the amount of $95,000,000 (the "Parent Breakup Fee"). A "Parent
Trigger Event" shall be deemed to have occurred if, (i) prior to a vote of
Parent's shareholders with respect to this Agreement, an Acquisition Proposal
with respect to Parent shall have been made, and (ii) within one year of
termination of this Agreement (A) Parent shall have entered into a definitive
agreement with a third party providing for the acquisition of Parent or a
majority of Parent's assets or voting securities by such third party or the
consolidation or merger of Parent pursuant to which Parent's shareholders will
hold less than 60% of the outstanding voting securities of the resulting
corporation immediately following consummation of such transaction or (B) any
third party shall have acquired beneficial ownership of more than 50% of the
outstanding voting securities of Parent.
SECTION 8.03. Amendment. This Agreement may be amended by the
parties hereto by action taken by or on behalf of their respective Boards of
Directors at any time prior to the Effective Time; provided, however, that,
after approval of the Merger by the stockholders of the Company, no amendment
may be made which would reduce the amount or change the type of consideration
into which each share of Company Common Stock shall be converted pursuant to
this Agreement upon consummation of the Merger. This Agreement may not be
amended except by an instrument in writing signed by the parties hereto.
SECTION 8.04. Waiver. At any time prior to the Effective Time,
any party hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other party hereto, (b) waive any inaccuracies
in the representations and warranties of the other party contained herein or in
any document delivered pursuant hereto and (c) waive compliance by the other
party with any of the agreements or conditions contained herein; provided,
however, that after any approval of the transactions contemplated by this
Agreement by the stockholders of the Company, there may not be, without further
approval of such stockholders, any extension or waiver of this Agreement or any
portion thereof which reduces the amount or changes the form of the
consideration to be delivered to the holders of Company Common Stock hereunder
other than as contemplated by this Agreement. Any such extension or waiver shall
be valid only if set forth in an instrument in
<PAGE>
57
writing signed by the party or parties to be bound thereby, but such extension
or waiver or failure to insist on strict compliance with an obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure.
SECTION 8.05. Fees and Expenses. All expenses incurred by the
parties hereto shall be borne solely and entirely by the party which has
incurred the same; provided, however, that each of Parent and the Company shall
pay one-half of the expenses related to printing, filing and mailing the
Registration Statement and the Proxy Statement and all SEC and other regulatory
filing fees incurred in connection with the Registration Statement and the Proxy
Statement.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations and Warranties.
None of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 9.01 shall not limit any covenant or agreement of the parties
which by its terms contemplates performance after the Effective Time.
SECTION 9.02. Notices. All notices and other communications
given or made pursuant hereto shall be in writing and shall be deemed to have
been duly given or made as of the date delivered, mailed or transmitted, and
shall be effective upon receipt, if delivered personally, mailed by registered
or certified mail (postage prepaid, return receipt requested) to the parties at
the following addresses (or at such other address for a party as shall be
specified by like changes of address) or sent by electronic transmission to the
telecopier number specified below:
(a) If to Parent or Merger Sub, addressed to it at:
120 Tredegar Street
Richmond, VA 23219
Telecopier No.: (804) 343-4609
Attention: Clifford A. Cutchins, IV
With a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
<PAGE>
58
Telecopier No.: (212) 403-2000
Attention: Patricia A. Vlahakis
(b) If to the Company, addressed to it at:
1919 South Broadway
Green Bay, WI 54304
Telecopier No.: (414) 435-3225
Attention: Secretary
With a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Telecopier No.: (212) 848-7179
Attention: Faith D. Grossnickle
SECTION 9.03. Certain Definitions. For purposes of this
Agreement, the term:
(a) "affiliate" means a person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is
under common control with, the first-mentioned person;
(b) "beneficial owner" means with respect to any shares of
Company Common Stock or Parent Common Stock a person who shall be
deemed to be the beneficial owner of such shares (i) which such person
or any of its affiliates or associates beneficially owns, directly or
indirectly, (ii) which such person or any of its affiliates or
associates (as such term is defined in Rule 12b-2 of the Exchange Act)
has, directly or indirectly, (A) the right to acquire (whether such
right is exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or understanding or upon
the exercise of conversion rights, exchange rights, warrants or
options, or otherwise, or (B) the right to vote pursuant to any
agreement, arrangement or understanding, (iii) which are beneficially
owned, directly or indirectly, by any other persons with whom such
person or any of its affiliates or associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of any such shares or (iv) pursuant to Section
13(d) of the Exchange Act and any rules or regulations promulgated
thereunder;
<PAGE>
59
(c) "Business Day" shall mean any day other than a day on
which banks in the State of New York are authorized or obligated to be
closed;
(d) "control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or
as trustee or executor, of the power to direct or cause the direction
of the management or policies of a person, whether through the
ownership of stock or as trustee or executor, by contract or credit
arrangement or otherwise;
(e) "knowledge" will be deemed to be present when the matter
in question was brought to the attention of any executive officer of
Parent or the Company, as the case may be;
(f) "person" means an individual, corporation, limited
liability company, partnership, association, trust, unincorporated
organization, other entity or group (as defined in Section 13(d) of the
Exchange Act);
(g) "subsidiary" or "subsidiaries" of Parent, the Company, the
Surviving Corporation or any other person means any corporation,
partnership, joint venture or other legal entity of which Parent, the
Company, the Surviving Corporation or such other person, as the case
may be (either alone or through or together with any other subsidiary),
owns, directly or indirectly, 50% or more of the stock or other equity
interests the holders of which are generally entitled to vote for the
election of the Board of Directors or other governing body of such
corporation or other legal entity.
