SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended January 1, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number 1-3506
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GEORGIA-PACIFIC CORPORATION
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(exact name of registrant as specified in its Charter)
Georgia 93-0432081
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(State or other jurisdiction of (I.R.S. Employer identification
Incorporation or Organization number)
133 Peachtree Street, N.E., Atlanta, Georgia 30303
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area (404) 652-4000
code ---------------------
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of each exchange on which registered
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Georgia-Pacific Corporation - Georgia-Pacific New York Stock Exchange
Group Common Stock ($.80 par value)
Georgia-Pacific Corporation - Timber New York Stock Exchange
Group Common Stock ($.80 par value)
Premium Equity Participating Security
Units---PEPS Units New York Stock Exchange
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Georgia-Pacific Group Rights to Purchase New York Stock Exchange
Series B Junior Preferred Stock (no par value)
Timber Group Rights to Purchase New York Stock Exchange
Series C Junior Preferred Stock (no par value)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant: (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes X No --
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
As of the close of business on March 8, 2000, the registrant
had 172,205,444 shares of Georgia-Pacific Group Common Stock outstanding and
82,064,710 shares of Timber Group Common Stock outstanding.
The aggregate market value of the voting stock held by
non-affiliates of the registrant on March 8, 2000 (assuming, for the sole
purpose of this calculation that all executive officers and directors of the
registrant are "affiliates") was $5,806,552,314.87 for Georgia-Pacific Group
Common Stock and $1,743,875,087.50 for Timber Group Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Listed hereunder are the documents any portions of which are
incorporated by reference and the Parts of this Form 10-K into which such
portions are incorporated:
1. The Corporation's Annual Report to Shareholders for the fiscal year
ended January 1, 2000, portions of which are incorporated by reference
in Parts I, II and IV of this Form 10-K; and
2. The Corporation's definitive Proxy Statement dated March 24, 2000, for
use in connection with the Annual Meeting of Shareholders to be held
on May 2, 2000, portions of which are incorporated by reference into
Part III of this Form 10-K.
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GEORGIA-PACIFIC CORPORATION
ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended January 1, 2000
TABLE OF CONTENTS
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PART I Page
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Item 1. Business 1
Item 2. Properties 8
Item 3. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security Holders 9
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 9
Item 6. Selected Financial Data 10
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 10
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 11
Item 8. Financial Statements and Supplementary Data 11
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 87
PART III
Item 10. Directors and Executive Officers of the Registrant 88
Item 11. Executive Compensation 90
Item 12. Security Ownership of Certain Beneficial Owners and Management 90
Item 13. Certain Relationships and Related Transactions 90
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 90
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PART I
ITEM 1. BUSINESS
Georgia-Pacific Corporation was organized in 1927 under the laws of the State of
Georgia.
On December 16, 1997, shareholders of Georgia-Pacific Corporation approved the
creation of two classes of common stock, Georgia-Pacific Group stock and Timber
Group stock, intended to reflect separately the performance of the Corporation's
two operating groups, Georgia-Pacific Group and The Timber Company.
In this document, the following terms and definitions are used:
"Corporation" refers to Georgia-Pacific Corporation and its subsidiaries, which
includes the businesses of both the Georgia-Pacific Group and The Timber
Company.
"Georgia-Pacific Group" refers to the Corporation's manufacturing and
distribution businesses.
"The Timber Company" refers to the Corporation's timber and timberlands
business.
"Georgia-Pacific Group stock" refers to the Corporation's Georgia-Pacific Group
common stock, par value $.80.
"Timber Group stock" refers to the Corporation's Timber Group common stock, par
value $.80.
Georgia-Pacific Corporation consists of two separate operating groups, the
Georgia-Pacific Group and The Timber Company. The performance of these distinct
businesses is reflected separately by two classes of common stock. The
Georgia-Pacific Group consists of all of the Corporation's manufacturing mills
and plants, its building products distribution business and its paper
distribution business. The facilities manufacture and sell a wide variety of
pulp and paper products (including pulp, communication papers, containerboard,
packaging and tissue) and manufactured building products (including plywood,
oriented strand board and industrial panels, lumber, gypsum products, chemicals
and other products). The Timber Company consists of approximately 4.7 million
acres of timberlands owned or leased by the Corporation, together with related
facilities and equipment. In 1999, these timberlands supplied approximately 19%
of the overall timber requirements of the Corporation's manufacturing
facilities.
Additional information pertaining to the Corporation's businesses, including
operating segments, is set forth under the captions "Georgia-Pacific Corporation
and Subsidiaries - Management's Discussion and Analysis" and "Georgia-Pacific
Corporation and Subsidiaries - Sales and Operating Profits by Operating Segment
(immediately following Note 14), and in Notes 1 and 2 of the Corporation's
Consolidated Financial Statements, and is presented under Item 8 of this Form
10-K.
GEORGIA-PACIFIC GROUP
The Georgia-Pacific Group has grown through expansion and acquisitions to become
one of the world's leading manufacturers and distributors of building products
and pulp and papers. Among North American producers, the Georgia-Pacific Group
(the "Group") ranks first in the production of industrial panels, wood bonding
resins and industrial thermosetting resins;
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second in the production of structural wood panels, communication papers
(uncoated free-sheet), gypsum wallboard, market pulp; third in lumber products
and tissue products, fourth in linerboard and medium; and fifth in corrugated
packaging. The Group's building products distribution segment leads in supplying
wholesale building products in the United States. The Group's paper
distribution, Unisource, is one of the largest distributors of paper and
supplies in North America. The Corporation's chemicals business also supplies
paper chemicals and tall oil based chemicals.
Since 1997, the Georgia-Pacific Group has made substantial progress toward its
goal of reducing capital expenditures. Management adopted a more disciplined
approach to investing in an effort to reduce expenditures for property, plant
and equipment from more than $1 billion in 1996 to a normalized level at or
below annual depreciation. After maintenance and environmental spending, the
Group limits investments in property, plant and equipment either to businesses
with higher return opportunities or to projects that lower costs or improve
efficiencies. Investments in property, plant and equipment in 1999 totaled $721
million, just below 1999's depreciation of $746 million. This follows 1998's
reinvestment of $632 million or of 85% of depreciation.
Georgia-Pacific Group operates its production facilities in five operating
business segments: Building Products, Building Products Distribution,
Containerboard and Packaging, Pulp and Paper, and Paper Distribution. Operating
segment descriptions follow.
BUILDING PRODUCTS
The Georgia-Pacific Group is a leading manufacturer of building products in the
United States. The building products segment includes wood panels (including
plywood, oriented strand board ("OSB") and industrial panels), lumber, gypsum
products, chemicals and other products. These products are manufactured at 148
facilities in the U.S., seven plants in Canada, and through joint ventures in
South Africa and South America. The building products business is affected by
the level of housing starts; the level of repairs, remodeling and additions;
commercial building activity; the availability and cost of financing; and
changes in industry capacity. Exports for the building products segment in 1999
were $144 million (about 2% of segment sales), primarily to the Caribbean and
Europe.
Wood Panels. A leading producer of structural wood panels in the United States,
the Georgia-Pacific Group accounts for about 20 percent of domestic capacity.
The segment's 16 softwood plywood plants and six OSB plants can produce in
excess of 7 billion square feet of panels annually. With most of these plants
located in the Southeast, the business benefits from an ample supply of timber,
favorable weather conditions, regional population growth, national economic
growth and other factors. OSB is a structural panel made from wood strands
arranged in layers and bonded with resin. OSB serves many of the same uses as
unsanded plywood including roof decking, sidewall sheathing and floor
underlayment.
Early in 1999 the Georgia-Pacific Group began construction of a new OSB plant in
Calhoun County Arkansas. The new facility will produce approximately 410 million
square feet (3/8") of OSB with start-up scheduled for late 2000. The plant will
ultimately replace older, less efficient structural panel capacity within the
segment.
The building products segment leads in production of manufactured board products
for industrial and construction applications. Nineteen mills manufacture
hardboard, particleboard, panelboard, softboard, hardwood plywood, decorative
panels and medium-density fiberboard. Applications include furniture, cabinets,
housing, retail fixtures, and other industrial products. In 1999 the segment
closed its Bemidji, Minnesota hardboard plant. In January 2000 the
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segment sold its Lebanon, Oregon hardboard plant. The combined capacity of these
facilities was 209 million square feet (1/8" basis).
Lumber. The third-largest lumber producer in North America, the Georgia-Pacific
Group annually manufactures about 2.7 billion board feet or approximately 5
percent of domestic lumber production. Most of the Group's 37 lumber mills are
located in the U.S. South. Lumber products are manufactured from Southern pine,
a variety of Appalachian and Southern hardwoods, cypress, redwood, cedar,
spruce, hemlock and Douglas fir.
In 1999 the segment acquired the operations of four lumber treating facilities
bringing our total to 12. These assets increase the Corporation's capacity to
pressure-treat lumber to more than one billion feet annually, ranking the
Corporation among the top producers of pressure treated lumber in the nation.
Pressure treated lumber is used primarily in construction of outdoor structures
such as decks, fences, bridges and playground equipment.
Demand for the building products segment's engineered lumber products has
increased in recent years as wood I-joists (made from veneer, OSB and sawn
lumber) appear to have become the product of choice for floor joist
applications. Laminated veneer lumber and wood I-joists are designed to meet the
precise structural performance requirements of roofing and flooring systems.
Gypsum Products. The Georgia-Pacific Group operates 20 gypsum board plants
throughout the U.S. and Canada and is the second-largest producer of gypsum
wallboard in North America, with an annual capacity of 6.55 billion square feet.
Gypsum products include wallboard, Dens specialty panels, fire-door cores,
industrial plaster and joint compound. In addition, the business is vertically
integrated in both paper and gypsum rock operating four recycled gypsum
paperboard mills and ten gypsum quarries/mines. Gypsum reserves are
approximately 309 million recoverable tons, an estimated 48-year supply at
current production rates.
In 1999 the Georgia-Pacific Group's new gypsum wallboard facility at Wheatfield,
Indiana began production. This low-cost facility has an annual capacity of a new
500 million square feet and uses synthetic gypsum, a waste by-product of a
nearby power generation plant, as its primary raw material. This arrangement
provides the business with a new low-cost source of raw material while more than
doubling the amount of this waste recycled in the State of Indiana. In January
2000 one of the business' older technology, higher-cost gypsum wallboard
facilities was closed in Grand Rapids, Michigan.
Chemicals. The building products segment's chemicals business is the forest
products industry's leading supplier of wood bonding resins, industrial
thermosetting resins, paper chemicals, and tall oil based chemicals. The
business ships more than four billion pounds of thermosetting resins,
formaldehyde, pulp chemicals, and paper chemicals annually from 20 plants to
most of the major buyers of these products. It also operates internationally
through joint ventures in South Africa, Argentina, and Chile. The segment also
produces chemicals and resins for use in a variety of specialty applications in
other industries, including roofing, thermal insulation, metalworking, coatings,
fertilizer, and transportation. In 1999 the segment acquired Actrachem, a
manufacturer of specialty chemical additives for a variety of industrial
markets. Also in 1999 the segment closed its chlor/alkali manufacturing
operations at Bellingham, Washington. This closure follows Georgia-Pacific's
decision to convert to pulp bleaching processes that does not use elemental
chlorine. There is an ongoing search for opportunities to leverage our chemicals
technology and other business strengths worldwide.
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BUILDING PRODUCTS DISTRIBUTION
The building products distribution division of the Georgia-Pacific Group is the
leading domestic wholesaler of building products. It sells building products to
independent dealers, industrial customers and large home improvement centers
from 63 locations throughout the U.S. and one in Canada. The building products
distribution business provides a nationwide outlet for a significant portion of
the Georgia-Pacific Group's building products. It also sells building products
purchased from third parties which make up a substantial portion of the
segment's sales. Building Products distribution's geographic coverage and
product breadth are unmatched in North America. The building products
distribution business is affected by the availability and cost of financing, the
pace of new-home construction, and the level of repair and remodel expenditures.
In 1995, the segment began reengineering its organizational, logistical and
information systems. Implementation of these initiatives, however, were far more
costly and difficult than anticipated. As part of an aggressive effort to return
these operations to profitability, management decided in late 1997 to sell or
close the division's millwork fabrication facilities and a number of
distribution centers in the Western U.S. These efforts were concluded in 1998
and since the last half of 1998, the segment was profitable. In 1999,
performance continued to improve as cost reduction efforts and strong demand for
building products combined to boost segment operating profits to $63 million.
CONTAINERBOARD AND PACKAGING
The containerboard and packaging segment produces containerboard, corrugated
containers and packaging, bleached paperboard and kraft paper. One of the
largest domestic producers of containerboard, the containerboard and packaging
segment is the second largest supplier of containerboard to independent
converters in the U.S. Annual capacity at the Group's five primary
containerboard mills and two smaller mills totals 4.1 million tons, representing
about 11 percent of total U.S. capacity. The segment's 50 corrugated packaging
plants consume approximately 70 percent of the segment's containerboard
production; the remainder is sold to independent box converters in the United
States, Latin America and Asia. Markets for containerboard and packaging
products are affected primarily by changes in industry capacity and the level of
industrial activity in the U.S. and export markets. Containerboard exports
totaled 460,000 tons during 1999 compared to 1998's level of 520,000 tons. In
1999, the segment further integrated its linerboard and medium production into
its own packaging plants with the acquisition of Connelly Containers, an
industry leader in the production of triple-wall corrugated packaging and
graphics. Also during the year, the segment closed a corrugated sheet
manufacturing facility in Devens, Massachusetts. In January 2000 the business
sold a packaging plant in Warren County, North Carolina.
In addition to standard corrugated containers, the segment's packaging plants
manufacture many specialty packaging products. These include double- and
triple-wall boxes, bulk bins, water-resistant packaging, and high-finish and
preprinted packaging for point-of-sale displays. The Technology and Development
Center in Norcross, Georgia, uses state-of-the-art technology to design and test
packaging for customers.
The containerboard and packaging segment also produces bleached paperboard for
use in frozen food containers, food service items and other products. Our
bleached paperboard products are sold primarily through our joint venture with
Gulf States Paper Company under the established CartonMate(TM) paperboard
trademark.
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PULP AND PAPER
The pulp and paper segment produces market pulp, communication papers, tissue
and other products at 22 facilities in North America. Combined production
capacity for pulp, paper and tissue is 5.4 million tons. The pulp and paper
segment's mills are among the industry's lowest cost producers. An initiative
over the past several years has motivated employees throughout the mill system
to find ways to continually reduce costs, increase quality, and reduce
maintenance spending. Markets for pulp and paper products are affected primarily
by changes in industry capacity, the level of economic growth in the U.S. and
export markets, and fluctuations in currency exchange rates. Exports from this
business segment consist chiefly of market pulp bound for Asia, Europe, and
Latin America. In 1999 exports for the pulp and paper segment were $535 million,
about 14% of segment sales.
Market Pulp. The Georgia-Pacific Group ranks second in the production of market
pulp. The pulp and paper segment includes five pulp mills with a combined annual
capacity of 2.0 million tons, approximately 21 percent of U.S. capacity. These
mills produce primarily Southern softwood, Northern hardwood, and sulfite pulps
for use in the manufacture of many paper grades. The segment also is a major
supplier of fluff pulp and other specialty pulps. Fluff pulp is used primarily
in the manufacture of disposable diapers and other sanitary items. Demand
continues to grow for these products, particularly in developing countries.
Communication Papers. The Georgia-Pacific Group is the nation's second-largest
domestic producer of communication papers. Also known as uncoated free-sheet,
communication papers are used in office copy machines and printers, commercial
printing, business forms, stationery, tablets, books, envelopes, labels and
checks. The pulp and paper segment's seven uncoated free-sheet paper mills have
a combined annual capacity of 2.3 million tons, approximately 15 percent of U.S.
capacity. These products are sold through our paper distribution segment, other
major paper distributors, office product distributors, printing equipment
manufacturers, retailers and converters. Products are sold under a variety of
names including: Microprint(TM), Quantum(TM), Spectrum(TM), Nekoosa
Solutions(TM), Valorem(TM), Geocycle(TM), HOTS(TM), St. Croix(TM), Re-Comm(TM)
and Westminster(TM).
In 1999, the communication papers business continued to focus on its strategy of
reducing costs and improving customer service levels. This business completed
the introduction of a major systems initiative that management believes will
enable the business to continue to optimize paper machine productivity, decrease
order fulfillment time, and reduce transportation and inventory costs.
Effective October 4, 1999, the Georgia-Pacific Group and Chesapeake Corp.
(Chesapeake) completed a previously announced agreement to create
Georgia-Pacific Tissue, a joint venture in which the two companies have combined
their away-from-home tissue businesses. The Georgia-Pacific Group contributed
substantially all the assets of its commercial tissue business to the joint
venture. The Georgia-Pacific Group controls and manages the joint venture and
owns 95% of its equity. Chesapeake contributed the assets of its Wisconsin
Tissue business to the joint venture for which it received a 5% equity interest
in the joint venture and an initial cash distribution of approximately $755
million. Wisconsin Tissue's results of operations were combined with the
Georgia-Pacific Group's commercial tissue business beginning on October 3, 1999,
when the Georgia-Pacific Tissue joint venture was formed. The combined business
ranks third among North American producers of tissue products, which include
bath tissue, paper towels and napkins made from virgin and recycled fibers.
These products are manufactured at 8 mills and 6 converting plants. Capacity
totals approximately 1.1 million tons annually, over 14 percent of North
American capacity. Approximately 50 percent is
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sold to customers through grocery, drug and mass merchandise retailers. Consumer
brand names include Angel Soft(TM), Sparkle(TM), Coronet(TM), MD(TM) and
Delta(TM). The other 50 percent of production is sold primarily to commercial
and industrial markets through our paper distribution segment, independent paper
distributors, food service and janitorial distributors, and directly to national
fast food accounts. The business' proprietary dispensing system for the
Cormatic(TM), Ultimatic(TM) and Guardian(TM) brands continued to expand in 1999.
The Wisconsin Tissue venture adds several new brand names to the business'
product offering including Park Avenue(TM), Main Street(TM), and Second
Nature(TM).
PAPER DISTRIBUTION
The paper distribution segment was formed with the acquisition of Unisource by
Georgia-Pacific Group in July of 1999. The segment is a leading distributor of
printing and imaging paper, packaging systems, and sanitary maintenance supplies
in North America. Unisource operates primarily in the United States, 26
locations in Canada, and 22 locations in Mexico and is a large distribution
customer for most major paper producers in North America, including the
Georgia-Pacific Group's paper and packaging businesses. The segment operates
from 11 customer service centers, 127 warehouses, and 57 Paper Plus retail store
locations in the United States. The paper distribution segment is affected by
the level of economic activity in the United States, Canada and Mexico and the
pricing environment of paper and paper products.
Unisource sells and distributes high-quality printing, writing and copying
papers to printers, publishers, business forms manufacturers and direct mail
firms, as well as to corporate and retail copy centers, in-plant print
facilities, government institutions and other paper intensive businesses.
Unisource also sells and distributes a broad range of packaging and maintenance
supplies, equipment and services (principally to manufacturers, food processors,
and retailers); maintenance supplies and equipment such as carton erectors,
baggers and filers as well as films, shrink-wrap and cushioning materials;
shipping room supplies such as corrugated boxes, cushioning materials, tapes and
labeling; and food service supplies such as films and food wraps, food
containers and disposable apparel for food service workers. Unisource was an
operating segment of the Georgia-Pacific Group, for the last half of 1999 with
revenues during the period of $3.33 billion. Roughly two thirds of the revenue
was derived from printing and imaging and one third derived from packaging and
supplies.
Additional information pertaining to Georgia-Pacific Group's businesses,
including operating segments, is set forth under the captions "Georgia-Pacific
Group - Management's Discussion and Analysis" and in Georgia-Pacific Group's
Notes 1-4 of the Notes to Combined Financial Statements contained in the
Corporation's 1999 Annual Report to Shareholders and set forth in Exhibit 13.1,
and is incorporated herein by reference.
THE TIMBER COMPANY
The Timber Company is engaged in the business of growing and marketing timber.
The Company is one of the largest timberland owners in the United States, owning
or controlling approximately 4.7 million acres. These timberlands are located in
three regions: 4.0 million acres of primarily pine forests in the South; 286,000
acres of primarily Douglas fir forests in Oregon; and 525,000 acres of mixed
hardwood forests in the Appalachian and north central regions of the United
States. These timberlands are within economic reach of over 1,000 customers and
grow various commercial species of trees for industrial wood users, including
the Georgia-Pacific Group. Principal products include softwood sawtimber,
softwood pulpwood, hardwood sawtimber and hardwood pulpwood.
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The Timber Company also operates six world-class nurseries, and plants more than
125 million conifer seedlings each year. It does not own or operate logging
equipment or converting facilities. Logging operations are performed by
independent contractors working for purchasers of the standing timber or, in
certain circumstances, for The Timber Company.
The Company also engages in certain businesses related to ownership and
management of its timberlands including, but not limited to, the management of
hunting leases and mineral rights and the continuous evaluation and sale of
selected properties that have greater value as conservation, commercial or
recreational sites.
The Timber Company attempts to maximize shareholder value through the
implementation of strategies that constantly focus on merchandising timber for
maximum return, maximizing timberland productivity, controlling costs, enhancing
the quality of its timberlands portfolio and ensuring environmentally
sustainable operations.
MAXIMIZE TIMBERLAND PRODUCTIVITY
Harvest plans and inventory projections reflect The Timber Company's objective
of increasing harvest volumes while maintaining the standing timber inventory.
Increased harvests will be effected through the use of intensive silvicultural
treatments in order to improve growth responses, and through the replanting of
harvested acres with faster-growing, higher-quality trees. Forest productivity
initiatives are based on proprietary forest growth systems and processes applied
on a site-by-site basis. The Integrated Forest Management System (IFMS)
electronically connects stand-level data collected in the field with
sophisticated forest growth models and discounted cash flow analysis to
"electronically grow and manage" the forests. This system allows forest
management on a site-by-site basis to maximize the present value of productive
lands. Growth rates are expected to continue to increase into the future through
the development and use of genetically enhanced seedlings, improvements in
responses to fertilization, vegetation control, thinning, and selective
harvesting.
FOCUS ON COST CONTROL
The Timber Company has one of the leanest, most productive workforces in the
industry generating revenue of approximately $1.2 million per salaried employee.
During 1999, The Timber Company continued to manage general and administrative
("G&A") costs. G&A levels in 1999 were similar to those experienced in 1997. G&A
expenses are expected to fall in 2000 consistent with the reduced size of
timberland holdings. While the potential for improvements in administrative
expenses are unlikely to be a significant value driver going forward, a
continuing focus on cost control is a core operating value embraced throughout
The Timber Company as part of our focus on maximizing cash flow and value for
our shareholders.
ENVIRONMENTAL STEWARDSHIP
The Timber Company is dedicated to environmental stewardship. The Timber
Company's 11-point environmental strategy adopts the provisions of the American
Forest and Paper Association's Sustainable Forestry InitiativeSM and
incorporates its own specific environmental goals. The Timber Company continues
to work closely with federal, state, and local authorities on issues concerning
endangered species, clean water, wildlife, flora and fauna diversity, and
conservation set asides.
Additional information pertaining to The Timber Company's business is set forth
under the captions "The Timber Company - Management's Discussion and Analysis"
and in The Timber Company's Notes 1-3 of the Notes to Combined Financial
Statements contained in the
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Corporation's 1999 Annual Report to Shareholders and set forth in Exhibit 13.2
hereto, and is incorporated herein by reference.
TIMBER RESOURCES
The principal raw material used by the Corporation is raw wood. During 1999, The
Timber Company supplied 19% of the overall timber requirements of
Georgia-Pacific Group's facilities. The prices and terms of the transactions
between The Timber Company and Georgia-Pacific Group were determined on an arms
length basis pursuant to supply contracts put in place in 1997 at the time of
the Corporation's recapitalization which created two separate classes of common
stock; The Timber Group and Georgia-Pacific Group.
Additional information pertaining to the Corporation's timber resources is set
forth under the caption "The Timber Company" in this item.
MINERAL RESOURCES
Information pertaining to the Corporation's gypsum resources is set forth under
the captions "Georgia-Pacific Group - Building Products - Gypsum Products" in
this item.
ENVIRONMENT
Information pertaining to environmental issues and the Corporation's
expenditures for pollution control facilities and equipment is set forth under
the captions "Georgia-Pacific Corporation and Subsidiaries - Management's
Discussion and Analysis - Liquidity and Capital Resources - Investing
Activities" and Note 12 of the Corporation's Consolidated Financial Statements,
and is presented under Item 8 of this Form 10-K.
Information pertaining to environmental issues and the Corporation's
expenditures for pollution control facilities and equipment is set forth under
the captions "Georgia-Pacific Group - Management's Discussion and Analysis -
Liquidity and Capital Resources - Investing Activities," Georgia-Pacific Group's
Note 13 and The Timber Company's Note 11 of the Notes to Combined Financial
Statements contained in the Corporation's 1999 Annual Report to Shareholders and
set forth in Exhibit 13.1 and 13.2, respectively, hereto, and is incorporated
herein by reference.
EMPLOYEES
Information pertaining to persons employed by the Corporation is set forth under
the captions "Georgia-Pacific Corporation and Subsidiaries - Management's
Discussion and Analysis - Liquidity and Capital Resources - Other", and is
presented under Item 8 of this Form 10-K.
Information pertaining to persons employed by the Corporation is set forth under
the captions "Georgia-Pacific Group - Management's Discussion and Analysis -
Liquidity and Capital Resources - Other" and "The Timber Company - Management's
Discussion and Analysis - Liquidity and Capital Resources - Other," contained in
the Corporation's 1999 Annual Report to Shareholders and set forth in Exhibit
13.1 and 13.2, respectively, hereto, and is incorporated herein by reference.
ITEM 2. PROPERTIES
The geographic location and capacity of the manufacturing facilities by segment
is set forth on Exhibit 99.1 hereto and is hereby incorporated herein by this
reference.
The Corporation's manufacturing and support facilities are designed according to
the requirements of the products to be manufactured. Therefore, the type of
construction varies
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from facility to facility. Management believes that its manufacturing
facilities, taken as a whole, are well maintained and generally adequate for
current operations.
Utilization of a particular facility varies based upon demand for the product.
While it is not possible to measure with any degree of certainty the productive
capacity of a facility we have estimated capacity in Exhibit 99.1.
The Corporation generally owns its manufacturing and other facilities, although
office facilities are often leased. The Corporation examines alternatives for
its higher cost facilities, including modernizing, replacing or closing such
facilities. Due to the Corporation's size, we continually review many business
opportunities and alternatives, including possible acquisitions or sales of
properties.
Information concerning the Corporation's timber and mineral resources is
presented under Item 1 of this Form 10-K.
ITEM 3. LEGAL PROCEEDINGS
Information pertaining to the Corporation's Legal Proceedings is set forth in
Note 12 of the Corporation's Consolidated Financial Statements, and is presented
under Item 8 of this Form 10-K.
Additional information pertaining to the Corporation's Legal Proceedings is set
forth in Georgia-Pacific Group's Note 13 and The Timber Company's Note 11 of the
Notes to Combined Financial Statements contained in the Corporation's 1999
Annual Report to Shareholders and set forth in Exhibit 13.1 and 13.2,
respectively, hereto, and is incorporated herein by reference.
ENVIRONMENTAL PROCEEDINGS
Pursuant to the rules of the Securities and Exchange Commission, the Corporation
is required to describe environmental proceedings to which a governmental
authority is a party and which involve potential monetary sanctions, exclusive
of interest and costs, of at least $100,000. There are no legal proceedings that
meets this criteria for this reporting period, except the environmental
proceedings described in the information pertaining to the Corporation's legal
proceedings incorporated into preceding paragraph.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information with respect to the Market for the Corporation's Common Equity and
Related Stockholder Matters is set forth in a table following Note 14 of the
Corporation's Consolidated Financial Statements and under the captions "Selected
Financial Data - Financial Position, End of Year" (following Note 14 to the
Corporation's Consolidated Financial Statements), and is presented under Item 8
of this Form 10-K.
Information with respect to the Market for the Corporation's Common Equity and
Related Stockholder Matters is set forth in the Corporation's 1999 Annual Report
to Shareholders under
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<PAGE>
the captions "Selected Financial Data - Financial Position, End of Year"
(following Note 15 and Note 13, respectively, of Georgia-Pacific Group's and the
Timber Company's Combined Financial Statements), and set forth in Exhibit 13.1
and 13.2, respectively, hereto, and is incorporated herein by reference.
The Corporation expects to continue to pay quarterly dividends in the amounts
set forth in "Selected Financial Data - Financial Position, End of Year"
following Note 14 to the Corporation's Consolidated Financial Statements, which
Note was incorporated into this item from Item 8 hereof.
As of the close of business on March 24, 2000, the Georgia-Pacific Group stock
price was $38.94 and the Timber Group stock price was $23.81, and there were
approximately 170,968,856 record holders of Georgia-Pacific Group stock and
81,998,510 record holders of the Timber Group stock.
On June 30, 1998, the Corporation issued an aggregate of 1,640,400 shares of
Georgia-Pacific Group Common Stock ("G-P Group Stock") in a private placement to
Jack W. Schwarz, Schwarz Family Irrevocable Trust, Schwarz Partners LLP II and
Schwarz Partners LLP III (hereinafter collectively referred to as the
"Investors"), in consideration for a portion of all of the issued and
outstanding capital stock of CeCorr, Inc., an Indiana corporation ("CeCorr"),
all as contemplated by a Stock Purchase Agreement dated June 30, 1998. In
connection with the Stock Purchase Agreement, the Corporation also entered into
a Put Agreement with the Investors dated June 30, 1998. On July 6, 1998, the
Investors put an aggregate of 1,140,400 shares of G-P Group Stock back to the
Corporation and prior to June 30, 1999, the Investors retain the option to put
an aggregate of 500,000 shares of G-P Group Stock back to the Corporation. The
aggregate of 1,640,400 shares of G-P Group Stock issued in the acquisition of
CeCorr were issued in accordance with an exemption from the registration
requirements of the Securities Act.
ITEM 6. SELECTED FINANCIAL DATA
Information with respect to Selected Financial Data for the Corporation is set
forth under the captions "Selected Financial Data - Operations - Georgia-Pacific
Corporation and Subsidiaries" and "-Financial Position, End of Year," (following
Note 14) and is presented under Item 8 of this Form 10-K.
Information with respect to Selected Financial Data for Georgia-Pacific Group is
set forth under the captions "Georgia-Pacific Group - Selected Financial Data -
Operations" (following Note 15) and " - Selected Financial Data - Financial
Position, End of Year" (following Note 15) contained in the Corporation's 1999
Annual Report to Shareholders and set forth in Exhibit 13.1 hereto, and is
incorporated herein by reference.
Information with respect to Selected Financial Data for The Timber Company is
set forth under the captions "The Timber Company - Selected Financial Data -
Operations" (following Note 13) and "- Selected Financial Data - Financial
Position, End of Year" (following Note 13) contained in the Corporation's 1999
Annual Report to Shareholders and set forth in Exhibit 13.2 hereto, and is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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<PAGE>
Management's Discussion and Analysis and factors affecting future performance
for the Corporation are set forth under the caption "Management's Discussion and
Analysis - Georgia-Pacific Corporation and Subsidiaries," and are presented
under Item 8 of this Form 10-K.
Management's Discussion and Analysis and factors affecting future performance
for Georgia-Pacific Group are set forth under the caption "Georgia-Pacific Group
- - Management's Discussion and Analysis" and in Georgia-Pacific Group's Note 2 of
the Notes to Combined Financial Statements contained in the Corporation's 1999
Annual Report to Shareholders and set forth in Exhibit 13.1 hereto, and are
incorporated herein by reference.
Management's Discussion and Analysis and factors affecting future performance
for The Timber Company are set forth under the caption "The Timber Company -
Management's Discussion and Analysis" and in The Timber Company's Note 2 of the
Notes to Combined Financial Statements contained in the Corporation's 1999
Annual Report to Shareholders and set forth in Exhibit 13.2 hereto, and are
incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and Qualitative Disclosure about Market Risk for the Corporation is
set forth under the captions "Georgia-Pacific Corporation and Subsidiaries -
Management's Discussion and Analysis - Liquidity and Capital Resources -
Financing Activities," and is presented under Item 8 of this Form 10-K.
Quantitative and Qualitative Disclosure about Market Risk for the
Georgia-Pacific Group is set forth under the captions "Management's Discussion
and Analysis - Georgia-Pacific Group - Liquidity and Capital Resources -
Financing Activities" contained in the Corporation's 1999 Annual Report to
Shareholders and set forth in Exhibit 13.1 hereto, and is incorporated herein by
reference.
Quantitative and Qualitative Disclosure about Market Risk for The Timber Company
is set forth under the captions "The Timber Company - Management's Discussion
and Analysis - Liquidity and Capital Resources - Financing Activities" contained
in the Corporation's 1999 Annual Report to Shareholders and set forth in Exhibit
13.2 hereto, and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements and Supplementary Data for the Corporation are set forth
under the captions "Consolidated Statements of Income - Georgia-Pacific
Corporation and Subsidiaries," "Consolidated Statements of Cash Flows -
Georgia-Pacific Corporation and Subsidiaries," "Consolidated Balance Sheets -
Georgia-Pacific Corporation and Subsidiaries," "Consolidated Statements of
Shareholders' Equity - Georgia-Pacific Corporation and Subsidiaries,"
"Consolidated Statements of Comprehensive Income - Georgia-Pacific Corporation
and Subsidiaries," "Report of Independent Public Accountants" and in the
Corporation's Notes to Consolidated Financial Statements, and is presented
below.
Financial Statements and Supplementary Data for Georgia-Pacific Group are set
forth under the captions "Georgia-Pacific Group - Combined Statements of
Income," "Georgia-Pacific Group - Combined Statements of Cash Flows,"
"Georgia-Pacific Group - Combined Balance Sheets," "Georgia-Pacific Group -
Combined Statements of Shareholders' Equity," "Georgia-Pacific Group - Combined
Statements of Comprehensive Income," "Report of Independent Public Accountants"
and in Georgia-Pacific Group's Notes to Combined Financial Statements
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<PAGE>
contained in the Corporation's 1999 Annual Report to Shareholders and set forth
in Exhibit 13.1 hereto, and is incorporated herein by reference.
Financial Statements and Supplementary Data for The Timber Company are set forth
under the captions "The Timber Company - Combined Statements of Income," "The
Timber Company - Combined Statements of Cash Flows," "The Timber Company -
Combined Balance Sheets," "The Timber Company - Combined Statements of
Shareholders' Equity," "Report of Independent Public Accountants" and in The
Timber Company's Notes to Combined Financial Statements contained in the
Corporation's 1999 Annual Report to Shareholders and set forth in Exhibit 13.2
hereto, and is incorporated herein by reference.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Georgia-Pacific Corporation and Subsidiaries
Georgia-Pacific Corporation consists of two separate operating groups, the
Georgia-Pacific Group and The Timber Company. The performance of these distinct
businesses is reflected separately by two classes of common stock:
Georgia-Pacific Group stock and The Timber Company stock. The Georgia-Pacific
Group consists of all the Corporation's manufacturing mills and plants, its
building products distribution business and its paper distribution business. The
facilities manufacture and sell a wide variety of pulp and paper products
(including pulp, communication papers, containerboard, packaging and tissue) and
manufactured building products (including plywood, oriented strand board and
industrial panels, lumber, gypsum products, chemicals and other products). The
Timber Company consists of approximately 4.7 million acres of timberlands owned
or leased by the Corporation, together with related facilities and equipment. In
1999, these timberlands supplied approximately 19% of the overall timber
requirements of the Corporation's manufacturing facilities.
1999 COMPARED WITH 1998
The Corporation reported consolidated net sales of $18.0 billion and net
income of $1,116 million for 1999, compared with net sales of $13.3 billion and
net income of $274 million in 1998. Included in 1999 are $3.4 billion and $104
million of net sales, respectively, from the recently acquired Unisource
Worldwide, Inc. (Unisource) and Wisconsin Tissue operations. In addition, the
1999 results included pretax gains of $355 million ($215 million after taxes)
from the sales of the Corporation's timberlands located in California, Maine and
New Brunswick, Canada. The 1998 results included an extraordinary, after-tax
loss of $15 million for the early retirement of debt.
Interest expense was $495 million in 1999, compared with $443 million in 1998.
The increase is the result of higher debt levels and the issuance of senior
deferrable notes, more fully described in Note 7 of the Notes to Consolidated
Financial Statements, slightly offset by a decrease in average interest rates.
The Corporation reported pretax income of $1,821 million and an income tax
provision of $705 million for the year ended January 1, 2000, compared with
pretax income of $491 million and an income tax provision of $202 million for
the year ended December 31, 1998. The effective tax rate used to calculate the
provision for income taxes was 38.7% in 1999 and 41.1% in 1998. The reduction in
the 1999 effective tax rate resulted principally from higher pretax income and
an increased utilization of foreign sales corporation tax benefits, which more
than offset nondeductible goodwill amortization expense associated with business
acquisitions.
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The remaining discussion refers to the "Selected Operating Segment Data" table
below.
SELECTED OPERATING SEGMENT DATA
Georgia-Pacific Corporation and Subsidiaries
<TABLE>
<CAPTION>
Year ended
------------------------------------
January 1, December 31,
In millions 2000 1998 1997
===========================================================================================
<S> <C> <C> <C>
Net sales
Building products $ 6,164 $ 5,792 $ 5,545
Building products distribution 4,869 4,333 4,406
Timber 526 534 551
Containerboard and packaging 2,391 2,104 1,817
Pulp and paper 3,891 3,554 3,701
Paper distribution 3,336 -- --
Other* (3,200) (2,975) (2,926)
- -------------------------------------------------------------------------------------------
Total net sales $ 17,977 $ 13,342 $ 13,094
===========================================================================================
Operating profits
Building products $ 1,139 $ 603 $ 490
Building products distribution 63 1 (171)
Timber 726 364 437
Containerboard and packaging 344 106 (6)
Pulp and paper 266 133 201
Paper Distribution 78 -- --
Other* (300) (273) (251)
- -------------------------------------------------------------------------------------------
Operating profits
Total operating profits 2,316 934 700
Interest expense 495 443 465
Provision for income taxes 705 202 106
- -------------------------------------------------------------------------------------------
Income before extraordinary items and
accounting change 1,116 289 129
Extraordinary items,
net of taxes -- (15) --
Cumulative effect of accounting
change, net of taxes -- -- (60)
- -------------------------------------------------------------------------------------------
Net income $ 1,116 $ 274 $ 69
===========================================================================================
</TABLE>
*Includes the elimination of intersegment sales
BUILDING PRODUCTS The Corporation's building products segment reported net sales
of $6.2 billion and operating profits of $1,139 million for the year ended
January 1, 2000, compared with net sales of $5.8 billion and operating profits
of $603 million in 1998. Return on sales was 18% in 1999 and 10% in 1998. The
primary components of the increase in 1999 sales
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<PAGE>
and operating profits were 26% higher average oriented strand board prices; 22%
higher average gypsum prices; 16% higher average plywood prices; and higher
average selling prices for lumber and particleboard. These increases were offset
slightly by lower chemical prices and slightly lower volume for plywood and
lumber. The Corporation expects softening building products markets and lower
levels of housing starts to reduce operating results for the building products
segment in 2000.
BUILDING PRODUCTS DISTRIBUTION The building products distribution segment
reported net sales of $4.9 billion and operating profits of $63 million for
1999, compared with net sales of $4.3 billion and operating profits of $1
million in 1998. The 1998 results included one-time gains, principally on sales
of assets related to the restructuring plan, of approximately $20 million. The
increase in profitability in 1999 is due primarily to higher margins in
commodity and specialty products and lower operating costs. The Corporation
expects a slight improvement in 2000 operating results for the building products
distribution segment related primarily to increased market share, despite an
expected softening of building products markets and lower levels of housing
starts.
TIMBER Net sales and operating profits for the timber segment were $526 million
and $726 million, respectively, in 1999 and $534 million and $364 million,
respectively, in 1998. Excluding the 1999 pretax gains of $355 million from the
sales of timberlands located in California, Maine and New Brunswick, Canada, and
the 1998 pretax gain of $24 million from the sale of certain timberlands located
in West Virginia, the timber segment's operating profits increased by $31
million to $371 million in 1999 compared with $340 million in 1998. This
increase resulted primarily from a $34 million increase in gains on
miscellaneous land sales. Overall, 2% higher total harvest volumes partially
offset the year over year 3% decline in average sales price. Prices for most
products are anticipated to hold at or near current levels in 2000.
CONTAINERBOARD AND PACKAGING The Corporation's containerboard and packaging
segment reported net sales of $2.4 billion and operating profits of $344 million
for the year ended January 1, 2000, compared with net sales of $2.1 billion and
operating profits of $106 million in 1998. Return on sales increased to 14% from
5% in 1998. Average selling prices increased steadily throughout 1999 and ended
the year above 1998 levels. Average selling prices for containerboard products
increased 8% while average selling prices for packaging increased 2%. Cost
decreases for wood fiber and energy as well as higher sales volume also
contributed to the increased profit margins. The Corporation expects continued
price improvement in the containerboard and packaging segment into 2000.
PULP AND PAPER The Corporation's pulp and paper segment reported net sales of
$3.9 billion and operating profits of $266 million for the year ended January 1,
2000, compared with net sales of $3.6 billion and operating profits of $133
million in 1998. Return on sales increased to 7% compared with 4% for the same
period a year ago. Operating profits in 1998 included a one-time, $12 million
charge primarily for the closure of a hardwood market pulp operation. The
increase in profitability in 1999 was due primarily to a 5% improvement in
average pulp selling prices, lower overall wood fiber costs and higher sales
volumes for the tissue business, despite a decrease in average selling prices
for most of the Corporation's paper products. Average selling prices in 1999 for
communication papers and tissue were approximately 2% and 5%, respectively,
below average selling prices in 1998.
In 1999, net sales and operating profits from the segment's tissue business were
$1.1 billion and $134 million, respectively, and included net sales and
operating profits of $104 million and $15 million, respectively, from the
Wisconsin Tissue operations. The Wisconsin Tissue operations
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<PAGE>
were combined with the Corporation's commercial tissue business beginning on
October 3, 1999, when the Georgia-Pacific Tissue joint venture was formed. In
1998, net sales and operating profits of the tissue business were $986 million
and $145 million, respectively. Excluding the results of the Wisconsin Tissue
operations in 1999, operating profits from the segment's tissue business
decreased by $26 million related primarily to lower selling prices, despite a 7%
increase in sales volume.
During 1999, the Corporation incurred market-related downtime at its pulp and
paper mills, resulting in a reduction in pulp production of 311,000 tons and
communication papers production of 17,000 tons. In 1998, the Corporation
incurred market-related downtime at its pulp and paper mills resulting in a
reduction in pulp and communication papers production of 300,000 tons and 74,000
tons, respectively. In the third quarter of 1998, the Corporation indefinitely
shut down the hardwood market pulp portion of its operations at Port Hudson,
Louisiana, resulting in closure of approximately 260,000 tons of annual
production capacity.
Selling prices for most of the Corporation's pulp and communication papers
products steadily increased during 1999 and ended the year at levels higher than
1998. The Corporation expects the improving selling price trend to continue
through 2000. Historically, selling prices for all of the Corporation's pulp and
paper products have been highly volatile.
PAPER DISTRIBUTION The Corporation's paper distribution segment, which
represents the operating results of Unisource since its acquisition by the
Corporation at the end of the second quarter of 1999, reported net sales of $3.3
billion and operating profits of $78 million for the year ended January 1, 2000.
Unisource sells and distributes high-quality printing, writing and copying
papers to printers, publishers, business forms manufacturers and direct mail
firms, as well as to corporate and retail copy centers, in-plant print
facilities, government institutions and other paper-intensive businesses.
Unisource also sells and distributes a broad range of packaging and maintenance
supplies, equipment and services (principally to manufacturers, food processors
and retailers); maintenance supplies and equipment such as towels, tissues, can
liners and sanitation chemicals; packaging supplies and equipment such as carton
erectors, baggers and filers as well as films, shrink-wrap and cushioning
materials; shipping room supplies such as corrugated boxes, cushioning
materials, tapes and labeling; and food service supplies such as films and food
wraps, food containers and disposable apparel for food service workers.
Operating results for the paper distribution segment have historically been
seasonal, with the strongest operating results occurring in the third quarter.
OTHER The operating loss for the "Other" nonreportable segment, which includes
some miscellaneous businesses, certain goodwill amortization, unallocated
corporate operating expenses and the elimination of profit on intersegment
sales, increased by $27 million to a loss of $300 million in 1999 from a loss of
$273 million in 1998. This increase was primarily a result of higher employee
benefit and incentive costs.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES The Corporation generated cash from operations of $1,427
million during 1999 and $1,554 million in 1998. The decrease in 1999 cash
provided by operations was primarily a result of higher working capital levels,
related principally to inventories and to accounts receivable associated with
the increase in revenues, offset somewhat by higher operating results.
INVESTING ACTIVITIES During 1999, capital expenditures for property, plant and
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<PAGE>
equipment, excluding acquisitions, were $723 million compared with $638 million
in 1998. Expenditures in 1999 included $265 million in the building products
segment, $16 million in the building products distribution segment, $2 million
in the timber segment, $92 million in the containerboard and packaging segment,
$262 million in the pulp and paper segment, $45 million in the paper
distribution segment, and $41 million of other and general corporate. In 2000,
the Corporation expects to make capital expenditures for property, plant and
equipment, excluding the cost of any acquisitions, that approximately equal
depreciation expense for the year.
During 1999, the Corporation invested $147 million for pollution control
and abatement. The Corporation's 2000 capital expenditure budget currently
includes approximately $260 million for environment-related projects. Certain
other capital projects that are being undertaken for the primary reason of
improving financial returns or safety will also include expenditures for
pollution control.
On April 15, 1998, the U.S. Environmental Protection Agency promulgated a
set of regulations known as the "Cluster Rule" that establishes new requirements
for air emissions and wastewater discharges from pulp and paper mills. The
Corporation estimates that it will make capital expenditures up to approximately
$550 million through April 2006 in order to comply with the Cluster Rule's
requirements. Of that total, approximately $160 million was spent through 1999
and about $350 million will be spent by the end of 2000. The Cluster Rule
requires that pulp and paper mills become elemental chlorine free (ECF) in the
pulp bleaching process. Approximately $110 million of the amount required to be
spent in 2000 will go toward ECF conversion at mills located in Ashdown,
Arkansas; Crossett, Arkansas; Bellingham, Washington; and Palatka, Florida. The
bulk of the remaining expenditures in 2000 will be for additional air emission
controls at the Corporation's other pulp and paper facilities.
Cash paid for timber and timberlands was $228 million in 1999 compared with
$201 million in 1998.
At the end of the second quarter of 1999, the Corporation, through its
wholly owned subsidiary Atlanta Acquisition Corp., completed a tender offer for
all the outstanding shares of common stock of Unisource, the largest independent
marketer and distributor of printing and imaging paper and supplies in North
America, and acquired 90.7% of the then outstanding shares of Unisource. On July
6, 1999, Atlanta Acquisition Corp. was merged with and into Unisource and, by
virtue of such merger, shares of Unisource that were not tendered to the
Corporation (other than shares held by Unisource and the Corporation and its
subsidiaries) were converted into the right to receive $12.00 per Unisource
share in cash, subject to dissenters' rights. The Corporation is paying for such
untendered shares as they are delivered to the exchange agent. Through January
1, 2000, the Corporation paid approximately $829 million for such shares.
Unisource's results of operations were consolidated with those of the
Corporation beginning July 4, 1999.
Effective October 3, 1999, the Corporation and Chesapeake Corp.
(Chesapeake) completed a previously announced agreement to create
Georgia-Pacific Tissue, a joint venture in which the two companies have combined
their away-from-home tissue businesses. The Corporation contributed
substantially all the assets of its commercial tissue business to the joint
venture. The Corporation controls and manages the joint venture and owns 95% of
its equity. Chesapeake contributed the assets of its Wisconsin Tissue business
to the joint venture, for which it received a 5% equity interest in the joint
venture and an initial cash distribution of approximately $755 million.
Wisconsin Tissue's results of operations were combined with the
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<PAGE>
Corporation's commercial tissue business beginning on October 3, 1999, when the
Georgia-Pacific Tissue joint venture was formed.
During 1999, the Corporation also completed the acquisition of a packaging
plant, four treated lumber facilities, a chemical business and lumber
transportation assets for a total consideration of approximately $74 million in
cash.
On June 30, 1998, the Corporation completed its acquisition of CeCorr Inc.
(CeCorr), a leading independent producer of corrugated sheets in the United
States. On June 30, 1998, the Corporation paid approximately $93 million in cash
(net of $2 million of cash acquired) and issued approximately 3.2 million shares
of Georgia-Pacific Group stock valued at approximately $28.94 per share for all
the outstanding shares of CeCorr. In addition, the Corporation assumed
approximately $92 million of CeCorr's debt, of which $34 million was owed to the
Corporation ($58 million net debt assumed). On July 2, 1998, a former owner of
CeCorr exercised his right to resell to the Corporation approximately 2.2
million shares of Georgia-Pacific Group stock issued in the transaction.
CeCorr's results of operations were consolidated with those of the Corporation
beginning July 1, 1998.
During 1999, the Corporation received $104 million from the sale of assets,
principally timberlands, located in New Brunswick, Canada and in Maine. During
1998, the Corporation received proceeds of $131 million from the sale of assets,
principally timberlands, real estate development properties located in South
Carolina and Florida, and various distribution facilities.
In December 1999, the Corporation sold approximately 194,000 acres of its
redwood and Douglas fir timberlands in Northern California for a purchase price
of approximately $397 million. In conjunction with the sale, the Corporation
received notes from the purchaser for the purchase price. These notes are fully
secured by a standby letter of credit with an unaffiliated third-party financial
institution. The Corporation expects to monetize these notes through the
issuance of notes payable in the first half of 2000. The estimated annual
operating profits and capital expenditures for 1999 related to these timberlands
were $30 million and $1 million, respectively. The Fort Bragg sawmill has a wood
supply agreement with The Timber Company through 2000 that was transferred as
part of the sale agreement.
FINANCING ACTIVITIES The Corporation's total debt, excluding senior deferrable
notes, increased by $1,473 million to $7,024 million at January 1, 2000 from
$5,551 million at December 31, 1998. At January 1, 2000 and December 31, 1998,
$6,054 million and $4,568 million, respectively, of such total debt was
allocated to the Georgia-Pacific Group and $970 million and $983 million,
respectively, was allocated to The Timber Company. The debt of each of the
groups bears interest at a rate equal to the weighted average interest rate of
the Corporation's total debt, calculated on a quarterly basis. At January 1,
2000, the weighted average interest rate on the Corporation's total debt,
excluding senior deferrable notes, was 7.2% including outstanding interest rate
exchange agreements. Each group's debt increases or decreases by the amount of
any cash provided by or used for that group's operating activities, investing
activities, dividend payments, share repurchases or issuances and other
nondebt-related financing activities. See Note 1 of the Notes to Consolidated
Financial Statements for further discussion of financial activities.
In conjunction with the sale of 440,000 acres of the Corporation's Maine
timberlands in June 1999, the Corporation received notes from the purchaser in
the amount of $51 million. In November 1999, the Corporation monetized these
notes through the issuance of notes payable
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<PAGE>
in a private placement. Proceeds from the notes received from the purchaser will
be used to fund payments required for the notes payable.
In conjunction with the sale of 194,000 acres of the Corporation's
California timberlands in December 1999, the Corporation received notes from the
purchaser with an estimated fair value of $350 million. The Corporation plans to
monetize these notes through the issuance of notes payable in the first half of
2000. Proceeds from the notes received from the purchaser will be used to fund
payments required for the notes payable.
In June 1999, the Corporation renegotiated its accounts receivable secured
borrowing program and increased the amount outstanding under the program from
$280 million to $750 million. The program expires in April 2000. In connection
with the acquisition of Unisource, the Corporation assumed former Unisource
programs to pledge up to $150 million of certain qualifying U.S. accounts
receivable and up to CN$70 million of certain eligible Canadian accounts
receivable. The U.S. program expires in April 2000 and the Canadian program
expires in May 2004. At January 1, 2000, approximately $948 million was
outstanding under the Corporation's and Unisource's programs in the aggregate.
The receivables outstanding under these programs and the corresponding debt are
included as "Receivables" and "Commercial paper and other short-term notes,"
respectively, on the Corporation's consolidated balance sheets. All programs are
accounted for as secured borrowings. As collections reduce previously pledged
interests, new receivables may be pledged.
Also, in connection with the acquisition of Unisource, the Corporation
assumed former Unisource industrial revenue bonds in the amount of $9 million
and capital leases in the amount of $12 million. Additionally, the Corporation
assumed other long-term debt in the amount of $447 million and bank overdrafts
in the amount of $120 million, and retained the previously described accounts
receivable secured borrowing programs in the amount of $197 million. These
amounts are included in the Corporation's total debt.
In November 1999, in connection with the formation of Georgia-Pacific
Tissue, the Corporation issued $500 million of 7.75% Debentures Due November 15,
2029.
During 1998, the Corporation issued $300 million of 7.25% Debentures Due
June 1, 2028 and a $14 million floating rate note due September 30, 2003. In
January 1998, the Corporation redeemed $200 million of 9 3/4% Sinking Fund
Debentures Due January 15, 2018. In February 1998, the Corporation redeemed $200
million of 9 1/2% Debentures Due February 15, 2018.
During 1999, the Corporation increased the amount of its unsecured
revolving credit facility from $1.5 billion to $2.0 billion. This unsecured
revolving credit facility is used for direct borrowings and as support for
commercial paper and other short-term borrowings. Under the agreement, $1
billion will terminate in July 2000 and $1 billion will terminate in 2004. As of
January 1, 2000, $1,145 million of committed credit was available in excess of
all short-term borrowings outstanding under or supported by the facility.
On July 7, 1999, the Corporation issued 17,250,000 of 7.5% Premium Equity
Participating Security Units (PEPS Units) for $862.5 million. Each PEPS Unit had
an issue price of $50 and consists of a contract to purchase shares of
Georgia-Pacific Group common stock on or prior to August 16, 2002 and a senior
deferrable note of the Georgia-Pacific Group due August 16, 2004. Each purchase
contract yields interest of 0.35% per year, paid quarterly, on the $50 stated
amount of the PEPS Unit. Each senior deferrable note yields interest of 7.15%
per year, paid quarterly, until August 16, 2002. On August 16, 2002, following a
remarketing of the senior
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<PAGE>
deferrable notes, the interest rate will be reset at a rate that will be equal
to or greater than 7.15%. The liability related to the PEPS Units is classified
as "Senior deferrable notes" on the Corporation's consolidated balance sheets
and is not included in the debt amount for purposes of determining the corporate
and Georgia-Pacific Group debt targets. The senior deferrable notes and related
interest expense are allocated specifically to the Georgia-Pacific Group.
In October 1999, the Corporation entered into a financing arrangement to
enhance the return on a deposit made in connection with a 1995 sale-leaseback
transaction by issuing $379 million of 5.74% Debentures Due April 5, 2005 that
were legally defeased with deposits of an equal amount. Accordingly, the
debentures and related deposits are not reflected on the Corporation's
consolidated balance sheets.
The Corporation's senior management establishes the parameters of the
Corporation's financial risk, which have been approved by the Board of Directors
(the Board). Hedging interest rate exposure through the use of swaps and options
and hedging foreign exchange exposure through the use of forward contracts are
specifically contemplated to manage risk in keeping with management policy.
Derivative instruments, such as swaps, forwards, options or futures, which are
based directly or indirectly upon interest rates, currencies, equities and
commodities, may be used by the Corporation to manage and reduce the risk
inherent in price, currency and interest rate fluctuations.
The Corporation does not utilize derivatives for speculative purposes.
Derivatives are transaction-specific so that a specific debt instrument,
contract or invoice determines the amount, maturity and other specifics of the
hedge. Counterparty risk is limited to institutions with long-term debt ratings
of A or better.
The following tables present principal (or notional) amounts and related
weighted average interest rates by year of expected maturity for the
Corporation's debt obligations as of January 1, 2000 and December 31, 1998. For
obligations with variable interest rates, the tables set forth payout amounts
based on current rates and do not attempt to project future interest rates.
