<PAGE>
Filed pursuant to Rule 424(b)(1)
Registration No. 333-80757
PROSPECTUS SUPPLEMENT
(To Prospectus dated June 30, 1999)
[Logo of Georgia-Pacific]
15,000,000 Units
Georgia-Pacific Corporation
7.50% PEPS/SM/ Units
(Premium Equity Participating Security Units -- PEPS/SM/ Units)
---------------
The PEPS Units will pay 7.50% of the stated amount of $50 per PEPS Unit
($3.750) per year. These payments will be made on February 16, May 16, August
16 and November 16 of each year, beginning November 16, 1999.
Each PEPS Unit consists of a purchase contract issued by us and a senior
deferrable note due 2004 issued by us.
. The purchase contract will obligate you to purchase from us, no later than
August 16, 2002 for a price of $50, the following number of shares of
Georgia-Pacific Corporation--Georgia-Pacific Group Common Stock
("Georgia-Pacific Group Stock"):
. if the average closing price of the Georgia-Pacific Group Stock over the
20-trading day period ending August 13, 2002 equals or exceeds $57.797,
.8651 shares;
. if the average closing price is less than $57.797 but greater than
$47.375, a number of shares having a value, based on the 20-trading day
average price, equal to $50; and
. if the average closing price is less than or equal to $47.375, 1.0554
shares.
. The purchase contract will obligate you to purchase shares of Georgia-
Pacific Group Stock no later than August 16, 2002. You may use the proceeds
from the remarketing of your senior deferrable note to satisfy your payment
obligations under the purchase contract. The senior deferrable note will be
pledged to secure your obligation to purchase Georgia-Pacific Group Stock
under the purchase contract.
. Under the purchase contract, we will pay you .35% of the $50 stated amount
per PEPS Unit ($.175) per year, paid quarterly. We may defer these payments
under the purchase contract. Any deferred payments under the purchase
contract will bear additional payments at a rate of .35% per year.
. The senior deferrable note will bear interest at a rate of 7.15% per year
prior to August 16, 2002, and at a reset rate that will be equal to or
greater than 7.15% per year after that date, paid quarterly. The senior
deferrable note will mature on August 16, 2004 and will not be redeemable
prior to maturity. We may defer these interest payments. Any deferred
interest payments will bear additional interest at the then current annual
rate on the senior deferrable notes.
---------------
The PEPS Units have been approved for listing on the New York Stock Exchange
under the symbol "GPW".
---------------
Investing in the PEPS Units involves risks. See "Risk Factors" beginning on
page S-19.
---------------
<TABLE>
<CAPTION>
Underwriting Proceeds
Discounts and to the
Price to Public Commissions Company
--------------- ------------- ------------
<S> <C> <C> <C>
Per PEPS Unit........................ $50.00 $1.50 $48.50
Total................................ $750,000,000 $22,500,000 $727,500,000
</TABLE>
---------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus supplement or the accompanying prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
We have granted the underwriters a 30-day option to purchase up to 2,250,000
additional PEPS Units on the same terms and conditions set forth above solely
to cover over-allotments, if any.
Morgan Stanley & Co. Incorporated expects to deliver the PEPS Units to
purchasers on or about July 7, 1999.
---------------
MORGAN STANLEY DEAN WITTER
GOLDMAN, SACHS & CO.
PAINEWEBBER INCORPORATED
SALOMON SMITH BARNEY
July 1, 1999
<PAGE>
ABOUT THIS PROSPECTUS SUPPLEMENT
You should read this prospectus supplement along with the prospectus that
accompanies it. You should rely only on the information provided or
incorporated by reference in this prospectus supplement and the accompanying
prospectus. The information in this prospectus supplement and the accompanying
prospectus is accurate as of the dates on these documents, and you should not
assume that it is accurate as of any other date. All references to Georgia-
Pacific Group Stock reflect a two-for-one split paid on June 3, 1999.
TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<CAPTION>
Page
----
<S> <C>
Forward-Looking Information.............................................. S-3
Index of Selected Terms for Prospectus Supplement........................ S-4
Prospectus Supplement Summary............................................ S-5
Risk Factors............................................................. S-19
Use of Proceeds.......................................................... S-27
Price Range of Georgia-Pacific Group Stock............................... S-28
Dividend Policy.......................................................... S-29
Capitalization........................................................... S-30
Accounting Treatment..................................................... S-31
Management and Allocation Policies....................................... S-31
Description of the PEPS Units............................................ S-36
Description of the Purchase Contracts.................................... S-39
Certain Provisions of the Purchase Contracts, the Purchase Contract
Agreement and the Pledge Agreement...................................... S-46
Description of the Senior Deferrable Notes............................... S-49
United States Federal Income Tax Consequences............................ S-54
ERISA Considerations..................................................... S-60
Underwriters............................................................. S-61
Legal Matters............................................................ S-63
Experts.................................................................. S-63
Prospectus
About This Prospectus.................................................... 1
Where You Can Find More Information...................................... 1
Incorporation of Certain Documents by Reference.......................... 2
The Company.............................................................. 3
Use of Proceeds.......................................................... 3
Ratio of Earnings to Fixed Charges....................................... 3
Description of Debt Securities........................................... 4
Description of Preferred Stock........................................... 15
Description of Common Stock.............................................. 17
Description of Warrants.................................................. 31
Description of Stock Purchase Contracts and Stock Purchase Units......... 31
Book-Entry Issuance...................................................... 32
Plan of Distribution..................................................... 34
Legal Matters............................................................ 35
Experts.................................................................. 35
</TABLE>
S-2
<PAGE>
FORWARD-LOOKING INFORMATION
Some of the matters discussed in this prospectus supplement and in the
documents incorporated by reference in the accompanying prospectus contain
forward-looking statements within the meaning of the securities laws. Forward-
looking statements can be identified by their use of such words as "may",
"will", "expect", "believe", "plan", "estimate", "anticipate", "project",
"potential", "opportunity" and other similar terms. While we believe those
statements to be based on reasonable expectations and assumptions concerning
future events and make those statements in good faith, we cannot assure you
that actual results will not differ materially from those assumptions or that
the expectations set forth in the forward-looking statements derived from
those assumptions will be realized. Investors should be aware of important
factors that could cause actual results to differ materially from these
forward-looking statements, including, among other things:
. our production capacity continuing to exceed demand for our pulp and
paper products, necessitating market-related downtime;
. our ability and that of our customers and suppliers to address year 2000
issues;
. changes in the productive capacity and production levels of our
competitors;
. the effect on us of changes in environmental and pollution control laws
and regulations;
. the general level of economic activity in U.S. and export markets,
particularly the Asian markets;
. variations in the level of housing starts;
. fluctuations in interest rates and currency exchange rates;
. the availability and cost of wood fiber;
. changing conditions in the capital and equity markets;
. risks relating to our acquisition of Unisource Worldwide Inc.;
. other risks detailed from time to time in our Securities and Exchange
Commission filings; and
. those items identified in "Risk Factors",
all of which are difficult to predict, and many of which are beyond our
control.
We do not intend to update or revise any forward-looking statements that we
may make in this prospectus supplement or other documents, reports, filings or
press releases, whether as a result of new information, future events or
otherwise.
S-3
<PAGE>
INDEX OF SELECTED TERMS FOR PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
Term Page
- ---- ----
<S> <C>
applicable market value.................................................... S-39
applicable spread.......................................................... S-50
business day............................................................... S-37
closing price.............................................................. S-40
collateral agent........................................................... S-8
current market price....................................................... S-44
deferred purchase contract payments........................................ S-8
early settlement........................................................... S-42
failed remarketing......................................................... S-41
Georgia-Pacific Group Stock................................................ S-1
original issue discount.................................................... S-12
PEPS Units................................................................. S-1
pledge agreement........................................................... S-8
pledged securities......................................................... S-45
purchase contract.......................................................... S-7
purchase contract agent.................................................... S-7
purchase contract agreement................................................ S-7
purchase contract payments................................................. S-7
purchase contract settlement date.......................................... S-7
reference price............................................................ S-19
remarketed................................................................. S-9
remarketing agent.......................................................... S-9
remarketing agreement...................................................... S-41
remarketing date........................................................... S-49
reset rate................................................................. S-9
securities intermediary.................................................... S-12
senior deferrable notes.................................................... S-1
senior trustee............................................................. S-37
settlement rate............................................................ S-11
threshold appreciation price............................................... S-19
trading day................................................................ S-40
Treasury PEPS Units........................................................ S-11
treasury security.......................................................... S-11
two-year benchmark treasury rate........................................... S-50
</TABLE>
S-4
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
This summary highlights selected information from this document and does not
contain all of the information you need to consider in making your investment
decision. To understand all of the terms of this offering and for a more
complete understanding of the business of Georgia-Pacific, you should read
carefully this entire document, the accompanying prospectus and the documents
incorporated by reference in the accompanying prospectus. Except as otherwise
noted, all information in this document assumes no exercise of the
underwriters' over-allotment option.
The Company
Georgia-Pacific, founded in 1927 as a wholesaler of hardwood lumber in
Augusta, Georgia, has grown through expansion and acquisitions to become one of
the world's leading manufacturers and distributors of building products and one
of the world's leading producers of pulp and paper. In December 1997, we
separated our timber business into a new operating group called The Timber
Company. Our manufacturing and distribution businesses are now known as the
Georgia-Pacific Group.
The Georgia-Pacific Group is one of the nation's largest producers of
structural and other wood panels, lumber, communication papers, containerboard
and market pulp. It also is the second largest gypsum wallboard producer in
North America and operates the world's largest building products distribution
system. In addition, it operates a rapidly growing tissue products business.
The Timber Company is engaged in the business of growing and selling timber
and wood fiber and is the third largest private owner of timberlands in the
United States, owning approximately 5.0 million acres of timberland in the
United States and Canada, and managing an additional 400,000 acres under long-
term leases. The Timber Company grows various commercial species of trees on
its timberlands and sells timber and wood fiber to the Georgia-Pacific Group
and other industrial wood users. The principal products sold by The Timber
Company are softwood sawtimber, softwood pulpwood, hardwood sawtimber and
hardwood pulpwood.
Recent Developments
On May 25, 1999, we entered into a definitive merger agreement with
Unisource Worldwide Inc., the largest independent marketer and distributor of
printing and imaging paper and supply systems in North America. For its fiscal
year ended September 30, 1998, Unisource had total revenues of $7.4 billion and
a net loss (before special charges after tax of $207.9 million) of $23.9
million. For its fiscal year ended September 30, 1997, Unisource had total
revenues of $7.1 billion and net income of $58.7 million. For the six-month
period ended March 31, 1999, Unisource had total revenues of $3.3 billion and
net income (before special charges after tax of $4.1 million) of $12.5 million.
For the six-month period ended March 31, 1998, Unisource had total revenues of
$3.7 billion and net income (before special charges after tax of $100.8
million) of $6.9 million.
Pursuant to the merger agreement, we will acquire all of the outstanding
shares of Unisource for $12 per share in cash, or approximately $843 million.
We also will refinance approximately $400 million of Unisource debt. We
anticipate completing the merger in the third quarter of 1999. After the
merger, Unisource will be a direct, wholly owned subsidiary of Georgia-Pacific.
We cannot assure you that we will consummate the transaction as scheduled, nor
can we predict the impact that the acquisition, if consummated, will have on
our business, financial condition and results of operations. The income and
revenue data of Unisource referred to above are not necessarily indicative of
future contributions of Unisource to our sales and earnings.
On June 22, 1999, we announced that we expect to report earnings for the
second quarter of 1999 for the Georgia-Pacific Group that are above then
current First Call earnings per share estimates for the period. Based on our
preliminary results for the first two months of this period, we expect the
Georgia-Pacific Group's earnings for the second quarter of 1999 to exceed $1
per share of Georgia-Pacific Group Stock.
S-5
<PAGE>
On June 25, 1999, we signed a letter of intent to combine in a new
partnership our away-from-home tissue business with the away-from-home tissue
business of Chesapeake Corporation, a specialty packaging and tissue company.
We will contribute the assets of our commercial tissue business and Chesapeake
will contribute the assets of its wholly owned subsidiary, Wisconsin Tissue. We
will control and manage the partnership and expect to own an approximately 90%
interest in the partnership. Chesapeake expects to receive an initial cash
distribution of approximately $730 million from the partnership and to retain
the remaining ownership interest in the partnership. Although financing for the
transaction has not been finalized, we currently anticipate that the
transaction will be financed through debt incurred by the partnership. We
anticipate completing the formation of the partnership, which is subject to
completion and execution of definitive agreements, completion of due diligence
by both Georgia-Pacific and Chesapeake and customary regulatory approvals, in
the fourth quarter of 1999.
S-6
<PAGE>
The PEPS Units Offering
Each PEPS Unit Consists of
a Purchase Contract and a
Senior Deferrable Note......
We are offering 15,000,000 7.50% Premium Equity
Participating Security Units--PEPSSM Units ("PEPS
Units"). The stated amount and issue price of
each PEPS Unit is $50.
Each PEPS Unit consists of two parts:
. a purchase contract for shares of Georgia-
Pacific Group Stock; and
. a senior deferrable note due August 16, 2004.
The senior deferrable note will be pledged to
secure the PEPS Unit holder's obligation to us
under the purchase contract to purchase shares of
Georgia-Pacific Group Stock.
You will receive from each PEPS Unit:
. total cash payments of 7.50% of the stated
amount per year, paid quarterly, consisting
of:
. purchase contract payments at a rate of
.35% per year, paid quarterly;
. interest payments at the rate of 7.15% per
year, paid quarterly; and
. on August 16, 2002, between .8651 and 1.0554
shares of Georgia-Pacific Group Stock,
depending on the average trading price of the
Georgia-Pacific Group Stock at that time.
You Will Be Required Under
the Purchase Contract to
Purchase Georgia-Pacific
Group Stock on or Prior to
August 16, 2002.............
We will enter into a purchase contract agreement
with The First National Bank of Chicago, which
will act as agent for all of the holders of the
PEPS Units (as well as the holders of the
Treasury PEPS Units described below). Each PEPS
Unit that you purchase will be issued under the
purchase contract agreement, which creates a
contractual arrangement between you and us for
the purchase of shares of Georgia-Pacific Group
Stock, a "purchase contract". Under this purchase
contract, you will be obligated to purchase, for
each of your PEPS Units, shares of Georgia-
Pacific Group Stock at a purchase price of $50.
You will not be obligated to pay the purchase
price until August 16, 2002, which has been set
as the "purchase contract settlement date", and
you will not receive your shares of Georgia-
Pacific Group Stock until you have settled your
purchase contract.
The number of shares of Georgia-Pacific Group
Stock that you will be entitled to receive on the
purchase contract settlement date will depend on
the fair market value of a share of Georgia-
Pacific Group Stock over a 20-trading day period
ending August 13, 2002. Until
S-7
<PAGE>
you actually purchase the shares of Georgia-
Pacific Group Stock, your obligation to pay the
$50 purchase price will be secured by the senior
deferrable note that is part of your PEPS Unit,
which will be pledged as collateral. You may
substitute a U.S. treasury security as
collateral. See "Description of the PEPS Units--
Creating Treasury PEPS Units by Substituting a
Treasury Security for Senior Deferrable Notes".
The Senior Deferrable Note
Will Mature on August 16,
2004........................
In addition to the purchase contract, each PEPS
Unit also will include a senior deferrable note
that will bear interest at a rate of 7.15% per
year prior to August 16, 2002, and at a reset
rate that will be equal to or greater than 7.15%
per year after that date, paid quarterly, subject
to our right to defer interest payments, as
described below. The senior deferrable notes will
mature on August 16, 2004 and will not be
redeemable prior to maturity.
We May Defer Payments on
the PEPS Units..............
We may, at our option, defer payment on all or
part of the purchase contract payments until no
later than the purchase contract settlement date.
We will pay additional purchase contract payments
on any deferred installments of purchase contract
payments at a rate of .35% per year (compounding
quarterly) until paid. We refer to these deferred
installments of purchase contract payments
together with the additional purchase contract
payments as "deferred purchase contract
payments".
We may also defer payments of interest on the
senior deferrable notes. We will pay additional
interest on any deferred interest payments at the
then current annual rate on the senior deferrable
notes (compounding quarterly).
The Senior Deferrable Note
Will Be Pledged As
Collateral Under the Pledge
Arrangement.................
When you purchase a PEPS Unit, the senior
deferrable note that is part of that PEPS Unit
will be pledged as collateral to secure your
obligation to purchase Georgia-Pacific Group
Stock on or prior to August 16, 2002 under the
related purchase contract. We will enter into a
pledge agreement, the "pledge agreement", under
which The Chase Manhattan Bank will act as
collateral agent, the "collateral agent", and
hold your senior deferrable note until the $50
purchase price under the purchase contract has
been paid. Even though your senior deferrable
note will be pledged as collateral, you will be
the beneficial owner of it.
You May Settle the Purchase
Contract By Paying Cash or
Using the Proceeds from the
Remarketing of the Senior
Deferrable Note.............
Under the purchase contract that is part of your
PEPS Unit, you will be obligated to pay, on or
prior to August 16, 2002, $50 to purchase shares
of Georgia-Pacific Group Stock. To satisfy this
obligation, you may choose to deliver a cash
payment of $50.
S-8
<PAGE>
If you do not, your senior deferrable note held
as collateral under the pledge arrangement will
be sold to the public for a price equal to or
greater than $50.1250 ("remarketed").
Morgan Stanley & Co. Incorporated will act as the
remarketing agent.
If You Pay Cash to Settle
Your Purchase Contract,
Your Senior Deferrable Note
Will Be Released From the
Pledge Arrangement..........
If you choose not to participate in the
remarketing and instead pay cash by August 9,
2002 for your shares of Georgia-Pacific Group
Stock, then:
. you will pay $50 in cash to us under your
purchase contract;
. we will deliver to you the shares of Georgia-
Pacific Group Stock; and
. your senior deferrable note will be released
from the pledge arrangement and distributed to
you. Starting on August 16, 2002, the
settlement date of the remarketing, and
continuing until August 16, 2004, interest on
the senior deferrable note will be payable at
the reset rate that will be equal to or
greater than 7.15% per year, as determined by
the remarketing agent in the remarketing.
If You Do Not Pay Cash
Under Your Purchase
Contract, Your Senior
Deferrable Note Will Be
Remarketed.................. On August 13, 2002, the third business day prior
to the purchase contract settlement date, the
remarketing agent will remarket the senior
deferrable notes of those holders of PEPS Units
who have not delivered cash payments for the
shares of Georgia-Pacific Group Stock when those
payments are due.
If You Hold a Senior
Deferrable Note That Is Not
Part of a PEPS Unit, You
May Choose to Have It
Remarketed..................
If you hold a senior deferrable note that is not
part of a PEPS Unit, you may elect to have your
senior deferrable note remarketed in the
remarketing. PEPS Unit holders who have created
Treasury PEPS Units or who have settled their
purchase contracts early may make such an
election, as more fully described below.
The Reset Rate Will Be
Determined by the
Remarketing.................
After the senior deferrable notes have been
remarketed, the interest rate on the senior
deferrable notes will be the rate equal to or
greater than 7.15% per year, as determined by the
remarketing agent in the remarketing (the "reset
rate").
If the Remarketing
Succeeds, the Remarketed
Senior Deferrable Notes
Will Be Sold and, If You
Are a PEPS Unit Holder, You
Will Receive Georgia-
Pacific Group Stock.........
. If you do not notify the purchase contract
agent that you will pay cash for the shares of
Georgia-Pacific Group Stock by
S-9
<PAGE>
5:00 p.m., New York City time, on August 7,
2002, the seventh business day prior to the
purchase contract settlement date, or if you
notify the purchase contract agent that you
will pay cash but you do not deliver the cash
by 11:00 a.m., New York City time, prior to or
on August 9, 2002, the fifth business day
prior to the purchase contract settlement
date, your senior deferrable note will be
remarketed.
. On August 13, 2002, the third business day
prior to the purchase contract settlement
date, the remarketing agent will use
reasonable efforts to sell your senior
deferrable note, together with all other
senior deferrable notes being remarketed. If
the market value of the senior deferrable
notes immediately prior to the remarketing is
less than $50.1250 per senior deferrable note,
then the remarketing agent will increase the
interest rate on the senior deferrable notes
so that the market value will be equal to
$50.1250 per senior deferrable note at the
time of the remarketing.
. If the remarketing is successful, then your
senior deferrable note will be sold. Of the
proceeds:
. $50 will be delivered to us as payment for
the shares of Georgia-Pacific Group Stock;
. $.1250 will be paid to the remarketing
agent;
. any proceeds above $50.1250 will be
delivered to you; and
. if you are a PEPS Unit holder, you will
receive the shares of Georgia-Pacific Group
Stock.
If the Remarketing Fails
and You Are a PEPS Unit
Holder, We Will Take
Possession of Your Senior
Deferrable Note............
If the remarketing agent cannot remarket the
senior deferrable notes, we will exercise our
rights as a secured party and take possession of
your senior deferrable note. Your obligation to
purchase the shares of Georgia-Pacific Group
Stock then will be fully satisfied, and you will
receive the shares of Georgia-Pacific Group
Stock.
Upon Settlement, You Will
Receive a Number of Shares
of Georgia-Pacific Group
Stock Equal to the
Settlement Rate............
Unless you elect to settle your purchase contract
early, the number of shares of Georgia-Pacific
Group Stock you will receive under your purchase
contract will depend on the average of the
closing price per share, or the last reported
sale price if no closing price is reported, of
the Georgia-Pacific Group Stock as reported on
the New York Stock Exchange, for a 20-trading day
period ending on August 13, 2002, the third
business day prior to the purchase contract
settlement date. If, for any trading day, the
trading of Georgia-
S-10
<PAGE>
Pacific Group Stock is suspended, or if the
Georgia-Pacific Group Stock does not trade at
least once on the New York Stock Exchange on that
day, then that day will not be considered to be a
trading day for purposes of determining the 20-
trading day period.
The number of shares of Georgia-Pacific Group
Stock you will receive for each PEPS Unit will be
determined by one of the following settlement
rates:
. if the average closing price during the 20-
trading day period equals or exceeds $57.797,
you will receive .8651 shares of Georgia-
Pacific Group Stock;
. if the average closing price during the 20-
trading day period is less than $57.797 but
greater than $47.375, you will receive a
number of shares of Georgia-Pacific Group
Stock having a value, based on the average
trading price during that period, equal to
$50; and
. if the average closing price during the 20-
trading day period is less than or equal to
$47.375, you will receive 1.0554 shares of
Georgia-Pacific Group Stock.
In some circumstances, the applicable settlement
rate will be subject to anti-dilution
adjustments.
We will not issue any fractional shares of
Georgia-Pacific Group Stock. If, however, you are
settling more than one purchase contract, then
any fractional shares of Georgia-Pacific Group
Stock will be aggregated. For any fractional
share not issuable, we will pay you the value of
that fractional share in cash.
You Can Create Treasury Once you own 20 PEPS Units, you may create 20
PEPS Units.................. Treasury PEPS Units by substituting a U.S.
treasury security for the senior deferrable note
that is a part of the PEPS Unit.
A Treasury PEPS Unit will consist of:
. a purchase contract for shares of Georgia-
Pacific Group Stock that is identical to the
purchase contract that is a part of the PEPS
Unit; and
. a 1/20 undivided beneficial ownership in a
zero-coupon U.S. treasury security (CUSIP No.
912820BE6), the "treasury security", that has
a principal amount at maturity of $1,000,
equivalent to $50 per Treasury PEPS Unit, and
matures on August 15, 2002, the business day
prior to the purchase contract settlement
date.
S-11
<PAGE>
You Create Treasury PEPS
Units by Substituting a
Treasury Security For
Senior Deferrable Notes.....
You may substitute a treasury security for senior
deferrable notes at any time prior to or on
August 7, 2002, the seventh business day prior to
the purchase contract settlement date. Interest
will continue to be paid on the senior deferrable
note. Because the treasury security has a
principal amount at maturity of $1,000, you must
substitute Treasury PEPS Units for PEPS Units in
multiples of 20. For each group of 20 PEPS Units
you submit, you will receive 20 Treasury PEPS
Units.
To create Treasury PEPS Units, you must:
. for each group of 20 Treasury PEPS Units you
wish to create, transfer a treasury security
to The Chase Manhattan Bank, which is acting
as the securities intermediary, the
"securities intermediary", under the pledge
arrangement. The securities intermediary then
will deposit the treasury security in the
collateral account maintained under the pledge
arrangement. The treasury security will become
the collateral supporting your obligation to
purchase shares of Georgia-Pacific Group
Stock, and the collateral agent will release
20 senior deferrable notes from the pledge.
Those senior deferrable notes then will be
freely tradable and will not be a part of a
PEPS Unit or a Treasury PEPS Unit; and
. pay to the collateral agent any fees or
expenses incurred in connection with the
substitution.
A Treasury PEPS Unit Holder
Will Receive Purchase
Contract Payments and Will
Be Required to Accrue
Original Issue Discount on
the Treasury PEPS Unit......
If you create Treasury PEPS Units from PEPS
Units, you will continue to receive purchase
contract payments under your purchase contract.
However, because the treasury security included
in the Treasury PEPS Units is a zero-coupon
security, you will not receive any other payments
on the Treasury PEPS Units. You generally will be
required, however, to include in gross income
each year your allocable share of original issue
discount or acquisition discount on the treasury
security that accrues in such year. See "United
States Federal Income Tax Consequences" in this
prospectus supplement.
As long as you continue to own the senior
deferrable notes that you separated from your
PEPS Units, you will receive interest payments on
them, separately from the Treasury PEPS Units.
You Can Recreate PEPS If you own Treasury PEPS Units, you may recreate
Units....................... PEPS Units at any time prior to or on August 7,
2002, the seventh business day prior to the
purchase contract settlement date. Because the
treasury security has a principal amount at
maturity of $1,000, you must recreate PEPS Units
from Treasury PEPS Units in multiples of 20. For
each group of 20 Treasury PEPS Units you submit,
you will receive 20 PEPS Units.
S-12
<PAGE>
To recreate PEPS Units, you must:
. for each group of 20 PEPS Units you wish to
recreate, transfer 20 senior deferrable notes
to the securities intermediary. The securities
intermediary then will deposit the senior
deferrable notes in the collateral account
maintained under the pledge arrangement. The
20 senior deferrable notes will become the
collateral supporting your obligation to
purchase the shares of Georgia-Pacific Group
Stock, and the collateral agent will release
the treasury security from the pledge. That
treasury security then will be freely
tradeable and will not be part of any PEPS
Unit; and
. pay to the collateral agent any fees or
expenses incurred in connection with the
substitution.
You May Settle the Purchase
Contracts of Treasury PEPS
Units By Paying Cash or
Having the Proceeds of the
Pledged Treasury Security
Applied.....................
Unless you notify the purchase contract agent
that you will pay cash for the shares of Georgia-
Pacific Group Stock, upon settlement of the
Treasury PEPS Units, we will receive the proceeds
of the treasury security being held as collateral
under the pledge arrangement. This will satisfy
your obligation to deliver the purchase price for
the shares of Georgia-Pacific Group Stock, and
you will receive the shares of Georgia-Pacific
Group Stock.
You May Settle the Purchase
Contract Early..............
You may satisfy your obligation to purchase
shares of Georgia- Pacific Group Stock under your
purchase contract before August 16, 2002, the
purchase contract settlement date. If you choose
early settlement, you will pay $50 in cash prior
to or on August 7, 2002, the seventh business day
prior to the purchase contract settlement date.
If you settle early:
. You must deliver to the purchase contract
agent a notice indicating your election to
"settle early".
. You must deliver a cash payment of $50 for
each purchase contract being settled.
. You will receive, for each PEPS Unit or
Treasury PEPS Unit you surrender, both:
. .8651 shares of Georgia-Pacific Group
Stock, regardless of the market price of
the shares of Georgia-Pacific Group Stock
on the date of early settlement
and subject to anti-dilution adjustments
in some circumstances; and
. your senior deferrable note (if you are
settling a PEPS Unit) or a 1/20 undivided
beneficial interest in a treasury security
(if you are settling a Treasury PEPS
Unit).
S-13
<PAGE>
. You will not receive any further purchase
contract payments from us.
. You will retain the right to have your senior
deferrable notes remarketed.
You may settle Treasury PEPS Units early only in
multiples of 20.
If You Elect to Have Your
Senior Deferrable Notes
That Are Not Part of PEPS
Units Remarketed and the
Remarketing Fails, You Will
Retain Possession of Your
Senior Deferrable Notes and
the Reset Rate Will Be
Determined by a Formula.....
If the remarketing agent cannot remarket the
senior deferrable notes, you will retain
possession of your senior deferrable note and the
reset rate will be set at the applicable rate
described under "Description of the Senior
Deferrable Notes--Interest Rate Reset by
Remarketing--Failed Remarketing".
Investing in the PEPS Units
Is Not the Equivalent of
Investing in Georgia-
Pacific Group Stock.........
The aggregate of the purchase contract payments
and interest payments on the senior deferrable
notes will be paid at a rate per year that is
greater than the current dividend yield on
Georgia-Pacific Group Stock. However, because the
number of shares of Georgia-Pacific Group Stock
that you will receive upon settlement of the
purchase contracts may decline by 18.03% as the
applicable market value increases, the PEPS Units
give you less opportunity for equity appreciation
than you would have if you invested directly in
Georgia-Pacific Group Stock.
You Will Have Limited As a holder of a PEPS Unit, you will have limited
Voting Rights............... voting rights. You may vote only with respect to
the modification of the senior deferrable notes.
You will not have any voting or other rights
(including under our restated rights plan) with
respect to the Georgia-Pacific Group Stock until
you settle the purchase contract.
The Purchase Contract Will
Terminate Upon Our
Bankruptcy.................. The purchase contract will terminate
automatically if certain bankruptcy, insolvency
or reorganization events occur with respect to
us. If the purchase contract terminates upon one
of these events, then your rights and obligations
under your purchase contract also will terminate,
including your right to receive accrued purchase
contract payments and your obligation to pay for,
and your right to receive, shares of Georgia-
Pacific Group Stock. Upon termination, you will
receive your senior deferrable note or your
treasury security.
S-14
<PAGE>
The PEPS Units Have Been
Approved For Listing on the
New York Stock Exchange.....
The PEPS Units have been approved for listing on
the New York Stock Exchange under the symbol
"GPW".
If Treasury PEPS Units are created and then
traded at a volume that satisfies applicable
exchange listing requirements, we will try to
list them on the national securities exchanges or
associations on which the PEPS Units are then
listed or quoted.
Georgia-Pacific Group Stock
New York Stock Exchange
Symbol......................
GP
United States Federal
Income Tax Consequences.....
Because a PEPS Unit will consist of a purchase
contract and a senior deferrable note, the
purchase price of each PEPS Unit will be
allocated between the purchase contract and the
related senior deferrable note in proportion to
their relative fair market values at the time of
purchase. We expect that, at the date of issuance
of the PEPS Units, the fair market value of each
purchase contract will be $0 and the fair market
value of each senior deferrable note will be $50.
We intend to report the purchase contract
payments as income to you, but you may want to
consult your tax advisor concerning alternative
characterizations.
If you own a PEPS Unit, you will include in gross
income interest income on the senior deferrable
notes when such interest income is paid or
accrued in accordance with your regular method of
tax accounting.
If you own a Treasury PEPS Unit, you will be
required to include in gross income each year
your allocable share of any original issue
discount or acquisition discount on the treasury
security that accrues in such year.
Because there is no statutory, judicial or
administrative authority directly addressing the
tax treatment of the PEPS Units or instruments
similar to the PEPS Units, you are urged to
consult your own tax advisor concerning the tax
consequences of an investment in the PEPS Units.
For additional information, see "United States
Federal Income Tax Consequences" in this
prospectus supplement.
Use of Proceeds............. The net proceeds from the sale of the PEPS Units,
after deducting underwriting discounts and
commissions and estimated fees and expenses, are
expected to be approximately $727,500,000
($836,625,000 if the underwriters' over-allotment
option is exercised in full).
We expect to use these proceeds to refinance debt
incurred in connection with our acquisition of
Unisource and for general corporate purposes.
S-15
<PAGE>
Illustration of PEPS Unit Terms and Features
The following illustrates some of the key terms and features of the PEPS
Units.
Components of each PEPS Unit: . A contract to purchase shares of Georgia-
Pacific Group Stock on or prior to August 16,
2002; and
. A senior deferrable note of Georgia-Pacific
due August 16, 2004
Issue price of each PEPS Unit:$50
Yield on each PEPS Unit: 7.50%, consisting of:
. Purchase contract payments of .35% per year,
paid quarterly, of the $50 stated amount per
PEPS Unit; and
. Interest on the senior deferrable note of
7.15% per year, paid quarterly, until August
16, 2002. On August 16, 2002, following a
remarketing of the senior deferrable notes,
the interest rate will be reset at a rate that
will be equal to or greater than 7.15% per
year.