SECTION 9.04. Headings. 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.
SECTION 9.05. Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
Law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that transactions contemplated hereby are fulfilled to the
extent possible.
SECTION 9.06. Entire Agreement. This Agreement (together with
the Exhibits, Parent and Company Disclosure Schedules and the other documents
delivered pursuant hereto) and the Confidentiality Agreements constitute the
entire agreement of the
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60
parties and supersede all prior agreements and undertakings, both written and
oral, between the parties, or any of them, with respect to the subject matter
hereof and, except as otherwise expressly provided herein, are not intended to
confer upon any other person any rights or remedies hereunder.
SECTION 9.07. Assignment. This Agreement shall not be assigned
by operation of law or otherwise.
SECTION 9.08. Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto and their
respective successors and assigns, and nothing in this Agreement, express or
implied, other than pursuant to Section 2.04, 6.06(b), 6.12 or 6.14 or the right
to receive the consideration payable in the Merger pursuant to Article II, is
intended to or shall confer upon any other person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement.
SECTION 9.09. Mutual Drafting. Each party hereto has
participated in the drafting of this Agreement, which each party acknowledges is
the result of extensive negotiations between the parties.
SECTION 9.10. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the Laws of the State of New York.
SECTION 9.11. Counterparts. This Agreement may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
<PAGE>
61
IN WITNESS WHEREOF, Parent and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
JAMES RIVER CORPORATION OF
VIRGINIA
By: /s/ Miles L. Marsh
-------------------------------------
Name: Miles L. Marsh
Title: Chairman and Chief Executive
Officer
JAMES RIVER DELAWARE, INC.
By: /s/ Clifford A. Cutchins, IV
-------------------------------------
Name: Clifford A. Cutchins, IV
Title: President
FORT HOWARD CORPORATION
By: /s/ Michael T. Riordan
-------------------------------------
Name: Michael T. Riordan
Title: Chairman and Chief Executive
Officer
May 4, 1997
James River Corporation of Virginia
120 Tredegar Street
Richmond, Virginia 23219
Attention: Clifford A. Cutchins, IV
Ladies and Gentlemen:
The undersigned understand that James River Corporation of
Virginia ("Parent"), and Fort Howard Corporation (the "Company") are entering
into an Agreement and Plan of Merger, dated as of May 4, 1997 (the "Merger
Agreement"), providing for, among other things, a merger between a wholly owned
subsidiary of Parent and the Company (the "Merger"), in which all of the
outstanding shares of common stock, par value $.01 per share, of the Company
(the "Company Common Stock") will be exchanged for shares of common stock, par
value $.10 per share, of Parent.
The undersigned are stockholders of the Company and are entering
into this letter agreement to induce you to enter into the Merger Agreement and
to consummate the transactions contemplated thereby.
The undersigned severally confirm their agreement with you as
follows:
1. Each of the undersigned represents, warrants and agrees that
Schedule I annexed hereto sets forth the number of shares of Company Common
Stock of which one or more of the undersigned is the record or beneficial owner
(the "Shares") and that, as of the date hereof, the undersigned which owns or
own such Shares owns them, free and clear of all liens, charges, encumbrances,
voting agreements and commitments of every kind, except as disclosed in Schedule
I.