<TABLE>
<CAPTION>
In millions 2000 2001 2002 2003
================================================================================
<S> <C> <C> <C> <C>
Debt
Commercial paper and other short-
term notes -- -- -- --
Average interest rates -- -- -- --
Notes and debentures -- -- $ 300 $ 300
Average interest rates -- -- 10.0% 5.7%
Revenue bonds $ 24 $ 6 $ 73 --
Average interest rates 4.5% 5.5% 4.7% --
Capital leases $ 2 $ 3 $ 3 $ 2
Average interest rates 9.8% 9.9% 10.2% 10.4%
Other loans $ 13 -- -- $ 15
Average interest rates 8.0% -- -- 6.7%
Senior deferrable notes -- -- $ 863 $ --
Average interest rates -- -- 7.2% --
Notional principal amount of
interest rate exchange
Agreements $ 177 -- $ 131 $ 300
Average interest rate paid
(fixed) 7.7% -- 6.0% 5.9%
</TABLE>
-19-
<PAGE>
<TABLE>
<S><C>
Average interest rate received
(variable) 5.9% -- 6.0% 5.9%
Fair value
January 1,
In millions 2004 Thereafter Total 2000
- --------------------------------------------------------------------------------
Debt
Commercial paper and other short-
term notes -- $ 2,067 $ 2,067 $ 2,067
Average interest rates -- 6.5% 6.5% 6.5%
Notes and debentures -- $ 3,389 $ 3,989 $ 3,952
Average interest rates -- 8.4% 8.3% 8.3%
Revenue bonds $ 33 $ 517 $ 653 $ 564
Average interest rates 5.4% 5.7% 5.5% 5.5%
Capital leases $ 2 $ 2 $ 14 $ 14
Average interest rates 10.5% 10.5% 10.1% 7.9%
Other loans -- -- $ 28 $ 27
Average interest rates -- -- 7.3% 6.9%
Senior deferrable notes -- -- $ 863 $ 866
Average interest rates 7.2% 7.4%
Notional principal amount of
interest rate exchange
Agreements -- -- $ (608) $ (1)
Average interest rate paid
(fixed) -- -- 6.4% 6.4%
Average interest rate received
(variable) -- -- 5.9% 5.9%
- --------------------------------------------------------------------------------
</TABLE>
The Corporation has the intent and ability to refinance commercial paper and
other short-term notes as they mature. Therefore, maturities of these
obligations are reflected as cash flows expected to be made after 2004.
<TABLE>
In millions 1999 2000 2001 2002
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debt
Commercial paper and other short-
term notes -- -- -- --
Average interest rates -- -- -- --
Notes and debentures -- -- -- $ 300
Average interest rates -- -- -- 10.0%
Revenue bonds $ 21 $ 21 $ 1 $ 75
Average interest rates 4.2% 4.4% 6.5% 5.1%
Other loans $ 2 $ 13 -- --
</TABLE>
-20-
<PAGE>
<TABLE>
<S><C>
Average interest rates 7.7% 7.9% -- --
Notional principal amount of
interest rate exchange
Agreements $ 56 $ 100 -- --
Average interest rate paid
(fixed) 8.8% 8.4% -- --
Average interest rate received
(variable) 5.0% 5.8% -- --
- --------------------------------------------------------------------------------
Fair
value
December
In millions 2003 Thereafter Total 31, 1998
- --------------------------------------------------------------------------------
Debt
Commercial paper and other short-
term notes -- $ 1,209 $ 1,209 $ 1,209
Average interest rates -- 5.8% 5.8% 5.8%
Notes and debentures $ 300 $ 2,900 $ 3,500 $ 3,783
Average interest rates 5.5% 8.6% 8.4% 8.4%
Revenue bonds $ 1 $ 518 $ 637 $ 587
Average interest rates 6.5% 5.2% 5.2% 5.2%
Other loans $ 14 -- $ 29 $ 29
Average interest rates 5.8% -- 6.9% 6.9%
Notional principal amount of
interest rate exchange
Agreements $ 300 -- $ 456 $ 14
Average interest rate paid
(fixed) 5.9% -- 6.8% 6.8%
Average interest rate received
(variable) 5.7% -- 5.7% 5.7%
- --------------------------------------------------------------------------------
</TABLE>
The Corporation has the intent and ability to refinance commercial paper
and other short-term notes as they mature. Therefore, maturities of these
obligations are reflected as cash flows expected to be made after 2003.
At January 1, 2000, the Corporation had interest rate exchange agreements
that effectively converted $608 million of floating rate obligations with a
weighted average interest rate of 5.9% to fixed rate obligations with an average
effective interest rate of approximately 6.4%. These agreements increased
interest expense by $7 million for the year ended January 1, 2000, and $11
million and $16 million for the years ended December 31, 1998 and 1997,
respectively. As of January 1, 2000, these agreements have a weighted average
maturity of approximately 2.6 years. As of January 1, 2000, the Corporation's
total floating rate debt exceeded related interest rate exchange agreements by
$1,957 million.
The Corporation also enters into foreign currency exchange agreements and
commodity futures and swaps, the amounts of which were not material to the
consolidated financial position of the Corporation at January 1, 2000.
-21-
<PAGE>
As of January 1, 2000, the Corporation had registered for sale up to $2.975
billion of debt and equity securities under a shelf registration statement filed
with the Securities and Exchange Commission. The Corporation registered $1.725
billion under such registration statement related to the PEPS Units ($862.5
million of which was received on July 7, 1999 in exchange for senior deferrable
notes, and $862.5 million of Georgia-Pacific Group common stock will be issued
upon exercise of the purchase contracts). The $862.5 million of cash (less
expenses) raised in the sale of the PEPS Units was used to pay for the
acquisition of Unisource. In addition, the Corporation registered $500 million
of 7.75% Debentures Due November 15, 2029 under this shelf registration
statement. Proceeds from the issuance of securities under this shelf
registration statement will be used for general corporate purposes, including
the repayment of short-term debt, acquisitions, investments in, or extension of
credit to, the Corporation's subsidiaries and the acquisition of real property.
The Board has adopted a policy that earnings and cash flows generated from
the businesses of the Georgia-Pacific Group or The Timber Company will be used
only for reinvestment in the business of the group generating such earnings and
related cash flows, for repayment of its debt, or for payment of dividends on,
or the repurchase of shares of, the class of common stock reflecting such
group's performance. Funds of one group will not be loaned to or otherwise
invested in the business of the other group.
In June 1999, the Board increased the corporate target debt level under
which the Corporation can purchase shares of Georgia-Pacific Group and The
Timber Company common stock on the open market from $5.75 billion to $6.8
billion. In addition, the Board increased the Georgia-Pacific Group's target
debt level from $4.75 billion to $5.8 billion. The Timber Company's target debt
level remains at $1.0 billion. Depending on operating and financial
considerations, debt levels of the Corporation, the Georgia-Pacific Group and
The Timber Company may from time to time be above or below these thresholds.
During 1999, the Corporation purchased on the open market approximately 6.2
million shares of Georgia-Pacific Group stock at an aggregate price of $257
million ($41.45 average per share), all of which were held as treasury stock at
January 1, 2000. The Corporation also purchased on the open market approximately
5.3 million shares of The Timber Company stock at an aggregate price of $131
million ($24.72 average per share). Of these purchased shares, approximately
5,343,000 shares of The Timber Company stock were held as treasury stock and
6,000 shares were purchased during 1999 and settled after January 1, 2000.
During 1998, the Corporation purchased approximately 15.4 million shares of
Georgia-Pacific Group stock (including 2.2 million shares related to the CeCorr
acquisition) at an aggregate price of $427 million ($27.73 average per share).
Of these purchased shares, approximately 13.5 million shares were held as
treasury stock and approximately 1.9 million shares were retired. Cash paid in
1998 related to Georgia-Pacific Group stock repurchases totaled $436 million,
which included $9 million for shares purchased but not settled in 1997. The
Corporation also purchased on the open market approximately 5.7 million shares
of The Timber Company stock at an aggregate price of $121 million ($21.23
average per share), all of which were held as treasury stock at December 31,
1998.
Subsequent to year-end 1999 through February 4, 2000, the Corporation
purchased on the open market 418,700 shares of The Timber Company stock at an
aggregate price of $9.5 million ($22.66 average per share). Subsequent to
year-end 1999 through February 4, 2000, no Georgia-Pacific Group stock was
purchased by the Corporation. The Corporation expects to repurchase
Georgia-Pacific Group and The Timber Company stock throughout 2000 as long as
-22-
<PAGE>
debt levels are below the established thresholds.
During 1999 and 1998, the Corporation paid dividends totaling $170 million
and $181 million, respectively.
In 2000, the Corporation expects its cash flow from operations, together
with proceeds from any sales of assets and available financing sources, to be
sufficient to fund planned capital investments, pay dividends and make scheduled
debt repayments.
OTHER The Corporation employs approximately 59,800 people, approximately 27,000
of whom are members of unions. The Corporation considers its relationship with
its employees to be good. Forty-nine union contracts are subject to negotiation
and renewal in 2000, including four at large paper facilities.
In July 1999, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 137, providing for a
one-year delay of the effective date of SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities on its balance sheet and measure those instruments at fair value.
The Corporation will be required to adopt SFAS No. 133 in 2001. Management is
evaluating the effect of this statement on the Corporation's derivative
instruments, which are primarily interest rate swaps, foreign currency forward
contracts, commodity futures and long-term purchase commitments. The impact of
such adjustments to fair value is not expected to be material to the
Corporation's consolidated financial position.
The Corporation has resolved the effects of the Year 2000 problem on its
key information systems, the operating systems used in its manufacturing
operations and its facilities systems. The Year 2000 problem, which is common to
most businesses, concerns the inability of such systems to properly recognize
and process dates and date-sensitive information on and beyond January 1, 2000.
The Corporation developed a Year 2000 plan, under which all key systems were
tested and noncompliant software or technology was modified or replaced. The
Corporation incurred only minor problems in its key systems related to Year 2000
that were immediately corrected at no incremental cost and with no effect on
operations.
The Corporation incurred approximately $30 million of incremental costs to
resolve the Year 2000 problem (including approximately $4 million of capital
costs). In addition, the Corporation incurred internal costs totaling
approximately $17 million related to the Year 2000 problem. These incremental
and internal costs were expensed as incurred, except for new systems purchased
that were capitalized in accordance with corporate policy. The Corporation will
continue to monitor and test for the effect of Year 2000 on its systems during
the first few months of 2000 and expects to incur related incremental and
internal costs totaling approximately $1 million during the first half of 2000.
For a discussion of commitments and contingencies, see Note 12 of the Notes
to Consolidated Financial Statements.
1998 COMPARED WITH 1997
The Corporation reported consolidated net sales of $13.3 billion and net income
of $274 million for 1998, compared with net sales of $13.1 billion and net
income of $69 million in 1997. The 1998 results included an extraordinary,
after-tax loss of $15 million for the early retirement of
-23-
<PAGE>
debt. The 1997 results included a pretax gain of $128 million ($80 million after
taxes) from the sale of the Corporation's Martell, California, assets and a $60
million one-time, after-tax charge for an accounting change. Interest expense
was $443 million in 1998, compared with $465 million in 1997. The reduction was
the result of lower average debt levels and lower average interest rates.
The Corporation reported pretax income of $491 million and an income tax
provision of $202 million for the year ended December 31, 1998, compared with
pretax income of $235 million and an income tax provision of $106 million for
the year ended December 31, 1997. The effective tax rate used to calculate the
provision for income taxes for both years was higher than the statutory rates
used to calculate federal and state income taxes primarily because of
nondeductible goodwill amortization expense associated with business
acquisitions.
In 1997, the Corporation adopted FASB Emerging Issues Task Force Issue No.
97-13 (EITF 97-13), "Accounting for Costs Incurred in Connection with a
Consulting Contract or an Internal Project That Combines Business Process
Reengineering and Information Technology Transformation," which resulted in a
one-time, after-tax charge of $60 million.
BUILDING PRODUCTS The Corporation's building products segment reported net sales
of $5.8 billion and operating profits of $603 million for the year ended
December 31, 1998, compared with net sales of $5.5 billion and operating profits
of $490 million in 1997. Return on sales was 10% in 1998 and 9% in 1997. The
1997 results included unusual one-time charges of $32 million primarily related
to asset write-downs, including closure of certain building products facilities,
as well as information systems write-offs.
The primary components of the increase in 1998 sales and operating profits
were 45% higher oriented strand board prices and 6% higher gypsum prices. Demand
and volume were also higher in 1998 for both of these products than in the prior
year. These increases were offset slightly by 12% lower lumber prices and 9%
higher log costs.
BUILDING PRODUCTS DISTRIBUTION The Corporation's building products distribution
segment reported operating profits of $1 million in 1998 (including gains on
asset sales of $20 million) compared with a loss of $171 million in 1997
(including gains on asset sales of $26 million). The 1997 results included
restructuring charges of $80 million. The improvement in the building products
distribution segment's operating results reflected the implementation of the
division's restructuring plan, which began in the 1997 fourth quarter. This plan
included disposition of its millwork fabrication facilities nationwide and of a
number of distribution centers located in the Western United States. The
millwork fabrication facilities were divested and the targeted distribution
centers were sold or closed.
TIMBER Excluding the pretax gain on the sale of certain timberlands in West
Virginia of $24 million in 1998, and the pretax gain on the sale of timberlands
near Martell, California of $114 million in 1997, the timber segment's operating
profits increased by $17 million to $340 million in 1998 compared with $323
million in 1997. This increase was a result of efforts to reduce costs by
optimizing productivity and focusing on cost control. The result of these
productivity and cost control efforts was reflected in lower cost of sales and
general and administrative expenses in 1998.
CONTAINERBOARD AND PACKAGING The Corporation's containerboard and packaging
segment reported net sales of $2.1 billion and operating profits of $106 million
for the year ended December 31, 1998, compared with net sales of $1.8 billion
and an operating loss of $6
-24-
<PAGE>
million in 1997. Return on sales increased to 5% in 1998 compared with (0.3)%
for 1997, principally due to a 19% increase in average prices for containerboard
and an average 6% price increase for packaging products. During 1998, the
Corporation took approximately 270,000 tons of downtime at its containerboard
mills to avoid building inventories.
PULP AND PAPER The Corporation's pulp and paper segment reported net sales of
$3.6 billion and operating profits of $133 million for the year ended December
31, 1998, compared with net sales of $3.7 billion and operating profits of $201
million in 1997. Return on sales decreased to 4% in 1998 compared with 5% for
1997, principally due to a slight decrease in average prices for almost all the
Corporation's pulp and paper products. Operating profits in 1998 included a
one-time, $12 million charge primarily for the closure of a hardwood market pulp
operation. Average pulp prices were approximately 9% below 1997 levels. Tissue
prices decreased approximately 3% due to lower fiber costs and new capacity.
Average prices of communication papers for 1998 were approximately 2% below 1997
levels.
During the second half of 1998, the Corporation took significant
market-related downtime due to continued weakness in demand and pricing for pulp
and paper, primarily stemming from market conditions in Asia. In the 1998 third
quarter, the Corporation indefinitely shut down the hardwood market pulp portion
of its operations at Port Hudson, Louisiana, resulting in closure of
approximately 260,000 tons of annual production capacity. Additionally, the
Corporation took approximately 300,000 tons of downtime in 1998 at its pulp
mills to avoid building inventories.
OTHER The operating loss for the "Other" nonreportable segment increased by $22
million to a loss of $273 million in 1998 from a loss of $251 million in 1997.
This increase was primarily a result of higher litigation and environmental
remediation costs.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The statements under "Management's Discussion and Analysis" and other statements
contained herein that are not historical facts are forward-looking statements
(as such term is defined under the Private Securities Litigation Reform Act of
1995) based on current expectations. The accuracy of such statements is subject
to a number of risks, uncertainties and assumptions. In addition to the risks,
uncertainties and assumptions discussed elsewhere herein, factors that could
cause or contribute to actual results differing materially from such
forward-looking statements include the following: the Corporation's production
capacity continuing to exceed demand for its pulp and paper products,
necessitating market-related downtime; changes in the productive capacity and
production levels of other building products and pulp and paper producers; the
effect on the Corporation of changes in environmental and pollution control laws
and regulations; the general level of economic activity in U.S. and export
markets; variations in the level of housing starts; fluctuations in interest
rates and currency exchange rates; the availability and cost of wood fiber; and
other risks, uncertainties and assumptions discussed in the Corporation's
filings with the Securities and Exchange Commission, including the Corporation's
Form 8-K dated October 17, 1996.
REPORT ON MANAGEMENT'S RESPONSIBILITIES
Georgia-Pacific Corporation and Subsidiaries
-25-
<PAGE>
Management of Georgia-Pacific Corporation is responsible for the
preparation, integrity and fair presentation of the consolidated financial
statements and the estimates and judgments upon which certain amounts in the
financial statements are based. Management is also responsible for preparing the
other financial information included in the annual report. In our opinion, the
accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, and the other financial information in
the annual report is consistent with the financial statements.
Management is also responsible for establishing and maintaining a system of
internal control over financial reporting, which encompasses policies,
procedures and controls directly related to, and designed to provide reasonable
assurance as to, the reliability of the published financial statements. An
independent assessment of the system is performed by the Corporation's internal
audit staff in order to confirm that the system is adequate and operating
effectively. The Corporation's independent public accountants also consider
certain elements of the internal control system in order to determine their
auditing procedures for the purpose of expressing an opinion on the financial
statements. Management has considered any significant recommendations regarding
the internal control system that have been brought to its attention by the
internal audit staff or independent public accountants and has taken steps it
deems appropriate to maintain a cost-effective internal control system. The
Audit Committee of the Board of Directors, consisting of independent directors,
provides oversight to the financial reporting process. The Corporation's
internal auditors and independent public accountants meet regularly with the
Audit Committee to discuss financial reporting and internal control issues and
have full and free access to the Audit Committee.
There are inherent limitations in the effectiveness of any system of
internal control, including the possibility of human error and the circumvention
or overriding of controls. Accordingly, even an effective internal control
system can provide only reasonable assurance with respect to financial statement
preparation. Furthermore, the effectiveness of an internal control system can
vary over time due to changes in conditions.
Management believes that as of January 1, 2000, the internal control system
over financial reporting is adequate and effective in all material
respects.
James E. Terrell
Vice President and Controller
Danny W. Huff
Executive Vice President-Finance
and Chief Financial Officer
A.D. Correll
Chairman, Chief Executive Officer
and President
February 4, 2000
-26-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Georgia-Pacific Corporation and Subsidiaries
TO GEORGIA-PACIFIC CORPORATION:
We have audited the accompanying consolidated balance sheets of Georgia-Pacific
Corporation (a Georgia corporation) and subsidiaries as of January 1, 2000 and
December 31, 1998 and the related consolidated statements of income,
shareholders' equity, comprehensive income, and cash flows for each of the
three years in the period ended January 1, 2000. These financial statements are
the responsibility of the Corporation's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Georgia-Pacific Corporation and subsidiaries as of January 1, 2000 and December
31, 1998 and the results of their operations and their cash flows for each of
the three years in the period ended January 1, 2000 in conformity with generally
accepted accounting principles.
As explained in Note 1 of the Notes to Consolidated Financial Statements,
effective December 31, 1997, Georgia-Pacific Corporation changed its method of
accounting for business process reengineering costs incurred as part of a
project to acquire, develop, or implement internal-use software.
/S/ARTHUR ANDERSEN LLP
- ----------------------
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 4, 2000
CONSOLIDATED STATEMENTS OF INCOME
Georgia-Pacific Corporation and Subsidiaries
<TABLE>
<CAPTION>
Year ended
---------------------------------
January 1, December 31,
In millions, except per share amounts 2000 1998 1997
=========================================================================================================
<S> <C> <C> <C>
Net sales $ 17,977 $ 13,342 $ 13,094
- ---------------------------------------------------------------------------------------------------------
Costs and expenses
-27-
<PAGE>
Cost of sales, excluding depreciation and cost of timber
harvested shown below 13,333 10,231 10,209
Selling and distribution 817 556 607
Depreciation, amortization and cost of timber harvested 1,013 997 1,017
General and administrative 853 648 689
Interest 495 443 465
Other income (355) (24) (128)
- ---------------------------------------------------------------------------------------------------------
Total costs and expenses 16,156 12,851 12,859
- ---------------------------------------------------------------------------------------------------------
Income before income taxes, extraordinary items and
accounting change 1,821 491 235
Provision for income taxes 705 202 106
- ---------------------------------------------------------------------------------------------------------
Income before extraordinary items and
accounting change 1,116 289 129
Extraordinary items - loss from early retirement of
debt, net of taxes -- (15) --
Cumulative effect of accounting change,
net of taxes -- -- (60)
- ---------------------------------------------------------------------------------------------------------
Net income $ 1,116 $ 274 $ 69
=========================================================================================================
Georgia-Pacific Group
Income (loss) before extraordinary items and
accounting change $ 716 $ 111 $ (86)
Extraordinary items, net of taxes -- (13) --
Cumulative effect of accounting
change, net of taxes -- -- (60)
- ---------------------------------------------------------------------------------------------------------
Net income (loss) $ 716 $ 98 $ (146)
=========================================================================================================
Basic per share:
Income (loss) before extraordinary items and
accounting change $ 4.17 $ 0.62 $ (0.47)
Extraordinary items, net of taxes -- (0.07) --
Cumulative effect of accounting change, net of taxes -- -- (0.33)
- ---------------------------------------------------------------------------------------------------------
Net income (loss) $ 4.17 $ 0.55 $ (0.80)
- ---------------------------------------------------------------------------------------------------------
Diluted per share:
Income (loss) before extraordinary items and
accounting change $ 4.07 $ 0.61 $ (0.47)
Extraordinary items, net of taxes -- (0.07) --
Cumulative effect of accounting change, net of taxes -- -- (0.33)
- ---------------------------------------------------------------------------------------------------------
Net income (loss) $ 4.07 $ 0.54 $ (0.80)
</TABLE>
-28-
<PAGE>
<TABLE>
<S><C>
- ---------------------------------------------------------------------------------------------------------
Average number of shares outstanding:
Basic 171.8 179.8 182.9
Diluted 175.9 181.1 182.9
=========================================================================================================
The Timber Company
Income before extraordinary items $ 400 $ 178 $ 215
Extraordinary items, net of taxes -- (2) --
- ---------------------------------------------------------------------------------------------------------
Net income $ 400 $ 176 $ 215
=========================================================================================================
Basic per share:
Income before extraordinary items $ 4.75 $ 1.97 $ 2.35
Extraordinary items, net of taxes -- (0.02) --
- ---------------------------------------------------------------------------------------------------------
Net income $ 4.75 $ 1.95 $ 2.35
=========================================================================================================
Diluted per share:
Income before extraordinary items $ 4.73 $ 1.96 $ 2.33
Extraordinary items, net of taxes -- (0.02) --
- ---------------------------------------------------------------------------------------------------------
Net income $ 4.73 $ 1.94 $ 2.33
=========================================================================================================
Average number of shares outstanding:
Basic 84.1 90.3 91.4
Diluted 84.6 90.8 92.1
=========================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Georgia-Pacific Corporation and Subsidiaries
<TABLE>
<CAPTION>
Year ended
-----------------------------
January 1, December 31,
In millions 2000 1998 1997
Cash flows from operating activities
<S> <C> <C> <C>
Net income $ 1,116 $ 274 $ 69
Adjustments to reconcile net income
</TABLE>
-29-
<PAGE>
<TABLE>
<S><C>
to cash provided by operations:
Depreciation 752 749 789
Cost of timber harvested 192 186 169
Deferred income taxes 73 38 100
Amortization of goodwill 69 62 59
Stock compensation programs 8 (3) --
Cumulative effect of accounting change, net of taxes -- -- 60
Other income (355) (24) (128)
Gain on disposal sales of assets, net (48) (16) (6)
Amortization of debt issue costs, discounts and premiums 9 13 5
(Increase) decrease in receivables (258) 146 (64)
(Increase) decrease in inventories (244) 92 101
Increase (decrease) in accounts payable 4 (47) (24)
Change in other working capital 32 (82) 51
Increase (decrease) in taxes payable 9 136 (45)
Change in other assets and other long-term liabilities 68 30 (20)
- --------------------------------------------------------------------------------------------------------------
Cash provided by operations 1,427 1,554 1,116
- --------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Property, plant and equipment investments (723) (638) (717)
Timber and timberland purchases (228) (201) (175)
Acquisition (1,658) (112) --
Proceeds from sales of assets 104 131 378
Other 29 21 (23)
- --------------------------------------------------------------------------------------------------------------
Cash used for investing activities (2,476) (799) (537)
- --------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Repayments of long-term debt (579) (874) (340)
Additions to long-term debt 624 575 48
Fees paid to issue debt (35) (5) (1)
Decrease in bank overdrafts (18) (33) (28)
Increase (decrease) in commercial
Paper and other short-term notes 656 308 (94)
Senior deferrable notes 863 -- --
Common stock repurchased (388) (557) (13)
Proceeds from option plan exercises 116 9 31
</TABLE>
-30-
<PAGE>
<TABLE>
<S><C>
Cash dividends paid (170) (181) (184)
- --------------------------------------------------------------------------------------------------------------
Cash provided by (used for) financing activities 1,069 (758) (581)
- --------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash 20 (3) (2)
Balance at beginning of year 5 8 10
- --------------------------------------------------------------------------------------------------------------
Balance at end of year $ 25 $ 5 $ 8
==============================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
CONSOLIDATED BALANCE SHEETS
Georgia-Pacific Corporation and Subsidiaries
<TABLE>
<CAPTION>
January 1, December 31
In millions, except shares and per share amounts 2000 1998
================================================================================================================================
<S> <C> <C>
Assets
Current assets
Cash $ 25 $ 5
- -----------------------------------------------------------------------------------------------------------------------------
Receivables, less allowances of $25 and $25, respectively 2,298 1,233
- -----------------------------------------------------------------------------------------------------------------------------
Inventories
Raw materials 453 418
Finished goods 1,367 760
Supplies 344 311
LIFO reserve (154) (209)
- -----------------------------------------------------------------------------------------------------------------------------
Total inventories 2,010 1,280
- -----------------------------------------------------------------------------------------------------------------------------
Deferred income tax assets 139 61
- -----------------------------------------------------------------------------------------------------------------------------
Other current assets 87 66
- -----------------------------------------------------------------------------------------------------------------------------
Total current assets 4,559 2,645
- -----------------------------------------------------------------------------------------------------------------------------
Timber and timberlands 1,189 1,210
- -----------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment
Land and improvements 498 428
Buildings 1,634 1,336
Machinery and equipment 13,343 12,374
Construction in progress 403 315
- -----------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment, at cost 15,878 14,453
Accumulated depreciation (8,799) (8,204)
</TABLE>
-31-
<PAGE>
<TABLE>
<S><C>
- -----------------------------------------------------------------------------------------------------------------------------
Total property, plant and equipment, net 7,079 6,249
- -----------------------------------------------------------------------------------------------------------------------------
Goodwill, net 2,697 1,677
- -----------------------------------------------------------------------------------------------------------------------------
Other assets 1,373 919
- -----------------------------------------------------------------------------------------------------------------------------
Total assets $ 16,897 $ 12,700
================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
January 1, December 31,
In millions, except per shares and per share amounts 2000 1998
======================================================================================================================
<S> <C> <C>
Liabilities and shareholders' equity
Current liabilities
Bank overdrafts, net $ 297 $195
Commercial paper and other short-term notes 2,067 1,209
Current portion of long-term debt 39 22
Accounts payable 891 556
Accrued compensation 334 247
Other current liabilities 563 419
- -----------------------------------------------------------------------------------------------------------------------
Total current liabilities 4,191 2,648
- -----------------------------------------------------------------------------------------------------------------------
Long-term debt, excluding current portion 4,621 4,125
- -----------------------------------------------------------------------------------------------------------------------
Senior deferrable notes 863 -
- -----------------------------------------------------------------------------------------------------------------------
Other long-term liabilities 1,811 1,572
- -----------------------------------------------------------------------------------------------------------------------
Deferred income tax liabilities 1,536 1,231
- -----------------------------------------------------------------------------------------------------------------------
Commitments and contingencies
Shareholders' equity
Common stock 155 150
Georgia-Pacific Group, par value $0.80; 400,000,000 shares authorized;
191,983,000 and 186,564,000 shares issued
at January 1, 2000 and December 31, 1998, respectively
The Timber Company, par value $0.80; 250,000,000 shares authorized;
93,904,000 and 92,785,000 shares issued
at January 1,2000 and December 31, 1998, respectively
Treasury stock, at cost (880) (492)
19,776,000 shares of Georgia-Pacific Group common stock and
13,524,000 shares of The Timber Company common stock at
January 1, 2000 and December 31,1998, respectively
Additional paid-in capital 1,510 1,331
</TABLE>
-32-
<PAGE>
<TABLE>
<S><C>
Retained earnings 3,124 2,178
Long-term incentive plan deferred compensation (2) -
Accumulated other comprehensive income (32) (43)
- -----------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 3,875 3,124
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $16,897 $12,700
=======================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Georgia-Pacific Corporation and Subsidiaries
<TABLE>
<CAPTION>
Year Ended
----------------------------------
January 1, December 31,
In millions, except shares and per share amounts 2000 1998 1997
==============================================================================================================
Common stock
<S> <C> <C> <C>
Beginning balance $ 150 $ 148 $ 1464
Common stock issued:
Stock option plans and directors plan 3 -- --
Employee stock purchase plans 2 -- 2
Common stock issued for acquisition -- 2 --
- --------------------------------------------------------------------------------------------------------------
Ending balance 155 150 148
- --------------------------------------------------------------------------------------------------------------
Treasury stock
Beginning balance (492) -- --
Common stock repurchased (388) (492) --
- --------------------------------------------------------------------------------------------------------------
Ending balance (880) (492) --
- --------------------------------------------------------------------------------------------------------------
Additional paid-in capital
Beginning balance 1,331 1,274 1,203
Common stock issued:
Stock option plans and directors plan 155 20 35
Employee stock purchase plans 53 -- 56
Long-term incentive plan -- (1) 3
Common stock repurchased -- (56) (22)
Common stock issued for acquisition -- 93 --
Stock issuance costs (29) -- --
- --------------------------------------------------------------------------------------------------------------
Ending balance 1,510 1,331 1,275
- --------------------------------------------------------------------------------------------------------------
Retained Earnings
Beginning balance 2,178 2,085 2,200
</TABLE>
-33-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Net income 1,116 274 69
Cash dividends declared (Georgia- Pacific Group, $0.50,
per common share for each of the three years presented;
The Timber Company, $1.00 per common share
for each of the three years presented) (170) (181) (184)
- --------------------------------------------------------------------------------------------------------------
Ending balance 3,124 2,178 2,085
- --------------------------------------------------------------------------------------------------------------
Long-term incentive plan deferred compensation
Beginning balance -- (5) (11)
Common stock issued under long-term incentive plan (2) 5 6
- --------------------------------------------------------------------------------------------------------------
Ending balance (2) -- (5)
- --------------------------------------------------------------------------------------------------------------
Accumulated other comprehensive income
Beginning balance (43) (33) (28)
Activity, net of taxes 11 (10) (5)
- --------------------------------------------------------------------------------------------------------------
Ending balance (32) (43) (33)
- --------------------------------------------------------------------------------------------------------------
Total shareholders' equity $ 3,875 $ 3,124 $ 3,470
==============================================================================================================
Georgia-Pacific Corporation common stock
Shares issued and outstanding :
Beginning balance
Common stock issued: 91,396
Stock option plans and directors plan 473
Employee stock purchase plans 763
Long-term incentive plan (25)
Other --
Recapitalization (December 17, 1997) (92,607)
- --------------------------------------------------------------------------------------------------------------
Ending balance --
==============================================================================================================
Georgia-Pacific Group common stock shares Issued and outstanding:
Beginning balance, common stock issued 186,564 184,498 --
Recapitalization (December 17, 1997) -- -- 185,214
Common stock issued:
Stock option plans and directors plan 3,982 278 --
Employee stock purchase plans 1,397 18 --
Long-term incentive plan 40 338 --
Common stock issued for acquisition -- 3,280 --
Common stock repurchased and retired -- (1,848) (716)
- --------------------------------------------------------------------------------------------------------------
Balance, common stock issued 191,983 186,564 184,498
Common stock repurchased and held in treasury (19,776) (13,524) --
- --------------------------------------------------------------------------------------------------------------
Balance, common stock outstanding 172,207 173,040 184,498
==============================================================================================================
</TABLE>
-34-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
The Timber Company common stock shares
issued and outstanding :
Beginning balance, common stock issued 92,785 92,607 --
Recapitalization (December 17, 1997) -- -- 92,607
Common stock issued:
Stock option plans and directors plan 421 174 --
Employee stock purchase plans 698 8 --
Long-term incentive plan -- (4) --
- --------------------------------------------------------------------------------------------------------------
Balance, common stock issued 93,904 92,785 92,607
Common stock repurchased and held in treasury (11,053) (5,704) --
- --------------------------------------------------------------------------------------------------------------
Balance, common stock outstanding 82,851 87,081 92,607
==============================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Georgia-Pacific Corporation and Subsidiaries
<TABLE>
<CAPTION>
Year Ended
-----------------------------------
January 1, December 31,
In millions 2000 1998 1997
==============================================================================================
<S> <C> <C> <C>
Net income $ 1,116 274 $ 69
Other comprehensive income (loss), before taxes
Foreign currency translation adjustments 11 (14) (11)
Minimum pension liability adjustment 7 (3) 3
Income tax (expense) benefit related to
items of other comprehensive income (7) 7 3
- -----------------------------------------------------------------------------------------------
Comprehensive income $ 1,127 $ 264 $ 64
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTE. 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Georgia-Pacific
Corporation and subsidiaries. All significant intercompany balances and
transactions are eliminated in consolidation.
-35-
<PAGE>
BASIS OF PRESENTATION The Corporation, a Georgia corporation, is broadly engaged
in six business operations: the manufacture of building products (including
plywood, oriented strand board, various industrial wood products, and softwood
and hardwood lumber as well as certain nonwood products including gypsum board,
chemicals and other products); the distribution of building products
manufactured by the Corporation or purchased from others; the manufacture of
containerboard and packaging (including linerboard, medium, kraft and corrugated
packaging); the manufacture of pulp and paper (including communication papers,
market pulp, bleached board and tissue); the distribution of paper products and
supplies manufactured by the Corporation or purchased from others; and the
growing of timber on the approximately 4.7 million acres of timberlands that the
Corporation owns or leases. In 1999, these timberlands supplied approximately
19% of the overall timber requirements of the Corporation's manufacturing
facilities.
On December 16, 1997, shareholders of the Corporation approved the creation
of two classes of common stock intended to reflect separately the performance of
the Corporation's manufacturing and timber businesses (the Letter Stock
Recapitalization). The Corporation's Articles of Incorporation were amended and
restated to (i) create a new class of stock designated as Georgia-Pacific
Corporation -Timber Group common stock, $0.80 par value per share (The Timber
Company stock), consisting of 250 million authorized shares; (ii) redesignate
each authorized share of the Corporation's common stock, $0.80 par value per
share (the Existing Common Stock) as, and convert each share into, one share of
Georgia-Pacific Corporation - Georgia-Pacific Group common stock (now two shares
of Georgia-Pacific Group common stock after giving effect to the May 14, 1999
two-for-one stock split), $0.80 par value per share (Georgia-Pacific Group
stock); (iii) increase the number of shares of Georgia-Pacific Group stock
authorized for issuance from 150 million shares to 400 million shares; and (iv)
authorize the distribution of one share of The Timber Company stock for each
outstanding share of Georgia-Pacific Group stock.
The Corporation's manufacturing and timber businesses are referred to
hereinafter as the "Georgia-Pacific Group" and "The Timber Company,"
respectively, or collectively as the "groups."
The Georgia-Pacific Group is a manufacturer and distributor of building
products as well as a producer and distributor of pulp and paper products. The
Georgia-Pacific Group includes a procurement function that is responsible for
purchasing timber and wood fiber for all the Georgia-Pacific Group's
manufacturing facilities. The Timber Company is engaged primarily in the growing
and selling of timber.
The Corporation has separately presented financial statements of the groups
at substantially the same level of detail as those of the Corporation to allow
investors to properly evaluate the financial condition and results of operations
of each business. It is the Corporation's expectation that investors will use
the groups' combined financial information in conjunction with the Corporation's
consolidated financial information to assist them in making informed financial
decisions relative to the acquisition or disposition of shares of each class of
stock.
The financial statements of the groups comprise all of the accounts
included in the corresponding consolidated financial statements of the
Corporation. The separate financial statements of the Georgia-Pacific Group and
The Timber Company have been prepared on a basis that management believes to be
reasonable and appropriate and include (i) the historical balance sheets,
results of operations and cash flows for each of the groups, with all
significant
-36-
<PAGE>
intragroup transactions and balances eliminated; (ii) in the case of The Timber
Company's financial statements, assets and liabilities of the Corporation and
related transactions identified with The Timber Company, including allocated
portions of the Corporation's debt and general and administrative expense (G&A);
and (iii) in the case of the Georgia-Pacific Group's financial statements, all
other assets and liabilities and related transactions of the Corporation,
including allocated portions of the Corporation's debt and G&A. Intergroup
timber sales between the Georgia-Pacific Group and The Timber Company have not
been eliminated on either group's financial statements.
Notwithstanding the allocation of assets and liabilities (including
contingent liabilities) and shareholders' equity between the Georgia-Pacific
Group and The Timber Company for the purpose of preparing the respective
financial statements of each group, holders of Georgia-Pacific Group stock and
The Timber Company stock are shareholders of the Corporation and will continue
to be subject to all the risks associated with an investment in the Corporation
and all of its businesses, assets and liabilities. The allocation of assets and
liabilities and change in the equity structure of the Corporation resulting from
the Letter Stock Recapitalization did not result in a transfer or spin-off of
any assets or liabilities of the Corporation, or otherwise affect ownership of
any assets or responsibility for the liabilities of the Corporation or any of
its subsidiaries. As a result, the Letter Stock Recapitalization does not affect
the rights of holders of the Corporation's or any of its subsidiaries' debt.
Holders of Georgia-Pacific Group stock and The Timber Company stock have
only the rights customarily held by common shareholders of the Corporation and
do not have any rights related to their corresponding group except as set forth
in provisions relating to dividend and liquidation rights and requirements for a
mandatory dividend, redemption or conversion upon the disposition of assets of
their corresponding group, or have any right to vote on matters as a separate
voting group other than in limited circumstances as provided under Georgia law
or by stock exchange rules. The relative voting power of Georgia-Pacific Group
stock and The Timber Company stock will fluctuate from time to time, with each
share of Georgia-Pacific Group stock having one vote and each share of The
Timber Company stock having a number of votes based upon the ratio, over a
specified period prior to any shareholder vote, of the time-weighted average
market values of one share of The Timber Company stock and of one share of
Georgia-Pacific Group stock. This formula is intended to give each class of
common stock a number of votes proportionate to its aggregate market
capitalization at the time of any vote. Accordingly, changes in the market value
of Georgia-Pacific Group stock and The Timber Company stock will affect their
relative voting rights. As of January 1, 2000, the holders of Georgia-Pacific
Group stock had a substantial majority of the voting power of the Corporation.
Financial effects arising from either group that affect the Corporation's
results of operations or financial condition could, if significant, affect the
results of operations or financial condition of the other group and the market
price of the common stock relating to the other group. Any net losses of the
Georgia-Pacific Group or The Timber Company and dividends or distributions on,
or repurchases of, Georgia-Pacific Group stock or The Timber Company stock will
reduce the assets of the Corporation legally available for payment of dividends
on both Georgia-Pacific Group stock and The Timber Company stock.
The Board may, in its sole discretion, determine to convert shares of the
class of common stock related to one group into the class of common stock
related to the other group at any time at a 15% premium, or at a 10% premium in
the case of certain dispositions of all or substantially all of the properties
or assets of the group whose stock is being converted. Any conversion at any
premium would dilute the interests in the Corporation of the holders of the
class of common
-37-
<PAGE>
stock being issued in the conversion. In addition, any such conversion of a
class of common stock into another class of common stock would 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.
The management and accounting policies applicable to the preparation of the
financial statements of the Georgia-Pacific Group and The Timber Company may be
modified or rescinded, or additional policies may be adopted, at the sole
discretion of the Board at any time without approval of the shareholders.
The groups' combined financial statements reflect the application of the
management and allocation policies adopted by the Board to various corporate
activities, as described below. The groups' combined financial statements should
be read in conjunction with the Corporation's consolidated financial statements.
FINANCIAL ACTIVITIES At June 30, 1997, $1.0 billion of the Corporation's total
debt was allocated to The Timber Company for financial statement purposes, and
the balance of the Corporation's total debt was allocated to the Georgia-Pacific
Group. The Corporation's debt was allocated between the groups based upon a
number of factors including expected future cash flows, volatility of earnings,
and the ability to pay debt service and dividends. In addition, the Corporation
considered certain measures of creditworthiness, such as coverage ratios and
various tests of liquidity, as a means of ensuring that each group could
continue to pay debt service during a business downcycle. Management believes
that such allocation is equitable and reasonable.
At January 1, 2000, $970 million of the Corporation's debt was allocated to
The Timber Company and $6,054 million was allocated to the Georgia-Pacific
Group. The senior deferrable notes and related interest expense are allocated
specifically to the Georgia-Pacific Group (see Note 6 of the Notes to the
Consolidated Financial Statements). The Corporation has not allocated any other
debt securities or instruments to either group. The debt of each group bears
interest at a rate equal to the weighted average interest rate of all the
Corporation's debt calculated on a quarterly basis. This weighted average
interest rate excluded the interest on the senior deferrable notes. Management
believes that this method of allocation of the cost of debt is equitable and
provides a reasonable estimate of the cost attributable to the groups.
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, investing
activities, dividend payments, share repurchases and other financing activities.
Interest is charged to each group in proportion to the respective amount of each
group's debt. Changes in the cost of the Corporation's debt are reflected in
adjustments to the weighted average interest cost of such debt. Dividend costs
with respect to any preferred stock issued by the Corporation are charged in a
similar manner.
ALLOCATION OF SHARED SERVICES A portion of the Corporation's shared G&A (such as
executive management, human resources, legal, accounting and auditing, tax,
treasury, strategic planning and information systems support) has been allocated
to each group based upon identification of such services specifically used by
each group. Where determinations based on specific usage alone have been
impracticable, other methods and criteria were used that management believes are
equitable and provide a reasonable estimate of the cost attributable to each
group. These methods consisted of allocating costs based on (i) number of
employees of each group, (ii) percentage of office space of each group and (iii)
estimated percentage of staff time allocable to each group. The total of these
allocations was $251 million, $282 million and
-38-
<PAGE>
$346 million in 1999, 1998 and 1997, respectively. It is not practicable to
provide a detailed estimate of the expenses that would be recognized if either
group were a separate legal entity.
ALLOCATION OF EMPLOYEE BENEFITS A portion of the Corporation's employee benefit
costs, including pension and postretirement health care and life insurance
benefits, has been allocated to each group. The pension cost related to their
participation in the Corporation's noncontributory defined benefit pension plan,
and other employee benefit costs related to their participation in the
Corporation's postretirement health care and life insurance benefit plans, are
actuarially determined based on the number of their employees and an allocable
share of the plan assets and are calculated in accordance with SFAS No. 87,
"Employers' Accounting for Pensions," and SFAS No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions," respectively. Management
believes such method of allocation is equitable and provides a reasonable
estimate of the costs attributable to each group.
Since plan assets are not segregated into separate accounts or restricted
to providing benefits to employees of either group, assets of the Corporation's
employee benefit plans may be used to provide benefits to employees of both the
Georgia-Pacific Group and The Timber Company. Plan assets have been allocated to
the groups based on the percentage of their projected benefit obligation to the
plans' total projected benefit obligations.
ALLOCATION OF FEDERAL AND STATE INCOME TAXES The federal income taxes of the
Corporation and the subsidiaries that own assets allocated between the groups
are determined on a consolidated basis. Consolidated federal income tax
provisions and related tax payments or refunds are allocated between the groups
based principally on the taxable income and tax credits directly attributable to
each group. Such allocations reflect each group's contribution (positive or
negative) to the Corporation's consolidated federal taxable income and the
consolidated federal tax liability and tax credit position. Tax benefits that
cannot be used by the group generating those benefits, but can be used on a
consolidated basis, are credited to the group that generated such benefits. Had
the groups filed separate tax returns, the provision for income taxes and net
income for each group would not have significantly differed from the amounts
reported on the groups' statements of income for the years ended January 1, 2000
and December 31, 1998 and 1997. However, the amounts of current and deferred
taxes and taxes payable or refundable allocated to each group on the historical
financial statements may differ from those that would have been allocated had
the groups filed separate income tax returns.
Depending on the tax laws of the respective jurisdictions, state and local
income taxes are calculated on either a consolidated or combined basis or on a
separate corporation basis. State income tax provisions and related tax payments
or refunds determined on a consolidated or combined basis are allocated between
the groups based on their respective contributions to such consolidated or
combined state taxable incomes. State and local income tax provisions and
related tax payments that are determined on a separate corporation basis are
allocated 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.
DIVIDENDS For purposes of the historical financial statements of the
Georgia-Pacific Group and The Timber Company, for periods prior to 1998, all
dividends declared and paid by the Corporation were evenly allocated between the
groups. Management believes that such method of allocation is equitable and
provides a reasonable estimate of the dividends that would have been declared
and paid in respect of each class of common stock. The amount of earnings
available for payment of dividends on Georgia-Pacific Group stock and on The
Timber Company stock (i.e., the available dividend amounts) on any date is the
amount in excess of the minimum
-39-
<PAGE>
amount necessary for the particular group to be able to pay its debts as they
become due in the usual course of business. Future dividends will not bear a
direct relationship to earnings and retained earnings as expressed on each
group's combined financial statements in accordance with generally accepted
accounting principles. Accordingly, a mathematical calculation of the available
dividend amount for either group cannot be made.
STOCK SPLIT On May 4, 1999, the Board declared a two-for-one split of the
Georgia-Pacific Group's stock in the form of a special dividend to shareholders
of record on May 14, 1999. The special dividend was paid as one share of
Georgia-Pacific Group stock for each such share outstanding on June 3, 1999. A
total of 95,126,911 additional shares were issued in conjunction with the stock
split. The Georgia-Pacific Group's par value of $0.80 remained unchanged. As a
result, $76 million of shareholders' equity was reclassified from "Additional
paid-in capital" to "Common stock." All historical share and per share amounts
have been restated to reflect retroactively the stock split.
REVENUE RECOGNITION The Corporation recognizes revenue when title to the goods
sold passes to the buyer, which is generally at the time of shipment. Timber
sales are recognized when legal ownership or the risk of loss passes to the
purchaser and the quantity sold is determinable.
INCOME PER SHARE Basic earnings per share are computed based on net income and
the weighted average number of common shares outstanding. Diluted earnings per
share reflect the assumed issuance of common shares under long-term incentive,
stock option and stock purchase plans, and pursuant to the terms of the PEPS
Units. The computation of diluted earnings per share does not assume conversion
or exercise of securities that would have an antidilutive effect on earnings per
share. Income per share for each group is reflected on a pro forma basis for
1997 as if the Letter Stock Recapitalization had occurred on January 1, 1997.
Amounts are computed for each class of common stock based on the separate
earnings attributed to each of the respective businesses.
EARNINGS PER SHARE
Georgia-Pacific Corporation and Subsidiaries
<TABLE>
<CAPTION>
Year ended
- ------------------------------------------------------------------------------------------------------------------------------------
In millions, except shares and per January 1, December 31,
share amounts 2000 2000 1998 1998
====================================================================================================================================
Georgia- The Georgia- The
Pacific Timber Pacific Timber
Group Company Group Company
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic and diluted income (loss) available
to shareholders (numerator):
Income (loss) before extraordinary
item and accounting change $ 716 $ 400 $ 111 $ 178
Extraordinary item, net of taxes -- -- (13) (2)
Accounting change, net of taxes -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-40-
<PAGE>
<TABLE>
<S><C>
Net income (loss) $ 716 $ 400 $ 98 $ 176
- ------------------------------------------------------------------------------------------------------------------------------------
Shares (denominator):
Average shares outstanding 171,807,884 84,138,673 179,765,172 90,313,022
Dilutive securities:
Options 3,677,295* 426,423** 1,249,430*** 492,549****
Employee stock purchase plans 438,630 40,508 71,620 7,575
- ------------------------------------------------------------------------------------------------------------------------------------
Total assuming conversion 175,923,809 84,605,604 181,086,222 90,813,146
- ------------------------------------------------------------------------------------------------------------------------------------
Per share amounts:
Basic
Income (loss) before extraordinary
items and accounting change $ 4.17 $ 4.75 $ 0.62 $ 1.97
Extraordinary item, net of taxes -- -- (0.07) (0.02)
Accounting change, net of taxes -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 4.17 $ 4.75 $ 0.55 $ 1.95
- ------------------------------------------------------------------------------------------------------------------------------------
Diluted
Income (loss) before extraordinary
Item and accounting change $ 4.07 $ 4.73 $ 0.61 $ 1.96
Extraordinary item, net of taxes -- -- (0.07) (0.02)
Accounting change, net of taxes -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 4.07 $ 4.73 $ 0.54 $ 1.94
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Year ended
----------------------------------------
December 31,
In millions, except shares and per share amounts 1997 1997
Georgia- The
Pacific Timber
Group Company
<S> <C> <C>
Basic and diluted income (loss) available
To shareholders (numerator):
Income (loss) before extraordinary
Item and accounting change $ (86) $ 215
Extraordinary item, net of taxes -- --
Accounting change, net of taxes (60) --
- --------------------------------------------------------------------------------------------------------
Net income (loss) $ (146) $ 215
========================================================================================================
Shares (denominator):
Average shares outstanding 182,860,880 91,444,588
Dilutive securities:
Options -# 677,784*****
Employee stock purchase plans -# 4,047
- --------------------------------------------------------------------------------------------------------
Total assuming conversion 182,860,880 92,126,419
========================================================================================================
Per share amounts:
Basic
</TABLE>
-41-
<PAGE>
<TABLE>
<S><C>
Income (loss) before extraordinary
items and accounting change $ (0.47) $ 2.35
Extraordinary items, net of taxes -- --
Accounting change, net of taxes (0.33) --
- --------------------------------------------------------------------------------------------------------
Net income (loss) $ (0.80) $ 2.35
========================================================================================================
Income (loss) before extraordinary
Items and accounting change $ (0.47) $ 2.33
Extraordinary item, net of taxes -- --
Accounting change, net of taxes (0.33) --
- --------------------------------------------------------------------------------------------------------
Net income (loss) $ (0.80) $ 2.33
========================================================================================================
</TABLE>
* Options to purchase 176,490 shares of Georgia-Pacific Group stock at prices
ranging from $43.58 to $91.58 per share were outstanding during 1999, as were
PEPS Units to purchase Georgia-Pacific Group stock. However, these were not
included in the computation of diluted earnings per share because the options'
exercise price and the PEPS Unit purchase contract price were greater than the
average market price of the common shares.
** Options to purchase 1,004,000 shares of The Timber Company stock at $25.13
per share were outstanding during 1999 but were not included in the computation
of diluted earnings per share because the options' exercise price was greater
than the average market price of the common shares.
*** Options to purchase 23,856 shares of Georgia-Pacific Group stock at $30.25
per share were outstanding during 1998 but were not included in the computation
of diluted earnings per share because the options' exercise price was greater
than the average market price of the common shares.
**** Options to purchase 1,951,130 shares of The Timber Company stock at prices
ranging from $23.21 to $25.13 per share were outstanding during 1998 but were
not included in the computation of diluted earnings per share because the
options' exercise price was greater than the average market price of the common
shares.
# Options to purchase 10,710,954 shares of Georgia-Pacific Group stock at prices
ranging from $21.00 to $28.65 per share were outstanding during 1997, as were
shares subscribed under the 1997 Employee Stock Purchase Plan. However, due to
operating losses, these shares are antidilutive and are not included in the
calculation of diluted earnings per share.
***** Options to purchase 1,010,600 shares of The Timber Company stock at $25.13
per share were issued on December 17, 1997 but were not included in the
computation of diluted earnings per share because the options' exercise price
was greater than the average market price of the common shares.
INVENTORY VALUATION Inventories are valued at the lower of year-to-date average
cost or market and include the costs of materials, labor and manufacturing
overhead. The last-in, first-out (LIFO) dollar value pool method was used to
determine the cost of approximately 65% and 59% of inventories at January 1,
2000 and December 31, 1998, respectively.
TIMBER AND TIMBERLANDS The Corporation capitalizes timber and timberland
purchases and reforestation costs. The cost of timber harvested is based on the
volume of timber harvested, the capitalized cost and the total timber volume
estimated to be available over the growth cycle. Timber carrying costs are
expensed as incurred.
Gains or losses on sales of timberlands are reflected as a reduction of
"Cost of sales" on the
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<PAGE>
accompanying statements of income, with the exception of major divestitures,
which are reflected as "Other income."
PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are recorded at
cost. Lease obligations for which the Corporation assumes or retains
substantially all the property rights and risks of ownership are capitalized.
Replacements of major units of property are capitalized, and the replaced
properties are retired. Replacements of minor components of property, and repair
and maintenance costs, are charged to expense as incurred.
Depreciation is computed using the straight-line method over the estimated
useful lives of the related assets. Useful lives are 25 years for land
improvements, 20 to 45 years for buildings, and 3 to 20 years for machinery and
equipment. Upon retirement or disposition of assets, cost and accumulated
depreciation are removed from the related accounts and any gain or loss is
included in income.
The Corporation capitalizes incremental costs that are directly associated
with the development of software for internal use. Amounts are amortized over
five years beginning when the assets are placed in service. Capitalized costs
were $66 million at January 1, 2000 and $31 million at December 31, 1998.
Amounts are included as property, plant and equipment on the accompanying
balance sheets.
In 1997, the Corporation adopted EITF 97-13, "Accounting for Costs Incurred
in Connection with a Consulting Contract or an Internal Project That Combines
Business Process Reengineering and Information Technology Transformation," which
resulted in a one-time, after-tax charge of $60 million.
The Corporation capitalizes interest on projects when construction takes
considerable time and entails major expenditures. Such interest is charged to
the property, plant and equipment accounts and amortized over the approximate
lives of the related assets. Interest capitalized, expensed and paid was as
follows:
Year ended
---------------------------------------------
January 1, December 31,
In millions 2000 1998 1997
====================================================================
Total interest costs $ 501 $ 452 $ 476
Interest capitalized (6) (9) (11)
- --------------------------------------------------------------------
Interest expense $ 495 $ 443 $ 465
====================================================================
Interest paid $ 473 $ 468 $ 475
====================================================================
LANDFILLS AND LAGOONS The Corporation accrues for landfill closure costs over
the periods that benefit from the use of the landfill and accrues for lagoon
clean-out costs over the useful period between clean-outs.
GOODWILL The Corporation amortizes costs in excess of fair value of net assets
of businesses acquired using the straight-line method over a period not to
exceed 40 years. The Corporation reviews the recorded value of its goodwill
annually, or sooner if events or changes in circumstances indicate that the
carrying amount may exceed fair value. Recoverability is then
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<PAGE>
determined by comparing the undiscounted net cash flows of the assets to which
the goodwill applies to the net book value, including goodwill, of those assets.
Amortization expense was $69 million, $62 million and $59 million in 1999,
1998 and 1997, respectively. Accumulated amortization at January 1, 2000 and
December 31, 1998 was $615 million and $546 million, respectively.
ENVIRONMENTAL MATTERS The Corporation recognizes a liability for environmental
remediation costs when it believes it is probable a liability has been incurred
and the amount can be reasonably estimated. The liabilities are developed based
on currently available information and reflect the participation of other
potentially responsible parties, depending on the parties' financial condition
and probable contribution. The accruals are recorded at undiscounted amounts and
are reflected as other liabilities on the accompanying balance sheets.
Environmental costs are generally capitalized when the costs improve the
condition of the property or the costs prevent or mitigate future contamination.
All other costs are expensed.
INVESTMENT IN REAL ESTATE HELD FOR DEVELOPMENT AND SALE The Corporation divested
its real estate development properties located in South Carolina and Florida in
the first quarter of 1998. As a result, the Corporation is no longer engaged in
real estate development activities. Real estate held for development and sale
was stated at the lower of cost or net realizable value, and included direct
costs of land and land development and indirect costs, including amenities, less
amounts charged to cost of sales. These costs were allocated to individual lots
or acreage sold based on relative sales value. Direct costs were allocated on a
specific neighborhood basis, while indirect costs were allocated over the
projects. The Corporation recognized sales of retail homesites developed when
all conditions, as set forth in SFAS No. 66, "Accounting for Sales of Real
Estate," had occurred.