Reference price: $47.375
Threshold appreciation price: $57.797 (a 22% premium to the reference price)
A PEPS Unit consists of two components, a purchase contract and a senior
deferrable note. The return to a PEPS Unit investor will depend upon the return
provided by each of these components. For an investor that holds the PEPS Unit
until remarketing and uses the proceeds from the remarketing to settle the
purchase contract, the return will be comprised of the following.
<TABLE>
<CAPTION>
Purchase Contract Senior Deferrable Note
- ------------------------------------------------- ---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Value of shares + Purchase contract + Interest payments on + Proceeds, if any, above
delivered at maturity of payments equal to the senior deferrable $50.1250 received in the
the purchase contract on .35% per year until note at 7.15% per year remarketing of the
August 16, 2002 August 16, 2002 until August 16, 2002 senior deferrable note
on August 16, 2002
</TABLE>
S-16
<PAGE>
Illustration continued
Purchase Contract
The purchase contract will obligate the investor to pay us $50, no later
than August 16, 2002, for a number of shares of Georgia-Pacific Group Stock for
$50. The number of shares delivered will depend on the average closing price of
the stock for the 20-trading day period ending August 13, 2002.
. If the average closing price is greater than $57.797, the threshold
appreciation price, the investor will receive .8651 shares. This is
calculated by dividing the PEPS Unit issue price by the threshold
appreciation price ($50/$57.797 = .8651).
. If the average closing price is between $47.375 and $57.797, the investor
will receive a number of shares that produces a value of $50.
. If the average closing price is less than or equal to $47.375, the
investor will receive 1.0554 shares. This is calculated by dividing the
PEPS Unit issue price by the assumed Georgia-Pacific Group Stock share
price at issue ($50/$47.375 = 1.0554).
The following graphs show the number of shares of Georgia-Pacific Group
Stock that would be delivered for each purchase contract on August 16, 2002 and
the value of the shares delivered on August 16, 2002 depending upon the
Georgia-Pacific Group Stock share price performance.
[GRAPHS]
. Prior to August 16, 2002, so long as the purchase contract is
outstanding, we would pay the investor a purchase contract payment equal
to .35% of the $50 stated amount per PEPS Unit per year, paid quarterly.
Senior Deferrable Note
The senior deferrable notes described above will bear interest at a rate of
7.15% per year, paid quarterly, until August 16, 2002. After that date, the
interest rate will be reset following the remarketing of the senior deferrable
notes. The senior deferrable notes will mature on August 16, 2004.
The senior deferrable note will serve as collateral for the investor's
purchase contract obligation. If the investor does not substitute a treasury
security for the senior deferrable note or elect to settle the purchase
contract for cash, the senior deferrable note will be remarketed and the
proceeds from the remarketing will be used to settle the purchase contract. Any
proceeds received from the remarketing in excess of $50.1250 per senior
deferrable note will be paid to the investor.
S-17
<PAGE>
Illustration continued
Comparison of Investment Returns for a PEPS Unit and Georgia-Pacific Group
Stock
The following table compares the hypothetical return realized by a PEPS Unit
investor compared to an investment made on the same day in Georgia-Pacific
Group Stock. If you bought this PEPS Unit, your investment would be
substantially similar to the risks and rewards of an investment in Georgia-
Pacific Group Stock. However, you would not benefit from the first 22%
appreciation in the market value per share of Georgia-Pacific Group Stock. In
addition, you would receive only 81.97% of the appreciation in market value per
share of Georgia-Pacific Group Stock above the threshold appreciation price.
Finally, until you settle the purchase contract, you would not receive any
dividends on Georgia-Pacific Group Stock. Instead, you would receive payments
on your PEPS Unit at a rate of 7.5% per year until August 16, 2002.
You should note that this analysis assumes that:
. we continue to pay quarterly dividends on Georgia-Pacific Group Stock
totalling $.50 per share per year; and
. there are no proceeds above $50.1250 received by the PEPS Unit
investor in connection with the remarketing of the senior deferrable
note.
<TABLE>
<CAPTION>
Pretax
Change in Hypothetical Annualized Pretax
Georgia-Pacific Georgia-Pacific Shares Value of Shares Rate of Return Annualized
Group Stock Group Stock Delivered Delivered Per on Georgia- Rate of
Price from Price at Per Purchase Purchase Pacific Group Return on
Reference Price Maturity Contract Contract Stock PEPS Units
- --------------- --------------- ------------ --------------- -------------- ----------
<S> <C> <C> <C> <C> <C>
-50% $23.69 1.0554 $25.00 -20.98% -12.13%
-40% $28.43 1.0554 $30.00 -15.32% -7.21%
-30% $33.16 1.0554 $35.00 -10.47% -2.91%
-20% $37.90 1.0554 $40.00 -6.20% .92%
-10% $42.64 1.0554 $45.00 -2.39% 4.36%
-5% $45.01 1.0554 $47.50 -.63% 5.97%
0% $47.38 1.0554 $50.00 1.06% 7.50%
5% $49.74 1.0051 $50.00 2.66% 7.50%
10% $52.11 .9595 $50.00 4.20% 7.50%
20% $56.85 .8795 $50.00 7.10% 7.50%
30% $61.59 .8651 $53.28 9.78% 9.42%
40% $66.33 .8651 $57.38 12.28% 11.68%
50% $71.06 .8651 $61.48 14.63% 13.80%
</TABLE>
The above diagrams and tables do not represent all potential outcomes from
an investment in PEPS Units. For example, prior to August 16, 2002, an investor
may substitute a treasury security for the senior deferrable note as
collateral. By substituting a zero-coupon treasury security for 20 senior
deferrable notes, an investor may achieve higher or lower rates of return than
shown above. The actual returns will vary depending upon a number of factors,
including:
. the price of the zero-coupon treasury security;
. the potential trading price of the senior deferrable notes; and
. the costs and expenses associated with creating a Treasury PEPS Unit.
An investor that creates a Treasury PEPS Unit, or an investor that settles
the purchase contract for cash, and continues to hold the senior deferrable
note will continue to receive interest payments on the senior deferrable note
until August 16, 2004. The interest rate on the senior deferrable notes will be
reset on August 16, 2002 to the rate determined in the remarketing of the
senior deferrable notes.
The return for a PEPS Unit investor may be greater if any proceeds above
$50.1250 are received in the remarketing of the senior deferrable note.
S-18
<PAGE>
RISK FACTORS
An investment in PEPS Units involves a number of risks. Before deciding to
buy any PEPS Units, you should carefully consider the following information,
together with the other information in this prospectus supplement, the
accompanying prospectus and the documents that are incorporated by reference
in the accompanying prospectus about risks concerning an investment in PEPS
Units.
Because a PEPS Unit consists of a purchase contract to acquire shares of
Georgia-Pacific Group Stock and a senior deferrable note issued by us, you are
making an investment decision with regard to the Georgia-Pacific Group Stock
and the senior deferrable notes as well as the PEPS Units. You should
carefully review the information in this prospectus supplement and the
accompanying prospectus about all of these securities.
Risk Factors Relating to the PEPS Units
You will bear the entire risk of a decline in the price of Georgia-Pacific
Group Stock
The number of shares of Georgia-Pacific Group Stock that you will receive
upon the settlement of the purchase contract is not fixed, but rather will
depend on the market value of the Georgia-Pacific Group Stock near the time of
settlement. Because the price of the Georgia-Pacific Group Stock fluctuates,
the aggregate market value of the shares of Georgia-Pacific Group Stock
receivable upon settlement of the purchase contract may be more or less than
the stated amount of $50 per PEPS Unit. If the market value of the Georgia-
Pacific Group Stock near the time of settlement is less than $47.375, the
aggregate market value of the shares issuable upon settlement generally will
be less than the stated amount of the purchase contract, and your investment
in a PEPS Unit will result in a loss. Therefore, you will bear the full risk
of a decline in the market value of the Georgia-Pacific Group Stock prior to
settlement of the purchase contract.
You will receive only a portion of any appreciation in the market price of
Georgia-Pacific Group Stock
The aggregate market value of the shares of Georgia-Pacific Group Stock
receivable upon settlement of the purchase contract generally will exceed the
stated amount of $50 only if the average closing price of the Georgia-Pacific
Group Stock over the 20-trading day period ending August 13, 2002 equals or
exceeds the "threshold appreciation price" of $57.797 (which represents an
appreciation of 22.00% over the "reference price" of $47.375). Therefore,
during the period prior to settlement, an investment in a PEPS Unit affords
less opportunity for equity appreciation than a direct investment in shares of
Georgia-Pacific Group Stock. If the applicable average closing price exceeds
the reference price of $47.375 but falls below the threshold appreciation
price of $57.797, you will realize no equity appreciation on the Georgia-
Pacific Group Stock for the period during which you own the purchase contract.
Furthermore, if the applicable average closing price equals or exceeds the
threshold appreciation price, you will realize only 81.97% of the equity
appreciation for that period above the threshold appreciation price. See
"Description of the Purchase Contracts--General" in this prospectus supplement
for an illustration of the number of shares of Georgia-Pacific Group Stock
that you would receive at various average market prices.
The market price of Georgia-Pacific Group Stock is unpredictable
It is impossible to predict whether the market price of the Georgia-Pacific
Group Stock will rise or fall. Many factors influence the trading price of the
Georgia-Pacific Group Stock. These factors include changes in our financial
condition, results of operations and prospects and complex and interrelated
political, economic, financial and other factors that can affect the capital
markets generally, the stock exchange on which the Georgia-Pacific Group Stock
is traded and the market segments of which we are a part.
The market for the Georgia-Pacific Group Stock likely will influence, and
be influenced by, any market that develops for the PEPS Units. For example,
investors' anticipation of the distribution into the market of the additional
shares of Georgia-Pacific Group Stock issuable upon settlement of the purchase
contracts could
S-19
<PAGE>
depress the price of Georgia-Pacific Group Stock and increase their
volatility. If the underwriters' over-allotment option is exercised in full,
the largest number of shares of Georgia-Pacific Group Stock issuable upon
settlement of the purchase contracts would constitute approximately 9% of the
Georgia-Pacific Group Stock outstanding as of June 21, 1999. The price of the
Georgia-Pacific Group Stock also could be affected by possible sales of the
Georgia-Pacific Group Stock by investors who view the PEPS Units as a more
attractive means of equity participation in Georgia-Pacific and by hedging or
arbitrage trading activity that may develop involving the PEPS Units and the
Georgia-Pacific Group Stock.
The PEPS Units and Treasury PEPS Units provide limited settlement rate
adjustments
The number of shares of the Georgia-Pacific Group Stock issuable upon
settlement of each purchase contract is subject to adjustment only for stock
splits and combinations, stock dividends and certain other specified
transactions. The number of shares of the Georgia-Pacific Group Stock issuable
upon settlement of each purchase contract is not subject to adjustment for
other events, such as employee stock option grants, offerings of Georgia-
Pacific Group Stock for cash or in connection with acquisitions or certain
other transactions, which may adversely affect the price of Georgia-Pacific
Group Stock. The terms of the PEPS Units do not restrict our ability to offer
Georgia-Pacific Group Stock in the future or to engage in other transactions
that could dilute the Georgia-Pacific Group Stock. We have no obligation to
consider the interests of the holders of the PEPS Units for any reason.
You have no shareholder rights with respect to Georgia-Pacific Group Stock
Until you acquire shares of Georgia-Pacific Group Stock upon settlement of
your purchase contract, you will have no rights with respect to the shares of
Georgia-Pacific Group Stock, including voting rights, rights to respond to
tender offers and rights to receive any dividends or other distributions
(including rights under our restated rights plan) on Georgia-Pacific Group
Stock. Upon settlement of your purchase contract, you will be entitled to
exercise the rights of a holder of shares of Georgia-Pacific Group Stock only
as to actions for which the applicable record date occurs after the settlement
date.
The yield on the PEPS Unit is fixed
We cannot assure you that the yield on the PEPS Unit will remain higher
than the dividend yield on the shares of Georgia-Pacific Group Stock. You will
be entitled to receive aggregate quarterly cash distributions at the rate of
7.50% of the stated amount per PEPS Unit per year, consisting of purchase
contract payments of $.175 and interest payments on the related senior
deferrable note of $3.575. We currently pay cash dividends at the rate of $.50
per share of Georgia-Pacific Group Stock per year (equivalent to 1.06% of the
$47.375 reference price per year).
We will have the option to defer purchase contract payments
We will have the right to defer payment of all or part of the purchase
contract payments on the purchase contracts until no later than the purchase
contract settlement date. We will pay additional purchase contract payments on
any deferred installments of purchase contract payments at a rate of .35% per
year (compounding quarterly) until paid. If the purchase contracts are settled
early (at your option) or terminated, you will have no right to receive any
accrued deferred purchase contract payments.
We will also have the option to defer interest payments; if we do, you will
have original issue discount income
If we exercise our right to defer payments of interest on the senior
deferrable notes, you would be required to include the stated interest on the
senior deferrable notes in gross income, as original issue discount, on a
daily economic accrual basis, regardless of your method of accounting. As a
result, you would recognize income for United States federal income tax
purposes in advance of the receipt of cash attributable to such income, and
S-20
<PAGE>
would not receive the cash until an interest payment is made. See "United
States Federal Income Tax Consequences--Senior Deferrable Notes--Interest
Income and Original Issue Discount" in this prospectus supplement.
If we exercise our right to defer payments of interest on the senior
deferrable notes, the market price of the PEPS Units is likely to decrease. In
addition, the mere existence of the right to defer interest payments may cause
the market price of the PEPS Units to be more volatile than the market price
of other securities that are not subject to such deferrals.
Your pledged senior deferrable note will be encumbered by our security
interest
Although you will be the beneficial owner of the underlying pledged senior
deferrable note, that pledged senior deferrable note will be pledged with the
collateral agent to secure your obligation under the purchase contract.
Therefore, for so long as the purchase contract remains in effect, you will
not be allowed to withdraw your pledged senior deferrable note from this
pledged arrangement, except to create Treasury PEPS Units as described in this
prospectus supplement.
Secondary trading in the PEPS Units, Treasury PEPS Units and the senior
deferrable notes may be limited
It is impossible to predict how the PEPS Units, the Treasury PEPS Units and
the senior deferrable notes will trade in the secondary market or whether the
market for any of these securities will be liquid or illiquid. There currently
is no secondary market for any of these securities, and we cannot assure you
as to the liquidity of any trading market that may develop, the ability of
holders to sell their securities in that market or whether any such market
will continue.
The PEPS Units have been approved for listing on the New York Stock
Exchange under the symbol "GPW". However, listing on the New York Stock
Exchange does not guarantee the depth or liquidity of the market for the PEPS
Units. If holders of the PEPS Units create Treasury PEPS Units, the liquidity
of the PEPS Units could be adversely affected. Moreover, if the number of PEPS
Units falls below the New York Stock Exchange's requirement for continued
listing (whether as a result of the creation of Treasury PEPS Units or
otherwise), the PEPS Units could be delisted from the New York Stock Exchange,
or trading in the PEPS Units could be suspended.
If Treasury PEPS Units are traded to a sufficient extent to meet applicable
exchange listing requirements, we will try to list those securities on the
same national securities exchanges or associations as the PEPS Units. However,
we do not presently plan to list the Treasury PEPS Units or the senior
deferrable notes on any securities exchange. The underwriters have advised us
that they presently intend to make a market for the PEPS Units, the Treasury
PEPS Units and the senior deferrable notes. However, they are not obligated to
do so, and they may discontinue any market making at any time.
The purchase contract agreement is not qualified under the Trust Indenture
Act and therefore the obligations of the purchase contract agent are
limited
The purchase contract agreement is not an indenture under the Trust
Indenture Act. Therefore, the purchase contract agent will not qualify as a
trustee under the Trust Indenture Act, and you will not benefit from the
protections of that law, such as disqualification of an indenture trustee for
"conflicting interests", provisions preventing an indenture trustee from
improving its own position at the expense of the security holders and the
requirement that an indenture trustee deliver reports at least annually with
respect to the indenture trustee and the securities. Under the terms of the
purchase contract agreement, the purchase contract agent will have only
limited obligations to you as a holder of the PEPS Unit.
S-21
<PAGE>
Delivery of securities subject to potential delay
The purchase contract will terminate automatically if certain bankruptcy,
insolvency or reorganization events occur with respect to us. If the purchase
contract terminates upon one of these events, your rights and obligations
under your purchase contract also will terminate, including your right to
receive accrued purchase contract payments and your obligation to pay for, and
your right to receive, shares of Georgia-Pacific Group Stock. Upon
termination, you will receive your senior deferrable note or your treasury
security. Notwithstanding the automatic termination of the purchase contracts,
imposition of an automatic stay under Section 362 of the Bankruptcy Code may
delay the delivery to you of your securities being held as collateral under
the pledge arrangement.
Risk Factors relating to our capital structure with two separate classes of
Common Stock
You are shareholders of one company and, therefore, financial effects of
one group could adversely affect the other
Holders of Georgia-Pacific Group Stock and Timber Stock are shareholders of
a single company. The Georgia-Pacific Group and the Timber Group are not
separate entities. As a result, shareholders are subject to all of the risks
of an investment in Georgia-Pacific and all of our businesses, assets and
liabilities. The assets we attribute to one group could be subject to the
liabilities of the other group, whether such liabilities arise from lawsuits,
contracts or indebtedness that we attribute to the other group. If we are
unable to satisfy one group's liabilities out of the assets we attribute to
it, we may be required to satisfy those liabilities with assets we have
attributed to the other group.
Financial effects from one group that affect our consolidated results of
operations or financial condition could affect the results of operations or
financial condition of the other group and the market price of the other
group's Common Stock. In addition, net losses of either group, if any, and
dividends and distributions on, or repurchases of, either group's Common
Stock, or repurchases of Preferred Stock will reduce the funds we can pay on
each class of Common Stock under Georgia law. For these reasons, you should
read our consolidated financial information with the financial information we
provide for each group.
Holders of Common Stock will have shareholder rights specific to their
group only in limited circumstances
Holders of Georgia-Pacific Group Stock or Timber Stock generally do not
have shareholder rights specific to their corresponding groups. Instead,
holders have customary shareholder rights relating to Georgia-Pacific as a
whole. For example, holders of Georgia-Pacific Group Stock and Timber Stock
vote together as a single voting group to approve a disposition of all or
substantially all of the assets of Georgia-Pacific.
Holders of Georgia-Pacific Group Stock and Timber Stock only have the
following rights with respect to their particular group:
. an opportunity to receive dividends declared by our board of directors
based on the available dividend amount for their group;
. requirements for a mandatory dividend, redemption or conversion upon the
disposition of all or substantially all of the assets of their group;
and
. a right to vote on matters as a separate voting group under certain
circumstances, as described under "Description of Common Stock--Voting
Rights" in the accompanying prospectus.
S-22
<PAGE>
Limits exist on voting power of Georgia-Pacific Group Stock
In circumstances in which the two classes of Common Stock vote together
as a single voting group, Timber Stock may not have any influence on the
outcome of shareholder voting
As of the date of this prospectus supplement, the Georgia-Pacific Group
Stock has a substantial majority of the combined voting power of the Common
Stock. However, except in limited circumstances requiring separate voting
group voting, either class of Common Stock that is entitled to more than the
number of votes required to approve any shareholder action could control the
outcome of a vote--even if the matter involves a divergence or conflict of the
interests of the holders of the Georgia-Pacific Group Stock and the Timber
Stock. These matters may include mergers and other extraordinary transactions.
In circumstances in which a separate voting group vote is required, the
class of Common Stock with less than majority voting power can block
action
If Georgia law, New York Stock Exchange rules or our board of directors
requires a separate vote on a matter by holders of either the Georgia-Pacific
Group Stock or the Timber Stock, those holders could prevent approval of the
matter--even if the holders of a majority of the total number of votes cast,
voting together as a voting group, were to vote in favor of it.
In circumstances in which the two classes of Common Stock vote together
as a single voting group, holders of only one class of Common Stock
cannot ensure that their voting power will be sufficient to protect
their interests
Since the relative voting power per share of Georgia-Pacific Group Stock
and Timber Stock will fluctuate based on the relative market values of the two
classes of Common Stock, the relative voting power of one class of Common
Stock could decrease. As a result, holders of shares of only one of the two
classes of Common Stock cannot ensure that their voting power will be
sufficient to protect their interests where the holders of the two classes of
Common Stock vote together as a single voting group.
Shareholders may not have any remedies for breach of fiduciary duties if
any action by directors and officers has a disadvantageous effect on a
class of Common Stock
If the members of our board of directors make a good faith business
determination in an informed and deliberate manner, carefully considering the
action to be taken, shareholders may not have any remedies if the action or
decision of our directors or officers has a disadvantageous effect on the
Georgia-Pacific Group Stock or the Timber Stock compared to the other class of
Common Stock. However, we are not aware of any Georgia court adjudicating such
an action in the context of our capital structure. Accordingly, a Georgia
court hearing such a challenge by shareholders may decide differently.
Stock ownership could cause directors and officers to favor one group over
the other group
Our directors and officers may have stock and option holdings in both the
Georgia-Pacific Group Stock and the Timber Stock. Differences in the trading
values between the Georgia-Pacific Group Stock and the Timber Stock could
cause the relative values of their interests in the two classes of Common
Stock to vary significantly. Accordingly, it is possible that our directors
and officers could have an incentive to favor one group over the other because
of the relative values of their interests.
Potential conflicts of interest exist between the two classes of Common
Stock which may be difficult to resolve by our board of directors or which
may be resolved adversely to one of the classes
Our board of directors may pay more or less dividends on one group's
Common Stock than if that group were a separate company
Subject to the limitations referred to below, our board of directors has
the authority to declare and pay dividends on the Georgia-Pacific Group Stock
and the Timber Stock in any amount. Our board of directors
S-23
<PAGE>
could, in its sole discretion, declare and pay dividends exclusively on the
Georgia-Pacific Group Stock, exclusively on the Timber Stock, or on both, in
equal or unequal amounts. The performance of one group may cause our board of
directors to pay more or less dividends on the other group's Common Stock than
if that other group were a stand-alone corporation. Our board of directors
will not be required to consider the amounts of dividends previously declared
on each class of Common Stock, the respective voting or liquidation rights of
each class of Common Stock or any other factor. In addition, Georgia law and
our restated articles of incorporation impose limitations on the amount of
dividends which may be paid on each class of Common Stock. For additional
information on these limitations, see "Description of Common Stock--Dividends"
in the accompanying prospectus and "Dividend Policy" in this prospectus
supplement.
Proceeds of mergers, consolidations or statutory share exchanges may be
allocated unfavorably
Because our restated articles of incorporation do not specify how
consideration to be received in a merger, consolidation or statutory share
exchange involving Georgia-Pacific will be allocated between the holders of
Georgia-Pacific Group Stock and the holders of Timber Stock, our board of
directors will make that determination. That determination could favor one
group's shareholders at the expense of the other group's shareholders.
Holders of either class of Common Stock, as well as holders of PEPS Units
and Treasury PEPS Units, may be adversely affected by a conversion of one
group's Common Stock
Our board of directors could, in its sole discretion and without
shareholder approval, determine to convert shares of Georgia-Pacific Group
Stock into shares of Timber Stock, or vice versa, at a 15% premium at any time
or at a 10% premium in connection with a disposition of all or substantially
all of the assets of the group whose stock is being converted. Any such
determination could be made at a time when either or both classes of Common
Stock may be considered to be overvalued or undervalued. Any conversion of one
class of Common Stock at a premium would dilute the interests in Georgia-
Pacific of the holders of the other class of Common Stock. Any conversion
would also preclude holders of both classes of Common Stock from retaining
their investment in a security that is intended to reflect separately the
performance of the relevant group. It would also give holders of shares of the
class of Common Stock converted a greater or lesser premium than any premium
that might be paid by a third-party buyer of all or substantially all of the
assets of the group whose stock is converted. For additional information on
the terms and conditions of a conversion of one class of Common Stock into the
other, see "Description of Common Stock--Conversion and Redemption" in the
accompanying prospectus.
Allocation of corporate opportunities could favor one group over the other
Our board of directors may be required to allocate corporate opportunities
between the two groups. In some cases, our directors could determine that a
corporate opportunity, such as a business that we are acquiring, should be
shared by the two groups. These decisions could favor one group at the expense
of the other. For additional information on the factors affecting these
decisions, see "--Management and Allocation Policies--Review of Corporate
Opportunities and Other Matters" in this prospectus supplement.
Our board of directors may change our management and allocation policies
without shareholder approval to the detriment of one group
Our board of directors may modify or rescind our policies with respect to
the allocation of corporate overhead, taxes, debt, interest and other matters,
or may adopt additional policies in its sole discretion without shareholder
approval. A decision to modify or rescind these policies, or adopt additional
policies, could have different effects on holders of Georgia-Pacific Group
Stock and holders of Timber Stock or could adversely affect one class of
shareholders compared to the other class.
A group's financing costs may be higher than if the group were a stand-
alone company
The debt costs attributable to the two groups are calculated based on the
weighted average interest rate of all of our debt, calculated on a quarterly
basis. Expenses related to our debt are reflected in the weighted
S-24
<PAGE>
average interest rate. As a result, changes in the weighted average interest
rate of our debt will increase or decrease the interest expense charged to each
group. In addition, each group will receive a "benefit" or "detriment" to the
extent such weighted average cost is lower or higher, respectively, than the
market rate for a hypothetical borrowing of debt by the group if the group were
a stand-alone corporation. See "Management and Allocation Policies--Financing"
in this prospectus supplement.
Holders of one group's Common Stock may receive less consideration upon a
sale of assets than if the group were a stand-alone company
Our restated articles of incorporation provide that if we dispose of all or
substantially all of the assets of either group, we must, subject to certain
exceptions,
. distribute to holders of that group's Common Stock an amount equal to
the net proceeds of the disposition; or
. convert the outstanding shares of that group's Common Stock into shares
of the other group's Common Stock at a 10% premium.
If the group whose assets are disposed were a separate, independent company
and its shares were acquired by another person, certain costs of that
disposition, including corporate level taxes, might not be payable in
connection with that acquisition. As a result, shareholders of the separate,
independent company might receive a greater amount than the net proceeds that
would be received by holders of either of our group's Common Stock. In
addition, we cannot assure you that the net proceeds per share of either of our
group's Common Stock will be equal to or more than the market value per share
of such Common Stock prior to or after announcement of a disposition. For
additional information on the terms and conditions of a conversion upon a
disposition of all or substantially all of the assets of a group, see
"Description of Common Stock--Conversion and Redemption--Mandatory Dividend,
Redemption or Conversion of Common Stock If Disposition of Group Assets Occurs"
in the accompanying prospectus.
It might be possible for an acquiror to obtain control of Georgia-Pacific by
purchasing shares of only one class of Common Stock
A potential acquiror could acquire control of Georgia-Pacific by acquiring
shares of Common Stock having a majority of the voting power of all shares of
Common Stock outstanding. Such a majority could be obtained by acquiring a
sufficient number of shares of both classes of Common Stock or, if one class of
Common Stock has a majority of the voting power, only shares of that class. As
of the date of this prospectus supplement, the Georgia-Pacific Group Stock has
a substantial majority of the voting power. As a result, as of the date of this
prospectus supplement, it might be possible for an acquiror to obtain control
of Georgia-Pacific by purchasing only shares of Georgia-Pacific Group Stock.
Decisions by directors and officers that affect market values could
adversely affect voting and conversion rights
The relative voting power per share of each class of Common Stock and the
number of shares of one class of Common Stock issuable upon the conversion of
the other class of Common Stock will vary depending upon the relative market
values of the Georgia-Pacific Group Stock and the Timber Stock. The market
value of either or both classes of Common Stock could be adversely affected by
market reaction to decisions by our board of directors or our management that
investors perceive to affect differently one class of Common Stock compared to
the other. These decisions could involve:
. changes to our management and allocation policies;
. transfers of assets between the groups;
. allocations of corporate opportunities and financing resources between
the groups; and
. changes in dividend policies.
S-25
<PAGE>
Provisions governing Georgia-Pacific Group Stock and Timber Stock could
discourage a change of control and the payment of a premium for shares
Our restated rights plan could prevent shareholders from profiting from an
increase in the market value of their shares as a result of a change in
control of Georgia-Pacific by delaying or preventing a change in control. The
existence of two classes of Common Stock could also present complexities and
could pose obstacles, financial and otherwise, to an acquiring person. In
addition, provisions of Georgia law, our restated articles of incorporation
and our bylaws may also deter hostile takeover attempts. For additional
information on these provisions, see "Description of Common Stock--Restated
Rights Agreement" and "Description of Common Stock--Certain Anti-Takeover
Provisions of Georgia Law, Our Restated Articles of Incorporation and Bylaws
and Our Restated Rights Agreement" in the accompanying prospectus.
Recent Clinton Administration proposal could result in taxation on issuance
of Common Stock
A recent proposal by the Clinton Administration would impose a corporate
level tax on the issuance of stock similar to the Georgia-Pacific Group Stock
and Timber Stock. As proposed by the Clinton Administration, this provision
would be effective upon the date of its enactment by Congress. We cannot
predict whether this proposal will be enacted by Congress, and, if enacted,
whether it will be in the form proposed by the Clinton Administration. If the
proposed legislation were enacted, we might be required to combine the two
classes of Common Stock which could adversely affect the value of the Georgia-
Pacific Group Stock and Timber Stock.
Risk Factors Relating to the Georgia-Pacific Group and the Timber Group
Provisions relating to our timber and wood fiber supply policy may not
reflect those that would have been negotiated between unaffiliated third
parties
Since the separation of our manufacturing and distribution businesses from
our timber business, the Georgia-Pacific Group and the Timber Group have
conducted their respective businesses pursuant to an operating policy, the
"policy". The policy is currently effective through the end of 2000. In 1999,
the Georgia-Pacific Group will purchase approximately 62% of the Timber
Group's total harvest at prices which approximate market prices. For 2000, the
Georgia-Pacific Group has a right of first refusal, exercisable by November 1,
1999, to purchase up to 70% of the Timber Group's total annual harvest from
its forests in Southeastern Arkansas and Mississippi and up to 80% of its
annual harvest from a majority of the Timber Group's other forests. The
Georgia-Pacific Group must purchase, on a take-or-pay basis, at least 50% of
the harvest from the Timber Group's Southeastern Arkansas and Mississippi
forests and at least 60% of the harvest from the Timber Group's other Southern
forests. The purchase price for such wood is set monthly based on the price
for all wood of the same species, grade and size purchased by the Georgia-
Pacific Group from unaffiliated third parties in the same geographic areas
and, in some cases, the price received by the Timber Group for wood sold to
third parties. Each party is bound by the policy through 2000, and the sale of
manufacturing facilities or forests are subject to the obligations imposed by
the policy.
The Georgia-Pacific Group and the Timber Group presently are negotiating a
wood purchase agreement for the year 2001 and for some period of time
thereafter. The purchase agreement currently under consideration will set
volumes and prices on a forest-by-forest basis, rather than on a nationwide
basis for timberlands owned by the Timber Group. This may result in less wood
being sold by the Timber Group to Georgia-Pacific Group. There is some risk to
the Georgia-Pacific Group as the Timber Group sells more of its available wood
to unaffiliated third parties and restructures its ownership of timberland.
However, the Georgia-Pacific Group historically has procured on average less
than 25% of its wood from timberlands now operated by the Timber Group. The
Georgia-Pacific Group believes it can continue to procure adequate wood
supplies for its mills at competitive prices despite sales by the Timber Group
to third parties.
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<PAGE>
The Timber Group's results of operations and financial condition may be
materially impacted by purchases and sales of timberland
We expect the Timber Group to buy and sell timberlands as part of a
continuing effort to improve its competitive position. We also expect the
Timber Group to use the proceeds from sales of timberlands to:
. fund the purchase of other timberlands which, due to location or species
mix, are more desirable;
. reduce debt; or
. return cash to holders of Timber Stock, either in the form of dividends
or stock repurchases.
The cost of timberland purchases or the proceeds from timberland sales
could be material to the results of operations and the financial condition of
the Timber Group in a particular quarter.
USE OF PROCEEDS
The net proceeds from the sale of the 15,000,000 PEPS Units, after
deducting the underwriters' discounts and commissions and estimated fees and
expenses, are expected to be approximately $727,500,000, or $836,625,000 if
the underwriters' over-allotment option is exercised in full.
We will use all of these proceeds to refinance a portion of a $1.0 billion
interim term loan, $600 million of which we borrowed on June 30, 1999 and $400
million of which we expect to borrow on July 6, 1999. Borrowings under the
interim term loan are being used to finance our acquisition of all of the
outstanding shares of Unisource for approximately $840 million and to
refinance a portion of Unisource's existing indebtedness. The interim term
loan bears interest at a rate equal to one-week LIBOR plus 100 basis points,
which was 6.35% on June 30, 1999.