2. Each of the undersigned agrees that it will not contract to
sell, sell or otherwise transfer or dispose of any of the Shares, or any
interest therein, or securities convertible thereinto or any voting rights with
respect thereto, other than: (a) in a pro rata distribution or transfer to the
partners of an undersigned which is a limited partnership pursuant to or
otherwise in accordance with its Agreement of Limited Partnership, (b) pursuant
to the Merger, (c) with your prior written consent, (d) a transfer to a party
who
<PAGE>
2
executes a counterpart of this agreement to be bound by the terms and provisions
hereof or (e) Shares transferred to the Company in connection with the exercise
of stock options to the extent that as of the date hereof the related option
agreement permits Shares to be so used in connection with the exercise of stock
options.
3. Each of the undersigned agrees that all of the Shares that are
beneficially owned by the undersigned at the record date for any meeting of
stockholders of the Company called to consider and vote to approve the Merger
and other transactions contemplated thereby will be voted by the undersigned
entitled to vote such Shares in favor thereof.
4. Each of the undersigned agrees to cooperate fully with you in
connection with the Merger Agreement and the transactions contemplated thereby.
Each of the undersigned agrees that the undersigned will not initiate, solicit
or encourage any discussions, inquiries or proposals with any third party that
constitute or may reasonably be expected to lead to a Competing Transaction (as
defined in the Merger Agreement), or provide any such person with information or
assistance or negotiate with any such person with respect to a possible
Competing Transaction. It is understood that certain affiliates of the
undersigned may be officers, directors, affiliates or representatives of the
Company and this letter agreement shall not be violated by the exercise by any
such officer, director, affiliate (which is not a signatory hereto) or
representative of its rights, obligations or duties, or limit or restrict in any
way the Company's rights, obligations or duties, or the actions of such
officers, directors, affiliates (which are not signatories hereto) or
representatives in the exercise thereof, as set forth in or in connection with
the Merger Agreement and the transactions contemplated thereby.
5. Each of the undersigned confirms that clause (a) of paragraph
2 in the letters attached hereto from Leeway & Co. and First Plaza Group Trust
is intended only to permit a transfer of Shares by the signatory thereto to
certain signatories hereto in satisfaction of such signatories' profit
participation interests in certain limited parterships.
Each of the undersigned has all necessary power and authority to
enter into this letter agreement. This agreement is the legal, valid and binding
agreement of the undersigned, and is enforceable against the undersigned in
accordance with its terms.
This letter agreement may be terminated at the option of any
party at any time after the earlier of: (i) termination of the Merger Agreement
in accordance with its terms and (ii) the day following the Closing Date (as
defined in the Merger Agreement). Please confirm that the foregoing correctly
states the understanding between us by signing and returning to us a counterpart
hereof.
<PAGE>
3
Nothing herein shall be construed to require the undersigned, or
any company, trust or other entity controlled by the undersigned, to take any
action or fail to take any action in violation of applicable law, rule or
regulation.
Very truly yours,
The Morgan Stanley Leveraged Equity
Fund II, L.P.
By: Morgan Stanley Leveraged Equity
Fund II, Inc., its General Partner
By /s/ Robert H. Niehaus
________________________________________
Morgan Stanley Group Inc.
By /s/ Robert H. Niehaus
________________________________________
Fort Howard Equity Investors, L.P.
By: Morgan Stanley Equity Investors, Inc.,
its General Partner
By /s/ Robert H. Niehaus
________________________________________
Fort Howard Equity Investors II, L.P.
By: Morgan Stanley Equity Investors, Inc.,
its General Partner
By /s/ Robert H. Niehaus
________________________________________
Morgan Stanley Leveraged Equity Holdings, Inc.
By /s/ Robert H. Niehaus
________________________________________
<PAGE>
4
Morgan Stanley Equity Investors, Inc.
By /s/ Robert H. Niehaus
________________________________________
Morgan Stanley Leveraged Equity Fund II, Inc.
By /s/ Robert H. Niehaus
________________________________________
Confirmed as of the date
first above written:
/s/ Miles L. Marsh
___________________________
For James River Corporation of Virginia
<PAGE>
SCHEDULE I
----------
Morgan Stanley Interests
------------------------
Direct Interest Through Limited
------ Partnerships
------------
2,264,999 2,874,808*
Limited Partnerships' Interests
-------------------------------
17,038,606 (including the 2,874,808 shares attributable to Morgan Stanley
Interests referred to above)**
- --------
* Subject to increase to the extent shares are transferred to certain of the
undersigned pursuant to their profit participation interests in certain
limited partnerships.