USE OF ESTIMATES The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions. These estimates and assumptions affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements as well as reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.
ACCOUNTING STANDARDS CHANGE In July 1999, the FASB issued SFAS No. 137,
providing for a one-year delay of the effective date of SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes accounting and reporting standards for derivative instruments and
for hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities on its balance sheet and measure those instruments
at fair value. The accounting for changes in the fair value of a derivative
depends on the intended use of the derivative and the resulting designation. The
Corporation will be required to adopt SFAS No. 133 in 2001. Management is
evaluating the effect of this statement on the Corporation's derivative
instruments, which are primarily interest rate swaps, foreign currency forward
contracts, commodity futures and long-term purchase commitments. The impact of
such adjustments to fair value is not expected to be material to the
Corporation's consolidated financial position.
CHANGE IN FISCAL YEAR On or about April 22, 1999, the Corporation determined to
change its fiscal year from December 31 to end on the Saturday closest to
December 31. Additionally, the Corporation reports its quarterly periods on a
13-week basis ending on a Saturday. The impact of one additional day on the year
ended January 1, 2000 was not material. There will be
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<PAGE>
no transition period on which to report.
RECLASSIFICATIONS Certain 1998 and 1997 amounts have been reclassified to
conform with the 1999 presentation. Beginning in 1999 and in connection with
the acquisition of Unisource (see Note 3 of the Notes to Consolidated Financial
Statements), certain selling and distribution expenses, which had previously
been included in "Net sales," "Cost of sales" and "General and administrative"
expenses, are now presented separately on the consolidated statements of income.
In addition, amortization of goodwill, which had previously been included in
"Cost of sales," is now presented in "Depreciation, amortization and cost of
timber harvested" on the consolidated statements of income.
NOTE 2. OPERATING SEGMENT INFORMATION
The Corporation has six reportable operating segments: building products,
building products distribution, timber, containerboard and packaging, pulp and
paper, and paper distribution.
Manufactured products in the building products segment consist primarily of
wood panels (plywood, oriented strand board, hardboard and particleboard),
lumber, gypsum products and chemicals. The building products distribution
segment sells a wide range of building products manufactured by the Corporation
or purchased from others. These segments of the business are primarily affected
by the level of housing starts; the level of repairs, remodeling and additions;
industrial markets; commercial building activity; the availability and cost of
financing; and changes in industry capacity.
The timber segment consists of The Timber Company and is engaged primarily
in the growing and selling of timber. In addition, the timber segment is engaged
in certain businesses related to ownership and management of timberlands,
including managing the sale of hunting leases, the sale of minerals and mineral
rights, and the sale of easements. The operations of the timber segment are
affected by a number of factors, including prices for timber generally, selling
prices for manufactured wood products, supplies of timber from other wood
sources in the United States and competition for these raw materials, as well as
seasonal factors such as weather.
The containerboard and packaging segment produces linerboard, medium, kraft
and corrugated packaging. The pulp and paper segment produces communication
papers, market pulp, bleached board and tissue. The paper distribution segment
sells and distributes high-quality printing, writing and copying papers and a
broad range of packaging and maintenance supplies, equipment and services.
Markets for these segments are affected primarily by changes in industry
capacity, the level of economic growth in U.S. and export markets, and
fluctuations in currency exchange rates.
The accounting policies of the segments are primarily the same as those
described in the summary of significant accounting policies. The Corporation
evaluates performance based on profit or loss from operations before interest
and income taxes (i.e., operating profit or loss).
The Corporation accounts for intersegment sales and transfers as if the
sales or transfers were to third parties, that is, at current market prices.
The Corporation's reportable segments are strategic business units that
offer different products and services. They are managed separately because each
business has different
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<PAGE>
customers and requires different production processes.
The "Other" nonreportable segment includes some miscellaneous businesses,
certain goodwill amortization, unallocated corporate operating expenses, and the
elimination of intersegment sales and related profits.
The Corporation has a large and diverse customer base, which includes some
customers located in foreign countries. No single unaffiliated customer
accounted for more than 10% of total sales in any year during the three years
ended January 1, 2000. Sales to foreign markets in 1999, 1998 and 1997 were 7%,
7% and 8%, respectively. These sales were primarily to customers in Canada,
Europe, Asia and Latin America. Information on operations in U.S. and foreign
markets is as follows:
REVENUES*
<TABLE>
<CAPTION>
Year ended
--------------------------------------------------------------
January 1, December 31,
In millions 2000 1998 1997
====================================================================================================
<S> <C> <C> <C>
United States $16,699 $12,411 $12,026
Foreign countries 1,278 931 1,068
- ----------------------------------------------------------------------------------------------------
</TABLE>
*Revenues are attributed to countries based on location of customer.
Because a substantial portion of the Corporation's foreign revenues are derived
from the sale of U.S.-produced products abroad, assets located outside the
United States are not material.
<TABLE>
<CAPTION>
Building Containerboard
Building products And
In millions Products distribution Timber Packaging
====================================================================================================================================
<S> <C> <C> <C> <C>
Net sales to unaffiliated customers $3,869 $ 4,858 $ 199 $ 2,327
Intersegment sales 2,295 11 327 64
- -----------------------------------------------------------------------------------------------------------------------------------
Total net sales $6,164 $ 4,869 $ 526 $ 2,391
Operating profit (loss) 1,139 63 726 344
Depreciation, amortization, cost of
timber harvested and
goodwill amortization 327 36 42 157
Property, plant and
equipment investments 265 16 2 92
Timber and timberland purchases 150 -- 78 --
Acquisitions 51 -- -- 23
Assets 2,593 1,006 1,521 1,955
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<PAGE>
===================================================================================================================================
1998
Net sales to unaffiliated $3,337 $ 4,325 $ 125 $ 2,044
Customers
Intersegment sales 2,455 8 409 60
- -----------------------------------------------------------------------------------------------------------------------------------
Total net sales $5,792 $ 4,333 $ 534 $ 2,104
Operating profit (loss) 603 1 364 106
Depreciation, amortization, cost of
timber harvested and
goodwill amortization 321 45 44 148
Property, plant and
equipment investments 186 12 6 84
Timber and timberland purchases 142 -- 59 --
Acquisitions 19 -- -- 93
Assets 2,505 990 1,174 1,871
===================================================================================================================================
1997
Net sales to unaffiliated customers $3,139 $ 4,398 $ 126 $ 1,765
Intersegment sales 2,406 8 425 52
- -----------------------------------------------------------------------------------------------------------------------------------
Total net sales $5,545 $ 4,406 $ 551 $ 1,817
Operating profit (loss) 490 (171) 437 (6)
Depreciation, amortization, cost of
timber harvested and
goodwill amortization 312 48 48 134
Property, plant and
equipment investments 169 44 2 132
Timber and timberland purchases 131 -- 44 --
Acquisitions -- -- -- --
Assets 2,452 1,179 1,171 1,735
===================================================================================================================================
Pulp and Paper All
In millions Paper distribution Other Consolidated
===================================================================================================================================
1999
Net sales to unaffiliated customers $3,407 $3,331 $ (14)* $17,977
Intersegment sales 484 5 (3,186)** --
- ------------------------------------------------------------------------------------------------------------------------------------
Total net sales $3,891 $3,336 $(3,200) $17,977
Operating profit (loss) 266 78 (300)*** 2,316
Depreciation, cost of
timber harvested and
goodwill amortization 351 26 74 1,013
Property, plant and
equipment investments 262 45 41 723
Timber and timberland purchases -- -- -- 228
Acquisitions 755 829 -- 1,658
</TABLE>
-47-
<PAGE>
<TABLE>
<S><C>
Assets 4,772 2,369 2,731 16,897
====================================================================================================================================
1998
Net sales to unaffiliated customers $3,521 $ -- $ (10)* $13,342
Intersegment sales 33 -- (2,965)** --
- ------------------------------------------------------------------------------------------------------------------------------------
Total net sales $3,554 $ -- $(2,975)*** $13,342
Operating profit (loss) 133 -- (273) 934
Depreciation, cost of
timber harvested and
goodwill amortization 354 -- 85 997
Property, plant and
equipment investments 305 -- 45 638
Timber and timberland purchases -- -- -- 201
Acquisitions -- -- -- 112
Assets 3,808 -- 2,352 12,700
====================================================================================================================================
1997
Net sales to unaffiliated customers $3,675 $ -- $ (9)* $13,094
Intersegment sales 26 -- (2,917)** --
- ------------------------------------------------------------------------------------------------------------------------------------
Total net sales $3,701 $ -- $(2,926) $13,094
Operating profit (loss) 201 -- (251)*** 700
Depreciation, cost of
timber harvested and
goodwill amortization 386 -- 89 1,017
Property, plant and
equipment investments 306 -- 64 717
Timber and timberland purchases -- -- -- 175
Acquisitions -- -- -- --
Assets 3,951 -- 2,462 12,950
====================================================================================================================================
</TABLE>
* Represents the elimination of hunting lease income reflected in net sales
for the timber segment and reflected as a reduction to cost of sales on a
consolidated basis. In addition, these amounts include net sales from
miscellaneous businesses.
** Elimination of intersegment sales.
*** Includes some miscellaneous businesses, certain goodwill amortization,
unallocated corporate operating expenses and the elimination of profit on
intersegment sales.
RECONCILIATION OF SEGMENT OPERATING PROFITS TO CONSOLIDATED NET INCOME
Georgia-Pacific Corporation and Subsidiaries
<TABLE>
<CAPTION>
Year Ended
----------------------------------------------------------------
January 1, December 31,
<S> <C> <C>
</TABLE>
-48-
<PAGE>
<TABLE>
<S><C>
In millions 2000 1998 1997
====================================================================================================================================
<S> <C> <C> <C>
Total operating profits $2,316 $ 934 $ 700
Interest expense 495 443 465
Provision for income taxes 705 202 106
- ------------------------------------------------------------------------------------------------------------------------------------
Income before extraordinary items
and accounting change 1,116 289 129
Extraordinary items, net of taxes -- (15) --
Accounting change, net of taxes -- -- (60)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $1,116 $ 274 $ 69
====================================================================================================================================
</TABLE>
NOTE 3. ACQUISITIONS, DIVESTITURES AND UNUSUAL ITEMS
ACQUISISTIONS AND DIVESTITURES. The following acquisitions and divestitures were
completed during 1999, 1998 and 1997.
At the end of the second quarter of 1999, the Corporation, through its
wholly owned subsidiary Atlanta Acquisition Corp., completed a tender offer for
all the outstanding shares of common stock of Unisource, the largest independent
marketer and distributor of printing and imaging paper and supplies in North
America, and acquired 90.7% of the then outstanding shares of Unisource. On July
6, 1999, Atlanta Acquisition Corp. was merged with and into Unisource and, by
virtue of such merger, shares of Unisource that were not tendered to the
Corporation (other than shares held by Unisource and the Corporation and its
subsidiaries) were converted into the right to receive $12.00 per Unisource
share in cash, subject to dissenters' rights. The Corporation is paying for such
untendered shares as they are delivered to the exchange agent for cancellation.
Through January 1, 2000, the Corporation paid approximately $829 million for
such shares. In addition, the Corporation assumed $785 million of Unisource debt
in the acquisition.
Unisource's results of operations were consolidated with those of the
Corporation beginning July 4, 1999. The Corporation has accounted for this
transaction using the purchase method to record a new cost basis for assets
acquired and liabilities assumed. The allocation of the purchase price and
acquisition costs to the assets acquired and liabilities assumed is preliminary
as of January 1, 2000, and is subject to change pending finalization of studies
of fair value and the finalization of management's plans to consolidate or close
additional distribution centers. The difference between the purchase price and
the fair market value of the assets acquired and liabilities assumed was
recorded as goodwill and is being amortized over 40 years. The preliminary
allocation of the purchase price of the acquisition is summarized as follows:
In millions
======================================================
Current assets $ 1,228
Property, plant and equipment 230
Goodwill 27
Liabilities 762
Common stock issued (1,418)
- ------------------------------------------------------
Net cash paid for Unisource $ 829
======================================================
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<PAGE>
The following unaudited pro forma financial data has been prepared
assuming that the acquisition of Unisource and related financings were
consummated on January 1, 1998. This pro forma financial data is presented for
informational purposes and is not necessarily indicative of the operating
results that would have occurred had the acquisition been consummated on January
1, 1998, nor does it include adjustments for expected synergies or cost savings.
Accordingly, this pro forma data is not necessarily indicative of future
operations.
Year ended
--------------------------
January 1, December 31,
In millions, except per share amounts 2000 1998
================================================================================
Georgia-Pacific Corporation:
Net sales $ 20,993 $ 20,359
Income before extraordinary items 1,109 33
Net income 1,109 18
Georgia-Pacific Group data:
Income (loss) before extraordinary items 709 (145)
Net income (loss) 709 (158)
Basic income (loss) before
extraordinary items per share 4.12 (0.81)
Diluted income (loss) before
extraordinary items per share 4.03 (0.81)
Basic earnings (loss) per share 4.12 (0.88)
Diluted earnings (loss) per share 4.03 (0.88)
- --------------------------------------------------------------------------------
The Timber Company's results of operations are not impacted by the
Unisource transaction.
The 1998 pro forma financial data includes nonrecurring restructuring and
asset write-down charges of $225 million ($178 million after taxes) taken by
Unisource.
The Corporation has nearly finalized and is in various phases of
implementing plans to restructure existing Unisource activities, including the
consolidation or closure of certain distribution centers, closure of the
Unisource headquarters facility, termination of redundant headcount and the
relocation of certain administrative functions. In connection with the
acquisition of Unisource, the Corporation recorded liabilities totaling
approximately $71 million for employee termination (relating to approximately
1,680 hourly and salaried employees) and relocation costs, and $20 million for
closing costs of 48 facilities. As a result of this program, approximately 580
employees were terminated and 31 facilities were closed or consolidated in 1999.
Finalization of management's plans to consolidate or close additional
distribution centers and changes in implementation plans could result in
additional liabilities recorded as part of the purchase price or charges to
earnings. The following table provides a rollforward of the $91 million reserve
for restructuring from the date of acquisition through January 1, 2000:
Type of Cost
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<PAGE>
<TABLE>
<CAPTION>
Balance Balance
July 4, January 1,
In millions 1999 Additions Usage 2000
======================================================================================================================
<S> <C> <C> <C> <C>
Employee separation $71 $ -- $(28) $43
Facility closing costs and asset impairments 20 -- (6) 14
- ----------------------------------------------------------------------------------------------------------------------
Total $91 $ -- $(34) $57
======================================================================================================================
</TABLE>
In addition, during 1999, the Corporation completed the acquisition of a
packaging plant, four treated lumber facilities, a chemical business and lumber
transportation assets for a total consideration of approximately $74 million in
cash. The results of operations of the packaging plant and treated lumber
facilities were consolidated with those of the Corporation beginning in the
second quarter of 1999. The operating results of the chemical business and
lumber transportation assets were consolidated with those of the Corporation
beginning in the third and fourth quarters, respectively, of 1999. The
Corporation has accounted for these business combinations using the purchase
method to record a new cost basis for assets acquired and liabilities assumed.
Effective October 3, 1999, the Corporation and Chesapeake completed a
previously announced agreement to create Georgia-Pacific Tissue, a joint venture
in which the two companies have combined their away-from-home tissue businesses.
The Corporation contributed substantially all the assets of its commercial
tissue business to the joint venture. The Corporation controls and manages the
joint venture and owns 95% of its equity. Chesapeake contributed the assets of
its Wisconsin Tissue business to the joint venture, for which it received a 5%
equity interest in the joint venture and an initial cash distribution of
approximately $755 million.
The results of the Wisconsin Tissue operations were combined with the
Corporation's commercial tissue business beginning on October 3, 1999, when the
Georgia-Pacific Tissue joint venture was formed. The Corporation has accounted
for this transaction using the purchase method to record a new cost basis for
assets acquired and liabilities assumed. The allocation of the purchase price
and acquisition costs to the assets acquired and liabilities assumed is
preliminary as of January 1, 2000, and is subject to change pending the
finalization of management's plans for manufacturing and distribution
activities. The difference between the purchase price and the fair market value
of the assets acquired and liabilities assumed was recorded as goodwill and is
being amortized over 40 years. The preliminary allocation of the purchase price
of the acquisition is summarized as follows:
In millions
=============================================================
Current assets $ 97
Property, plant and equipment 632
Goodwill 290
Liabilities (264)
- -------------------------------------------------------------
Net cash paid for Wisconsin Tissue assets $ 755
=============================================================
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<PAGE>
The Corporation has completed an organizational restructuring of the sales,
marketing, administrative and manufacturing support activities for its
away-from-home tissue business, which resulted in the elimination of
approximately 300 salaried and hourly positions. The Corporation recorded
liabilities totaling approximately $7 million for termination and relocation
costs of Wisconsin Tissue employees. This $7 million liability was included as
part of the Wisconsin Tissue assets purchase price. In addition, the Corporation
recorded liabilities totaling approximately $2 million for the termination and
relocation of employees of the Corporation. This $2 million liability was
charged to earnings in 1999. As a result of these programs, approximately 100
employees were terminated and approximately $2 million of the termination and
relocation reserves was used in 1999. The Corporation has not yet finalized its
plans for manufacturing and distribution activities. Finalization of these plans
may result in additional liabilities recorded as part of the purchase price or
charges to earnings.
On June 30, 1998, the Corporation completed its acquisition of CeCorr, a
leading independent producer of corrugated sheets in the United States. On June
30, 1998, the Corporation paid approximately $93 million in cash (net of $2
million of cash acquired) and issued approximately 3.2 million shares of
Georgia-Pacific Group stock valued at approximately $28.94 per share for all the
outstanding shares of CeCorr. In addition, the Corporation assumed approximately
$92 million of CeCorr's debt, of which $34 million was owed to the Corporation
($58 million net debt assumed). On July 2, 1998, a former owner of CeCorr
exercised his right to resell to the Corporation approximately 2.2 million
shares of Georgia-Pacific Group stock issued in the transaction. CeCorr's
results of operations were consolidated with those of the Corporation beginning
July 1, 1998. The Corporation accounted for the CeCorr acquisition using the
purchase method to record a new cost basis for assets acquired and liabilities
assumed.
During the second quarter of 1999, the Corporation sold approximately
390,000 acres of timberlands in New Brunswick, Canada and approximately 440,000
acres of timberlands in Maine for approximately $92 million and recognized a
pretax gain of $84 million ($50 million after taxes). The amount is reflected in
"Other income" on the accompanying statements of income. In conjunction with the
sale of its Maine timberlands, the Corporation received notes from the purchaser
in the amount of $51 million. In November 1999, the Corporation monetized these
notes through the issuance of notes payable in a private placement. The
Corporation will use proceeds from the notes received from the purchaser to fund
payments required for the notes payable. The notes receivable are classified as
"Other assets" and the notes payable are classified as "Other long-term
liabilities" on the accompanying January 1, 2000 balance sheets.
In December 1999, the Corporation sold approximately 194,000 acres of
redwood and Douglas fir timberlands in Northern California for a purchase price
of approximately $397 million and recognized a pretax gain of $271 million ($165
million after taxes). The amount is reflected in "Other income" on the
accompanying statements of income. In conjunction with the sale of its
California timberlands, the Corporation received notes from the purchaser with
an estimated fair value of $350 million. These notes are fully secured by a
standby letter of credit with an unaffiliated third-party financial institution.
The Corporation plans to monetize these notes through the issuance of notes
payable in the first half of 2000. These notes are included in "Other assets" on
the accompanying balance sheets at January 1, 2000.
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<PAGE>
In March 1998, the Corporation sold its real estate development properties
located in South Carolina and Florida for $18 million in cash, resulting in a
pretax gain of approximately $1 million.
In December 1998, the Corporation completed the sale of approximately
61,000 acres of timberlands located in West Virginia. This sale resulted in a
pretax gain of $24 million ($14 million after taxes). The amount is reflected in
"Other income" on the accompanying statements of income.
In March 1997, the Corporation sold its Martell, California, operations for
$308 million. Assets included in this transaction were 127,000 acres of
timberlands allocated to The Timber Company, and a sawmill and a particleboard
plant allocated to the Georgia-Pacific Group. In conjunction with the sale of
its Martell operations, the Corporation received notes from the purchaser in the
amount of $270 million related to the timberlands. In April 1997, the
Corporation monetized the notes through the issuance of notes payable in a
private placement. The notes receivable are classified as "Other assets" and the
notes payable are classified as "Other long-term liabilities" on the
accompanying balance sheets. The Corporation recognized a pretax gain of
approximately $128 million on the sale ($80 million after taxes). The amount is
reflected in "Other income" on the accompanying statements of income.
BUILDING PRODUCTS DISTRIBUTION SEGMENT RESTRUCTURING In December 1997, the
Corporation began a restructuring plan that included disposing of its millwork
fabrication facilities nationwide as well as several building products
distribution centers located in the Western United States. A reserve of $70
million was recorded in the 1997 fourth quarter for anticipated liabilities and
write-down of assets associated with the plan. The execution of the plan
included termination of approximately 1,770 employees in 1998. The employees
included hourly and salaried personnel employed in the identified millwork
fabrication facilities and distribution centers, and associated sales and
administrative personnel. The Corporation also accrued related pension,
outplacement and retention expenses for these employees. The total amount of the
1997 charge related to employee severance was $15 million and is reflected in
"Cost of sales" and "General and administrative" expenses on the accompanying
statements of income. No termination benefits were paid in 1997 related to this
plan.
The following table provides a rollforward of the remaining reserve for
business restructurings from December 31, 1998 to January 1, 2000.
<TABLE>
<CAPTION>
Balance Balance
December 31, January 1,
In millions 1998 Additions Usage 2000
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Employee separation $- $ -- $-- $ --
Facility closing costs
and asset impairments 2 -- (2) --
- --------------------------------------------------------------------------------------------------------
Total $2 $ -- $(2) $ --
========================================================================================================
</TABLE>
Prior to 1996, the Corporation implemented a program to change and improve
certain processes in the Corporation's building products distribution segment.
The Corporation expensed $10 million of termination benefit costs in 1997
related to this program. As a result of this program, approximately 720
employees were terminated in 1997.
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<PAGE>
NOTE 4 RECEIVABLES
The Corporation has a large, diversified customer base, which includes some
customers located in foreign countries. The Corporation closely monitors
extensions of credit and has not experienced significant losses related to its
receivables. In addition, a portion of the receivables from foreign sales is
covered by confirmed letters of credit to help ensure
collectibility.Supplemental information on the accounts receivable balances at
January 1, 2000 and December 31, 1998 is as follows:
January 1, December 31,
(In millions) 2000 1998
================================================================================
Receivables
Trade $2,183 $1,170
Other 140 88
- --------------------------------------------------------------------------------
2,323 1,258
Less allowances 25 25
- --------------------------------------------------------------------------------
Receivables, net $2,298 $1,233
================================================================================
In June 1999, the Corporation renegotiated its accounts receivable secured
borrowing program and increased the amount outstanding under the program from
$280 million to $750 million. The program expires in April 2000. In connection
with the acquisition of Unisource, the Corporation assumed former Unisource
programs to pledge up to $150 million of certain qualifying U.S. accounts
receivable and up to CN$70 million of certain eligible Canadian accounts
receivable. The U.S. program expires in April 2000 and the Canadian program
expires in May 2004. At January 1, 2000, approximately $948 million was
outstanding under the Corporation's and Unisource's programs in the aggregate.
All programs are accounted for as secured borrowings.
The $948 million and $280 million of receivables outstanding under these
programs at January 1, 2000 and December 31, 1998, respectively, and the
corresponding debt are included as both "Receivables" and "Commercial paper and
other short-term notes" on the accompanying balance sheets. A portion of the
cost of the accounts receivable secured borrowing programs is based on the
creditors' level of investment and borrowing costs. The Corporation pays fees
based on its senior debt ratings. The total cost of the programs, which was $36
million in 1999, $17 million in 1998 and $19 million in 1997, is included in
interest expense on the accompanying statements of income.
Under the accounts receivable secured borrowing programs, the maximum
amount of the creditors' investment is subject to change based on the level of
eligible receivables and restrictions on concentrations of receivables.
NOTE 5. INDEBTEDNESS
The Corporation's indebtedness includes the following:
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<PAGE>
<TABLE>
<CAPTION>
January 1, December 31,
In millions 2000 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Debentures, 8.6% average rate,
payable through 2029 $ 3,589 $ 3,100
Notes, 6.1% average rate,
payable through 2006 400 400
Revenue bonds, 5.5% average rate,
payable through 2029 653 637
Other loans, 7.3% average rate,
payable through 2005 28 29
Capital leases, 10.1% average rate,
payable through 2010 14 --
Less: unamortized discount (24) (19)
- -------------------------------------------------------------------------------------------------------
4,660 4,147
Less: long-term portion of debt 4,621 4,125
- -------------------------------------------------------------------------------------------------------
Current portion of long-term debt 39 22
Commercial paper and other
short-term notes, 6.5% average rate 2,067 1,209
Bank overdrafts, net 297 195
- -------------------------------------------------------------------------------------------------------
Total short-term debt 2,403 1,426
- -------------------------------------------------------------------------------------------------------
Total debt $ 7,024 $ 5,551
=======================================================================================================
Georgia-Pacific Group's portion of Corporation debt:
Short-term debt $ 2,071 $ 1,173
Long-term debt, excluding
current portion 3,983 3,395
- -------------------------------------------------------------------------------------------------------
Georgia-Pacific Group's total debt $ 6,054 $ 4,568
=======================================================================================================
The Timber Company's portion of
Corporation debt:
Short-term debt $ 332 $ 253
Long-term debt, excluding
current portion 638 730
- -------------------------------------------------------------------------------------------------------
The Timber Company's total debt $ 970 $ 983
=======================================================================================================
Weighted average interest rate on
Corporation debt at year end 7.2% 7.2%
=======================================================================================================
</TABLE>
For additional information regarding financial instruments, see Note 6 and 7.
The scheduled maturities of the Corporation's long-term debt for the next
five years are as follows: $39 million in 2000, $9 million in 2001, $376 million
in 2002, $317 million in 2003 and $35 million in 2004.
NOTES, DEBENTURES AND OTHER LOANS During 1999, in connection with the formation
of Georgia-Pacific Tissue, the Corporation issued $500 million of 7.75%
Debentures Due November 15, 2029.
During 1998, the Corporation issued $300 million of 7.25% Debentures Due
June 1, 2028
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<PAGE>
and a $14 million floating rate note due September 30, 2003. In January 1998,
the Corporation redeemed $200 million of 9 3/4% Sinking Fund Debentures Due
January 15, 2018. In February 1998, the Corporation redeemed $200 million of 9
1/2% Debentures Due February 15, 2018. The Corporation recorded an after-tax
extraordinary loss of approximately $14 million related to these redemptions, of
which $12 million was allocated to the Georgia-Pacific Group and $2 million was
allocated to The Timber Company based on the ratio of each group's debt to the
Corporation's total debt.
REVOLVING CREDIT FACILITY During 1999, the Corporation increased the amount of
its unsecured revolving credit facility from $1.5 billion to $2.0 billion. This
unsecured revolving credit facility is used for direct borrowings and as support
for commercial paper and other short-term borrowings. Under the agreement with
Bank of America National Trust and Savings Association and 14 other domestic and
international banks, $1 billion will terminate in July 2000 and $1 billion will
terminate in 2004. As of January 1, 2000, $1,145 million of committed credit was
available in excess of all short-term borrowings outstanding under or supported
by the facility.
Borrowings under the agreement bear interest, at the election of the
Corporation, at either (i) the higher of the Federal Funds Rate plus 1/2% or the
stipulated bank lending rate or (ii) LIBOR plus 0.2625% or (iii) fixed or
floating rates set by competitive bids. Fees associated with this revolving
credit facility include a facility fee of 0.125% and 0.150% per annum on the
aggregate commitments of the lenders under Tranche A and Tranche B,
respectively, and a utilization fee of 0.125%. Fees and margins may be adjusted
upward or downward according to a pricing grid based on the Corporation's
long-term debt ratings. At January 1, 2000, $855 million was borrowed under the
credit agreement at a weighted average interest rate of 6.5%. Amounts
outstanding under the revolving credit facility are included in "Commercial
paper and other short-term notes" on the accompanying balance sheets.
The revolving credit agreement contains certain restrictive covenants. The
covenants include a maximum leverage ratio (funded indebtedness, including
senior deferrable notes, to earnings before interest, taxes, depreciation and
amortization [EBITDA]) of 4.5 to 1.0, which is to be maintained throughout the
term of the credit agreement. As of January 1, 2000, the leverage ratio was 2.7
to 1.0.
COMMERCIAL PAPER AND OTHER SHORT-TERM NOTES These borrowings are classified as
current liabilities, although all or a portion of them may be refinanced on a
long-term basis in 2000.
REVENUE BONDS At January 1, 2000, the Corporation had outstanding borrowings of
approximately $653 million under certain industrial revenue bonds. During 1999,
approximately $75 million of floating rate bonds were replaced, of which $73
million were refunded by fixed rate instruments and $2 million were replaced by
floating rate instruments.
OTHER At January 1, 2000, the amount of long-term debt secured by property,
plant and equipment and by timber and timberlands was not material.
Prior to 1996, the Corporation sold certain assets for $354 million and
has agreed to lease the assets back from the purchaser over a period of 30
years. Under the agreement with the purchaser, the Corporation agreed to
maintain a deposit (initially in the amount of $322 million) that, together with
interest earned thereon, was expected to be sufficient to fund the Corporation's
lease obligation, including the repurchase of assets at the end of the term.
This
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<PAGE>
transaction was accounted for as a financing arrangement. At the inception
of the agreement, the Corporation recorded on its balance sheet an asset for the
deposit from the sale of $305 million and a liability for the lease obligation
of $302 million.
At January 1, 2000, the deposit and lease obligation balances were both
$357 million. Of these amounts, approximately $16 million was recorded as a
current asset and $19 million was recorded as a current liability. The long-term
portions of these amounts are recorded in "Other assets" and "Other long-term
liabilities" on the accompanying balance sheets.
In October 1999, the Corporation entered into a financing arrangement to
enhance the return on this deposit by issuing $379 million of 5.74% Debentures
Due April 5, 2005 that were legally defeased with deposits of an equal amount.
Accordingly, the debentures and related deposits are not reflected on the
accompanying balance sheets.
In connection with the acquisition of Unisource, the Corporation assumed
former Unisource industrial revenue bonds in the amount of $9 million and
capital leases in the amount of $12 million. Additionally, the Corporation
assumed other long-term debt in the amount of $447 million and bank overdrafts
in the amount of $120 million, and retained accounts receivable secured
borrowing programs in the amount of $197 million. These amounts are included in
the Corporation's total debt.
During 1999, the Board increased the corporate target debt level under
which the Corporation can purchase shares of Georgia-Pacific Group and The
Timber Company common stock on the open market from $5.75 billion to $6.8
billion. In addition, the Board increased the Georgia-Pacific Group's target
debt level from $4.75 billion to $5.8 billion. The Timber Company's target debt
level remains at $1.0 billion.
Also during 1999, the Corporation registered for sale up to $2.975 billion
of debt and equity securities under a shelf registration statement filed with
the Securities and Exchange Commission. The Corporation registered $1.725
billion under such registration statement related to the PEPS Units ($862.5
million of which was received on July 7, 1999 in exchange for senior deferrable
notes, and $862.5 million of Georgia-Pacific Group stock will be issued upon
exercise of the purchase contracts) (see Note 6 of the Notes to Consolidated
Financial Statements). The $862.5 million of cash (less expenses) raised in this
sale of the PEPS Units was used to pay for the acquisition of Unisource. In
addition, the Corporation registered the $500 million of 7.75% Debentures Due
November 15, 2029 under this registration statement.
NOTE 6. SENIOR DEFERRABLE NOTES
On July 7, 1999, the Corporation issued 17,250,000 of 7.5% PEPS Units for
$862.5 million. Each PEPS Unit had an issue price of $50 and consists of a
contract to purchase shares of Georgia-Pacific Group stock on or prior to August
16, 2002 and a senior deferrable note of the Georgia-Pacific Group due August
16, 2004. Each purchase contract yields interest of 0.35% per year, paid
quarterly, on the $50 stated amount of the PEPS Unit. Each senior deferrable
note yields interest 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%. The liability related to the PEPS Units is classified as "Senior
deferrable notes" on the accompanying balance sheets and is not included in the
debt amount for purposes of determining the corporate and Georgia-Pacific Group
debt targets. The
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<PAGE>
senior deferrable notes and related interest expense are allocated specifically
to the Georgia-Pacific Group.
NOTE 7. FINANCIAL INSTRUMENTS
The carrying amount and estimated fair value of the Corporation's
financial instruments are as follows:
<TABLE>
<CAPTION>
January 1, 2000 December 31, 1998
==================================================================
Carrying Fair Carrying Fair
In millions amount value amount Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Liabilities:
Commercial paper and
Other short-term notes
(Note 4 and 5) $ 2,067 $ 2,067 $ 1,209 $ 1,209
Notes and debentures (Note 5) 3,989 3,952 3,500 3,783
Revenue bonds (Note 5) 653 564 637 587
Other loans (Note 5) 28 27 29 29
Senior deferrable notes (Note 6) 863 866 - -
Interest rate exchange
Agreements * (1) * 14
Note receivable 350 350 - -
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The Corporation's balance sheets at December 31, 1998 and 1997 included
accrued interest of $1 million and $5 million, respectively, related to these
agreements.
COMMERCIAL PAPER AND OTHER SHORT-TERM NOTES The carrying amounts approximate
fair value because of the short maturity of these instruments.
NOTES AND DEBENTURES The fair value of notes and debentures was estimated
primarily by obtaining quotes from brokers for these and similar issues. For
notes and debentures for which there are no quoted market prices, the fair value
was estimated by calculating the present value of anticipated cash flows. The
discount rate used was an estimated borrowing rate for similar debt instruments
with like maturities.
REVENUE BONDS, SENIOR DEFERRABLE NOTES, OTHER LOANS AND NOTES RECEIVABLE The
fair value of revenue bonds, senior deferrable notes, other loans and notes
receivable that have not been monetized was estimated by calculating the present
value of anticipated cash flows. The discount rate used was an estimated
borrowing rate for similar debt instruments with like maturities.
INTEREST RATE AND FOREIGN CURRENCY EXCHANGE AGREEMENTS The Corporation has used
interest rate swap and foreign currency exchange agreements in the normal course
of business to manage and reduce the risk inherent in interest rate and foreign
currency fluctuations.
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<PAGE>
The Corporation uses interest rate swap arrangements to manage its exposure
to interest rate changes. Such arrangements are considered hedges of specific
borrowings, and differences paid and received under the swap arrangements are
recognized as adjustments to interest expense. Under these agreements, the
Corporation makes payments to counterparties at fixed interest rates and in turn
receives payments at variable rates. The Corporation entered into interest rate
exchange agreements in prior years to protect against the increased cost
associated with a rise in interest rates. At January 1, 2000, the Corporation
had outstanding interest rate exchange agreements that effectively converted
$608 million of floating rate obligations with a weighted average interest rate
of 5.9% to fixed rate obligations with an average effective interest rate of
approximately 6.4%. These agreements increased interest expense by $7 million,
$11 million and $16 million for the years ending January 1, 2000 and December
31, 1998 and 1997, respectively. As of January 1, 2000, these agreements had a
weighted average maturity of approximately 2.6 years. As of January 1, 2000, the
Corporation's total floating rate debt, including the accounts receivable
secured borrowing programs, exceeded related interest rate exchange agreements
by $1,957 million.
The estimated fair value of the Corporation's (asset) liability under
interest rate exchange agreements at January 1, 2000 and December 31, 1998 was
$(1) million and $14 million, respectively, and represents the estimated amount
the Corporation could have paid (received) to terminate the agreements. The fair
value at January 1, 2000 and December 31, 1998 was estimated by calculating the
present value of anticipated cash flows. The discount rate used was an estimated
borrowing rate for similar debt instruments with like maturities.
The Corporation also enters into foreign currency exchange agreements and
commodity futures and swaps, the amounts of which were not material to the
consolidated financial position of the Corporation at January 1, 2000 and
December 31, 1998.
The Corporation may be exposed to losses in the event of nonperformance of
counterparties but does not anticipate such nonperformance.
NOTE 8. INCOME TAXES
The provision for income taxes includes income taxes currently payable and those
deferred because of temporary differences between the financial statement and
tax bases of assets and liabilities. The provision for income taxes consists of
the following:
<TABLE>
<CAPTION>
Year ended
-------------------------------------------------
January 1, December 31,
In millions 2000 1998 1997
====================================================================================================
<S> <C> <C> <C>
Federal income taxes:
Current $ 536 $ 139 $ 11
Deferred 62 37 80
State income taxes:
Current 96 25 (5)
Deferred 11 1 20
- ---------------------------------------------------------------------------------------------------
Provision for income taxes $ 705 $ 202 $ 106
====================================================================================================
</TABLE>
-59-
<PAGE>
<TABLE>
<S><C>
Income taxes paid, net of refunds $ 620 $ 21 $ 51
====================================================================================================
</TABLE>
Income taxes paid during 1999 are net of approximately $8 million in state
income tax refunds and $8 million in federal income tax refunds. Income taxes
paid during 1998 were net of refunds of approximately $81 million, primarily
related to a 1997 federal tax overpayment.
The federal statutory income tax rate was 35%. The provision for income
taxes is reconciled to the federal statutory rate as follows:
<TABLE>
<CAPTION>
Year ended
-----------------------------------------------
January 1, December 31,
In millions 2000 1998 1997
=========================================================================================================
<S> <C> <C> <C>
Provision for income taxes
computed at the federal
statutory tax rate $ 637 $ 172 $ 82
State income taxes, net
of federal benefit 73 16 9
Goodwill amortization 25 24 23
Foreign sales corporation (25) (6) (8)
Other (5) (4) -
- ---------------------------------------------------------------------------------------------------------
Provision for income taxes $ 705 $ 202 $ 106
=========================================================================================================
</TABLE>
The components of the net deferred income tax liabilities are as follows:
<TABLE>
<CAPTION>
Year ended
--------------------------------------
January 1, December 31,
In millions 2000 1998
====================================================================================================
<S> <C> <C>
Deferred income tax assets:
Compensation related accruals $ 342 $ 275
Other accruals and reserves 121 59
Other - 1
- ----------------------------------------------------------------------------------------------------
463 335
- ----------------------------------------------------------------------------------------------------
Valuation allowance - -
- ----------------------------------------------------------------------------------------------------
463 335
- ----------------------------------------------------------------------------------------------------
Deferred income tax liabilities:
Property, plant and equipment (1,413) (1,181)
Timber and timberlands (372) (236)
Other (75) (88)
- ----------------------------------------------------------------------------------------------------
(1,860) (1,505)
- ----------------------------------------------------------------------------------------------------
Deferred income tax liabilities, net $ (1,397) $ (1,170)
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<PAGE>
====================================================================================================
Included on the balance sheets:
Deferred income tax assets* $ 139 $ 61
Deferred income tax liabilities** (1,536) (1,231)
- ----------------------------------------------------------------------------------------------------
Deferred income tax liabilities, net $ (1,397) $ (1,170)
====================================================================================================
</TABLE>
* Net of current liabilities of $9 million at both January 1, 2000 and
December 31, 1998.
** Net of long-term assets of $317 million and $236 million at January 1, 2000
and December 31, 1998, respectively.
NOTE 9. RETIREMENT PLANS DEFINED BENEFIT PENSION PLANS
Most of the Corporation's employees participate in noncontributory defined
benefit pension plans. These include plans that are administered solely by the
Corporation and union-administered multiemployer plans. The Corporation's
funding policy for solely administered plans is based on actuarial calculations
and the applicable requirements of federal law. Contributions to multiemployer
plans are generally based on negotiated labor contracts.
Benefits under the majority of plans for hourly employees (including
multiemployer plans) are primarily related to years of service. The Corporation
has separate plans for salaried employees and officers under which benefits are
primarily related to compensation and years of service. The officers' plan and
certain Unisource salaried employee plans are not funded and are nonqualified
for federal income tax purposes.
Plan assets consist principally of common stocks, bonds, mortgage
securities, interests in limited partnerships, cash equivalents and real estate.
At January 1, 2000 and December 31, 1998, $114 million and $101 million,
respectively, of noncurrent prepaid pension cost was included in "Other assets"
on the accompanying balance sheets. Accrued pension liability of $136 million
and $78 million at January 1, 2000 and December 31, 1998, respectively, was
included in "Other long-term liabilities" on the accompanying balance sheets.
Pursuant to the provisions of SFAS No. 87, intangible assets of $3 million
and $5 million were recorded as of January 1, 2000 and December 31, 1998,
respectively, in order to recognize the required minimum liability.
In connection with the acquisition of Unisource and the formation of
Georgia-Pacific Tissue, projected benefit obligations of $264 million and plan
assets of $216 million related to solely administered plans are reflected as a
"Transfer in" on the following tables. The following table sets forth the change
in projected benefit obligation and the change in plan assets for the solely
administered plans:
<TABLE>
<CAPTION>
January 1, December 31,
In millions 2000 1998
===============================================================================================
<S> <C> <C>
Change in projected benefit obligation
Projected benefit obligation at beginning
of year $ 1,799 $ 1,629
Service cost 97 83
</TABLE>
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<PAGE>
<TABLE>
<S><C>
Interest cost 126 114
Transfer in 264 -
Plan amendments 13 12
Actuarial gains (losses) (171) 72
Foreign currency exchange rate changes 2 (2)
Benefits paid (116) (109)
- -----------------------------------------------------------------------------------------------
Projected benefit obligation at end
of year $ 2,014 $ 1,799
===============================================================================================
Change in plan assets
Fair value of assets at beginning of year $ 2,082 $ 1,939
Actual return on plan assets 422 231
Transfer in 216 -
Employer contributions 7 23
Foreign currency exchange rate changes 2 (2)
Benefits paid (116) (109)
- -----------------------------------------------------------------------------------------------
Fair value of assets at end of year $ 2,613 $ 2,082
===============================================================================================
</TABLE>
The funded status and the amounts recognized on the accompanying balance
sheets for the solely administered plans are set forth in the following table:
<TABLE>
<CAPTION>
January 1, December 31,
In millions 2000 1998
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Funded status $ 599 $ 286
Unrecognized actuarial gain (691) (319)
Unrecognized prior service cost 73 68
Unrecognized net (asset) obligation - -
- ---------------------------------------------------------------------------------------------
Net prepaid benefit cost $ (19) $ 35
=============================================================================================
Amounts recognized on the balance sheets consist of:
Prepaid pension cost $ 114 $ 101
Accrued pension liability (136) (78)
Intangible asset 3 5
Deferred tax liability (3) -
Accumulated other comprehensive income 3 7
- ---------------------------------------------------------------------------------------------
Net amount recognized $ (19) $ 35
=============================================================================================
</TABLE>
Net periodic pension cost for solely administered and union-administered
pension plans included the following:
<TABLE>
<CAPTION>
Year ended
-----------------------------------------------------
January 1, December 31,
In millions 2000 1998 1997
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost of benefits earned $ 97 $ 83 $ 84
</TABLE>
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<PAGE>
<TABLE>
<S><C>
Interest cost on projected benefit
Obligation 126 114 108
Expected return on plan assets (208) (184) (165)
Amortization of gains (11) (13) (7)
Amortization of prior service cost 9 8 6
Amortization of net transition
Obligation - - (9)
Contributions to multiemployer
pension plans 4 4 4
- ----------------------------------------------------------------------------------------------------------------
Net periodic pension cost $ 17 $ 12 $ 21
================================================================================================================
</TABLE>
The following assumptions were used:
<TABLE>
<CAPTION>
Year ended
------------------------------------------------
January 1, December 31,
2000 1998 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate used to determine the projected benefit
Obligation 7.5% 6.5% 7.0%
Rate of increase in future
compensation levels used to
determine the projected benefit
Obligation 5.7% 5.6% 5.5%
Expected long-term rate of return
on plan assets used to determine
net periodic pension cost 9.5% 9.5% 9.5%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
DEFINED CONTRIBUTION PLANS The Corporation sponsors several defined contribution
plans to provide eligible employees with additional income upon retirement. The
Corporation's contributions to the plans are based on employee contributions and
compensation. The Corporation's contributions totaled $62 million in 1999, $52
million in 1998 and $48 million in 1997.
HEALTH CARE AND LIFE INSURANCE BENEFITS The Corporation provides certain health
care and life insurance benefits to eligible retired employees. Salaried
participants generally become eligible for retiree health care benefits after
reaching age 55 with 10 years of service or after reaching age 65. Benefits,
eligibility and cost-sharing provisions for hourly employees vary by location
and/or bargaining unit. Generally, the medical plans pay a stated percentage of
most medical expenses, reduced for any deductible and payments made by
government programs and other group coverage. The plans are funded through a
trust established for the payment of active and retiree benefits. The
Corporation contributes to the trust in the amounts necessary to fund current
obligations of the plans.
In 1991, the Corporation began transferring its share of the cost of
post-age 65 health care benefits to future salaried retirees. It is currently
anticipated that the Corporation will continue to reduce the percentage of the
cost of post-age 65 benefits that it will pay on behalf of salaried employees
who retire in each of the years 1995 through 1999 and that the Corporation will
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<PAGE>
continue to share the pre-age 65 cost with future salaried retirees but will no
longer pay any of the post-age 65 cost for salaried employees who retire after
1999.
In connection with the acquisition of Unisource and the formation of
Georgia-Pacific Tissue, projected benefit obligations of $15 million are
reflected as a "Transfer in" on the change in projected benefit obligation table
below.
The following tables set forth the change in projected benefit obligation
and the amounts recognized on the accompanying balance sheets:
<TABLE>
<CAPTION>
January 1, December 31,
In millions 2000 1998
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Change in projected benefit obligation
Projected benefit obligation at
beginning of year $ 432 $ 414
Service cost 8 7
Interest cost 26 26
Transfer in 15 -
Actuarial gains (losses) (16) 6
Benefits paid (28) (21)
- ----------------------------------------------------------------------------------------------------
Projected benefit obligation at
end of year $ 437 $ 432
====================================================================================================
Funded status $ (437) $ (432)
Unrecognized actuarial gain (82) (67)
Unrecognized prior service cost 11 11
Unrecognized net (asset) obligation - -
- ----------------------------------------------------------------------------------------------------
Net accrued benefit cost $ (508) $ (488)
====================================================================================================
Amounts recognized on the balance sheets consist of:
Prepaid benefit cost $ - $ -
Accrued benefit liability (508) (488)
- ----------------------------------------------------------------------------------------------------
Net amount recognized $ (508) $ (488)
====================================================================================================
</TABLE>
Net periodic postretirement benefit cost included the following components:
<TABLE>
<CAPTION>
Year ended
-------------------------------------------------------------
January 1, December 31,
In millions 2000 1998 1997
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost of benefits earned $ 8 $ 7 $ 7
Interest cost on accumulated
postretirement benefit obligation 26 26 26
Amortization of prior service cost 1 1 1
Amortization of gains (2) (2) (3)
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<PAGE>
- --------------------------------------------------------------------------------------------------------------
Net periodic postretirement
benefit cost $ 33 $ 32 $ 31
===============================================================================================================
</TABLE>
For measuring the expected postretirement benefit obligation, a 7%, 8% and
9% annual rate of increase in the per capita claims cost was assumed for 1999,
1998 and 1997, respectively. The rate was assumed to decrease 1% per year to
5.5% in 2001 and remain at that level thereafter. The weighted average discount
rate used in determining the accumulated postretirement benefit obligation was
7.0% at January 1, 2000, 6.0% at December 31, 1998 and 6.5% at December 31,
1997.
If the annual health care cost trend rate were increased by 1%, the
accumulated postretirement benefit obligation would have increased by 10% as of
January 1, 2000, 10% as of December 31, 1998 and 9% as of December 31, 1997. The
effect of this change on the aggregate of service and interest costs would be an
increase of 12% for 1999, 11% for 1998 and 14% for 1997.
If the annual health care cost trend rate were decreased by 1%, the
accumulated postretirement benefit obligation would have decreased by 9% as of
January 1, 2000, 9% as of December 31, 1998 and 9% as of December 31, 1997. The
effect of this change on the aggregate of service and interest costs would be a
decrease of 11% for 1999, 10% for 1998 and 13% for 1997.
NOTE 10. COMMON AND PREFERRED STOCK
The Corporation's authorized capital stock consists of (i) 10 million
shares of Preferred Stock and 25 million shares of Junior Preferred Stock, of
which no shares were issued at January 1, 2000, and (ii) 400 million shares of
Georgia-Pacific Group stock and 250 million shares of The Timber Company stock.
The Georgia-Pacific Group stock has a par value of $0.80 per share, and
191,983,000 and 186,564,000 shares were issued as of January 1, 2000 and
December 31, 1998, respectively. The Timber Company stock has a par value of
$0.80 per share, and 93,904,000 and 92,785,000 shares were issued as of January
1, 2000 and December 31, 1998, respectively.
At January 1, 2000, the following authorized shares of common stock were
reserved for issue:
Georgia-Pacific Group
=====================================================================
1999 Unisource conversions 628,290
1999 Wisconsin Tissue conversions 92,960
1997 Long-Term Incentive Plan 8,090,826
1995 Outside Directors Stock Plan 332,193
1995 Shareholder Value Incentive Plan 5,138,103
- ---------------------------------------------------------------------
Common stock reserved 14,282,372
=====================================================================
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<PAGE>
The Timber Company
=====================================================================
1997 Long-Term Incentive Plan 2,293,400
1995 Outside Directors Stock Plan 166,097
1995 Shareholder Value Incentive Plan 3,959,600
- ---------------------------------------------------------------------
Common stock reserved 6,419,097
=====================================================================
1997 LONG-TERM INCENTIVE PLANS The Corporation reserved 9,000,000 shares of
Georgia-Pacific Group stock for issuance under the Georgia-Pacific Group 1997
Long-Term Incentive Plan (the Georgia-Pacific Group Plan). Options covering
2,938,500; 34,000; 27,600; and 2,839,260 shares were granted under the
Georgia-Pacific Group Plan on January 29, March 2 and July 29, 1998 and January
28, 1999, respectively. These grants have a 10-year term and vest ratably over a
three-year period.
The Corporation reserved 2,300,000 shares of The Timber Company stock for
issuance under The Timber Company 1997 Long-Term Incentive Plan (The Timber
Company Plan). Options covering 1,010,600 and 950 shares were granted under The
Timber Company Plan on December 17, 1997 and January 28, 1999, respectively.
These grants have a 10-year term and vest ratably over a four-year period and
three-year period, respectively.
The Georgia-Pacific Group Plan authorizes grants of stock options,
restricted stock and performance awards with respect to Georgia-Pacific Group
stock. The Timber Company Plan authorizes grants of stock options, restricted
stock and performance awards with respect to The Timber Company stock. The
Corporation does not currently intend to grant awards under the Georgia-Pacific
Group Plan to employees of The Timber Company. However, certain officers and
employees of the Corporation with responsibilities involving both the
Georgia-Pacific Group and The Timber Company may be granted options, restricted
stock or performance awards under both the Georgia-Pacific Group Plan and The
Timber Company Plan in a manner that reflects their responsibilities.
1990 LONG-TERM INCENTIVE PLAN The Corporation reserved 8,000,000 and 4,000,000
shares of Georgia-Pacific Group stock and The Timber Company stock,
respectively, for issuance under the 1990 Long-Term Incentive Plan (the 1990
Incentive Plan), which expired March 9, 1995. Shares were awarded to employees
at no cost, based on increases in average market value of the Existing Common
Stock. At the time shares were awarded, the market value of the stock was added
to common stock and additional paid-in capital and was deducted from
shareholders' equity (long-term incentive plan deferred compensation) on the
accompanying financial statements. Shares were restricted until they vested
under the terms of the 1990 Incentive Plan. The long-term incentive plan
deferred compensation was amortized over the vesting (restriction) period,
generally five years, with adjustments made monthly for market price
fluctuations. At the time awarded shares became vested, the Corporation paid on
behalf of each participant a cash bonus in the amount of the estimated income
tax liability to be incurred by the participant as a result of the award and
cash bonus. Under the 1990 Incentive Plan, the Corporation issued 2,037,480
shares of Georgia-Pacific Group stock and 1,018,740 shares of The Timber Company
stock. All such shares were vested as of October 1999.
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<PAGE>
The Corporation recognized compensation expense of $2 million in 1999, $7
million in 1998 and $15 million in 1997 related to the 1990 Incentive Plan.
As a result of the Letter Stock Recapitalization, each share of restricted
Existing Common Stock held in the 1990 Incentive Plan was redesignated as
Georgia-Pacific Group stock, and an equal number of restricted shares of The
Timber Company stock were distributed. The tax gross-up provided in the 1990
Incentive Plan was calculated based on the aggregate market value of the two
classes of shares distributed to an individual at such time.
EMPLOYEE STOCK PURCHASE PLAN The Corporation reserved 1,582,800 shares of
Georgia-Pacific Group stock and 791,400 shares of The Timber Company stock for
issuance under the 1997 Employee Stock Purchase Plan (the 1997 Purchase Plan),
which offered employees the right to subscribe for shares of the Georgia-Pacific
Group and The Timber Company at a subscription price of $27.785 and $22.52 per
share, respectively, representing 85% of the mean of the high and low prices of
the Corporation's Existing Common Stock on September 2, 1997. The subscription
period expired on November 14, 1997. A subscriber purchased and paid for shares
no later than November 30, 1999, but prior to the time of the subscriber's last
contribution he/she could obtain a refund of his/her payments plus interest at a
rate of 6% per annum in lieu of stock.
In conjunction with the Letter Stock Recapitalization, the terms of the
subscription agreements were adjusted to allow subscribers, pursuant to the
terms of the 1997 Purchase Plan, to purchase at the same subscription price a
package consisting of one share of Georgia-Pacific Group stock and one share of
The Timber Company stock in lieu of each share of Existing Common Stock for
which he/she had originally subscribed.
Under the 1997 Purchase Plan, the Corporation issued 1,397,000 and 698,500
shares of Georgia-Pacific Group stock and The Timber Company stock,
respectively, in 1999.
1995 OUTSIDE DIRECTORS STOCK PLAN The Corporation reserved 400,000 shares of
Georgia-Pacific Group stock and 200,000 shares of The Timber Company stock for
issuance under the 1995 Outside Directors Stock Plan (the Directors Plan), which
provides for the issuance of shares of common stock to nonemployee directors of
the Corporation on a restricted basis. Each nonemployee director was issued 692
and 784 restricted shares of Georgia-Pacific Group stock in 1999 and 1998,
respectively, and 346 and 392 restricted shares of The Timber Company stock in
1999 and 1998, respectively.
As a result of the Letter Stock Recapitalization, each share of restricted
stock held in the Directors Plan was redesignated as Georgia-Pacific Group
stock, and an equal number of shares of The Timber Company stock (subject to the
same restrictions as the original restricted shares) were distributed. Each
director's annual grant consists of a number of shares of Georgia-Pacific Group
stock and of The Timber Company stock determined so that (i) a substantially
equal number of shares of Georgia-Pacific Group stock and The Timber Company
stock will be granted in each year and (ii) the total market value of the shares
granted in each year (based on the mean of the high and low prices of each stock
on the date of grant) is $40,000 (subject to immaterial rounding differentials).
The restrictions on the shares lapse at the time of death, retirement from the
Board or disability.
Effective May 6, 1997, accrual of additional retirement benefits under the
Corporation's retirement program for directors ceased, and the accrued benefits
of each of the current nonemployee directors (the present value of which totaled
$1,303,889 as of May 6, 1997) were
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<PAGE>
converted into a grant of an equivalent number of shares of restricted stock
under the Directors Plan. The total number of shares issued related to this
conversion was 15,702.
EMPLOYEE STOCK OPTION PLANS The 1995 Shareholder Value Incentive Plan (the SVIP)
provides for the granting of stock options having a term of either 5 1/2 or 10
years to officers and key employees. Under the amended and restated SVIP, no
further grants may be made under that plan. Options having a term of 10 years
become exercisable in 9 1/2 years unless certain performance targets tied to the
Corporation's common stock performance are met, in which case the holder could
exercise such options after 3, 4 or 5 years from the grant date. Options having
a term of 5 1/2 years may be exercised only if such performance targets are met
in the third, fourth or fifth year after such grant date. At the time options
are exercised, the exercise price is payable in cash or by surrender of shares
of common stock already owned by the optionee.