S-27
<PAGE>
PRICE RANGE OF GEORGIA-PACIFIC GROUP STOCK
Georgia-Pacific Group Stock is listed on the New York Stock Exchange under
the symbol "GP". The following table sets forth the range of intra-day high
and low sale prices (reflecting the two-for-one stock split of Georgia-Pacific
Group Stock effected June 3, 1999), as reported on the New York Stock Exchange
Composite Tape:
<TABLE>
<CAPTION>
Price Range
----------------
High Low
------ ------
<S> <C> <C>
1997
Fourth Quarter(1).................................. $ 32 $ 29 1/2
1998
First Quarter...................................... 35 26
Second Quarter..................................... 40 1/2 27 11/32
Third Quarter...................................... 30 1/4 18 11/16
Fourth Quarter..................................... 30 22
1999
First Quarter...................................... 41 29 11/32
Second Quarter(2).................................. 54 1/8 38 9/32
</TABLE>
- --------
(1) Trading began December 17, 1997.
(2) Through June 30, 1999.
On June 30, 1999, the last reported sale price of Georgia-Pacific Group
Stock on the New York Stock Exchange was $47 3/8 per share.
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<PAGE>
DIVIDEND POLICY
Our board of directors has adopted a dividend policy pursuant to which we
presently pay a quarterly dividend of $.1250 per share on the Georgia-Pacific
Group Stock and $.25 per share on the Timber Stock. The relative dividends on
the Georgia-Pacific Group Stock and the Timber Stock are based upon each
group's relative contribution to the earnings of Georgia-Pacific and on a
number of other factors, including:
. the number of each group's shares outstanding;
. their respective cash flows;
. volatility of earnings; and
. our ability to satisfy our debt obligations and other fixed charges.
Our board of directors does not currently intend to change the above-
described dividend policy but reserves the right to do so at any time based
primarily on the financial condition, results of operations and business
requirements of the respective groups and of Georgia-Pacific as a whole.
Future dividends on Georgia-Pacific Group Stock and Timber Stock will be
payable when, as and if declared by our board of directors out of the lesser
of:
. all assets of Georgia-Pacific legally available for the payment of
dividends; and
. the amount calculated under the definition of that group's available
dividend amount contained in our restated articles of incorporation.
For additional information on the amount available for paying dividends on
Georgia-Pacific Group Stock and Timber Stock, see "Description of Common
Stock--Dividends" in the accompanying prospectus.
S-29
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
Georgia-Pacific at April 3, 1999 (1) on an actual basis and (2) as adjusted
for the PEPS Units offering and the application of the net proceeds therefrom.
This table should be read in conjunction with the consolidated financial
statements incorporated by reference in the accompanying prospectus.
<TABLE>
<CAPTION>
April 3, 1999
--------------------------
As adjusted
for the PEPS Units
Actual offering
------ ------------------
(In millions)
<S> <C> <C>
Senior deferrable notes............................. $ -- $ 750
Long-term debt, excluding current portion(1)........ 4,112 4,112
Shareholders' equity:
Common Stock....................................... 75 75
Georgia-Pacific Group Stock, par value $.80;
400,000,000
shares authorized; 93,824,000 shares issued(2)
Timber Stock par value $.80; 250,000,000
shares authorized; 92,893,000 shares issued
Treasury Stock, at cost 7,932,000 shares of
Georgia-Pacific
Group Stock and 7,113,700 shares of Timber
Stock............................................ (615) (615)
Additional paid-in capital......................... 1,444 1,418
Retained earnings.................................. 2,280 2,280
Accumulated other comprehensive income............. (39) (39)
------ ------
Total shareholders' equity........................ 3,145 3,119
------ ------
Total capitalization............................ $7,257 $7,981
====== ======
</TABLE>
- --------
(1) Does not reflect indebtedness that we have incurred in connection with our
acquisition of Unisource, including a $1.0 billion interim term loan,
borrowings under which are being used to finance the purchase price of
Unisource and to refinance a portion of Unisource's existing indebtedness.
We will use the net proceeds from the sale of PEPS Units offered hereby to
repay a portion of the interim term loan. We intend to repay the balance
of the interim term loan through borrowings under uncommitted lines of
credit supported by our senior credit facility that we expect to
refinance. Also does not reflect indebtedness that the partnership to be
formed in connection with the Chesapeake transaction may incur to finance
the initial $730 million cash distribution to Chesapeake.
(2) Does not reflect the two-for-one stock split of Georgia-Pacific Group
Stock effective June 3, 1999.
S-30
<PAGE>
ACCOUNTING TREATMENT
The purchase contracts are forward transactions in Georgia-Pacific Group
Stock. Upon settlement of a purchase contract, we will receive the stated
amount of $50 on the purchase contract and will issue the requisite number of
shares of Georgia-Pacific Group Stock. The stated amount received will be
credited to shareholders' equity and allocated between Georgia-Pacific Group
Stock and additional paid-in capital accounts. The present value of the
purchase contract payments will initially be charged to equity, with a credit
to liabilities.
Prior to the issuance of shares of Georgia-Pacific Group Stock upon
settlement of the purchase contracts, the PEPS Units will be reflected in our
earnings per share calculations using the treasury stock method. Under this
method, the number of shares of Georgia-Pacific Group Stock used in
calculating earnings per share is deemed to be increased by the excess, if
any, of the number of shares issuable upon settlement of the purchase
contracts over the number of shares that could be purchased by us in the
market (at the average market price during the period) using the proceeds
receivable upon settlement. Consequently, we expect there will be no dilutive
effect on our earnings per share except during periods when the average market
price of a share of Georgia-Pacific Group Stock is above the threshold
appreciation price.
MANAGEMENT AND ALLOCATION POLICIES
Because the Georgia-Pacific Group and the Timber Group are each a part of a
single company, our board of directors and management have established
policies designed to highlight the separate performance of each of the
Georgia-Pacific Group and the Timber Group and to allow each group to focus on
its own business strategy and financial model. These policies establish
guidelines to help us to allocate costs and charges between the two groups on
an objective basis and to ensure that transactions between the Georgia-Pacific
Group and the Timber Group are made on terms that approximate the terms that
could be obtained from unaffiliated third parties.
Policies Subject to Change Without Shareholder Approval
Our board of directors may modify or rescind these policies, or may adopt
additional policies, in its sole discretion without shareholder approval. A
decision to modify or rescind these policies, or adopt additional policies,
could have different effects on holders of Georgia-Pacific Group Stock and
holders of Timber Stock or could result in a benefit or detriment to one class
of shareholders compared to the other class. Our board of directors would make
any such decision in accordance with its good faith business judgment that
such decision is in the best interests of Georgia-Pacific.
Timber and Wood Fiber Supply
Since the separation of our manufacturing and distribution businesses from
our timber business, the Georgia-Pacific Group and the Timber Group have
conducted their respective businesses pursuant to an operating policy, the
"policy". The policy is currently effective through the end of 2000. In 1999,
the Georgia-Pacific Group will purchase approximately 62% of the Timber
Group's total harvest at prices which approximate market prices. For 2000, the
Georgia-Pacific Group has a right of first refusal, exercisable by November 1,
1999, to purchase up to 70% of the Timber Group's total annual harvest from
its forests in Southeastern Arkansas and Mississippi and up to 80% of its
annual harvest from a majority of the Timber Group's other forests. The
Georgia-Pacific Group must purchase, on a take-or-pay basis, at least 50% of
the harvest from the Timber Group's Southeastern Arkansas and Mississippi
forests and at least 60% of the harvest from the Timber Group's other Southern
forests. The purchase price for such wood is set monthly based on the price
for all wood of the same species, grade and size purchased by the Georgia-
Pacific Group from unaffiliated third parties in the same geographic areas
and, in some cases, the price received by the Timber Group for wood sold to
third parties. Each party is bound by the policy through 2000, and the sale of
manufacturing facilities or forests are subject to the obligations imposed by
the policy.
S-31
<PAGE>
The Georgia-Pacific Group and the Timber Group presently are negotiating a
wood purchase agreement for the year 2001 and for some period of time
thereafter. The purchase agreement currently under consideration will set
volumes and prices on a forest-by-forest basis, rather than on a nationwide
basis for timberlands owned by the Timber Group. This may result in less wood
being sold by the Timber Group to Georgia-Pacific Group. There is some risk to
the Georgia-Pacific Group as the Timber Group sells more of its available wood
to unaffiliated third parties and restructures its ownership of timberland.
However, the Georgia-Pacific Group historically has procured on average less
than 25% of its wood from timberlands now operated by the Timber Group. The
Georgia-Pacific Group believes it can continue to procure adequate wood
supplies for its mills at competitive prices despite sales by the Timber Group
to third parties.
These prices are intended to approximate prices negotiated between
unaffiliated third parties in the open market:
. the purchase price for the wood harvested from the Timber Group's
Southeastern Arkansas and Mississippi forests is set monthly based on the
average of the price for all wood of the same species, grade and size
purchased by the Georgia-Pacific Group from unaffiliated third parties in
the same geographic area, and the price received by the Timber Group for
wood of the same species, grade and size harvested from the same forests
and sold to unaffiliated third parties, plus a premium representing the
benefit to the Georgia-Pacific Group of having access to a committed
quantity of high quality timber and wood fiber in close proximity to its
mills and plants;
. the purchase price for the wood harvested from the Timber Group's other
Southern forests is set monthly based on the price for all wood fiber of
the same species, grade and size purchased by the Georgia-Pacific Group
from unaffiliated third parties in the same geographic areas, plus a
premium representing the benefit to the Georgia-Pacific Group of having
access to a committed quantity of high quality timber and wood fiber in
close proximity to its mills; and
. the purchase price for the wood harvested from the Timber Group's
Northeast, Wisconsin, West Virginia and Pacific Northwest forests and
sold under the policy is established without a formula through
negotiations based upon each party's perception of the actual market
value of the wood.
Returns to Shareholders
Our board of directors has adopted a policy that we will only use earnings
and cash flows generated from the businesses of the Georgia-Pacific Group or
the Timber Group for:
. reinvestment in the business of the group generating such earnings and
related cash flow,
. repayment of that group's debt; or
. payment of dividends on, or the repurchase of shares of, that group's
Common Stock.
We will not loan funds of one group to the other group or otherwise invest the
funds of one group in the business of the other group.
We may only make repurchases of shares of Georgia-Pacific Group Stock or
Timber Stock in the open market or in private transactions so long as:
. Georgia-Pacific's debt is below $6.8 billion;
. Georgia-Pacific Group's debt is below $5.8 billion, if we are
repurchasing Georgia-Pacific Group Stock; and
. Timber Group's debt is below $1.0 billion, if we are repurchasing Timber
Stock.
The debt levels of Georgia-Pacific or either of the groups may from time to
time be above or below these thresholds, depending on operating and financial
considerations.
S-32
<PAGE>
Financing
The debt costs attributable to the Georgia-Pacific Group and the Timber
Group are calculated based on the weighted average interest rate of all of our
debt calculated on a quarterly basis. Expenses related to our debt are
reflected in the weighted average interest rate. Each group's debt increases
or decreases by the amount of any net cash generated by, or required to fund,
the group's operating activities, dividend payments, share repurchases and
other financing activities. We charge interest to each group based on the
amount of the group's debt. We reflect changes in the cost of our debt in
adjustments in the weighted average cost of the debt. We charge dividend costs
in respect of Preferred Stock and Junior Preferred Stock in a similar manner.
Capital Spending
The Georgia-Pacific Group's annual cash flows are generally sufficient to
allow it to maintain its current capital spending level of approximately $750
million per year. The Timber Group's annual cash flows are sufficient to
finance its normal capital spending programs which are expected to approximate
$50 million in 1999. The Timber Group's cash flows should also permit it to
make additional capital expenditures and selected acquisitions of timberlands
and other assets.
Our board of directors will make any decision to fund capital expenditures
or capital investments in excess of the cash flows of the respective groups in
its good faith business judgment, based on all relevant circumstances,
including:
. the financing and investing needs and objectives of each group;
. the availability and cost of alternative financing;
. the existence of alternative investment opportunities for the Georgia-
Pacific Group and the Timber Group; and
. the analysis of our board of directors of the desirability of making the
investment or acquisition.
Fiduciary and Management Responsibilities
Under Georgia law, a director or officer will be deemed to have satisfied
his or her fiduciary duties to Georgia-Pacific and our shareholders if that
person acts in a manner which he or she believes in good faith to be in the
best interests of Georgia-Pacific and with the care that an ordinarily prudent
person in a like position would exercise under similar circumstances. Our
board of directors and our chief executive officer, in establishing policies
with regard to intracompany matters such as the sale of timber and wood fiber
and allocations of assets, liabilities, debt, corporate overhead, taxes,
interest and other matters, will consider various factors and information
which could be beneficial or detrimental to the shareholders of the respective
groups and will make determinations in the best interests of Georgia-Pacific.
We have separate management teams for each group to ensure that the efforts
of each team of managers are focused solely on the business and operations for
which they have responsibility.
To further our objective that directors remain impartial notwithstanding
their equity ownership interests in the Georgia-Pacific Group and the Timber
Group, our board of directors has adopted a policy pursuant to which the
equity component of the annual compensation payable to each non-employee
director is a grant of restricted stock under our Outsider Directors Stock
Plan, consisting of a substantially equal number of shares of each of Georgia-
Pacific Group Stock and Timber Stock. Because of the differences in trading
values between the Georgia-Pacific Group Stock and the Timber Stock, the
actual value of the shares of Georgia-Pacific Group Stock and Timber Stock
held by directors vary significantly. See "Risk Factors--Risk Factors relating
to our capital structure with two classes of Common Stock--Stock ownership
could cause directors and officers to favor one group over the other group" in
this prospectus supplement.
Review of Corporate Opportunities and Other Matters
Our board of directors will review any significant matter which involves
the allocation of a corporate opportunity to either the Georgia-Pacific Group
or the Timber Group. Georgia law requires our board of
S-33
<PAGE>
directors to make its determination with regard to the allocation of any such
opportunity in accordance with its good faith business judgment of the best
interests of Georgia-Pacific. Among the factors that our board of directors
may consider in making this allocation is:
. whether a particular corporate opportunity is principally related to the
business of the Georgia-Pacific Group or the Timber Group;
. whether one group, because of its managerial or operational expertise,
will be better positioned to undertake the corporate opportunity;
. existing contractual agreements and restrictions; and
. other matters.
Our board of directors also will review:
. the allocation of significant tax benefits or charges to either the
Georgia-Pacific Group or the Timber Group;
. the allocation of significant liabilities to either the Georgia-Pacific
Group or the Timber Group;
. the write-off of significant assets; and
. any actions which would significantly affect the groups' access to
Georgia-Pacific's credit.
Competition Between Groups
Neither the Georgia-Pacific Group nor the Timber Group will compete in each
other's principal businesses, except that from time to time the Georgia-
Pacific Group may sell in the open market excess timber or wood fiber acquired
from the Timber Group or from third parties but not needed by nearby Georgia-
Pacific Group facilities.
Financial Statements; Allocation Matters
We prepare financial statements in accordance with generally accepted
accounting principles, consistently applied, for the Georgia-Pacific Group and
the Timber Group. These financial statements, taken together, comprise all of
the accounts included in our consolidated financial statements. The financial
statements of each of the Georgia-Pacific Group and the Timber Group reflect
the financial condition, results of operations and cash flows of the
businesses included in the corresponding group.
Group financial statements also include allocated portions of debt,
interest, corporate overhead and taxes. We will make these allocations for the
purpose of preparing each group's financial statements; however, holders of
Georgia-Pacific Group Stock and Timber Stock continue to be subject to all of
the risks associated with an investment in Georgia-Pacific and all of our
businesses, assets and liabilities. For additional information in these risks,
see "Risk Factors--Risk Factors relating to our capital structure with two
classes of Common Stock--You are shareholders of one company and, therefore,
financial effects of one group could adversely affect the other" in this
prospectus supplement.
In addition to allocating debt and interest as described under "Financing"
of this prospectus supplement, our board of directors has adopted the
following allocation policies, each of which is reflected in the financial
statements of the respective groups:
. Corporate Overhead. We will directly charge specifically identified costs
for certain general and administrative expenses to the Georgia-Pacific
Group and the Timber Group based upon the use of such corporate overhead.
Where determinations based on use alone are not practical, we will use
other methods and criteria to provide a reasonable allocation of the cost
attributable to the groups. Such allocated corporate overhead includes
executive management, human resources, legal, accounting and auditing,
tax, treasury, strategic planning, information systems support and
environmental services.
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<PAGE>
. Taxes. We will determine the federal income tax provisions of Georgia-
Pacific and its subsidiaries which own assets allocated between the
groups on a consolidated basis. We will allocate consolidated federal
income tax provisions and related tax payments or refunds between the
groups based principally on the taxable income and tax credits directly
attributable to each group. These allocations will reflect each group's
contribution, whether positive or negative, to Georgia-Pacific's
consolidated federal taxable income and the consolidated federal tax
liability and tax credit position. We will credit tax benefits to the
group generating those benefits if those benefits can be used on a
consolidated basis. Inter-group transactions are treated as if each group
were a stand-alone company.
We will determine the state and local income tax provisions on a
consolidated or combined basis or on a separate corporation basis, depending
on the tax laws of the respective jurisdictions. We will allocate state and
local income tax provisions and related tax payments or refunds determined on
a consolidated or combined basis between the groups based on their respective
contributions to these consolidated or combined state and local taxable
incomes. We will allocate state and local income tax provisions and related
tax payments or refunds determined on a separate corporation basis between the
groups in a manner designed to reflect the respective contributions of the
groups to the corporation's separate state or local taxable income.
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DESCRIPTION OF THE PEPS UNITS
The following description sets forth some of the terms of the PEPS Units.
It supplements the description of the stock purchase units in the accompanying
prospectus and, to the extent it is inconsistent with the prospectus, replaces
the description in the prospectus. The terms of the PEPS Units will include
those set forth in the purchase contract agreement between the purchase
contract agent and us. The following summary of some of the terms of the PEPS
Units and the summary of some of the terms of the purchase contracts, the
purchase contract agreement, the pledge agreement and the senior deferrable
notes set forth under the captions "Description of the Purchase Contracts",
"Certain Provisions of the Purchase Contracts, the Purchase Contract Agreement
and the Pledge Agreement" and the "Description of the Senior Deferrable Notes"
in this prospectus supplement contain a description of all of their material
terms but are not complete. We refer you to the forms of the purchase
contract, the purchase contract agreement, the pledge agreement and the senior
deferrable notes that have been filed as exhibits to the Registration
Statement.
PEPS Units
Each PEPS Unit offered hereby is a unit initially consisting of:
. a purchase contract under which (1) the holder will purchase from us on
August 16, 2002, the "purchase contract settlement date", or upon early
settlement, for $50, a number of shares of Georgia-Pacific Group Stock
equal to the settlement rate described below under "Description of the
Purchase Contracts--General" and (2) we will pay purchase contract
payments to the holder at a rate of .35% per year, paid quarterly; and
. a senior deferrable note due August 16, 2004 bearing interest at a rate
of 7.15% per year prior to August 16, 2002, and at a reset rate that will
be equal to or greater than 7.15% per year after that date, paid
quarterly, subject to our right to defer interest payments, as described
under "Description of the Senior Deferrable Notes--Option to Defer
Interest Payments".
The senior deferrable note will be pledged to the collateral agent under
the pledge agreement to secure the holder's obligation under the related
purchase contract to purchase shares of Georgia-Pacific Group Stock.
The purchase price of each PEPS Unit will be allocated between the purchase
contract and the senior deferrable note comprising the PEPS Unit in proportion
to their respective fair market values at the time of purchase. We expect
that, at the date of issuance of the PEPS Units, the fair market value of each
purchase contract will be $0 and the fair market value of each senior
deferrable note will be $50. This position generally will be binding on each
beneficial owner of a PEPS Unit (but not on the Internal Revenue Service). See
"United States Federal Income Tax Consequences--PEPS Unit--Allocation of
Purchase Price" in this prospectus supplement.
Creating Treasury PEPS Units by Substituting a Treasury Security for Senior
Deferrable Notes
Each holder of 20 PEPS Units may create 20 Treasury PEPS Units by
substituting for the senior deferrable notes that are a part of the PEPS Units
a treasury security with a principal amount at maturity equal to $1,000.
Each Treasury PEPS Unit will be a unit consisting of:
. a purchase contract under which (1) the holder will purchase from us on
the purchase contract settlement date, or upon early settlement, for $50,
a number of shares of Georgia-Pacific Group Stock equal to the settlement
rate and (2) we will pay purchase contract payments to the holder; and
. a 1/20 undivided beneficial ownership interest in a related zero-coupon
U.S. treasury security (CUSIP No. 912820BE6) with a principal amount at
maturity equal to $1,000 and maturing on August 15, 2002, the business
day preceding the purchase contract settlement date.
S-36
<PAGE>
The term "business day" means any day other than Saturday or Sunday or a day
on which banking institutions in New York City are authorized or required by
law or executive order to remain closed or a day on which The Bank of New
York, acting as trustee with respect to the senior deferrable notes (the
"senior trustee") is closed for business.
The treasury security will be pledged under the pledge agreement to secure
the holder's obligation to purchase shares of Georgia-Pacific Group Stock
under the purchase contract.
Holders of PEPS Units may create Treasury PEPS Units at any time prior to
or on August 7, 2002, the seventh business day prior to the purchase contract
settlement date. Because the treasury security is issued in integral multiples
of $1,000, holders of PEPS Units may create Treasury PEPS Units only in
integral multiples of 20.
To create 20 Treasury PEPS Units, a holder is required to:
. deposit with the securities intermediary a zero-coupon U.S. treasury
security (CUSIP No. 912820BE6) with a principal amount at maturity equal
to $1,000 and maturing on August 15, 2002; and
. transfer to the purchase contract agent 20 PEPS Units, accompanied by a
notice stating that the holder of the PEPS Units has deposited a treasury
security with the securities intermediary and requesting that the
purchase contract agent instruct the collateral agent to release the
related 20 senior deferrable notes.
Upon receiving instructions from the purchase contract agent and
confirmation of receipt of the treasury security by the securities
intermediary, the collateral agent will cause the securities intermediary to
release the related 20 senior deferrable notes from the pledge and deliver
them to the purchase contract agent, on behalf of the holder, free and clear
of our security interest. The purchase contract agent then will:
. cancel the 20 PEPS Units;
. transfer the related 20 senior deferrable notes to the holder; and
. deliver 20 Treasury PEPS Units to the holder.
The treasury security will be substituted for the senior deferrable notes
and will be pledged to the collateral agent to secure the holder's obligation
to purchase shares of Georgia-Pacific Group Stock under the related purchase
contracts. These senior deferrable notes thereafter will trade separately from
the Treasury PEPS Units.
Holders who create Treasury PEPS Units or recreate PEPS Units (as discussed
below) will be responsible for any fees or expenses payable to the collateral
agent in connection with substitutions of collateral. See "Certain Provisions
of the Purchase Contracts, the Purchase Contract Agreement and the Pledge
Agreement--Miscellaneous" in this prospectus supplement.
Recreating PEPS Units
Each holder of Treasury PEPS Units may recreate PEPS Units by:
. depositing with the securities intermediary 20 senior deferrable notes;
and
. transferring to the purchase contract agent 20 Treasury PEPS Units,
accompanied by a notice stating that such holder has deposited 20 senior
deferrable notes with the securities intermediary and requesting that the
purchase contract agent instruct the collateral agent to release the
related treasury security.
Upon receiving instructions from the purchase contract agent and
confirmation of receipt of the senior deferrable notes by the securities
intermediary, the collateral agent will cause the securities intermediary to
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<PAGE>
release the related treasury security from the pledge and deliver it to the
purchase contract agent, on behalf of the holder, free and clear of our
security interest therein. The purchase contract agent then will:
. cancel the 20 Treasury PEPS Units;
. transfer the related treasury security to the holder; and
. deliver 20 PEPS Units to the holder.
Holders of Treasury PEPS Units may recreate PEPS Units at any time prior to
or on August 7, 2002, the seventh business day prior to the purchase contract
settlement date.
Current Payments
Holders of PEPS Units will be entitled to receive aggregate cash
distributions at a rate of 7.50% of the stated amount and issue price of $50
per year from and after July 7, 1999, payable quarterly in arrears, subject to
increase as described under "Description of the Purchase Contracts--Purchase
Contract Payments" in this prospectus supplement. The quarterly payments on
the PEPS Units will consist of (1) purchase contract payments at the rate of
.35% of the stated amount per year and (2) interest on the related senior
deferrable note, payable at the rate of 7.15% of the principal amount per
year. We may defer payment of either or both purchase contract payments or
interest payments.
If a holder of PEPS Units creates Treasury PEPS Units by substituting a
treasury security for the senior deferrable notes, the only payments that such
holder will receive will be the quarterly purchase contract payments. In lieu
of payments with respect to any senior deferrable note, original issue
discount will accrue on the related treasury security.
Listing of the PEPS Units and the Treasury PEPS Units
The PEPS Units have been approved for listing on the New York Stock
Exchange under the symbol "GPW". If Treasury PEPS Units are created and then
traded to a sufficient extent that applicable exchange listing requirements
are met, we will try to list them on the national securities exchanges or
associations on which the PEPS Units are then listed or quoted. We do not
intend to list the senior deferrable notes on any securities exchange.
Miscellaneous
We may purchase from time to time any of the PEPS Units offered hereby that
are then outstanding by tender, in the open market or by private agreement.
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DESCRIPTION OF THE PURCHASE CONTRACTS
General
Each purchase contract that is a part of a PEPS Unit will obligate its
holder to purchase, and us to sell, on the purchase contract settlement date
(unless the purchase contract terminates prior to that date or is settled
early at the holder's option), a number of shares of Georgia-Pacific Group
Stock equal to the settlement rate, for $50 in cash. The number of shares of
Georgia-Pacific Group Stock issuable upon settlement of each purchase contract
on the purchase contract settlement date will be determined as follows
(subject to adjustment as described under "--Anti-Dilution Adjustments"
below):
. If the applicable market value is equal to or greater than the threshold
appreciation price of $57.797, then each purchase contract will be
settled for .8651 shares. (The reference price will equal the closing
price of Georgia-Pacific Group Stock on the date of this prospectus
supplement, subject to anti-dilution adjustments, the "reference price".
The threshold appreciation price represents an appreciation of 22.00%
above the reference price of $47.375.)
. If the applicable market value is less than the threshold appreciation
price but greater than the reference price, then each purchase contract
will be settled for a number of shares having a value, based on the
average applicable market value, equal to $50.
. If the applicable market value is less than or equal to the reference
price, then each purchase contract will be settled for 1.0554 shares of
Georgia-Pacific Group Stock.
For illustrative purposes only, the following table shows the number of
shares of Georgia-Pacific Group Stock issuable upon settlement of each
purchase contract at various assumed applicable market values. The table
assumes that there will be no adjustments to the settlement rate described
under "--Anti-Dilution Adjustments" below. We cannot assure you that the
actual applicable market value will be within the range set forth below. Given
the reference price of $47.375 and the threshold appreciation price of
$57.797, a holder of a PEPS Unit would receive on the purchase contract
settlement date the following number of shares of Georgia-Pacific Group Stock:
<TABLE>
<CAPTION>
Number of
Applicable Shares of
Market Georgia-Pacific
Value Group Stock
---------- ---------------
<S> <C>
$40.000 1.0554
$47.375 1.0554
$52.000 .9615
$57.797 .8651
$60.000 .8651
</TABLE>
As the above table illustrates, if, on the purchase contract settlement
date, the applicable market value is greater than or equal to $57.797, we will
be obligated to deliver .8651 shares of Georgia-Pacific Group Stock for each
purchase contract. As a result, the holder would receive 81.97% of the
appreciation in the market value of the shares of Georgia-Pacific Group Stock
above $57.797. If, on the purchase contract settlement date, the applicable
market value is less than $57.797 but greater than $47.375, we will be
obligated to deliver a number of shares of Georgia-Pacific Group Stock having
a value, based on the applicable market value, equal to $50 and we would
retain all appreciation in the market value of the shares of Georgia-Pacific
Group Stock for that period. If, on the purchase contract settlement date, the
applicable market value is less than or equal to $47.375, we will be obligated
to deliver 1.0554 shares of Georgia-Pacific Group Stock for each purchase
contract, regardless of the market price of the shares of Georgia-Pacific
Group Stock. As a result, the holder would realize the entire loss on the
decline in market value of the shares of Georgia-Pacific Group Stock for that
period.
The term "applicable market value" means the average of the closing prices
of the shares of Georgia- Pacific Group Stock on each of the 20 consecutive
trading days ending on August 13, 2002, the third business day prior to the
purchase contract settlement date.
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The term "closing price" of the shares of Georgia-Pacific Group Stock
means, on any date of determination (1) the closing sale price (or, if no
closing sale price is reported, the last reported sale price) of the shares of
Georgia-Pacific Group Stock on the New York Stock Exchange on such date or, if
the shares of Georgia-Pacific Group Stock are not listed for trading on the
New York Stock Exchange on any such date, as reported in the composite
transactions for the principal United States securities exchange on which the
shares of Georgia-Pacific Group Stock are so listed, or if the shares of
Georgia-Pacific Group Stock are not so listed on a United States national or
regional securities exchange, as reported by the NASDAQ Stock Market, Inc., or
(2) if the shares of Georgia-Pacific Group Stock are not so reported, the last
quoted bid price for the shares of Georgia-Pacific Group Stock in the over-
the-counter market as reported by the National Quotation Bureau or a similar
organization, or, if such bid price is not available, the average of the mid-
point of the last bid and ask prices of the shares of Georgia-Pacific Group
Stock on such date from at least three nationally recognized independent
investment banking firms retained for this purpose by us.
The term "trading day" means a day on which the shares of Georgia-Pacific
Group Stock (1) are not suspended from trading on any national or regional
securities exchange or association or over-the-counter market at the close of
business and (2) have traded at least once on the national or regional
securities exchange or association or over-the-counter market that is the
primary market for the trading of the shares of Georgia-Pacific Group Stock.
If we (1) sell all of the assets of the Georgia-Pacific Group and decide to
redeem all of the shares of the Georgia-Pacific Group Stock, as set forth
under "Description of Common Stock--Conversion and Redemption--Mandatory
Dividend, Redemption or Conversion of Common Stock If Disposition of Group
Assets Occurs", or (2) redeem all of the shares of the Georgia-Pacific Group
Stock for shares of common stock of one or more of our wholly owned
subsidiaries which own all of the assets and liabilities attributed to the
Georgia-Pacific Group, as set forth under "Description of Common Stock--
Conversion and Redemption--Redemption in Exchange for Stock of Subsidiary",
the purchase contract settlement date and the remarketing date will be
accelerated to a date prior to the record date for such redemption.
No fractional shares of Georgia-Pacific Group Stock will be issued by us
upon settlement of a purchase contract. In lieu of a fractional share, the
holder will receive an amount of cash equal to such fraction multiplied by the
applicable market value. If, however, a holder surrenders for settlement at
one time more than one purchase contract, then the number of shares of
Georgia-Pacific Group Stock issuable pursuant to such purchase contracts will
be computed based upon the aggregate number of purchase contracts surrendered.
Prior to the settlement of a purchase contract, the shares of Georgia-
Pacific Group Stock underlying the purchase contract will not be outstanding,
and the holder of the purchase contract will not have any voting rights,
rights to dividends or other distributions or other rights (including under
our restated rights plan) of a holder of Georgia-Pacific Group Stock by virtue
of holding such purchase contract.
By purchasing a PEPS Unit or a Treasury PEPS Unit, a holder will be deemed
to have:
. irrevocably authorized the purchase contract agent as attorney-in-fact to
enter into and perform that holder's obligations under the related
purchase contract on behalf of such holder;
. agreed to be bound by the terms and provisions of the related purchase
contract;
. irrevocably authorized the purchase contract agent as attorney-in-fact to
enter into and perform that holder's obligations under the pledge
agreement on behalf of such holder; and
. agreed to be bound by the pledge arrangement contained in the pledge
agreement.
In addition, each such holder will be deemed to have agreed to treat itself
as the owner of the related senior deferrable note or treasury security, as
the case may be, for United States federal, state and local income and
franchise tax purposes.
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<PAGE>
Settlement through Remarketing
PEPS Unit holders who fail to notify the purchase contract agent, prior to
or on August 7, 2002, the seventh business day prior to the purchase contract
settlement date, of their intention to effect settlement of the related
purchase contracts with cash in the manner described under "--Notice to Settle
with Cash", or who so notify the purchase contract agent but fail to deliver
such cash prior to or on August 9, 2002, the fifth business day prior to the
purchase contract settlement date, will have their senior deferrable notes
remarketed on August 13, 2002, the third business day prior to the purchase
contract settlement date. (These PEPS Unit holders will join the holders of
senior deferrable notes who have elected to have their senior deferrable notes
remarketed.)