** Assumes no distribution pursuant to paragraph 2(a) of this letter.
May 4, 1997
James River Corporation of Virginia
120 Tredegar Street
Richmond, Virginia 23219
Attention: Clifford A. Cutchins, IV
Ladies and Gentlemen:
The undersigned understands that James River Corporation of
Virginia ("Parent"), and Fort Howard Corporation (the "Company") are entering
into an Agreement and Plan of Merger, dated as of May 4, 1997 (the "Merger
Agreement"), providing for, among other things, a merger between a wholly owned
subsidiary of Parent and the Company (the "Merger"), in which all of the
outstanding shares of common stock, par value $.01 per share, of the Company
(the "Company Common Stock") will be exchanged for shares of common stock, par
value $.10 per share, of Parent.
The undersigned is a stockholder of the Company and is entering
into this letter agreement to confirm its agreement with you as follows:
1. The undersigned represents, warrants and agrees that Schedule
I annexed hereto sets forth the number of shares of Company Common Stock of
which the undersigned is the record or beneficial owner and over which the AT&T
Investment Management Organization exercises investment discretion on the date
hereof (the "Shares") and that, as of the date hereof, the undersigned owns such
Shares, free and clear of all liens, charges, encumbrances, voting agreements
and commitments of every kind, except as disclosed in Schedule I.
2. The undersigned agrees that the undersigned will not contract
to sell, sell or otherwise transfer or dispose of any of the Shares, or any
interest therein, or securities convertible thereinto or any voting rights with
respect thereto, other than: (a) pursuant to the MSLEF II Agreement of Limited
Partnership, (b) pursuant to the Merger, (c) with your prior written consent,
(d) a transfer to a party who executes a counterpart of this agreement to be
bound by the terms and provisions hereof, (e) Shares transferred to the Company
in connection with the exercise of stock options to the extent that as of the
date
<PAGE>
2
hereof the related option agreement permits Shares to be so used in connection
with the exercise of stock options or (f) a transfer to a successor trust or the
trust for a successor plan (the "New Trust") in connection with or following the
reorganization of the pension plans or trust of AT&T Corp. and Lucent
Technologies Inc., such New Trust to be bound by the terms of this letter.
3. The undersigned agrees that all of the shares of Company
Common Stock, including the Shares and any shares of Company Common Stock
hereafter acquired over which the AT&T Investment Management Organization
exercises investment discretion, that are beneficially owned by the undersigned
at the record date for any meeting of stockholders of the Company called to
consider and vote to approve the Merger and the Agreement and the Agreement and
other transactions contemplated thereby will be voted by the undersigned in
favor thereof.
4. The undersigned agrees that the undersigned will not initiate,
solicit or encourage any discussions, inquiries or proposals with any third
party that constitute or may reasonably be expected to lead to a Competing
Transaction (as defined in the Merger Agreement), or provide any such person
with information or assistance or negotiate with any such person with respect to
a possible Competing Transaction.
The undersigned has all necessary power and authority to enter
into this letter agreement. This agreement is the legal, valid and binding
agreement of the undersigned, and is enforceable against the undersigned in
accordance with its terms. It is understood and agreed that the undersigned's
obligations are limited solely to those contained in this letter, and that the
undersigned has no liability with respect to the Merger Agreement or the
transactions contemplated thereby other than as specifically described herein.
This letter agreement may be terminated at the option of any
party at any time after the earlier of: (i) termination of the Merger Agreement
in accordance with its terms, (ii) the day following the Closing Date (as
defined in the Merger Agreement) and (iii) March 31, 1998. Please confirm that
the foregoing correctly states the understanding between us by signing and
returning to us a counterpart hereof.
<PAGE>
3
Nothing herein shall be construed to require the undersigned, or
any company, trust or other entity controlled by the undersigned, to take any
action or fail to take any action in violation of applicable law, rule or
regulation.
Very truly yours,
Leeway & Co., as Nominee for the
Long-Term Investment Trust
Leeway & Co. by State Street Bank
& Trust Co. a Partner
By /s/ Lisa Lane
__________________________
State Street Bank & Trust Company,
Trustee
Name: Lisa Lane
Title: Assistant Secretary
Confirmed as of the date
first above written:
/s/ Miles L. Marsh
___________________________
For James River Corporation of Virginia
<PAGE>
SCHEDULE I
----------
2,738,789 shares directly owned on the date hereof over which the AT&T
Investment Management Organization exercises investment discretion.