The 1994 Employee Stock Option Plan (the 1994 Option Plan) provided for the
granting of stock options to certain nonofficer key employees. Under the 1994
Option Plan, the Corporation issued 253,000 and 230,900 shares of
Georgia-Pacific Group stock in 1999 and 1998, respectively, and 146,350 and
75,550 shares of The Timber Company stock in 1999 and 1998, respectively. All
remaining options were exercised in February 1999.
Following the Letter Stock Recapitalization, each outstanding stock option
under the SVIP and the 1994 Option Plan was converted into separately
exercisable options to acquire a number of shares of Georgia-Pacific Group stock
and The Timber Company stock, each of which equaled the number of shares of
Existing Common Stock specified in the original option. The exercise prices for
the resulting Georgia-Pacific Group stock options and The Timber Company stock
options were calculated by multiplying the exercise price under the original
option from which they were converted by a fraction, the numerator of which was
the average of the high and low price of Georgia-Pacific Group stock or The
Timber Company stock, as the case may be, on December 17, 1997 and the
denominator of which was the sum of such Georgia-Pacific Group and The Timber
Company stock prices. This was intended to ensure that the aggregate intrinsic
value of the options was preserved and the ratio of the exercise price per
option to the market value per share was not reduced. In addition, the vesting
provisions and option periods of the original grants remained the same following
such conversion.
UNISOURCE CONVERSIONS In connection with the acquisition of Unisource as
described in Note 3 of the Notes to Consolidated Financial Statements, the
Corporation converted certain stock options awarded under a former Unisource
stock option plan (Unisource stock options) into Georgia-Pacific Group stock
options. The conversion was intended to ensure that the aggregate intrinsic
value of the Unisource stock options was preserved and the ratio of the exercise
price per Unisource stock option to the market value per share of
Georgia-Pacific Group stock was not reduced. Unisource stock options to purchase
2,633,459 shares had original grant dates ranging from November 10, 1994 through
May 19, 1999 with a 10-year term, and vest ratably over three-year and five-year
periods. These Unisource stock options were converted into options to purchase
629,648 shares of Georgia-Pacific Group stock at prices ranging from $31.88 to
$91.58 per share. The vesting provisions and option periods of the original
grants remained the same following such conversion. The value of these options
at the acquisition date was $9.4 million and was included as part of the
purchase price paid for Unisource. No options to purchase The Timber Company
stock were issued as part of the conversion.
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<PAGE>
The Corporation also issued 40,152 restricted shares of Georgia-Pacific
Group stock under the 1997 Long-Term Incentive Plan to two former Unisource
officers who became officers of the Corporation. Each officer was issued 20,076
restricted shares of Georgia-Pacific Group stock. At the time restricted shares
were awarded, the average of the high and low market value of the stock was
added to common stock and additional paid-in capital and was deducted from
shareholders' equity (long-term incentive plan deferred compensation) on the
accompanying financial statements. The long-term incentive plan deferred
compensation of $2 million is being amortized over the vesting (restriction)
period, which is three years.
WISCONSIN TISSUE CONVERSIONS In connection with the formation of Georgia-Pacific
Tissue as described in Note 3 of the Notes to Consolidated Financial Statements,
the Corporation converted certain outstanding stock options awarded under a
Chesapeake stock option plan (Chesapeake stock options) into Georgia-Pacific
Group stock options. The conversion was intended to ensure that the aggregate
intrinsic value of the Chesapeake stock options was preserved and the ratio of
the exercise price per Chesapeake stock option to the market value per share of
Georgia-Pacific Group stock was not reduced. Chesapeake stock options to
purchase 172,250 shares had original grant dates ranging from August 11, 1997
through April 16, 1999, with a vesting period of three years and a 10-year term.
These Chesapeake stock options were converted into options to purchase
92,960 shares of Georgia-Pacific Group stock at prices ranging from $36.20 to
$50.36 per share. The vesting provisions and option periods of the original
grants remained the same following such conversion. The stock options' total
value of $1.3 million was included in the asset purchase price on the date the
Corporation formed Georgia-Pacific Tissue. No options to purchase The Timber
Company stock were issued as part of the conversion.
Additional information relating to the Corporation's existing employee
stock options is as follows:
<TABLE>
<CAPTION>
Year ended January 1,
2000 2000
- --------------------------------------------------------------------------------------------------------------------------
Georgia-Pacific The Timber
Group Company
- --------------------------------------------------------------------------------------------------------------------------
Weighted Weighted
average Average
exercise Exercise
Shares price Shares Price
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding at January 1, 1999 11,704,600 $27.03 5,544,850 $22.26
Options granted/converted 3,561,868 36.10 950 22.56
Options exercised/surrendered 3,974,803) 26.89 (417,150) 17.66
Options cancelled (461,974) 28.25 (164,100) 19.69
- --------------------------------------------------------------------------------------------------------------------------
Options outstanding at January 1, 2000 0,829,691* $30.01 4,964,550* $22.32
Options available for grant at January 1, 2000 3,160,640 1,288,450
- --------------------------------------------------------------------------------------------------------------------------
Total reserved shares 13,990,331 6,253,000
==========================================================================================================================
Options exercisable at January 1, 2000 2,936,311 $30.17 2,972,400 $22.32
Option prices per share:
</TABLE>
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<PAGE>
<TABLE>
<S><C>
Granted/converted $32-$92 $23
Exercised/surrendered $26-$37 $21-$23
Cancelled $26-$32 $21-$23
* Options outstanding by exercise price:
$20.95 - $25.13 4,964,550 $22.33
Average remaining life 7.0 years
$25.84 - $31.88 7,451,500 $27.15
Average remaining life 7.3 years
$32.17 - $44.07 3,018,453 $32.68
Average remaining life 8.1 years
$45.77 - $61.63 56,631 $52.80
Average remaining life 7.0 years
$63.73 - $91.58 303,107 $69.46
Average remaining life 6.9 years
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year ended December 31,
1998 1998
- -----------------------------------------------------------------------------------------------------------------------------------
Georgia-Pacific The Timber
Group Company
- -----------------------------------------------------------------------------------------------------------------------------------
Weighted Weighted
average Average
exercise Exercise
Shares price Share Price
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding at January 1, 1998 10,038,200 $26.66 6,029,600 $ 22.20
Options granted 3,000,100 28.23 - -
Options exercised/surrendered (637,200) 27.22 (180,400) 21.52
Options canceled (696,500) 26.71 (304,350) 21.54
- -----------------------------------------------------------------------------------------------------------------------------------
Options outstanding at December 31, 1998 11,704,600 $27.03 5,544,850 $ 22.26
Options available for grant at December 31,1998 5,999,900 1,289,400
- -----------------------------------------------------------------------------------------------------------------------------------
Total reserved shares 17,704,500 6,834,250
===================================================================================================================================
Options exercisable at December 31, 1998 2,220,633 $28.43 1,448,975 $ 23.28
Average remaining life of options outstanding 7.1 years 6.3 years
Option prices per share:
Granted $28-$30 $-
Exercised/surrendered $21-$29 $17-$23
Cancelled $21-$29 $17-$25
Outstanding $26-$31 $21-$25
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Year ended December 31,
1997* 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Georgia-Pacific The Timber
Group Company
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted Weighted
average Average
exercise Exercise
Shares price Share Price
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding at December 17, 1997 10,042,400 $19.47 5,021,200 $ 15.78
Options granted - - 1,010,600 25.13
Options exercised/surrendered (600) 21.00 (300) 17.01
Options cancelled (3,600) 26.93 (1,900) 21.83
- ------------------------------------------------------------------------------------------------------------------------------------
Options outstanding at December 31, 1997 10,038,200 $26.66 6,029,600 $ 21.20
Options available for grant at December 31,1997 9,000,000 1,289,400
- ------------------------------------------------------------------------------------------------------------------------------------
Total reserved shares 19,038,200 7,319,000
====================================================================================================================================
Options exercisable at December 31, 1997 789,332 $26.41 391,100 $21.39
Average remaining life of options outstanding 5.7 years 6.3 years
Option prices per share (December 17 through December 31, 1997):
Granted $- $25
Exercised/surrendered $21 $17
Canceled $26-$29 $21-$23
Outstanding $26-$29 $17-$25
====================================================================================================================================
</TABLE>
*All shares and prices reflect the two-for-one stock split of the
Georgia-Pacific Group's common stock on May 14, 1999.
<TABLE>
<CAPTION>
Period ended December 16,
1997*
============================================================================================================================
Georgia-Pacific Corporation
- ----------------------------------------------------------------------------------------------------------------------------
Weighted
Average
Exercise
Shares Price
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding at January 1, 1997 4,092,300 $ 57.48
Options granted 1,746,700 52.84
Options exercised/surrendered (514,950) 69.94
Options canceled (302,850) 55.04
- ----------------------------------------------------------------------------------------------------------------------------
Options outstanding at December 16, 1997 5,021,200 $ 54.73
Options available for grant at December 16,1997 2,966,100
- ----------------------------------------------------------------------------------------------------------------------------
Total reserved shares 7,987,300
============================================================================================================================
Options exercisable at December 16, 1997 396,766 $ 70.69
Average remaining life of options outstanding 5.7 years
Option prices per share:
Granted $53
Exercised/surrendered $59-$75
</TABLE>
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<PAGE>
<TABLE>
<S><C>
Canceled $52-$75
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
*All shares and prices reflect the Corporation's Existing Common Stock through
December 16, 1997.
SHAREHOLDER RIGHTS PLAN On December 16, 1997, shareholders approved an amended
and restated Shareholder Rights Plan (the Rights Agreement) pursuant to which
preferred stock purchase rights (the Rights) are issued on each outstanding
share of Georgia-Pacific Group stock (a Georgia-Pacific Group Right), which will
entitle the holders thereof to purchase shares of Series B Junior Preferred
Stock under the conditions specified in the Rights Agreement, and on each
outstanding share of The Timber Company stock (a Timber Company Right), which
will entitle the holders thereof to purchase shares of Series C Junior Preferred
Stock under the conditions specified in the Rights Agreement.
The Rights will expire on December 31, 2007, unless earlier redeemed by the
Corporation or extended. The Rights would be exercisable only if a person or
group acquires 15% or more of the total voting rights of all then outstanding
shares of common stock of the Corporation or commences a tender offer that would
result in such person or group beneficially owning 15% or more of the total
voting rights of all then outstanding shares of common stock of the Corporation.
In such event, each Right would entitle the holder to purchase from the
Corporation (i) in the case of a Georgia-Pacific Group Right, one one-hundredth
of a share of Series B Junior Preferred Stock (a Series B Unit) at a purchase
price of $175 (the Series B Unit Purchase Price), subject to adjustment, and
(ii) in the case of a Timber Company Right, one one-hundredth of a share of
Series C Junior Preferred Stock (a Series C Unit) at a purchase price of $100
(the Series C Unit Purchase Price), subject to adjustment.
Thereafter, in the event one of several specified events (generally
involving transactions by an acquirer in the Corporation's common stock or a
business combination involving the Corporation) occurs, each Georgia-Pacific
Group Right and each Timber Company Right will entitle its holder to purchase,
for the Series B Unit Purchase Price and the Series C Unit Purchase Price,
respectively, a number of shares of common stock of such entity or purchaser
with a market value equal to twice the applicable purchase price. Because of the
nature of the dividend, liquidation and voting rights of each class of Junior
Preferred Stock related to the Rights, the economic value of one Series B Unit
and one Series C Unit should approximate the economic value of one share of
Georgia-Pacific Group stock and one share of The Timber Company stock,
respectively.
CAPITAL STOCK During 1999, the Corporation purchased on the open market
approximately 6.2 million shares of Georgia-Pacific Group stock at an aggregate
price of $257 million ($41.45 average per share), all of which were held as
treasury stock at January 1, 2000. During 1998, the Corporation purchased
approximately 15.4 million shares of Georgia-Pacific Group stock (including 2.2
million shares related to the CeCorr acquisition) at an aggregate price of $427
million ($27.73 average per share). Of these purchased shares, approximately
13.5 million shares were held as treasury stock and approximately 1.9 million
shares were retired. Cash paid in 1998 for Georgia-Pacific Group stock
repurchases totaled $436 million, which included $9 million for shares purchased
but not settled in 1997.
During 1999, the Corporation also purchased on the open market
approximately 5.3 million shares of The Timber Company stock at an aggregate
price of $131 million ($24.72 average per
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<PAGE>
share). Of these purchased shares, approximately 5,343,000 shares of The Timber
Company stock were held as treasury stock and 6,000 shares were purchased during
1999 and settled after January 1, 2000. During 1998, the Corporation purchased
on the open market 5.7 million shares of The Timber Company stock at an
aggregate price of $121 million ($21.23 average per share), all of which were
held as treasury stock at December 31, 1998.
Subsequent to year-end 1999 through February 4, 2000, the Corporation
purchased on the open market 418,700 shares of The Timber Company stock at an
aggregate price of $9.5 million ($22.66 average per share). Subsequent to
year-end 1999 through February 4, 2000, there was no Georgia-Pacific Group stock
purchased by the Corporation.
The resolution of the Board authorizing such repurchases allows purchases
of Georgia-Pacific Group stock so long as the Georgia-Pacific Group's total debt
remains below $5.8 billion and the Corporation's total debt remains below $6.8
billion. Repurchases of The Timber Company stock may be made so long as The
Timber Company's debt remains below $1.0 billion and the Corporation's debt
remains below $6.8 billion.
OTHER The Corporation has elected to continue to account for its stock-based
compensation plans under APB Opinion No. 25 and disclose pro forma effects of
the plans on net income and earnings per share as provided by SFAS No. 123.
Accordingly, no compensation cost has been recognized for the Unisource stock
options, Chesapeake stock options, the SVIP, the Georgia-Pacific Group Plan, The
Timber Company Plan or the 1997 Purchase Plan. Had compensation cost for these
plans been determined based on the fair value at the grant dates in 1999, 1998
or 1997 under the plan consistent with the method of SFAS No. 123, the pro forma
net income and earnings per share would have been as follows:
<TABLE>
<CAPTION>
Year ended
-------------------------------------------------------------------------------------------
January 1, December 31,
In millions, except 2000 1998 1997
per share amounts
=================================================================================================================================
Income Income Net Income
Net per Net per Income (loss)
Income share* income share* (loss) Per share*
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Georgia-Pacific Corporation
As reported 1,116 $ 274 $ 69
Pro forma 1,084 252 62
Georgia-Pacific Group
As reported 716 $ 4.17 98 $ 0.55 (146) $ (0.80)
Pro forma 685 3.97 77 0.43 (153) (0.84)
The Timber Company
As reported 400 4.75 176 1.95 215 2.35
Pro forma 399 4.74 175 1.94 215 2.35
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Represents basic earnings per share. Pro forma diluted income (loss) per share
was $3.89 and $4.72 in 1999, $0.42 and $1.93 in 1998, and $(0.84) and $2.33 in
1997 for the Georgia-Pacific Group and The Timber Company, respectively.
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<PAGE>
The fair-value-based method of accounting for stock-based compensation
plans under SFAS No. 123 recognizes the value of options granted as compensation
cost over the option's vesting period and has not been applied to options
granted prior to January 1, 1995. Accordingly, the resulting pro forma
compensation cost is not representative of what compensation cost will be in
future years.
Following are the weighted average assumptions used in connection with the
Black-Scholes option pricing model tso estimate the fair value of options
granted in 1999, 1998 and 1997:
<TABLE>
<CAPTION>
Year ended
------------------------------------------------------------------
January 1, December 31,
2000 1998 1997
======================================================================================================================
Options Options Options ESPP*
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Georgia-Pacific Group
Risk-free interest rate 4.9% 5.8% 6.6% 5.8%
Expected dividend yield 1.0% 1.8% 2.7% 2.3%
Expected life 7 years 10 years 10 years 2 years
Expected volatility 0.46 0.39 0.30 0.37
Option forfeiture rate 3% 3% 3% 28%
- ----------------------------------------------------------------------------------------------------------------------
The Timber Company
Risk-free interest rate 4.9% 5.9% 6.4% 5.8%
Expected dividend yield 4.4% 3.9% 3.2% 2.3%
Expected life 9 years 10 years 10 years 2 years
Expected volatility 0.32 0.37 0.27 0.29
Option forfeiture rate 3% 3% 3% 28%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
*1997 Purchase Plan.
The weighted average grant date fair value per share, including
modifications, of Georgia-Pacific Group options and The Timber Company options
granted during the year using the Black-Scholes option pricing model was $29.38
and $5.80, $13.44 and $8.55, and $11.87 and $7.54 for 1999, 1998, and 1997,
respectively. The weighted average grant date fair value per share of shares
subscribed under the 1997 Purchase Plan was $8.85 for the Georgia-Pacific Group
and $6.52 for The Timber Company. The total pro forma compensation cost
calculated under SFAS No. 123 was allocated between the Georgia-Pacific Group
and The Timber Company based on the number of employees in each group for
periods prior to December 17, 1997. Management believes that this method of
allocation is equitable and provides a reasonable estimate of the costs
attributable to each group.
STOCK SPLIT On May 4, 1999, the Board declared a two-for-one split of the
Georgia-Pacific Group's stock in the form of a special dividend to shareholders
of record on May 14, 1999. The special dividend was paid as one share of
Georgia-Pacific Group stock for each such share outstanding on June 3, 1999. A
total of 95,126,911 additional shares were issued in conjunction with the stock
split. The Georgia-Pacific Group's par value of $0.80 remained unchanged. As a
result, $76 million of shareholders' equity was reclassified from "Additional
paid-in capital" to "Common stock." All historical share and per share amounts
have been restated to reflect retroactively the stock split.
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<PAGE>
NOTE 11. OTHER COMPREHENSIVE INCOME The Corporation's accumulated other
comprehensive income includes the following:
Minimum Accumulated
Foreign pension other
Currency liability comprehensive
In millions Items adjustment income
============================================================================
December 31, 1997 $ (28) $ (5) $ (33)
Activity, net of taxes (8) (2) (10)
- ----------------------------------------------------------------------------
December 31, 1998 (36) (7) (43)
Activity, net of taxes 7 4 11
- ----------------------------------------------------------------------------
January 1, 2000 $ (29) $ (3) $ (32)
============================================================================
NOTE 12. COMMITMENTS AND CONTINGENCIES
Total rental expense was approximately $117.4 million, $75.8 million and $74.1
million in 1999, 1998 and 1997, respectively.
At January 1, 2000, total commitments of the Corporation under long-term,
noncancelable contracts, including operating leases, were as follows:
In millions
=========================
2000 $ 76
2001 73
2002 67
2003 61
2004 54
After 2004 184
- -------------------------
$ 515
=========================
The Corporation is a party to various legal proceedings incidental to its
business and is subject to a variety of environmental and pollution control laws
and regulations in all jurisdictions in which it operates. As is the case with
other companies in similar industries, the Corporation faces exposure from
actual or potential claims and legal proceedings involving environmental
matters. Liability insurance in effect during the last several years provides
only very limited coverage for environmental matters.
The Corporation is involved in environmental remediation activities at
approximately 173 sites, both owned by the Corporation and owned by others,
where it has been notified that it is
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<PAGE>
or may be a potentially responsible party under the Comprehensive Environmental
Response, Compensation and Liability Act or similar state "superfund" laws. Of
the known sites in which it is involved, the Corporation estimates that
approximately 46% are being investigated, approximately 30% are being remediated
and approximately 24% are being monitored (an activity that occurs after either
site investigation or remediation has been completed). The ultimate costs to the
Corporation for the investigation, remediation and monitoring of many of these
sites cannot be predicted with certainty, due to the often unknown magnitude of
the pollution or the necessary cleanup, the varying costs of alternative cleanup
methods, the amount of time necessary to accomplish such cleanups, the evolving
nature of cleanup technologies and governmental regulations, and the inability
to determine the Corporation's share of multiparty cleanups or the extent to
which contribution will be available from other parties. The Corporation has
established reserves for environmental remediation costs for these sites in
amounts that it believes are probable and reasonably estimable. Based on
analysis of currently available information and previous experience with respect
to the cleanup of hazardous substances, the Corporation believes it is
reasonably possible that costs associated with these sites may exceed current
reserves by amounts that may prove insignificant or that could range, in the
aggregate, up to approximately $56 million. This estimate of the range of
reasonably possible additional costs is less certain than the estimates upon
which reserves are based, and in order to establish the upper limit of such
range, assumptions least favorable to the Corporation among the range of
reasonably possible outcomes were used. In estimating both its current reserve
for environmental remediation and the possible range of additional costs, the
Corporation has not assumed it will bear the entire cost of remediation of every
site to the exclusion of other known potentially responsible parties who may be
jointly and severally liable. The ability of other potentially responsible
parties to participate has been taken into account, based generally on the
parties' financial condition and probable contribution on a per site basis.
The Corporation and many other companies are defendants in suits brought in
various courts around the nation by plaintiffs who allege that they have
suffered personal injury as a result of exposure to asbestos-containing
products. These suits allege a variety of lung and other diseases based on
alleged exposure to products previously manufactured by the Corporation. In many
cases, the plaintiffs are unable to demonstrate that they have suffered any
compensable loss as a result of such exposure, or that any injuries they have
incurred in fact resulted from exposure to the Corporation's products.
The Corporation generally settles asbestos cases for amounts it considers
reasonable given the facts and circumstances of each case. The amounts it has
paid to date to defend and settle these cases have been substantially covered by
product liability insurance. The Corporation is currently defending claims of
approximately 44,800 such plaintiffs as of January 31, 2000 and anticipates that
additional suits will be filed against it over the next several years. The
Corporation has insurance available in amounts that it believes are adequate to
cover substantially all of the reasonably foreseeable damages and settlement
amounts arising out of claims and suits currently pending. The Corporation has
further insurance coverage available for the disposition of suits that may be
filed against it in the future, but there can be no assurance that the amounts
of such insurance will be adequate to cover all future claims. The Corporation
has established reserves for liabilities and legal defense costs it believes are
probable and reasonably estimable with respect to pending suits and claims, and
has also established a receivable for expected insurance recoveries.
On May 6, 1998, a lawsuit was filed in state court in Columbus, Ohio,
against the Corporation and Georgia-Pacific Resins, Inc. (GPR), a wholly owned
subsidiary of the Corporation. The lawsuit was filed by eight plaintiffs who
seek to represent a class of individuals who at any time
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<PAGE>
from 1985 to the present lived, worked, resided, owned, frequented or otherwise
occupied property located within a three-mile radius of the GPR's resins
manufacturing operations in Columbus, Ohio. The lawsuit alleges that the
individual plaintiffs and putative class members have suffered personal injuries
and/or property damage because of (i) alleged "continuing and long-term releases
and threats of releases of noxious fumes, odors and harmful chemicals, including
hazardous substances" from GPR's operations and/or (ii) a September 10, 1997
explosion at the Columbus facility and alleged release of hazardous material
resulting from that explosion. Virtually all activity in this case has been
stayed pending a decision on a motion by plaintiffs for reconsideration of a
case management order issued by the court. The Corporation has denied the
material allegations of this lawsuit. While it is premature to evaluate the
claims asserted in this lawsuit, the Corporation believes it has meritorious
defenses. Prior to the filing of the lawsuit, the Corporation had received a
number of explosion-related claims from nearby residents and businesses. These
claims were for property damage, personal injury and business interruption and
were being reviewed and resolved on a case-by-case basis. On January 12, 2000,
five plaintiffs, including one of the class representatives in the state class
action, filed a lawsuit against the Corporation and GPR pursuant to the citizen
suit provisions of the federal Clean Air Act and the Community Right-to-Know
law. This suit alleges violations of these federal laws and certain state laws
regarding the form and substance of the defendants reporting of emissions and
alleged violations of permitting requirements under certain regulations issued
under the Clean Air Act. This suit seeks civil penalties of $25,000 per day, per
violation, an injunction to force the defendants to comply with these laws and
regulations and other relief. The defendants have denied the material
allegations of the complaint and have sought a ruling from a federal appeals
court to the effect that the regulations under which the alleged violations of
the Clean Air Act are premised are not applicable to the defendants. While it is
premature to completely evaluate these claims, the Corporation believes it has
meritorious defenses.
In May 1997, the Corporation and nine other companies were named as
defendants in a lawsuit brought by the Attorney General of the State of Florida
alleging that the defendants engaged in a conspiracy to fix the prices of
sanitary commercial paper products, such as towels and napkins, in violation of
various federal and state laws. Shortly after the filing of this suit,
approximately 55 similar suits were filed by private plaintiffs in federal
courts in California, Florida, Georgia and Wisconsin, and in the state courts of
California, Wisconsin, Minnesota and Tennessee. On July 28, 1999, the
Corporation and the Attorney General of the State of Florida entered into a
Settlement Agreement pursuant to which the State will dismiss its claims against
the Corporation. The Settlement Agreement states that the Attorney General is
dismissing its claims in the public interest and consistent with its
responsibilities. The Agreement also provides that the Corporation continues to
deny that there is any evidence that it engaged in the alleged price-fixing
conspiracy. In addition, the Corporation agreed to donate an immaterial amount
of real property to the State of Florida, Board of Trustees of the Internal
Improvement Trust. In addition, as part of the formation of the joint venture
with Chesapeake described in Note 3 of the Notes to Consolidated Financial
Statements, the Corporation and Wisconsin Tissue assigned, and Georgia-Pacific
Tissue agreed to assume, the liabilities of both companies in connection with
these antitrust cases. The Corporation and Wisconsin Tissue have denied that
they have engaged in any of the illegal conduct alleged in these cases and
intend to defend themselves vigorously.
Although the ultimate outcome of these environmental matters and legal
proceedings cannot be determined with certainty, based on presently available
information, management believes that adequate reserves have been established
for probable losses with respect thereto. Management further believes that the
ultimate outcome of such environmental matters and
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<PAGE>
legal proceedings could be material to operating results in any given quarter or
year but will not have a material adverse effect on the long-term results of
operations, liquidity or consolidated financial position of the Corporation.
NOTE 13. RELATED-PARTY TRANSACTIONS
For all periods in which the separate accompanying combined statements of income
of the groups are presented, timber has been transferred from the Corporation's
timberlands at prices intended to reflect fair market prices based on prices
paid by independent purchasers and sellers for similar kinds of timber.
During the second quarter of 1998, the Georgia-Pacific Group and The Timber
Company revised the operating policy, which they had entered into in 1997, with
respect to sales of timber by The Timber Company to the Georgia-Pacific Group.
These revisions arose from sharp changes in the prices of timber from the first
quarter to the second quarter of 1998, a significant decrease in the volume of
timber purchased by the Georgia-Pacific Group in the second quarter, and other
issues in the policy. At the time these revisions were negotiated, The Timber
Company sold a timber deed to the Georgia-Pacific Group in the amount of
approximately $23 million, and the Georgia-Pacific Group made a one-time $3
million payment to The Timber Company for 1998 second quarter adjustments due
under the revised policy. The Timber Company recognized revenues and earnings
from this timber deed, and other contracts to sell timber to the Georgia-Pacific
Group, as the timber was cut.
Under the revised policy, beginning July 1, 1998, the prices for Southern
timber sold by The Timber Company are adjusted monthly, rather than quarterly,
and represent the average of prices paid by the Georgia-Pacific Group for timber
purchased from third parties in a particular forest over the most recent
three-month period. In most of The Timber Company's Southern forests, it must
offer 80% of its projected annual harvest from those forests to the
Georgia-Pacific Group, and the Georgia-Pacific Group must purchase not less than
60% nor more than 80% of that projected annual harvest. In addition, premiums
charged by The Timber Company for the right to harvest a significant percentage
of wood from its Southern forests have been reduced.
In two key Southern forests, the price paid by the Georgia-Pacific Group
for timber purchased from The Timber Company will be based on the average prices
paid over the most recent three months by the Georgia-Pacific Group for timber
purchased from third parties, and prices received by The Timber Company for
timber sold to third parties, in each forest. In those same forests, the
Georgia-Pacific Group has agreed to purchase, each quarter, 20% of the annual
volume of timber it has committed to purchase from The Timber Company during
that year. The revised policy reduces the volume of timber that the
Georgia-Pacific Group can purchase in these same two forests from 80% to 70% of
The Timber Company's annual harvest in those forests, and also reduces the
Georgia-Pacific Group's minimum annual purchase obligation in those forests from
60% to 50% of the annual harvest in 1999 and 2000.
These changes are intended to cause prices paid by the Georgia-Pacific
Group for timber sold by The Timber Company to more quickly reflect market
prices in particular forests, to allow the Georgia-Pacific Group more
flexibility in purchasing wood from third parties, and to allow The Timber
Company greater flexibility in the timing of sales of its annual harvest on the
open market. The revised policy also contains additional provisions that resolve
issues related to certain operating practices of The Timber Company and the
Georgia-Pacific Group. This policy will remain in effect through 2000.
-78-
<PAGE>
The Georgia-Pacific Group and The Timber Company are negotiating the terms
of a new long-term agreement to govern the purchases and sales of timber
beginning in 2001. If such negotiations are unsuccessful, neither the
Georgia-Pacific Group nor The Timber Company will have any obligation to buy
timber from or sell timber to the other.
The Corporation is a 50% partner in a joint venture (GA-MET) with
Metropolitan Life Insurance Company (Metropolitan). GA-MET owns and operates the
Corporation's main office building in Atlanta, Georgia. The Corporation accounts
for its investment in GA-MET under the equity method.
At January 1, 2000, GA-MET had an outstanding mortgage loan payable to
Metropolitan in the amount of $144 million. The note bears interest at 9 1/2%,
requires monthly payments of principal and interest through 2011, and is secured
by the land and building owned by the joint venture. In the event of
foreclosure, each partner has severally guaranteed payment of one-half of any
shortfall of collateral value to the outstanding secured indebtedness. Based on
the present market conditions and building occupancy, the likelihood of any
obligation to the Corporation with respect to this guarantee is considered
remote.
NOTE 14. UNAUDITED SELECTED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
First quarter Second quarter
In millions, except per share amounts 1999 1998 1999 1998
<S> <C> <C> <C> <C>
================================================================================================
Net sales $ 3,409 $ 3,223 $ 3,850 $ 3,307
Gross profit (net sales minus cost of sales) 900 758 1,094 762
Income before extraordinary
items and accounting change 146 68 311 68
Net income 146 54 311 67
================================================================================================
Georgia-Pacific Group
Dividends declared per share $ 0.125 $ 0.125 $ 0.125 $ 0.125
Basic per share:
Income before extraordinary items 0.57 0.09 1.23 0.17
Net income 0.57 0.02 1.23 0.16
Diluted per share:
Income before extraordinary items 0.56 0.09 1.20 0.17
Net income 0.56 0.02 1.20 0.16
The Timber Company
Dividends declared per share 0.25 0.25 0.25 0.25
Basic per share:
Income before extraordinary items 0.54 0.56 1.17 0.41
Net income 0.54 0.54 1.17 0.41
Diluted per share:
Income before extraordinary items 0.54 0.56 1.16 0.41
Net income 0.54 0.54 1.16 0.41
- ------------------------------------------------------------------------------------------------
Price range of common stock
Georgia-Pacific Group
High $ 41.00 $ 35.00 $ 54.13 $ 40.50
Low 29.34 26.00 38.75 27.34
The Timber Company
High 24.06 27.25 27.13 27.00
Low 19.88 21.25 22.00 19.69
</TABLE>
-79-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Third quarter Fourth quarter
In millions, except per share amount 1999 1998 1999 1998
=================================================================================================
<S> <C> <C> <C> <C>
Net sales $ 5,526 $ 3,398 $ 5,192 $ 3,414
Gross profit (net sales minus cost of sales) 1,334 814 1,316 777
Income before extraordinary items and
accounting change 279 80 380 73
Net income 279 80 380 73
=================================================================================================
Georgia-Pacific Group
Dividends declared per share $ .125 $ 0.125 $ 0.125 $ 0.125
Basic per share:
Income before extraordinary items 1.34 0.22 1.02 0.15
Net income 1.34 0.22 1.02 0.15
Diluted per share:
Income before extraordinary items 1.31 0.22 1.00 0.15
Net income 1.31 0.22 1.00 0.15
The Timber Company
Dividends declared per share 0.25 0.25 0.25 0.25
Basic per share:
Income before extraordinary items 0.59 0.46 2.48 0.54
Net income 0.59 0.46 2.48 0.54
Diluted per share:
Income before extraordinary items 0.59 0.46 2.47 0.54
Net income 0.59 0.46 2.47 0.54
=================================================================================================
Price range of common stock
Georgia-Pacific Group
High $ 52.88 $ 30.25 $ 50.88 $ 30.00
Low 37.50 18.69 35.75 22.00
The Timber Company
High 27.19 23.19 25.81 24.56
Low 22.00 18.00 22.38 17.38
=================================================================================================
</TABLE>
The first and second quarters of 1998 included an after-tax extraordinary loss
of $14 million and $1 million, respectively, on early extinguishment of debt.
SELECTED FINANCIAL DATA - OPERATIONS
Georgia-Pacific Corporation and Subsidiaries
EARNINGS TO FIXED CHARGES Income before income taxes, extraordinary items and
accounting change plus total interest cost (interest expense plus capitalized
interest) and one-third of rent expense, divided by total interest cost plus one
one-third of rent expense.
CASH FLOW TO INTEREST Cash provided by operations plus interest expense, divided
by total interest cost (interest expense plus capitalized interest).
EFFECTIVE INCOME TAX RATE Provision (benefit) for income taxes divided by income
(loss) before income taxes, extraordinary items and accounting change.
-80-
<PAGE>
<TABLE>
<CAPTION>
Year ended
-------------------------------------------------------
Dollar amounts, except per January 1, December 31,
share, and shares are in millions 2000 1998 1997 1996 1995
============================================================================================
<S> <C> <C> <C> <C> <C>
Operations
Net sales $ 17,977 $ 13,342 $ 13,094 $ 13,024 $ 14,313
- --------------------------------------------------------------------------------------------
Cost and expenses
Cost of sales 13,333 10,231 10,209 9,798 9,794
Selling and distribution 817 556 607 642 575
Depreciation, amortization
and cost of timber harvested 1,013 997 1,017 996 984
General and administrative 853 648 689 833 831
Interest 495 443 465 459 432
Other income (355) (24) (128) - -
- --------------------------------------------------------------------------------------------
Total costs and expenses 16,156 12,851 12,859 12,728 12,616
- --------------------------------------------------------------------------------------------
Income before income
taxes, extraordinary
items and accounting change 1,821 491 235 296 1,697
Provision for income taxes 705 202 106 135 679
- --------------------------------------------------------------------------------------------
Income before
extraordinary items
and accounting change 1,116 289 129 161 1,018
Extraordinary items and
accounting change, net of taxes - (15) (60) (5) -
- --------------------------------------------------------------------------------------------
Net income $ 1,116 $ 274 $ 69 $ 156 $ 1,018
============================================================================================
Cash provided by operations $ 1,427 $ 1,554 $ 1,116 $ 1,225 $ 1,820*
============================================================================================
Other statistical data Georgia-Pacific Corporation Basic per share:
Income before extraordinary items
and accounting change $ 1.78 $ 11.29
Extraordinary items and
accounting change, net of taxes (0.06) -
- --------------------------------------------------------------------------------------------
Net income $ 1.72 $ 11.29
============================================================================================
Diluted per share:
</TABLE>
-81-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Income before extraordinary items
and accounting change $ 1.77 $ 11.18
Extraordinary items and
accounting change, net of taxes (0.06) -
- --------------------------------------------------------------------------------------------
Net income $ 1.71 $ 11.18
============================================================================================
Georgia-Pacific Group
Income (loss) before extraordinary
accounting change $ 716 $ 111 $ (86)
Extraordinary items and accounting
change, net of taxes - (13) (60)
- --------------------------------------------------------------------------------------------
Net income (loss)
============================================================================================
Basic per share:
Income (loss) before extraordinary
items and accounting change $ 4.17 $ 0.62 $ (0.47)
Extraordinary items and
accounting change, net of taxes - (0.07) (0.33)
- --------------------------------------------------------------------------------------------
Net income (loss) $ 4.17 $ 0.55 $ (0.80)
============================================================================================
Diluted per share:
Income before extraordinary items
and accounting change $ 4.07 $ 0.61 $ (0.47)
Extraordinary items and
accounting change, net of taxes - (0.07) (0.33)
- --------------------------------------------------------------------------------------------
Net income (loss) $ 4.07 $ 0.54 $ (0.80)
============================================================================================
The Timber Company
Income before extraordinary items $ 400 $ 178 $ 215
Extraordinary items, net of taxes - (2) -
- --------------------------------------------------------------------------------------------
Net income $ 400 $ 176 $ 215
============================================================================================
Basic per share:
Income before extraordinary items $ 4.75 $ 1.97 $ 2.35
Extraordinary items, net of taxes - (0.02) -
- --------------------------------------------------------------------------------------------
Net income $ 4.75 $ 1.95 $ 2.35
============================================================================================
Diluted per share
</TABLE>
-82-
<PAGE>
<TABLE>
<S><C>
Income before extraordinary items $ 4.73 $ 1.96 $ 2.33
Extraordinary items, net of taxes - (0.02) -
- --------------------------------------------------------------------------------------------
Net income $ 4.73 $ 1.94 $ 2.33
============================================================================================
Average number shares outstanding
Georgia-Pacific Corporation, basic 90.6 90.2
Georgia-Pacific Corporation, diluted 91.2 91.1
Georgia-Pacific Group, basic 171.8 179.8 182.9
Georgia-Pacific Group, diluted 175.9 181.1 182.9
The Timber Company, basic 84.1 90.3 91.4
The Timber Company, diluted 84.6 90.8 92.1
Earnings to fixed charges 4.4 2.1 1.5 1.7 4.8
Cash flow to interest 3.8 4.4 3.3 3.4 4.8
Effective income tax rate 38.7% 41.1% 45.1% 45.6% 40.0%
============================================================================================
</TABLE>
* Excludes the accounts receivable secured borrowing program.
SELECTED FINANCIAL DATA - FINANCIAL POSITION, END OF YEAR
Georgia-Pacific Corporation and Subsidiaries
BOOK VALUE PER COMMON SHARE Shareholders' equity divided by shares of common
stock outstanding as of the end of the year.
TOTAL DEBT TO CAPITAL, BOOK BASIS Total debt divided by the sum of total debt,
senior deferrable notes, deferred income taxes, net, other long-term liabilities
and shareholders' equity as of the end of the year. Total debt includes bank
overdrafts, commercial paper and short-term notes, current portion of long-term
debt, (all of which are included "Current liabilities"), long-term debt and
accounts receivable pledged.
TOTAL DEBT TO CAPITAL, MARKET BASIS Total debt
divided by the sum of total debt and the market value of shareholders' equity as
of the end of the year. Total debt includes bank overdrafts, commercial paper
and short-term notes, current portion of long-term debt, (all of which are
included in "Current liabilities),long-term debt and accounts receivable
pledged. The market value of shareholders' equity is the market price of common
stock multiplied by the number of common stock shares outstanding.
CURRENT RATIO Current assets divided by current liabilities as of the end of the
year.
<TABLE>
<CAPTION>
Year ended
Dollar amounts, except per -----------------------------------------------------
share, and shares January 1, December 31,
are in millions 2000 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
==============================================================================================
Financial position, end of year
Current assets $ 4,559 $ 2,645 $ 2,916 $ 2,615 $ 2,595
</TABLE>
-83-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Timber and timberlands 1,189 1,210 1,201 1,342 1,374
Property, plant and
equipment, net 7,079 6,249 6,297 6,560 6,013
Goodwill, net 2,697 1,677 1,599 1,658 1,714
Other assets 1,373 919 937 643 639
- ----------------------------------------------------------------------------------------------
Total assets $ 16,897 $12,700 $ 12,950 $12,818 $12,335
- ----------------------------------------------------------------------------------------------
Current liabilities $ 4,191 $2,648 $3,020 $ 2,490 $ 1,764
Long-term debt 4,621 4,125 3,713 4,371 4,704
Senior deferrable notes 863 - - - -
Other long-term liabilities 1,811 1,572 1,544 1.285 1,201
Deferred income taxes 1,536 1,231 1,199 1,161 1,147
- ----------------------------------------------------------------------------------------------
Total liabilities $ 13,022 $ 9,576 $9,480 $9,307 $8,816
- ----------------------------------------------------------------------------------------------
Shareholders' equity $ 3,875 $ 3,124 $ 3,470 $ 3,511 $ 3,519
==============================================================================================
Other statistical data
Property, plant and equipment
investments $ 723 $ 638 $ 717 $ 1,059 $ 1,259
Timber & timberland purchases 228 201 175 142 244
Cash paid for acquisitions 1,658 112 - 363 -
==============================================================================================
Total debt to capital, book basis 46.9% 48.6% 47.2% 50.4% 49.3%
Total debt to capital, market basis - - - 47.4% 47.2%
Current ratio 1.1 1.0 1.0 1.1 1.5
==============================================================================================
Georgia-Pacific Corporation
Per share (through December 16, 1997)
Market price:
High $ 108.56 $ 81.00 $95.75
Low $ 70.50 $ 63.00 $ 65.75
Period-end $ 85.13 $ 72.00 $ 68.63
Book value $ 38.52 $ 38.54
Shares of stock outstanding at
year-end 91.4 91.3
Dividends declared per share $ 2.00 $ 2.00 $ 1.90
==============================================================================================
Georgia-Pacific Group*
Per share
Market price:
High $ 54.13 $ 40.50 $ 32.00
Low $ 29.34 $ 18.69 $ 29.50
Year-end $ 50.75 $ 29.28 $ 30.38
Book value $ 21.78 $ 18.55 $ 19.10
Shares of stock outstanding at year-end 172.2 173.0 184.5
Dividends declared per share $ 0.50 $ 0.50
==============================================================================================
The Timber Company*
Per share
Market price:
High $ 27.19 $ 27.25 $ 25.88
</TABLE>
-84-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Low $ 19.88 $ 17.38 $ 22.50
Year-end $ 24.63 $ 23.81 $ 22.69
Book value $ 1.51 $ (0.98) $ (0.53)
Shares of stock outstanding at
year-end 82.9 87.1 92.6
Dividends declared per share $ 1.00 $ 1.00
</TABLE>
* 1997 amounts are for the period from December 17, 1997 through December 31,
1997.
SALES AND OPERATING PROFITS BY OPERATING SEGMENT
Georgia-Pacific Corporation and Subsidiaries
<TABLE>
<CAPTION>
(In millions) 1999 1998 1997 1996
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales (1)
Building products
Wood panels $ 1,193 7% $ 1,055 8% $ 946 7% $ 948 7%
Lumber 1,079 6 844 6 876 7 779 6
Gypsum products 1,083 6 891 7 794 6 647 5
Chemicals 414 2 427 3 455 3 416 3
Other 100 1 120 1 68 1 51 1
- ---------------------------------------------------------------------------------------------------------------------------------
3,869 22 3,337 25 3,139 24 2,841 22
- ---------------------------------------------------------------------------------------------------------------------------------
Building products
Distribution
Wood panels 2,503 14 2,117 16 1,904 15 1,997 15
Lumber 1,659 9 1,467 11 1,634 12 1,619 13
Other 696 4 741 5 860 7 937 7
- ---------------------------------------------------------------------------------------------------------------------------------
4,858 27 4,325 32 4,398 34 4,553 35
- ---------------------------------------------------------------------------------------------------------------------------------
Timber 199 1 125 1 126 1 123 1
- ---------------------------------------------------------------------------------------------------------------------------------
Containerboard and
Packaging
Containerboard 505 3 488 4 505 4 499 4
Packaging 1,822 10 1,556 12 1,260 9 1,422 11
- ---------------------------------------------------------------------------------------------------------------------------------
2,327 13 2,044 16 1,765 13 1,921 15
- ---------------------------------------------------------------------------------------------------------------------------------
Pulp and paper
Communication papers 1,234 7 1,492 11 1,506 11 1,521 12
Tissue 1,096 6 987 8 940 7 939 7
Market pulp 745 4 709 5 863 7 738 5
Bleached board 193 1 176 1 207 2 228 2
Other 139 1 157 1 159 1 167 1
- ---------------------------------------------------------------------------------------------------------------------------------
3,407 19 3,521 26 3,675 28 3,593 27
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-85-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Paper distribution
Fine paper 1,980 11 - - - - - -
Supply systems 1,329 7 - - - - - -
Other 22 - - - - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
3,331 18 - - - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
Corporate and all other (14) - (10) - (9) - (7) -
- ---------------------------------------------------------------------------------------------------------------------------------
Total net sales $17,977 100% $13,342 100% $13,094 100% $13,024 100%
=================================================================================================================================
Operating profits
Building products $ 1,139 49% $ 603 65% $ 490 70% $ 567 75%
Building products
Distribution 63 3 1 - (171) (24) (220) (29)
Timber 726 31 364 39 437 62 313 41
Containerboard and packaging 344 15 106 11 (6) (1) 127 17
Pulp and paper 266 12 133 14 201 29 250 33
Paper distribution 78 3 - - - - - -
Corporate and all other (3) (300) (13) (273) (29) (251) (36) (282) (37)
- ---------------------------------------------------------------------------------------------------------------------------------
Total operating profits $ 2,316 100% $ 934 100% $ 700 100% $ 755 100%
=================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
(In millions) 1995
===================================================================
<S> <C> <C>
Net sales*
Building products
Wood panels $ 923 6%
Lumber 668 5
Gypsum products 371 3
Chemicals 427 3
Other 72 -
- ------------------------------------------------------------------
2,461 17
- ------------------------------------------------------------------
Building products
Distribution
Wood panels 2,301 16
Lumber 1,577 11
Other 978 7
- ------------------------------------------------------------------
4,856 34
- ------------------------------------------------------------------
Timber 118 1
- ------------------------------------------------------------------
Containerboard and
Packaging
Containerboard 702 5
Packaging 1,681 12
-86-
<PAGE>
- ------------------------------------------------------------------
2,383 17
- ------------------------------------------------------------------
Pulp and paper
Communication
Papers 1,961 14
Tissue 878 6
Market pulp 1,220 8
Bleached board 269 2
Other 173 1
4,501 31
- ------------------------------------------------------------------
Paper distribution
Fine paper - -
Supply systems - -
Other - -
- ------------------------------------------------------------------
- -
- ------------------------------------------------------------------
Corporate and all other (2) (6) -
- ------------------------------------------------------------------
Total net sales $ 14,313 100%
==================================================================
Operating profits
Building products $ 419 20%
Building products distribution (83) (4)
Timber 277 13
Containerboard and packaging 547 26
Pulp and paper 1,125 53
Paper distribution - -
Corporate and all other (3) (156) (8)
- ------------------------------------------------------------------
Total operating profits $ 2,129 100%
==================================================================
</TABLE>
(1) Represents net sales to unaffiliated customers.
(2) Represents the elimination of hunting lease income reflected in net sales
for the timber segment and reflected as a reduction to cost of sales on a
consolidated basis. In addition, includes net sales from miscellaneous
businesses.
(3) Includes some miscellaneous businesses, certain goodwill
amortization, unallocated corporate operating expenses and the elimination of
profit on intersegment sales.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements with accountants on accounting
and financial disclosure within the twenty-four months prior to the date of the
most recent financial statements filed as part of the 1999 Annual Report on Form
10-K.
-87-
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information with respect to directors required by this Item is set forth on
pages 3 through 6 and on page 32 of the Corporation's Notice of 2000 Annual
Meeting of Shareholders and Proxy Statement dated March 24, 2000, in the
sections entitled "Nominees and Directors" and "Other Matters" are incorporated
herein by reference.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Corporation are as follows:
<TABLE>
<CAPTION>
Date first
elected as
Name Age an officer Position or office
- ---- --- ---------- ------------------
<S> <C> <C>
A. D. Correll 58 1988 Chairman, Chief Executive Officer,
President and a Director
Donald L. Glass 51 1982 Executive Vice President - Timber,
President and Chief Executive Officer,
The Timber Company
Danny W. Huff 49 1993 Executive Vice President - Finance and
Chief Financial Officer
Clint M. Kennedy 50 1988 Executive Vice President - Pulp and
Paperboard
Ronald L. Paul 56 1997 Executive Vice President - Wood
Products and Distribution
John F. Rasor 56 1983 Executive Vice President - Wood
Procurement, Gypsum and Industrial Wood
Products
Lee M. Thomas 55 1993 Executive Vice President - Paper and
Chemicals
James E. Bostic, Jr. 52 1991 Senior Vice President - Environmental,
Government Affairs and Communications
James F. Kelley 58 1993 Senior Vice President - Law and General
Counsel
James E. Terrell 50 1989 Vice President and Controller
</TABLE>
-88-
<PAGE>
Alston D. Correll has been Chief Executive Officer of Georgia-Pacific since May
1993, Chairman since December 1993 and President since May 1996. He served as
Chief Operating Officer of the Corporation from August 1991 until May 1993, and
President and Chief Executive Officer from May 1993 until December 1993. Mr.
Correll was elected as a Director of the Corporation on May 5, 1992.
Donald L. Glass has been Executive Vice President - Timber and President and
Chief Executive Officer of The Timber Company since December 16, 1997. Mr. Glass
served as Executive Vice President - Building Products from January 1997 to
December 1997 and Senior Vice President - Building Products Manufacturing and
Sales from 1991 until December 1996.
Danny W. Huff has been Executive Vice President - Finance and Chief Financial
Officer since November 1, 1999. Prior to that time, he served as Vice President
and Treasurer from February, 1996 to November, 1999 and Treasurer from October
23, 1993 to February 1, 1996.
Clint M. Kennedy has been Executive Vice President - Pulp and Paperboard since
January 1, 1997. Prior to that time, he served as Senior Vice President - Pulp,
Bleached Board and Logistics from February 1995 until December 1996, Group Vice
President - Pulp and Bleached Board from July 1992 through January 1995 and Vice
President - Sales and Marketing, Pulp and Bleached Board from May 1990 to July
1992.
Ronald L. Paul has been Executive Vice President - Wood Products and
Distribution since December 30, 1997. Prior to that time, he served as Executive
Vice President - Wood Products from September 1997 until December 1997, Vice
President - Structural Panels and Building Products Engineering from May 1996
until September 1997 and Vice President - Engineering and Technology - Building
Products from May 1995 until May 1996.
John F. Rasor has been Executive Vice President - Wood Procurement, Gypsum and
Industrial Wood Products since December 16, 1997. Prior to that time, he served
as Executive Vice President - Forest Resources from January 1997 to December
1997, Senior Vice President - Forest Resources from February 1995 until December
1996, Group Vice President - Forest Resources from May 1992 through January
1995, Group Vice President - Timber from January 1992 to May 1992 and Vice
President - Forest Resources from 1991 to January 1992.
Lee M. Thomas has been Executive Vice President - Paper and Chemicals since
December 16, 1997. Prior to that time, he served as Executive Vice President -
Paper from January 1997 to December 1997, Senior Vice President - Paper from
February 1995 until December 1996, Senior Vice President - Environmental,
Government Affairs and Communications from February 1994 through January 1995,
and Senior Vice President - Environmental and Government Affairs from March 1993
through January 1994.
James E. Bostic, Jr. has been Senior Vice President - Environmental, Government
Affairs and Communications since February 1995. Prior to that time, he served as
Group Vice President - Communication Papers from April 1992 through January
1995, Group Vice President - Butler Paper and Mail-Well from January 1992 to
April 1992, and Vice President - Butler Paper and Mail-Well from January 1991 to
January 1992.
James F. Kelley has been Senior Vice President - Law and General Counsel since
December 1993.
-89-
<PAGE>
James E. Terrell was elected Vice President of the Corporation in January 1991
and has served as Controller since 1989.
The Corporation's Board of Directors elects officers of the Corporation. The
Chief Executive Officer has the authority to appoint one or more Vice Presidents
to hold such office until the next annual organizational meeting of the Board.
The Chief Executive Officer also has the authority to approve the compensation
of officers at the Vice President level. The Compensation Committee of the Board
of Directors determines the compensation of all other officers of the
Corporation, including officers who are also directors of the Corporation. There
are no other arrangements or understandings between the respective officers and
any other person pursuant to which such officers are elected.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth on pages 10 through 18 of the Corporation's Notice of
2000 Annual Meeting of Shareholders and Proxy Statement dated March 24, 2000, in
the sections entitled "Compensation Committee Report," "Summary Compensation
Table," "Option and Performance Rights Grants in 1999" and "Agreements with
Officers" is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is set forth on pages 19 through 21 of the
Corporation's Notice of 2000 Annual Meeting and Proxy Statement dated March 24,
2000, in the section entitled "Ownership of Common Stock of G-P" and is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
PART IV
<TABLE>
<CAPTION>
ITEM 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
<S> <C> <C>
(a) The following documents are filed as a part of this Annual Report for the Corporation:
(1) The Consolidated Financial Statements, Notes to Consolidated Financial
Statements and the Report of Independent Public Accountants for
Georgia-Pacific Corporation and subsidiaries dated February 4, 2000 are
presented under Item 8 of this Form 10-K.
The Combined Financial Statements, Notes to Combined Financial Statements and
the Reports of Independent Public Accountants for Georgia-Pacific Group and
The Timber Company dated February 4, 2000 are set forth in Exhibit 13.1 and
13.2 hereto, respectively, and are incorporated herein by reference to the
Corporation's 1999 Annual Report to Shareholders.
(2) Financial Statement Schedules:
</TABLE>
-90-
<PAGE>
<TABLE>
<S><C>
Reports of Independent Public Accountants as to Schedules
II Valuation and Qualifying Accounts of Georgia-Pacific Corporation and
subsidiaries and Georgia-Pacific Group for the years ended January 1, 2000,
and December 31, 1998 and 1997.
Schedules other than that listed above are omitted because they are not
required, are inapplicable or the information is otherwise shown in the
financial statements or notes thereto.
(3) Exhibits
The exhibits required to be filed as part of this Annual Report on Form 10-K
are as follows:
NUMBER DESCRIPTION
3.1(i) Articles of Incorporation, restated as of December 16, 1997 (Filed as
Exhibit 4.1 to the Corporation's Registration Statement on Form S-8 as
filed with the Commission on December 18, 1997, and incorporated herein
by this reference thereto).
3.1(ii) Articles of Amendment to Restated Articles of Incorporation (Filed as
Exhibit 3.1 to the Corporation's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998, and incorporated herein by this reference
thereto).
3.2 Bylaws, as amended to date.
4.1 Credit Agreement, dated as of December 23, 1996, among Georgia-Pacific
Corporation, as borrower, the lenders named therein, and Bank of America
National Trust and Savings Association, as agent (Filed as Exhibit
4.1(i) to the Corporation's Annual Report on Form 10-K for the year
ended December 31, 1996, and incorporated herein by this reference
thereto).
</TABLE>
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<PAGE>
<TABLE>
<S><C>
4.2 In reliance upon Item 601(b)(4)(iii) of Regulation S-K, various
instruments defining the rights of holders of long-term debt of the
Corporation are not being filed herewith because the total of securities
authorized under each such instrument does not exceed 10% of the total
assets of the Corporation. The Corporation hereby agrees to furnish a
copy of any such instrument to the Commission upon request.
4.3(i) Restated Rights Agreement, dated as of December 16, 1997, between
Georgia-Pacific Corporation and First Chicago Trust Company of New York,
with form of Georgia-Pacific Group Rights Certificate attached as
Exhibit A-1, form of Timber Group Rights Certificate attached as Exhibit
A-2, Series B Preferred Stock Designation attached as Exhibit B-1 and
Series C Preferred Stock Designation attached as Exhibit B-2 (Filed as
Exhibit 8 to the Corporation's Registration Statement on Form 8-A as
filed with the Commission on November 26, 1997, and incorporated herein
by this reference thereto).
4.3(ii) Amendment No. 1, dated as of November 8, 1999, to Amended and Restated
Rights Agreement dated as of December 16, 1997 between Georgia-Pacific
Corporation and First Chicago Trust Company of New York, as Rights Agent.
4.4(i) Indenture, dated as of March 1, 1983, between Georgia-Pacific
Corporation and The Chase Manhattan Bank (National Association), Trustee
(Filed as Exhibit 4.4(i) to the Corporation's Annual Report on Form 10-K
for the year ended December 31, 1996, and incorporated herein by this
reference thereto).
4.4(ii) First Supplemental Indenture, dated as of July 27, 1988, among
Georgia-Pacific Corporation, The Chase Manhattan Bank (National
Association), Trustee, and Morgan Guaranty Trust Company of New York
(Filed as Exhibit 4.4(ii) to the Corporation's Annual Report on Form
10-K for the year ended December 31, 1996, and incorporated herein by
this reference thereto).