Pursuant to the remarketing agreement between the remarketing agent and us
(the "remarketing agreement"), the remarketing agent will use its reasonable
efforts to remarket such senior deferrable notes on the remarketing date. If
the remarketing agent determines that it will not be able to remarket all the
senior deferrable notes tendered or deemed tendered for a purchase price of at
least $50.1250 per senior deferrable note immediately prior to remarketing,
then the remarketing agent will increase the interest rate on the senior
deferrable notes so that the market value will be equal to $50.1250 per senior
deferrable note at the time of the remarketing. Of the proceeds from the
remarketing of the senior deferrable notes that are a part of the PEPS Units,
$50 will automatically be applied to satisfy in full such PEPS Unit holder's
obligations to purchase shares of Georgia-Pacific Group Stock under the
related purchase contracts and $.1250 will automatically be applied to pay the
remarketing agent for its services in connection with the remarketing. Any
proceeds above $50.1250 per senior deferrable note will be delivered to the
respective PEPS Unit holder. These excess proceeds will be paid to the PEPS
Unit holders at the same time we pay the final purchase contract payment. See
"Description of the Senior Deferrable Notes--Interest Rate Reset by
Remarketing" in this prospectus supplement.
If the remarketing agent cannot remarket the senior deferrable notes, a
"failed remarketing" will occur. If you are a PEPS Unit holder who did not
settle your purchase contract early, we will be entitled to exercise our
rights as a secured party and, subject to applicable law, retain the senior
deferrable note pledged as collateral under the pledge agreement or sell it in
one or more private sales. In either case, the obligations of the holders
under the related purchase contracts would be satisfied in full. If we
exercise our rights as a secured creditor, we will pay any accrued and unpaid
interest on such senior deferrable notes in cash to the purchase contract
agent for payment to the holders of the PEPS Units of which such senior
deferrable notes are a part. We will cause a notice of such failed remarketing
to be published on August 14, 2002, the second business day prior to the
purchase contract settlement date in a daily newspaper in the English language
of general circulation in New York City, which is expected to be The Wall
Street Journal, and on Bloomberg News.
In the event of a failed remarketing, if you are a holder of a senior
deferrable note that is not a part of a PEPS Unit, such as a PEPS Unit holder
who settled the purchase contract early or a Treasury PEPS Unit holder, the
interest rate on your senior deferrable note will be set at the applicable
rate set forth under "Description of the Senior Deferrable Notes--Interest
Rate Reset by Remarketing--Failed Remarketing".
As long as the PEPS Units, the Treasury PEPS Units or the senior deferrable
notes are evidenced by one or more global security certificates deposited with
The Depository Trust Company ("DTC"), we will request, not later than 15 nor
more than 30 calendar days prior to the remarketing date, that DTC notify its
participants holding PEPS Units, Treasury PEPS Units or senior deferrable
notes of such remarketing and of the procedures to be followed for settlement
with cash. See "--Book-Entry System" in this prospectus supplement and "Book-
Entry Issuance" in the accompanying prospectus. We have agreed that, if
required under the U.S. federal securities laws, we will try to have in effect
a registration statement covering the senior deferrable notes to be remarketed
in a form that the remarketing agent may use in connection with the
remarketing process.
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Notice to Settle with Cash
A holder of a PEPS Unit or a Treasury PEPS Unit wishing to settle the
related purchase contract with cash must notify the purchase contract agent by
delivering a "Notice to Settle by Cash" prior to or on 5:00 p.m., New York
City time, on August 7, 2002, the seventh business day prior to the purchase
contract settlement date.
Such holder must deliver to the securities intermediary cash payment in the
form of a certified or cashier's check or by wire transfer, in each case in
immediately available funds payable to or upon the order of the securities
intermediary. Such payment must be delivered prior to 11:00 a.m., New York
City time, on August 9, 2002, the fifth business day prior to the purchase
contract settlement date, in the case of a PEPS Unit.
Upon receipt of such cash payment, the related senior deferrable note or
treasury security, as the case may be, will be released from the pledge
arrangement and transferred to the purchase contract agent for distribution to
the holder of the related PEPS Unit or Treasury PEPS Unit. If the payment is
not delivered by the applicable time and date specified above, the related
senior deferrable note will be remarketed and we will use the proceeds to
satisfy in full such holder's obligations under the related purchase contract,
or we will receive at maturity the principal amount of the related treasury
security in full satisfaction of such holder's obligations under the related
purchase contract.
Any cash received by the securities intermediary upon cash settlement will
be invested promptly in permitted investments and paid to us on the purchase
contract settlement date. Any funds received by the securities intermediary in
respect of the investment earnings from such investments will be distributed
to the purchase contract agent for payment to the holders who settled with
cash.
Early Settlement
A holder of a PEPS Unit or a Treasury PEPS Unit may settle the related
purchase contract prior to the purchase contract settlement date by delivering
to the purchase contract agent (1) a completed "Election to Settle Early" form
and (2) payment (payable to us in immediately available funds) in an amount
equal to $50 multiplied by the number of purchase contracts being settled. A
holder of a PEPS Unit or a Treasury PEPS Unit may settle early the related
purchase contract at any time prior to or on August 7, 2002, the seventh
business day prior to the purchase contract settlement date. A holder of a
Treasury PEPS Unit may settle early only in integral multiples of 20 Treasury
PEPS Units.
Upon early settlement, we will sell, and the holder will be entitled to
buy, .8651 shares of Georgia-Pacific Group Stock for each PEPS Unit or
Treasury PEPS Unit (regardless of the market price of one share of Georgia-
Pacific Group Stock on the date of early settlement), subject to adjustment
under the circumstances described under "--Anti-Dilution Adjustments" below.
The holder's right to receive future purchase contract payments will
terminate. We will cause (1) the shares of Georgia-Pacific Group Stock to be
delivered and (2) the related senior deferrable note or treasury security, as
the case may be, securing such purchase contract to be released from the
pledge under the pledge agreement, and, within three business days following
the settlement date, each will be transferred to the purchase contract agent
for delivery to the holder.
If the purchase contract agent receives a completed "Election to Settle
Early" and payment of $50 for each PEPS Unit or Treasury PEPS Unit, as the
case may be, being settled early by 5:00 p.m., New York City time, on any
business day, then that day will be considered the settlement date. If the
purchase contract agent receives the foregoing after 5:00 p.m., New York City
time, on any business day or at any time on a day that is not a business day,
then the next business day will be considered the settlement date. As long as
the PEPS Units or Treasury PEPS Units, as applicable, are evidenced by one or
more global security certificates deposited with DTC, procedures for early
settlement also will be governed by standing arrangements between DTC and the
purchase contract agent.
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<PAGE>
Purchase Contract Payments
Purchase contract payments will be fixed at a rate per year of .35% of the
$50 stated amount per purchase contract. Purchase contract payments payable
for any period will be computed (1) for any full quarterly period on the basis
of a 360-day year of twelve 30-day months and (2) for any period shorter than
a full quarterly period, on the basis of a 30-day month and, for periods of
less than a month, on the basis of the actual number of days elapsed per 30-
day month. Purchase contract payments will accrue from July 7, 1999 and will
be payable quarterly in arrears on February 16, May 16, August 16 and November
16 of each year, commencing November 16, 1999.
We will have the right to defer payment of all or part of the purchase
contract payments on the purchase contracts until no later than the purchase
contract settlement date. We will pay additional purchase contract payments on
any deferred installments of purchase contract payments at a rate of .35% per
year (compounding quarterly) until paid. If the purchase contracts are settled
early (at your option) or terminated, you will have no right to receive any
accrued deferred purchase contract payments.
Purchase contract payments will be payable to the holders of purchase
contracts as they are registered on the books and records of the purchase
contract agent on the relevant record dates, which, so long as the PEPS Units
or Treasury PEPS Units, as the case may be, remain in book-entry only form,
will be the business day preceding the relevant payment dates. Purchase
contract payments will be paid through the purchase contract agent, which will
hold amounts received in respect of the purchase contract payments for the
benefit of the holders of the purchase contracts that are a part of these PEPS
Units or Treasury PEPS Units, as the case may be. Subject to any applicable
laws and regulations, each such payment will be made as described under "Book-
Entry Issuance" in the accompanying prospectus. If the PEPS Units or Treasury
PEPS Units, as the case may be, do not remain in book-entry only form, the
relevant record dates will be the fifteenth business day prior to the relevant
payment dates. If any date on which purchase contract payments are to be made
is not a business day, then payment of the purchase contract payments payable
on such date will be made on the next day that is a business day (and without
any interest in respect of any such delay), except that, if such business day
is in the next calendar year, such payment will be made on the preceding
business day.
Anti-Dilution Adjustments
The formula for determining the settlement rate will be adjusted if certain
events occur, including:
(1) the payment of dividends (and other distributions) of shares of
Georgia-Pacific Group Stock on Georgia-Pacific Group Stock;
(2) the issuance to all holders of Georgia-Pacific Group Stock of
rights, warrants or options entitling them, for a period of up to 45 days,
to subscribe for or purchase Georgia-Pacific Group Stock at less than the
"current market price" of Georgia-Pacific Group Stock;
(3) subdivisions, splits or combinations of Georgia-Pacific Group Stock
(including an effective subdivision of the Georgia-Pacific Group Stock
through reclassification of the Georgia-Pacific Group Stock);
(4) distributions to all holders of Georgia-Pacific Group Stock of
evidences of our indebtedness, shares of capital stock, securities, cash or
property (excluding any dividend or distribution covered by clause (1) or
(2) above and any dividend or distribution paid exclusively in cash);
(5) distributions consisting exclusively of cash to all holders of
Georgia-Pacific Group Stock, excluding any quarterly cash dividend on the
Georgia-Pacific Group Stock to the extent that the aggregate cash dividend
per share of Georgia-Pacific Group Stock in any quarter does not exceed the
greater of: (a) the amount per share of the next preceding quarterly cash
dividend on the Georgia-Pacific Group Stock to the extent that such
preceding quarterly dividend did not require an adjustment to the
settlement rate pursuant to this clause (as adjusted to reflect
subdivisions or combinations of the Georgia-Pacific Group Stock) and (b)
3.75% of the average of the closing prices of the Georgia-Pacific Group
Stock during the ten consecutive trading days immediately prior to the date
of declaration of such dividend, and excluding any dividend or distribution
in connection with our liquidation, dissolution or termination (if an
adjustment
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is required to be made as set forth in this clause as a result of a
distribution (i) that is a quarterly dividend, such an adjustment would be
based on the amount by which such dividend exceeds the amount of the
largest quarterly dividend permitted to be excluded by this clause or (ii)
that is not a quarterly dividend, such an adjustment would be based on the
full amount of such distribution); and
(6) the successful completion of a tender or exchange offer made by us
or any of our subsidiaries for the Georgia-Pacific Group Stock that
involves an aggregate consideration having a fair market value that, when
combined with (a) any cash and the fair market value of other consideration
payable in respect of any tender or exchange offer by us or any of our
subsidiaries for the Georgia-Pacific Group Stock concluded within the
preceding 12 months and (b) the aggregate amount of any all-cash
distributions to all holders of Georgia-Pacific Group Stock made within the
preceding 12 months, exceeds 15% of our aggregate market capitalization on
the expiration of such tender or exchange offer.
The term "current market price" per share of Georgia-Pacific Group Stock on
any day means the average of the daily closing prices for the five consecutive
trading days selected by us commencing not more than 30 trading days before,
and ending not later than, the earlier of the day in question and the day
before the "ex date" with respect to the issuance or distribution requiring
such computation. For purposes of this paragraph, the term "ex date", when
used with respect to any issuance or distribution, will mean the first date on
which the shares of Georgia-Pacific Group Stock trade on the applicable
exchange or in the applicable market without the right to receive such
issuance or distribution.
In the case of certain reclassifications, consolidations, mergers, sales or
transfers of assets or other transactions (which for this purpose shall
include a conversion of Georgia-Pacific Group Stock into Timber Stock as set
forth under "Description of Common Stock--Conversion and Redemption" in the
accompanying prospectus) pursuant to which Georgia-Pacific Group Stock is
converted into the right to receive other securities, cash or property, each
purchase contract then outstanding would become, without the consent of the
holder of the related PEPS Unit or Treasury PEPS Unit, as the case may be, a
contract to purchase only the kind and amount of securities, cash and other
property receivable upon consummation of the transaction by a holder of the
number of shares that would have been received by the holder of the related
PEPS Unit or Treasury PEPS Unit immediately prior to the date of consummation
of such transaction if such holder had then settled such purchase contract.
If at any time we make a distribution of property to holders of Georgia-
Pacific Group Stock that would be taxable to such shareholders as a dividend
for United States federal income tax purposes (i.e., distributions of
evidences of our indebtedness or assets, but generally not stock dividends or
rights to subscribe to capital stock) and, pursuant to the settlement rate
adjustment provisions of the purchase contract agreement, the settlement rate
is increased, such increase may give rise to a taxable dividend to holders of
the PEPS Units and Treasury PEPS Units. See "United States Federal Income Tax
Consequences--PEPS Units--Purchase Contracts--Adjustment to Settlement Rate"
in this prospectus supplement.
In addition, we may make such increases in the settlement rate as we deem
advisable in order to avoid or diminish any income tax to holders of Georgia-
Pacific Group Stock resulting from any dividend or distribution of Georgia-
Pacific Group Stock (or rights to acquire Georgia-Pacific Group Stock) or from
any event treated as such for income tax purposes or for any other reason.
Adjustments to the settlement rate will be calculated to the nearest
1/10,000th of a share. No adjustment in the settlement rate will be required
unless such adjustment would require an increase or decrease of at least 1% in
the settlement rate; provided that any adjustments not made by reason of the
foregoing will be carried forward and taken into account in any subsequent
adjustment.
Whenever the settlement rate is adjusted, we must deliver to the purchase
contract agent a certificate setting forth the settlement rate, detailing the
calculation of the settlement rate and describing the facts upon which the
adjustment is based. In addition, we must notify the holders of the PEPS Units
and Treasury PEPS Units of the adjustment within ten business days of any
event requiring such adjustment and describe in reasonable detail the method
by which the settlement rate was adjusted.
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Each adjustment to the settlement rate will result in a corresponding
adjustment to the number of shares of Georgia-Pacific Group Stock issuable
upon early settlement of a purchase contract.
If an adjustment is made to the settlement rate, an adjustment also will be
made to the applicable market value solely to determine which settlement rate
will be applicable on the purchase contract settlement date.
Termination
The purchase contracts and the obligations and rights of us and of the
holders of the PEPS Units and Treasury PEPS Units thereunder (including the
holders' right to receive accrued purchase contract payments and the
obligation and right to purchase and receive shares of Georgia-Pacific Group
Stock) will terminate automatically upon the occurrence of certain events of
bankruptcy, insolvency or reorganization with respect to us. Upon such
termination, the collateral agent will release the related senior deferrable
notes or treasury security, as the case may be, from the pledge arrangement
and cause the securities intermediary to transfer such senior deferrable notes
or treasury security to the purchase contract agent for distribution to the
holders of the PEPS Units and Treasury PEPS Units. Upon such termination,
however, such release and distribution may be subject to a delay. In the event
that we become the subject of a case under the Bankruptcy Code, such delay may
occur as a result of the automatic stay under the Bankruptcy Code and continue
until such automatic stay has been lifted. We expect any such delay to be
limited.
Pledged Securities and Pledge Agreement
The senior deferrable notes that are a part of the PEPS Units or, if
substituted, the treasury security that is a part of the Treasury PEPS Units
(collectively, the "pledged securities") will be pledged to the collateral
agent for our benefit pursuant to the pledge agreement to secure the
obligations of the holders of the PEPS Units and the Treasury PEPS Units to
purchase shares of Georgia-Pacific Group Stock under the related purchase
contracts. The rights of the holders of the PEPS Units and the Treasury PEPS
Units with respect to such pledged securities will be subject to our security
interest therein. No holder of PEPS Units or Treasury PEPS Units will be
permitted to withdraw the pledged securities related to such PEPS Units or
Treasury PEPS Units from the pledge arrangement except:
(1) to substitute a treasury security for the related senior deferrable
notes;
(2) to substitute senior deferrable notes for the related treasury
security (for both (1) and (2), as provided for under "Description of the
PEPS Units--Creating Treasury PEPS Units by Substituting a Treasury
Security for Senior Deferrable Notes" and "--Recreating PEPS Units" in this
prospectus supplement); and
(3) upon early settlement, settlement for cash or termination of the
related purchase contracts.
Subject to such security interest and the terms of the purchase contract
agreement and the pledge agreement, each holder of PEPS Units will retain
beneficial ownership of the related senior deferrable notes and will be
entitled, through the purchase contract agent and the collateral agent, to all
of the interest payments under the related senior deferrable notes, and each
holder of Treasury PEPS Units will retain beneficial ownership of the related
treasury security pledged in respect of the related purchase contracts. We
will have no interest in the pledged securities other than our security
interest.
Upon receipt of interest payments on the pledged securities, the securities
intermediary will distribute such payments to the purchase contract agent,
which in turn will distribute those payments, together with purchase contract
payments received from us, to the holders in whose names the PEPS Units are
registered at the close of business on the record date preceding the date of
such distribution.
Book-Entry System
The PEPS Units will be issued only as fully-registered securities
registered in the name of Cede & Co., DTC's nominee. The PEPS Units will be
issued in accordance with the procedures set forth under "Book-Entry Issuance"
in the accompanying prospectus.
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CERTAIN PROVISIONS OF THE PURCHASE CONTRACTS,
THE PURCHASE CONTRACT AGREEMENT AND THE PLEDGE AGREEMENT
General
Distributions on the PEPS Units and Treasury PEPS Units will be payable,
the purchase contracts will be settled and transfers of the PEPS Units and
Treasury PEPS Units will be registrable at the office of the purchase contract
agent in the Borough of Manhattan, New York City. In addition, if the PEPS
Units or Treasury PEPS Units do not remain in book-entry form, we have the
option to make payments on the PEPS Units and Treasury PEPS Units by check
mailed to the address of the person entitled thereto as shown on the security
register.
No service charge will be made for any registration of transfer or exchange
of the PEPS Units or Treasury PEPS Units, except for any tax or other
governmental charge that may be imposed in connection therewith.
Modification
Subject to certain limited exceptions, we and the purchase contract agent
may not modify the terms of the purchase contracts or the purchase contract
agreement without the consent of the holders of not less than a majority of
the outstanding purchase contracts, except that no such modification may,
without the consent of the holder of each outstanding purchase contract
affected thereby:
(1) change any payment date;
(2) change the amount or type of collateral required to be pledged to
secure a holder's obligations under the purchase contract, impair the right
of the holder of any purchase contract to receive interest payments on such
collateral, or otherwise adversely affect the holder's rights in or to such
collateral;
(3) reduce any purchase contract payments or change the place or
currency of payment;
(4) impair the right to institute suit for the enforcement of a purchase
contract;
(5) reduce the number of shares of Georgia-Pacific Group Stock
purchasable under a purchase contract, increase the purchase price of the
shares of Georgia-Pacific Group Stock on settlement of any purchase
contract, change the purchase contract settlement date or otherwise
adversely affect the holder's rights under a purchase contract; or
(6) reduce the above-stated percentage of outstanding purchase contracts
whose holders' consent is required for the modification or amendment of the
provisions of the purchase contracts, the purchase contract agreement or
the pledge agreement;
provided that if any amendment or proposal would adversely affect only the
PEPS Units or only the Treasury PEPS Units, then only the affected voting
group of holders will be entitled to vote on such amendment or proposal, and
such amendment or proposal will not be effective except with the consent of
the holders of not less than a majority of such voting group or, if referred
to in (1) through (6) above, all of the holders of such voting group.
Subject to certain limited exceptions, we, the collateral agent, the
securities intermediary and the purchase contract agent may not modify the
terms of the pledge agreement without the consent of the holders of not less
than a majority of the outstanding purchase contracts, except that no such
modification may, without the consent of the holder of each outstanding
purchase contract affected thereby:
(1) change the amount or type of collateral required to be pledged to
secure a holder's obligations under the purchase contract, impair the right
of the holder of any purchase contract to receive interest payments on such
collateral or otherwise adversely affect the holder's rights in or to such
collateral;
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(2) otherwise effect any action that under the purchase contract
agreement would require the consent of the holders of each outstanding
purchase contract affected thereby; or
(3) reduce the above-stated percentage of outstanding purchase contracts
whose holders' consent is required for the modification or amendment;
provided that if any amendment or proposal would adversely affect only the
PEPS Units or only the Treasury PEPS Units, then only the affected voting
group of holders will be entitled to vote on such amendment or proposal, and
such amendment or proposal will not be effective except with the consent of
the holders of not less than a majority of such voting group or, if referred
to in (1) through (3) above, all of the holders of such voting group.
No Consent to Assumption
Each holder of a PEPS Unit or a Treasury PEPS Unit will be deemed under the
terms of the purchase contract agreement, by the purchase of such PEPS Unit or
Treasury PEPS Unit, to have expressly withheld any consent to the assumption
(i.e., affirmance) of the related purchase contracts by us, our receiver,
liquidator or trustee in the event that we become the subject of a case under
the Bankruptcy Code or other similar state or federal law providing for
reorganization or liquidation.
Merger, Sale or Lease
We will covenant in the purchase contract agreement that we will not merge
or consolidate with any other entity or sell, assign, transfer, lease or
convey all or substantially all of our properties and assets to any other
entity or group of affiliated entities unless:
(1) either we are the continuing corporation or the successor
corporation is a corporation organized under the laws of the United States
of America, a state thereof or the District of Columbia and such
corporation expressly assumes all of our obligations under the purchase
contracts, the purchase contract agreement and the pledge agreement by one
or more supplemental agreements in form reasonably satisfactory to the
purchase contract agent and the collateral agent; and
(2) we are, or such successor corporation is, not, immediately after
such merger, consolidation, sale, assignment, transfer, lease or
conveyance, in default in the performance of any of our or its obligations
thereunder.
Governing Law
The purchase contracts, the purchase contract agreement and the pledge
agreement will be governed by, and construed in accordance with, the laws of
the State of New York.
Information Concerning the Purchase Contract Agent
The First National Bank of Chicago will be the purchase contract agent. The
purchase contract agent will act as the agent for the holders of the PEPS
Units and Treasury PEPS Units from time to time. The purchase contract agent
will not be obligated to take any discretionary action in connection with a
default under the terms of the PEPS Units, the Treasury PEPS Units or the
purchase contract agreement.
The purchase contract agreement will contain provisions limiting the
liability of the purchase contract agent. The purchase contract agreement also
will contain provisions under which the purchase contract agent may resign or
be replaced. Such resignation or replacement would be effective upon the
appointment of a successor.
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Information Concerning the Collateral Agent
The Chase Manhattan Bank will be the collateral agent. The collateral agent
will act solely as our agent and will not assume any obligation or
relationship of agency or trust for or with any of the holders of the PEPS
Units or Treasury PEPS Units except for the obligations owed by a pledgee of
property to the owner thereof under the pledge agreement and applicable law.
The pledge agreement will contain provisions limiting the liability of the
collateral agent. The pledge agreement also will contain provisions under
which the collateral agent may resign or be replaced. Such resignation or
replacement would be effective upon the appointment of a successor.
Information Concerning the Securities Intermediary
The Chase Manhattan Bank will be the securities intermediary. All property
delivered to the securities intermediary pursuant to the purchase contract
agreement or the pledge agreement will be credited to a collateral account
established by the securities intermediary for the collateral agent. The
securities intermediary will treat the purchase contract agent as entitled to
exercise all rights relating to any financial asset credited to such
collateral account, subject to the provisions of the pledge agreement.
Miscellaneous
The purchase contract agreement will provide that we will pay all fees and
expenses related to (1) the retention of the collateral agent and the
securities intermediary and (2) the enforcement by the purchase contract agent
of the rights of the holders of the PEPS Units and Treasury PEPS Units;
provided that holders who elect to substitute the related pledged securities,
thereby creating Treasury PEPS Units or recreating PEPS Units, will be
responsible for any fees or expenses payable in connection with such
substitution, as well as for any commissions, fees or other expenses incurred
in acquiring the pledged securities to be substituted, and we will not be
responsible for any such fees or expenses.
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DESCRIPTION OF THE SENIOR DEFERRABLE NOTES
The senior deferrable notes are to be issued under our senior indenture. As
of the date of this prospectus supplement, the Bank of New York acts as
trustee under the senior indenture. The senior indenture is qualified under
the Trust Indenture Act.
The senior deferrable notes will mature on August 16, 2004. The senior
deferrable notes will not be redeemable prior to the maturity date.
Interest
Interest on the senior deferrable notes will accrue from July 7, 1999 at an
initial rate of 7.15% prior to August 16, 2002, and at a reset rate that will
be equal to or greater than 7.15% per year thereafter. Interest will be
payable quarterly on February 16, May 16, August 16 and November 16, subject
to our right to defer interest payments as described under "--Option to Defer
Interest Payments". Interest will be payable to the holders of the senior
deferrable notes on each record date, which will be one business day before
the interest payment date. The amount of interest payable for any period will
be computed on the basis of a 360-day year consisting of twelve 30-day months.
If any date on which interest is payable is not a business day, then payment
of the interest will be made on the next business day (and if payment is made
on the next business day, without any interest or other payment as a result of
such delay), except that if the next business day is in the next succeeding
calendar year, the payment will be made on the prior business day, in each
case with the same force and effect as if made on the date such payment was
originally payable.
Interest Rate Reset by Remarketing
The interest rate on the senior deferrable notes will be determined on
August 13, 2002, the third business day prior to the purchase contract
settlement date (the "remarketing date") and reset on August 16, 2002 to the
reset rate. The reset rate, which will be equal to or greater than 7.15% per
year, will be the rate per year that results from the remarketing of (1) the
senior deferrable notes that are a part of PEPS Units as to which the holders
have not given notice of their election to settle the related purchase
contracts with cash, or have given such notice but failed to deliver cash, and
(2) the senior deferrable notes that are not a part of PEPS Units (that is,
the senior deferrable notes that are owned by Treasury PEPS Unit holders, by
PEPS Unit holders who elected to settle early or by holders who purchased
senior deferrable notes in a secondary trading transaction), as to which the
holders have requested remarketing.
On the remarketing date, the remarketing agent will use reasonable efforts
to remarket these senior deferrable notes. If the remarketing agent determines
that it will not be able to remarket all the senior deferrable notes tendered
or deemed tendered for purchase at a price of $50.1250 per senior deferrable
note prior to 4:00 p.m., New York City time, then, on the remarketing date,
the remarketing agent will increase the interest rate on the senior deferrable
notes so that the market value will be equal to $50.1250 per senior deferrable
note at that time. If the remarketing agent determines, in its sole
discretion, that an increase in the interest rate is necessary to remarket the
senior deferrable notes at $50.1250 per senior deferrable note, then the reset
rate will equal that increased rate. If the remarketing agent determines that
it can remarket the senior deferrable notes at or above $50.1250 per senior
deferrable note (without an increase in the rate), then the reset rate will
equal 7.15%.
Remarketing Procedures
We have summarized below the procedures to be followed in connection with a
remarketing of the senior deferrable notes.
As long as the PEPS Units, the Treasury PEPS Units or the senior deferrable
notes are evidenced by one or more global security certificates deposited with
DTC, we will request, not later than 15 nor more than 30 calendar days prior
to the remarketing date, that DTC notify its participants holding PEPS Units
of the remarketing.
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Not later than 5:00 p.m., New York City time, on August 7, 2002, the
seventh business day prior to the purchase contract settlement date, any
holder of senior deferrable notes that are a part of the PEPS Units may elect
to have his or her senior deferrable notes remarketed. Holders of PEPS Units
that do not give notice prior to such time of their intention to settle their
related purchase contracts for cash, and holders who give such notice but fail
to deliver such cash prior to 11:00 a.m., New York City time, on August 9,
2002, the fifth business day prior to the purchase contract settlement date,
will be deemed to have consented to the disposition of the senior deferrable
notes that are a part of their PEPS Units in the remarketing. Holders of
senior deferrable notes that are not a part of the PEPS Units who wish to have
their senior deferrable notes remarketed must give notice of their election to
the senior trustee prior to 11:00 a.m., New York City time, on August 9, 2002,
such fifth business day. Any such notice will be irrevocable and may not be
conditioned upon the level at which the reset rate is established in the
remarketing.
If none of the holders elects to have senior deferrable notes remarketed in
the remarketing, the reset rate will be the rate determined by the remarketing
agent, in its sole discretion, as the rate that would have been established
had a remarketing been held on the remarketing date.
Failed Remarketing
If, by 4:00 p.m., New York City time, on the remarketing date, the
remarketing agent is unable to remarket all the senior deferrable notes
tendered or deemed tendered for purchase, a failed remarketing will be deemed
to have occurred, and the remarketing agent will so advise DTC, the senior
trustee and us.
If a failed remarketing occurs and you are a PEPS Unit holder who has not
settled your purchase contract with cash or has given notice of your election
to settle your purchase contract with cash but failed to do so, we will
exercise our rights as a secured party and take possession of your senior
deferrable note. Your obligation to purchase the shares of Georgia-Pacific
Group Stock then will be fully satisfied, and you will receive the appropriate
number of shares of Georgia-Pacific Group Stock.
If a failed remarketing occurs and you are a holder of senior deferrable
notes that are not part of a PEPS Unit, you will retain possession of your
senior deferrable note and the reset rate will be equal to (1) the two-year
benchmark treasury rate plus (2) the applicable spread.
The term "two-year benchmark treasury rate" means the bid side rate
displayed at 10:00 a.m., New York City time, on August 13, 2002, the third
business day prior to the purchase contract settlement date for direct
obligations of the United States having a maturity comparable to the remaining
term to maturity of the senior deferrable notes, as agreed upon by us and the
remarketing agent. This rate will be as displayed in the Telerate system or,
if the Telerate system is no longer available or, in the opinion of the
remarketing agent (after consultation with us), no longer an appropriate
system from which to obtain such rate, such other nationally recognized
quotation system as, in the opinion of the remarketing agent (after
consultation with us) is appropriate. If this rate is not so displayed, the
two-year benchmark treasury rate will be calculated by the remarketing agent
as the yield to maturity of the senior deferrable notes, expressed as a bond
equivalent on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis, and computed by taking the arithmetic mean of the
secondary market bid rates, as of 10:30 a.m., New York City time, on August
13, 2002, the third business day prior to the purchase contract settlement
date of three leading United States government securities dealers selected by
the remarketing agent (after consultation with us) (which may include the
remarketing agent or an affiliate thereof).
The term "applicable spread" means the spread determined as set forth
below, based on the prevailing rating of the senior deferrable notes in effect
at the close of business on the business day immediately preceding the date of
a failed remarketing:
<TABLE>
<CAPTION>
Spread
Prevailing Rating ------
<S> <C>
AA/"Aa"............................................................ 3.00%
A/"a".............................................................. 4.00%
BBB/"Baa".......................................................... 5.00%
Below BBB/"Baa".................................................... 7.00%
</TABLE>
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For purposes of this definition, the "prevailing rating" of the senior
deferrable notes shall be:
(i) AA/"Aa" if the senior deferrable notes have a credit rating of AA-
or better by Standard & Poor's Ratings Services ("S&P") and "Aa3" or better
by Moody's Investors Service, Inc. ("Moody's") or the equivalent of such
ratings by such agencies or a substitute rating agency or substitute rating
agencies selected by the remarketing agent;
(ii) if not under clause (i) above, then A/"a" if the senior deferrable
notes have a credit rating of A- or better by S&P and "A3" or better by
Moody's or the equivalent of such ratings by such agencies or a substitute
rating agency or substitute rating agencies selected by the remarketing
agent;
(iii) if not under clauses (i) or (ii) above, then BBB/"Baa" if the
senior deferrable notes have a credit rating of BBB- or better by S&P and
"Baa3" or better by Moody's or the equivalent of such ratings by such
agencies or a substitute rating agency or substitute rating agencies
selected by the remarketing agent; or
(iv) if not under clauses (i) through (iii) above, then Below BBB/"Baa".
Notwithstanding the foregoing, (A) if (i) the credit rating of the senior
deferrable notes by S&P shall be on the "Credit Watch" of S&P with a
designation of "negative implications" or "developing", or (ii) the credit
rating of the senior deferrable notes by Moody's shall be on the "Corporate
Credit Watch List" of Moody's with a designation of "downgrade" or uncertain",
or, in each case, on any successor list of S&P or Moody's with a comparable
designation, the prevailing ratings of the senior deferrable notes shall be
deemed to be within a range one full level lower in the above table than those
actually assigned to the senior deferrable notes by Moody's and S&P and (B) if
the senior deferrable notes are rated by only one rating agency on or before
the remarketing date, the prevailing rating shall at all times be determined
without reference to the rating of any other rating agency; provided that if
no such rating agency shall have in effect a rating for the senior deferrable
notes and the remarketing agent is unable to identify a substitute rating
agency or rating agencies, the prevailing rating shall be Below BBB/"Baa".
By approximately 4:30 p.m., New York City time, on the remarketing date,
provided that there has not been a failed remarketing, the remarketing agent
will advise (1) DTC, the senior trustee and us of the reset rate determined in
the remarketing and the number of senior deferrable notes sold in the
remarketing, (2) each person purchasing senior deferrable notes in the
remarketing (or the appropriate DTC participant) of the reset rate and the
number of senior deferrable notes such person is to purchase and (3) each such
purchaser to give instructions to its DTC participant to pay the purchase
price on the purchase contract settlement date in same day funds against
delivery of the senior deferrable notes purchased through the facilities of
DTC.