2,194,432 shares owned indirectly through limited partnerships over which, if
distributed, the AT&T Investment Management Organization will exercise
investment discretion.*
- --------
* To be removed from this Schedule I upon agreement by Parent and Company
that removal will not jeopardize pooling accounting treatment.
May 4, 1997
James River Corporation of Virginia
120 Tredegar Street
Richmond, Virginia 23219
Attention: Clifford A. Cutchins, IV
Ladies and Gentlemen:
The undersigned understands that James River Corporation of
Virginia ("Parent"), and Fort Howard Corporation (the "Company") are entering
into an Agreement and Plan of Merger, dated as of May 4, 1997 (the "Merger
Agreement"), providing for, among other things, a merger between a wholly owned
subsidiary of Parent and the Company (the "Merger"), in which all of the
outstanding shares of common stock, par value $.01 per share, of the Company
(the "Company Common Stock") will be exchanged for shares of common stock, par
value $.10 per share, of Parent.
The undersigned is a stockholder of the Company and is
entering into this letter agreement to induce you to enter into the Merger
Agreement and to consummate the transactions contemplated thereby.
The undersigned confirms its agreement with you as follows:
1. The undersigned represents, warrants and agrees that
Schedule I annexed hereto sets forth the number of shares of Company Common
Stock of which the undersigned is the record or beneficial owner (the "Shares")
and that, as of the date hereof, the undersigned owns such Shares, free and
clear of all liens, charges, encumbrances, voting agreements and commitments of
every kind, except as disclosed in Schedule I.
2. The undersigned agrees that the undersigned will not
contract to sell, sell or otherwise transfer or dispose of any of the Shares, or
any interest therein, or securities convertible thereinto or any voting rights
with respect thereto, other than: (a) pursuant to the MSLEF II Agreement of
Limited Partnership and the Fort Howard Equity Investors II Agreement of Limited
Partnership, (b) pursuant to the Merger, (c) with your prior written consent,
(d) a transfer to a party who executes a counterpart of this agreement to be
bound by the terms and provisions hereof or (e) Shares transferred to the
Company in
<PAGE>
2
connection with the exercise of stock options to the extent that as of the date
hereof the related option agreement permits Shares to be so used in connection
with the exercise of stock options.
3. The undersigned agrees that all of the shares of Company
Common Stock, including the Shares and any shares of Company Common Stock
hereafter acquired, that are beneficially owned by the undersigned at the record
date for any meeting of stockholders of the Company called to consider and vote
to approve the Merger and the Agreement and the Agreement and other transactions
contemplated thereby will be voted by the undersigned in favor thereof.
4. The undersigned agrees that the undersigned will not
initiate, solicit or encourage any discussions, inquiries or proposals with any
third party that constitute or may reasonably be expected to lead to a Competing
Transaction (as defined in the Merger Agreement), or provide any such person
with information or assistance or negotiate with any such person with respect to
a possible Competing Transaction.
The undersigned has all necessary power and authority to enter
into this letter agreement. This agreement is the legal, valid and binding
agreement of the undersigned, and is enforceable against the undersigned in
accordance with its terms.
This letter agreement may be terminated at the option of any
party at any time after the earlier of: (i) termination of the Merger Agreement
in accordance with its terms and (ii) the day following the Closing Date (as
defined in the Merger Agreement). Please confirm that the foregoing correctly
states the understanding between us by signing and returning to us a counterpart
hereof.
<PAGE>
3
Nothing herein shall be construed to require the undersigned,
or any company, trust or other entity controlled by the undersigned, to take any
action or fail to take any action in violation of applicable law, rule or
regulation.
Very truly yours,
Mellon Bank, N.A.,
solely in its capacity as Trustee for
FIRST PLAZA GROUP TRUST, (as directed by
General Motors Investment Management
Corporation), and not in its individual
capacity
By /s/ Laurie A. Adams
____________________
Name: Laurie A. Adams
Title: Trust Officer
Confirmed as of the date first above written:
/s/ Miles L. Marsh
_________________________
For James River Corporation of Virginia
<PAGE>
SCHEDULE I
Interest Through Limited
Direct Partnerships
------ ------------------------
5,477,586 3,389,473*
- --------
* Subject to reduction to the extent transferred to the general partners
pursuant to the general partners' profit participation interests.