4.4(iii) Agreement of Resignation, Appointment and Acceptance, dated as of
January 31, 1992 by and among Georgia-Pacific Corporation, Morgan
Guaranty Trust Company of New York and The Bank of New York, as
Successor Trustee (Filed as Exhibit 4.4(iii) to the Corporation's Annual
Report on Form 10-K for the year ended December 31, 1996, and
incorporated herein by this reference thereto).
</TABLE>
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<PAGE>
<TABLE>
<S><C>
4.5 Form of Purchase Contract Agreement relating to Stock Purchase Contracts
and Stock Purchase Units (filed as Exhibit 4(p) to the Corporation's
Registration Statement on Form S-3, as filed with the Commission on June
30, 1999, and incorporated herein by this reference thereto).
4.6 Form of Pledge Agreement for Stock Purchase Contracts and Stock Purchase
Units (filed as Exhibit 4(q) to the Corporation's Registration Statement
on Form 8-A relating to File No.333-80757 as filed with the Commission
on June 25, 1999, and incorporated herein by this reference thereto).
4.7 Form of Remarketing Agreement between Georgia-Pacific Corporation and
Morgan Stanley & Co. Incorporated (filed as Exhibit 4(u) to the
Corporation's Registration Statement on Form S-3, as filed with the
Commission on June 30, 1999, and incorporated herein by this reference
thereto).
4.8 Form of Stock Purchase Units (included as Exhibits A and B of Exhibit
4.3) (filed as Exhibit 4(v) to the Corporation's Registration Statement
on Form S-3, as filed with the Commission on June 30, 1999, and
incorporated herein by this reference thereto).
10.1 Directors Group Life Insurance Program. (Filed as Exhibit 10.1 to the
Corporation's Annual Report on Form 10-K for the year ended December 31,
1998, and incorporated herein by this reference thereto).
10.2 Officer Retirement Agreement (Officers Retirement Plan). (Filed as
Exhibit 10.2 to the Corporation's Annual Report on Form 10-K for the
year ended December 31, 1998, and incorporated herein by this reference
thereto).
10.3(i) Key Salaried Employees Group Insurance Plan - Pre-1987 Group (As Amended
and Restated Effective January 1, 1987) (Filed as Exhibit 10.3(i) to the
Corporation's Annual Report on Form 10-K for the year ended December 31,
1996, and incorporated herein by this reference thereto).
10.3(ii) Amendment No. 1 (Effective January 1, 1991) to the Key Salaried
Employees Group Insurance Plan - Pre-1987 Group (As Amended and Restated
Effective January 1, 1987) (Filed as Exhibit 10.3(ii) to the
Corporation's Annual Report on Form 10-K for the year ended December 31,
1996, and incorporated herein by this reference thereto).
</TABLE>
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<PAGE>
<TABLE>
<S><C>
10.3(iii) Key Salaried Employees Group Insurance Plan - Post-1986 Group (Effective
January 1, 1987) (Filed as Exhibit 10.3(iii) to the Corporation's Annual
Report on Form 10-K for the year ended December 31, 1996, and
incorporated herein by this reference thereto).
10.3(iv) Amendment No. 1 (Effective January 1, 1991) to the Key Salaried
Employees Group Insurance Plan - Post-1986 Group (Effective January 1,
1987) (Filed as Exhibit 10.3(iv) to the Corporation's Annual Report on
Form 10-K for the year ended December 31, 1996, and incorporated herein
by this reference thereto).
10.3(v) Amendment No. 2 to the Key Salaried Employees Group Insurance Plan -
Post-1986 Group (effective January 1, 1987). (Filed as Exhibit 10.3(v)
to the Corporation's Annual Report on Form 10-K for the year ended
December 31, 1998, and incorporated herein by this reference thereto).
10.3(vi) Amendment No. 3 to the Key Salaried Employees Group Insurance Plan -
Post-1986 Group (effective August 1, 1994). (Filed as Exhibit 10.3(vi)
to the Corporation's Annual Report on Form 10-K for the year ended
December 31, 1998, and incorporated herein by this reference thereto).
10.3(vii) Amendment No. 4 to the Key Salaried Employees Group Insurance Plan -
Post-1986 Group (effective January 1, 1998). (Filed as Exhibit 10.3(vii)
to the Corporation's Annual Report on Form 10-K for the year ended
December 31, 1998, and incorporated herein by this reference thereto).
10.4(i) 1990 Long-Term Incentive Plan (Filed as Exhibit 10.5(i) to the
Corporation's Annual Report on Form 10-K for the year ended December 31,
1996, and incorporated herein by this reference thereto).
10.4(ii) Amendment No. 1 to 1990 Long-Term Incentive Plan (Filed as Exhibit
10.5(ii) to the Corporation's Annual Report on Form 10-K for the year
ended December 31, 1996, and incorporated herein by this reference
thereto).
10.4(iii) Amendment No. 2 to the 1990 Long-Term Incentive Plan (Filed as Exhibit
10.8(iii) to the Corporation's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996, and incorporated herein by this reference
thereto).
</TABLE>
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<PAGE>
<TABLE>
<S><C>
10.6 Retirement Letter Agreement between John F. McGovern and Georgia-Pacific
Corporation dated September 22, 1999.
10.7 Economic Value Incentive Plan, as Amended and Restated effective January
21, 2000.
10.8(i) 1995 Shareholder Value Incentive Plan, as Amended and Restated effective
December 16, 1997 (Filed as Exhibit 10.8(iv) to the Corporation's
Amendment No. 2 to Registration Statement on Form S-4 as filed with the
Commission on November 7, 1997, and incorporated herein by this
reference thereto).
10.8(ii) Amendment No. 1 to the Amended and Restated 1995 Shareholder Value
Incentive Plan, effective May 5, 1998.
10.8(iii) Amendment No. 2 to the Amended and Restated 1995 Shareholder Value
Incentive Plan, effective September 29, 1999.
10.8(iv) Amendment No. 3 to the Amended and Restated 1995 Shareholder Value
Incentive Plan, effective March 24, 2000.
10.8(v) Form of Replacement Option Under the 1995 Shareholder Value Incentive
Plan (Georgia-Pacific Group stock) (1995 Grant) (Filed as Exhibit 99.11
to the Corporation's Registration Statement on Form S-8 as filed with
the Commission on December 18, 1997, and incorporated herein by this
reference thereto).
10.8(vi) Form of Replacement Option Under the 1995 Shareholder Value Incentive
Plan (Timber Group stock) (1995 Grant) (Filed as Exhibit 99.12 to the
Corporation's Registration Statement on Form S-8 as filed with the
Commission on December 18, 1997, and incorporated herein by this
reference thereto).
10.8(vii) Form of Replacement Option Under the 1995 Shareholder Value Incentive
Plan (Georgia-Pacific Group stock) (1996 Grant) (Filed as Exhibit 99.13
to the Corporation's Registration Statement on Form S-8 as filed with
the Commission on December 18, 1997, and incorporated herein by this
reference thereto).
</TABLE>
-95-
<PAGE>
<TABLE>
<S><C>
10.8(viii) Form of Replacement Option Under the 1995 Shareholder Value Incentive
Plan (Timber Group stock) (1996 Grant) (Filed as Exhibit 99.14 to the
Corporation's Registration Statement on Form S-8 as filed with the
Commission on December 18, 1997, and incorporated herein by this
reference thereto).
10.8(ix) Form of Replacement Option Under the 1995 Shareholder Value Incentive
Plan (Georgia-Pacific Group stock) (1997 Grant) (Filed as Exhibit 99.15
to the Corporation's Registration Statement on Form S-8 as filed with
the Commission on December 18, 1997, and incorporated herein by this
reference thereto).
10.8(x) Form of Replacement Option Under the 1995 Shareholder Value Incentive
Plan (Timber Group stock) (1997 Grant) (Filed as Exhibit 99.16 to the
Corporation's Registration Statement on Form S-8 as filed with the
Commission on December 18, 1997, and incorporated herein by this
reference thereto).
10.8(xi) Form of Special Replacement Option Under the 1995 Shareholder Value
Incentive Plan (Georgia-Pacific Group stock) (1997 Grant) (Filed as
Exhibit 99.17 to the Corporation's Registration Statement on Form S-8 as
filed with the Commission on December 18, 1997, and incorporated herein
by this reference thereto).
10.8(xii) Form of Special Replacement Option Under the 1995 Shareholder Value
Incentive Plan (Timber Group stock) (1997 Grant) (Filed as Exhibit 99.18
to the Corporation's Registration Statement on Form S-8 as filed with
the Commission on December 18, 1997, and incorporated herein by this
reference thereto).
10.9(i) Outside Directors Stock Plan, adopted March 17, 1995.
10.9(ii) Amendment No. 1 to the Outside Directors Stock Plan, effective May 6,
1997 (Filed as Exhibit 10.11 to the Corporation's Quarterly Report on
Form 10-Q for the Quarter ended June 30, 1997, and incorporated herein
by this reference thereto).
10.9(iii) Amendment No. 2 to the Outside Directors Stock Plan, effective September
23, 1998 (Filed as Exhibit 10.9 to the Corporation's Quarterly Report on
Form 10-Q for the Quarter ended September 30, 1998, and incorporated
herein by this reference thereto).
</TABLE>
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<PAGE>
<TABLE>
<S><C>
10.10(i) Directors Deferred Compensation Plan, effective September 22, 1998
(Filed as Exhibit 10.10(ii) to the Corporation's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1998, and incorporated
herein by this reference thereto).
10.10(ii) Form of Deferral Agreement. (Filed as Exhibit 10.10(i) to the
Corporation's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998, and incorporated herein by this reference thereto).
10.11(i) Amended and Restated Receivables Purchase Agreement dated as of October
13, 1999, among G-P Receivables, Inc., as the Seller, and
Georgia-Pacific Corporation, as the Collection Agent, and Canadian
Imperial Bank of Commerce, Citibank, N.A., and Bank One, NA (Chicago
Office), as the Secondary Purchasers, and Canadian Imperial Bank of
Commerce, as the Administrative Agent.
10.11(ii) Amended and Restated Receivables Purchase Agreement dated as of October
13, 1999, among G-P Receivables, Inc., as the Seller, and
Georgia-Pacific Corporation, as the Collection Agent, and Asset
Securitization Cooperative Corporation, Corporate Asset Funding Company,
Inc., and Falcon Asset Securitization Corporation, as the Purchasers,
and Canadian Imperial Bank of Commerce, as the
Administrative Agent.
10.12(i) Georgia-Pacific Corporation/Georgia-Pacific Group 1997 Long-Term
Incentive Plan (Filed as Exhibit 10.10(i) to the Corporation's
Amendment No. 2 to Registration Statement on Form S-4 as filed with
the Commission on November 7, 1997, and incorporated herein by this
reference thereto).
10.12(ii) Amendment No. 1 to the Georgia-Pacific Group 1997 Long-Term Incentive
Plan.
10.12(iii) Amendment No. 2 to the Georgia-Pacific Group 1997 Long-Term Incentive
Plan.
10.12(iv) Form of Revised Georgia-Pacific Group 1997 Long-Term Incentive Plan
Option (Filed as Exhibit 10.1 to the Corporation's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1998, and incorporated
herein by this reference thereto).
</TABLE>
-97-
<PAGE>
<TABLE>
<S><C>
10.12(v) Form of Revised Special Georgia-Pacific Group 1997 Long-Term Incentive
Plan Option (Filed as Exhibit 10.2 to the Corporation's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1998, and incorporated
herein by this reference thereto).
10.12(vi) Form of Georgia-Pacific Group 1997 Long-Term Incentive Plan Performance
Share Grant Agreement for the January 1, 1999 through December 31, 1999
Performance Period (January 28, 1999 Grant). (Filed as Exhibit 10.12(iv)
to the Corporation's Annual Report on Form 10-K for the year ended
December 31, 1998, and incorporated herein by this reference thereto).
10.12(vii) Form of Georgia-Pacific Group 1997 Long-Term Incentive Plan Performance
Share Grant Agreement for the January 1, 1999 through December 31, 2000
Performance Period (January 28, 1999 Grant). (Filed as Exhibit 10.12(v)
to the Corporation's Annual Report on Form 10-K for the year ended
December 31, 1998, and incorporated herein by this reference thereto).
10.12(viii) Form of Georgia-Pacific Group 1997 Long-Term Incentive Plan Performance
Share Grant Agreement for the January 1, 1999 through December 31, 2001
Performance Period (January 28, 1999 Grant). (Filed as Exhibit 10.12(vi)
to the Corporation's Annual Report on Form 10-K for the year ended
December 31, 1998, and incorporated herein by this reference thereto).
10.12(ix) Form of Georgia-Pacific Group 1997 Long-Term Incentive Plan Option
(January 28, 1999 Grant). (Filed as Exhibit 10.12(vii) to the
Corporation's Annual Report on Form 10-K for the year ended December 31,
1998, and incorporated herein by this reference thereto).
10.12(x) Form of Georgia-Pacific Group 1997 Long-Term Incentive Plan Option
(January 21, 2000 Grant).
10.12(xi) Form of Georgia-Pacific Group 1997 Long-Term Incentive Plan Performance
Share Grant Agreement for the January 1, 2000 through December 31, 2002
Performance Period (January 21, 2000 Grant).
10.13(i) Georgia-Pacific Corporation/Timber Group 1997 Long-Term Incentive Plan
(Filed as Exhibit 10.10(ii) to the Corporation's Amendment No. 2 to
Registration Statement on Form S-4 as filed with the Commission on
November 7, 1997, and incorporated herein by this reference thereto).
</TABLE>
-98-
<PAGE>
<TABLE>
<S><C>
10.13(ii) Amendment No. 1 to the Timber Group 1997 Long-Term Incentive Plan.
10.13(iii) Form of Revised Timber Group 1997 Long-Term Incentive Plan Option (Filed
as Exhibit 10.3 to the Corporation's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1998, and incorporated herein by this
reference thereto).
10.13(iv) Form of Timber Group 1997 Long-Term Incentive Plan Option (January 21,
2000 Grant).
10.14 Agreement and Plan of Merger dated as of May 25, 1999, among Unisource
Worldwide, Inc., Georgia-Pacific Corporation and Atlanta Acquisition
Corp. (filed as Exhibit 99(c)(1) to the Schedule 14D-1 of Atlanta
Acquisition Corp. and Georgia-Pacific Corporation, and incorporated
herein by this reference thereto).
10.15 Joint Venture Agreement among Georgia- Pacific Corporation, Chesapeake
Corporation, Wisconsin Tissue Mills Inc. and Georgia-Pacific Tissue,
LLC, dated as of October 4, 1999.
10.16 Operating Agreement of Georgia-Pacific Tissue, LLC, dated as of October
4, 1999, among Wisconsin Tissue Mills Inc. and Georgia-Pacific
Corporation.
10.17 Credit Agreement, dated as of July 22, 1999, among Georgia-Pacific
Corporation, the Lenders Named therein, Bank of America National Trust
and Savings Association, as Administrative Agent, Commerzbank AG, New
York Branch, as Documentation Agent, and The Chase Manhattan Bank and
Citibank, N.A. as Co-Syndication Agents, Banc of America Securities LLC
as Sole Book Manager and Sole Lead Arranger
10.18 Credit Agreement, dated as of July 22, 1999, among North American Timber
Corp., the Lenders Named therein, Bank of America National Trust and
Savings Association, as Administrative Agent, Commerzbank AG, New York
Branch, as Documentation Agent, and The Chase Manhattan Bank and
Citibank, N.A. as Co-Syndication Agents, Banc of America Securities LLC
as Sole Book Manager and Sole Lead Arranger.
10.19 Form of Parent (Georgia-Pacific Corporation) Guaranty (included as
7.01(c) to Exhibit 10.18).
</TABLE>
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<PAGE>
<TABLE>
<S><C>
10.20 Form of Subsidiary Guaranty (North American Timber Corp., Unisource
Worldwide, Inc., Brunswick Pulp & Paper Company, G-P Gypsum Corporation,
Georgia-Pacific West, Inc., Great Northern Nekoosa Corporation, Leaf
River Forest Products, Inc., Nekoosa Packaging Corporation and Nekoosa
Papers Inc. ).
10.21 Georgia-Pacific Group 2000 Employee Stock Purchase Plan.
10.22 The Timber Company 2000 Employee Stock Purchase Plan
10.23 Georgia-Pacific Tissue, LLC 2000 Employee Stock Purchase Plan.
12 Statements of Computation of Ratio of Earnings to Fixed Charges.
13.1 Portions of Georgia-Pacific Corporation's 1999 Annual Report to
Shareholders relating to Georgia-Pacific Group. Such Report is not
deemed to be filed with the Commission as part of this Annual Report on
Form 10-K, except for the portions thereof expressly incorporated by
reference.
13.2 Portions of Georgia-Pacific Corporation's 1999 Annual Report to
Shareholders relating to The Timber Company. Such Report is not deemed
to be filed with the Commission as part of this Annual Report on Form
10-K, except for the portions thereof expressly incorporated by
reference.
21 Subsidiaries.
23 Consent of Independent Public Accountants.
27.1 Financial Data Schedule. (1)
27.2 Financial Data Schedule. (1)
27.3 Financial Data Schedule. (1)
27.4 Financial Data Schedule. (1)
27.5 Financial Data Schedule. (1)
27.6 Financial Data Schedule. (1)
27.7 Financial Data Schedule. (1)
27.8 Financial Data Schedule. (1)
27.9 Financial Data Schedule. (1)
99.1 Properties
(b) Reports on Form 8-K The Corporation filed Current Reports on Form 8-K
dated March 18, 1999, June 22, 1999, June 28, 1999, July 15, 1999,
October 4, 1999 and November 10, 1999 and Current Report on Form 8-K/A
dated July 15, 1999, in which it reported under Item 5 - "Other Events."
</TABLE>
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<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
GEORGIA-PACIFIC CORPORATION
(Registrant)
By: /s/ A.D. Correll
----------------
(A. D. Correll,
Chairman, Chief Executive
Officer and President)
Date: March 24, 2000
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
As Officers or Directors of GEORGIA-PACIFIC CORPORATION
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
As Officers or Directors of GEORGIA-PACIFIC CORPORATION
<S> <C> <C>
/s/ A.D. CORRELL Director, Chairman, Chief Executive March 24, 2000
- ---------------- Officer and President (Principal
(A. D. Correll) Executive Officer)
/s/ DANNY W. HUFF Executive Vice President-Finance and March 24, 2000
- -------------------------- Chief Financial Officer (Principal
(Danny W. Huff) Financial Officer)
/s/ JAMES E. TERRELL Vice President and Controller March 24, 2000
- -------------------------- (Principal Accounting Officer)
(James E. Terrell)
/s/ JAMES S. BALLOUN Director March 24, 2000
- --------------------------
(James S. Balloun)
/s/ ROBERT CARSWELL Director March 24, 2000
- --------------------------
Robert Carswell)
/s/ JANE EVANS Director March 24, 2000
- --------------------------
(Jane Evans)
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<PAGE>
/s/ DONALD V. FITES Director March 24, 2000
- --------------------------
(Donald V. Fites)
/s/ HARVEY C. FRUEHAUF, JR. Director March 24, 2000
- --------------------------
(Harvey C. Fruehauf, Jr.)
/s/ RICHARD V. GIORDANO Director March 24, 2000
- --------------------------
(Richard V. Giordano)
/s/ DAVID R. GOODE Director March 24, 2000
- --------------------------
(David R. Goode)
/s/ M. DOUGLAS IVESTER Director March 24, 2000
- --------------------------
(M. Douglas Ivester)
/s/ JAMES P. KELLY Director March 24, 2000
- --------------------------
(James P. Kelly)
/s/ LOUIS W. SULLIVAN Director March 24, 2000
- --------------------------
(Louis W. Sullivan)
/s/JAMES B. WILLIAMS Director March 24, 2000
- --------------------------
(James B. Williams)
</TABLE>
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<PAGE>
Report of Independent Public Accountants as to Schedule
To Georgia-Pacific Corporation:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements of Georgia-Pacific Corporation and
subsidiaries incorporated by reference in this Form 10-K, and have issued our
report thereon dated February 4, 2000. Our audits were made for the purpose of
forming an opinion on the basic financial statements taken as a whole. Schedule
II is the responsibility of the Corporation's management and is presented for
the purpose of complying with the Securities and Exchange Commission's rules and
is not part of the basic financial statements. This schedule has been subjected
to the auditing procedures applied in the audits of the basic financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
/S/ARTHUR ANDERSEN LLP
----------------------
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 4, 2000
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<PAGE>
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JANUARY 1, 2000 AND DECEMBER 31, 1998 AND 1997
(Millions)
<TABLE>
<CAPTION>
Balance at
beginning
at end of Charged to Charged to
of period costs and other
Description period expenses accounts Deductions Balance
- ------------ --------- -------- -------- ---------- --------
Year ended
January 1,
2000
- -------------
Allowance for
doubtful
<S> <C> <C> <C> <C> <C>
accounts $ 25 $ 5 $ - $ (5) ** $ 25
------------- ------------ --------------------------------------
Restructuring
reserves 2 2 98*** (38) 64
------------- ------------ --------------------------------------
Year ended
December 31,
1998
- -------------
Allowance for
doubtful
accounts $ 19 $ 17 $ 1* $ (12) ** $ 25
------------- ------------ --------------------------------------
Restructuring
reserves 70 - - (68) 2
------------- ------------ --------------------------------------
Year ended
December 31,
1997
- -------------
Allowance for
doubtful
accounts $ 10 $ 23 $ 1* $ (15) ** $ 19
------------- ------------ --------------------------------------
Restructuring
reserves 17 80 - (27) 70
------------- ------------ --------------------------------------
</TABLE>
*Recoveries of accounts previously written off.
**Accounts written off.
***Reserves acquired
-104-
<PAGE>
Report of Independent Public Accountants as to Schedule
To Georgia-Pacific Corporation:
We have audited in accordance with generally accepted auditing standards, the
combined financial statements of Georgia-Pacific Corporation - Georgia-Pacific
Group incorporated by reference in this Form 10-K, and have issued our report
thereon dated February 4, 2000. Our audits were made for the purpose of forming
an opinion on the basic financial statements taken as a whole. Schedule II is
the responsibility of the Corporation's management and is presented for the
purpose of complying with the Securities and Exchange Commission's rules and is
not part of the basic financial statements. This schedule has been subjected to
the auditing procedures applied in the audits of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
/S/ARTHUR ANDERSEN LLP
----------------------
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 4, 2000
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<PAGE>
GEORGIA-PACIFIC CORPORATION - GEORGIA-PACIFIC GROUP
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JANUARY 1, 2000 AND DECEMBER 31, 1998 AND 1997
(Millions)
<TABLE>
<CAPTION>
Balance at
beginning
at end of Charged to Charged to
of period costs and other
Description period expenses accounts Deductions Balance
- ----------- --------- -------- -------- ---------- --------
Year ended
January 1,
2000
- -------------
<S> <C> <C> <C> <C> <C>
Allowance for
doubtful
accounts $ 25 $ 5 $ - $ (5) ** $ 25
------------- ------------ --------------------------------------
Restructuring
reserves 2 2 98*** (38) 64
------------- ------------ --------------------------------------
Year ended
December 31,
1998
- -------------
Allowance for
doubtful
accounts $ 19 $ 17 $ 1* $ (12) ** $ 25
------------- ------------ --------------------------------------
Restructuring
reserves 70 - - (68) 2
------------- ------------ --------------------------------------
Year ended
December 31,
1997
- -------------
Allowance for
doubtful
accounts $ 10 $ 23 $ 1* $ (15) ** $ 19
------------- ------------ --------------------------------------
- --------
Restructuring
reserves 17 80 - (27) 70
------------- ------------ --------------------------------------
</TABLE>
*Recoveries of accounts previously written off.
**Accounts written off.
***Reserves acquired
-106-
<PAGE>
<TABLE>
<CAPTION>
GEORGIA-PACIFIC CORPORATION
INDEX TO EXHIBITS
FILED WITH THE ANNUAL REPORT
ON FORM 10-K FOR THE
YEAR ENDED JANUARY 1, 2000
NUMBER DESCRIPTION
<S> <C>
3.2 Bylaws, as amended to date. (1)
4.3(ii) Amendment No. 1, dated as of November 8, 1999, to Amended and Restated Rights Agreement dated
as of December 16, 1997 between Georgia-Pacific Corporation and First Chicago Trust Company
of New York, as Rights Agent.
10.6 Retirement Letter Agreement between John F. McGovern and Georgia-Pacific Corporation dated
September 22, 1999. (1)
10.7 Economic Value Incentive Plan, as Amended and Restated effective January 21, 2000. (1)
10.8(ii) Amendment No. 1 to the Amended and Restated 1995 Shareholder Value Incentive Plan, effective May
5, 1998. (1)
10.8(iii) Amendment No. 2 to the Amended and Restated 1995 Shareholder Value Incentive Plan, effective
September 29, 1999. (1)
10.8(iv) Amendment No. 3 to the Amended and Restated 1995 Shareholder Value Incentive Plan, effective
March 24, 2000. (1)
10.9(i) Outside Directors Stock Plan, adopted March 17, 1995. (1)
10.11(i) Amended and Restated Receivables Purchase Agreement dated as of October 13, 1999, among G-P
Receivables, Inc., as the Seller, and Georgia-Pacific Corporation, as the Collection Agent, and
Canadian Imperial Bank of Commerce, Citibank, N.A., and Bank One, NA (Chicago Office), as the
Secondary Purchasers, and Canadian Imperial Bank of Commerce, as the Administrative Agent.
10.11(ii) Amended and Restated Receivables Purchase Agreement dated as of October 13, 1999, among G-P
Receivables, Inc., as the Seller, and Georgia-Pacific Corporation, as the Collection Agent, and
Asset Securitization Cooperative Corporation, Corporate Asset Funding Company, Inc., and Falcon
Asset Securitization Corporation, as the Purchasers, and Canadian Imperial Bank of Commerce, as
the Administrative Agent.
10.12(ii) Amendment No. 1 to the Georgia-Pacific Group 1997 Long-Term Incentive Plan. (1)
10.12(iii) Amendment No. 2 to the Georgia-Pacific Group 1997 Long-Term Incentive Plan. (1)
10.12(x) Form of Georgia-Pacific Group 1997 Long-Term Incentive Plan Option (January 21, 2000 Grant). (1)
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<PAGE>
10.12(xi) Form of Georgia-Pacific Group 1997 Long-Term Incentive Plan Performance Share Grant Agreement
for the January 1, 2000 through December 31, 2002 Performance Period (January 21, 2000 Grant).
(1)
10.13(ii) Amendment No. 1 to the Timber Group 1997 Long-Term Incentive Plan. (1)
10.13(iv) Form of Timber Group 1997 Long-Term Incentive Plan Option (January 21, 2000 Grant). (1)
10.15 Joint Venture Agreement among Georgia-Pacific Corporation, Chesapeake Corporation, Wisconsin
Tissue Mills Inc. and Georgia-Pacific Tissue, LLC, dated as of October 4, 1999. (1)
10.16 Operating Agreement of Georgia-Pacific Tissue, LLC, dated as of October 4, 1999, among Wisconsin
Tissue Mills Inc. and Georgia-Pacific Corporation. (1)
10.17 Credit Agreement, dated as of July 22, 1999, among Georgia-Pacific Corporation, the Lenders
Named therein, Bank of America National Trust and Savings Association, as Administrative Agent,
Commerzbank AG, New York Branch, as Documentation Agent, and The Chase Manhattan Bank and
Citibank, N.A. as Co-Syndication Agents, Banc of America Securities LLC as Sole Book Manager and
Sole Lead Arranger. (1)
10.18 Credit Agreement, dated as of July 22, 1999, among North American Timber Corp., the Lenders
Named therein, Bank of America National Trust and Savings Association, as Administrative Agent,
Commerzbank AG, New York Branch, as Documentation Agent, and The Chase Manhattan Bank and
Citibank, N.A. as Co-Syndication Agents, Banc of America Securities LLC as Sole Book Manager and
Sole Lead Arranger. (1)
10.19 Form of Parent (Georgia-Pacific Corporation) Guaranty (included as 7.01(c) to Exhibit 10.18). (1)
10.20 Form of Subsidiary Guaranty (North American Timber Corp., Unisource Worldwide, Inc., Brunswick
Pulp & Paper Company, G-P Gypsum Corporation, Georgia-Pacific West, Inc., Great Northern Nekoosa
Corporation, Leaf River Forest Products, Inc., Nekoosa Packaging Corporation and Nekoosa Papers
Inc.) (1)
10.21 Georgia-Pacific Group 2000 Employee Stock Purchase Plan. (1)
10.22 The Timber Company 2000 Employee Stock Purchase Plan. (1)
10.23 Georgia-Pacific Tissue, LLC 2000 Employee Stock Purchase Plan. (1)
12 Statements of Computation of Ratio of Earnings to Fixed Charges. (1)
13.1 Portions of Georgia-Pacific Corporation's 1999 Annual Report to Shareholders pertaining to
Georgia-Pacific Group. Such Report is not deemed to be filed with the Commission as part of
this Annual Report on Form 10-K, except for the portions thereof expressly incorporated by
reference. (1)
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<PAGE>
13.2 Portions of Georgia-Pacific Corporation's 1999 Annual Report to Shareholders pertaining to The
Timber Company. Such Report is not deemed to be filed with the Commission as part of this
Annual Report on Form 10-K, except for the portions thereof expressly incorporated by reference.
(1)
21 Subsidiaries. (1)
23 Consent of Independent Public Accountants. (1)
27.1 Financial Data Schedule. (1)
27.2 Financial Data Schedule. (1)
27.3 Financial Data Schedule. (1)
27.4 Financial Data Schedule. (1)
27.5 Financial Data Schedule. (1)
27.6 Financial Data Schedule. (1)
27.7 Financial Data Schedule. (1)
27.8 Financial Data Schedule. (1)
27.9 Financial Data Schedule. (1)
99.1 Properties (1)
(1) Filed via EDGAR
</TABLE>
EXHIBIT 3.2
REVISED AS OF JANUARY 21, 2000
BYLAWS
OF
GEORGIA-PACIFIC CORPORATION
ARTICLE I
SHAREHOLDERS' MEETINGS
SECTION 1. Annual Meeting. The annual meeting of the shareholders for
the election of directors and for the transaction of such other business as may
properly come before the meeting shall be held at such place, either within or
without the State of Georgia, on such date and at such time as the Board of
Directors may by resolution provide, or, if the Board of Directors fails to
provide, then such meeting shall be held at the principal executive office of
the Corporation at 11:00 A.M. on the first Tuesday in the month of May in each
year, or, if such date is a legal holiday, on the next following business day.
If an annual meeting of shareholders is not held as provided in this Section 1
of this Article I, any business, including the election of directors, that might
properly have been acted upon at such annual meeting may be acted upon at a
special meeting in lieu of the annual meeting held pursuant to these Bylaws or
held pursuant to a court order.
SECTION 2. Special Meetings. Special meetings of the shareholders may
be called at any time by the Chairman, any Vice Chairman, the President, the
Chief Executive Officer or the Board of Directors. In addition, special meetings
of shareholders shall be called by the Corporation as set forth in the
Corporation's Articles of Incorporation or upon written demand of the holders of
at least seventy-five percent (75%) of the voting power of the outstanding
capital stock of the Corporation entitled to vote on any issue proposed to be
considered at the proposed special meeting, voting as a separate voting group,
or upon the written demand of shareholders as provided in Section 1 (C) of
Article II hereof, any such written demand to be made in accordance with the
requirements of applicable law. Each special meeting shall be held at such
place, either within or without the State of Georgia, as the Board of Directors
may by resolution provide, or, if the Board of Directors fails to provide, then
such meeting shall be held at the principal executive office of the Corporation,
on such date and at such time as shall be fixed by the party calling the
meeting.
SECTION 3. Notice of Meeting. Except as may otherwise be required or
prohibited by law, written notice stating the place, day and hour of the meeting
of shareholders and, in case of a special meeting of shareholders, the purpose
or purposes for which the meeting is called, shall be delivered in the case of
an annual or special meeting of shareholders, not less than ten (10) nor more
than sixty (60) days before the date of the meeting either personally or by
mail, by the Corporation by or at the direction of the Chairman, any Vice
Chairman, the President, the Chief Executive Officer, the Secretary or the
officer or persons calling the meeting, to each shareholder of record entitled
to vote at such meeting. If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail, addressed to the shareholder at his or
its address as it appears on the stock transfer books of the Corporation, with
first class postage thereon prepaid, or, if the Corporation has more than 500
shareholders of record entitled to vote at the meeting and the notice is mailed
not less than thirty (30) days before the date of the meeting, with postage
thereon prepaid for any other class of United States mail.
<PAGE>
SECTION 4. Waivers. Notwithstanding anything herein to the contrary,
notice of a meeting of shareholders need not be given to any shareholder who
waives notice of such meeting in accordance with the Georgia Business
Corporation Code.
SECTION 5. Voting Group. Voting group means all shares of one or more
classes or series that are entitled to vote and be counted together collectively
on a matter at a meeting of shareholders. All shares entitled to vote generally
on the matter are for that purpose a separate voting group.
SECTION 6. Quorum. With respect to shares entitled to vote as a
separate voting group on a matter at a meeting of shareholders, the presence, in
person or by proxy, of a majority of the votes entitled to be cast on the matter
by the voting group shall constitute a quorum of that voting group for action on
that matter unless the Articles of Incorporation, any designation of a class or
series of capital stock of the Corporation, or the Georgia Business Corporation
Code provides otherwise. Once a share is represented for any purpose at a
meeting, other than solely to object to holding the meeting or to transacting
business at the meeting, it is deemed present for quorum purposes for the
remainder of the meeting and for any adjournment of the meeting unless a new
record date is or must be set for the adjourned meeting.
SECTION 7. Vote Required for Action. If a quorum exists, action on a
matter (other than the election of directors) by a voting group is approved if
the votes cast within the voting group favoring the action exceed the votes cast
opposing the action, unless the Articles of Incorporation, provisions of these
Bylaws validly adopted by the shareholders, or the Georgia Business Corporation
Code requires a greater number of affirmative votes. Unless otherwise provided
in the Articles of Incorporation, directors shall be elected by a plurality of
the votes cast by the shares entitled to vote in the election of directors at a
meeting at which a quorum is present. If the Articles of Incorporation or the
Georgia Business Corporation Code provide for voting by two or more voting
groups on a matter, action on that matter is taken only when voted upon by each
of those voting groups counted separately. Action may be taken by one voting
group on a matter even though no action is taken by another voting group
entitled to vote on the matter.
SECTION 8. Voting of Shares. Unless the Articles of Incorporation, any
designation of a class or series of capital stock of the Corporation, or the
Georgia Business Corporation Code provides otherwise, each outstanding share
having voting rights shall be entitled to one vote on each matter submitted to a
vote at a meeting of shareholders. Voting on all matters shall be by voice vote
or by show of hands unless any qualified voter, prior to the voting on any
matter, demands vote by ballot, in which case each ballot shall state the name
of the shareholder voting and the number of shares voted by him, and if the
ballot be cast by proxy, it shall also state the name of the proxy.
SECTION 9. Proxies. A shareholder entitled to vote may vote in
person or by proxy pursuant to an appointment of proxy executed in writing or
delivered by electronic transmission or by any other method permitted by the
Official Code of Georgia Annotated. An appointment of proxy shall be valid for
only one meeting to be specified therein, and any adjournments of such meeting,
but shall not be valid for more than eleven (11) months unless expressly
provided therein. If the validity of any appointment of proxy is questioned, it
must be submitted to the secretary of the meeting of shareholders for
examination or to a proxy officer or committee appointed by the person presiding
at the meeting. The secretary of the meeting or, if appointed, the proxy officer
or committee shall determine the validity or invalidity of any appointment of
proxy submitted, and reference by the secretary in the minutes of the meeting to
the regularity of an appointment of proxy shall be received as prima facie
evidence of the facts stated for the purpose of establishing the presence of a
quorum at the meeting and for all other purposes.
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<PAGE>
SECTION 11. Presiding Officer. The Chief Executive Officer shall serve
as the chairman of every meeting of shareholders unless another person is
elected by shareholders to serve as chairman at the meeting. The chairman shall
appoint any persons he deems necessary to assist with the meeting.
SECTION 12. Adjournments. Whether or not a quorum is present to
organize a meeting, any meeting of shareholders (including an adjourned meeting)
may be adjourned by the holders of a majority of the voting power represented at
the meeting to reconvene at a specific time and place, but no later than 120
days after the date fixed for the original meeting unless the requirements of
the Georgia Business Corporation Code concerning the selection of a new record
date have been met. At any reconvened meeting within that time period, any
business may be transacted that could have been transacted at the meeting that
was adjourned. If notice of the adjourned meeting was properly given, it shall
not be necessary to give any notice of the reconvened meeting or of the business
to be transacted, if the date, time and place of the reconvened meeting are
announced at the meeting that was adjourned and before adjournment; provided,
however, that if a new record date is or must be fixed, notice of the reconvened
meeting must be given to persons who are shareholders as of the new record date.
SECTION 13. Fixing of Record Date with Regard to Shareholder Action.
For the purpose of determining shareholders entitled to notice of a
shareholders' meeting, to demand a special meeting, to vote, or to take any
other action, the Board of Directors may fix a future date as the record date,
which date shall be not more than seventy (70) days and, in case of a meeting of
shareholders, not less than ten (10) days prior to the date on which the
particular action, requiring a determination of shareholders, is to be taken. A
determination of shareholders entitled to notice of or to vote at a
shareholders' meeting is effective for any adjournment of the meeting unless the
Board of Directors fixes a new record date, which it must do if the meeting is
adjourned to a date more than 120 days after the date fixed for the original
meeting. If no record date is fixed by the Board of Directors, the record date
shall be determined in accordance with the provisions of the Georgia Business
Corporation Code.
SECTION 14. Shareholder Proposals. No proposal for a shareholder vote
(other than director nominations, to which Section 1(D) of Article II applies)
(a "Shareholder Proposal") shall be submitted by a shareholder, either pursuant
to Securities and Exchange Commission Rule 14a-8, 14a-4 or otherwise, to the
Corporation's shareholders unless the shareholder submitting such proposal (the
"Proponent") shall have filed a written notice setting forth with particularity
(i) the names and business addresses of the Proponent and all natural persons,
corporations, partnerships, trusts or any other type of legal entity or
recognized ownership vehicle (collectively, a "Person") acting in concert with
the Proponent; (ii) the name and address of the Proponent and the Persons
identified in clause (i), as they appear on the Corporation's books (if they so
appear); (iii) the class and number of shares of the Corporation beneficially
owned by the Proponent and the Persons identified in clause (i); (iv) a
description of the Shareholder Proposal containing all material information
relating thereto; and (v) such other information as the Board of Directors
reasonably determines is necessary or appropriate to enable the Board of
Directors and shareholders of the Corporation to consider the Shareholder
Proposal. Shareholder Proposals shall be delivered to the Secretary of the
Corporation at the principal executive office of the Corporation within the time
period specified in Securities and Exchange Commission Rule 14a-8(e)(2), or any
successor rule. The presiding officer at any shareholders' meeting may determine
that any Shareholder Proposal was not made in accordance with the procedures
prescribed in these Bylaws or is otherwise not in accordance with law, and if it
is so determined, such officer shall so declare at the meeting and the
Shareholder Proposal shall be disregarded.
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<PAGE>
ARTICLE II
DIRECTORS
SECTION 1. Number, Election and Term of Office.
-----------------------------------
(A) Number of Directors. The business and affairs of the Corporation
shall be managed and controlled by or under the authority of its Board of
Directors. In addition to the powers and authority expressly conferred upon it
by these Bylaws and the Articles of Incorporation, the Board of Directors may
exercise all such lawful acts and things as are not by law, by the Articles of
Incorporation or by these Bylaws directed or required to be exercised or done by
the shareholders. The number of directors shall be twelve (12), but the number
may be increased or diminished by amendment of these Bylaws either by the Board
of Directors or by the affirmative vote of at least seventy-five percent (75%)
of the voting power of the outstanding capital stock of the Corporation entitled
to vote generally in the election of directors, voting as a separate voting
group. The directors shall be divided into three (3) classes, each composed, as
nearly as possible, of one-third of the total number of directors. In the event
that the number of directors shall not be evenly divisible by three (3), the
Board of Directors shall determine in which class or classes the remaining
director or directors, as the case may be, shall be included. The term of office
of each director shall be three (3) years; provided, that, of those directors
initially elected in classes, the term of office of directors of the first class
shall expire at the first annual meeting of the shareholders after their
election, that of the second class shall expire at the second annual meeting
after their election, and that of the third class shall expire at the third
annual meeting after their election. At each annual meeting of shareholders
subsequent to the initial election of directors in classes, directors shall be
elected for a full term of three (3) years to succeed those whose terms expire.
When the number of directors is increased and any newly created directorships
are filled by the Board of Directors, there shall be no classification of the
additional directors until the next election of directors by the shareholders.
(B) Special Voting Rights. Anything in this Section 1 of this Article
II to the contrary notwithstanding, if and whenever any class or series of
capital stock of the Corporation shall have the exclusive right, voting as a
separate voting group, to elect one or more directors of the Corporation, the
term of office of all directors in office when such voting rights shall vest in
such class or series (other than directors who were elected by vote of another
class or series of capital stock) shall terminate upon the election of any new
directors at any meeting of shareholders called for the purpose of electing
directors; and, while such voting rights are vested in any class or series of
capital stock, the directors shall not be divided into classes, and the term of
office of each director elected shall extend only until the next succeeding
annual meeting of shareholders.
(C) Election of Directors Following Termination of Special Voting
Rights. 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, the term of office of all such directors then in office shall
terminate upon the election of any new directors at a meeting of the
shareholders then entitled to vote for directors, which meeting may be held at
any time after the termination of such exclusive right and which meeting, if not
previously called, shall be called by the Secretary of the Corporation upon
written request of the holders of record of ten percent (10%) of the aggregate
voting power of the outstanding capital stock of the Corporation then entitled
to vote generally in the election of directors. At such election and thereafter,
unless and until a class or series of capital stock shall again have the
exclusive right, voting as a separate voting group, to vote for directors, the
directors shall again be divided into three (3) classes, as hereinabove
provided, the term of office of each to be three (3) years; provided, that the
terms of office of those initially elected in classes shall be as hereinabove
provided.
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<PAGE>
(D) Nominations for Election of Directors.
-------------------------------------
(i) Subject to the rights of holders of any class or series of capital
stock of the Corporation then outstanding, nominations for the election of
directors may be made by the affirmative vote of a majority of the entire Board
of Directors or by any shareholder of record entitled to vote generally in the
election of directors. However, any shareholder of record entitled to vote
generally in the election of directors may nominate one or more persons for
election as directors at a meeting only if written notice of such shareholder's
intent to make such nomination or nominations has been given, either by personal
delivery or by first class United States mail, postage prepaid, to the Secretary
of the Corporation not less than 60 days nor more than 75 days prior to the
meeting; provided, that in the event that less than 70 days' notice or prior
public disclosure of the date of the meeting is given or made to shareholders,
notice by the shareholder to be timely must be so received not later than the
close of business on the 10th day following the day on which such notice of the
date of meeting was mailed or such public disclosure was made, whichever first
occurs.
(ii) Each notice to the Secretary under subsection (D)(i) above shall
set forth: (a) the name and address of record of the shareholder who intends to
make the nomination; (b) a representation that the shareholder is a holder of
record of shares of the Corporation's capital stock entitled to vote at such
meeting and intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice; (c) the class and number of
shares of common stock held of record, owned beneficially, and represented by
proxy, by the shareholder, and each proposed nominee, as of the date of the
notice; (d) the name, age, business and residence addresses, and principal
occupation or employment of each proposed nominee; (e) a description of all
arrangements or understandings between the shareholder and each proposed nominee
and any other person or persons (naming such person or persons) pursuant to
which the nomination or nominations are to be made by the shareholder; (f) such
other information regarding each proposed nominee as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission; and (g) the written consent of each proposed
nominee to serve as a director of the Corporation if so elected. The Corporation
may require any proposed nominee to furnish such other information as may
reasonably be required by the Corporation to determine the eligibility of such
proposed nominee to serve as a director of the Corporation.
(iii) The chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
SECTION 2. Term. Subject to the provisions of the Articles of
Incorporation and of Section 1 of this Article II, each director shall hold
office until the election and qualification of his successor or until his death
or until he shall resign or be removed from office as hereinafter provided.
SECTION 3. Resignations. Any director of the Corporation may resign at
any time by giving written notice thereof to the Board of Directors, the
Chairman or the Corporation. Such resignation shall take effect at the time the
notice is delivered unless the notice specifies a later effective date; and,
unless otherwise specified with respect thereto, the acceptance of such
resignation shall not be necessary to make it effective.
-5-
<PAGE>
SECTION 4. Removal of Directors. At any shareholders' meeting with
respect to which notice of such purpose has been given, the entire Board of
Directors or any individual director may be removed, with or without cause, by
the affirmative vote of the holders of seventy-five percent (75%) of the voting
power of the outstanding capital stock of the Corporation entitled to vote
generally in the election of directors, voting as a separate voting group.
Whenever the holders of the shares of any class or series of capital stock are
entitled to elect one or more directors by the provisions of the Articles of
Incorporation, the provisions of this Section 4 of this Article II shall apply,
in respect of the removal of a director or directors so elected, to the vote of
the holders of the outstanding shares of that class or series and not to the
vote of the outstanding shares as a whole. Removal action may be taken at any
shareholders' meeting with respect to which notice of such purpose has been
given.
SECTION 5. Vacancies.
----------
(A) Director Elected by All Shareholders. Except as provided in
Subsection 5(B) below, any vacancy occurring in the Board of Directors may be
filled by the affirmative vote of a majority of the remaining directors though
less than a quorum of the Board of Directors, or by the sole remaining director,
as the case may be, or, if the vacancy is not so filled, 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.
(B) Director Elected by Particular Class or Series. If a vacancy occurs
with respect to a director elected by a particular class or series of shares
voting as a separate voting group, the vacancy may be filled by the remaining
director or directors elected by that class or series, or, if the vacancy is not
filled by such remaining director or directors, or if no such director remains,
by the holders of that class or series of shares.
(C) Term of New Director. A director elected to fill a vacancy shall be
elected for the unexpired term of his predecessor in office. Any directorship to
be filled by reason of an increase in the number of directors may be filled by
the Board of Directors, but only for a term of office continuing until the next
election of directors by the shareholders and the election and qualification of
his successor.
SECTION 6. Place of Meeting. Meetings of the Board of Directors or of
any committee thereof may be held either within or without the State of Georgia.
SECTION 7. Regular Meetings. The Board of Directors may, by resolution
adopted by vote of a majority of the whole Board, from time to time, appoint the
time and place for holding regular meetings of the Board, if deemed advisable by
the Board; and such regular meetings shall, thereupon, be held at the time and
place so appointed, without the giving of any notice with regard thereto. In
case the day appointed for the regular meeting shall fall on a legal holiday,
such meeting shall be held on the next following business day, at the regular
appointed hour.
SECTION 8. Special Meetings. Special meetings of the Board of Directors
shall be held whenever called by the Chairman, by any Vice Chairman, by the
President, by the Chief Executive Officer, by the Chief Operating Officer, or by
any two directors. Notice of any such meeting shall be mailed to each director,
addressed to him at his residence or usual place of business, not later than
three (3) days before the day on which the meeting is to be held, or shall be
sent to him at such place by telegram, telex, facsimile or cablegram, or be
delivered personally, or by telephone, not later than the day before the day on
which the meeting is to be held. Notice of a meeting of the Board of Directors
need not be given to any director who signs a waiver of notice either before or
after the meeting (in addition to any other form of waiver, such waiver may be
evidenced by a telegram, telex, facsimile or cablegram from a director).
Attendance of a director at a meeting shall constitute a waiver of notice of
such meeting and waiver of any and all objections to the place of the meeting,
the time of the meeting or the manner in which it has been called or convened,
except when a director states, at the beginning of the meeting (or promptly upon
his arrival), any such objection or objections to the transaction of business
and does not thereafter vote for or assent to action taken at the meeting.
Neither the business to be transacted at, nor the purpose of, any special
meeting of the Board of Directors need be specified in the notice or waiver of
notice of such meeting. Except as is otherwise indicated in the notice thereof,
any and all business may be transacted at any special meeting of the Board of
Directors.
-6-
<PAGE>
SECTION 9. Quorum and Manner of Acting. Except as herein otherwise
provided, two-fifths of the whole Board of Directors at a meeting duly assembled
shall constitute a quorum for the transaction of business, except that, if the
Chairman or the President is not present at any such meeting, a majority of the
whole Board of Directors shall be necessary to constitute a quorum; and, except
as otherwise required by statute or by the Bylaws, the act of a majority of the
directors present at any such meeting at which a quorum is present shall be the
act of the Board of Directors. In the absence of a quorum, a majority of the
directors present may adjourn the meeting from time to time, until a quorum is
present. No notice of any adjourned meeting need be given.
SECTION 10. Participation by Conference Telephone. Any or all directors
may participate in a meeting of the Board of Directors or of a committee of the
Board of Directors through the use of any means of communication by which all
directors participating may simultaneously hear each other during the meeting. A
director participating in a meeting by this means is deemed to be present in
person at the meeting.
SECTION 11. Action by Directors Without a Meeting. Unless the Articles
of Incorporation or these Bylaws provide otherwise, any action required or
permitted to be taken at any meeting of the Board of Directors or any action
that may be taken at a meeting of a committee of the Board of Directors may be
taken without a meeting if the action is taken by all the members of the Board
of Directors (or of the committee as the case may be). The action must be
evidenced by one or more written consents describing the action taken, signed by
each director (or each director serving on the committee, as the case may be),
and delivered to the Corporation for inclusion in the minutes or filing with the
corporate records.
SECTION 12. Directors' Fees. In consideration of a director serving in
such capacity, each director of the Corporation, other than directors who are
officers of the Corporation or any of its subsidiary companies, shall be
entitled to receive such compensation as the Board of Directors, by vote of a
majority of the whole Board, may from time to time determine. The Board of
Directors shall also have the authority to determine, from time to time, the
amount of compensation, if any, which shall be paid to its members for
attendance at any meeting of the Board or any committee thereof. A director may
also serve the Corporation in a capacity other than that of director and receive
compensation, as determined by the Board of Directors, for services rendered in
such other capacity.
-7-
<PAGE>
ARTICLE III
EXECUTIVE COMMITTEE
SECTION 1. Constitution and Powers. The Board of Directors may, by
resolution adopted by vote of a majority of the whole Board, designate from
among its members an Executive Committee, to consist of the Chairman, the Chief
Executive Officer (provided he is also a director), and one or more other
directors, which Executive Committee shall have and may exercise all the powers
of the Board of Directors in the management of the business, affairs and
property of the Corporation and the exercise of its corporate powers, including
the power to authorize the seal of the Corporation to be affixed to all papers
which may require it. So far as practicable, members of the Executive Committee
shall be designated at the organization meeting of the Board, in each year, and,
unless sooner discharged by vote of a majority of the whole Board of Directors,
shall hold office until the organization meeting of the Board in the next
subsequent year and until their respective successors are appointed. The Board
shall designate one member of the Committee as Chairman of the Executive
Committee, but such designee shall not be considered to be an officer of the
Corporation by reason of such designation. Anything herein to the contrary
notwithstanding, the Executive Committee shall not exercise the authority of the
Board of Directors in reference to: (1) approving or proposing to shareholders
any action required by applicable law to be approved by the shareholders of the
Corporation; (2) the filling of vacancies on the Board of Directors or any of
its committees; (3) amending the Articles of Incorporation of the Corporation;
(4) the adoption, amendment or repeal of any Bylaws of the Corporation; or (5)
the approval of a plan of merger or consolidation, the sale, lease, exchange or
other disposition of all or substantially all the property and assets of the
Corporation, or a voluntary dissolution of the Corporation or a revocation
thereof.
SECTION 2. Meetings. Regular meetings of the Executive Committee, of
which no notice shall be necessary, shall be held on such days and at such
places as shall be fixed, from time to time, by resolution adopted by vote of a
majority of the Committee and communicated to all the members thereof. Special
meetings of the Executive Committee may be called by the Chairman of the
Committee at any time. Notice of each special meeting of the Committee shall be
sent to each member of the Committee by mail to his residence or usual place of
business not later than three (3) days before the day on which the meeting is to
be held, or shall be sent to him at such place by telegram, telex, facsimile or
cablegram, or be delivered personally, or by telephone, to each member of the
Committee not later than the day before the day on which the meeting is to be
held. Notice of any such meeting need not be given to any member who signs a
waiver of notice either before or after the meeting (in addition to any other
form of waiver, such waiver may be evidenced by a telegram, telex, facsimile or
cablegram from a member). Attendance of a member at a meeting shall constitute a
waiver of notice of such meeting and waiver of any and all objections to the
place of the meeting, the time of the meeting or the manner in which it has been
called or convened, except when a member states, at the beginning of the meeting
(or promptly upon his arrival), any such objection or objections to the
transaction of business. Neither the business to be transacted at, nor the
purpose of, any meeting of the Committee need be specified in the notice or
waiver of notice of such meeting. A majority of the Executive Committee shall
constitute a quorum for the transaction of business, and the act of a majority
of those present at a meeting, at which a quorum is present, shall be the act of
the Executive Committee. The members of the Executive Committee shall act only
as a committee, and the individual members shall have no power as such.
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<PAGE>
SECTION 3. Records. The Executive Committee shall keep a record of its
acts and proceedings and shall report the same promptly to the Board of
Directors. Such acts and proceedings shall be subject to review by the Board of
Directors, but no rights of third parties shall be affected by such review. The
Secretary of the Corporation, or, in his absence, an Assistant Secretary, shall
act as secretary to the Executive Committee; or the Committee may, in its
discretion, appoint its own secretary.
SECTION 4. Vacancies. Any vacancy in the Executive Committee shall be
filled by vote of a majority of the whole Board of Directors.
ARTICLE IV
OTHER COMMITTEES
The Board of Directors, by resolution adopted by a majority of the
whole Board, may designate from among its members other committees in addition
to the Executive Committee, each consisting of two (2) or more directors and
each of which, to the extent provided in such resolution, shall have and may
exercise all the authority of the Board of Directors, provided that no such
committee shall have the authority of the Board of Directors in reference to:
(1) approving or proposing to shareholders any action required by applicable law
to be approved by the shareholders of the Corporation; (2) the filling of
vacancies on the Board of Directors or any of its committees; (3) amending the
Articles of Incorporation of the Corporation; (4) the adoption, amendment or
repeal of any Bylaws of the Corporation; or (5) the approval of a plan of merger
or consolidation, the sale, lease, exchange or other disposition of all or
substantially all of the property and assets of the Corporation, or a voluntary
dissolution of the Corporation or a revocation thereof. The provisions of
Section 2 of Article III as to the Executive Committee and its deliberations
shall be applicable to any such other committee of the Board of Directors.
ARTICLE V
OFFICERS AND AGENTS; POWERS AND DUTIES
SECTION 1. Officers. The Board of Directors shall elect a Chairman (who
shall be a director), a President, a Secretary and a Treasurer. The Board of
Directors may also elect one or more Vice Chairmen, one or more Vice Presidents
(one or more of whom may be designated an Executive Vice President and one or
more of whom may be designated a Senior Vice President and one or more of whom
may be designated a Group Vice President), a Controller and such other officers
and agents of the Corporation as from time to time may appear to be necessary or
advisable in the conduct of the affairs of the Corporation. The Board shall
designate from among such elected officers a Chief Executive Officer and may
designate from among such elected officers a Chief Operating Officer. Any two or
more offices may be held by the same person, except that the office of President
and the office of Secretary shall be held by separate persons. In addition to
the authority of the Board of Directors set forth in this Section 1, the Chief
Executive Officer shall have the authority to appoint one or more Vice
Presidents, none of whom may be designated an Executive Vice President, Senior
Vice President or Group Vice President (a "CEO Appointed Office"). Individuals
appointed to CEO Appointed Offices by the Chief Executive Officer shall be
officers of the Corporation as fully as if elected by the Board of Directors.
SECTION 2. Term of Office. So far as practicable, all officers shall be
elected at the organization meeting of the Board of Directors in each year, and,
subject to the provisions of Section 3 of this Article V, each officer shall
hold office until the organization meeting of the Board of Directors in the next
subsequent year and until his successor has been elected and has qualified, or
until his earlier resignation, removal from office, or death.
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<PAGE>
SECTION 3. Removal of Officers. Any officer may be removed at any time,
either with or without cause, by the Board of Directors at any meeting. Any
officer holding a CEO Appointed Office, whether elected to such office by the
Board or appointed by the Chief Executive Officer, may be removed at any time,
either with or without cause, by the Chief Executive Officer, except for such
individuals holding CEO Appointed Offices who also hold any of the titles of
Controller, Treasurer or Secretary.