In accordance with DTC's normal procedures, on the purchase contract
settlement date, the transactions described above with respect to each senior
deferrable note tendered for purchase and sold in the remarketing will be
executed through DTC, and the accounts of the respective DTC participants will
be debited and credited and such senior deferrable notes delivered by book
entry as necessary to effect purchases and sales of such senior deferrable
notes. DTC will make payment in accordance with its normal procedures.
If any holder selling senior deferrable notes in the remarketing fails to
deliver such senior deferrable notes, the direct or indirect DTC participant
of such selling holder and of any other person that was to have purchased
senior deferrable notes in the remarketing may deliver to any such other
person a number of senior deferrable notes that is less than the number of
senior deferrable notes that otherwise was to be purchased by such person. In
such event, the number of senior deferrable notes to be so delivered will be
determined by such direct or indirect participant, and delivery of such lesser
number of senior deferrable notes will constitute good delivery.
The right of each holder to have senior deferrable notes tendered for
purchase will be limited to the extent that (1) the remarketing agent conducts
a remarketing pursuant to the terms of the remarketing agreement, (2) the
remarketing agent is able to find a purchaser or purchasers for tendered
senior deferrable notes and (3) such purchaser or purchasers deliver the
purchase price therefor to the remarketing agent.
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The remarketing agent is not obligated to purchase any senior deferrable
notes that would otherwise remain unsold in the remarketing. Neither we nor
the senior trustee nor the remarketing agent will be obligated in any case to
provide funds to make payment upon tender of senior deferrable notes for
remarketing.
We will be liable for any and all costs and expenses incurred in connection
with the remarketing.
Remarketing Agent
The remarketing agent will be Morgan Stanley & Co. Incorporated. We and the
remarketing agent will enter into the remarketing agreement which provides,
among other things, that Morgan Stanley & Co. Incorporated, will act as the
exclusive remarketing agent and will use reasonable efforts to remarket
securities tendered or deemed tendered for purchase in the remarketing. Under
some circumstances, a portion of the senior deferrable notes tendered in the
remarketing may be purchased by the remarketing agent; however, the
remarketing agent will not be required to purchase any of the senior
deferrable notes tendered in the remarketing.
The remarketing agreement provides that the remarketing agent will incur no
liability to us or to any holder of the PEPS Units, Treasury PEPS Units or the
senior deferrable notes in its individual capacity or as remarketing agent for
any action or failure to act in connection with a remarketing or otherwise,
except as a result of the gross negligence or willful misconduct on its part.
We have agreed to indemnify the remarketing agent against certain
liabilities, including liabilities under the Securities Act of 1933, arising
out of or in connection with its duties under the remarketing agreement.
The remarketing agreement also will provide that the remarketing agent may
resign and be discharged from its duties and obligations thereunder; provided
that no such resignation will become effective unless a nationally recognized
broker-dealer has been appointed by us as successor remarketing agent and such
successor remarketing agent has entered into a remarketing agreement with us.
In such case, we will use reasonable efforts to appoint a successor
remarketing agent and enter into a remarketing agreement with such person as
soon as reasonably practicable.
Option to Defer Interest Payments
So long as no event of default has occurred and is continuing, we will have
the right under the senior indenture at any time during the term of the senior
deferrable notes to defer the payment of interest for a period not extending
beyond the maturity date. We refer to any such period of deferral as an
"extension period". At the end of an extension period, we must pay all
interest then accrued and unpaid (together with accrued interest at the
deferral rate compounded on each succeeding interest payment date).
During any extension period, we may not take any of the prohibited actions
described under "--Certain Covenants of Georgia-Pacific" in this prospectus
supplement.
Prior to the expiration of any extension period, we may further extend the
extension period, but not beyond the maturity date. Upon the termination of
any extension period and the payment of all amounts then due on any interest
payment date, we may elect to begin a new extension period, subject to the
same requirements as described above. No interest will be due and payable
during an extension period. We must give the senior trustee written notice of
our election of any extension period (or our further extension) at least five
business days prior to the earlier of:
(1) the date the interest on the senior deferrable notes would have been
payable except for the election to begin or extend the extension period;
(2) the date the senior trustee is required to give notice to any
securities exchange or to holders of senior deferrable notes of the record
date or the date the interest is payable; and
(3) the record date.
The senior trustee must give notice of our election to begin a new
extension period or continue an extension period to the holder of the senior
deferrable notes. There is no limitation on the number of times that we may
elect to begin an extension period.
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Certain Covenants of Georgia-Pacific
We will covenant that during an extension period or during the continuance
of an event of default, we will not:
(1) make any payment of principal, premium, if any, or interest on or
repay, repurchase or redeem any of our Debt Securities that rank junior to
the senior deferrable notes in right of payment;
(2) make any guarantee payments with respect to any guarantee by us of
any securities of any of our subsidiaries if such guarantee ranks junior to
the senior deferrable notes in right of payment; or
(3) declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of our
capital stock (other than Timber Stock), except for:
. dividends or distributions in, or options, warrants or rights to
subscribe for or purchase, our Georgia-Pacific Group Stock;
. any declaration of a dividend in connection with the implementation
of a shareholder's rights plan, or the issuance of shares under any
such plan in the future, or the redemption or repurchase of any such
rights pursuant thereto;
. as a result of a reclassification of our capital stock solely into
shares of one or more classes or series of our capital stock or the
exchange or conversion of one class or series of our capital stock
for or into another class or series of our capital stock;
. the purchase of fractional interests in shares of our capital stock
pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged; and
. the purchase of Georgia-Pacific Group Stock in connection with our
normal course issuer bid-purchases for the satisfaction by us of our
obligations under any benefit plans for our and our subsidiaries'
directors, officers or employees or any of our dividend reinvestment
plans.
Governing Law
The senior deferrable notes will be governed by the laws of the State of
New York.
Book-Entry System
The depositary for the senior deferrable notes will be DTC. The senior
deferrable notes will be issued only as fully-registered securities registered
in the name of Cede & Co., DTC's nominee. The senior deferrable notes will be
issued in accordance with the procedures set forth under "Book-Entry Issuance"
in the accompanying prospectus.
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UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Simpson Thacher & Bartlett, the following is an accurate
summary of the material United States federal income tax consequences of the
purchase, ownership and disposition of PEPS Units, Treasury PEPS Units, senior
deferrable notes and Georgia-Pacific Group Stock acquired under a purchase
contract. Unless otherwise stated, this summary applies only to holders (1)
who purchase PEPS Units in the initial offering at the issue price, (2) who
hold the PEPS Units, Treasury PEPS Units, senior deferrable notes and shares
of Georgia-Pacific Group Stock as capital assets, and (3) who are United
States holders. United States holders include the following:
. a person who is a citizen or resident of the United States;
. a corporation or partnership created or organized in or under the laws of
the United States or any state thereof or the District of Columbia;
. an estate the income of which is subject to United States federal income
taxation, regardless of its source; or
. a trust
. that is subject to the supervision of a court within the United
States and the control of one or more United States persons; or
. that has a valid election in effect under applicable Treasury
regulations to be treated as a United States person.
The tax treatment of a holder may vary depending on such holder's
particular situation. This summary does not deal with special classes of
holders. For example, this summary does not address:
. tax consequences to holders who may be subject to special tax treatment,
such as banks, thrifts, real estate investment trusts, regulated
investment companies, insurance companies, dealers in securities or
currencies, or tax-exempt investors;
. tax consequences to persons that will hold PEPS Units, Treasury PEPS
Units, senior deferrable notes or Georgia-Pacific Group Stock acquired
under a purchase contract as a position in a "straddle", "synthetic
security", "hedge", "integrated transaction", "conversion transaction" or
"constructive sale";
. tax consequences to holders of PEPS Units, Treasury PEPS Units, senior
deferrable notes or Georgia-Pacific Group Stock whose functional currency
is not the U.S. dollar;
. tax consequences to shareholders, partners or beneficiaries of a holder
of PEPS Units, Treasury PEPS Units, senior deferrable notes or Georgia-
Pacific Group Stock acquired under a purchase contract;
. alternative minimum tax consequences, if any; or
. any state, local or foreign tax consequences.
If you are not a United States holder, we urge you to consult your own tax
advisor regarding the United States federal income tax consequences of an
investment in PEPS Units, including the potential application of United States
withholding taxes.
This summary is based upon the Internal Revenue Code of 1986, as amended,
Treasury regulations (including proposed Treasury regulations) issued
thereunder, Internal Revenue Service rulings and pronouncements and judicial
decisions now in effect, all of which are subject to change, possibly on a
retroactive basis. Any such changes may be applied retroactively in a manner
that could cause the tax consequences to vary substantially from the
consequences described below, possibly adversely affecting you.
No statutory, administrative or judicial authority directly addresses the
treatment of PEPS Units or instruments similar to PEPS Units for United States
federal income tax purposes. As a result, we cannot assure you that the
Internal Revenue Service will agree with the tax consequences described
herein. We urge you to
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consult your own tax advisor with respect to the tax consequences to you of
the purchase, ownership and disposition of the PEPS Units, including the tax
consequences under state, local, foreign and other tax laws and the possible
effects of changes in United States federal or other tax laws.
PEPS Units
Allocation of Purchase Price
Your acquisition will be treated as an acquisition of the senior deferrable
note and the purchase contract constituting the unit. The purchase price of
each PEPS Unit will be allocated between the senior deferrable note and the
purchase contract in proportion to their respective fair market values at the
time of purchase. This allocation will establish your initial tax basis in the
senior deferrable note and the purchase contract. We will report the fair
market value as of the date of issuance of the PEPS Units of each senior
deferrable note as $50 and the fair market value of each purchase contract as
$0. This position will be binding on you (but not on the Internal Revenue
Service) unless you explicitly disclose a contrary position in a statement
attached to your timely filed United States federal income tax return for the
taxable year in which you acquire a PEPS Unit. Thus, absent such disclosure,
you should allocate the purchase price for a PEPS Unit in accordance with the
foregoing. The remainder of this discussion assumes that this allocation of
the purchase price will be respected for United States federal income tax
purposes.
Senior Deferrable Notes
Interest Income and Original Issue Discount. Except as set forth below, you
will be required to include stated interest on the senior deferrable notes in
your income at the time such interest income is paid or accrues in accordance
with your regular method of tax accounting.
If, however, we exercise our right to defer payments of interest on the
senior deferrable notes, the senior deferrable notes will become original
issue discount instruments at such time. In such case, you will be subject to
the special original issue discount rules described below. If the senior
deferrable notes become original issue discount instruments, they will be
taxed as original issue discount instruments as long as they remain
outstanding.
If the senior deferrable notes become original issue discount instruments:
. you would be required to accrue an amount of interest income each year
that approximates the stated interest payments called for under the terms
of the senior deferrable notes using the constant-yield-to-maturity
method of accrual set forth in section 1272 of the Code;
. you would not separately report the actual cash payments of interest you
receive on the senior deferrable notes as taxable income;
. any amount of original issue discount included in your gross income
(whether or not during a deferral period) with respect to the senior
deferrable notes will increase your tax basis in the senior deferrable
notes; and
. the amount of cash payments that you receive in respect of the accrued
original issue discount will reduce your tax basis in the senior
deferrable notes.
The Treasury regulations dealing with original issue discount and
deferrable payments have not been addressed in any rulings or other
interpretations by the Internal Revenue Service. It is possible that the
Internal Revenue Service could take a position contrary to that set forth in
this summary. If the Internal Revenue Service were to assert successfully that
the stated interest on the senior deferrable notes was original issue discount
regardless of whether we exercise our right to defer payments, you would be
required to treat the senior deferrable notes as original issue discount
instruments from the date of their issuance.
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Sale, Exchange or Other Disposition of Senior Deferrable Notes. Upon the
sale, exchange or other disposition of a senior deferrable note (including the
remarketing thereof), you will recognize capital gain or loss in an amount
equal to the difference between your amount realized (which does not include
amounts equal to any accrued but unpaid interest that you have not previously
included in gross income, which will be taxable as interest) and your tax
basis in the senior deferrable note. Selling expenses incurred will reduce the
amount of gain or increase the amount of loss recognized by you. Capital gains
of individuals derived with respect to capital assets held for more than one
year are taxed at a maximum rate of 20%. Your ability to deduct capital losses
is subject to limitations.
Possible Alternative Characterization. The Treasury regulations do not deal
with instruments involving a reset mechanism such as the reset in the senior
deferrable notes. Thus, it is possible that the Internal Revenue Service could
treat the senior deferrable note as a "contingent payment debt instrument".
Under such treatment (1) regardless of your regular method of tax accounting,
you would be required to use an accrual method with respect to the senior
deferrable notes; (2) interest income that accrues may exceed stated interest
payments actually received; and (3) any gain or loss on the sale, exchange or
other disposition of the senior deferrable notes generally would be ordinary
rather than capital in nature.
Purchase Contracts
Income From Purchase Contract Payments and Deferred Purchase Contract
Payments. There is no direct authority addressing the treatment of the
purchase contract payments and deferred purchase contract payments under
current law, and such treatment is unclear. Purchase contract payments and
deferred purchase contract payments may constitute taxable income to you when
received or accrued, in accordance with your method of tax accounting. To the
extent we are required to file information returns with respect to purchase
contract payments or deferred purchase contract payments, we intend to report
such payments as taxable income to you. You should consult your own tax
advisor concerning the treatment of purchase contract payments and deferred
purchase contract payments, including the possibility that any such payment
may be treated as a loan, purchase price adjustment, rebate or payment
analogous to an option premium, rather than being includible in income on a
current basis. The treatment of purchase contract payments and deferred
purchase contract payments could affect your tax basis in a purchase contract
or Georgia-Pacific Group Stock received under a purchase contract or your
amount realized upon the sale or disposition of a PEPS Unit or the termination
of a purchase contract. See "--Acquisition of Georgia-Pacific Group Stock
Under a Purchase Contract", "--Sale or Disposition of Units" and "--
Termination of Purchase Contract".
Acquisition of Georgia-Pacific Group Stock Under a Purchase Contract. You
generally will not recognize gain or loss on the purchase of shares of
Georgia-Pacific Group Stock under a purchase contract, except with respect to
any cash paid in lieu of a fractional share of Georgia-Pacific Group Stock.
Subject to the following discussion, your aggregate initial tax basis in the
shares of Georgia-Pacific Group Stock received under a purchase contract
generally should equal (a) the purchase price paid for such shares of Georgia-
Pacific Group Stock, plus (b) your tax basis in the purchase contract (if
any), and less (c) the portion of such purchase price and tax basis allocable
to the fractional share. Purchase contract payments or deferred purchase
contract payments that were paid to you in cash but were not includible in
your income should reduce your tax basis in the purchase contract or the
shares of Georgia-Pacific Group Stock to be received thereunder. See "--Income
from Purchase Contract Payments and Deferred Purchase Contract Payments". The
holding period for shares of Georgia-Pacific Group Stock received under a
purchase contract will commence on the day you receive such stock.
Ownership of Georgia-Pacific Group Stock Acquired Under the Purchase
Contract. Any dividend paid to you on shares of Georgia-Pacific Group Stock
will be treated as dividend income to you to the extent paid out of our
current or accumulated earnings and profits, as determined under United States
federal income tax principles. You will be required to include any such
dividend in your gross income as ordinary income on the day you receive the
dividend. Such dividends will be eligible for the dividends received deduction
allowed to corporations.
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You will recognize capital gain or loss on any sale or exchange of Georgia-
Pacific Group Stock in an amount equal to the difference between your amount
realized for the Georgia-Pacific Group Stock and your tax basis in the
Georgia-Pacific Group Stock. Capital gains of individuals derived with respect
to capital assets held for more than one year are taxed at a maximum rate of
20%. Your ability to deduct capital losses is subject to limitations.
Early Settlement of Purchase Contract. You will not recognize gain or loss
on the receipt of senior deferrable notes or treasury security upon early
settlement of a purchase contract and you will have the same tax basis and
holding period in such senior deferrable notes or treasury security as before
such early settlement.
Termination of Purchase Contract. If a purchase contract terminates, you
will recognize capital gain or loss equal to the difference between your
amount realized (if any) upon such termination and your adjusted tax basis (if
any) in the purchase contract at the time of the termination. Purchase
contract payments or deferred purchase contract payments, if any, received by
you but not includible in your income should either reduce your tax basis in
the purchase contract or result in an amount realized on the termination of
the purchase contract. Any purchase contract payments or deferred purchase
contract payments includible in your income but not paid should increase your
tax basis in the purchase contract. See "--Income from Purchase Contract
Payments and Deferred Purchase Contract Payments". Capital gains of
individuals derived in respect of capital assets held for more than one year
are taxed at a maximum rate of 20%. Your ability to deduct capital losses is
subject to limitations. You will not recognize gain or loss on the receipt of
the senior deferrable notes or the treasury security upon termination of the
purchase contract and you will have the same tax basis in the senior
deferrable notes or treasury security as before termination.
Adjustment to Settlement Rate. You might be treated as receiving a
constructive distribution from us if (i) the settlement rate is adjusted and
as a result of such adjustment your proportionate interest in our assets or
earnings and profits is increased and (ii) the adjustment is not made pursuant
to a bona fide, reasonable anti-dilution formula. An adjustment in the
settlement rate would not be considered made pursuant to such a formula if the
adjustment were made to compensate you for certain taxable distributions with
respect to the Georgia-Pacific Group Stock. Thus, under some circumstances, an
increase in the settlement rate might give rise to a taxable dividend to you
even though you would not receive any cash.
Treasury PEPS Units
Substitution of Treasury Security to Create Treasury PEPS Units. If you
hold 20 PEPS Units and deliver a treasury security to the collateral agent in
substitution for the senior deferrable notes, you generally will not recognize
gain or loss upon the delivery of the treasury security or the release of the
senior deferrable notes. You will continue to include in income any interest
with respect to the senior deferrable notes, and your tax basis in the senior
deferrable notes and the purchase contracts will not be affected by the
delivery and release.
Ownership of Treasury Securities. Your initial tax basis in the treasury
security will be equal to the amount paid for the treasury security. You
generally will include in income any original issue discount or acquisition
discount otherwise includible with respect to the treasury security. In
general, you will be required to include in income each year that you hold a
treasury security the portion of the original issue discount or acquisition
discount that accrues on the treasury security in such year.
Substitution of Senior Deferrable Notes to Recreate PEPS Units. If you hold
20 Treasury PEPS Units and deliver senior deferrable notes to the collateral
agent to recreate 20 PEPS Units, you generally will not recognize gain or loss
upon the delivery of the senior deferrable notes or the release of the
treasury security. You will continue to include in income any interest,
original issue discount or acquisition discount otherwise includible with
respect to the treasury security and the senior deferrable notes, and your tax
basis in the treasury security, the senior deferrable notes and the purchase
contract will not be affected by the delivery and release.
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Sale or Disposition of Units
Upon a disposition of a PEPS Unit or Treasury PEPS Unit, you will be
treated as having sold, exchanged or disposed of the purchase contract and the
senior deferrable note or treasury security, as the case may be, that
constitute the PEPS Unit or Treasury PEPS Unit. You generally will have
capital gain or loss equal to the difference between the portion of your
proceeds allocable to the purchase contract and the senior deferrable note or
treasury security, as the case may be, and your respective adjusted tax bases
in the purchase contract and the senior deferrable note or treasury security.
For purposes of determining gain or loss, your proceeds will not include an
amount equal to accrued and unpaid interest on the senior deferrable note or
treasury security not previously included in income, which will be treated as
ordinary interest income. Further, to the extent you are treated as having
received an amount with respect to accrued purchase contract payments or
deferred purchase contract payments, such amounts may be treated as ordinary
income, to the extent not previously included in income. Capital gains of
individuals derived in respect of capital assets held for more than one year
are taxed at a maximum rate of 20%. Your ability to deduct capital losses is
subject to limitations. For a possible recharacterization of gain or loss on
the sale, exchange or other disposition of a senior deferrable note, see "--
PEPS Units--Senior Deferrable Notes--Possible Alternative Characterization".
If the disposition of a PEPS Unit or Treasury PEPS Unit occurs when the
purchase contract has a negative value, you should be considered to have
received additional consideration for the senior deferrable note or treasury
security in an amount equal to such negative value, and to have paid such
amount to be released from your obligation under the purchase contract. You
should consult your tax advisor regarding a disposition of a PEPS Unit or
Treasury PEPS Unit at a time when the purchase contract has a negative value.
Purchase contract payments or deferred purchase contract payments that you
did not previously include in income should either reduce your tax basis in
the purchase contract or result in an increase in the amount realized on the
disposition of the purchase contract. Any purchase contract payments or
deferred purchase contract payments included in your income but not paid
should increase your tax basis in the purchase contract. See "--Income from
Purchase Contract Payments and Deferred Purchase Contract Payments".
Non-United States Holders
The following summary discusses the tax consequences to Non-United States
holders. You are a "Non-United States holder" if you are not a United States
holder.
United States Federal Withholding Tax
The 30% U.S. federal withholding tax will not apply to any payment of
principal or interest (including original issue discount) on the senior
deferrable notes or treasury security provided that:
. you do not actually (or constructively) own 10% or more of the total
combined voting power of all classes of our voting stock within the
meaning of the Code and the Treasury Regulations;
. you are not a controlled foreign corporation that is related to us
through stock ownership;
. you are not a bank whose receipt of interest on the senior deferrable
notes is described in section 881(c)(3)(A) Code; and
. (a) you provide your name and address on an Internal Revenue Service
Form W-8 (or successor form), and certify, under penalty of perjury,
that you are not a United States person or (b) a financial
institution holding the senior deferrable notes or treasury security
on your behalf certifies, under penalty of perjury, that it has
received an Internal Revenue Service Form W-8 (or successor form)
from the beneficial owner and provides us with a copy.
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We generally will withhold tax at a rate of 30% on the purchase contract
payments and dividends paid on the shares of Georgia-Pacific Group Stock
acquired under the purchase contract.
You may reduce or eliminate the 30% withholding tax applicable to you on
interest (including original issue discount), purchase contract payments or
dividends if you provide us with a properly executed (1) Internal Revenue
Service Form 1001 (or successor form) claiming a reduction of or an exemption
from withholding under the benefit of an applicable tax treaty or (2) Internal
Revenue Service Form 4224 (or successor form) stating that such payments paid
are not subject to withholding tax because they are effectively connected with
your conduct of a trade or business in the United States.
The 30% U.S. federal withholding tax will not apply to any gain or income
that you realize on the sale, exchange, or other disposition of the PEPS
Units, the Treasury PEPS Units, senior deferrable notes, treasury security or
Georgia-Pacific Group Stock acquired under the purchase contract.
United States Federal Income Tax
If you are engaged in a trade or business in the United States and interest
on the senior deferrable notes, original issue discount on the treasury
security, dividends on the Georgia-Pacific Group Stock and, to the extent they
constitute taxable income, purchase contract payments from the purchase
contracts are effectively connected with the conduct of that trade or business
(although exempt from the 30% withholding tax), you will be subject to United
States federal income tax on the interest, original issue discount, dividends
and purchase contract payments on a net income basis in the same manner as if
you were a United States holder. In addition, if you are a foreign
corporation, you may be subject to a branch profits tax equal to 30% (or lower
applicable treaty rate) of your earnings and profits for the taxable year,
subject to adjustments, that are effectively connected with your conduct of a
trade or business in the United States. For this purpose, interest on the
senior deferrable notes, original issue discount on the treasury security,
dividends on the Georgia-Pacific Group Stock and, to the extent they
constitute taxable income, the purchase contract payments from the purchase
contracts will be included in earnings and profits.
Any gain or income realized on the disposition of a PEPS Unit, a Treasury
PEPS Unit, a senior deferrable note, a treasury security or Georgia-Pacific
Group Stock acquired under the purchase contract generally will not be subject
to United States federal income tax unless:
(1) that gain or income is effectively connected with your conduct of a
trade or business in the United States;
(2) you are an individual who is present in the United States for 183
days or more in the taxable year of that disposition, and certain other
conditions are met; or
(3) in the case of PEPS Units, Treasury PEPS Units or Georgia-Pacific
Group Stock, we are or have been a "U.S. real property holding corporation"
for United States federal income tax purposes.
We have not determined whether we are a "U.S. real property holding
corporation" for United States federal income tax purposes. If we are or
become a U.S. real property holding corporation, so long as the Georgia-
Pacific Group Stock continues to be regularly traded on an established
securities market, you will not be subject to U.S. federal income tax on the
disposition of a purchase contract (that is a part of a PEPS Unit or Treasury
PEPS Unit) or Georgia-Pacific Group Stock if you hold or have held (at any
time during the shorter of the five year period preceding the date of
disposition or your holding period) less than five percent of the total
outstanding purchase contracts or Georgia-Pacific Group Stock, respectively.
Special rules may apply to you if you are a "controlled foreign
corporation", "passive foreign investment company" or "foreign personal
holding company" and are subject to special treatment under the Code. If you
are such an entity, you should consult your own tax advisor to determine the
United States federal, state, local and other tax consequences that may be
relevant to you.
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Information Reporting and Backup Withholding
If you are a United States holder, unless you are an exempt recipient such
as a corporation, payments under the PEPS Units, Treasury PEPS Units, senior
deferrable notes, treasury security or Georgia-Pacific Group Stock, the
proceeds received with respect to a fractional share of a share of Georgia-
Pacific Group Stock upon the settlement of a purchase contract, and the
proceeds received from the sale, exchange or other disposition of PEPS Units,
Treasury PEPS Units, senior deferrable notes, treasury security or Georgia-
Pacific Group Stock may be subject to information reporting and may be subject
to United States federal backup withholding at the rate of 31% if you fail to
supply an accurate taxpayer identification number or otherwise fail to comply
with applicable United States information reporting or certification
requirements.
If you are a Non-United States holder, no information reporting (except
possibly with respect to purchase contract payments to the extent they
constitute taxable income) or backup withholding will be required with respect
to payments made by us if a statement described above under "Non-United States
Holders" has been received and the payor does not have actual knowledge that
you are a United States holder.
Amounts withheld under the backup withholding rules may be allowed as a
refund or a credit against your United States federal income tax liability
provided the required information is furnished to the Internal Revenue
Service.
ERISA CONSIDERATIONS
Generally, employee benefit plans that are subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), plans and
individual retirement accounts that are subject to Section 4975 of the Code
and entities whose assets are considered assets of such plans (collectively,
"Plans") may purchase PEPS Units subject to the investing fiduciary's
determination that the investment satisfies ERISA's fiduciary standards and
other requirements applicable to investments by Plans. Accordingly, among
other factors, the fiduciary should consider whether the investment would
satisfy the prudence and diversification requirements of ERISA and would be
consistent with the documents and instruments governing the Plans.
Section 406 of ERISA and Section 4975 of the Code prohibit fiduciaries from
engaging in specified transactions involving Plan assets with persons that are
"parties in interest" under ERISA or "disqualified persons" under the Code
with respect to the Plan. A violation of these "prohibited transaction" rules
may generate excise tax and other liabilities under ERISA and the Code. Thus,
a Plan fiduciary considering an investment in PEPS Units also should consider
whether such an investment might constitute or give rise to a prohibited
transaction under ERISA or the Code for which no exemption is available. For
example, the purchase and holding of PEPS Units by a Plan with respect to
which Georgia-Pacific, the underwriters or any of their affiliates is a party
in interest or disqualified person could constitute a prohibited transaction
under ERISA or the Code unless an exemption were available for such purchase.
In this regard, the United States Department of Labor has issued prohibited
transaction class exemptions ("PTCEs") that may apply to the acquisition and
holding of the PEPS Units. These class exemptions are PTCE 84-14 (respecting
transactions determined by independent qualified professional asset managers),
PTCE 90-1 (respecting insurance company separate accounts), PTCE 91-38
(respecting bank collective trust funds), PTCE 95-60 (respecting insurance
company general accounts) and PTCE 96-23 (respecting transactions determined
by in-house asset managers).
Any fiduciary proposing to acquire the PEPS Units on behalf of a Plan
should consult with counsel for the Plan and determine that such acquisition
and holding does not and will not constitute a prohibited transaction and will
satisfy the applicable fiduciary requirements imposed under ERISA. Any such
acquisition by a Plan will be deemed a representation by the Plan and the
fiduciary effecting the investment on behalf of the Plan that such acquisition
and holding satisfies the applicable fiduciary requirements of ERISA and is
entitled to exemptive relief from the prohibited transaction provisions of
ERISA and the Code in accordance with one or more of the foregoing PTCEs or
another available prohibited transaction exemption or otherwise will not
result in a nonexempt prohibited transaction.
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UNDERWRITERS
Under the terms and subject to the conditions contained in an underwriting
agreement dated June 30, 1999, the underwriters named below have severally
agreed to purchase, and we have agreed to sell to them, the number of PEPS
Units indicated below:
<TABLE>
<CAPTION>
Number of
Underwriters PEPS Units
------------ ----------
<S> <C>
Morgan Stanley & Co. Incorporated................................. 10,500,000
Goldman, Sachs & Co. ............................................. 3,000,000
PaineWebber Incorporated.......................................... 750,000
Salomon Smith Barney Inc. ........................................ 750,000
----------
Total......................................................... 15,000,000
==========
</TABLE>
The underwriters are offering the PEPS Units subject to their acceptance of
the PEPS Units from us and subject to prior sale. The underwriting agreement
provides that the obligations of the several underwriters to pay for and
accept delivery of the PEPS Units offered by this prospectus supplement are
subject to the approval of certain legal matters by their counsel and to
certain other conditions. The underwriters are obligated to take and pay for
all of the PEPS Units offered by this prospectus supplement if any such PEPS
Units are taken. However, the underwriters are not required to take or pay for
the PEPS Units covered by the underwriters' over-allotment option described
below.
The per PEPS Unit price of any PEPS Unit sold by the underwriters shall be
the public offering price listed on the cover page of this prospectus
supplement, in United States dollars, less an amount not greater than the per
PEPS Unit amount of the concession to dealers described below.
The underwriters initially propose to offer part of the PEPS Units directly
to the public at the public offering price listed on the cover page of this
prospectus supplement and part to certain dealers at a price that represents a
concession not in excess of $.90 per PEPS Unit under the public offering
price. Any underwriter may allow, and such dealers may reallow, a concession
not in excess of $.10 per PEPS Unit to other underwriters or to certain
dealers. After the initial offering of the PEPS Units, the offering price and
other selling terms may from time to time be varied by the underwriters.
We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus supplement, to purchase up to an aggregate of
2,250,000 additional PEPS Units at the public offering price listed on the
cover page of this prospectus supplement, less underwriting discounts and
commissions. The underwriters may exercise this option solely for the purpose
of covering overallotments, if any, made in connection with the offering of
the PEPS Units offered by this prospectus supplement. To the extent the option
is exercised, each underwriter will become obligated, subject to certain
conditions, to purchase about the same percentage of additional PEPS Units as
the number listed next to the underwriter's name in the preceding table. If
the underwriters' over-allotment option is exercised in full, the total price
to the public would be $862,500,000, the total underwriters' discounts and
commissions would be $25,875,000 and the total proceeds to Georgia-Pacific
would be $836,625,000.
Prior to this offering, there has been no public market for the PEPS Units.
The PEPS Units have been approved for listing on the New York Stock Exchange
under the symbol "GPW". In order to meet one of the requirements for listing
on the New York Stock Exchange, the underwriters have undertaken to sell the
PEPS Units to a minimum of 400 beneficial owners.
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We have agreed that, without the prior written consent of Morgan Stanley &
Co. Incorporated on behalf of the underwriters, we will not, during the period
ending 90 days after the date of this prospectus supplement:
. offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend or otherwise transfer or dispose of
directly or indirectly, any PEPS Units, purchase contracts or shares of
Georgia-Pacific Group Stock or any securities convertible into or
exercisable or exchangeable for PEPS Units, purchase contracts or shares
of Georgia-Pacific Group Stock; or
. enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of PEPS
Units, purchase contracts or shares of Georgia-Pacific Group Stock,
whether any transaction described above is to be settled by delivery of PEPS
Units, purchase contracts or shares of Georgia-Pacific Group Stock or such
other securities, in cash or otherwise. The restrictions described in this
paragraph do not apply to:
. the sale of PEPS Units to the underwriters;
. the repurchase by us of shares of either Georgia-Pacific Group Stock or
Timber Stock, or both;
. the issuance by us of shares of Georgia-Pacific Group Stock upon the
exercise of an option or a warrant or the conversion of a security
outstanding on the date of this prospectus supplement of which the
underwriters have been advised in writing; or
. transactions by any person other than us relating to PEPS Units, purchase
contracts or shares of Georgia-Pacific Group Stock or other securities
acquired in open market transactions after the completion of the offering
of the PEPS Units.