SECTION 4. Vacancies. If any vacancy occurs in any office, the Board of
Directors may elect a successor to fill such vacancy for the remainder of the
term. If a vacancy occurs in any CEO Appointed Office, the Chief Executive
Officer may appoint a successor to fill such vacancy for the remainder of the
term.
SECTION 5. Chief Executive Officer. The Chief Executive Officer shall,
under the direction of the Board of Directors, have general direction of the
Corporation's business, policies and affairs. He shall preside, when present, at
all meetings of the shareholders and, in the absence of the Chairman of the
Executive Committee, at all meetings of the Executive Committee. He, the Vice
Chairmen, the President and the Chief Operating Officer shall each have general
power to execute bonds, deeds and contracts in the name of the Corporation and
to affix the corporate seal; to sign stock certificates; and to remove or
suspend such employees or agents as shall not have been appointed by the Board
of Directors. In the absence or disability of the Chief Executive Officer, his
duties shall be performed and his powers may be exercised by the Chief Operating
Officer or by such other officer as shall be designated by the Board of
Directors.
SECTION 6. Chief Operating Officer. The Chief Operating Officer shall,
under the direction of the Chief Executive Officer, have direct superintendence
of the Corporation's business, policies, properties and affairs. He shall have
such further powers and duties as from time to time may be conferred upon, or
assigned to, him by the Board of Directors or the Chief Executive Officer. In
the absence or disability of the Chief Executive Officer, the Chief Operating
Officer shall perform his duties and may exercise his powers.
SECTION 7. Chairman. The Chairman shall preside, when present, at all
meetings of the Board of Directors and shall have such other powers and duties
as from time to time may be conferred upon or assigned to him by the Board of
Directors or the Chief Executive Officer (if the Chairman is not the Chief
Executive Officer).
SECTION 8. Vice Chairmen. Each of the several Vice Chairmen shall have
such powers and duties as from time to time may be conferred upon or assigned to
him by the Board of Directors or the Chief Executive Officer (if such Vice
Chairman is not the Chief Executive Officer).
SECTION 9. President. The President shall have such powers and duties
as from time to time may be conferred upon or assigned to him by the Board of
Directors or the Chief Executive Officer (if the President is not the Chief
Executive Officer).
SECTION 10. Vice Presidents. The several Vice Presidents shall have
such powers and duties as shall be assigned to or required of them, from time to
time, by the Board of Directors, the Chief Executive Officer or the Chief
Operating Officer.
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<PAGE>
SECTION 11. Secretary. The Secretary shall attend to the giving of
notice of all meetings of shareholders and of the Board of Directors and shall
keep and attest true records of all proceedings thereat. He shall have the
responsibility of authenticating records of the Corporation. He shall have
charge of the corporate seal and have authority to attest any and all
instruments or writings to which the same may be affixed. He shall keep and
account for all books, documents, papers and records of the Corporation, except
those which are hereinafter directed to be in the charge of the Treasurer or the
Controller. He shall have authority to sign stock certificates and shall
generally perform all the duties usually appertaining to the office of secretary
of a corporation. In the absence of the Secretary, an Assistant Secretary or
Secretary pro tempore shall perform his duties.
SECTION 12. Treasurer. The Treasurer shall have the care and custody of
all moneys, funds and securities of the Corporation and shall deposit or cause
to be deposited all funds of the Corporation in and with such depositories as
shall, from time to time, be designated by the Board of Directors or by such
officers of the Corporation as may be authorized by the Board of Directors to
make such designation. He shall have power to sign stock certificates; to
endorse for deposit or collection, or otherwise, all checks, drafts, notes,
bills of exchange or other commercial paper payable to the Corporation; and to
give proper receipts or discharges therefor.
SECTION 13. Controller. The Controller shall keep complete and accurate
books of account relating to the business of the Corporation, including records
of all assets, liabilities, commitments, receipts, disbursements and other
financial transactions of the Corporation, and its divisions and subsidiaries.
He shall render a statement of the Corporation's financial condition whenever
required to do so by the Board of Directors, the Chief Executive Officer, the
Chief Operating Officer or the Executive Vice President - Finance.
SECTION 14. Attorneys. The Board of Directors may, from time to time,
appoint one or more attorneys-in-fact to act for and in representation of the
Corporation, either generally or specially, judicially or extra-judicially, and
may delegate to any such attorney or attorneys-in-fact all or any powers which,
in the judgment of the Board of Directors, may be necessary, advisable,
convenient or suitable for exercise in any country or jurisdiction in the
administration or management of the business of the Corporation, or the defense
or enforcement of its rights, even though such powers be herein provided or
directed to be exercised by a designated officer of the Corporation, or by the
Board of Directors. The act of the Board of Directors in conferring any such
powers upon, or delegating the same to, any attorney-in-fact shall be conclusive
evidence in favor of any third person of the right of the Board of Directors so
to confer or delegate such powers; and the exercise by any attorney-in-fact of
any powers so conferred or delegated shall in all respects be binding upon the
Corporation.
SECTION 15. Additional Powers and Duties. In addition to the foregoing
especially enumerated duties and powers, the several officers of the Corporation
shall perform such other duties and exercise such further powers as may be
provided by these Bylaws or as the Board of Directors may, from time to time,
determine, or as may be assigned to them by any competent superior officer.
SECTION 16. Compensation. The compensation of all officers of the
Corporation shall be fixed, from time to time, by the Board of Directors.
SECTION 17. Designated Positions and Titles. The Chief Executive
Officer may, from time to time, designate employees ("Designated Employees") to
serve in such designated capacities for the Corporation and to hold such nominal
titles (such as a designated officer of a group, division or of another area of
the business affairs of the Corporation) as the Chief Executive Officer may deem
appropriate. No individual designated pursuant to this Section 17 shall, by
reason of such designation, become an officer of the Corporation. Each
Designated Employee shall perform such duties and shall have such authority as
shall be delegated to him from time to time by the Chief Executive Officer. Any
title granted to any Designated Employee pursuant to this Section 17 may be
withdrawn, with or without cause, at any time by the Chief Executive Officer,
and any duty or authority delegated to any Designated Employee pursuant to this
Section 17 may be withdrawn, with or without cause, at any time by the Chief
Executive Officer.
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<PAGE>
ARTICLE VI
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 1. Indemnified Parties. Every person (and the heirs and
personal representatives of such person) who is or was a director, officer,
employee or agent of the Corporation, or of any other corporation, partnership,
joint venture, trust or other enterprise in which he served as such at the
request of the Corporation, shall be indemnified by the Corporation in
accordance with the provisions of this Article VI against any and all liability
and expense (including, without limitation, counsel fees and disbursements, and
amounts of judgments, fines or penalties against, or amounts paid in settlement
by, a director, officer, employee or agent) actually and reasonably incurred by
him in connection with or resulting from any threatened, pending or completed
claim, action, suit or proceeding, whether civil, criminal, administrative, or
investigative or in connection with any appeal relating thereto, in which he may
become involved, as a party or otherwise, or with which he may be threatened, by
reason of his being or having been a director, officer, employee or agent of the
Corporation or such other corporation, partnership, joint venture, trust or
other enterprise, or by reason of any action taken or omitted by him in his
capacity as such director, officer, employee or agent whether or not he
continues to be such at the time such liability or expense shall have been
incurred.
SECTION 2. Indemnification As of Right. Every person (and the heirs and
personal representatives of such person) referred to in Section I of this
Article VI, to the extent that such person has been successful on the merits or
otherwise with respect to any claim, action, matter, suit or proceeding of the
character described in Section 1, shall be entitled to indemnification as of
right for expenses (including attorneys' fees) actually and reasonably incurred
by him in connection therewith.
SECTION 3. Indemnification Based on Review. Except as provided in
Section 2 of this Article VI, upon receipt of a claim for indemnification
hereunder, the Corporation shall proceed as follows, or as otherwise permitted
by applicable law. If the claim is made by a director or officer of the
Corporation, the Board of Directors, by a majority vote of a quorum consisting
of directors who were not parties to the applicable action, suit or proceeding,
shall determine whether the claimant met the applicable standard of conduct as
set forth in Subsections (A) and (B) below. If such quorum is not obtainable or,
even if obtainable, a quorum of disinterested directors so directs, such
determination shall be made by independent legal counsel (who may be the regular
inside or outside counsel of the Corporation) in a written opinion. If such
determination has not been made within 90 days after the claim is asserted, the
claimant shall have the right to require that the determination be submitted to
the shareholders at the next regular meeting of shareholders by vote of a
majority of the shares entitled to vote thereon. If a claim is made by a person
who is not a director or officer of the Corporation, the Chief Executive Officer
and the general counsel of the Corporation shall determine, subject to
applicable law, the manner in which there shall be made the determination as to
whether the claimant met the applicable standard of conduct as set forth in
Subsections (A) and (B) below. In the case of each claim for indemnification,
the Corporation shall pay the claim to the extent the determination is favorable
to the person making the claim.
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<PAGE>
(A) In the case of a claim, action, suit or proceeding other than by or
in the right of the Corporation to procure a judgment in its favor, the
director, officer, employee or agent must have acted in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
in addition, in any criminal action or proceeding, had no reasonable cause to
believe that his conduct was unlawful. In addition, any director seeking
indemnification must not have been adjudged liable on the basis that any
personal benefit was received by him. For the purpose of this Subsection (A),
the termination of any claim, action, suit or proceeding, civil, criminal or
administrative, by judgment, order, settlement (either with or without court
approval) or conviction, or upon a plea of guilty or nolo contenders or its
equivalent, shall not create a presumption that a director, officer, employee or
agent did not meet the standards of conduct set forth in this Subsection.
(B) In the case of a claim, action, suit or proceeding by or in the
right of the Corporation to procure a judgment in its favor, the director,
officer, employee or agent must have acted in good faith in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation; provided, however, that no indemnification under this Subsection
(B) shall be made (1) with regard to any claim, issue or matter as to which such
director, officer, employee or agent shall have been adjudged to be liable to
the Corporation unless and only to the extent that the court in which such
action or suit was brought shall determine that, despite the adjudication of
liability but in view of all the circumstances of the case, such director,
officer, employee or agent is fairly and reasonably entitled to indemnity for
such expenses which the court shall deem proper, or (2) for amounts paid, or
expenses incurred, in connection with the defense or settlement of any such
claim, action, suit or proceeding, unless a court of competent jurisdiction has
approved indemnification with regard to such amounts or expenses.
SECTION 4. Advances. Expenses incurred with respect to any claim,
action, suit or proceeding of the character described in Section 1 of this
Article VI shall be advanced by the Corporation prior to the final disposition
thereof upon receipt of an undertaking by or on behalf of the recipient to repay
such amount if it shall be ultimately determined that he is not entitled to
indemnification under this Article VI.
SECTION 5. General. The rights of indemnification and advancement of
expenses provided in this Article VI shall be in addition to any rights to which
any such director, officer, employee or other person may otherwise be entitled
by contract or as a matter of law. Each person who shall act as a director,
officer, employee or agent of the Corporation or of any other corporation
referred to in Section 1 of this Article VI, shall be deemed to be doing so in
reliance upon the right of indemnification provided for in this Article VI, and
this Article VI constitutes a contract between the Corporation and each of the
persons from time to time entitled to indemnification hereunder, and the rights
of each such person hereunder may not be modified without the consent of such
person.
ARTICLE VII
STOCK AND TRANSFER OF STOCK
SECTION 1. Direct Registration of Shares. The Corporation may, with the
Board of Directors' approval, participate in a direct registration system
approved by the Securities and Exchange Commission and by the New York Stock
Exchange or any securities exchange on which the stock of the Corporation may
from time to time be traded, whereby shares of capital stock of the Corporation
may be registered in the holder's name in uncertificated, book-entry form on the
books of the Corporation.
SECTION 2. Stock Certificates. Except in the case of shares represented
in book-entry form under a direct registration system contemplated in Section 1
of this Article VII, every shareholder shall be entitled to a certificate signed
by the Chairman, the President or a Vice President and the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer, certifying the
number of shares owned by him in the Corporation and that those shares are fully
paid and non-assessable. Where any such certificate is countersigned by either a
Transfer Agent or a Registrar (other than the Corporation or one of its
employees) designated by the Corporation for that purpose, any other signature
on such certificate may be a facsimile, engraved, stamped or printed. In case
any person who served as any such officer shall have signed any such certificate
or whose facsimile signature shall have been placed thereon shall have ceased to
hold such office prior to the issue of such certificate, such certificate may be
issued at the direction of the Corporation with the same effect as if such
person held such office at the date of the issue of such certificate.
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<PAGE>
SECTION 3. Transfer Agents and Registrars. The Board of Directors may,
in its discretion, appoint responsible banks or trust companies in such city or
cities as the Board may deem advisable, from time to time, to act as Transfer
Agents and Registrars of the stock of the Corporation; and, upon such
appointments being made, no stock certificate shall be valid until countersigned
by one of such Transfer Agents and registered by one of such Registrars.
SECTION 4. Transfer of Stock. Except in the case of shares represented
in book-entry form under a direct registration system contemplated in Section 1
of this Article VII, shares of stock may be transferred by delivery of the
certificates therefor, accompanied either by an assignment, in writing on the
back of the certificates or by written power of attorney to sell, assign and
transfer the same, signed by the record holder thereof; but no transfer shall
affect the right of the Corporation to pay any dividend upon the stock to the
holder of record thereof, or to treat the holder of record as the holder in fact
thereof for all purposes, and no transfer shall be valid, except between the
parties thereto, until such transfer shall have been made upon the books of the
Corporation.
SECTION 5. Lost Certificates. In case any certificate of stock shall be
lost, stolen or destroyed, the Board of Directors or the Executive Committee, in
its discretion, may authorize the issue of a substitute certificate in place of
the certificate so lost, stolen or destroyed, and may cause such substitute
certificate to be countersigned by the appropriate Transfer Agent and registered
by the appropriate Registrar; provided, that, in each such case, the applicant
for a substitute certificate shall furnish to the Corporation, or to its
Transfer Agents and Registrars, satisfactory evidence of the loss, theft or
destruction of such certificate and of the ownership thereof, and also such
security or indemnity as may be required by any of such parties.
ARTICLE VIII
MISCELLANEOUS
SECTION 1. Inspection of Books and Records. The Board of Directors
shall have power to determine which accounts, books and records of the
Corporation shall be opened to the inspection of shareholders, except those as
may by law specifically be made open to inspection, and shall have power to fix
reasonable rules and regulations not in conflict with the applicable law for the
inspection of accounts, books and records which by law or by determination of
the Board of Directors shall be open to inspection. Without the prior approval
of the Board of Directors in its discretion, the right of inspection set forth
in Section 14-2-1602(c) of the Georgia Business Corporation Code shall not be
available to any shareholder owning two percent or less of the shares
outstanding.
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<PAGE>
SECTION 2. Fiscal Year. The fiscal year of the Corporation shall end on
the Saturday closest to December 31. The quarterly periods shall be on a 13 week
basis ending on a Saturday.
SECTION 3. Surety Bonds. Such officers or agents of the Corporation as
the Board of Directors may direct, from time to time, shall be bonded for the
faithful performance of their duties, in such amounts and by such surety
companies as the Board of Directors may determine. The premiums on such bonds
shall be paid by the Corporation, and the bonds so furnished shall be in the
custody of the Secretary.
SECTION 4. Signature of Negotiable Instruments. All bills, notes,
checks or other instruments for the payment of money shall be signed or
countersigned by such officers and in such manner as, from time to time, may be
prescribed by resolution (whether general or special) of the Board of Directors.
SECTION 5. Conflict with Articles of Incorporation. In the event that
any provision of these Bylaws conflicts with any provision of the Articles of
Incorporation, the Articles of Incorporation shall govern.
SECTION 6. Election of Certain Provisions of Georgia Business
Corporation Code. All requirements and provisions of Parts 2 and 3 of Article 11
of the Georgia Business Corporation Code, as may be in effect from time to time,
including any successor statutes, shall be applicable to any "business
combination" (as respectively defined in Parts 2 and 3 of such Article 11) of
the Corporation.
ARTICLE IX
AMENDMENTS
Subject to the provisions of the Georgia Business Corporation Code, the
Board of Directors shall have the power to alter, amend or repeal these Bylaws
or to adopt new bylaws, but any bylaws adopted by the Board of Directors may be
altered, amended or repealed, and new bylaws adopted, by the shareholders. The
shareholders may prescribe that any bylaw or bylaws adopted by them shall not be
altered, amended or repealed by the Board of Directors. Action by the directors
with respect to the Bylaws shall be taken by an affirmative vote of a majority
of all of the directors then in office. Except as provided in the Articles of
Incorporation, action by the shareholders with respect to the Bylaws shall be
taken by an affirmative vote of the holders of a majority of the voting power of
the outstanding capital stock of the Corporation entitled to vote generally in
the election of directors, voting as a separate voting group.
The undersigned Secretary of Georgia-Pacific Corporation, a Georgia
corporation, hereby certifies that the foregoing is a true and complete copy of
the Bylaws of the said Corporation, as at present in full force and effect.
Witness the hand of the undersigned and the seal of the said
Corporation this 21st day of January, 2000.
/s/ Kenneth F. Khoury
------------------------------
Kenneth F. Khoury
Vice President, Deputy General
Counsel and Secretary
#180203
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EXHIBIT 4.3(ii)
AMENDMENT NO. 1 TO AMENDED AND RESTATED RIGHTS AGREEMENT
AMENDMENT No. 1, dated as of November 8, 1999, to the Amended and
Restated Rights Agreement, dated as of December 16, 1997 (the "Rights
Agreement"), between Georgia-Pacific Corporation, a Georgia corporation (the
"Company"), and First Chicago Trust Company of New York, as Rights Agent (the
"Rights Agent").
WHEREAS, the Company and the Rights Agent entered into the Rights
Agreement, specifying the terms of the Rights (as defined therein);
WHEREAS, the Company and the Rights Agent desire to amend the Rights
Agreement, in accordance with Section 26 of the Rights Agreement;
NOW, THEREFORE, in consideration of the premises and mutual agreements
set forth in the Rights Agreement, and this Amendment No. 1, the parties hereby
agree as follows:
1. The definition of "Independent Director" in Section 1(m) is hereby
amended and restated as follows:
"(m) "Independent Director" shall mean a member of the Board of
Directors of the Company (i) who is not, and has never been, an officer or
employee of the Company, and (ii) who is not (A) an Acquiring Person or an
Affiliate or Associate of an Acquiring Person or (B) a Person which shall have
made a proposal to the Company or its shareholders, or taken any other action
that, if effective, could cause such Person to become an Acquiring Person
hereunder, or an Affiliate or Associate of any such Person."
2. The text of the present paragraph in Section 23 shall be amended by
adding new sub-paragraphs (c) and (d) at the end thereof as follows:
"(c) It is understood that the TIDE Committee (as defined below) of the
Board of Directors of the Company shall review and evaluate this Agreement to
determine whether the maintenance of this Agreement continues to be in the
interests of the Company, its shareholders and any other relevant constituencies
of the Company, at least once every three years, or sooner than that if any
Person shall have made a proposal to the Company or its shareholders, or taken
any other action that, if effective, could cause such Person to become an
Acquiring Person hereunder, unless a majority of the members of the TIDE
Committee shall determine that such review and evaluation are not appropriate
after giving due regard to all relevant circumstances. Following each such
review, the TIDE Committee will communicate its conclusions to the full Board of
Directors, including any recommendation in light thereof as to whether this
Agreement should be modified or the Rights should be terminated. The TIDE
Committee shall be comprised of Independent Directors selected by the Governance
Committee of the Board, and may be the Governance Committee so long as all of
its members are Independent Directors.
(d) The TIDE Committee (and the Independent Directors, when considering
the termination of, or any supplement or amendment to, the Rights requiring
approval of the
<PAGE>
Independent Directors) shall have the power to set their own agenda and to
retain at the expense of the Company their choice of legal counsel, investment
bankers and other advisors. The TIDE Committee (and the Independent Directors,
when considering termination of, or amendments or supplements to, the Rights, as
described above) shall have the authority to review all information of the
Company and to consider any and all factors they deem relevant to an evaluation
of whether to maintain or modify the Agreement or terminate the Rights."
3. The term "Agreement" as used in the Rights Agreement shall be deemed
to refer to the Rights Agreement as amended hereby.
4. The foregoing amendment shall be effective as of the date hereof
and, except as set forth herein, the Rights Agreement shall remain in full force
and effect and shall otherwise be unaffected hereby.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1
to be duly executed, all as of the date first above written.
ATTEST: GEORGIA-PACIFIC CORPORATION
By: /s/ Kenneth F. Khoury By: /s/ James F. Kelley
---------------------------------- -----------------------------------
Name: Kenneth F. Khoury Name: James F. Kelley
Title: Vice President & Deputy Title: Senior Vice President - Law &
General Counsel & Secretary General Counsel
ATTEST: FIRST CHICAGO TRUST COMPANY
OF NEW YORK
By: /s/ Authorized Officer By: /s/ Authorized Officer
---------------------------------- -----------------------------------
Name: Name:
Title: Title:
EXHIBIT 10.6
September 22, 1999
Mr. John F. McGovern
4456 Paces Battle Drive
Atlanta, Georgia 30327
Dear Jack:
This letter will confirm our agreement regarding your resignation from
Georgia-Pacific Corporation ("Georgia-Pacific" or the "Company"). As we
discussed, the effective date of your resignation as Executive Vice President -
Finance and Chief Financial Officer will be November 1, l999, and you will
submit your formal resignation from that position and from any other officer or
director positions you may hold with any Georgia-Pacific subsidiary effective on
that date.
As a result of your resignation, you will be entitled to the same normal
benefits as any similarly situated employee of the Company. In addition, we have
agreed to the following arrangements:
1) You will be allowed to defer your resignation as a regular
employee until February 29, 2000 (your "deferred resignation
date"). During this extended employment period, we will
continue your pay at your current base rate of $475,000/annum.
Except as provided below, you will continue to be eligible for
all perquisites of officer status until December 31, 1999 and
for all benefits of employment as a regular salaried employee
until your deferred resignation date.
You will not be expected (nor will you be authorized) to
perform any duties for or on behalf of Georgia-Pacific after
November 1, 1999. However, during your extended employment
period, you will be expected to abide by the same employment
policies as other regular salaried employees, including but
not limited to the Code of Business Conduct. In the unlikely
event you violate those policies, you would, as any other
employee, be subject to such employment action and benefits as
the timing and circumstances would warrant.
Deferring the effective date of your resignation has the
following effect on your normal benefits:
a) You will continue to accrue benefits under the
Georgia-Pacific Corporation Salaried Employees
Retirement Plan ("SERP") and the Georgia-Pacific
Corporation Savings and Capital Growth Plan ("Savings
Plan") through your deferred resignation date. You
may request distribution of your vested account
balance under the Savings Plan and your Personal
Account balance under the SERP following your
deferred resignation date. You may also elect to
leave your funds in the plans (but no later than your
attainment of age 70 1/2) and withdraw them at some
future time of your choosing. Under the Savings Plan
and the SERP, you are eligible for a lump sum
distribution of your account balance or Personal
Account (as the case may be) at any time, or in the
alternative, an immediate or deferred annuity
commencing at a time of your choosing (but no later
than age 70 1/2). You should note that the "annuity
equivalent" of the portion of your account balance
under the Savings Plan attributable to Company
contributions and your Personal Account balance under
the SERP will reduce your
<PAGE>
Mr. John F. McGovern
September 22, 1999
Page 2
benefits under your Officer Retirement Agreement,
regardless of whether you have received your
distribution of these amounts or not.
b) Your present executive (face amount $950,000) and
supplemental (face amount $200,000) life insurance
will terminate on your deferred resignation date.
However, you may then convert your executive and
supplemental life insurance coverages to individual
policies by contacting the Human Resources Service
Center. You will have 31 days from your deferred
resignation date to accomplish this conversion.
During this conversion period, you will continue to
be covered under the life insurance program. At the
end of the conversion period, your coverage will stop
if you have not elected to convert your coverage to
an individual policy.
c) Your present (active employee) medical/dental/vision
and long-term disability coverages will terminate on
your deferred resignation date. Under COBRA, however,
you will be entitled to continue your present
medical/dental/vision plan coverage for a maximum of
eighteen (18) months thereafter. You will receive
more detailed information regarding the procedures
for electing this coverage under separate cover.
2) We will pay you a lump sum of $673,147, less applicable tax
withholding, will be paid to you as soon as practicable after
January 1, 2000.
3) We will pay you $45,673 in lieu of all earned and accrued
vacation entitlements after November 1, 1999. This sum, less
applicable tax withholding, will be paid to you as soon as
practicable after your deferred resignation date.
4) You will receive a bonus under the Georgia-Pacific Corporation
Economic Value Incentive Plan (the "Incentive Plan") for 1999
in an amount determined by the Compensation Committee of the
Board of Directors of the Company, which shall not be less
than $299,300. This payment, less applicable tax withholding,
will be made to you at the time Incentive Plan payments are
made to regular participants. You will not be entitled to any
payment under the Incentive Plan for 2000.
5) We will amend your stock option agreements under the
Georgia-Pacific Corporation 1995 Shareholder Value Incentive
Plan ("SVIP"), the Georgia-Pacific Corporation/Georgia-Pacific
Group 1997 Long-Term Incentive Plan ("G-P LTIP"), and the
Georgia-Pacific Corporation/Timber Group 1997 Long-Term
Incentive Plan ("Timber LTIP") to provide for accelerated
vesting and/or extended exercise periods for certain of your
outstanding options (except for your 1997 grants under the
SVIP) so that, as of your deferred resignation date, your
outstanding options will be vested and exercisable as follows:
--------------------- ---------- ---------- ---------------------------
PLAN AWARD DATE VESTED EXERCISE PERIOD
PERCENTAGE
--------------------- ---------- ---------- ---------------------------
SVIP (G-P and Timber
Stock) 04/01/95 100% Through March 31, 2005
--------------------- ---------- ---------- ---------------------------
SVIP (G-P and
Timber Stock) 02/01/96 100% Through January 31, 2006
--------------------- ---------- ---------- ---------------------------
1997 Timber LTIP 12/17/97 100% Through December 31, 2005
--------------------- ---------- ---------- ---------------------------
<PAGE>
Mr. John F. McGovern
September 22, 1999
Page 3
--------------------- ---------- ---------- ---------------------------
1997 G-P LTIP 01/29/98 100% Through December 31, 2005
--------------------- ---------- ---------- ---------------------------
1997 G-P LTIP 01/28/99 100% Through December 31, 2005
--------------------- ---------- ---------- ---------------------------
In the event that your February 3, 1997 grants under the SVIP
to purchase G-P Stock and/or Timber Stock vest on February 3,
2000 due to attainment of the SVIP's performance standards,
you will be able to exercise the vested options at any time
prior to February 3, 2007. If either of such grants do not
vest on February 3, 2000, then the Company, at its option, may
either i) amend the SVIP to provide for 100% vesting and an
extended exercise period for either of such options through
February 2, 2007, or ii) pay you a lump sum amount equal to
the excess of the closing price of G-P Stock or Timber Stock,
as applicable, on any date before February 3, 2007 selected by
you, over the stated exercise price for such options.
In addition, your Performance Share Grant Agreement under the
G-P LTIP dated January 28, 1999 will be amended to waive the
five year vesting requirement with respect to any Performance
Shares which are awarded for the Performance Period ending on
December 31, 1999.
6) We will amend your Officer Retirement Agreement so that you
will be eligible to receive "Early Retirement" benefits
beginning in March 2000, but otherwise subject to the terms
and conditions of the Agreement, including but not limited to
Section 9. Your monthly early retirement benefit at such time
will equal 72 percent of your accrued monthly normal
retirement benefit as of your deferred resignation date. Your
accrued monthly normal retirement benefit is 50 percent of
your average monthly cash salary reduced by the "annuity
equivalent" (as defined in the agreement) of your benefit
entitlements under any other retirement plans sponsored by
Georgia-Pacific or its subsidiaries (to the extent
attributable to Georgia-Pacific's contributions). Your monthly
"cash salary" will be calculated as of December 31, 1999 and
will take into account your base salary (including deferrals
in the Savings Plan) and incentive bonuses during your 48
months of employment immediately preceding that date. If
certain conditions are met, the agreement provides death
benefits for your surviving spouse.
7) The Company will pay the premiums for extended
medical/dental/vision coverage under COBRA for you and your
dependents for a maximum of eighteen months following your
deferred resignation date. In order to implement this
coverage, when you receive your COBRA notice, you must
promptly elect continuation coverage in accordance with the
instructions in the notice. The Company payment will be made
directly to the applicable health plan. At the end of the
COBRA continuation coverage period, the Company will provide
continued medical benefits for you and your dependents that
are substantially similar to the medical benefits provided
under Georgia-Pacific's retiree medical program as in effect
from time to time. You will be required to contribute 50% of
the premium costs for such benefits until you attain age 65
and 100% of the premium costs thereafter. Any such medical
benefits may, at the Company's option, be provided through the
purchase of an insurance policy. Regardless of whether your
medical benefits are provided through insurance or otherwise,
the amount of your premium costs shall be the same as the
premium charged to participants under Georgia-Pacific's
retiree medical program from time to time.
If you have any questions concerning your termination or welfare benefits
contact Patricia A. Barnard in the Compensation and Benefits Department in
Atlanta at 404/652-5584. Questions pertaining to the SVIP,
<PAGE>
Mr. John F. McGovern
September 22, 1999
Page 4
the 1997 Timber LTIP, or the 1997 G-P LTIP should be directed to First Chicago
Trust at 1-888-700-3837. Of course, all benefits will be subject to applicable
taxes as well as to the terms and conditions of the applicable benefit plan,
policy or arrangement.
As you know, the arrangement detailed above adds substantially to those benefits
to which you are normally entitled upon your separation from Georgia-Pacific. In
consideration of these additional benefits, and so that there will be no
misunderstanding as to your entitlement to any additional money or benefits, you
must agree to release Georgia-Pacific, all related companies, and their
officers, directors, and employees, from all actions, claims and liabilities of
any kind arising out of either your employment with Georgia-Pacific or your
separation from employment. This release includes (but is not limited to) any
rights or claims you may have under the Age Discrimination in Employment Act,
which prohibits age discrimination in employment; Title VII of the Civil Rights
Act of 1964, which prohibits discrimination in employment based on race, color,
national origin, religion or sex; the Americans with Disabilities Act, which
prohibits discrimination in employment based on disability; the Equal Pay Act,
which prohibits paying men and women unequal pay for equal work; or any other
federal, state or local laws or regulations prohibiting employment
discrimination. This also includes a release of any claims for wrongful
discharge arising from your separation from employment and any claims under any
Georgia-Pacific severance plan. This release includes both claims that you know
about and those you may not know about. However, this release does not affect
your rights under this resignation agreement, any claim for indemnification
under the "Indemnification of Directors and Officers" article of the
Georgia-Pacific Corporation By-laws or any rights you have accrued under the
SERP, the Savings Plan, your Officer Retirement Agreement (as amended) or
insurance or other welfare benefit plans (other than any severance plans or
arrangements). Nor does this release waive or release any rights or claims that
you may have under the Age Discrimination in Employment Act which arise after
the date you sign this agreement. Of course, I know you understand that nothing
in this letter is to be construed as an admission of liability of wrongdoing of
any sort by Georgia-Pacific.
The special benefits package described above is also conditioned on your promise
never to file a lawsuit asserting any claims which are included in the release
set out in the preceding paragraph. If you break this promise, you agree to pay
for all costs incurred by Georgia-Pacific, any related company, or the directors
or employees of any of them, including reasonable attorneys' fees in defending
against your claim. Moreover, if you file any such lawsuit or other claim, you
agree that Georgia-Pacific has the right, in its sole discretion, not to pay any
special payment outlined above and/or to cease the payment of any further
benefits under the special arrangement outlined above, and you further agree to
tender back any and all payments previously paid under this agreement.
As another condition, you must agree to provide, to the extent necessary,
reasonable cooperation and consultation with the Company and its attorneys
regarding any litigation or claims arising our of matters that were under your
management or responsibility. Obviously, Georgia-Pacific will reimburse your
reasonable out-of-pocket expenses associated with such cooperation and
assistance.
As a final condition, you must agree to keep the terms of this agreement
confidential. You agree not to disclose any provision of this agreement to
anyone except as set forth below or as necessary in the filing of your tax
returns or with the express written consent of Georgia-Pacific.
I urge you to think over the terms of this proposed agreement carefully before
accepting it and to discuss it with your family, an attorney of your choice or
your financial advisor before making a decision. Our offer will remain open for
twenty-one days from the date of this letter. Once you have agreed to the terms
<PAGE>
Mr. John F. McGovern
September 22, 1999
Page 5
set out in this letter (as evidenced by your signature below) you will have one
week in which to revoke your decision. This agreement will not become effective
or enforceable until one week from the date of your signature (assuming of
course, that you do not revoke it), and thus the special payments described
above cannot be paid prior to that time.
If you feel you need more time to make a decision or if you would like to
discuss this matter further, let me know. By signing below, you are indicating
that you have discussed the terms of our proposed agreement with whomever you
wished, that you have had as much time as you wished in which to consider it,
that you fully understand it, including its final and binding effect, and that
you fully and voluntarily agree to the terms and conditions set forth. By
signing below, you are also indicating that the terms and provisions set forth
in this letter constitute the entire agreement between you and Georgia-Pacific
and supersede all previous communications, negotiations, proposals,
representations, conditions, or other agreements, whether written or oral,
between you and Georgia-Pacific with respect to the subject matter of this
letter.
Finally, it is routine for the Company to remind all departing employees, but
especially departing officers, of their obligations under the Employee
Confidential Information and Invention Agreement. As you are no doubt aware,
this agreement requires you to maintain in perpetuity the confidentiality of
Company trade secrets and any other secret, confidential, or proprietary
information of the Company, including, but not limited to, secret, confidential
or proprietary information concerning:
--Company products, equipment, processes, formulas, methods and procedures;
--Company personnel, customers, suppliers, contractors, and agents;
--Company plans, strategies, records, communications, and procedures,
including but not limited to litigation strategies, information
developed in anticipation of litigation and information protected by
the attorney/client privilege; and
--computer software and documentation owned or licensed by the Company.
On behalf of Georgia-Pacific, I extend to you my best wishes for success in your
future endeavors.
Sincerely,
GEORGIA-PACIFIC CORPORATION
By: /s/ JAMES F. KELLEY
-------------------
James F. Kelley
Senior Vice President - Law
and General Counsel
<PAGE>
Mr. John F. McGovern
September 22, 1999
Page 6
SO AGREED:
/s/ JOHN F. MCGOVERN
- -----------------------
John F. McGovern
Date: September 22, 1999
EXHIBIT 10.7
GEORGIA-PACIFIC CORPORATION
ECONOMIC VALUE INCENTIVE PLAN
(As Amended and Restated by Action of the Compensation Committee
on January 21, 2000)
By action of its Board of Directors on February 1, 1995,
Georgia-Pacific Corporation adopted the Georgia-Pacific Corporation 1995
Economic Value Incentive Plan ("EVIP") for its senior management and staff
effective for calendar year 1995 and subsequent Covered Years. By action of the
Compensation Committee on January 28, 1999, the EVIP was amended and restated as
the "Georgia-Pacific Corporation Economic Value Incentive Plan", effective for
calendar year 1999 and subsequent Covered Years. By action of the Compensation
Committee on January 21, 2000, the EVIP was further amended and restated to read
as follows:
I. DEFINITIONS
For purposes of the EVIP, the following terms or phrases shall have the
indicated meanings:
1. "Affected Officer" means any officer of Georgia-Pacific Corporation
as of January 1 of a given Covered Year (other than the CEO) who participates in
the EVIP for that Covered Year and who in the judgment of the Committee may
receive total compensation for that Covered Year in excess of the limit on tax
deductible compensation specified in Section 162(m) of the Internal Revenue Code
of 1986 or any statute which is the successor or replacement of Section 162(m),
as the same may be amended from time to time (and any regulations promulgated
thereunder). The Committee shall determine which officer Participants in this
Plan will be considered Affected Officers in a given Covered Year prior to March
31 of that Covered Year.
2. "Base Salary as of January 1 of that Covered Year" means a
Participant's base annual salary in effect on January 1 of a given Covered Year,
PROVIDED THAT the determination of "Base Salary on January 1 of that Covered
Year" shall take into account base salary increases
<PAGE>
retroactively effective to that date as approved (in accordance with normal
corporate procedures) by management or by the Committee or the Board on or
before March 31 of that Covered Year, and PROVIDED FURTHER THAT, for Employees
who become Participants for that Covered Year after the commencement of that
year, "Base Salary on January 1 of that Covered Year" shall mean such
Participant's base annual salary in effect on the date his/her participation
commences.
3. "Board" means the Board of Directors of the Corporation.
4. "Business Unit" means any operating group, business segment,
division or corporate staff department of the Corporation (including, without
limitation, the G-P Group and/or TTC) for which Relative EVA or EVA performance
standards are set for a given Covered Year.
5. "CEO" means the Chairman and Chief Executive Officer of
Georgia-Pacific Corporation or, if one person does not hold both of these
offices, the Chief Executive Officer of Georgia-Pacific Corporation.
6. "Committee" means the Compensation Committee of the Board, as
constituted from time to time, or such subcommittee of that body as the
Compensation Committee shall specify to act for the Compensation Committee with
respect to this Plan, provided however that any such subcommittee shall consist
entirely of (but not less than two) "outside directors" as that term is defined
pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended from
time to time, or any statute which is a successor or replacement for such
statute (and applicable regulations promulgated thereunder).
7. "Compensation" means midpoint of the Salary Grade of a Participant
for a given Covered Year determined as of January 1 of that Covered Year by the
Plan Administrator, provided that the determination of "Compensation" shall take
into account Salary Grade and Salary Grade midpoint increases retroactively
effective to that date as approved (in accordance with normal corporate
procedures) by management or by the Committee on or before the date of the
Board's first regular meeting during that Covered Year.
-2-
<PAGE>
8. "Corporation" means Georgia-Pacific Corporation and its
subsidiaries.
9. "Covered Year" means any calendar year beginning on or after January
1, 2000.
10. "Discretionary Bonus" means that portion of a Participant's award
under this Plan for a given Covered Year which is determined in accordance with
the provisions of subsection 2 of Section III.
11. "Discretionary Bonus Limit" means, for a given Covered Year, (i)
for Participants other than the CEO, the least of (A) the amount of the maximum
total Quantitative Bonus and Discretionary Bonus the Participant could receive
if both Target Relative EVA for the G-P Group and Target EVA for TTC were
achieved in that Covered Year (as determined by the Committee pursuant to
paragraphs 1(a)(ii) and (iii) of Section III), (B) 100% of the Participant's
Base Salary on January 1 of that Covered Year, reduced by any Quantitative Bonus
that may be payable for that Covered Year or (C); the amount of the maximum
total Quantitative Bonus and Discretionary Bonus the Participant could receive
if both Maximum Relative EVA for the G-P Group and Maximum EVA for TTC were
achieved in that Covered Year (as determined by the Committee pursuant to
paragraphs 1(a)(ii) and (iii) of Section III), reduced by any Quantitative Bonus
that may be payable for that Covered Year and (ii) for the CEO, the lesser of
(A) an amount equal to twice the Quantitative Bonus to which he would be
entitled for that Covered Year, or (B) 200% of the CEO's Base Salary on January
1 of that Covered Year, reduced by any Quantitative Bonus that may be payable
for that Covered Year.
12. "EVA" means "economic value added" for a given Covered Year, which
is defined, in the case of a given Business Unit, as "net operating profit after
tax" for that Business Unit for that Covered Year minus a capital charge
determined by multiplying its weighted average cost of debt and equity capital
for that Covered Year by that Business Unit's "average invested capital" for
that Covered Year. For purposes of determining Relative EVA performance of the
G-P Group, EVA for a given Peer Group Company will be "Indexed EVA" determined
by subtracting that Peer Group Company's weighted average cost of debt and
-3-
<PAGE>
equity capital from its "return on average invested capital" and multiplying the
difference by the G-P Group's "average invested capital". For purposes of this
definition: (i) "net operating profit after tax" for a given entity for a given
Covered Year is its reported net earnings for that Covered Year adjusted by (A)
adding its net interest expense for that Covered Year, (B) adding its goodwill
amortization for that Covered Year, (C) eliminating the effect of changes in its
LIFO inventory reserve for that Covered Year, (D) eliminating the effects of
Special Items during that Covered Year (such as non-recurring gains or losses,
disposals of assets, restructuring charges and similar items), and (E) adjusting
taxes for that Covered Year to reflect actual cash taxes paid and eliminating
the tax benefit of interest expense; (ii) "average invested capital" for a given
entity for a given Covered Year is the average of the sum of its short-tem debt,
long-term debt and adjusted book value of equity at the beginning of that
Covered Year and at the end of that Covered Year; and (iii) "return on average
invested capital" for a given entity for a given Covered Year is its "net
operating profit after tax" divided by its "average invested capital" for that
Covered Year. All determinations made under this subsection 12 shall be based
(a) with respect to the Corporation, on its unaudited financial results for the
Covered Year, and (b) with respect to each Peer Group Company, on its unaudited
financial results as reported on its Forms 10Q for the first three quarters of
the Covered Year plus its unaudited financial results for the fourth quarter of
the Covered Year determined from financial data provided in its earnings
releases in January of the immediately following calendar year using the same
assumptions, policies and procedures used by the Corporation to determine fourth
quarter financial results for each such Peer Group Company in 1999 for purposes
of calculating the 1999 awards under this Plan for Participants other than the
CEO and the four next most highly compensated Participants.
13. "Employee" means any exempt full-time, salaried employee of the
Corporation.
14. "G-P Group" means the Business Unit known as the "Georgia-Pacific
Group", VIZ. that portion of the business and operations of the Corporation
which is reflected by the
-4-
<PAGE>
class of the Corporation's common stock known as Georgia-Pacific
Corporation-Georgia-Pacific Group Common Stock.
15. "Maximum EVA" means the EVA performance level of TTC at which the
percentage of Compensation paid as a Quantitative Bonus reaches its maximum, as
determined by the Committee pursuant to subsection 1 of Section III.
16. "Maximum Relative EVA" means the Relative EVA performance level of
the G-P Group at which the percentage of Compensation paid as a Quantitative
Bonus reaches its maximum, as determined by the Committee pursuant to subsection
1 of Section III.
17. "Participant" means an Employee of the Corporation who, for a given
Covered Year, meets the eligibility standards of Section II.
18. "Peer Group Companies" means, for a given Covered Year, the
companies included in the Standard & Poors Paper and Forest Products Industry
Index (but excluding the Corporation) on January 1 of that year; provided,
however that if a Peer Group Company is not in existence as an independent
entity generating the types of public information needed for EVA calculations
under this EVIP both at the beginning and the end of that Covered Year, that
company shall be disregarded for purposes of making awards under this Plan for
that Covered Year, notwithstanding its inclusion in the group of Peer Group
Companies otherwise applicable to such calculations.
19. "Plan" or "EVIP" means the Georgia-Pacific Corporation Economic
Value Incentive Plan as set forth in this document, as amended from time to
time.
20. "Plan Administrator" means the person or entity having
administrative authority under this EVIP, as specified in Section IV.
21. "Quantitative Bonus" means that portion of a Participant's award
under this Plan for a given Covered Year which is determined in accordance with
the provisions of subsection 1 of Section III.
22. "Quantitative Bonus Limit" means, for a given Covered Year, (i) for
any Participant other than the CEO, the lesser of (A) 200% of the amount which
is the product of
-5-
<PAGE>
(x) the maximum total Quantitative Bonus and Discretionary Bonus that the
Participant could receive if both Target Relative EVA for the G-P Group and
Target EVA for TTC were achieved in that Covered Year (as determined by the
Committee under paragraph 1(a)(ii) and (iii) of Section III) and (y) the
weighting assigned by the Committee (under paragraph 1(a)(vi) of Section III) to
the Quantitative Bonus opportunity for that Covered Year or (B) 100% of the
Participant's Base Salary on January 1 of that Covered Year; and (ii) for the
CEO, the lesser of (A) an amount equal to the amount described in (i)(A) above
calculated for the CEO or (B) 200% of the CEO's Base Salary on January 1 of that
Covered Year.
23. "Relative EVA" means, for a given Covered Year, the percentile
ranking of the G-P Group's EVA performance for that Covered Year as compared to
the "indexed EVA" performance (determined pursuant to subsection 12 of this
Section I) of the Peer Group Companies for that year.
24. "Salary Grade" means the salary grade of a Participant as
established from time to time by the Compensation Department of the Corporation
in accordance with the Corporation's generally applicable policies.
25. "Target EVA" means the EVA performance level of TTC as determined
by the Committee pursuant to subsection 1 of Section III.
26. "Target Relative EVA" means the Relative EVA performance level of
the G-P Group as determined by the Committee pursuant to subsection 1 of Section
III.
27. "Threshold EVA" means the minimum EVA of TTC for which a
Quantitative Bonus will be paid, as determined by the Committee pursuant to
subsection 1 of Section III.
28. "Threshold Relative EVA" means the minimum Relative EVA of the G-P
Group for which a Quantitative Bonus will be paid, as determined by the
Committee pursuant to subsection 1 of Section III.
29. "TTC" means the Business Unit known as "The Timber Company", VIZ.
that portion of the business and operations of the Corporation which is
reflected by the class of the
-6-
<PAGE>
Corporation's common stock known as Georgia-Pacific Corporation-Timber Group
Common Stock.
II. ELIGIBILITY
1. Participation Criteria. An Employee will be eligible to participate
in the EVIP for a given Covered Year if he/she is, on January 1 of that Covered
Year, an officer of Georgia-Pacific Corporation (or becomes an officer during
that Covered Year) or, if a non-officer, has been designated by the CEO or the
Committee as a Participant at the beginning of that year or has been added as a
Participant in the EVIP by act of the CEO.
2. Special Rules. Notwithstanding anything in subsection 1 of this
Section II to the contrary:
(a) A Participant who terminates employment with the Corporation
during a given Covered Year may receive a prorated award or no
award pursuant to subsection 4 of Section III.
(b) The CEO shall have authority, in his discretion, to add or
delete Employees from the Participant group, PROVIDED THAT no
person may be added as a Participant during the fourth
calendar quarter of a Covered Year, and PROVIDED FURTHER THAT
the bonus for an Employee who is added as a Participant for a
given Covered Year will be prorated based on the number of
complete calendar months he/she was a Participant for that
Covered Year. In each case in which the CEO adds a
Participant, he shall designate the effective date of his/her
participation and his/her Business Unit.
(c) Participants in other incentive compensation programs
(excluding any stock option plan) maintained by the
Corporation are not eligible to participate in the EVIP.
-7-
<PAGE>
III. AWARDS
Bonuses under the EVIP are composed of two different types of awards,
VIZ., the non-discretionary annual bonus award ("Quantitative Bonus") and the
discretionary long-term bonus award ("Discretionary Bonus"):
1. Award of Quantitative Bonuses. Quantitative Bonuses for each
Participant under this EVIP for a given Covered Year will be an amount
determined pursuant to standards adopted by the Committee prior to March 31 of
that Covered Year as follows:
(a) The Committee will determine, in its discretion:
(i) The identity of any Affected Officers for the Covered
Year in question;
(ii) The Threshold Relative EVA, Target Relative EVA and
Maximum Relative EVA levels for that Covered Year for
the G-P Group;
(iii) The Threshold EVA, Target EVA and Maximum EVA levels
for that Covered Year for TTC;
(iv) For the G-P Group, the total Quantitative Bonus and
Discretionary Bonus permissible under this Plan
(expressed as a percentage of Compensation) for each
Salary Grade at each of the Relative EVA levels
described in subparagraph (ii) above (and at such
other Relative EVA levels as the Committee, in its
discretion, may decide to specify);
(v) For TTC, the total Quantitative Bonus and
Discretionary Bonus permissible under this Plan
(expressed as a percentage of Compensation) for each
Salary Grade at each of the EVA levels described in
subparagraph (iii) above (and at such other EVA
levels as the Committee, in its discretion, may
decide to specify);
(vi) The percentage of the total bonus opportunity for
that Covered Year which will comprise the
Quantitative Bonus; and
(vii) For each Participant for that Covered Year whose
Quantitative Bonus will be based on both G-P Group
Relative EVA and TTC EVA
-8-
<PAGE>
performance, the fractional weighting assigned to G-P Group
Relative EVA and/or TTC EVA performance for each Participant,
such weightings to total 1 for each such Participant.
(c) The amount of Quantitative Bonus (expressed as a percentage of
Compensation) for any Relative EVA level between a given level
and the next preceding or following level shall be determined
by interpolation between those two levels. If the achieved
Relative EVA level for the G-P Group for a given Covered Year
is less than the Threshold Relative EVA set for the G-P Group
for that year, no Quantitative Bonuses with respect to the
performance of the G-P Group for that year shall be paid. If
the achieved Relative EVA level for the G-P Group for a given
Covered Year exceeds the Maximum Relative EVA set for the G-P
Group for that year, the percentage of Compensation
corresponding to the Maximum Relative EVA for the G-P Group
for that year shall be used to determine the amount of the
Quantitative Bonus.
(d) The amount of Quantitative Bonus (expressed as a percentage of
Compensation) for any EVA level between a given level and the
next preceding or following level shall be determined by
interpolation between those two levels. If the achieved EVA
level for TTC for a given Covered Year is less than the
Threshold EVA set for TTC for that year, no Quantitative
Bonuses with respect to the performance of TTC shall be paid.
If the achieved EVA level for TTC for a given Covered Year
exceeds the Maximum EVA set for TTC for that year, the
percentage of Compensation corresponding to the Maximum EVA
for TTC for that year shall be used to determine the amount of
the Quantitative Bonus.
(d) The Quantitative Bonus of any Participant in a given Covered
Year shall be calculated as follows:
(i) After the close of that Covered Year and before the
payment date specified in subsection 3 of this
Section III, the Committee shall certify
-9-
<PAGE>
in writing the extent to which the Relative EVA
standards for the G-P Group and the EVA standards for
TTC, determined pursuant to this subsection 1 of this
Section III, have been achieved for that Covered
Year.
(ii) Based upon the achieved Relative EVA performance for
the G-P Group and achieved EVA performance for TTC
for that Covered Year determined in accordance with
subparagraph (i) of this paragraph (d), the
corresponding percentages of Compensation for the
Salary Grade of each Participant shall be determined
using the standards established pursuant to paragraph
(a) of this subsection 1.
(iii) The Participant's Quantitative Bonus for that Covered
Year will equal the product of (x) the sum of the
percentages calculated pursuant to subparagraph (ii)
of this paragraph (e), and (y) the Participant's
Compensation.
(f) Notwithstanding anything in this Plan to the contrary, the
Quantitative Bonus for any Participant for a given Covered
Year may not exceed the Quantitative Bonus Limit for that
year.
2. Award of Discretionary Bonuses. Any Participant shall be eligible to
receive a Discretionary Bonus for a given Covered Year, regardless of whether
he/she receives an Quantitative Bonus for that year, PROVIDED THAT the CEO will
not be eligible for a Discretionary Bonus for a given Covered Year if he is not
eligible for an Quantitative Bonus for that year. Discretionary Bonus amounts
will be determined as follows:
(a) Subject to the limits of this subsection 2, the CEO, in
his/her discretion, shall determine the amount of the
Discretionary Bonus for a given Covered Year for each
Participant (other that the CEO and each Affected Officer)
after reviewing, in his/her discretion, (i) the performance of
the Business Unit to which such Participant belongs during
that Covered Year with respect to EVA drivers
-10-
<PAGE>
specified no later than March 31 of that Covered Year by the
CEO, and (ii) the actions taken by the Business Unit to which
such Participant belongs during that Covered Year to increase
the long-term EVA of that Business Unit and/or the Corporation
as a whole. In conducting this review, the CEO may consider
any actions by Business Units he/she deems appropriate,
including but not limited to actions to (i) increase
efficiency (by increasing revenue or reducing costs using the
same or less capital), (ii) develop new investment
opportunities, and/or (iii) reduce or divest under-performing
assets.
(b) For each Affected Officer, the Discretionary Bonus for a given
Covered Year shall equal the Discretionary Bonus Limit for
such Affected Officer (determined in accordance with
subsection 11 of Section I), subject to reduction by the
Committee, in its discretion, based on its review and
evaluation of such performance criteria as the Committee may
deem appropriate.
(c) For the CEO, the Discretionary Bonus for a given Covered Year
shall equal 200% of the Quantitative Bonus applicable to
him/her for that year, subject to reduction by the Committee
in its discretion based on its review and evaluation of such
performance criteria as the Committee may deem appropriate.
(d) Notwithstanding anything in this Plan to the contrary:
(i) The amount of the Discretionary Bonus for each
Participant (including the CEO) will also reflect
his/her individual performance - and the performance
of any Business Unit under his/her supervision - with
respect to the Corporation's standing policies (as
applicable and in effect from time to time), in
particular (but without limitation) the Corporation's
Code of Business Conduct and its safety and
environmental policies; and
(ii) For all Participants, the Discretionary Bonus for a
given Covered Year may not exceed the Discretionary
Bonus Limit for that year.
-11-
<PAGE>
3. Payment of Awards. Awards shall be paid as soon as practicable after
the calculation of achieved Relative EVA and EVA levels for a given Covered
Year, but in no event later than March 15 following the end of that Covered
Year. In the event of the death of a Participant, any awards due to - or in
respect of - him/her under this Plan will be paid, first, to his/her surviving
spouse (if any) and, if there is no surviving spouse, to his/her estate.
4. Special Situations.
(a) A Participant whose employment with the Corporation terminates
during a given Covered Year (i) for any reason after he/she
has attained at least age 65 or has attained age 55 and
accumulated at least ten (10) years of service for vesting
purposes under the Georgia-Pacific Corporation Savings and
Capital Growth Plan, (ii) because of his/her death, (iii)
because of his/her total and permanent disability (as
determined by the Plan Administrator pursuant to the standards
of the Georgia-Pacific Corporation Salaried Long-Term
Disability Plan, whether or not the Participant has enrolled
in that plan) or (iv) for any other reason specifically
approved by the Plan Administrator (PROVIDED THAT, for
purposes of this clause (iv) only, the approval of the
Committee shall be required in the case of the CEO or an
Affected Officer) shall be entitled to a bonus award prorated
to reflect the number of complete calendar months actually
worked during that Covered Year payable at the same time
bonuses for other Participants are paid for that Covered Year.
(b) Subject to paragraph (a) of this subsection 4, Participants
who during a given Covered Year (i) voluntarily terminate
their employment with the Corporation or (ii) are
involuntarily terminated by the Corporation for any reason,
will not be eligible to receive a bonus under this Plan for
that Covered Year.
5. Maximum Total Bonus Award. Notwithstanding anything in this Plan to
the contrary, no Participant may receive a Quantitative Bonus and Discretionary
Bonus award under this Plan in any Covered Year which in total exceeds
$2,000,000.
-12-
<PAGE>
IV. ADMINISTRATION
The Plan will be administered by the Committee. Decisions and
determinations by the Committee shall be final and binding upon all parties,
including the Corporation, shareholders, Participants and other employees. The
Committee shall have the authority to administer the Plan, make all
determinations with respect to the construction and application of the Plan and
the Board resolutions establishing the Plan, adopt and revise rules and
regulations relating to the Plan and make any other determinations which it
believes necessary or advisable for the administration of the Plan. No member of
the Committee shall be liable to any person for any action taken or omitted in
connection with the interpretation and administration of this Plan unless
attributable to the member's own willful misconduct or lack of good faith. The
Committee is expressly authorized to appoint one or more individuals, who need
not be members of the Committee, or entities to administer the Plan and to make
all determinations with respect to the construction and application of the Plan,
and otherwise exercise all powers vested in the Committee under the Plan. Such
agents shall serve at the pleasure of the Committee. The decisions of any such
agents taken within the scope of his/her authority will have the same effect as
decisions by the Committee. Notwithstanding anything in this Section IV to the
contrary, the Committee may not delegate authority which under this Plan is
expressly reserved to the Committee alone.
V. AMENDMENT OR TERMINATION
The Board, by action of the Committee, expressly reserves the
right to amend or terminate the EVIP at any time, PROVIDED THAT no Quantitative
Bonus for a given Covered Year may thereby be reduced on or after December 31 of
that Covered Year.