In order to facilitate the offering of the PEPS Units, the underwriters may
engage in transactions that stabilize, maintain or otherwise affect the price
of the PEPS Units, the senior deferrable notes or Georgia-Pacific Group Stock.
Specifically, the underwriters may over-allot in connection with the offering,
creating a short position in the PEPS Units for their own account. In
addition, to cover over-allotments or to stabilize the price of the PEPS Units
or Georgia-Pacific Group Stock, the underwriters may bid for, and purchase,
PEPS Units or Georgia-Pacific Group Stock in the open market. Finally, the
underwriting syndicate may reclaim selling concessions allowed to an
underwriter or a dealer for distributing the PEPS Units in the offering, if
the syndicate repurchases previously distributed PEPS Units in transactions to
cover syndicate short positions, in stabilization transactions or otherwise.
Any of these activities may stabilize or maintain the market price of the PEPS
Units, the senior deferrable notes or Georgia-Pacific Group Stock above
independent market levels. The underwriters are not required to engage in
these activities, and may end any of these activities at any time. On June 30,
1999, the underwriters purchased an aggregate of 300,000 shares of Georgia-
Pacific Group Stock at prices ranging from $47 to $47 7/16.
We intend to use the net proceeds of the offering of PEPS Units to
refinance a portion of an interim term loan made to us by an affiliate of
Morgan Stanley & Co. Incorporated. Because more than 10% of the net proceeds
of the offering will be received by an entity who is affiliated with a member
of the National Association of Securities Dealers, Inc. (the "NASD") who is
participating in the offering, the offering is being conducted in compliance
with NASD Conduct Rule 2710(c)(8). In accordance with this rule, Goldman,
Sachs & Co. is acting, and assuming the responsibility of acting, as qualified
independent underwriter ("QIU"), and the public offering price of the PEPS
Units will be no higher than that recommended by the QIU. The QIU has
participated in the preparation of the registration statement of which this
prospectus supplement is a part and has performed due diligence with respect
thereto.
From time to time, Morgan Stanley & Co. Incorporated and certain of its
affiliates have provided, and continue to provide, investment banking and
other financial services to us, including as lender under the interim term
loan referred to above.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act.
S-62
<PAGE>
LEGAL MATTERS
The validity of the PEPS Units, the purchase contracts and senior
deferrable notes offered hereby will be passed upon for us by Simpson Thacher
& Bartlett, New York, New York. The validity of the Georgia-Pacific Group
Stock offered hereby will be passed upon for us by Troutman Sanders LLP,
Atlanta, Georgia. Certain legal matters will be passed upon for the
underwriters by Shearman & Sterling, New York, New York. Simpson Thacher &
Bartlett and Shearman & Sterling may rely on Troutman Sanders LLP as to
matters of Georgia law. Shearman & Sterling from time to time provides legal
services to us.
EXPERTS
The audited consolidated and combined financial statements and schedules of
Georgia-Pacific Corporation and subsidiaries, Georgia-Pacific Corporation--
Georgia-Pacific Group and Georgia-Pacific Corporation--The Timber Company
incorporated by reference in the accompanying prospectus and elsewhere in the
registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and
are incorporated by reference in the accompanying prospectus in reliance upon
the authority of said firm as experts in giving said reports.
S-63
<PAGE>
PROSPECTUS
[Logo of Georgia-Pacific]
$2,975,000,000
Georgia-Pacific Corporation
Georgia-Pacific Corporation may offer and sell--
. Debt Securities
. Preferred Stock
. Georgia-Pacific Corporation--Georgia-Pacific Group
Common Stock and Georgia-Pacific Group Rights to
Purchase Series B Junior Preferred Stock
. Georgia-Pacific Corporation--Timber Group Common Stock
and Timber Group Rights to Purchase Series C Junior
Preferred Stock
. Warrants
. Stock Purchase Contracts
. Stock Purchase Units
We will provide specific terms of these securities in supplements to this
prospectus. You should read this prospectus and any supplements carefully
before you invest.
This prospectus may be used to offer and sell securities only if
accompanied by the prospectus supplement for those securities.
Neither the Securities and Exchange Commission nor any state securities
commission has approved these securities or determined that this prospectus
supplement or the prospectus is accurate or complete. Any representation to
the contrary is a criminal offense.
June 30, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ABOUT THIS PROSPECTUS..................................................... 1
WHERE YOU CAN FIND MORE INFORMATION....................................... 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... 2
THE COMPANY............................................................... 3
USE OF PROCEEDS........................................................... 3
RATIO OF EARNINGS TO FIXED CHARGES........................................ 3
DESCRIPTION OF DEBT SECURITIES............................................ 4
General................................................................. 4
Subordination of Subordinated Debt Securities........................... 6
Certain Covenants....................................................... 7
Certain Definitions..................................................... 9
Merger, Sale and Lease.................................................. 9
Conversion Rights....................................................... 10
Events of Default....................................................... 10
Modification and Waiver................................................. 11
Discharge, Defeasance and Covenant Defeasance........................... 12
Book-Entry Securities................................................... 13
Concerning the Trustees................................................. 14
DESCRIPTION OF PREFERRED STOCK............................................ 15
General................................................................. 15
Rank.................................................................... 15
Dividend Rights......................................................... 16
Voting Rights........................................................... 16
Liquidation Rights...................................................... 17
Redemption.............................................................. 17
Conversion.............................................................. 17
DESCRIPTION OF COMMON STOCK............................................... 17
Authorized and Outstanding Shares....................................... 17
Dividends............................................................... 17
Voting Rights........................................................... 18
Conversion and Redemption............................................... 19
Liquidation............................................................. 24
Determinations by Our Board of Directors................................ 25
Preemptive Rights....................................................... 25
Restated Rights Agreement............................................... 25
Certain Anti-Takeover Provisions of Georgia Law, Our Restated Articles
of Incorporation and Bylaws and Our Restated Rights Agreement.......... 27
DESCRIPTION OF WARRANTS................................................... 31
DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS.......... 31
BOOK-ENTRY ISSUANCE....................................................... 32
PLAN OF DISTRIBUTION...................................................... 34
LEGAL MATTERS............................................................. 35
EXPERTS................................................................... 35
</TABLE>
i
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission, the "Commission", utilizing a "shelf"
registration process. Under this shelf process, we may from time to time sell
any combination of the securities described in this prospectus in one or more
offerings up to a total dollar amount of $2,975,000,000.
We provide information to you about the securities in two separate
documents that progressively provide more detail:
. this prospectus, which contains general information, some of which may
not apply to your securities; and
. the accompanying prospectus supplement, which describes the terms of
your securities and may also add, update or change information contained
in this prospectus.
If the terms of your securities vary between the accompanying prospectus
supplement and this prospectus, you should rely on the different information
in the prospectus supplement.
You should read both this prospectus and any prospectus supplement together
with the additional information described under the heading "Where You Can
Find More Information" to learn more about us and the securities we are
offering.
Unless otherwise indicated or unless the context requires otherwise, all
references in this prospectus to "Georgia-Pacific", "we", "us", "our" or
similar references mean Georgia-Pacific Corporation and its consolidated
subsidiaries.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the Commission. You may read and copy any document that we
file at the Public Reference Room of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Information on the operation of the Public Reference
Room may be obtained by calling the Commission at 1-800-SEC-0330. You may also
inspect our filings at the regional offices of the Commission located at
Citicorp, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7
World Trade Center, New York, New York 10048 or over the Internet at the
Commission's home page at http://www.sec.gov. You can also inspect reports and
other information we file at the offices of the New York Stock Exchange, Inc.,
20 Broad Street, New York, New York 10005, on which exchange our Georgia-
Pacific Corporation--Georgia-Pacific Group Common Stock, par value $.80 per
share, "Georgia-Pacific Group Stock", and our Georgia-Pacific Corporation--
Timber Group Common Stock, par value $.80 per share, "Timber Stock", are
traded. We refer to the Georgia-Pacific Group Stock and the Timber Stock as
the "Common Stock".
This prospectus constitutes part of a Registration Statement on Form S-3
filed with the Commission under the Securities Act of 1933. It omits some of
the information contained in the Registration Statement, and you should refer
to the Registration Statement for further information about us and the
securities offered by this prospectus. Any statement contained in this
prospectus concerning the provisions of any document filed as an exhibit to
the Registration Statement or otherwise filed with the Commission is not
necessarily complete, and in each instance you should refer to the copy of the
document filed.
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<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Commission allows us to disclose important information to you by
referring you to documents we have filed or will file with them. The
information "incorporated by reference" is an important part of this
prospectus, and information that we file later with the Commission will
automatically update and supersede previously filed information. We
incorporate by reference the documents listed below and any future filings
made with the Commission under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 until the offering of all of the securities is
completed:
. Our Annual Report on Form 10-K for the year ended December 31, 1998
(filed on March 19, 1999 and amended on April 7, 1999);
. Our Quarterly Report on Form 10-Q for the quarter ended April 3, 1999;
and
. Our Current Reports on Form 8-K dated March 18, 1999, May 4, 1999, June
22, 1999 and June 28, 1999.
You may request a copy of these filings, at no cost, by directing your
request to Kenneth F. Khoury, Vice President, Deputy General Counsel and
Secretary, Georgia-Pacific Corporation, 133 Peachtree Street, N.E., Atlanta,
Georgia 30303, (404) 652-4000.
2
<PAGE>
THE COMPANY
Georgia-Pacific, founded in 1927 as a wholesaler of hardwood lumber in
Augusta, Georgia, has grown through expansion and acquisitions to become one
of the world's leading manufacturers and distributors of building products and
one of the world's leading producers of pulp and paper. In December 1997, we
separated our timber business into a new operating group called The Timber
Company. Our manufacturing and distribution businesses are now known as the
Georgia-Pacific Group.
The Georgia-Pacific Group is one of the nation's largest producers of
structural and other wood panels, lumber, communication papers, containerboard
and market pulp. It also is the second largest gypsum wallboard producer in
North America and operates the world's largest building products distribution
system. In addition, it operates a rapidly growing tissue products business.
The Timber Company is engaged in the business of growing and selling timber
and wood fiber and is the third largest private owner of timberlands in the
United States, owning approximately 5.0 million acres of timberland in the
United States and Canada, and managing an additional 400,000 acres under long-
term leases. The Timber Company grows various commercial species of trees on
its timberlands and sells timber and wood fiber to the Georgia-Pacific Group
and other industrial wood users. The principal products sold by The Timber
Company are softwood sawtimber, softwood pulpwood, hardwood sawtimber and
hardwood pulpwood.
Our principal executive offices are located at 133 Peachtree Street, N.E.,
Atlanta, Georgia 30303, and our telephone number is (404) 652-4000.
USE OF PROCEEDS
Unless we otherwise indicate in the applicable prospectus supplement, we
will use net proceeds from the sale of the securities offered by this
prospectus and the applicable prospectus supplement for general corporate
purposes. General corporate purposes may include the reduction of debt,
possible acquisitions, and investments in, or extension of credit to, our
subsidiaries.
RATIO OF EARNINGS TO FIXED CHARGES
Our ratio of earnings to fixed charges for each of the periods indicated is
as follows:
<TABLE>
<CAPTION>
Three
Months
Ended Year Ended December 31,
April 3, ------------------------
1999 1998 1997 1996 1995 1994
-------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges
(unaudited)................................ 3.08 2.05 1.48 1.55 4.41 2.14
</TABLE>
The ratio of earnings to fixed charges is computed by dividing "earnings",
which consist of (1) income before income taxes, extraordinary items and
accounting changes, (2) interest expense (excluding interest capitalized
during the period and including amortization of previously capitalized
interest) and (3) one-third of rental expense (the portion deemed
representative of interest), by "fixed charges", which consist of (1) total
interest costs (including interest capitalized during the period) and (2) one-
third of rental expense.
We do not have, and have not had, any Preferred Stock outstanding during
the periods indicated. Accordingly, we cannot show you the ratio of combined
fixed charges and Preferred Stock dividends to earnings.
3
<PAGE>
DESCRIPTION OF DEBT SECURITIES
We may from time to time offer and sell debt securities, consisting of
debentures, notes and/or other unsecured evidences of indebtedness, the "Debt
Securities". The Debt Securities will be either our unsecured senior debt
securities, the "Senior Debt Securities", or our unsecured subordinated debt
securities, the "Subordinated Debt Securities". The Senior Debt Securities
will be issued under an indenture, the "senior indenture", between us and The
Bank of New York, as Trustee, the "senior trustee". The Subordinated Debt
Securities are to be issued under a second indenture, the "subordinated
indenture", which will be entered into between us and The Bank of New York, as
Trustee, the "subordinated trustee". The senior indenture and the subordinated
indenture are together called the "indentures" and the senior trustee and the
subordinated trustee are together called the "trustees".
The following summary of certain provisions of the Indentures is not
complete. You should refer to the indentures. We have filed copies of the
indentures as exhibits to the registration statement of which this prospectus
is a part, Registration Statement File No. 333-80757, the "Registration
Statement". Section references below are to the section in the applicable
indenture. Capitalized terms have the meanings assigned to them in the
applicable indenture. The referenced sections of the indentures and the
definitions of capitalized terms are incorporated by reference.
We have summarized below the general terms and provisions of the Debt
Securities. We will describe the particular terms of the Debt Securities
offered by any prospectus supplement in the prospectus supplement relating to
the offered Debt Securities.
We have substantial operations at the subsidiary level. Claims of creditors
of our subsidiaries, including general creditors, generally will have priority
as to the assets of subsidiaries over our claims and the claims of holders of
our indebtedness, including holders of the Debt Securities. We will rely on
cash generated from operations, including the operations of our subsidiaries,
and our available financing sources in order to meet our debt service
obligations.
General
The indentures do not limit the amount of Debt Securities that we may
issue. (section 301) Each indenture provides that Debt Securities may be
issued from time to time in one or more series. The Debt Securities will be
our unsecured obligations.
The indentures and the Debt Securities do not contain any provisions that
would:
. limit our ability or the ability of our subsidiaries to incur debt;
. require us or an acquiror to repurchase Debt Securities in the event of
a "change in control"; or
. afford holders of Debt Securities protection in the event of a highly
leveraged or similar transaction involving us or our subsidiaries.
You should read the applicable prospectus supplement for information with
respect to any deletions from, modifications of or additions to the events of
default or covenants described below that are applicable to the offered Debt
Securities.
Unless otherwise indicated in the applicable prospectus supplement,
principal of, premium, if any, and interest on the Debt Securities will be
payable at the corporate trust office of the trustees in the Borough of
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<PAGE>
Manhattan, The City of New York, provided that, at our option, interest may be
paid by mailing a check to the address of the person receiving interest as it
appears on the security register for the Debt Securities. Transfers of Debt
Securities, other than book-entry securities, may be made at the same
location. The Debt Securities will be issued only in fully registered form
without coupons and, unless otherwise indicated in the applicable prospectus
supplement, in denominations of $1,000 or integral multiples thereof. (section
302) We will not charge for any registration of transfer or exchange of the
Debt Securities, but we may require payment of an amount sufficient to cover
any tax or other governmental charge imposed in connection with the transfer
or exchange. (section 305)
The prospectus supplement relating to the particular series of Debt
Securities being offered will specify the particular terms of those Debt
Securities. The terms may include:
. the title and type of the particular series of Debt Securities;
. any limit on the aggregate principal amount of the particular series of
Debt Securities;
. the date or dates on which the principal of the particular series of
Debt Securities will mature;
. the rate or rates, which may be fixed or variable, per year or the
method by which such rate or rates will be determined, at which the
particular series of Debt Securities will bear interest, if any;
. the date or dates from which interest, if any, will accrue, or the
method by which such date or dates will be determined, the date or dates
on which interest will be payable and the record dates for interest
payment dates;
. the place or places where the principal of, and premium, if any, and any
interest on the particular series of Debt Securities will be payable;
. the period or periods within which, the price or prices at which, and
the terms and conditions upon which, the particular series of Debt
Securities may be redeemed, in whole or in part, at our option;
. our obligation, if any, to redeem, repay or purchase the particular
series of Debt Securities pursuant to any sinking fund or analogous
provision or at the option of the holders and the period or periods
within which, the price or prices at which and the terms and conditions
upon which the particular series of Debt Securities will be redeemed,
repaid or purchased, in whole or in part, pursuant to such obligation;
. the currency or currencies of payment of principal of, premium, if any,
and interest on the particular series of Debt Securities;
. the index, if any, used to determine the amount of payment of principal
of, premium, if any, and interest on the particular series of Debt
Securities;
. in the case of a particular series of Subordinated Debt Securities, the
portion of the principal amount of the Subordinated Debt Securities
which will be payable upon the declaration of acceleration of the
maturity thereof;
. any additional restrictive covenants included for the benefit of the
holders of the particular series of Debt Securities;
. any additional events of default with respect to the particular series
of Debt Securities;
. in the case of a particular series of Subordinated Debt Securities,
whether that series will be convertible into shares of any class of
Common Stock and if so, the terms and conditions, which may be in
addition to or in lieu of the provisions contained in the subordinated
indenture, upon which the series will be convertible, including the
conversion price and conversion period;
. in the case of a particular series of Subordinated Debt Securities,
information with respect to book-entry procedures, if any; and
5
<PAGE>
. any other terms of the particular series of Debt Securities not
inconsistent with the provisions of the indentures. (section 301)
Some of the Debt Securities may be issued as original issue discount Debt
Securities. Original issue discount Debt Securities are securities sold by us
for substantially less than their stated principal amount. Federal income tax
consequences and other special considerations applicable to any original issue
discount Debt Securities will be described in the applicable prospectus
supplement. (section 101)
Subordination of Subordinated Debt Securities
Our obligations to make any payment of the principal of and premium, if
any, and interest on the Subordinated Debt Securities will be subordinate and
junior in right of payment to all senior indebtedness and, in certain
circumstances relating to our liquidation, dissolution, termination or
reorganization, to all "additional senior obligations". (Article Thirteen of
the subordinated indenture) We cannot make any payment of the principal of and
premium, if any, or interest on the Subordinated Debt Securities if there is a
default in payment with respect to senior indebtedness or an event of default
with respect to any senior indebtedness that results in the acceleration of
its maturity and that default or event of default continues.
The subordinated indenture defines "senior indebtedness" as:
. all "indebtedness of Georgia-Pacific for money borrowed", whether now
outstanding or later created, assumed or incurred, other than:
. the Subordinated Debt Securities;
. any obligation "ranking on a parity with the Subordinated Debt
Securities"; or
. any obligation "ranking junior to the Subordinated Debt Securities";
and
. any deferrals, renewals or extensions of any such senior indebtedness.
The term "indebtedness of Georgia-Pacific for money borrowed" means any
obligation of, or any obligation guaranteed by, Georgia-Pacific for repayment
of borrowed money, whether or not evidenced by bonds, debentures, notes or
other written instruments, and any deferred obligations for payment of the
purchase price of property or assets acquired other than in the ordinary
course of business.
The subordinated indenture defines "additional senior obligations" as all
our indebtedness, whether now outstanding or later created, assumed or
incurred, for claims in respect of derivative products such as interest and
foreign exchange rate contracts, commodity contracts and similar arrangements.
However, additional senior obligations do not include:
. any claims in respect of senior indebtedness; or
. any obligations:
. ranking on a parity with the Subordinated Debt Securities or
. ranking junior to the Subordinated Debt Securities.
For purposes of this definition, "claim" has the meaning assigned to it in
Section 101(4) of the United States Bankruptcy Code of 1978. The subordinated
indenture does not limit or prohibit the incurrence of senior indebtedness or
additional senior obligations.
The subordinated indenture defines "ranking on a parity with the
Subordinated Debt Securities" as any obligation of Georgia-Pacific that:
. ranks equally with and not prior to the Subordinated Debt Securities in
right of payment upon the happening of any insolvency, receivership,
conservatorship, reorganization, readjustment of debt,
6
<PAGE>
marshalling of assets and liabilities or similar proceedings or any
liquidation, dissolution or termination of or relating to Georgia-
Pacific as a whole, whether voluntary or involuntary; and
. is specifically designated as ranking on a parity with the Subordinated
Debt Securities by express provision in the instrument creating or
evidencing such obligation. (section 101 of the subordinated indenture)
The subordinated indenture defines "ranking junior to the Subordinated Debt
Securities" as any obligation of Georgia-Pacific that:
. ranks junior to and not equally with or prior to the Subordinated Debt
Securities in right of payment upon the happening of any insolvency,
receivership, conservatorship, reorganization, readjustment of debt,
marshalling of assets and liabilities or similar proceedings or any
liquidation, dissolution or termination of or relating to Georgia-
Pacific as a whole, whether voluntary or involuntary; and
. is specifically designated as ranking junior to the Subordinated Debt
Securities by express provisions in the instrument creating or
evidencing that obligation (section 101 of the subordinated indenture).
Upon any payment or distribution of assets to creditors upon any
insolvency, receivership, conservatorship, reorganization, readjustment of
debt, marshalling of assets and liabilities or similar proceedings or any
liquidation, dissolution or termination of or relating to Georgia-Pacific as a
whole, whether voluntary or involuntary, the holders of all senior
indebtedness will first be entitled to receive payment in full before the
holders of the Subordinated Debt Securities will be entitled to receive any
payment of the principal of and premium, if any, or interest on the
Subordinated Debt Securities. If, after paying the holders of senior
indebtedness, any cash, property or securities remain, those excess proceeds
will first be applied to pay in full all the additional senior obligations;
then we can make payments on the Subordinated Debt Securities.
If the holders of Subordinated Debt Securities receive payment and are
aware at the time of receiving payment that all senior indebtedness and
additional senior obligations have not been paid in full, then that payment
will be held in trust for the benefit of the holders of senior indebtedness or
additional senior obligations, as the case may be. (Section 1301 of the
subordinated indenture) Because of this subordination, in the event of
insolvency, holders of the Subordinated Debt Securities may recover less,
proportionately, than holders of senior indebtedness and holders of additional
senior obligations and our general unsecured creditors.
Certain Covenants
Limitation on Liens
We may not, nor may we permit any restricted subsidiary, as defined below,
to, create or assume any mortgage, security interest, pledge or lien,
collectively, a "lien", upon any principal property, as defined below, or upon
the shares of stock or indebtedness of any restricted subsidiary, without
equally and ratably securing the Debt Securities. However, this restriction
does not apply to:
(1) liens on any principal property existing at the time of its
acquisition and liens created contemporaneously with or within 120 days
after (or created pursuant to firm commitment financing arrangements
obtained within that period) the completion of the acquisition, improvement
or construction of such property to secure payment of the purchase price of
such property or the cost of such construction or improvements;
(2) liens on property or shares of stock or indebtedness of a
corporation existing at the time it is merged into or its assets are
acquired by us or a restricted subsidiary;
(3) liens on property or shares of stock or indebtedness of a
corporation existing at the time it becomes a restricted subsidiary;
(4) liens securing debts of a restricted subsidiary to us and/or one or
more of our subsidiaries;
7
<PAGE>
(5) liens in favor of a governmental unit to secure payments under any
contract or statute, or to secure debts incurred in financing the
acquisition of or improvements to property subject thereto;
(6) liens on timberlands in connection with an arrangement under which
we and/or one or more restricted subsidiaries are obligated to cut or pay
for timber in order to provide the lienholder with a specified amount of
money, however determined;
(7) liens created or assumed in the ordinary course of the business of
exploring for, developing or producing oil, gas or other minerals
(including borrowings in connection therewith) on, or on any interest in,
or on any proceeds from the sale of, property acquired for such purposes,
production therefrom (including the proceeds thereof), or material or
equipment located thereon;
(8) liens in favor of any customer arising in respect of and not
exceeding the amount of performance deposits and partial, progress, advance
or other payments by that customer for goods produced or services rendered
to that customer in the ordinary course of business;
(9) liens to extend, renew or replace any liens referred to in clauses
(1) through (8) or this clause (9) or any lien existing on the date of the
applicable Indenture;
(10) mechanics' and similar liens;
(11) liens arising out of litigation or judgments being contested; and
(12) liens for taxes not yet due, or being contested, landlords' liens,
tenants' rights under leases, easements, and similar liens not impairing
the use or value of the property involved. (section 1004)
See "Exemption from Limitations on Liens and Sale and Lease-Back".
Limitation on Sale and Lease-Back
Transactions involving sale and lease-back by us or one or more restricted
subsidiaries of any principal property, except for leases not exceeding three
years, are prohibited unless:
(1) we and/or such restricted subsidiary or subsidiaries would be
entitled to incur indebtedness secured by a lien on that property without
securing the Debt Securities;
(2) an amount equal to the value of the sale and lease-back is applied
within 120 days to:
. the voluntary retirement of indebtedness for borrowed money of Georgia-
Pacific or any restricted subsidiary maturing more than one year after
the date incurred and which is senior to or equal with the Debt
Securities in right of payment ("funded debt"); or
. the purchase of other property that will constitute principal property
having a value at least equal to the net proceeds of the sale; or
(3) we and/or a restricted subsidiary shall deliver to the applicable
Trustee for cancellation funded debt (including the Debt Securities) in an
aggregate principal amount at least equal to the net proceeds of the sale.
(section 1005)
See "Exemption from Limitations on Liens and Sale and Lease-Back".
Exemption from Limitations on Liens and Sale and Lease-Back
We and/or one or more restricted subsidiaries are permitted to create or
assume liens or enter into sale and lease-back transactions that would not
otherwise be permitted under the limitations described under "Limitation on
Liens" and "Limitation on Sale and Lease-Back", provided that the sum of the
aggregate amount of all indebtedness secured by these liens (not including
indebtedness otherwise permitted under the exceptions described in clauses (1)
through (12) under "Limitation on Liens") and the value of all of these sale
and lease-back transactions (not including those that are for less than three
years or in respect of which indebtedness is retired or property is purchased
or Debt Securities are delivered, as described under "Limitation on Sale and
Lease-Back") will not exceed 5% of the net tangible assets, as defined below,
of us and our restricted subsidiaries. (section 1006)
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Applicability of Covenants
Any series of Debt Securities may provide that any one or more of the
covenants described above, as well as certain provisions of the "Merger, Sale
and Lease" covenant described below, shall not be applicable to the Debt
Securities of such series. (section 1009)
Certain Definitions
The following terms are defined in more detail in section 101 of the
applicable indenture.
"Net tangible assets" means, at any date, the aggregate amount of assets
(less applicable reserves and other properly deductible items) after
deducting therefrom (1) all current liabilities, (2) any item representing
Investments in Unrestricted Subsidiaries, as defined in the applicable
indenture, and (3) all goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other like intangibles, all of
the foregoing as set forth on the most recent consolidated balance sheet of
Georgia-Pacific and computed in accordance with generally accepted
accounting principles.
"Principal property" means any mill, manufacturing plant or facility or
timberlands owned by us or one or more restricted subsidiaries and located
within the continental United States, but does not include any such mill,
plant, facility or timberlands which are acquired after the date of the
applicable Indenture for the disposal of solid waste or control or
abatement of atmospheric pollutants or contaminants, or water, noise or
other pollutants, or which in the opinion of our board of directors is not
of material importance to our total business and our restricted
subsidiaries as an entirety, and does not include timberlands designated by
our board of directors as being held primarily for development or sale, or
minerals or mineral rights.
"Restricted subsidiary" means a subsidiary substantially all of the
property of which is located within the continental United States and which
itself, or with us or one or more other restricted subsidiaries, owns a
principal property.
"Subsidiary" means any corporation a majority of the outstanding voting
stock of which is owned or controlled by us or one or more subsidiaries and
which is consolidated in our accounts.
Merger, Sale and Lease
Under the senior indenture, we may consolidate with or merge into any other
corporation or sell, convey or lease all or substantially all of our
properties and assets to any person, without the consent of the holders of any
of the outstanding Senior Debt Securities, provided that:
. any successor or purchaser will expressly assume the due and punctual
payment of the principal of and interest on all the Senior Debt
Securities and the due and punctual performance and observance of all of
the covenants and conditions of the senior indenture to be performed by
us under a supplemental indenture; and
. we have delivered to the senior trustee an opinion of counsel stating
compliance with these provisions. (sections 801 and 804 of the senior
indenture)
Under the subordinated indenture, we may not consolidate with or merge into
any other corporation or sell, convey, exchange, transfer or lease all or
substantially all of our properties and assets to any person, unless:
. any successor or purchaser is a corporation organized under the laws of
any domestic jurisdiction;
. any such successor or purchaser expressly assumes our obligations on the
Subordinated Debt Securities and under the subordinated indenture;
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. immediately after the transaction, no event of default, and no event
that, after notice or lapse of time or both, would become an event of
default, occurs and continues; and
. certain other conditions are met. (section 801 of the subordinated
indenture)
Under both indentures, if upon any merger of us with or into any other
corporation, or upon any sale or lease of all or substantially all of our
properties, any principal property of Georgia-Pacific or a restricted
subsidiary or any shares of stock or indebtedness of a restricted subsidiary
owned immediately prior to such merger, sale or lease would, thereupon, become
subject to any lien other than liens permitted, without securing the Debt
Securities under sections 1004 and 1006 of the applicable indenture summarized
above, prior to such event, we will secure the Debt Securities, equally with
all of our other obligations so secured, by a lien on such principal property,
shares or indebtedness prior to all liens other than any liens existing up to
that time thereon and liens so permitted by those sections of the indenture.
(section 802)
Conversion Rights
The terms and conditions, if any, upon which Subordinated Debt Securities
are convertible into shares of any class of Common Stock will be set forth in
the prospectus supplement relating to such series of Subordinated Debt
Securities. Such terms will include:
. the conversion price;
. the conversion period;
. provisions as to whether conversion will be at the option of the holder
or us;
. the events requiring an adjustment of the conversion price; and
. provisions affecting conversion in the event of the redemption of such
series of Subordinated Debt Securities.
Events of Default
Unless otherwise provided in the applicable prospectus supplement, the
indentures provide that the following events constitute events of default:
. failure to pay any interest upon any Debt Security when due, and that
failure continues for 30 days (in the case of the subordinated
indenture, whether or not payment is prohibited by the subordination
provisions);
. failure to pay the principal of, or premium, if any, on, any Debt
Security when due at its maturity or upon acceleration (in the case of
the subordinated indenture, whether or not payment is prohibited by the
subordination provisions);
. failure to deposit any sinking fund payment, when due, in respect of any
Debt Security of that series (whether or not payment is prohibited by
the subordination provisions);
. failure to perform any other covenants or warranties in the applicable
Indenture, other than a covenant or warranty included in the applicable
indenture solely for the benefit of a series of Debt Securities under
the applicable Indenture other than that series, and that failure
continues for 90 days, in the case of the senior indenture, and 60 days,
in the case of the subordinated indenture, after written notice as
provided in the applicable Indenture;
. certain events of bankruptcy, insolvency or reorganization of Georgia-
Pacific; and
. any other event of default provided with respect to Debt Securities of
that series. (section 501)
Acceleration of Debt Securities. If an event of default with respect to
Debt Securities of any series at the time outstanding occurs and is
continuing, either the applicable trustee or the holders of at least 25% in
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aggregate principal amount of outstanding Debt Securities of that series may
declare the principal amount (or, if those Debt Securities are original issue
discount Debt Securities, the portion of the principal amount specified in
their terms) of all Debt Securities of that series due and payable
immediately. At any time after a declaration of acceleration with respect to
Debt Securities of any series has been made but, before a judgment or decree
based on acceleration has been obtained, the holders of a majority in
aggregate principal amount of the outstanding Debt Securities of that series
may, under certain circumstances, rescind and annul that acceleration if all
events of default, other than the non-payment of accelerated principal (or
specified portion thereof) with respect to Debt Securities of that series,
have been cured or waived as provided in the applicable indenture. (section
502)
General. If there is a default in the payment of principal, premium, if
any, or interest, if any, or the performance of any covenant or agreement in
the Debt Securities or the indentures, the applicable trustee, subject to
certain limitations and conditions, may institute judicial proceedings to
enforce payment of that principal, premium, if any, or interest, if any, or to
obtain the performance of that covenant or agreement or any other proper
remedy. (section 503) Under certain circumstances, the applicable trustee may
withhold notice of a default to the holders of the securities if the
applicable trustee in good faith determines that the withholding of that
notice is in the best interest of the holders, and the applicable trustee will
withhold the notice for certain defaults for a period of 30 days. (section
602) You should review the prospectus supplement relating to any series of
Debt Securities that are original issue discount Debt Securities for
particular provisions relating to acceleration of the stated maturity of a
portion of the principal amount of that series of original issue discount Debt
Securities if an event of default occurs and is continuing.