-13-
<PAGE>
VI. MISCELLANEOUS
1. Awards Unfunded. Awards payable pursuant to the EVIP (if any) shall
be paid solely from the general assets of the Corporation. No trust or other
funding device providing for the identification or segregation of assets to fund
EVIP awards has been established, nor is it the Corporation's intention to do
so.
2. Taxation of Awards. Awards under the EVIP will be compensation
subject to Federal and State tax withholding (including, without limitation,
FICA withholding) in the calendar year in which they are paid.
3. Retirement Plans and Welfare Benefit Plans. Except as otherwise
specified in the plan in question, awards under the EVIP will not be included as
"compensation" for purposes of the Corporation's retirement plans (both
qualified and non-qualified) or welfare benefit plans.
4. Spendthrift Clause. A Participant may not assign, anticipate,
alienate, commute, pledge or encumber any benefits to which he or she may become
entitled under the EVIP, nor are the awards subject to attachment or garnishment
by any creditor.
5. No Contract of Employment. The Corporation intends that the awards
provided under the EVIP be a term of employment and a part of each Participant's
compensation and benefit package. Participation in this Plan shall not
constitute an agreement (1) of the Participant to remain in the employ of and to
render his/her services to the Corporation or (2) of the Corporation to continue
to employ such Participant, and the Corporation may terminate the employment of
a Participant at any time with or without cause.
6. Previous EVIP Interpretations. The amendment and restatement of this
Plan is not intended to and shall not - affect the continuing validity of EVIP
interpretations issued by the Plan Administrator prior to January 1, 2000.
-14-
<PAGE>
VII. EFFECTIVE DATE/SHAREHOLDER APPROVAL
1. Effective Date. This amendment and restatement of the EVIP shall
become effective as of January 1, 2000.
2. Shareholder Approval. The Compensation Committee has determined that
the approval of the shareholders of the Corporation is not required for this
amendment and restatement.
-15-
EXHIBIT 10.8(ii)
AMENDMENT NO. 1
TO THE
GEORGIA-PACIFIC CORPORATION
1995 SHAREHOLDER VALUE INCENTIVE PLAN
WHEREAS, the Board of Directors (the "Board") of Georgia-Pacific
Corporation (the "Corporation") adopted the Georgia-Pacific Corporation 1995
Shareholder Value Incentive Plan (the "SVIP") effective April 1, 1995, and the
SVIP was thereafter approved by the shareholders of the Corporation;
WHEREAS, pursuant to Section 5.1 of the SVIP, the Board has retained
the authority to amend the SVIP from time to time, subject to certain
limitations; and
WHEREAS, the Board deems it desirable to amend the SVIP to permit
grants under the SVIP during the first quarter of any calendar year;
NOW, THEREFORE, the Board hereby amends the SVIP as follows effective
January 1, 1996:
The second full sentence of Section 2.1 of the SVIP is amended by
deleting the proviso at the end thereof, so that as modified, the sentence reads
as follows:
"Prior to each Grant Date following the Effective Date, the
Committee, in its sole discretion, shall designate the
Employees who shall become Participants in this Plan at each
such Grant Date."
Except as modified in this Amendment, the SVIP, as in effect from April
1, 1995, shall remain in full force and effect.
Approved by the Board: February 1, 1996
EXHIBIT 10.8(iii)
AMENDMENT NO. 2
TO THE
GEORGIA-PACIFIC CORPORATION
1995 SHAREHOLDER VALUE INCENTIVE PLAN
(As Amended and Restated Effective December 17, 1997)
WHEREAS, the Board of Directors (the "Board") of Georgia-Pacific
Corporation (the "Corporation") originally adopted the Georgia-Pacific
Corporation 1995 Shareholder Value Incentive Plan effective April 1, 1995, and
adopted an Amended and Restated SVIP effective December 17, 1997 (the "SVIP"),
both of which were thereafter approved by the shareholders of the Corporation;
WHEREAS, pursuant to Section 5.1 of the SVIP, the Board has retained
the authority to amend the SVIP from time to time, subject to certain
limitations; and
WHEREAS, the Board deems it desirable to amend the SVIP to allow the
Compensation Committee under circumstances which it deems appropriate to fully
vest a Participant's Option Grants, and/or to provide for the exercise of such
Option Grants prior to the 10th anniversary of the Grant Date;
NOW, THEREFORE, the Board hereby amends the SVIP as follows effective
September 30, 1999:
1. The last paragraph of Section 3.3 of the SVIP is amended to read as
follows:
"Vesting under subsections (a), (b) and (c) shall be
conditioned upon the Committee's written certification that the
performance vesting standards of this Section 3.3 have been met.
Vesting of Option Grants under this Section 3.3 is subject in all cases
to the restrictions/forfeiture rules in Section 3.5. Option Grants
vesting pursuant to this Section 3.3 may be exercised at any time on or
after the Vesting Date and prior to (in the case of Option Grants under
Sections 3.1 and 3.2) the 10th anniversary of the Grant Date (not
inclusive) or (in the case of Discretionary Grants) the date which is
183 days following the fifth anniversary of the Option Grant (not
inclusive), provided that if a Participant's employment with the
Corporation and its Subsidiaries terminates for any reason other than
retirement (as defined in Section 3.4(b)(i)), death or disability (as
defined in Section 3.4(b)(iii)), or in accordance with the special rule
set forth in Section 3.4(b)(iv) after the Vesting Date of an Option
Grant and before that Option Grant has expired, the vested Option Grant
may be exercised only during the 90-day period following the
Participant's date of termination or, if shorter, during the remaining
period before the Option Grant expires. If a Participant's employment
with the Corporation and its Subsidiaries terminates for any reason
other than retirement (as defined in Section 3.4(b)(i)), death or
disability (as defined in Section 3.4(b)(iii)), or in accordance with
the special rule set forth in Section 3.4(b)(iv) prior to the Vesting
Date of an Option Grant, the Option Grant will terminate as of the
Participant's termination date, and the Participant will have no
further rights under that Option Grant."
<PAGE>
2. The first paragraph of Section 3.4(b) of the SVIP is amended to read
as follows:
"(b) Notwithstanding anything in Sections 3.3 or 3.5 to the
contrary, if an Option Grant (other than a Discretionary Grant) is not
vested pursuant to the performance-based vesting standards of
subsections (a), (b) and (c) of Section 3.3 or another provision of
this Plan, it will vest in the circumstances and on the date specified
in paragraphs (i) through (iv) below to the extent permitted by the
schedule set forth in Section 3.4(c):"
3. Section 3.4(b) of the SVIP is amended by adding a new subsection
(iv) to read as follows:
"(iv) If the Participant terminates employment with the
Corporation under such circumstances as may be specifically approved by
resolution of the Committee, on the date of such termination of
employment."
4. The first paragraph of Section 3.4(c) of the SVIP is amended to read
as follows:
"(c) A Participant who is entitled to special vesting in
accordance with Section 3.4(b) above will vest in his/her outstanding
Option Grants as of the applicable date specified in Section 3.4(b) to
the extent indicated in paragraphs (i) through (vii) below:
5. Section 3.4(c) of the SVIP is amended by adding a new subsection
(vii) to read as follows:
"(vii) If special vesting as described in Section 3.4(b)(iv)
occurs and the Participant has an Option Grant that has not otherwise
vested, 100% of that Option Grant will vest."
6. Section 3.4(d) of the SVIP is amended to read as follows:
"(d) Option Grants vesting pursuant to Section 3.4(a) or
3.4(b)(iv) may be exercised at any time on or after the Vesting Date
and prior to the 10th anniversary of the applicable Grant Date (not
inclusive). Option Grants vesting pursuant to Section 3.4(b)(i) through
(iii) may be exercised at any time on or after the Vesting Date and
prior to the 183rd day following the Vesting Date (not inclusive) or,
if earlier, prior to the 10th anniversary of the applicable Grant Date
(not inclusive)."
7. This Amendment shall be effective from and after September 30, 1999.
Except as hereinabove amended and modified, the SVIP as amended and restated
effective December 17, 1997 shall remain in full force and effect.
EXHIBIT 10.8(iv)
AMENDMENT NO. 3
TO THE
GEORGIA-PACIFIC CORPORATION
1995 SHAREHOLDER VALUE INCENTIVE PLAN
(AS AMENDED AND RESTATED EFFECTIVE DECEMBER 16, 1997)
WHEREAS, pursuant to Section 5.1 of the Georgia-Pacific Corporation
1995 Shareholder Value Incentive Plan, as amended and restated effective
December 16, 1997 ("Plan"), the Board of Directors of Georgia-Pacific
Corporation ("Corporation") has reserved the right to amend the Plan at any
time; and
WHEREAS, the Board desires to amend the Plan to recognize employment
for all purposes under the Plan with the Corporation or any subsidiary in which
the Corporation has a proprietary interest of more than 20%;
NOW THEREFORE, Section 1.20 of the Plan (the definition of
"Subsidiary") is hereby amended effective as of March 31, 2000 to read as
follows:
"Subsidiary" shall mean any corporation or other entity, whether
domestic or foreign, in which the Corporation has or obtains, directly
or indirectly, a proprietary interest of more than 20% by reason of
stock ownership or otherwise."
EXHIBIT 10.9(i)
GEORGIA-PACIFIC CORPORATION
OUTSIDE DIRECTORS STOCK PLAN
<PAGE>
TABLE OF CONTENTS
PAGE
ss. 1. PURPOSE................................................................1
ss. 2. DEFINITIONS............................................................1
2.1. G-P.........................................................1
2.2. Market Price................................................1
2.3. Outside Director............................................1
2.4. Plan........................................................1
2.5. Retirement..................................................1
2.6. Restriction Period..........................................2
2.7. Stock.......................................................2
ss. 3. STOCK GRANTS............................................................2
3.1. Available Shares............................................2
3.2. Annual Grants...............................................2
(a) May 3, 1995.......................................2
(b) May 15, 1996 and Thereafter.......................2
3.3. No Transfer or Other Disposition............................3
3.4. Dividends, Voting and Other Rights..........................3
3.5. Forfeiture..................................................3
ss. 4. MISCELLANEOUS...........................................................3
4.1 Administration...............................................3
4.2. References..................................................4
4.3 Construction.................................................4
4.4. Stock Transfer..............................................4
4.5. Shareholder Approval........................................4
4.6. Amendment...................................................4
4.7. Termination.................................................5
<PAGE>
SS. 1.
PURPOSE
The purpose of this Plan is to help Georgia-Pacific Corporation ("G-P")
attract and retain well qualified individuals as Outside Directors (as defined
below) and to align their interests more closely with the interests of G-P's
other shareholders through annual grants of Stock to each Outside Director.
SS. 2.
DEFINITIONS
2.1. G-P. The term "G-P" shall mean Georgia-Pacific Corporation, a
Georgia corporation.
2.2. MARKET PRICE. The term "Market Price" shall mean the mean between
the high and the low sales price for a share of Stock for a day as reported for
such day in the record of Composite Transactions for the New York Stock Exchange
and printed in The Wall Street Journal or, if there is no such report for such
day, such prices as so reported and printed for the last trading day before such
day.
2.3. OUTSIDE DIRECTOR. The term "Outside Director" shall mean a member
of the Board of Directors of G-P who is not an employee of G-P or a G-P
subsidiary.
2.4. PLAN. The term "Plan" shall mean this Georgia-Pacific Corporation
Outside Directors Stock Plan, as such plan may be amended and in effect from
time to time.
2.5. RETIREMENT. The term "Retirement" shall mean the termination of an
Outside Director's status as such (a) because the Outside Director has reached
the mandatory retirement age for a director under G-P's policy for directors as
in effect when he or she reaches such age, (b) due to the Outside Director's
taking a position with, or providing services to, a governmental, charitable or
educational institution whose policies prohibit the Outside Director from
continuing to serve as a director for G-P or (c) due to a determination by plan
<PAGE>
administrator (as defined in Section 4.1) that the Outside Director cannot
continue as such without violating applicable law.
2.6. RESTRICTION PERIOD. The term "Restriction Period" for any shares
of Stock granted underss.3.2 to an Outside Director shall mean the period which
begins on the date of such grant underss.3.2 and which ends on the earlier of
(a) the Outside Director's date of death or (b) six months after the date on
which an Outside Director's status as such terminates at G-P's request as a
result of a disability or his or her Retirement.
2.7. STOCK. The term "Stock" shall mean G-P common stock, par value
$0.80.
SS. 3.
STOCK GRANTS
3.1. AVAILABLE SHARES.G-P shall make 30,000 shares of Stock available
for Stock grants under this Plan from G-P's authorized but unissued Stock.
3.2. ANNUAL GRANTS.
(A) MAY 3, 1995. Each person who is an Outside Director on May 3, 1995
shall be granted 200 shares of Stock subject to the terms and conditions set
forth in this Plan.
(B) MAY 15, 1996 AND THEREAFTER. Each person who is an Outside Director
on May 15, 1996 or on May 15 of any subsequent year shall (while a sufficient
number of shares of Stock remain available underss. 3.1) be granted a number of
shares of Stock subject to the terms and conditions set forth in this Plan,
which number shall be determined by dividing $15,000 by the Market Price of a
share of Stock on such date and rounding the resulting number to the nearest
whole share of Stock.
3.3. NO TRANSFER OR OTHER DISPOSITION. An Outside Director shall not
have the right to sell, transfer, assign, pledge or otherwise encumber or
dispose of any shares of Stock granted under this Plan during the Restriction
Period with respect to such Stock and,
<PAGE>
during such Restriction Period, G-P shall retain custody of the certificate
which represents such Stock.
3.4. DIVIDENDS, VOTING AND OTHER RIGHTS. Except as set forth inss.3.3,
an Outside Director shall have the entire beneficial interest in the shares of
Stock granted to him or to her underss.3.2 and shall have all the rights and
privileges of a shareholder with respect to such shares of Stock, including the
right to receive dividends on such Stock and to vote such Stock.
3.5. FORFEITURE. If an Outside Director's status as such terminates for
any reason other than his or her death, his or her Retirement or at G-P's
request as a result of a disability, he or she shall forfeit all shares of Stock
granted to him or her under this Plan and all of his or her rights and
privileges as a shareholder with respect to such Stock immediately shall
terminate.
SS. 4.
MISCELLANEOUS
4.1. ADMINISTRATION. The Nominating Committee of G-P's Board of
Directors (or any successor to such committee) shall be the administrator of
this Plan and shall have the power to interpret this Plan and be responsible for
the operation and administration of this Plan. The Nominating Committee shall
interpret this Plan and operate and administer this Plan in a manner which shall
qualify the grants of Stock made to Outside Directors under this Plan for an
exemption under Rule 16b-3 promulgated under Section 16(b) of the Securities
Exchange Act of 1934, as amended from time to time.
4.2. REFERENCES. All references made to sections under this Plan shall
be to sections of this Plan.
4.3. CONSTRUCTION. The headings and subheadings in this Plan have been
included for convenience of reference only. This Plan shall be governed by and
construed in accordance with the laws of the State of Georgia.
<PAGE>
4.4. STOCK TRANSFER. If any Stock issued under this Plan has not been
registered under any applicable federal or state securities laws at the time
such Stock is issued, G-P shall have the right, as a condition to the issuance
of such Stock, to require the Outside Director to make such representations or
take such other or additional action to satisfy any requirements of, or any
exemptions to, any applicable state or federal securities laws respecting such
issuance as G-P deems necessary or appropriate under the circumstances, and no
such issuance shall be made under this Plan until such condition or conditions
have been satisfied to G-P's satisfaction in full.
4.5. SHAREHOLDER APPROVAL. This Plan shall be null and void if G-P's
shareholders fail to approve this Plan at a duly called meeting of such
shareholders held on or before May 1, 1996, and any grant of Stock under this
Plan before the date of such approval shall be made subject to such approval.
4.6. AMENDMENT. The Board of Directors of G-P may amend this Plan from
time to time, provided, however, that no such amendment shall be made to this
Plan more often than once every six months (other than to comply with the
requirements of the Internal Revenue Code of 1986 or other applicable law, as
amended, and any related rules or regulations), and no amendment shall become
effective absent the approval of G-P's shareholders to the extent such amendment
(under the terms of Rule 16b-3 of the Securities Exchange Act of 1934, as
amended) would
(a) materially increase the benefits accruing to Outside Directors
under this Plan,
(b) materially increase the number of securities which may be
issued under this Plan, or
(c) materially modify the requirements as to eligibility to
participation in this Plan.
<PAGE>
4.7. TERMINATION. The Board of Directors of G-P shall have the right to
terminate this Plan at any time, provided that the Plan shall continue in
accordance with its terms in effect immediately prior to such termination with
respect to grants made prior to the date such termination is approved by the
Board of Directors.
EXHIBIT 10.11(i)
$750,000,000
AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT
Dated as of October 13, 1999
Among
G-P RECEIVABLES, INC.
as the Seller
-------------
GEORGIA-PACIFIC CORPORATION
as the Collection Agent
-----------------------
CANADIAN IMPERIAL BANK OF COMMERCE
CITIBANK, N.A.
AND
BANK ONE, NA (CHICAGO OFFICE)
as the Secondary Purchasers
---------------------------
and
CANADIAN IMPERIAL BANK OF COMMERCE
as the Administrative Agent
---------------------------
<PAGE>
TABLE OF CONTENTS
Page No.
--------
ARTICLE I. DEFINITIONS
SECTION 1.01 Certain Defined Terms..........................................1
SECTION 1.02 Defined Terms Incorporated by Reference........................5
SECTION 1.03 Other Terms....................................................6
ARTICLE II. AMOUNTS AND TERMS OF THE PURCHASES
SECTION 2.01 Purchase Facility..............................................6
SECTION 2.02 Making Purchases...............................................8
SECTION 2.03 Incorporation by Reference.....................................9
SECTION 2.04 Incorporation by Reference.....................................9
SECTION 2.05 Fees...........................................................9
SECTION 2.06 Incorporation by Reference.....................................9
SECTION 2.07 Incorporation by Reference.....................................9
SECTION 2.08 Yield Protection..............................................10
SECTION 2.09 Incorporation by Reference....................................11
SECTION 2.10 Incorporation by Reference....................................11
ARTICLE III. CONDITIONS OF PURCHASES
SECTION 3.01 Conditions Precedent to Initial Purchase......................11
SECTION 3.02 Conditions Subsequent.........................................12
SECTION 3.03 Conditions Precedent to All Purchases and Reinvestments.......12
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
SECTION 4.01 Incorporation by Reference....................................13
ARTICLE V. COVENANTS
SECTION 5.01 Incorporation by Reference....................................13
ARTICLE VI. ADMINISTRATION AND COLLECTION
SECTION 6.01 Designation of Collection Agent...............................14
SECTION 6.02 Duties of Collection Agent....................................14
SECTION 6.03 Rights of the Administrative Agent............................16
i
<PAGE>
SECTION 6.04 Responsibilities of the Seller................................17
SECTION 6.05 Further Actions Evidencing Purchases..........................17
SECTION 6.06 Collection Agent Fee..........................................18
ARTICLE VII. EVENTS OF TERMINATION
SECTION 7.01 Incorporation by Reference; Additional Events of Termination..19
ARTICLE VIII. INDEMNIFICATION
SECTION 8.01 Indemnities by the Seller.....................................19
SECTION 8.02 Contribution..................................................22
ARTICLE IX. THE ADMINISTRATIVE AGENT
SECTION 9.01 Authorization and Action......................................22
SECTION 9.02 UCC Filings...................................................23
SECTION 9.03 Administrative Agent's Reliance, Etc..........................23
SECTION 9.04 CIBC and Affiliates...........................................24
SECTION 9.05 Secondary Purchasers' Purchase Decisions......................24
SECTION 9.06 Indemnification...............................................24
SECTION 9.07 Successor Administrative Agent................................25
ARTICLE X. ASSIGNMENT OF RECEIVABLE INTERESTS
SECTION 10.01 Assignment....................................................25
SECTION 10.02 Effects of Assignment.........................................26
ARTICLE XI. MISCELLANEOUS
SECTION 11.01 Amendments, Etc...............................................27
SECTION 11.02 Notices, Etc..................................................27
SECTION 11.03 Assignability; Termination....................................27
SECTION 11.04 Costs, Expenses and Taxes.....................................27
SECTION 11.05 Confidentiality...............................................28
SECTION 11.06 No Recourse...................................................28
SECTION 11.07 Governing Law; Execution in Counterparts......................29
SECTION 11.08 Construction of Agreement.....................................29
SECTION 11.09 Actions by Secondary Purchasers...............................29
ii
<PAGE>
EXHIBITS
EXHIBIT A Form of Assignment Agreement
iii
<PAGE>
AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT dated as of October
13, 1999 among G-P Receivables, Inc., a Delaware corporation (the "Seller"),
GEORGIA-PACIFIC CORPORATION, a Georgia corporation (the "Collection Agent"),
CANADIAN IMPERIAL BANK OF COMMERCE ("CIBC"), CITIBANK, N.A. ("Citibank") and
BANK ONE, NA (CHICAGO OFFICE) ("Bank One") (each of CIBC, Citibank and Bank One,
individually, a "Secondary Purchaser", and, collectively, the "Secondary
Purchasers") and CIBC, as agent (the "Administrative Agent") for the Secondary
Purchasers. Unless defined elsewhere herein, capitalized terms used in this
Agreement shall have the meanings assigned to such terms in Article I hereof.
ARTICLE I.
DEFINITIONS
SECTION 1.01 Certain Defined Terms.
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"ADJUSTED LIBOR RATE" means, with respect to a Secondary Purchaser for
any Fixed Period, the rate per annum obtained by dividing (a) the arithmetic
average (rounded upwards, if necessary, to the nearest multiple of one-sixteenth
of one percent per annum) of (i) the offered rates for deposits in United States
dollars which appear on the display designated as page "LIBO" (or any successor
page quoting the offered rates for United States dollars in the London interbank
market) on the Reuter Monitor Money Rates Service, or (ii) if such rates are not
obtainable from the Reuter Monitor Money Rates Service, the respective rates
notified to the Secondary Purchaser by each of the Reference Banks as the rate
at which it would offer deposits in United States dollars to prime banks in the
London interbank market, in either case for a period equal to such Fixed Period
as such Secondary Purchaser shall select and in an amount comparable to the
aggregate amount of Capital of the Receivable Interest to be funded or
maintained at or about 11:00 a.m. (London time) on the second Business Day
before (and for value on) the first day of such period by (b) a percentage equal
to (i) 100% minus (ii) the Eurodollar Reserve Percentage for such Fixed Period.
"AGGREGATE CAPITAL" means, at the time of any determination thereof
with respect to a Secondary Purchaser, the sum of the Capital for all Receivable
Interests of such Secondary Purchaser.
"BASE RATE" means, for any day, the per annum rate of interest
published on such day (or, if not then published, on the most recently preceding
day) in The Wall Street Journal as the "Prime Rate." Changes in the Base Rate
shall be effective on each date on which a change in the "Prime Rate" is
published.
"CAPITAL" of any Receivable Interest owned by a Secondary Purchaser
means the original amount paid by such Secondary Purchaser to the Seller or to a
Purchaser (in connection with an assignment as contemplated by SECTION 2.02(c)),
as the case may be,
<PAGE>
for such Receivable Interest at the time of its purchase by such Secondary
Purchaser pursuant to this Agreement, or such amount divided or combined in
accordance with Section 2.07, in each case reduced from time to time by
Collections distributed on account of such Capital pursuant to Section 2.04;
provided, that if such Capital shall have been reduced by any distribution and
thereafter all or a portion of such distribution is rescinded or must otherwise
be returned for any reason, such Capital shall be increased by the amount of
such rescinded or returned distribution, as though it had not been made;
provided, further, that such Capital shall not be reduced for the purposes of
this Agreement to the extent and so long as Collections to be used to effect an
Optional Reduction or a Mandatory Reduction are retained by the Collection Agent
(if the Seller or an Affiliate thereof).
"COLLECTION AGENT" means at any time the Person (which may include the
Administrative Agent) then authorized pursuant to Article VI to service,
administer and collect Pool Receivables.
"COLLECTION AGENT FEE" has the meaning specified in Section 6.06.
"COMMITMENT" means (i) for all Secondary Purchasers in the aggregate an
amount equal to $750,000000 initially, or such lesser amount as shall reflect
any reduction pursuant to Section 2.01(b) and (ii) for each Secondary Purchaser,
its Pro Rata Share of such aggregate amount. References to the unused portion of
the Commitment shall mean, at any time, the Commitment in effect at such time,
less the sum of the Total Aggregate Capital under this Agreement and the "Total
Aggregate Capital" under the Primary Purchase Agreement.
"EURODOLLAR RESERVE PERCENTAGE" for any Secondary Purchaser and for any
Fixed Period means the reserve percentage applicable to such Secondary Purchaser
under regulations issued from time to time by the Board of Governors of the
Federal Reserve System (or any successor) (or, if more than one such percentage
shall be so applicable, the weighted daily averages of such percentages for
those days in such Fixed Period during which any such percentage shall be so
applicable) for determining the maximum reserve requirement of such Secondary
Purchaser (including, but not limited to, any emergency, supplemental or other
marginal reserve requirement) with respect to liabilities consisting of or
including Eurocurrency liabilities (as that term is defined in Regulation D of
the Board of Governors of the Federal Reserve System as in effect from time to
time) having a term equal to such Fixed Period.
"EVENT OF TERMINATION" has the meaning specified in Article VII.
"EXPIRATION DATE" has the meaning specified in Section 2.01(i).
"FACILITY TERMINATION DATE" means the earliest to occur of (i) the
Expiration Date, as determined pursuant to Section 2.01(i), (ii) the date of the
occurrence of an Event of Termination under Section 7.01(i), (iii) the date the
Facility Termination Date is declared pursuant to Section 7.01 or (iv) the date
the Commitment is reduced or falls to zero.
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"INVESTOR RATE" for any Settlement Period for any Receivable Interest
means:
(a) a rate equal to the weighted average of the Adjusted LIBOR Rates
for the Fixed Periods occurring within such Settlement Period or portion
thereof, plus 1.25%, notified to the Seller and the Collection Agent by the
Secondary Purchaser on the first day of each of such Fixed Periods, or such
other rate as such Secondary Purchaser and the Seller shall agree to in writing.
(b) if such Receivable Interest is acquired by the Secondary Purchaser
pursuant to Section 2.01(d) hereof, with respect to each day during such
Settlement Period which is either the first, second or third day immediately
following the day notice is given by the Related Purchaser of the assignment of
such Receivable Interest, the Base Rate in effect for such day.
(c) if during any Settlement Period more than one of the
above-mentioned rates shall be applicable, then the "Investor Rate" for such
Settlement Period shall be the daily weighted average of such applicable rates.
"LIQUIDATION FEE" means, for any Secondary Purchaser and for any
Settlement Period during which a Liquidation Day occurs, the amount, if any, by
which (i) the additional Yield (calculated without taking into account any
Liquidation Fee or any shortened duration of a Fixed Period pursuant to clause
(ii) of the definition thereof) which would have accrued during the remainder of
such Settlement Period on all reductions of Capital of the Receivable Interest
during such Settlement Period exceeds (ii) the income received by such Secondary
Purchaser's investing the proceeds of such reductions of Capital.
"LIQUIDATION YIELD" means, for any Receivable Interest on any date, an
amount equal to the product of (1) the Capital of such Receivable Interest on
such date, (2) the Adjusted LIBOR Rate for such Receivable Interest for a 30-day
Fixed Period to commence on such date multiplied by 1.3 and (3) a fraction
having the sum of the Average Maturity plus the Collection Delay Period (each as
in effect at such date) as its numerator and 360 as its denominator.
"ORIGINATOR" means Georgia-Pacific and any direct or indirect
Subsidiary of Georgia-Pacific party to a Transfer Agreement and approved by the
Purchasers (as of the date hereof being those Subsidiaries specified on Schedule
V of the Primary Purchase Agreement).
"POTENTIAL TERMINATION EVENT" means an event which, with the passage of
time or notice or both, would constitute an Event of Termination.
"PRIMARY PURCHASE AGREEMENT" means that certain Amended and Restated
Receivables Purchase Agreement dated as of October 13, 1999 among the Seller,
the Purchasers and the Administrative Agent, as the same may, from time to time,
be amended, modified or supplemented.
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"PRO RATA SHARE" means, for each Secondary Purchaser, the "Pro Rata
Share" of the Related Purchaser under the Primary Purchase Agreement.
"PURCHASE" has the meaning specified in Section 2.01(a).
"REFERENCE BANKS" means CIBC, Citibank and Bank One, or such other
banks as the Secondary Purchasers shall designate with the consent of the
Seller.
"RELATED PURCHASER" means, with respect to each Secondary Purchaser set
forth below, the Person set forth opposite its name.
CIBC ASCC
Citibank CAFCO
Bank One Falcon
"REQUIRED SECONDARY PURCHASERS" means, at a particular time, Secondary
Purchasers the aggregate Commitment of which equals at least 66.666666% of the
overall Commitment; provided, that the Commitment for any Purchaser that has
breached a material provision of this Agreement shall be zero for so long as
such breach has not been cured.
"SUBSIDIARY" means, with respect to any Person, any corporation of
which more than 50% of the outstanding capital stock having ordinary voting
power to elect a majority of the board of directors (or others performing a
comparable function) of such corporation is at the time directly or indirectly
owned by such Person, by such Person and one or more other Subsidiaries of such
Person, or by one or more other Subsidiaries of such Person.
"TOTAL AGGREGATE CAPITAL" means, at any time of determination, the sum
of the Aggregate Capital for the Secondary Purchasers.
"UNUSED COMMITMENT" means, with respect to any Secondary Purchaser, the
Commitment of such Secondary Purchaser less the Aggregate Capital of such
Secondary Purchaser and the "Aggregate Capital" of the Related Purchaser under
the Primary Purchase Agreement.
"YIELD" means for each Receivable Interest for any Settlement Period
IR x C x ED + LF
--
360
where:
C = the daily average (calculated at the close of
business each day) Capital of such Receivable
Interest during such Settlement Period
IR = Investor Rate for such Receivable Interest
for such Settlement Period
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ED = the actual number of days elapsed during
such Settlement Period
LF = the Liquidation Fee, if any, for such
Receivable Interest for such Settlement
Period;
provided, that no provision of this Agreement shall require the payment or
permit the collection of Yield in excess of the maximum permitted by applicable
law; and provided, further, that Yield for any Receivable Interest shall not be
considered paid by any distribution to the extent that at any time all or a
portion of such distribution is rescinded or must otherwise be returned for any
reason.
SECTION 1.02 Defined Terms Incorporated by Reference. Unless otherwise
defined in this Agreement and subject to the modifications herein set forth,
capitalized terms used in this Agreement or in any provisions of the Primary
Purchase Agreement incorporated in this Agreement by reference shall have the
meanings given to them in the Primary Purchase Agreement. Without limiting the
foregoing, the defined terms "Concentration Bank", "Concentration Notice",
"Consent and Acknowledgement", "Credit and Collection Policy", "Default Ratio",
"Depositary Bank", "Depositary Notice", "Investor Report", "Lock-Box Agreement",
"Lock-Box Bank", "Originator" and "Transfer Agreement" are hereby incorporated
by reference together with the related Schedule III, Exhibit G, Exhibit E,
Schedule IV, Schedule VII, Schedule II, Exhibit F Exhibit A, Exhibit B, Schedule
I, Schedule V and Exhibit C, respectively, of the Primary Purchase Agreement, as
well as Schedule VI thereto. All references to "the Administrative Agent" in
provisions of the Primary Purchase Agreement incorporated in this Agreement by
reference shall, without further reference, mean CIBC as Administrative Agent
under this Agreement. Each use of the word "hereunder", "herein" or "hereof" in
the provisions of the Primary Purchase Agreement incorporated in this Agreement
by reference shall, without further reference, be deemed to be a reference to
this Agreement. Unless the context otherwise requires, any reference to a
"Purchaser", the "Required Purchasers" or the "Purchasers" under the Primary
Purchase Agreement shall be deemed to be a reference to a "Secondary Purchaser",
the "Required Secondary Purchasers" or the "Secondary Purchasers" hereunder.
Furthermore, all references in such incorporated provisions to "Collections",
"Contract", "Net Receivables Pool Balance", "Pool Receivable", "Receivables
Pool" and "Related Security" shall mean the Collections, a Contract, the Net
Receivables Pool Balance, a Pool Receivable, the Receivables Pool and the
Related Security under this Agreement, respectively. To the extent any word or
phrase is defined in this Agreement, any such word or phrase appearing in
provisions so incorporated by reference from the Primary Purchase Agreement
shall have the meaning given to it in this Agreement. The incorporation by
reference into this Agreement from the Primary Purchase Agreement is for
convenience only, and this Agreement and the Primary Purchase Agreement shall at
all times be, and be treated as, separate and distinct agreements.
Incorporations by reference in this Agreement from the Primary Purchase
Agreement shall not be affected or impaired by any subsequent expiration or
termination of the Primary Purchase Agreement, nor by any amendment thereof or
waiver thereunder unless the parties hereto shall have consented to such
amendment or waiver in writing.
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<PAGE>
SECTION 1.03 Other Terms. All accounting terms not specifically defined
herein shall be construed in accordance with generally accepted accounting
principles. All terms used in Article 9 of the UCC in the State of New York, and
not specifically defined herein, are used herein as defined in such Article 9.
ARTICLE II.
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 2.01 Purchase Facility.
(a) On the terms and conditions hereinafter set forth, each Secondary
Purchaser shall purchase Receivable Interests from the Seller from time to time
during the period from the date hereof to the Facility Termination Date. Under
no circumstances shall a Secondary Purchaser make any Purchase if after giving
effect to such Purchase, such Secondary Purchaser's Aggregate Capital, together
with the Related Purchaser's "Aggregate Capital" under the Primary Purchase
Agreement, would exceed such Secondary Purchaser's Commitment. Notwithstanding
anything to the contrary contained herein, until such time as the parties
expressly agree, all Purchases of Receivable Interests hereunder and under the
Primary Purchase Agreement shall be made with respect to a single Receivables
Pool.
(b) The Seller may, upon at least five Business Days' notice to the
Administrative Agent and the Secondary Purchasers, terminate in whole or reduce
in part the unused portion of the Commitment; provided, that each partial
reduction shall be in the amount of at least $5,000,000 or an integral multiple
thereof and shall be applied pro rata among the Secondary Purchasers according
to their Pro Rata Shares; provided, further, that any partial reduction of the
Commitment for any Secondary Purchaser must not result in a remaining Commitment
of less than $25,000,000 or the Commitment for such Secondary Purchaser shall be
reduced to zero. Any reductions in the Commitment pursuant to this subsection
(b) shall be permanent.
(c) The Seller may, upon at least five Business Days' written notice to
the Administrative Agent and the Secondary Purchasers specifying an Optional
Reduction Amount and an Optional Reduction Effective Date, effect an Optional
Reduction. Commencing on the Optional Reduction Effective Date, the Collection
Agent shall cease the reinvestment of Collections for a period of time such that
after giving effect to the amount of Collections which are not reinvested in
accordance with the provisions of Section 2.04(b)(ii), the amount of Total
Aggregate Capital on the day immediately preceding the Optional Reduction
Effective Date is reduced by an amount equal to the Optional Reduction Amount.
Any Optional Reduction under this subsection (c) shall be applied pro rata among
the Secondary Purchasers according to their Pro Rata Shares. The Seller shall
indemnify any Secondary Purchaser for all losses, expenses and liabilities, if
any (including, without limitation, any loss or expense incurred by reason of
the liquidation or reemployment of deposits or other funds required by any
Secondary Purchaser in connection with such Secondary Purchaser's funding or
maintenance of the Receivable Interests), which such Secondary Purchaser may
sustain as a result of any Optional Reduction pursuant to this subsection (c).
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<PAGE>
(d) The Secondary Purchasers recognize and agree that their respective
Pro Rata Shares shall be reallocated in accordance with any reallocation of the
"Pro Rata Shares" of the Purchasers under the Primary Purchase Agreement. If, as
a result of any reallocation, a Secondary Purchaser's Aggregate Capital exceeds
its Pro Rata Share (as reallocated) of the Commitment, such Secondary Purchaser
shall transfer a Receivable Interest or Receivables Interest computed on the
basis of such excess Capital to the Secondary Purchaser or Secondary Purchasers
whose Pro Rata Share has increased as a result of such reallocation in exchange
for a cash payment in an amount equal to the aggregate Capital of the Receivable
Interests so transferred.
(e) The Seller may, upon thirty days' prior written notice to the
Administrative Agent and the Secondary Purchasers and the written signed consent
of the Administrative Agent and the Secondary Purchasers, cease purchasing
Receivables from any Originator, and after the Seller ceases purchasing
Receivables from such Originator, such Originator shall no longer have the
obligations of an Originator for all purposes of this Agreement other than with
respect to those obligations which are expressly intended to survive the
termination of this Agreement, including, without limitation, the indemnities
contained in Section 8.01 as incorporated by reference in the Consent and
Acknowledgement to which such Originator is a party. If, as a result of the
Seller's decision to cease purchasing Receivables from any Originator, the
Required Secondary Purchasers determine, in their sole discretion, that the
Events of Termination in Section 7.01(j) are no longer reasonable or protective,
the Required Secondary Purchasers may modify the provisions of such Section
7.01(j) with the consent of the Seller (which consent shall not be unreasonably
withheld or delayed).
(f) The Seller may, upon thirty days' prior written notice to the
Administrative Agent and the Secondary Purchasers and the written signed consent
of the Administrative Agent and the Secondary Purchasers (which consent shall
not be unreasonably withheld or delayed), cease purchasing from any Originator
all Receivables generated by any division of such Originator (an "Originator
Division"), and after the Seller ceases purchasing from such Originator
Division, all Receivables generated by such Originator Division, any agreement
arising thereafter between such Originator and an Obligor pursuant to or under
which such Obligor shall be obligated to pay for merchandise, insurance or
services provided by such Originator Division, shall not be a "Contract" for
purposes of this Agreement; provided, that any Contract generated by such
Originator Division prior to the date the Seller ceases purchasing such
Originator Division's Receivables shall remain a "Contract" under this
Agreement. If, as a result of the Seller's decision to cease purchasing from any
Originator all Receivables generated by an Originator Division pursuant to this
Section 2.01(f), the Required Secondary Purchasers determine, in their sole
discretion, that the Events of Termination in Section 7.01(j) are no longer
reasonable or protective, the Required Secondary Purchasers may modify the
provisions of such Section 7.01(j) with the consent of the Seller (which consent
shall not be unreasonably withheld or delayed).
(g) The Seller may, upon ninety days' prior written notice to the
Administrative Agent and the Secondary Purchasers and the written signed consent
of the Administrative Agent and the Secondary Purchasers, commence purchasing
from
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<PAGE>
any Originator all Receivables generated by any Originator Division, and after
the Seller commences purchasing from such Originator all Receivables generated
by such Originator Division, all related agreements between the Originator and
an Obligor pursuant to or under which such Obligor shall be obligated to pay for
merchandise, insurance or service provided by such Originator Division shall be
"Contracts" for purposes of this Agreement. If, as a result of the Seller's
decision to commence purchasing from any Originator all Receivables generated by
an Originator Division pursuant to this Section 2.01(g), the Required Secondary
Purchasers determine, in their sole discretion, that the Events of Termination
in Section 7.01(j) are no longer reasonable or protective, the Required
Secondary Purchasers may modify the provisions of such Section 7.01(j) with the
consent of the Seller (which consent shall not be unreasonably withheld or
delayed).
(h) If Georgia-Pacific sells or otherwise conveys or disposes of the
stock of any Originator, upon the effective date of such sale, such Originator
shall no longer be an Originator under the Primary Purchase Agreement; provided,
that if the Required Secondary Purchasers determine, in their sole discretion,
that the Events of Termination in Section 7.01(j) are no longer reasonable or
protective as a result of such sale, the Required Secondary Purchasers may
modify the provisions of such Section 7.01(j) with the consent of the Seller
(which consent shall not be unreasonably withheld or delayed).
(i) The Expiration Date shall be 364 days from the date hereof;
provided, that the Expiration Date may be extended for an additional 364-day
period at the end of each 364-day period from the date hereof if the Seller
gives each Secondary Purchaser written notice not later than 90 days prior to
each such period (beginning with the first such period) and each Secondary
Purchaser provides the Seller with its written consent to such extension not
later than 60 days after receipt of the Seller's notice; provided, however, that
such extension of the Expiration Date shall not occur unless each Purchaser
consents to similarly extend the "Facility Termination Date" of the Primary
Purchase Agreement.
SECTION 2.02 Making Purchases.
(a) Each Purchase shall be made on at least three Business Days' notice
from the Seller to each Secondary Purchaser. Each such notice shall specify (i)
the amount requested to be paid to the Seller (which shall not be less than
$5,000,000), and (ii) the date of such Purchase (which shall be a Business Day).
Any notice from the Seller to a Related Purchaser to make a "Purchase" under the
Primary Purchase Agreement shall be deemed to satisfy the notice provisions
hereof. No Secondary Purchaser shall be responsible for any failure by any other
Secondary Purchaser to perform its obligations to make a Purchase hereunder nor
shall the Commitment of any Secondary Purchaser be increased or decreased as a
result of such failure.
(b) On the date of each Purchase, each Secondary Purchaser shall, upon
satisfaction of the applicable conditions set forth in Section 3.01 and Section
3.02, make available to the Seller in same day funds, at the Seller's account
with Bank One, account number 10-31343, an amount equal to the initial Capital
of such Receivable Interest purchased by such Secondary Purchaser. Each notice
given by the Seller pursuant to
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<PAGE>
subsection (a) above (other than a notice given under the Primary Purchase
Agreement which is deemed to be notice hereunder) shall be irrevocable and
binding on the Seller and the Seller shall indemnify each Secondary Purchaser
against any loss or expense incurred by such Secondary Purchaser as a result of
any failure by the Seller to accept the amount requested to be paid by such
Secondary Purchaser, including, without limitation, any loss (including loss of
anticipated profits) or expense incurred by such Secondary Purchaser by reason
of the liquidation or reemployment of funds acquired or requested by such
Secondary Purchaser to fund such requested amount.
(c) Each Secondary Purchaser hereby agrees that it may, in its sole
discretion, subject to the satisfaction of the applicable conditions set forth
in Section 3.01 and Section 3.02 hereof and upon the request of such Secondary
Purchaser's Related Purchaser, acquire by assignment from such Related Purchaser
any "Receivable Interest" owned and maintained by such Related Purchaser under
the Primary Purchase Agreement. The Seller hereby agrees that each such
acquisition, if any, shall be considered to be a Purchase requested by the
Seller for all purposes hereunder other than with respect to the obligation of
the Secondary Purchasers to deliver funds to the Seller in respect of such
acquisition and with respect to the requirement of three Business Days' notice
of a Purchase being given by the Seller. The Seller hereby acknowledges that the
Secondary Purchasers may provide Liquidity Facilities to such Secondary
Purchaser's Related Purchaser and nothing in this Section 2.02(c) shall preclude
the assignment by a Purchaser to such Secondary Purchaser under a Liquidity
Facility of any such "Receivable Interest" in accordance with the terms and
conditions thereof.
SECTION 2.03 Incorporation by Reference. Section 2.03 of the Primary
Purchase Agreement is hereby incorporated herein by reference, except that each
reference therein to the "Reinvestment Termination Date" shall be deemed to be a
reference to the "Facility Termination Date".
SECTION 2.04 Incorporation by Reference. Section 2.04 of the Primary
Purchase Agreement is hereby incorporated herein by reference.
SECTION 2.05 Fees. The Seller shall pay to the Secondary Purchasers
fees in the amounts and at the times specified in the Fee Letter.
(a) The Collection Agent (if other than the Seller) shall be paid a
Collection Agent Fee as set forth in Section 6.06 hereof.
(b) The Seller shall pay to the Administrative Agent a fee as
separately agreed between the Seller and the Administrative Agent.
SECTION 2.06 Incorporation by Reference. Section 2.06 of the Primary
Purchase Agreement is hereby incorporated herein by reference.
SECTION 2.07 Incorporation by Reference. Section 2.07 of the Primary
Purchase Agreement is hereby incorporated herein by reference.
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SECTION 2.08 Yield Protection.
(a) If, after the date hereof, the adoption of any applicable law, rule
or regulation, or any change therein, including Regulation D of the Board of
Governors of the Federal Reserve System, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Secondary Purchaser or any Person controlling any Secondary Purchaser, or
any permitted assignee under this Agreement (each of which being an "Affected
Party") with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency,
(A) shall subject an Affected Party to any tax (except for taxes
on the overall net income of such Affected Party), duty or other charge with
respect to the Receivable Interests or any right to make purchases, or shall
change the basis of taxation of payments to an Affected Party of its Capital or
Yield or any other amounts due under this Agreement in respect of its Capital or
its rights, if any, to make purchases; or
(B) shall impose, modify or deem applicable any reserve
requirement (including, without limitation, any reserve requirement imposed by
the Board of Governors of the Federal Reserve System, but excluding any reserve
requirement, if any, included in the determination of Yield), special deposit or
similar requirement against assets of, deposits with or for the account of, or
credit extended by, any Affected Party; or
(C) shall impose any other condition affecting the Receivable
Interests or the Secondary Purchaser's rights, if any, to make purchases;
and the result of any of the foregoing is (i) to increase the cost to, or, in
the case of Regulation D referred to above, to impose a cost on an Affected
Party funding or making or maintaining any Receivable Interest, or (ii) to
reduce the amount of any sum received or receivable by an Affected Party under
this Agreement with respect thereto, then within ten days after demand by such
Affected Party (which demand shall be accompanied by a statement setting forth
the basis for such demand), the Seller shall pay directly to such Affected Party
such additional amount or amounts as will compensate such Affected Party for
such additional or increased cost incurred or such reduction suffered.
(b) If an Affected Party shall reasonably determine that the adoption
of any applicable law, rule, regulation, directive or guideline regarding
capital adequacy, or any change in or phase-in of any applicable law, rule,
regulation, directive or guideline or in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by an Affected
Party with any request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on the
capital of any Affected Party as a consequence of its obligations hereunder or
arising in connection herewith to a level below that which any such Affected
Party could have
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achieved but for such adoption, change or compliance (taking into consideration
the policies of such Affected Party with respect to capital adequacy) by an
amount deemed by such Affected Party to be material, then from time to time,
within ten days after demand by such Affected Party, the Seller shall pay to
such Affected Party such additional amount or amounts as will compensate such
Affected Party for such reduction.
(c) Each Affected Party will promptly notify the Seller of any event of
which it has knowledge occurring after the date hereof which will entitle such
Affected Party to compensation pursuant to this Section 2.08. If an Affected
Party fails to give such notice within 90 days after it obtains actual knowledge
of such event and such result, such Affected Party shall be entitled to
compensation pursuant to this Section 2.08 only to the extent such additional
amount or reduction accrues on or after the date 90 days prior to the date on
which such Affected Party gives such notice.
(d) In determining any amount provided for in this Section 2.08, the
Affected Party may use any reasonable averaging and attribution methods. Any
Affected Party making a claim under this Section 2.08 shall submit to the Seller
a certificate as to such additional or increased cost or reduction, which
certificate shall be conclusive absent demonstrable error; provided, that the
failure to deliver any such certificate shall not affect the Affected Party's
right to payment hereunder unless notice as required by Section 2.08(c) has not
been given.
SECTION 2.09 Incorporation by Reference. Section 2.09 of the Primary
Purchase Agreement is hereby incorporated herein by reference.
SECTION 2.10 Incorporation by Reference. Section 2.10 of the Primary
Purchase Agreement is hereby incorporated herein by reference.
ARTICLE III.
CONDITIONS OF PURCHASES
SECTION 3.01 Conditions Precedent to Initial Purchase. The initial
Purchase of Receivable Interests under this Agreement is subject to the
conditions precedent that the Secondary Purchasers shall have received on or
before the date of such Purchase the following, each (unless otherwise
indicated) dated such date and in form and substance satisfactory to the
Secondary Purchasers and the Administrative Agent:
(a) Certificates of the Secretary or Assistant Secretary of the Seller
and each Originator certifying the names and true signatures of their respective
officers authorized to sign this Agreement, the Certificates and the other
documents to be delivered by them hereunder or in connection herewith, evidence
of corporate authorization of the transactions contemplated hereby, the articles
of incorporation (attached and appropriately certified by the Secretary of State
of the Seller's and each Originator's jurisdiction of incorporation) and the
by-laws and all amendments thereto of the Seller and each Originator.
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(b) Executed financing statements (including any assignments of and
amendments to financing statements previously filed), to be filed on or before
the date of such initial Purchase under the UCC of all jurisdictions that the
Secondary Purchasers or the Administrative Agent may deem necessary or desirable
in order (i) to perfect the ownership interests contemplated by this Agreement
and (ii) to perfect the ownership interests of the Seller in the receivables
purchased by the Seller from the Originators pursuant to the Transfer
Agreements.
(c) Executed UCC termination statements, if any, necessary to release
all security interests and other rights of any Person (other than the Purchasers
and the Secondary Purchasers) in the Receivables, Contracts or Related Security
previously granted by the Seller or any Originator.
(d) Evidence (including Uniform Commercial Code search reports) that
all Receivables and all proceeds thereof are free and clear of liens, security
interests, claims and encumbrances other than those held by the Purchasers and
the Secondary Purchasers.
(e) An executed Transfer Agreement and Consent and Acknowledgment from
each Originator.
(f) [Notices, in form and substance satisfactory to the Secondary
Purchasers, to the Lock-Box Banks with respect to the interest of the Purchasers
in the Receivables.]
SECTION 3.02 Conditions Subsequent. The Seller shall, no later than
November 1, 1999, deliver to the Secondary Purchasers and the Administrative
Agent:
(a) A favorable opinion of Troutman Sanders LLP, counsel for the Seller
and the Originators, in form and substance reasonably satisfactory to the
Secondary Purchasers.
(b) A favorable opinion of local counsel for each Originator, in form
and substance reasonably satisfactory to the Secondary Purchasers.
SECTION 3.03 Conditions Precedent to All Purchases and Reinvestments.
Each Purchase (including the initial Purchase and each acceptance of an
assignment pursuant to Section 2.02(c) hereof) and each reinvestment shall be
subject to the further conditions precedent that (a) in the case of each
Purchase, the Collection Agent shall have delivered to the Secondary Purchasers
and the Administrative Agent on or prior to the date of such Purchase, in form
and substance satisfactory to the Secondary Purchasers, all Investor Reports as
and when due under Section 6.02(g) and, on or prior to the date of the initial
Purchase, an Investor Report containing then current information acceptable to
the Secondary Purchasers, and (b) on the date of each Purchase or reinvestment,
the following statements shall be true (and acceptance of the proceeds of such
Purchase or reinvestment shall be deemed a representation and warranty by the
Seller that such statements are then true):
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(i) the representations and warranties contained in Article IV are
correct on and as of the date of such Purchase or reinvestment as though made on
and as of such date,
(ii) no event has occurred and is continuing, or would result from such
Purchase or reinvestment, that constitutes an Event of Termination or a
Potential Termination Event,
(iii) the Facility Termination Date shall not have occurred,
(iv) the Internal Revenue Service shall not have filed a notice of lien
pursuant to Section 6323 of the Code with regard to any assets of the Seller or
any Originator, and the Pension Benefit Guaranty Corporation shall not have
filed a notice of lien pursuant to Section 4068 of ERISA with regard to any
assets of the Seller or any Originator, unless such liens (1) have been
suspended or (2) are being contested in good faith by the Seller or such
Originator and have been bonded in the full amount thereof; provided, however,
that with respect to any Originator, the amount of such lien shall be greater
than $50,000,000, and
(v) the Related Purchaser shall have failed to make a "Purchase" of
like amount, term and tenor which was requested by the Seller, or shall have
ceased to make reinvestments, in either case under the Primary Purchase
Agreement,
and (c) the Secondary Purchasers shall have received such other approvals,
opinions or documents as they may reasonably request.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 Incorporation by Reference. Article IV of the Primary
Purchase Agreement is hereby incorporated herein by reference, except that each
reference to the "Secondary Purchase Agreement" shall be deemed to be a
reference to the "Primary Purchase Agreement."
ARTICLE V.
COVENANTS
SECTION 5.01 Incorporation by Reference. Article V of the Primary
Purchase Agreement is hereby incorporated herein by reference, except that each
reference therein to the "Secondary Purchase Agreement" shall be deemed to be a
reference to the "Primary Purchase Agreement."
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ARTICLE VI.
ADMINISTRATION AND COLLECTION
SECTION 6.01 Designation of Collection Agent. The administration and
collection of the Pool Receivables shall be conducted by such Person (the
"Collection Agent") so designated from time to time in accordance with this
Section 6.01. Georgia-Pacific is hereby designated as, and hereby agrees to
perform the duties and obligations of, the Collection Agent pursuant to the
terms of this Agreement. The Secondary Purchasers may at any time designate as
Collection Agent any Person (including a Secondary Purchaser or a Purchaser) to
succeed Georgia-Pacific or any successor Collection Agent, if such Person shall
consent and agree to the terms hereof. Unless the Required Secondary Purchasers
determine in their sole discretion that it would be impractical or inadvisable
to do so, the Secondary Purchasers shall give the Seller and the Collection
Agent at least five Business Days' notice of any such designation. The
Collection Agent may, with the prior consent of the Secondary Purchasers,
subcontract with any other Person for the administration and collection of all
or a significant portion of the Pool Receivables; provided, that the Collection
Agent may, so long as it is the Seller, subcontract with an Originator for the
administration and collection of the Pool Receivables without the consent of the
Secondary Purchasers; provided, further, that Georgia-Pacific may, without the
consent of the Secondary Purchasers, subcontract with any other Person for the
administration and collection of Pool Receivables as authorized by the Credit
and Collection Policy. Any such subcontract shall not affect the Collection
Agent's liability for performance of its duties and obligations pursuant to the
terms hereof.
SECTION 6.02 Duties of Collection Agent.
(a) The Collection Agent shall take or cause to be taken all such
actions as may be necessary or advisable to collect each Pool Receivable from
time to time, all in accordance with applicable laws, rules and regulations,
with reasonable care and diligence, and in accordance with the Credit and
Collection Policy. Each of the Seller, each Secondary Purchaser and the
Administrative Agent hereby appoints the Collection Agent, from time to time
designated pursuant to Section 6.01 hereof, as agent for itself and for the
owners of Receivable Interests to enforce their respective rights and interests
in the Pool Receivables, the Related Security and the related Contracts.
(b) The Collection Agent shall administer the Collections in accordance
with the procedures described herein and in Section 2.04. The Collection Agent
shall set aside and hold in trust for the account of the Seller and each
Secondary Purchaser, their respective shares of the Collections of Pool
Receivables in accordance with Section 2.04 but shall not be required, except
either upon the request of the Administrative Agent acting at the direction of
the Required Secondary Purchasers or upon the occurrence and during the
continuance of an Event of Termination or a Potential Termination Event, to
segregate the funds constituting each Secondary Purchaser's share of such
Collections from the general funds of the Collection Agent or the Seller prior
to the remittance thereof in accordance with Section 2.04. If the Collection
Agent shall be required to segregate Collections pursuant to the proceeding
sentence, the Collection Agent shall segregate and deposit with a bank (which
may be CIBC, Citibank or Bank
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One) designated by each Secondary Purchaser such allocable share of Collections
of Pool Receivables set aside for such Secondary Purchaser on the first Business
Day following receipt by the Collection Agent of such Collections.
(c) If no Event of Termination or Potential Termination Event shall
have occurred, the Collection Agent, may, in accordance with the Credit and
Collection Policy, extend the maturity or adjust the Outstanding Balance of any
Receivable as the Collection Agent deems appropriate to maximize Collections in
respect thereof; provided, that the extension or adjustment by the Collection
Agent of a Receivable which is a Defaulted Receivable or a Delinquent Receivable
shall not change the status of such Receivable for purposes of this Agreement.
(d) The Collection Agent shall hold in trust for the Seller and the
Secondary Purchasers, in accordance with their respective interests, all Records
that evidence or relate to Pool Receivables and shall, as soon as practicable
upon demand of the Administrative Agent acting at the direction of the Required
Secondary Purchasers, deliver or make available to the Administrative Agent all
Records in its possession which evidence or relate to Pool Receivables.
(e) The Collection Agent, shall as soon as practicable following
receipt thereof, turn over to the Seller (i) that portion of Collections of Pool
Receivables representing the Seller's undivided fractional ownership interest
therein, less all reasonable out-of-pocket costs and expenses of the Collection
Agent of servicing, administering and collecting the Pool Receivables to the
extent not covered by the Collection Agent Fee received by it, and (ii) any cash
collections or other cash proceeds received with respect to Receivables not
constituting Pool Receivables.