The indentures provide that, subject to the duty of the applicable trustee
during default to act with the required standard of care, the applicable
trustee does not have to exercise any of its rights or powers under the
applicable indenture at the request or direction of any of the holders, unless
those holders have offered to the applicable trustee reasonable security or
indemnity. (section 603) Subject to the foregoing sentence and to certain
other conditions, the holders of a majority in aggregate principal amount of
the outstanding Debt Securities of any series will have the right to direct
the time, method and place of conducting any proceeding for any remedy
available to the applicable trustee, or exercising any trust or power
conferred on the applicable trustee, with respect to the Debt Securities of
that series. (section 512)
No holders of any Debt Securities of any series may institute any
proceeding with respect to the applicable Indenture, or for the appointment of
a receiver or trustee or for any remedy relating to that appointment:
. unless those holders have already given to the applicable trustee
written notice of a continuing event of default;
. unless the holders of at least 25% in aggregate principal amount of the
outstanding Debt Securities of that series have made written request,
and offered reasonable indemnity, to the applicable trustee to institute
such a proceeding as trustee;
. if the trustee has received from the holders of a majority in aggregate
principal amount of the outstanding Debt Securities of that series a
direction inconsistent with the written request; and
. unless the trustee has failed to institute the proceeding within 60
days. (section 507)
The above limitations do not apply to a suit instituted by holder of a Debt
Security for enforcement of payment of the principal of and premium, if any,
or interest on the Debt Security on or after the respective due dates
described in the Debt Security. (section 508)
We are required to furnish to each trustee annually a statement as to the
performance by us of certain of our obligations under the applicable indenture
and as to any default in such performance. (section 1007)
Modification and Waiver
We and the applicable trustee may modify and amend the indentures with the
consent of the holders of at least 66 2/3% in aggregate principal amount of
the outstanding Debt Securities of each series issued under the applicable
indenture and affected by the modification or amendment, but no such
modification or amendment
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may, without the consent of the holders of each outstanding Debt Security of
the series affected by the modification or amendment:
. change the stated maturity of the principal of, or any installment of
principal of or interest on, any Debt Security of that series;
. reduce the principal amount of or premium, if any, or interest on, any
Debt Security of any series (including, in the case of an original issue
discount Debt Security, the amount payable upon acceleration of
maturity);
. change the place or currency of payment of principal of or the premium,
if any, or interest on any Debt Security of that series;
. impair the right of any holder to institute suit for the enforcement of
any payment on any Debt Security of such series;
. in the case of the Subordinated Debt Securities, modify the
subordination provisions in a manner adverse to the holders of the
Subordinated Debt Securities of that series; or
. reduce the percentage in principal amount of outstanding Debt Securities
of any series, the consent of whose holders is required for modification
or amendment of the applicable indenture or for waiver of compliance
with certain provisions of the applicable indenture or for waiver of
certain defaults. (section 902)
The holders of at least 66 2/3% in aggregate principal amount of the
outstanding Debt Securities of any series may, on behalf of all holders of
that series, waive compliance by us with certain restrictive provisions of the
applicable indenture. (section 1008) The holders of a majority in aggregate
principal amount of the outstanding Debt Securities of any series may, on
behalf of all holders of that series, waive any past default under the
applicable indenture, except a default in the payment of principal, premium,
if any, or interest and regarding certain covenants. (section 513)
Discharge, Defeasance and Covenant Defeasance
The applicable indenture with respect to Debt Securities of any series may
be discharged, subject to certain terms and conditions, when:
. either (1) all Debt Securities of such series have been delivered to the
applicable trustee for cancellation or (2) all Debt Securities of such
series not theretofore delivered to the applicable trustee for
cancellation (a) have become due and payable, (b) will become due and
payable at their stated maturity within one year, or (c) are to be
called for redemption within one year under arrangements satisfactory to
the applicable trustee for the giving of notice by the applicable
trustee, and we, in the case of (a), (b) or (c) of subclause (2), have
irrevocably deposited or caused to be deposited with the applicable
trustee as trust funds in trust for such purpose an amount in the
currency in which such Debt Securities are denominated sufficient to pay
and discharge the entire indebtedness on such Debt Securities for
principal and premium, if any, and interest to the date of such deposit
in the case of Debt Securities which have become due and payable or to
the stated maturity or redemption date, as the case may be;
. paid or caused to be paid all other sums payable under the applicable
indenture by us; and
. we have delivered to the applicable trustee an officers' certificate and
an opinion of counsel each stating that all conditions precedent therein
provided relating to the satisfaction and discharge of the applicable
indenture with respect to such series have been complied with. (section
401)
If so specified when the Subordinated Debt Securities of a particular
series are created, after we have deposited with the subordinated trustee,
cash or government securities, in trust for the benefit of the holders
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sufficient to pay the principal of, premium, if any, and interest on the
Subordinated Debt Securities of such series when due, then we, at our option:
. will be deemed to have paid and satisfied our obligations on all
outstanding Subordinated Debt Securities of that series, which is known
as "defeasance and discharge"; or
. will cease to be under any obligation, other than to pay when due the
principal of, premium, if any, and interest on these Subordinated Debt
Securities, relating to the Subordinated Debt Securities of that series,
which is known as "covenant defeasance".
Under the subordinated indenture, we must also deliver to the subordinated
trustee an opinion of counsel to the effect that the holders of the
Subordinated Debt Securities will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit and defeasance and
discharge or covenant defeasance and that federal income tax would be imposed
on the holders in the same manner as if such defeasance and discharge had not
occurred. In the case of a defeasance and discharge, such opinion must be
based upon a ruling or administrative pronouncement of the Internal Revenue
Service.
When there is a defeasance and discharge, (1) the subordinated indenture
will no longer govern the Subordinated Debt Securities of that series, (2) we
will no longer be liable for payment and (3) the holders of that series of
Subordinated Debt Securities will be entitled only to the deposited funds.
When there is a covenant defeasance, however, we will continue to be obligated
to make payments when due if the deposited funds are not sufficient.
The obligations and rights under the subordinated indenture regarding
compensation, reimbursement and indemnification of the subordinated trustee,
optional redemption, mandatory and optional scheduled installment payments, if
any, registration of transfer and exchange of the Subordinated Debt Securities
of such series, replacement of mutilated, destroyed, lost or stolen
Subordinated Debt Securities and certain other administrative provisions will
continue even if we exercise our defeasance and discharge or covenant
defeasance options. (sections 403 and 404 of the subordinated indenture)
Under current federal income tax law, a covenant defeasance would not be
treated as a taxable exchange of Subordinated Debt Securities. Prospective
investors are urged to consult their own tax advisors as to the specific
consequences of a defeasance and discharge, including the applicability and
effect of tax laws other than the federal income tax law.
Book-Entry Securities
The Debt Securities of a series may be issued in the form of one or more
book-entry securities that will be deposited with a Depositary or its nominee
identified in the applicable prospectus supplement. In this case, book-entry
securities will be issued in aggregate denominations equal to the aggregate
principal amount of Debt Securities represented by such book-entry securities.
Unless and until it is exchanged in whole or in part for Debt Securities in
definitive registered form, a book-entry security may not be transferred
except as a whole by the applicable Depositary to a nominee of such Depositary
or by a nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor of the
Depositary or a nominee of such successor.
The specific terms of the depositary arrangement with respect to any Debt
Securities to be represented by a book-entry security will be described in the
applicable prospectus supplement. We anticipate that the following provisions
will apply to all depositary arrangements.
Upon the issuance of a book-entry security, the Depositary for such book-
entry security or its nominee will credit, on its book-entry registration and
transfer system, the respective principal amounts of the Debt Securities
represented by such book-entry security to the accounts of persons that have
accounts with such Depositary, "participants". We or the underwriters or
agents will designate such accounts. Participants include securities brokers
and dealers, banks and trust companies, clearing corporations and certain
other organizations.
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Access to the Depositary's system is also available to others, such as banks,
brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly,
"indirect participants". Persons who are not participants may beneficially own
book-entry securities held by the Depositary only through participants or
indirect participants.
Ownership of beneficial interests in any book-entry security will be shown
on, and the transfer of that ownership will be effected only through, records
maintained by the Depositary or its nominee (with respect to interests of
participants) and on the records of participants (with respect to interests of
indirect participants). The laws of some states require that certain
purchasers of securities take physical delivery of such securities in
definitive form. These laws, as well as the limits on participation in the
Depositary's book-entry system, may impair the ability to transfer beneficial
interests in a book-entry security.
So long as the Depositary or its nominee is the registered owner of a book-
entry security, such Depositary or such nominee will be considered the sole
owner or holder of the Debt Securities represented by such book-entry security
for all purposes under the applicable indenture. Except as provided below,
owners of beneficial interests in securities represented by book-entry
securities will not be entitled to have such Debt Securities registered in
their names, will not be entitled to receive physical delivery of such Debt
Securities in definitive form and will not be considered the owners or holders
of such Debt Securities under the applicable indenture.
Payments of principal of and any premium and interest on Debt Securities
registered in the name of the Depositary or its nominee will be made to the
Depositary or its nominee, as the case may be, as the registered owner of the
book-entry securities representing such Debt Securities. We expect that the
Depositary for a series of Debt Securities or its nominee, upon receipt of any
payment of principal, premium or interest, will credit immediately
participants' accounts with payments in amounts proportionate to their
beneficial interests in the book-entry security, as shown on the records of
such Depositary or its nominee. We also expect that payments by participants
and indirect participants to owners of beneficial interests in such book-entry
security held through such persons will be governed by standing instructions
and customary practices, as is now the case with securities registered in
"street name", and will be the responsibility of such participants and
indirect participants. Neither we, the applicable trustee, any authenticating
agent, any paying agent nor the security registrar for such Debt Securities
will have any responsibility or liability for any aspect of the records
relating to, or payments made on account of, beneficial ownership interests in
any book-entry security or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests. (section 311)
If the Depositary for Debt Securities of a series notifies us that it is
unwilling or unable to continue as Depositary or if at any time the Depositary
ceases to be a clearing agency registered under the Exchange Act, we have
agreed to appoint a successor depositary. If such a successor is not appointed
by us within 90 days, we will issue Debt Securities of such series in
definitive registered form in exchange for the book-entry security. In
addition, we may at any time and in our sole discretion determine that the
Debt Securities of any series will no longer be represented by book-entry
securities. In that event, we will issue Debt Securities of such series in
definitive registered form in exchange for such book-entry securities.
Further, if we so specify with respect to the Debt Securities of a series, or
if an event of default, or an event which with notice, lapse of time or both
would be an event of default with respect to the Debt Securities of such
series has occurred and is continuing, an owner of a beneficial interest in a
book-entry security representing Debt Securities of such series may receive
Debt Securities of such series in definitive registered form. In any such
case, an owner of a beneficial interest in a book-entry security will be
entitled to physical delivery in definitive registered form of Debt Securities
of the series represented by such book-entry security equal in principal
amount to such beneficial interest and to have such Debt Securities registered
in such owner's name. (section 305) Debt Securities so issued in definitive
form will be issued in denominations of $1,000 and integral multiples of
$1,000 and will be issued in registered form only, without coupons.
Concerning the Trustees
We maintain customary banking relationships with The Bank of New York, and
The Bank of New York is a lender under our $1.5 billion unsecured revolving
credit facility.
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DESCRIPTION OF PREFERRED STOCK
We have summarized below the general terms of the Preferred Stock, without
par value per share, "Preferred Stock", to which any prospectus supplement may
relate, and the Junior Preferred Stock, without par value per share, "Junior
Preferred Stock". The summary is not complete. We will describe some of the
terms of any series of the Preferred Stock or the Junior Preferred Stock, as
the case may be, offered by any prospectus supplement in the prospectus
supplement for that series of Preferred Stock or Junior Preferred Stock, as
applicable. If we indicate the terms of any such series in the prospectus
supplement, those terms may differ from the terms described below. We
encourage you to read our restated articles of incorporation which have been
filed with the Commission and the articles supplementary to our restated
articles of incorporation which will be filed with the Commission in
connection with the offering of the series of Preferred Stock or Junior
Preferred Stock.
General
We are authorized to issue up to 10,000,000 shares of Preferred Stock and
25,000,000 shares of Junior Preferred Stock, of which 5,000,000 shares have
been designated as Series B Junior Preferred Stock and 5,000,000 shares have
been designated as Series C Junior Preferred Stock. The shares of Series B
Junior Preferred Stock and Series C Junior Preferred Stock have been reserved
for issuance in connection with our restated rights agreement described under
"Description of Common Stock--Restated Rights Agreement". As of the date of
this prospectus, we had no Preferred Stock or Junior Preferred Stock
outstanding.
Our restated articles of incorporation authorize our board of directors to
provide for the issuance of Preferred Stock and Junior Preferred Stock in one
or more series, without shareholder action. Our board of directors can
determine the rights, preferences and limitations of each series. Prior to the
issuance of each series of Preferred Stock or Junior Preferred Stock, as the
case may be, our board of directors will adopt resolutions creating and
designating the series as a series of Preferred Stock or Junior Preferred
Stock, as applicable.
The Preferred Stock and the Junior Preferred Stock have the terms described
below, unless otherwise provided in the prospectus supplement relating to a
particular series of the Preferred Stock or Junior Preferred Stock, as the
case may be. You should read the prospectus supplement relating to the
particular series of the Preferred Stock or Junior Preferred Stock offered
thereby for specific terms, including:
. the designation of the series and the number of shares offered;
. the amount per share payable in the event of liquidation;
. the price at which the particular series of Preferred Stock or the
Junior Preferred Stock, as the case may be, will be issued;
. the dividend rate, the dates on which dividends will be payable and the
date from which dividends will commence to cumulate;
. any redemption, retirement or sinking fund provisions;
. whether the shares have voting rights, and the extent of any such voting
rights, including, without limitation, the right to elect directors;
. the terms and conditions, if any, on which shares may be converted;
. any other preferences, rights, restrictions and qualifications of shares
of such series permitted by law and the restated articles of
incorporation.
Rank
Any series of Preferred Stock will rank:
. senior to all classes of Common Stock and Junior Preferred Stock with
respect to dividend rights and liquidation rights;
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. senior to classes of Preferred Stock with respect to either dividend
rights or liquidation rights where the terms of the Preferred Stock
entitle the holders to receipt of dividends or a liquidation
distribution, as the case may be, in preference or priority to the
holders of such other classes of Preferred Stock;
. equally with classes of Preferred Stock with respect to either dividend
rights or liquidation rights if the holders of the Preferred Stock are
entitled to receipt of dividends or a liquidation distribution, as the
case may be, without preference or priority one over the other; and
. junior to classes of Preferred Stock with respect to either dividend
other rights or liquidation rights if the rights of holders are subject
or subordinate to the rights of holders of such other classes of
Preferred Stock to receipt of dividends or a liquidation distribution,
as the case may be.
Any series of Junior Preferred Stock will rank:
. senior to all classes of Common Stock with respect to dividend rights
and liquidation rights;
. senior to classes of Junior Preferred Stock with respect to either
dividend rights or liquidation rights if the terms of the Junior
Preferred Stock entitle the holders to receipt of dividends or a
liquidation distribution, as the case may be, in preference or priority
to the holders of such other classes of Junior Preferred Stock;
. equally with classes of Junior Preferred Stock with respect to either
dividend rights or liquidation rights if the holders of the Junior
Preferred Stock are entitled to receipt of dividends or a liquidation
distribution, as the case may be, without preference or priority one
over the other; and
. junior to all classes of Preferred Stock with respect to dividend rights
and liquidation rights, and to classes of Junior Preferred Stock with
respect to either dividend rights or liquidation rights if the rights of
holders are subject or subordinate to the rights of holders of such
other classes of Junior Preferred Stock to receipt of dividends or a
liquidation distribution, as the case may be.
Dividend Rights
Dividends on the Preferred Stock and the Junior Preferred Stock are
cumulative.
Each series of Preferred Stock and Junior Preferred Stock will be entitled
to dividends as described in the prospectus supplement. Different series of
Preferred Stock and Junior Preferred Stock may be entitled to dividends at
different rates. The rate may be fixed or variable or both.
Holders of the Preferred Stock and Junior Preferred Stock of each series
will be entitled to receive, when, as and if declared by our board of
directors, cash dividends at the rates and on the dates described in the
prospectus supplement. Each dividend will be payable to the holders of record
as they appear on our stock record books on record dates determined by our
board of directors.
No full dividends may be declared or paid or funds set apart for the
payment of dividends on any equal securities unless dividends have been paid
or set apart for payment on the Preferred Stock or Junior Preferred Stock, as
the case may be. If full dividends are not paid, the Preferred Stock or Junior
Preferred Stock, as the case may be, will share dividends pro rata with the
securities ranking equally. No dividends may be declared or paid or funds set
apart for the payment of dividends on any junior securities unless full
cumulative dividends for all dividend periods terminating on or prior to the
date of the declaration or payment will have been paid or declared and a sum
sufficient for the payment set apart for payment on the Preferred Stock or
Junior Preferred Stock, as the case may be.
Voting Rights
Except as we indicate in the prospectus supplement, or except as required
by applicable law, the holders of the Preferred Stock and the Junior Preferred
Stock will not be entitled to any voting rights.
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Liquidation Rights
If we liquidate, dissolve or terminate our affairs, either voluntarily or
involuntarily, the holders of each series of Preferred Stock and Junior
Preferred Stock will be entitled to receive, after we pay our debts and
liabilities and after we provide for liquidating distributions to holders of
securities senior to such series of Preferred Stock or Junior Preferred Stock,
as the case may be, and before we make any liquidating distributions to
holders of securities junior to such series of Preferred Stock or Junior
Preferred Stock, as the case may be, liquidating distributions in the amount
described in the prospectus supplement relating to such series of Preferred
Stock and Junior Preferred Stock, as the case may be, plus an amount equal to
accrued and unpaid dividends for all dividend periods prior to that point in
time.
If the amounts payable with respect to such series of Preferred Stock or
Junior Preferred Stock, as the case may be, and any other securities equal
with such series are not paid in full, the holders of such series of Preferred
Stock or Junior Preferred Stock and the securities equal with such series will
share proportionately in the distribution of our assets in proportion to the
full liquidation preferences to which they are entitled. After the holders of
such series of Preferred Stock or Junior Preferred Stock, as the case may be,
are paid in full, they will have no right or claim to any of our remaining
assets.
Redemption
The prospectus supplement will state the terms, if any, on which shares of
a series of Preferred Stock or Junior Preferred Stock, as the case may be, may
be redeemable, in whole or in part, or subject to mandatory redemption
pursuant to a sinking fund.
Conversion
The prospectus supplement will state the terms, if any, on which shares of
a series of Preferred Stock or Junior Preferred Stock, as the case may be, are
convertible into other securities of ours.
DESCRIPTION OF COMMON STOCK
We have summarized below the material terms of the Georgia-Pacific Group
Stock and the Timber Stock. The summary is not complete. We encourage you to
read our restated articles of incorporation and our bylaws. You should also
refer to the applicable provisions of the Georgia Business Corporation Code.
Authorized and Outstanding Shares
We are authorized to issue up to 400,000,000 shares of Georgia-Pacific
Group Stock, par value $.80 per share. At May 13, 1999, we had outstanding
85,818,888 shares of Georgia-Pacific Group Stock. On June 3, 1999, we split
the Georgia-Pacific Group Stock, issuing to holders of Georgia-Pacific Group
Stock an additional share of Georgia-Pacific Group Stock for each share that
they owned. After giving effect to the stock split, the number of shares of
Georgia-Pacific Group Stock outstanding on May 13, 1999 would have been
171,637,776. We also are authorized to issue up to 250,000,000 shares of
Timber Stock, par value $.80 per share. At May 13, 1999, we had outstanding
84,909,044 shares of Timber Stock.
Dividends
Our ability to pay dividends on the Georgia-Pacific Group Stock and the
Timber Stock is limited by Georgia law. Under Georgia law, dividends are
limited to our legally available assets and subject to the prior payment of
dividends on any outstanding shares of Preferred Stock and Junior Preferred
Stock. Under Georgia law, assets are not legally available for paying
dividends if (1) we would not be able to pay our debts as they become due in
the usual course of business or (2) our total assets would be less than our
total liabilities plus, subject to some exceptions, any amounts necessary to
satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those of shareholders receiving the
dividend.
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Our ability to pay dividends on the Georgia-Pacific Group Stock and the
Timber Stock is also limited by our restated articles of incorporation. Under
our restated articles of incorporation, dividends are limited to an amount not
greater than the available dividend amount for the relevant group. Each
group's available dividend amount is, on any date, any amount in excess of the
minimum amount necessary for the group to be able to pay its debts as they
become due in the usual course of business, as determined by our board of
directors exercising its business judgment based on the facts and
circumstances then existing. This amount is calculated as if the group were a
stand-alone company.
Under Georgia law, the amount of assets legally available for paying
dividends is determined on the basis of our entire company, and not just the
respective groups. Consequently, the amount of our legally available assets
will reflect the amount of any net losses of each group, any dividends on
Georgia-Pacific Group Stock, Timber Stock, any Preferred Stock or any Junior
Preferred Stock, and any repurchases of Georgia-Pacific Group Stock or Timber
Stock or Preferred Stock or Junior Preferred Stock. Dividend payments on the
Georgia-Pacific Group Stock and the Timber Stock could be precluded because
legally available assets are not available under Georgia law, even though the
available dividend amount test for the particular relevant group was met.
Moreover, we cannot assure you that there will be an available dividend amount
for either group.
Subject to these restrictions on paying dividends, our board of directors
may, in its sole discretion, declare and pay dividends exclusively on the
Georgia-Pacific Group Stock, exclusively on the Timber Stock or on both, in
equal or unequal amounts, without having to take into account the relative
available dividend amounts for the two groups, the amount of dividends it
previously declared on each class of Common Stock, the respective voting or
liquidation rights of each class or any other factor.
Voting Rights
Under our restated articles of incorporation, the entire voting power of
our shareholders is vested in the holders of Georgia-Pacific Group Stock and
Timber Stock. Except as otherwise provided by law, by the terms of any
outstanding Preferred Stock and Junior Preferred Stock or by any provision of
our restated articles of incorporation restricting the power to vote on a
specified matter to other shareholders, holders of Georgia-Pacific Group Stock
and Timber Stock are entitled to vote on any matter on which our shareholders
are, by law or by the provisions of our restated articles of incorporation or
our bylaws, entitled to vote. Both classes of Common Stock vote together as a
single voting group on each matter on which holders of Common Stock are
generally entitled to vote.
On each matter as to which holders of both classes of Common Stock vote
together as a single voting group:
. each share of Georgia-Pacific Group Stock has one vote; and
. each share of Timber Stock has a number of votes equal to the quotient
of the time-weighted average market value of one share of Timber Stock
over the 20-trading day period ending on the 10th trading day prior to
the record date for determining the Common Stock holders entitled to
vote, divided by the time-weighted average market value of one share of
Georgia-Pacific Group Stock over the same period.
In calculating the time-weighted average market values of the two classes of
Common Stock, the average market values for the second, third and fourth five-
trading day period in the 20-trading day period will be weighted two times,
three times and four times, respectively, the weight given to the average
market value of the first five trading days in the 20-trading day period.
Accordingly, the relative per share voting rights of the Georgia-Pacific
Group Stock and the Timber Stock fluctuate depending upon changes in the
relative market values of shares of the two classes of Common Stock. As of the
date of this prospectus, Georgia-Pacific Group Stock has a substantial
majority of the voting power because the aggregate market value of the
outstanding shares of Georgia-Pacific Group Stock is substantially greater
than the aggregate market value of the outstanding shares of Timber Stock.
18
<PAGE>
If shares of only one class of Common Stock are outstanding, each share of
that class has one vote. If either class of Common Stock is entitled to vote
as a separate voting group with respect to any matter, each share of that
class will, for purposes of that vote, have one vote on the matter.
Fluctuations in the relative voting rights of the Georgia-Pacific Group
Stock and the Timber Stock could influence an investor interested in acquiring
and maintaining a fixed percentage of the voting power of our stock to acquire
such percentage of both classes of Common Stock, and would limit the ability
of investors in one class to acquire for the same consideration relatively
more or less votes per share than investors in the other class.
The holders of Georgia-Pacific Group Stock and Timber Stock do not have any
right to vote separately as a voting group on any matter coming before our
shareholders, except for the limited voting group voting rights provided under
Georgia law described below, by New York Stock Exchange rules or as determined
by our board of directors. In addition to the approval of the holders of a
majority of the voting power of all shares of Common Stock voting together as
a single voting group, the approval of a majority of the outstanding shares of
Georgia-Pacific Group Stock or Timber Stock, voting as a separate voting
group, would also be required under Georgia law to approve any amendment to
our restated articles of incorporation that would, among other things:
. increase or decrease the number of authorized shares of Georgia-Pacific
Group Stock or Timber Stock; or
. change the designation, rights, preferences or limitations of the shares
of the class.
The following illustration demonstrates the calculation of the number of
votes each share of Timber Stock would be entitled on all matters on which
holders of Georgia-Pacific Group Stock and Timber Stock vote together as a
single voting group. If:
. the time-weighted average market value of Timber Stock during the 20-
trading day valuation period was $30 per share; and
. the time-weighted average market value of Georgia-Pacific Group Stock
during the 20-trading day valuation period was $50 per share,
then each share of Georgia-Pacific Group Stock would have one vote and each
share of Timber Stock would have 0.6 votes based on the following calculation:
$30 per share = 0.6 votes
-------------
$50 per share
Assuming 200 million shares of Georgia-Pacific Group Stock and 100 million
shares of Timber Stock were outstanding, the shares of Georgia-Pacific Group
Stock would represent 76.9% of our total voting power and the shares of Timber
Stock would represent 23.1% of our total voting power.
Conversion and Redemption
Mandatory Dividend, Redemption or Conversion of Common Stock If Disposition
of Group Assets Occurs
If we dispose of all or substantially all of the properties and assets of
either the Georgia-Pacific Group or the Timber Group, we must take action that
returns the value of those assets to the holders of that group's Common Stock.
That action could take the form of a cash dividend, a redemption of shares or
a conversion into the other group's Common Stock.
Accordingly, if we sell all or substantially all of one group's assets in a
transaction other than one described below under "Exceptions to the Dividend,
Redemption or Conversion Requirement if a Disposition Occurs", we will:
19
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. pay a dividend to the holders of shares of that group's Common Stock in
cash and/or securities or other property having a fair value equal to
the net proceeds of the disposition; or
. (1) if the disposition involves all of the properties and assets of that
group, redeem all outstanding shares of that group's Common Stock in
exchange for cash and/or securities or other property having a fair
value equal to the net proceeds of the disposition; or
. (2) if the disposition involves substantially all, but not all, of the
properties and assets of that group, redeem a number of whole shares of
that group's Common Stock in exchange for cash and/or securities or
other property having a fair value equal to the net proceeds of the
disposition; the number of shares so redeemed will have, in the
aggregate, an average market value, during the 10-trading day period
beginning on the 16th trading day following the disposition date,
closest to the net proceeds; or
. convert each outstanding share of that group's Common Stock into a
number of shares of the other group's Common Stock equal to 110% of the
ratio of the average market value of one share of Common Stock of the
group whose assets are disposed to the average market value of one share
of Common Stock of the other group, during the 10-trading day period
beginning on the 16th trading day following the disposition date.
We may only pay a dividend or redeem shares of Common Stock if we have
legally available assets under Georgia law and the amount to be paid to
holders is less than or equal to the available dividend amount for the group.
We will pay the dividend or complete the redemption or conversion prior to or
on the 85th trading day following the disposition date.
For purposes of determining whether a disposition has occurred,
"substantially all of the properties and assets" of either group means a
portion of the properties and assets:
. that represents at least 80% of the then fair value of the properties
and assets of that group; or
. from which were derived at least 80% of the aggregate revenues of that
group for the immediately preceding 12 fiscal quarterly periods.
The "net proceeds" of a disposition means an amount equal to what remains
of the gross proceeds of the disposition after we pay or reasonably provide
for, as determined by our board of directors:
. any taxes payable by us, or which would have been payable but for the
utilization of tax benefits attributable to the group not subject to the
disposition, in respect of the disposition or in respect of any
resulting dividend or redemption;
. any transaction costs, including, without limitation, any legal,
investment banking and accounting fees and expenses; and
. any liabilities of or attributed to the group whose assets are disposed,
including, without limitation, any liabilities for deferred taxes, any
indemnity or guarantee obligations incurred in connection with the
disposition or otherwise, any liabilities for future purchase price
adjustments and any preferential amounts plus any accumulated and unpaid
dividends in respect of the Preferred Stock or Junior Preferred Stock
attributed to that group.
We may elect to pay the dividend or redemption price either in the same
form as the proceeds of the disposition were received or in any other
combination of cash, securities or other property that our board of directors
or, in the case of securities that have not been publicly traded for a period
of at least 15 months, an independent investment banking firm, determines will
have an aggregate market value of not less than the fair value of the net
proceeds.
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<PAGE>
The following illustration demonstrates the provisions requiring a
mandatory dividend, redemption or conversion if a disposition occurs. If:
. 200 million shares of Georgia-Pacific Group Stock and 100 million shares
of Timber Stock were outstanding;
. the net proceeds of the disposition of substantially all (but not all)
of the assets of the Timber Group equals $2 billion;
. the average market value of Timber Stock during the 10-trading day
valuation period was $30 per share; and
. the average market value of Georgia-Pacific Group Stock during the same
valuation period was $50 per share,
then we could do any of the following:
(1) pay a dividend to the holders of shares of Timber Stock equal to:
<TABLE>
<S> <C> <C>
net proceeds = $2 billion
---------------- ------------------
number of 100 million shares
outstanding
shares of Timber
Stock
</TABLE>
(2) redeem for $30 per share a number of shares of Timber Stock equal
to:
<TABLE>
<S> <C> <C>
net proceeds = $2 billion
----------------- -----------------
average market $30 per share
value of
Timber Stock
= 66,666,666 shares
</TABLE>
(3) convert each outstanding share of Timber Stock into a number of
Georgia-Pacific Group Stock equal to:
<TABLE>
<S> <C> <C> <C> <C> <C>
average market
value of
1.10 x Timber Stock = 1.10 x $30 per share
--------------------------- -------------
average market value of $50 per share
Georgia-Pacific Group Stock
= 0.66 shares
</TABLE>
Our board of directors may, within one year after a dividend or redemption
following a disposition of a group's properties or assets, convert each
outstanding share of that group's Common Stock into a number of shares of the
other group's Common Stock equal to 110% of the ratio of the time-weighted
average market value of one share of Common Stock of the group whose assets
are disposed over the 20-trading day period ending on the 5th trading day
prior to the date the notice of the conversion is mailed to the holders to the
time-weighted average market value of one share of Common Stock of the other
group over the same period. We refer you to "--Voting Rights" for a summary
explanation of how we will calculate the time-weighted average market values.
The following illustration demonstrates the calculation of the number of
shares issuable upon conversion of one class of Common Stock into shares of
the other class of Common Stock within one year following a disposition. If:
. 200 million shares of Georgia-Pacific Group Stock and 100 million shares
of Timber Stock were outstanding immediately prior to a conversion;
. the time-weighted average market value of Timber Stock during the 20-
trading day valuation period was $10 per share; and
21
<PAGE>
. the time-weighted average market value of Georgia-Pacific Group Stock
during the same valuation period was $50 per share,
then each share of Timber Stock could be converted into 0.22 shares of
Georgia-Pacific Group Stock based on the following calculation:
<TABLE>
<S> <C> <C> <C> <C>
1.10 x $10.00 per share = 0.22 shares
----------------
$50 per share
</TABLE>
Exceptions to the Dividend, Redemption or Conversion Requirement If a
Disposition Occurs
We are not required to take any of the above actions for any disposition of
all or substantially all of the properties and assets of either group in a
transaction or series of related transactions that results in our receiving
for those properties and assets primarily equity securities of any entity
which:
. acquires those properties or assets or succeeds to the business
conducted with those properties or assets or controls such acquiror or
successor; and
. is primarily engaged or proposes to engage primarily in one or more
businesses similar or complementary to the businesses conducted by that
group prior to the disposition, as determined by our board of directors.
The purpose of this exception is to enable us technically to dispose of
properties or assets of a group to other entities engaged or proposing to
engage in businesses similar or complementary to those of that group without
requiring a dividend on, or a conversion or redemption of, the class of Common
Stock of that group, so long as we hold an equity interest in that entity. A
joint venture in which we own a direct or indirect equity interest is an
example of such an acquiror. We are not required to control that entity,
whether by ownership or contract provisions.
We are also not required to effect a dividend, redemption or conversion if
the disposition is:
. of all or substantially all of our properties and assets in one
transaction or a series of related transactions in connection with our
dissolution, liquidation or winding up and the distribution of our
assets to shareholders;
. on a pro rata basis, such as in a spin-off, to the holders of all
outstanding shares of the Common Stock of the group whose assets are
disposed; or
. made to any person or entity controlled by us, as determined by our
board of directors.
Notices If Disposition of Group Assets Occurs
Not later than the 10th trading day after the consummation of a
disposition, we will announce publicly by press release:
. the estimated net proceeds of the disposition;
. the number of shares outstanding of the Common Stock of the group whose
assets are disposed; and
. the number of shares of that group's Common Stock into or for which
convertible securities are then convertible, exchangeable or exercisable
and the conversion, exchange or exercise price of those convertible
securities.
In addition, not earlier than the 26th trading day and not later than the 30th
trading day after the consummation of the disposition, we will announce
publicly by press release whether we will pay a dividend or redeem shares of
the Common Stock with the net proceeds of the disposition or convert the
shares of Common Stock of the group whose assets are disposed into the other
group's Common Stock.
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<PAGE>
We will mail to each holder of shares of the group whose assets are
disposed the additional notices and other information required by our restated
articles of incorporation.
Conversion of Common Stock at Our Option at Any Time
Our board of directors may at any time convert each outstanding share of:
. Georgia-Pacific Group Stock into a number of shares of Timber Stock; or
. Timber Stock into a number of shares of Georgia-Pacific Group Stock,
equal to 115% of the ratio of the time-weighted average market value of one
share of Common Stock of the group whose shares are to be converted over the
20-trading day period ending on the 5th trading day prior to the date the
notice of conversion is mailed to the holders to the time-weighted average
market value of one share of Common Stock of the other group over the same
period. We refer you to "--Voting Rights" for a summary explanation of how we
will calculate the time-weighted average market values.
These provisions allow us the flexibility to recapitalize the two classes
of Common Stock into one class of Common Stock that would, after the
recapitalization, represent an equity interest in all of our businesses. The
optional conversion could be exercised at any time in the future if our board
of directors determines that, under the facts and circumstances then existing,
an equity structure consisting of two classes of Common Stock intended to
reflect separately the performance of our manufacturing business and our
timber business were no longer in the best interests of all of our
shareholders. A conversion could be exercised, however, at a time that is
disadvantageous to the holders of one of the classes of Common Stock.
Conversion would be based upon the relative market values of the Georgia-
Pacific Group Stock and the Timber Stock. Many factors could affect the market
values of the Georgia-Pacific Group Stock or the Timber Stock, including:
. our results of operations and those of each of the groups;
. trading volumes; and
. general economic and market conditions.
Market values could also be affected by decisions by our board of directors or
our management that investors perceive to affect differently one class of
Common Stock compared to the other. These decisions could include:
. changes to our management and allocation policies;
. transfers of assets between the groups;
. allocations of corporate opportunities and financing resources between
the groups; and
. changes in dividend policies.
The following illustration demonstrates the calculation of the number of
shares issuable upon conversion of one class of Common Stock into shares of
the other class at our option. If:
. 200 million shares of Georgia-Pacific Group Stock and 100 million shares
of Timber Stock were outstanding immediately prior to a conversion;
. the time-weighted average market value of Timber Stock during the 20-
trading day valuation period was $30 per share; and
. the time-weighted average market value of Georgia-Pacific Group Stock
during the same valuation period was $50 per share,
23
<PAGE>
then each share of Timber Stock could be converted into 0.69 shares of
Georgia-Pacific Group Stock based on the following calculation:
1.15 X $30 per share = 0.69 shares
-------------
$50 per share
Redemption in Exchange for Stock of Subsidiary
Our board of directors may redeem on a pro rata basis all of the
outstanding shares of Georgia-Pacific Group Stock or Timber Stock for shares
of the common stock of one or more of our wholly-owned subsidiaries which own
all of the assets and liabilities attributed to the relevant group. We may
redeem shares of Common Stock for subsidiary stock only if we have legally
available assets under Georgia law.
As a result of a redemption, holders of each class of Common Stock would
hold securities of separate legal entities operating in distinct lines of
business. This redemption could be authorized by our board of directors at any
time in the future if it determines that, under the facts and circumstances
then existing, an equity structure comprised of Georgia-Pacific Group Stock
and Timber Stock is no longer in the best interests of all of our
shareholders.
Selection of Shares for Redemption
If less than all of the outstanding shares of a class of Common Stock are
to be redeemed, we will redeem those shares proportionately from among the
holders of outstanding shares of that class of Common Stock or by such method
as may be determined by our board of directors to be equitable.
Fractional Interests
We are not required to issue fractional shares of any capital stock or any
fractional securities to any holder of either class of Common Stock upon any
conversion, redemption, dividend or other distribution described above. If a
fraction is not issued to a holder, we will pay cash instead of that fraction.
Transfer Taxes
We will pay all documentary, stamp or similar issue or transfer taxes that
may be payable in respect of the issue or delivery of any shares of capital
stock and/or other securities on conversion or redemption of shares. We will
not, however, be required to pay any tax that may be payable in respect of any
transfer involved in the issue or delivery of any shares of capital stock
and/or other securities in a name other than that in which the shares of such
Common Stock so converted or redeemed were registered, and no such issue or
delivery will be made unless the person requesting such issue has paid to us
the amount of any such tax, or has established to our satisfaction that such
tax had been paid.
Liquidation
In the event of our liquidation, dissolution or termination, after we pay
our debts, other liabilities and full preferential amounts to which our
holders of any Preferred Stock or Junior Preferred Stock are entitled, the
holders of Georgia-Pacific Group Stock and Timber Stock are entitled to
receive our assets, if any, remaining for distribution to holders of Common
Stock on a per share basis in proportion to a fixed number of liquidation
units per share of such class.
Each share of Georgia-Pacific Group Stock has one liquidation unit. As of
the date of this prospectus, each share of Timber Stock has 0.402 of a
liquidation unit. The number of liquidation units per share of Common Stock
will not change without the approval of shareholders of each Group, except in
the limited circumstances described below. Consequently, the liquidation
rights of the holders of the respective classes of Common Stock may not bear
any relationship to the relative market values or the relative voting rights
of the two classes.
24
<PAGE>
No holders of Georgia-Pacific Group Stock will have any special right to
receive specific assets of the Georgia-Pacific Group and no holder of Timber
Stock will have any special right to receive specific assets of the Timber
Group in the case of our liquidation, dissolution or termination.
If we subdivide or combine the outstanding shares of either class of Common
Stock or declare a dividend or other distribution of shares of either class of
Common Stock to holders of that class of Common Stock, the number of
liquidation units of either class of Common Stock will be appropriately
adjusted by our board of directors to avoid any dilution in the aggregate,
relative liquidation rights of any class of Common Stock.
Neither a merger nor share exchange of Georgia-Pacific into or with any
other corporation, nor any sale, transfer, lease, exchange or other
disposition of all or any part of our assets, will, alone, be deemed to be a
liquidation of us, or cause our dissolution, for purposes of these liquidation
provisions.
Determinations by Our Board of Directors
Any determinations made in good faith by our board of directors under any
provision described above and any determination with respect to any group or
the rights of holders of shares of either class of Common Stock, are final and
binding on all of our shareholders, subject to the rights of shareholders
under applicable Georgia law and under the federal and state securities laws.
Preemptive Rights
Neither the holders of Georgia-Pacific Group Stock nor the holders of
Timber Stock have any preemptive rights or any rights to convert their shares
into any other securities of Georgia-Pacific.
Restated Rights Agreement
Under our restated rights agreement, we have issued to all holders of
Georgia-Pacific Group Stock rights to purchase Series B Junior Preferred Stock
if a "distribution date" occurs and to all holders of Timber Stock rights to
purchase Series C Junior Preferred Stock if a "distribution date" occurs. We
refer to the Georgia-Pacific Group purchase rights and the Timber Group
purchase rights as the "rights".
Until a distribution date occurs, the rights can be transferred only with
the Common Stock. On the occurrence of a distribution date, the rights will
separate from the Common Stock and become exercisable as described below.
A "distribution date" will occur upon the earlier of:
. the tenth day after a public announcement that a person or group of
affiliated or associated persons other than us, one of our subsidiaries
or one of our employee benefit plans (an "acquiring person") has
acquired beneficial ownership of 15% or more of the total voting rights
of the then outstanding shares of Common Stock; or
. the tenth business day following the commencement of a tender or
exchange offer that would result in such person or group beneficially
owning such voting rights.
The total voting rights of the Common Stock will be determined based upon the
voting rights of holders of outstanding shares of Georgia-Pacific Group Stock
and Timber Stock at the time of any determination.
Following the distribution date, holders of rights will be entitled to
purchase from us:
. in the case of a Georgia-Pacific Group right, one one-hundredth
(1/100th) of a share of Series B Junior Preferred Stock at a purchase
price of $350, subject to adjustment; and
. in the case of a Timber Group right, one one-hundredth (1/100th) of a
share of Series C Junior Preferred Stock at a purchase price of $100,
subject to adjustment.
25
<PAGE>
If (1) any person or group becomes an acquiring person, (2) an acquiring
person engages in one or more "self-dealing" transactions with us as described
in our restated rights agreement, (3) we are the surviving or continuing
corporation in a merger or other combination with an acquiring person and all
of the Common Stock remains outstanding and is not changed or exchanged, or
(4) while there is an acquiring person, there is a reclassification of
securities, recapitalization of Georgia-Pacific or other transaction that
increases by more than 1% the proportionate share of the outstanding shares of
any class or series of any equity securities of Georgia-Pacific beneficially
owned by the acquiring person, then the rights will "flip-in". At that time,
the rights beneficially owned by any acquiring person will become null and
void and:
. a Georgia-Pacific Group right will entitle its holder to purchase, at
the Series B purchase price, a number of shares of Series B Junior
Preferred Stock with a market value equal to twice the Series B purchase
price; and
. a Timber Group right will entitle its holder to purchase, at the Series
C purchase price, a number of shares of Series C Junior Preferred Stock
with a market value equal to twice the Series C purchase price.
If, following the date of a public announcement that an acquiring person
has become such, (1) we are acquired in a merger or other business combination
transaction and we are not the surviving corporation, (2) any person
consolidates or merges with us and all or part of the Common Stock is
converted or exchanged for securities, cash or property or any other person,
or (3) 50% or more of our assets or earning power is sold or transferred, then
the rights will "flip-over". At that time, each Georgia-Pacific Group right
and each Timber Group right will entitle its holder to purchase, for the
Series B purchase price or Series C purchase price, as applicable, a number of
shares of common stock of the surviving entity in any such merger,
consolidation or other business combination or the purchaser in any such sale
or transfer with a market value equal to twice the Series B purchase price or
Series C purchase price.
The rights will expire on December 31, 2007, unless we terminate them
before that time. A majority of the independent directors of our board may
terminate all of the rights without any payment to any holder of rights at any
time until the earlier of:
. the tenth day following a public announcement that an acquiring person
has become such; or
. December 31, 2007.
Once our board acts to terminate the rights, the right to exercise the rights
will terminate and each right will become null and void.
A holder of a right will not have any rights as a shareholder of Georgia-
Pacific, including the right to vote or to receive dividends, until a right is
exercised.
At any time prior to the occurrence of a distribution date, we may, without
the approval of any holders of rights, supplement or amend any provision of
our restated rights agreement in any manner, whether or not such supplement or
amendment is adverse to any holders of the rights. However, we may not
supplement or amend the principal economic terms, such as the expiration date
of the rights and the number and price of shares of Junior Preferred Stock for
which a right is exercisable, without the approval of a majority of the
independent directors.
From and after the occurrence of a distribution date, we may, without the
approval of any holder of rights, supplement or amend our restated rights
agreement:
. to cure any ambiguity;
. to correct or supplement any provision that may be defective or
inconsistent;
. subject to some exceptions, to shorten or lengthen any time period under
the restated rights agreement; or
26
<PAGE>
. in any manner that we may deem necessary or desirable and which does not
adversely affect the interests of the holders of rights, other than an
acquiring person, and which does not change the principal economic
terms.
Certain Anti-Takeover Provisions of Georgia Law, Our Restated Articles of
Incorporation and Bylaws and Our Restated Rights Agreement
The following discussion concerns certain provisions of Georgia law, our
restated articles of incorporation, our bylaws and our restated rights
agreement that could be viewed as having the effect of discouraging an attempt
to obtain control of Georgia-Pacific.
Georgia Law
Under Georgia law, unless otherwise provided by a corporation's articles of
incorporation or bylaws, a merger or share exchange or sale of all or
substantially all of the corporation's assets must be approved by a majority
of all the votes entitled to be cast, voting as a single voting group.
Shareholders of the corporation surviving a merger or share exchange need not
approve the merger or share exchange if certain conditions are met. Neither
our restated articles of incorporation nor our bylaws contain a provision
which alters the requirements with respect to mergers or share exchanges or a
sale of all or substantially all of our assets under Georgia law.
We have elected in our bylaws to be covered by two provisions of Georgia
law that restrict business combinations with interested shareholders: the
Business Combinations Provision and the Fair Price Provision. Under Georgia
law, once adopted, these provisions may be repealed only by the affirmative
vote of at least 66 2/3% of the "continuing directors" and a majority of the
votes entitled to be cast by the voting shares, other than the voting shares
beneficially owned by an "interested shareholder" and, with respect to the
Fair Price Provision, his, her or its associates and affiliates. An
"interested shareholder" is defined as a holder of 10% or more of the
outstanding voting stock. "Continuing directors" are directors who served
prior to the time the interested shareholder acquired an ownership of 10% or
more of the outstanding voting stock and who are unaffiliated with the
interested shareholder.
Interested Shareholder Transactions
The Business Combinations Provision generally prohibits us from entering
into certain business combination transactions with any interested shareholder
for a five-year period following the time that such shareholder became an
interested shareholder.
An interested shareholder may engage in a business combination transaction
with us within the five-year period only if:
. our board of directors approved the transaction before the shareholder
became an interested shareholder or approved the transaction in which
the shareholder became an interested shareholder;
. the interested shareholder acquired at least 90% of the voting stock
outstanding in the transaction in which it became an interested
shareholder; or
. after becoming an interested shareholder, the interested shareholder
acquired additional shares resulting in the interested shareholder being
the beneficial owner of at least 90% of the outstanding voting shares,
excluding Insider Shares, and the transaction was approved at an annual
or special meeting of shareholders by the holders of a majority of the
voting stock entitled to vote, excluding from the vote, Insider Shares
and voting stock beneficially owned by the interested shareholder.
"Insider Shares" refer to shares owned by:
. persons who are directors or officers of Georgia-Pacific, their
affiliates or associates;
27
<PAGE>
. our subsidiaries; and
. our employee stock plans under which participants do not have the right
to determine confidentially the extent to which shares held under such
plans will be tendered in a tender or exchange offer.
Fair Price Requirements
The Fair Price Provision imposes requirements on "business combinations" of
Georgia-Pacific with any interested shareholder. In addition to any vote
required by law or by our restated articles of incorporation, under the Fair
Price Provision, business combinations with an interested shareholder must
meet one of the following criteria:
. the transaction must be unanimously approved by our continuing
directors, provided that the continuing directors constitute at least
three members of our board of directors at the time the transaction is
approved;
. the transaction must be recommended by at least 66 2/3% of the
continuing directors and approved by a majority of the votes entitled to
be cast by the voting shares, other than the voting shares beneficially
owned by the interested shareholder who is, or whose affiliate is, a
party to the business combination; or
. the terms of the transaction must meet specified fair pricing criteria
and other tests.
These criteria are designed to protect our minority shareholders.
Our Restated Articles of Incorporation and Bylaws
Authorized Shares of Preferred Stock
Our restated articles of incorporation provide that we may from time to
time issue shares of Preferred Stock and Junior Preferred Stock in one or more
series, the terms of which will be determined by our board of directors. Our
restated articles of incorporation authorize 10,000,000 shares of Preferred
Stock and 25,000,000 shares of Junior Preferred Stock, of which 5,000,000
shares have been designated as Series B Junior Preferred Stock and 5,000,000
shares of Series C Junior Preferred Stock. The shares of Series B Junior
Preferred Stock and Series C Junior Preferred Stock have been reserved for
issuance in connection with our restated rights agreement. We will not solicit
approval of our shareholders unless our board of directors believes that
approval is advisable or is required by New York Stock Exchange rules or
Georgia law.
The existence of authorized, unissued and unreserved Preferred Stock and
Junior Preferred Stock could enable our board of directors to issue shares to
persons friendly to current management which could render more difficult, or
discourage, an attempt to obtain control of Georgia-Pacific by means of a
merger, tender offer, proxy contest or otherwise, and protect the continuity
of our management. These additional shares also could be used to dilute the
share ownership of persons seeking to obtain control of Georgia-Pacific.
Shareholder Nominations and Proposals
Our bylaws provide that any shareholder may present a nomination for a
directorship at an annual meeting of shareholders only if advance notice of
such nomination has been delivered to Georgia-Pacific not less than 60 days or
more than 75 days prior to the meeting. If less than 70 days' notice or public
disclosure of the date of the meeting is given or made to shareholders, notice
by the shareholder must be received not later than 10 days after the notice
was mailed or the disclosure made.
Similarly, any shareholder may present a proposal at an annual meeting only
if advance notice of the proposal has been delivered to Georgia-Pacific not
less than 120 calendar days before the date Georgia-Pacific's proxy statement
released to shareholders in connection with the previous year's annual
meeting.
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The foregoing notices must describe:
. the proposal to be brought at the meeting or the nominee for director,
as applicable;
. personal information regarding the shareholder giving the notice;
. the number of shares owned by the shareholder; and
. his or her interest in the proposal.
These procedural requirements could have the effect of delaying or
preventing the submission of matters proposed by any shareholder to a vote of
the shareholders.
Staggered Board
Our board of directors is divided into three classes of directors serving
staggered three-year terms. Each class consists of, as nearly as possible,
one-third of the total number of directors.
The classification of directors makes it more difficult for shareholders to
change the composition of our board of directors. At least two annual meetings
of shareholders, instead of one, generally will be required to change the
majority of our board of directors. The classification provisions of our
bylaws and restated articles of incorporation could discourage a third party
from initiating a proxy contest, making a tender offer or otherwise attempting
to obtain control of Georgia-Pacific.
Increase in the Number of Directors
Our bylaws provide that the number of directors may be increased or
decreased either by:
. our board of directors; or
. the affirmative vote of at least 75% of the voting power of the
outstanding capital stock entitled to vote generally in the election of
directors, voting as a separate voting group.
Filling Vacancies
Our bylaws provide that any vacancy on our board of directors may be
filled:
. by a majority of the remaining members of the board though less than a
quorum or by the sole remaining director, as the case may be; or
. if no director remains, by the holders of the shares of capital stock
who are entitled to vote for the director with respect to which the
vacancy is being filled.
However, if a vacancy occurs with respect to a director elected by a
particular class or series of shares voting as a separate voting group, our
bylaws provide that that vacancy may be filled:
. by the remaining director or directors elected by that class or series;
. or if no director remains, by the holders of that class or series.
Any vacancy arising by reason of an increase in the number of directors may
only be filled by our board of directors.
Accordingly, our board of directors could temporarily prevent any
shareholder from enlarging our board and filling the new directorships with
such shareholder's own nominees.
Special Meetings of Shareholders
Under Georgia law and our bylaws, we must call a special meeting of the
shareholders if called by:
. the chairman or vice chairman of our board of directors;
. our chief executive officer;
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. our president;
. our board of directors; or
. the holders of at least 75% of the voting power of the outstanding
capital stock entitled to vote on any issue proposed to be considered at
the proposed special meeting, voting as a separate voting group.
In addition, a special meeting must be called upon the termination of the
exclusive right of one or more classes or series of capital stock, voting as a
separate voting group, to vote for directors, when requested by the holders of
10% of the aggregate voting power of the outstanding capital stock then
entitled to vote generally in the election of directors.
Restrictions on Amendments of Our Restated Articles of Incorporation
Amendments to our restated articles of incorporation must be recommended to
the shareholders by our board of directors and approved at a properly called
meeting of shareholders by a majority of the voting power of the outstanding
capital stock entitled to vote generally in the election of directors, voting
together as a single voting group. However, the affirmative vote of the
holders of at least 75% of the voting power of the outstanding capital stock
entitled to vote generally in the election of directors, voting together as a
single voting group, is required to amend, change, repeal or add any provision
of our restated articles of incorporation relating to:
. the Junior Preferred Stock; or
. the provisions establishing the required votes for amending our restated
articles of incorporation or our bylaws.
Restrictions on Amendments of Our Bylaws
Amendments to our bylaws may be approved by our board of directors or by
the affirmative vote of the holders of a majority of the voting power of the
outstanding capital stock entitled to vote generally in the election of
directors, voting together as a single voting group. However, the affirmative
vote of the holders of at least 75% of the voting power of the outstanding
capital stock entitled to vote generally in the election of directors, voting
together as a single voting group, is required to amend, change, repeal or add
any provision of our bylaws relating to:
. the number of members of our board of directors;
. the classification of our board of directors;
. the procedure for nominating directors;
. calling special meetings of the shareholders;
. calling special meetings of our board of directors; or
. establishing a quorum at a meeting of our board of directors.
Social Responsibility Provision
Our restated articles of incorporation permit our board of directors to
consider any pertinent factors, including general, social and economic
effects, in discharging its duties and in determining what is in the best
interests of Georgia-Pacific. Consequently, our board of directors is
authorized to consider factors other than the interests of the shareholders
when considering an acquisition offer.
Our Restated Rights Agreement
As described under "--Restated Rights Agreement", our restated rights
agreement will permit disinterested shareholders to acquire additional shares
of Georgia-Pacific or of an acquiring company at a substantial discount in the
event of certain described changes in control. Our restated rights agreement
is intended to discourage anyone from buying shares of Common Stock having
more than 15% of the total voting power of Georgia-Pacific without approval of
our board of directors.
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DESCRIPTION OF WARRANTS
We may issue warrants, the "Warrants", to purchase Debt Securities,
Preferred Stock or Common Stock, collectively, the "Securities". Warrants may
be issued independently or together with Debt Securities, Preferred Stock or
Common Stock and may be attached to or separate from any offered securities.
Each series of Warrants will be issued under a separate warrant agreement,
each a "Warrant Agreement", to be entered into between us and a warrant agent,
the "Warrant Agent". The Warrant Agent will act solely as our agent in
connection with the Warrants and will not assume any obligation or
relationship of agency or trust for or with holders or beneficial owners of
Warrants.
We have summarized below the general terms and provisions of the Warrants
that we may offer. We will describe further terms of the Warrants and the
applicable Warrant Agreement in the prospectus supplement.
The prospectus supplement will describe the following terms, where
applicable, of the Warrants in respect of which this prospectus is being
delivered:
. the title of the Warrants;
. the aggregate number of the Warrants;
. the price or prices at which the Warrants will be issued;
. the designation, aggregate principal amount and terms of the securities
purchasable upon exercise of the Warrants;
. the designation and terms of the securities with which the Warrants are
issued and the number of the Warrants issued with each such security;
. if applicable, the date on and after which the Warrants and the related
securities will be separately transferable;
. the price at which the securities purchasable upon exercise of the
Warrants may be purchased;
. the date on which the right to exercise the Warrants will commence and
the date on which the right will expire;
. the minimum or maximum amount of the Warrants which may be exercised at
any one time;
. information with respect to book-entry procedures, if any;
. a discussion of certain federal income tax considerations; and
. any other terms of the Warrants, including terms, procedures and
limitations relating to the exchange and exercise of the Warrants.
DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS
We may issue stock purchase contracts, "Stock Purchase Contracts",
representing contracts obligating holders to purchase from us, and us to sell
to the holders, a specified number of shares of either class or both classes
of Common Stock at a future date or dates. The price per share of Common Stock
and number of shares of Common Stock may be fixed at the time the Stock
Purchase Contracts are issued or may be determined by reference to a specific
formula set forth in the Stock Purchase Contracts. The Stock Purchase
Contracts may be issued separately or as a part of stock purchase units,
"Stock Purchase Units", consisting of a Stock Purchase Contract and Debt
Securities or debt obligations of third parties, including U.S. Treasury
securities, securing the holders' obligations to purchase the Common Stock
under the Stock Purchase Contracts. The Stock Purchase Contracts may require
us to make periodic payments to the holders of the Stock Purchase Units or
vice-versa. These payments may be unsecured or prefunded on some basis. The
Stock Purchase Contracts may require holders to secure their obligations
thereunder in a specified manner.
The prospectus supplement will describe the terms of any Stock Purchase
Contracts or Stock Purchase Units.
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BOOK-ENTRY ISSUANCE
Unless otherwise specified in the applicable prospectus supplement, the
securities, including the Debt Securities, the Preferred Stock, the Stock
Purchase Contracts and the Stock Purchase Units may be issued in whole or in
part in global form ("global securities"). Such global securities may be
issued only in fully registered form and in either temporary or permanent
form. Specific terms for each security described in this prospectus will be
set forth in the applicable prospectus supplement relating to that security.
Unless otherwise specified in the applicable prospectus supplement, the
depositary for the global securities will be The Depository Trust Company
("DTC").
The global securities will be issued as fully registered securities
registered in the name of Cede & Co. (DTC's partnership nominee). One or more
fully registered global securities will be issued for each issue of
securities, each in the aggregate principal or stated amount of such issue,
and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("participants") deposit with DTC. DTC
also facilitates the settlement among participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
of DTC ("direct participants") include securities brokers and dealers, banks
trust companies, clearing corporations and certain other organizations. DTC is
owned by a number of its direct participants and by the NYSE, the American
Stock Exchange, Inc. and the National Association of Securities Dealers, Inc.
Access to DTC's system is also available to others such as securities brokers
and dealers, banks and trust companies that clear through or maintain a
custodial relationship with a Direct Participant, either directly or
indirectly ("indirect participants"). The rules applicable to DTC and its
participants are on file with the Commission.
Purchases of securities under DTC's system must be made by or through
direct participants, which will receive a credit for such securities on DTC's
records. The ownership interest of each actual purchaser of each security
("beneficial owner") is in turn to be recorded on the records of direct
participants and indirect participants. Beneficial owners will not receive
written confirmation from DTC of their purchases, but beneficial owners are
expected to receive written confirmations providing details of the
transactions, as well as periodic statements of their holdings, from the
direct participants or indirect participants through which such beneficial
owners entered into the transactions. Transfers of ownership interests in the
securities are to be accomplished by entries made on the books of participants
acting on behalf of beneficial owners. Beneficial owners will not receive
certificates representing their securities, except in the event that use of
the book-entry system for the securities is discontinued.
To facilitate subsequent transfers, all global securities that are
deposited with, or on behalf of, DTC are registered in the name of DTC's
nominee, Cede & Co. The deposit of global securities with, or on behalf of,
DTC and their registration in the name of Cede & Co. effect no change in
beneficial ownership. DTC has no knowledge of the actual beneficial owners of
the securities; DTC's records reflect only the identity of the direct
participants to whose accounts such securities are credited, which may or may
not be the beneficial owners. The participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants and by direct
participants and indirect participants to beneficial owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
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Neither DTC nor Cede & Co. will consent to vote with respect to the global
securities. Under its usual procedures, DTC will mail an omnibus proxy to us
as soon as possible after the applicable record date. The omnibus proxy
assigns Cede & Co.'s consenting or voting rights to those direct participants
to whose accounts the securities are credited on the applicable record date
(identified in a listing attached to the omnibus proxy).
Redemption proceeds, distributions, principal payments and any premium,
interest or other payments on the global securities will be made to Cede &
Co., as nominee of DTC. DTC's practice is to credit direct participants'
accounts on the applicable payment date in accordance with their respective
holdings shown on DTC's records unless DTC has reason to believe that it will
not receive payment on such date. Payments by participants to beneficial
owners will be governed by standing instructions and customary practices, as
is the case with securities held for the accounts of customers in bearer form
or registered in "street name," and will be the responsibility of such
participant and not of DTC, Georgia-Pacific, the applicable Trustee or the
purchase contract agent, subject to any statutory or regulatory requirements
as may be in effect from time to time. Payment of redemption payments,
principal and any premium, interest or other payments to DTC is the
responsibility of us, the purchase contract agent, the applicable paying
agent, disbursement of such payments to direct participants will be the
responsibility of DTC, and disbursement of such payments to the beneficial
owners will be the responsibility of direct participants and indirect
participants.
If applicable, redemption notices will be sent to Cede & Co. If less than
all of the securities of like tenor and terms are being redeemed, DTC's
practice is to determine by lot the amount of the interest of each direct
participant in such issue to be redeemed. Any Preferred Stock to be redeemed
will be selected by DTC on a pro rata basis in accordance with DTC's customary
procedures.
A beneficial owner will give notice of any option to elect to have its
interest in a global security repaid by us, through its participant, to the
senior trustee, and will effect delivery of such interest by causing the
direct participant to transfer the participant's interest in the global
security or securities on DTC's records, to the senior trustee. The
requirement for physical delivery in connection with a demand for repayment
will be deemed satisfied when the ownership rights in the global security or
securities are transferred by direct participants on DTC's records.
DTC's management is aware that some computer applications, systems and the
like for processing data that are dependent upon calendar dates, including
dates before, on, and after January 1, 2000, may encounter "Year 2000
problems." DTC has informed its participants and other members of the
financial community that it has developed and is implementing a program so
that its systems, as the same relate to the timely payment of distributions
(including principal and interest payments) to security holders, book-entry
deliveries, and settlement of trades within DTC, continue to function
appropriately. This program includes a technical assessment and a remediation
plan, each of which is complete. Additionally, DTC's plan includes a testing
phase, which is expected to be completed within appropriate time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to issuers and their agents, as
well as third party vendors from whom DTC licenses software and hardware, and
third party vendors on whom DTC relies for information of the provision of
services, including telecommunication and electrical utility service
providers, among others. DTC has informed its participants and other members
of the financial community that it is contacting (and will continue to
contact) third party vendors from whom DTC acquires services to: (i) impress
upon them the importance of such services being Year 2000 compliant; and (ii)
determine the extent of their efforts for Year 2000 remediation (and, as
appropriate, testing) of their services. In addition, DTC is in the process of
developing such contingency plans as it deems appropriate.
The foregoing information with respect to DTC has been provided to its
participants and other members of the financial community for information
purposes only and is not intended to serve as a representation, warranty, or
contract modification of any kind.
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DTC may discontinue providing its services as securities depositary with
respect to the global securities at any time by giving reasonable notice to
the applicable issuer or the applicable trustee. Under such circumstances, in
the event that a successor securities depositary is not obtained, certificates
for the securities are required to be printed and delivered.
We may decide to discontinue use of the system of book-entry transfers
through DTC (or a successor securities depository). In that event,
certificates for the securities will be printed and delivered.
The information in this section concerning DTC and DTC's system has been
obtained from sources that we believe to be reliable, but we take no
responsibility for the accuracy thereof.
PLAN OF DISTRIBUTION
We may sell securities to or through underwriters or dealers, directly to
other purchasers or through agents. Each prospectus supplement will describe
the method of distribution of the securities that are being offered.
The distribution of the securities may take place from time to time in one
or more transactions at a fixed price or prices, which may be changed, or at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In connection with the sale of securities, underwriters may receive
compensation from us or from purchasers of securities for whom they may act as
agents in the form of discounts, concessions or commissions. Underwriters may
sell securities to or through dealers, and the dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters and/or commissions from the purchasers for whom they may act as
agents. Underwriters, dealers and agents that participate in the distribution
of securities may be deemed to be underwriters, and any discounts or
commissions received by them from us and any profit on the resale of
securities by them may be deemed to be underwriting discounts and commissions,
under the Securities Act. Any underwriter or agent will be identified, and any
compensation received from us will be described, in the prospectus supplement.
If so indicated in the applicable prospectus supplement and subject to
existing market conditions, we will authorize underwriters or other persons
acting as our agents to solicit offers by certain institutions to purchase
offered Debt Securities from us pursuant to contracts providing for payment
and delivery on a future date. Institutions with which such contracts may be
made include but are not limited to commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and others, but in all cases such institutions must be approved
by us. The obligations of any purchaser under any such contract will be
subject to the condition that the purchase of the offered Debt Securities will
not at the time of delivery be prohibited under the laws of the jurisdiction
to which the purchaser is subject. The underwriters and the other agents will
not have any responsibility in respect of the validity or performance of the
contracts.
Underwriters and agents who participate in the distribution of securities
may be entitled under agreements which may be entered into by us to
indemnification by us against certain liabilities, including liabilities under
the Securities Act.
Except as indicated in the applicable prospectus supplement, the securities
are not expected to be listed on a securities exchange, except for the
Georgia-Pacific Group Stock and Timber Stock, which are listed on the New York
Stock Exchange, and any underwriters or dealers will not be obligated to make
a market in securities. We cannot predict the activity or liquidity of any
trading in the securities.
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LEGAL MATTERS
The validity of the Georgia-Pacific Group Stock, the Timber Stock and the
Preferred Stock will be passed upon for us by Troutman Sanders LLP, Atlanta,
Georgia. The validity of any other Securities will be passed upon for us by
Simpson Thacher & Bartlett, New York, New York. Simpson Thacher & Bartlett
will rely on Troutman Sanders LLP as to matters of Georgia law.
EXPERTS
The audited consolidated and combined financial statements and schedules of
Georgia-Pacific Corporation and subsidiaries, Georgia-Pacific Corporation--
Georgia-Pacific Group and Georgia-Pacific Corporation--The Timber Company
incorporated by reference in this prospectus and elsewhere in the registration
statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
incorporated by reference in this prospectus in reliance upon the authority of
said firm as experts in giving said reports.
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[Logo of Georgia-Pacific]