(f) The Collection Agent shall, from time to time at the request of a
Secondary Purchaser, furnish to such Secondary Purchaser (promptly after any
such request) a calculation of the amounts set aside for such Secondary
Purchaser pursuant to Section 2.04 hereof.
(g) On or prior to each Investor Report Date, the Collection Agent
shall prepare and forward to each Secondary Purchaser and the Administrative
Agent (i) an Investor Report relating to each Receivable Interest outstanding on
the immediately preceding Settlement Date, and (ii) if requested by a Secondary
Purchaser, a listing by Obligor of all Pool Receivables outstanding on such
Settlement Date, together with an analysis of the aging of such Pool Receivables
by Obligor and such additional information as may be reasonably requested by
such Secondary Purchaser. Prior to the occurrence of an Event of Termination or
a Potential Termination Event, the Collection Agent will use its best efforts to
provide the Secondary Purchasers and the Administrative Agent with the
information in clauses (i) and (ii) above on a more frequent basis if reasonably
requested by the Required Secondary Purchasers. Following an Event of
Termination or a Potential Termination Event, the Collection Agent will provide
the Secondary Purchasers and the Administrative Agent with the information in
clauses (i) and (ii) above on a more frequent basis if required by the Required
Secondary Purchasers.
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(h) The Collection Agent will, to the extent permitted by applicable
law and with respect to any amount not paid by the Collection Agent when
required to be paid hereunder, pay on demand interest to each Secondary
Purchaser at a rate per annum equal to 2% above the Base Rate, provided,
however, that such interest rate will not at any time exceed the maximum rate
permitted by applicable law.
(i) The Collection Agent's authorization under this Agreement will
terminate after the Facility Termination Date, upon payment in full of all
amounts payable to the Secondary Purchasers and the Collection Agent under this
Agreement.
SECTION 6.03 Rights of the Administrative Agent.
(a) Upon five days notice to the Seller, unless the Required Secondary
Purchasers determine in their sole discretion that it would be impracticable or
inadvisable to give such notice, the Administrative Agent at the direction of
the Required Secondary Purchasers is authorized at any time to date and to
deliver to the Lock-Box Banks, the Lock-Box Notices, to the Depositary Banks,
the Depositary Notices and to the Concentration Banks, the Concentration Notices
delivered hereunder. The Seller hereby transfers to the Administrative Agent,
effective when the Administrative Agent delivers such Lock-Box Notices, such
Depositary Notices or such Concentration Notices, as the case may be, the
exclusive ownership and control of such Lock-Box Accounts, such Depositary
Accounts or such Concentration Accounts. The Seller shall, and shall cause each
Originator to, take any actions reasonably requested by the Administrative Agent
to effect such transfer. In case any authorized signatory of the Seller or any
Originator whose signature appears on a Lock-Box Notice, a Depositary Notice or
a Concentration Notice shall cease to have such authority before the delivery of
such Lock-Box Notice, such Depositary Notice or a Concentration Notice, such
signature shall nevertheless be valid as if such authority had remained in
force. The Administrative Agent at the direction of the Required Secondary
Purchasers may notify the Obligors of Pool Receivables, at any time and at the
Seller's expense, of the ownership of Receivable Interests under this Agreement
and may also direct that payments of all amounts due or that become due under
any or all Receivables be made directly to the Administrative Agent or its
designee. In furtherance of the foregoing, the Administrative Agent shall, upon
the direction of the Required Secondary Purchasers, be entitled to take all such
actions as it deems necessary or advisable to exercise dominion and control over
the collection and servicing of the Pool Receivables including such action as
shall be necessary or desirable to cause all cash, checks and other instruments
constituting Collections of Pool Receivables to come into the possession of the
Administrative Agent rather than the Seller. Unless the Required Secondary
Purchasers determine in their sole discretion that it would be impractical or
inadvisable to do so, the Secondary Purchasers must give the Seller five days
prior notice of any such action.
(b) At any time following the designation of a Collection Agent other
than Georgia-Pacific pursuant to Section 6.01:
(i) The Administrative Agent may, and at the direction of the
Required Secondary Purchasers shall, direct the Obligors of Pool
Receivables that
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all payments thereunder be made directly to the Administrative Agent or
its designee.
(ii) The Seller shall, and shall cause each Originator to, at
the Administrative Agent's request and at the expense of the Seller and
the Originators, notify each Obligor of Pool Receivables of the
ownership of Receivable Interests under this Agreement and direct that
payments be made directly to the Administrative Agent or a designee of
the Administrative Agent approved by the Required Secondary Purchasers.
(iii) The Seller shall, and shall cause each Originator to, at
the Administrative Agent's request (which shall be at the direction of
the Required Secondary Purchasers) and at the expense of the Seller and
the Originators, (A) assemble all of the Records that evidence or
relate to the Pool Receivables, and the related Contracts and Related
Security, or that are otherwise necessary or desirable to collect the
Pool Receivables, and shall make the same available to the
Administrative Agent or its designee, at a place selected by the
Administrative Agent, and (B) segregate all cash, checks and other
instruments received by it from time to time constituting Collections
of Pool Receivables in a manner acceptable to the Administrative Agent
and the Required Secondary Purchasers and, promptly upon receipt, remit
all such cash, checks and instruments, duly endorsed or with duly
executed instruments of transfer, to the Administrative Agent or its
designee.
(iv) The Seller hereby authorizes the Administrative Agent to
take any and all steps in the Seller's name and on behalf of the Seller
that are necessary or desirable, in the determination of the
Administrative Agent and the Required Secondary Purchasers, to collect
amounts due under the Pool Receivables, including, without limitation,
endorsing the Seller's name on checks and other instruments
representing Collections of Pool Receivables and enforcing the Pool
Receivables and the Related Security and related Contracts.
SECTION 6.04 Responsibilities of the Seller. Anything herein to the
contrary notwithstanding:
(a) The Seller shall, and shall cause each Originator to, perform its
obligations under the Contracts related to the Pool Receivables to the same
extent as if Receivable Interests and Receivables had not been sold and the
exercise by the Administrative Agent and by the Secondary Purchasers of their
rights hereunder shall not release the Collection Agent, the Seller or any
Originator from any of their duties or obligations with respect to any Pool
Receivables or under the related Contracts; and
(b) Neither the Administrative Agent nor the Secondary Purchasers shall
have any obligation or liability with respect to any Pool Receivables or related
Contracts, nor shall any of them be obligated to perform the obligations of the
Seller or any Originator thereunder.
SECTION 6.05 Further Actions Evidencing Purchases.
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(a) The Seller shall, and shall cause each Originator to, from time to
time, at their expense, promptly execute and deliver all further instruments and
documents, and take all further actions, that may be necessary or desirable, or
that the Administrative Agent or any Secondary Purchaser may reasonably request,
to perfect, protect or more fully evidence the Receivable Interests purchased
hereunder, or to enable any Secondary Purchaser or the Administrative Agent to
exercise and enforce their respective rights and remedies hereunder. Without
limiting the foregoing, the Seller and each Originator will upon the request of
any Secondary Purchaser or the Administrative Agent (i) execute and file such
financing or continuation statements, or amendments thereto, and such other
instruments and documents, that may be necessary or desirable, or that any
Secondary Purchaser or the Administrative Agent may reasonably request, to
perfect, protect or evidence such Receivable Interests; (ii) mark conspicuously
each invoice evidencing each Pool Receivable and the related Contract with a
legend, acceptable to the Secondary Purchasers, evidencing that Receivable
Interests therein have been sold; and (iii) mark its master data processing
records evidencing such Pool Receivables and related Contracts with a legend,
acceptable to the Secondary Purchasers, evidencing that Receivable Interests
therein have been sold; provided that the actions specified in clauses (ii) and
(iii) may be directed by the Required Secondary Purchasers or the Administrative
Agent only upon the occurrence of an Event of Termination or a Potential
Termination Event.
(b) The Seller authorizes the Administrative Agent to file financing or
continuation statements, and amendments thereto, relating to the Pool
Receivables and the Related Security, the related Contracts and the Collections
with respect thereto without the signature of the Seller where permitted by law.
A photocopy or other reproduction of this Agreement shall be sufficient as a
financing statement where permitted by law.
(c) If the Collection Agent fails to perform any of its obligations
hereunder, any Secondary Purchaser or the Administrative Agent may (but shall
not be required to) perform, or cause performance of, such obligation; and such
Secondary Purchaser's or the Administrative Agent's costs and expenses incurred
in connection therewith shall be payable by the Seller (if the Collection Agent
that fails to so perform is Georgia-Pacific or an Affiliate thereof) as provided
in Section 8.01 or Section 9.04, as applicable.
SECTION 6.06 Collection Agent Fee. The Collection Agent shall be paid a
collection fee (the "Collection Agent Fee") of 1% per annum on the average daily
amount of the Total Aggregate Capital payable monthly in arrears on each
Settlement Date. The Collection Agent Fee shall be payable only from Collections
pursuant to, and subject to the priority of payment set forth in, Section 2.04.
Notwithstanding anything contained in this Section 6.06 to the contrary, the
Collection Agent Fee payable hereunder shall be reduced to the extent and in the
amount of the "Collection Agent Fee" paid to the Collection Agent under the
Primary Purchase Agreement.
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ARTICLE VII.
EVENTS OF TERMINATION
SECTION 7.01 Incorporation by Reference; Additional Events of
Termination. If any of the events specified in subsection (a) or subsection (b)
below ("Events of Termination") shall occur and be continuing:
(a) The text set forth in Sections 7.01(a) through (q) of the Primary
Purchase Agreement is incorporated herein by reference as if set forth herein in
its entirety, except that each reference to the "Secondary Purchase Agreement"
shall be deemed to be a reference to the "Primary Purchase Agreement", each use
of the word "hereunder", "hereof" or "herein" shall be deemed to be a reference
to this Agreement and any reference to a "Purchaser", the "Required Purchasers"
or the "Purchasers" shall be deemed to be a reference to a "Secondary
Purchaser", the "Required Secondary Purchasers" or the "Secondary Purchasers");
or
(b) the occurrence or declaration of an "Event of Termination" under
the Primary Purchase Agreement, unless cured or waived;
then, and in any such event, at the direction of the Required Secondary
Purchasers, the Administrative Agent shall, by notice to the Seller, take either
or both of the following actions: (x) declare the Facility Termination Date to
have occurred (in which case the Facility Termination Date shall be deemed to
have occurred), and (y) designate another Person to succeed Georgia-Pacific as
the Collection Agent, subject to the approval of the Secondary Purchasers;
provided, that automatically upon the occurrence of any event (without any
requirement for the passage of time or the giving of notice) described in
subsection (i) of this Section 7.01, the Facility Termination Date shall occur.
Upon any such declaration or designation or upon any such automatic termination,
(i) each Receivables Pool shall be fixed as of the Business Day immediately
preceding the Facility Termination Date and the Collection Agent shall prepare
and forward to each Secondary Purchaser and the Administrative Agent, within one
Business Day after the Facility Termination Date, an Investor Report relating to
each Receivable Interest outstanding on the Business Day immediately preceding
the Facility Termination Date, and (ii) the Secondary Purchasers and the
Administrative Agent shall have, in addition to the rights and remedies which
they may have under this Agreement, all other rights and remedies provided after
default under the UCC and under other applicable law, which rights and remedies
shall be cumulative.
ARTICLE VIII.
INDEMNIFICATION
SECTION 8.01 Indemnities by the Seller. Without limiting any other
rights that the Administrative Agent or the Secondary Purchasers or any
Affiliate thereof and their respective officers, directors, employees and agents
(each, an "Indemnified Party") may have hereunder or under applicable law, the
Seller hereby agrees to indemnify each Indemnified Party from and against any
and all claims, losses and liabilities (including reasonable attorneys fees and
expenses) (all of the foregoing being collectively referred
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to as "Indemnified Amounts") arising out of or resulting from this Agreement or
the use of proceeds of purchases or reinvestments or the ownership of Receivable
Interests or in respect of any Receivable or any Contract, excluding, however,
(a) Indemnified Amounts to the extent resulting from gross negligence or willful
misconduct on the part of such Indemnified Party, (b) recourse for uncollectible
Receivables (except to the extent the Buyer has recourse against the Seller with
respect to such Receivable on grounds other than the noncollectability of the
Receivable) or (c) except as set forth below, any income taxes incurred by such
Indemnified Party arising out of or as a result of this Agreement or the
ownership of Receivable Interests or in respect of any Receivable or any
Contract. Without limitation of the generality of the foregoing, the Seller
shall pay on demand to each Indemnified Party any and all amounts necessary to
indemnify such Indemnified Party from and against any and all Indemnified
Amounts relating to or resulting from any of the following:
(i) the creation of a Receivable Interest in any Pool
Receivable which is not at the date of the creation of such Receivable
Interest an Eligible Receivable;
(ii) reliance on any representation or warranty made or deemed
made by the Seller or any Originator (or any of their respective
Responsible Officers) or any statement made by any Responsible Officer
of the Seller or any Originator under or in connection with this
Agreement which shall have been incorrect when made;
(iii) the failure by the Seller or any Originator to comply
with any applicable law, rule or regulation;
(iv) the failure to vest in a Secondary Purchaser an undivided
percentage ownership interest, to the extent of such Secondary
Purchaser's Receivable Interest, in the Receivables (including, without
limitation, Receivables of Government Obligors) in, or purporting to be
in, the Receivables Pool and the Related Security and Collections in
respect thereof, free and clear of any Adverse Claim other than as
authorized hereunder;
(v) the failure to vest in the Seller all right, title and
interest in the Receivables purchased by the Seller from any Originator
pursuant to a Transfer Agreement, free and clear of any Adverse Claim
other than as authorized hereunder;
(vi) the failure to have filed, or any delay in filing,
financing statements or other similar instruments or documents under
the UCC of any applicable jurisdiction, or under applicable law with
respect to the assignment of Receivables of Government Obligors or
other applicable laws with respect to any Receivables in, or purporting
to be in, the Receivables Pool and the Related Security and Collections
in respect thereof, whether at the time of any purchase or reinvestment
or at any subsequent time;
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(vii) any dispute, claim, offset or defense (other than
discharge in bankruptcy of the Obligor) of the Obligor to the payment
of any Receivable in, or purporting to be in, the Receivables Pool
(including, without limitation, a defense based on such Receivable or
the related Contract not being a legal, valid and binding obligation of
such Obligor enforceable against it in accordance with its terms), or
any other claim resulting from the sale of the merchandise or service
related to such Receivable or the furnishing or failure to furnish such
merchandise or services;
(viii) any failure of the Seller or the Collection Agent (if
Georgia-Pacific or an Affiliate thereof), to perform their respective
duties or obligations in accordance with the provisions of this
Agreement;
(ix) any products liability claim arising out of or in
connection with merchandise, insurance or services which are the
subject of any Contract;
(x) any loss incurred by any Secondary Purchaser as a result
of the Outstanding Balance of all Pool Receivables from the same
Obligor, expressed as a percentage of the aggregate Outstanding Balance
of Eligible Receivables, being in excess of the Concentration Limit or,
if applicable, Special Concentration Limit for such Obligor;
(xi) the commingling of Collections of Pool Receivables at any
time with other funds;
(xii) any action or omission by the Seller or the Collection
Agent (if Georgia-Pacific or an Affiliate thereof), reducing or
impairing the rights of a Secondary Purchaser with respect to any Pool
Receivable or the value of any Pool Receivable, except in accordance
with the Credit and Collection Policy;
(xiii) any failure of the Seller to give reasonably equivalent
value to any Originator in consideration of the transfer by such
Originator to the Seller of any Receivables, or any attempt by any
Person to void any such transfer under statutory provisions or common
law or equitable action, including, without limitation, any provision
of the Bankruptcy Code;
(xiv) any reductions in the amount of a Pool Receivable the
Obligor of which is a Government Obligor, and the Related Security and
Collections with respect thereto, as the result of appropriation by the
government or the inability to collect any amount from a Government
Obligor;
(xv) any inability to collect the full Outstanding Balance of
a Pool Receivable which was entitled to an Administrative Priority as a
result of the Obligor's bankruptcy and which was included as an
Eligible Receivable as a result of such Administrative Priority;
(xvi) any investigation, litigation or proceeding related to
or arising from this Agreement, the transactions contemplated hereby,
the use of the
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proceeds of the Purchase, the ownership of the Receivable Interests or
any Pool Receivable, Related Security or Contract or any other
investigation, litigation or proceeding relating to the Seller or any
Originator in which any Indemnified Party becomes involved as a result
of any of the transactions contemplated hereby;
(xvii) all losses, expenses and liabilities, if any
(including, without limitation, any loss or expense incurred by reason
of the liquidation or reemployment of deposits or other funds acquired
by any Secondary Purchaser in connection with such Secondary
Purchaser's funding or maintenance of the Receivable Interests) which
such Secondary Purchaser may sustain as the result of the termination
or reduction of any Receivable Interest or the failure by the Seller or
the Collection Agent (if Georgia-Pacific or an Affiliate thereof) to
make any payment of Capital when due;
(xviii) any inability to litigate any claim against any
Obligor in respect of any Pool Receivable as a result of such Obligor
being immune from civil and commercial law and suit on the grounds of
sovereignty or otherwise from any legal action, suit or proceeding;
(xix) any Event of Termination described in clause (i) of
SECTION 7.01;
(xx) a Year 2000 Problem with respect to hardware or software
systems used by the Seller or the Collection Agent; or
(xxi) any loss incurred by any Secondary Purchaser on any Pool
Receivable of a Government Obligor.
SECTION 8.02 Contribution. If for any reason the indemnification
provided above in SECTION 8.01 (and subject to the exceptions set forth therein)
is unavailable to an Indemnified Party or is insufficient to hold an Indemnified
Party harmless, then the Seller shall contribute to the amount paid or payable
by such Indemnified Party as a result of such loss, claim or liability in such
proportion as is appropriate to reflect not only the relative benefits received
by such Indemnified Party on the one hand and the Seller on the other hand but
also the relative fault of such Indemnified Party as well as any other relevant
equitable considerations.
ARTICLE IX.
THE ADMINISTRATIVE AGENT
SECTION 9.01 Authorization and Action. Each Secondary Purchaser hereby
appoints and authorizes the Administrative Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement as are delegated to
the Administrative Agent by the terms hereof together with such powers as are
reasonably incidental thereto. As to any matters not expressly provided for by
this Agreement, the Administrative Agent shall not be required to exercise any
discretion or take any action,
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but shall be required to act or to refrain from acting (and shall be fully
protected in so acting or refraining from acting) upon the instructions of any
Secondary Purchaser, the Required Secondary Purchasers or all of the Secondary
Purchasers (and all references in this Agreement to the "Secondary Purchasers"
shall be deemed to mean "all of the Secondary Purchasers") as provided by this
Agreement and such instructions shall be binding upon all parties hereto and all
assignees of the Secondary Purchasers; provided, however, that the
Administrative Agent shall not be required to take any action which exposes the
Administrative Agent to personal liability or which is contrary to this
Agreement or applicable law. The Administrative Agent agrees to give to each
Secondary Purchaser prompt notice of each notice given to it by the Seller, or
by it to the Seller, pursuant to the terms of this Agreement. The appointment
and authority of the Administrative Agent hereunder shall terminate at the later
to occur of (i) the payment to (A) each Secondary Purchaser of its Aggregate
Capital, accrued and unpaid Yield and all other amounts due to such Secondary
Purchaser hereunder and (B) the Administrative Agent of all amounts due
hereunder and (ii) the Facility Termination Date.
SECTION 9.02 UCC Filings. The Secondary Purchasers and the Seller
expressly recognize and agree that the Administrative Agent may be listed as the
assignee or secured party of record on the various UCC filings required to be
made hereunder in order to perfect the transfer of the Receivable Interests from
the Seller to the Secondary Purchasers, that such listing shall be for
administrative convenience only in creating a record or nominee owner to take
certain actions hereunder on behalf of the Secondary Purchasers and that such
listing will not affect in any way the status of the Secondary Purchasers as the
beneficial owners of the Receivable Interests. In addition, such listing shall
impose no duties on the Administrative Agent other than those expressly and
specifically undertaken in accordance with the provisions of this Article IX. In
furtherance of the foregoing, each Secondary Purchaser shall be entitled to
enforce its rights created under this Agreement without the need to conduct such
enforcement through the Administrative Agent except as provided herein.
SECTION 9.03 Administrative Agent's Reliance, Etc. Neither the
Administrative Agent nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with this Agreement, except for its or their own gross
negligence or willful misconduct. Without limitation of the generality of the
foregoing, the Administrative Agent (i) may consult with legal counsel
(including counsel for the Seller), independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (ii) makes no warranty or representation to any Person
and shall not be responsible to any Person for any statements, warranties or
representations (whether written or oral) made in or in connection with this
Agreement; (iii) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement on the part of the Seller, or of any Transfer Agreement on the part of
the Seller or the Originator a party thereto, or to inspect the property
(including the books and records) of the Seller or any Originator; (iv) shall
not be responsible to any Secondary Purchaser for the due execution, legality,
23
<PAGE>
validity, enforceability, genuineness, sufficiency or value of this Agreement or
any Transfer Agreement or any other instrument or document furnished pursuant
hereto; and (v) shall incur no liability under or in respect of this Agreement
by acting upon any notice, consent, certificate or other instrument or writing
(which may be by facsimile, telegram, cable or telex) believed by it to be
genuine and signed or sent by the proper party or parties.
SECTION 9.04 CIBC and Affiliates. With respect to any Pool Receivable
owned by CIBC, CIBC shall have the same rights and powers under this Agreement
and any document delivered pursuant hereto as would any Secondary Purchaser and
may exercise the same as though it were not the Administrative Agent. CIBC and
its Affiliates may generally engage in any kind of business with the Seller, any
Originator or any Obligor and any of their respective Affiliates and any Person
who may do business with or own securities of the Seller, any Originator or any
Obligor or any of their respective Affiliates, all as if CIBC were not the
Administrative Agent and without any duty to account therefor to any Secondary
Purchaser.
SECTION 9.05 Secondary Purchasers' Purchase Decisions. Each Secondary
Purchaser acknowledges that it has, independently and without reliance upon the
Administrative Agent, any of its Affiliates or any other Secondary Purchaser and
based on such documents and information as it has deemed appropriate, made its
own evaluation and decision to enter into this Agreement and, if it so
determines, to purchase undivided ownership interests in Pool Receivables
hereunder. Each Secondary Purchaser also acknowledges that it will,
independently and without reliance upon the Administrative Agent, any of its
Affiliates or any other Secondary Purchaser and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
decisions in taking or not taking action under this Agreement.
SECTION 9.06 Indemnification. Each Secondary Purchaser agrees to
indemnify the Administrative Agent (to the extent not reimbursed by the Seller),
ratably according to the ratio its Commitment bears to the aggregate Commitment
of the Secondary Purchasers, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against the Administrative Agent in any way
relating to or arising out of this Agreement or any action taken or omitted by
the Administrative Agent under this Agreement, provided that a Secondary
Purchaser shall not be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Administrative Agent's gross negligence or
willful misconduct. Without limitation of the generality of the foregoing, each
Secondary Purchaser agrees to reimburse the Administrative Agent, ratably
according to the ratio its Commitment bears to the aggregate Commitment of the
Secondary Purchasers, promptly upon demand, for any out-of-pocket expenses
(including reasonable counsel fees) incurred by the Administrative Agent in
connection with the administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement, to the
extent that such expenses are incurred in the interests of
24
<PAGE>
or otherwise in respect of the Secondary Purchasers hereunder and are approved
by the Secondary Purchasers and to the extent that the Administrative Agent is
not reimbursed for such expenses by the Seller.
SECTION 9.07 Successor Administrative Agent. The Administrative Agent
may resign at any time by giving 30 days' written notice thereof to the
Secondary Purchasers, the Seller, the Collection Agent and the Purchasers and
may be removed at any time with or without cause by the Required Secondary
Purchasers. Upon any such resignation or removal, the Secondary Purchasers shall
have the right to appoint a successor Administrative Agent approved by the
Seller (which approval will not be unreasonably withheld or delayed). If no
successor Administrative Agent shall have been so appointed by the Secondary
Purchasers, and shall have accepted such appointment, within 30 days after the
retiring Administrative Agent's giving of notice of resignation or the Secondary
Purchasers' removal of the Administrative Agent, then Georgia-Pacific shall
appoint a Secondary Purchaser or such other Person approved by the Purchasers
(which approval will not be unreasonably withheld or delayed) as a successor
Administrative Agent. If such successor Administrative Agent is not a Secondary
Purchaser, such successor Administrative Agent shall be (a) either (i) a
commercial bank having a combined capital and surplus of at least $250,000,000
or (ii) an Affiliate of such bank and (b) experienced in the types of
transactions contemplated by this Agreement. Upon the acceptance of any
appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations under this Agreement. After any retiring
Administrative Agent's resignation or removal hereunder as Administrative Agent,
the provisions of this Article IX shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Administrative Agent under this
Agreement.
ARTICLE X.
ASSIGNMENT OF RECEIVABLE INTERESTS
SECTION 10.01 Assignment. Each Secondary Purchaser (with respect to any
Receivable Interest) may (i) without the consent of the Seller, assign to
another Secondary Purchaser, any Purchaser, or to any vehicle organized by a
Secondary Purchaser which is rated at least A-1 by S&P and P-1 by Moody's and
(ii) with the prior written consent of the Seller (which consent shall not be
unreasonably withheld or delayed), to any other Person (such Person, and the
Persons described in clause (i) above, referred to herein as "Assignees"), and
any such Assignee, may, without the written consent of the Seller, assign to any
Person described in clause (i) hereof and may, with the prior written consent of
the Seller (which consent shall not be
25
<PAGE>
unreasonably withheld or delayed), assign to any other Person, its Commitment or
any Receivable Interest, in either case, in whole or in part; provided, however,
that any assignment of a Secondary Purchaser's Commitment to a Purchaser or to
any vehicle organized by a Secondary Purchaser pursuant to clause (i) above at a
time when such Purchaser or such vehicle cannot issue a commitment to make
Purchases shall be made only with the prior written consent of the Seller (which
consent shall not be unreasonably withheld or delayed). Upon any assignment of a
Receivable Interest, (i) the Assignee shall become the owner of such Receivable
Interest for all purposes of this Agreement and (ii) the assignor thereof (the
"Assignor") shall relinquish its rights with respect to such Receivable Interest
for all purposes of this Agreement. Any assignments hereunder shall be upon such
terms and conditions as the Assignor and the Assignee may mutually agree. The
parties thereto shall deliver to the Administrative Agent an assignment
agreement, in substantially the form of Exhibit B hereto (an "Assignment"), duly
executed by such parties, and such Assignor shall promptly execute and deliver
all further instruments and documents, and take all further action, that the
Assignee may reasonably request in order to perfect, protect or more fully
evidence the Assignee's right, title and interest in and to any Receivable
Interest assigned hereunder, and to enable the Assignee to exercise or enforce
any rights hereunder . Upon any assignment pursuant to this Section 10.01, the
Assignee thereof shall have all of the rights and obligations (and only such
rights and obligations) of a Secondary Purchaser hereunder, and shall be subject
to the same terms and conditions hereunder. The Administrative Agent shall
provide notice to the Seller of any assignment hereunder.
SECTION 10.02 Effects of Assignment. By executing and delivering an
Assignment, the Assignor thereunder and the Assignee thereunder confirm to and
agree with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment, the Assignor makes no representation or warranty
and assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement or any other agreement, instrument or document furnished pursuant
hereto; (ii) the Assignor makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Seller or any
Originator or the performance or observance by the Seller or any Originator of
any of its obligations under this Agreement (in the case of the Seller) or the
Transfer Agreements (in the case of the Seller and the Originators) or other
agreement, instrument or document furnished pursuant hereto; (iii) such Assignee
confirms that it has received a copy of this Agreement, together with copies of
the financial statements referred to in Section 4.01 and such other agreements,
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and to purchase the
pertinent Receivable Interests; (iv) such Assignee will, independently and
without reliance upon the Administrative Agent, any Secondary Purchaser, any
Purchaser or any of their Affiliates or such Assignor and based on such
agreements, documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (v) such Assignee appoints and authorizes the Administrative
Agent to take such action as agent on its behalf and to exercise such powers
under this Agreement as are delegated to the Administrative Agent by the terms
hereof, together with such powers as are reasonably incidental thereto; (vi)
such Assignee appoints as its agent the Collection Agent from time to time
designated pursuant to Section 6.01 to enforce its respective rights and
interests in and under the pertinent Receivable Interests and the Related
Security and related Contracts; and (vii) such Assignee agrees that it will not
institute against any Secondary Purchaser any proceeding of the type referred to
in Section 7.01(i) of the Primary Purchase Agreement.
26
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ARTICLE XI.
MISCELLANEOUS
SECTION 11.01 Amendments, Etc. No amendment or waiver of any provision
of this Agreement or consent to any departure by the Seller or the Collection
Agent therefrom shall be effective unless in a writing signed by all of the
Secondary Purchasers or, where permitted under this Agreement, the Required
Secondary Purchasers, and then such amendment, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no amendment or waiver of Section 6.03 or of any
other provision of this Agreement which affects the rights or obligations of the
Administrative Agent shall be effective unless signed by the Administrative
Agent. No failure on the part of the Secondary Purchasers or the Administrative
Agent to exercise, and no delay in exercising, any right hereunder shall operate
as a waiver thereof; nor shall any single or partial exercise of any right
hereunder preclude any other or further exercise thereof or the exercise of any
other right.
SECTION 11.02 Notices, Etc. All notices and other communications
hereunder shall, unless otherwise stated herein, be in writing (including
facsimile communication) and shall be delivered or sent by facsimile, to each
party hereto, at its address set forth under its name on the signature pages
hereof or at such other address as shall be designated by such party in a
written notice to the other parties hereto. Notices and communications by
facsimile shall be effective when sent, and notices and communications sent by
other means shall be effective when received.
SECTION 11.03 Assignability; Termination.
(a) This Agreement and each Secondary Purchaser's rights herein
(including ownership of each Receivable Interest) shall be assignable by such
Secondary Purchaser and its respective successors and assigns in accordance with
Section 10.01. The term "Secondary Purchaser" shall include any owner by
assignment or otherwise of a Receivable Interest but shall not include any
Person to whom a participation is granted. The Seller may not assign its rights
hereunder or any interest herein without the prior written consent of the
Secondary Purchasers.
(b) Any Secondary Purchaser may grant participations to any Person
without the consent or knowledge of the Seller, any other Secondary Purchaser or
the Administrative Agent; provided, that such grant will not affect the
obligation, if any, of such Secondary Purchaser hereunder nor the obligations of
the Seller hereunder.
(c) The provisions of Sections 8.01, 11.04, 11.05, 11.06 and 11.07
survive any termination of this Agreement.
SECTION 11.04 Costs, Expenses and Taxes.
(a) In addition to the rights of indemnification granted under Section
8.01 hereof, the Seller agrees to pay on demand all reasonable costs and
expenses actually incurred in connection with the preparation, execution,
delivery and administration
27
<PAGE>
(including periodic auditing of Pool Receivables) of this Agreement and the
other documents and agreements to be delivered hereunder, including, without
limitation, (i) the reasonable fees and expenses of Latham & Watkins, counsel
for the Secondary Purchasers, actually incurred with respect to the preparation,
execution and delivery of this Agreement, the Primary Purchase Agreement and the
other documents and agreements to be delivered hereunder or thereunder; (ii) the
reasonable fees and out-of-pocket expenses of counsel for the Administrative
Agent actually incurred with respect to administration of this Agreement,
including without limitation, advising the Administrative Agent as to its rights
and remedies hereunder; and (iii) all costs and expenses, if any (including
reasonable counsel fees and expenses), in connection with the enforcement or
amendment of this Agreement and the other documents and agreements to be
delivered hereunder.
(b) In addition, the Seller shall pay on demand any and all stamp and
other taxes and fees payable in connection with the execution, delivery, filing
and recording of this Agreement or the other documents or agreements to be
delivered hereunder, and agrees to save each Indemnified Party harmless from and
against any liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes and fees.
(c) The Seller also shall pay on demand all other reasonable costs,
expenses and all taxes (excluding income taxes) actually incurred by a Secondary
Purchaser or any stockholder of a Secondary Purchaser ("Other Costs"), including
(i) the costs of auditing such Secondary Purchaser's books by certified public
accountants, (ii) the taxes (excluding income taxes) resulting from such
Secondary Purchaser's operations and (iii) the reasonable fees and out-of-pocket
expenses of counsel for such Secondary Purchaser or any counsel for any
shareholder of such Secondary Purchaser with respect to advising such Secondary
Purchaser or shareholder as to rights and remedies under this Agreement, the
enforcement of this Agreement or advising such Secondary Purchaser or
shareholder as to matters relating to such Secondary Purchaser's operations;
provided, that the Seller and any other persons who from time to time sell
receivables or interests therein to such Secondary Purchaser ("Other Sellers")
each shall be liable for such Other Costs ratably in accordance with the usage
under their respective facilities; provided, further, that (i) if such Other
Costs are attributable to the Seller and not attributable to any Other Seller,
the Seller shall be solely liable for such Other Costs and (ii) if such Other
Costs are attributable to any Other Seller and not attributable to the Seller in
any way, the Seller shall not be liable for any of such Other Costs.
SECTION 11.05 Confidentiality. Unless otherwise required by applicable
law, rule or regulation or by court order or process, the Seller and the
Collection Agent agree to maintain the confidentiality of this Agreement (and
all drafts thereof) in communications with third parties and otherwise;
provided, that this Agreement may be disclosed to the Seller's and the
Collection Agent's legal counsel and auditors if they agree to hold it
confidential.
SECTION 11.06 No Recourse. The obligations of each Secondary Purchaser
under this Agreement or any other agreement, instrument, document or certificate
executed and delivered by or issued by such Secondary Purchaser or any officer
thereof in connection herewith are solely the corporate obligations of such
Secondary
28
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Purchaser. No recourse shall be had for payment of any fee or other obligation
or claim arising out of or relating to this Agreement or any other agreement,
instrument, document or certificate executed and delivered or issued by such
Secondary Purchaser or any officer in connection herewith, against any
stockholder, employee, officer, director or incorporator of such Secondary
Purchaser. The provisions of this Section 11.07 shall survive the termination of
this Agreement.
SECTION 11.07 Governing Law; Execution in Counterparts.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK (INCLUDING ITS APPLICABLE CONFLICT OF
LAWS RULES).
(b) This Agreement may be executed in any number of counterparts, each
of which when so executed shall be deemed to be an original and all of which
when taken together shall constitute one and the same agreement.
SECTION 11.08 Construction of Agreement. It is the intention of each
Transfer Agreement that the conveyance by the applicable Originator to the
Seller of Receivables shall constitute a purchase and sale and not a secured
loan. It is the intention of this Agreement that the Purchases and reinvestments
shall convey to the Secondary Purchasers, to the extent of their Receivable
Interests, undivided ownership interests in the Pool Receivables and that each
such transaction shall constitute a purchase and sale and not a secured loan.
If, notwithstanding such intention, the conveyance of Receivables from any
Originator to the Seller pursuant to a Transfer Agreement shall ever be
characterized as a secured loan and not a sale, then the Seller shall be deemed
to have transferred to the Secondary Purchasers, in addition to the Receivable
Interests, all of the Seller's right, title and interest in, to and under the
obligations of such Originator deemed to be secured by a pledge of such
Receivables, and, in such event, this Agreement and the filings of the UCC
statements referred to in Section 3.01(b) shall be deemed to have granted
(subject to the exceptions set forth in Section 4.01 of the Primary Purchase
Agreement), to the Secondary Purchasers a duly perfected security interest prior
to all other liens on and security interests in all of the Seller's right,
title, and interest in, to and under the obligations of such Originator to the
Seller deemed to be secured by such pledge, and the Administrative Agent shall
be deemed to be an independent custodian for purposes of perfection of the
security interest granted to the Seller. If the conveyance of the Receivable
Interests from the Seller to the Secondary Purchasers shall ever be
characterized as a secured loan and not a sale, it is the intention of this
Agreement that this Agreement shall constitute a security agreement under
applicable law, and that the Seller shall be deemed to have granted to the
Secondary Purchasers a duly perfected security interest in all of the Seller's
right, title and interest in, to and under the Pool Receivables, all payments on
or with respect to such Pool Receivables, all other rights relating to and
payments made in respect of the Pool Receivables, and all proceeds of any
thereof prior to all other liens on and security interests therein.
SECTION 11.09 Actions by Secondary Purchasers. The Secondary Purchasers
expressly recognize and agree that in making any determination or taking
29
<PAGE>
any action hereunder which is required to be made or taken by the Required
Secondary Purchasers or all of the Secondary Purchasers, the Purchasers shall be
treated as if they were Secondary Purchasers hereunder and no determination or
action hereunder shall be made or taken which would be inconsistent with or
contrary to a determination or action made or taken under the Primary Purchase
Agreement.
30
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
SELLER:
G-P RECEIVABLES, INC.
By: /s/ Danny W. Huff
-------------------------
Treasurer
133 Peachtree Street, N.E.
Atlanta, Georgia 30348-5605
Attention: Treasurer
Facsimile No.: (404) 827-7076
COLLECTION AGENT:
GEORGIA-PACIFIC CORPORATION:
By: /s/ Danny W. Huff
--------------------------
Name: Danny W. Huff
Title Vice President and Treasurer
133 Peachtree Street, N.E.
Atlanta, Georgia 30348-5605
Attention: Treasurer
Facsimile No.: (404) 827-7076
<PAGE>
SECONDARY PURCHASERS:
CANADIAN IMPERIAL BANK OF COMMERCE
By: /s/ John Gevlin
--------------------------
Authorized Signatory
425 Lexington Avenue
New York, New York 10017
Attention: President
Facsimile No.: (212) 856-3643
CITIBANK, N.A.
By: /s/ Nancy Georgi Free
--------------------------
Vice President
500 W. Madison St., 7th Floor
Chicago, Illinois 60661
Attention: Global Securitization
Department
Facsimile No.: (312) 627-3771
BANK ONE, NA (CHICAGO OFFICE)
By: /s/ Julie C. Benda
--------------------------
Vice President
1 Bank One Plaza
Suite 0079, 17th Floor
Chicago, Illinois 60670
Attention: Julie Benda
Facsimile No.: (312) 732-2231
<PAGE>
ADMINISTRATIVE AGENT:
CANADIAN IMPERIAL BANK OF COMMERCE,
as Administrative Agent
By: /s/ John Gevlin
--------------------------
Authorized Signatory
425 Lexington Avenue
New York, New York 10017
Attention: Asset Securitization Group
Facsimile No.: (212) 856-3643
<PAGE>
EXHIBIT A
[FORM OF ASSIGNMENT AGREEMENT]
ASSIGNMENT AGREEMENT
Assignment dated __________, ____, made by the undersigned to
______________ pursuant to the Amended and Restated Receivables Purchase
Agreement dated as of October 13, 1999 (the "Agreement"; terms defined therein
being used herein as therein defined) among G-P Receivables, Inc.,
Georgia-Pacific Corporation, Canadian Imperial Bank of Commerce, Citibank, N.A.,
Bank One, NA (Chicago Office), and Canadian Imperial Bank of Commerce, as agent
(the "Administrative Agent").
In consideration of the payment of $___________, being the existing
[Aggregate] Capital of the Receivable Interest[s] referred to below, [and of
$________, being the [aggregate] unpaid accrued Yield for such Receivable
Interest[s],] receipt of which payment is hereby acknowledged, the undersigned
hereby assigns to _____________ all of its right, title and interest in and to
the Receivable Interest[s] purchased by the undersigned in [a] Purchase[s] on
___________, 19__, [__________, 19__, [etc.]] under the Agreement.]
The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the Receivable Interest[s] being assigned by it hereunder
and that such Receivable Interest[s] [is] [are] free and clear of any Adverse
Claim created by the Assignor; (ii) makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Agreement, or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of the
Agreement or any other agreement, instrument or document furnished pursuant
thereto; and (iii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Seller or the
performance or observance by the Seller of any of its obligations under the
Agreement or any other agreement, instrument or document furnished pursuant
thereto.
The Assignee (i) confirms that it has received a copy of the Agreement,
together with copies of the financial statements referred to in Section 4.01
thereof, and such other agreements, documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and purchase the Receivable Interest[s]; (ii) agrees that it will,
independently and without reliance upon the Administrative Agent, any of its
Affiliates or the Assignor and based on such agreements, documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Agreement; (iii)
appoints and authorizes the Administrative Agent to take such action as agent on
its behalf and to exercise such powers under the Agreement as are delegated to
the Administrative Agent by the terms thereof, together with such powers as are
reasonably incidental thereto; (iv) appoints as its agent the Collection Agent
from time to time designated pursuant to Section 6.01 to enforce its respective
rights and interests in and under the Pool Receivables, the Related Security and
the related Contracts; and
<PAGE>
(v) agrees that it will not institute against any Secondary Purchaser any
proceeding of the type referred to in Section 7.01(i) incorporated by reference
in the Agreement so long as any Notes issued by such Secondary Purchaser shall
be outstanding or there shall not have elapsed one year plus one day since the
last day on which any such Notes shall have been outstanding.
Following the execution of this Assignment by the Assignor and the
Assignee, it will be delivered to the Administrative Agent. The effective date
of this Assignment shall be the date above specified (the "Effective Date").
As of the Effective Date, (i) the Assignee shall be and become an owner
in the Receivable Interest[s] referred to herein for all purposes of the
Agreement and (ii) the Assignor shall relinquish its rights with respect to the
Receivable Interest[s] for all purposes of the Agreement.
This Assignment shall be governed by and construed in accordance with
the laws of the State of New York.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be
duly executed and delivered by its duly authorized officer or agent as of the
date first written above.
[NAME OF ASSIGNOR]
By: ______________________________
Title:
[NAME OF ASSIGNEE]
By: ______________________________
Title:
EXHIBIT 10.11(ii)
$750,000,000
AMENDED AND RESTATED
RECEIVABLES PURCHASE AGREEMENT
Dated as of October 13, 1999
Among
G-P RECEIVABLES, INC.
as the Seller
GEORGIA-PACIFIC CORPORATION
as the Collection Agent
ASSET SECURITIZATION COOPERATIVE CORPORATION,
CORPORATE ASSET FUNDING COMPANY, INC.,
AND
FALCON ASSET SECURITIZATION CORPORATION
as the Purchasers
and
CANADIAN IMPERIAL BANK OF COMMERCE
as the Administrative Agent
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
ARTICLE I. DEFINITIONS
SECTION 1.01 Certain Defined Terms.......................................................................1
SECTION 1.02 Other Terms................................................................................18
ARTICLE II. AMOUNTS AND TERMS OF THE PURCHASES
SECTION 2.01 Purchase Facility..........................................................................18
SECTION 2.02 Making Purchases...........................................................................20
SECTION 2.03 Receivable Interest Percentage.............................................................21
SECTION 2.04 Settlement Procedures......................................................................22
SECTION 2.05 Fees.......................................................................................24
SECTION 2.06 Payments and Computations, Etc.............................................................25
SECTION 2.07 Dividing or Combining Receivable Interests.................................................25
SECTION 2.08 Yield Protection...........................................................................26
SECTION 2.09 Sharing of Payments, Etc...................................................................27
SECTION 2.10 Effect of Early Payments...................................................................27
ARTICLE III. CONDITIONS OF PURCHASES
SECTION 3.01 Conditions Precedent to Initial Purchase...................................................28
SECTION 3.02 Conditions Subsequent......................................................................29
SECTION 3.03 Conditions Precedent to All Purchases and Reinvestments....................................29
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
SECTION 4.01 Representations and Warranties of the Seller and the Collection Agent......................30
ARTICLE V. COVENANTS
SECTION 5.01 Covenants of the Seller and the Collection Agent...........................................35
ARTICLE VI. ADMINISTRATION AND COLLECTION
SECTION 6.01 Designation of Collection Agent............................................................42
SECTION 6.02 Duties of Collection Agent.................................................................42
SECTION 6.03 Rights of the Administrative Agent.........................................................44
SECTION 6.04 Responsibilities of the Seller.............................................................45
SECTION 6.05 Further Actions Evidencing Purchases.......................................................45
SECTION 6.06 Collection Agent Fee.......................................................................46
ARTICLE VII. EVENTS OF TERMINATION
i
<PAGE>
SECTION 7.01 Events of Termination......................................................................46
ARTICLE VIII. INDEMNIFICATION
SECTION 8.01 Indemnities by the Seller..................................................................50
SECTION 8.02 Contribution...............................................................................52
ARTICLE IX. THE ADMINISTRATIVE AGENT
SECTION 9.01 Authorization and Action...................................................................52
SECTION 9.02 UCC Filings................................................................................53
SECTION 9.03 Administrative Agent's Reliance, Etc.......................................................53
SECTION 9.04 CIBC and Affiliates........................................................................54
SECTION 9.05 Purchasers' Purchase Decisions.............................................................54
SECTION 9.06 Successor Administrative Agent.............................................................54
ARTICLE X. ASSIGNMENT OF RECEIVABLE INTERESTS
SECTION 10.01 Assignment.................................................................................55
SECTION 10.02 Effects of Assignment......................................................................55
ARTICLE XI. MISCELLANEOUS
SECTION 11.01 Amendments, Etc............................................................................56
SECTION 11.02 Notices, Etc...............................................................................56
SECTION 11.03 Assignability; Termination.................................................................57
SECTION 11.04 Costs, Expenses and Taxes..................................................................57
SECTION 11.05 No Proceedings.............................................................................58
SECTION 11.06 Confidentiality............................................................................58
SECTION 11.07 No Recourse................................................................................58
SECTION 11.08 Governing Law; Execution in Counterparts...................................................58
SECTION 11.09 Construction of Agreement..................................................................59
</TABLE>
ii
<PAGE>
SCHEDULES
SCHEDULE I - Lock-Box Banks
SCHEDULE II - Depositary Banks
SCHEDULE III - Concentration Banks
SCHEDULE IV - Credit and Collection Policy
SCHEDULE V - Originators
SCHEDULE VI - Georgia-Pacific's Interests in Originators
SCHEDULE VII - Defaulted Receivables
SCHEDULE VIII - Agreed Procedures
EXHIBITS
EXHIBIT A - Form of Investor Report
EXHIBIT B - Form of Lock-Box Agreement
EXHIBIT C - Form of Transfer Agreement
EXHIBIT D - Form of Assignment Agreement
EXHIBIT E - Form of Consent and Acknowledgment
EXHIBIT F - Form of Depositary Notice
EXHIBIT G - Form of Concentration Notice
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AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT dated as of October
13, 1999 among G-P Receivables, Inc., a Delaware corporation (the "Seller"),
GEORGIA-PACIFIC CORPORATION, a Georgia corporation ("Georgia-Pacific"), ASSET
SECURITIZATION COOPERATIVE CORPORATION ("ASCC"), CORPORATE ASSET FUNDING
COMPANY, INC. ("CAFCO") and FALCON ASSET SECURITIZATION CORPORATION ("Falcon")
(each of ASCC, CAFCO, Falcon and their respective successors and permitted
assigns, individually, a Purchaser, and, collectively, the "Purchasers"), and
CANADIAN IMPERIAL BANK OF COMMERCE ("CIBC"), as agent (the "Administrative
Agent") for the Purchasers. Unless defined elsewhere herein, capitalized terms
used in this Agreement shall have the meanings assigned to such terms in Article
I hereof.
ARTICLE I.
DEFINITIONS
SECTION 1.01 Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Adjusted LIBOR Rate" means, with respect to a Purchaser for any Fixed
Period, the rate per annum obtained by dividing (a) the arithmetic average
(rounded upwards, if necessary, to the nearest multiple of one-sixteenth of one
percent per annum) of (i) the offered rates for deposits in United States
dollars which appear on the display designated as page "LIBO" (or any successor
page quoting the offered rates for United States dollars in the London interbank
market) on the Reuter Monitor Money Rates Service, or (ii) if such rates are not
obtainable from the Reuter Monitor Money Rates Service, the respective rates
notified to the Purchaser by each of the Reference Banks as the rate at which it
would offer deposits in United States dollars to prime banks in the London
interbank market, in either case for a period equal to such Fixed Period as such
Purchaser shall select and in an amount comparable to the aggregate amount of
Capital of the Receivable Interest to be funded or maintained at or about 11:00
a.m. (London time) on the second Business Day before (and for value on) the
first day of such period by (b) a percentage equal to (i) 100% minus (ii) the
Eurodollar Reserve Percentage for such Fixed Period.
"Administrative Priority" means an administrative priority granted
under Section 364(a) of the Bankruptcy Code.
"Adverse Claim" means a lien, security interest, claim or other charge
or encumbrance, or any other type of preferential arrangement.
"Affiliate" means, as to any Person, any other Person that, directly or
indirectly, is in control of, is controlled by or is under common control with
such Person or is a director or officer of such Person.
"Affiliated Obligor" means any Obligor that is an Affiliate of another
Obligor.
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"Aggregate Capital" means, at the time of any determination thereof
with respect to a Purchaser, the sum of the Capital for all Receivable Interests
of such Purchaser.
"Assignment" has the meaning specified in Section 10.01(a).
"Average Maturity" means, on any day, that period (expressed in days)
equal to the weighted average maturity of the Pool Receivables, as calculated by
the Collection Agent and as set forth in the most recent Investor Report;
provided, however, that if any Purchaser shall reasonably disagree with any such
calculation, the Purchasers may recalculate the Average Maturity with respect to
such day (which calculation shall be conclusive absent demonstrative error).
"Bankruptcy Code" means Title 11 of the United States Code (11
U.S.C.ss.101 et seq.), as amended from time to time, or any successor statute.
"Bankrupt Receivable" means a Receivable the Obligor of which has taken
any action, or suffered to occur any event, of the type described in Section
7.01(i).
"Base Rate" means, for any day, the per annum rate of interest
published on such day (or, if not then published, on the most recently preceding
day) in The Wall Street Journal as the "Prime Rate." Changes in the Base Rate
shall be effective on each date on which a change in the "Prime Rate" is
published.
"Business Day" means any day on which banks are not authorized or
required to close in Chicago, Illinois or New York, New York and, if the
applicable Business Day relates to any computation or payment to be made with
respect to the Adjusted LIBOR Rate, any day on which dealings in dollar deposits
are carried on in the London interbank market.
"Capital" of any Receivable Interest owned by a Purchaser means the
original amount paid by such Purchaser to the Seller for such Receivable
Interest at the time of its purchase by such Purchaser pursuant to this
Agreement, or such amount divided or combined in accordance with Section 2.07,
in each case reduced from time to time by Collections distributed on account of
such Capital pursuant to Section 2.04; provided, that if such Capital shall have
been reduced by any distribution and thereafter all or a portion of such
distribution is rescinded or must otherwise be returned for any reason, such
Capital shall be increased by the amount of such rescinded or returned
distribution, as though it had not been made; provided, further, that such
Capital shall not be reduced for the purposes of this Agreement to the extent
and so long as Collections to be used to effect an Optional Reduction or a
Mandatory Reduction are retained by the Collection Agent (if the Seller or an
Affiliate thereof).
"Capital Lease Obligations" of any Person means the obligations of such
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance
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sheet of such Person under GAAP, and the amount of such obligations shall be the
capitalized amount thereof determined in accordance with GAAP.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Collection Agent" means at any time the Person (which may include the
Administrative Agent) then authorized pursuant to Article VI to service,
administer and collect Pool Receivables.
"Collection Agent Fee" has the meaning specified in Section 6.06.
"Collection Agent Fee Reserve" means, on any date, the sum of (i) 1% of
the Total Aggregate Capital on such date plus (ii) the accrued and unpaid
Collection Agent Fee on such date.
"Collection Delay Period" means 10 days or such other number of days as
the Administrative Agent may select (acting upon the direction of the Required
Purchasers) upon three Business Days' notice to the Seller.
"Collection Event" means any event which causes Georgia-Pacific's
long-term unsecured debt rating to be withdrawn or fall below BBB-, in the case
of S&P, or Baa3, in the case of Moody's.
"Collections" means, with respect to any Pool Receivable, all cash
collections and other cash proceeds in respect of such Pool Receivable,
including, without limitation, all cash proceeds of Related Security with
respect to such Pool Receivable, and any Collection of such Pool Receivable
deemed to have been received pursuant to Section 2.04(d).
"Concentration Account" means a concentration account maintained at a
Concentration Bank for the purpose of, among other things, receiving the
proceeds of Collections initially deposited into Lock-box Accounts and
Depositary Accounts.
"Concentration Bank" means, at any time, any of the banks holding one
or more Concentration Accounts (as of the date hereof being those banks
specified in Schedule III hereof).
"Concentration Limit" means, at any time, for any Obligor, 3.33% of the
Total Aggregate Capital outstanding at such time, or such other amount (a
"Special Concentration Limit") for such Obligor designated by the Administrative
Agent in a writing delivered to the Seller at the instruction of all of the
Purchasers; provided, that in the case of an Obligor with any Affiliated
Obligor, the Concentration Limit shall be calculated as if such Obligor and such
Affiliated Obligor are one Obligor; provided, further, that the Administrative
Agent (acting upon the instructions of any Purchaser) may, upon not less than
three Business Days' notice to the Seller, cancel any Special Concentration
Limit.
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"Concentration Notice" means a notice, in substantially the form of
Exhibit G, from the Seller or Originator to a Concentration Bank.
"Consent and Acknowledgment" means the agreement, in substantially the
form attached hereto as Exhibit E, by each Originator in favor of the
Purchasers, the Secondary Purchasers and the Seller pursuant to which such
Originator consents to and acknowledges the transactions contemplated hereby.
"Contract" means an agreement between an Originator and an Obligor,
substantially in a form permitted by the Credit and Collection Policy, pursuant
to or under which such Obligor shall be obligated to pay for merchandise, goods,
insurance or services from time to time.
"Credit and Collection Policy" means those receivables credit and
collection policies and practices of the Originators in effect on the date
hereof and approved by the Purchasers, summarized on Schedule IV hereto, as the
same may be modified in strict compliance with this Agreement.
"Current Default Ratio" means, at the time any determination thereof is
to be made, a fraction, expressed as a percentage, the numerator of which is the
aggregate Outstanding Balance of all Pool Receivables that were Defaulted
Receivables at such time and the denominator of which is the aggregate
Outstanding Balance of all Pool Receivables at such time.
"Dealer Fee" means, with respect to a Purchaser, any and all
commissions of placement agents and commercial paper dealers in respect of Notes
issued by such Purchaser to fund the purchase or maintenance by such Purchaser
of any Receivable Interest.
"Debt" of any Person means, without duplication, (a) all obligations of
such Person for borrowed money, (b) all obligations of such Person evidenced by
bonds, debentures, notes or similar instruments, (c) all obligations of such
Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (d) all obligations of such Person in respect
of the deferred purchase price of property or services (excluding accounts
payable incurred in the ordinary course of business), (e) all Debt of others
secured by (or for which the holder of such Debt has an existing right,
contingent or otherwise, to be secured by) any Lien on property owned or
acquired by such Person, whether or not the Debt secured thereby has been
assumed, (f) all Guarantees by such Person of Debt of others, (g) all Capital
Lease Obligations of such Person, (h) all obligations, contingent or otherwise,
of such Person as an account party in respect of letters of credit and letters
of guaranty, (i) liabilities in respect of unfunded vested benefits under plans
covered by Title IV or ERISA and (j) all obligations, contingent or otherwise,
of such Person in respect of bankers' acceptances. The Debt of any Person shall
include the Debt of any other entity (including any partnership in which such
Person is a general partner) to the extent such Person is liable therefor as a
result of such Person's ownership interest in or other relationship with such
entity, except to the extent the terms of such Debt provide that such Person is
not liable therefor.
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"Default Ratio" means, at the time any determination thereof is to be
made, a fraction, expressed as a percentage, the numerator of which is 1/12 of
the aggregate Outstanding Balance of all Pool Receivables that were Defaulted
Receivables on the last Business Day of the month most recently ended and the
last Business Day of each of the immediately preceding eleven (11) calendar
months or that would have been Defaulted Receivables on such last Business Days
had they not been written off the books of the Seller or an Originator during
such months (such Outstanding Balances of such Defaulted Receivables for the
eleven (11) calendar months immediately preceding the date hereof as set forth
on Schedule VII hereto), and the denominator of which is 1/12 of the aggregate
Outstanding Balance of all Pool Receivables on the last Business Day of the
month most recently ended and the last Business Day of each of the immediately
preceding eleven (11) calendar months (such Outstanding Balances for the eleven
(11) calendar months immediately preceding the date hereof as set forth on
Schedule VII hereto).
"Defaulted Receivable" means a Receivable:
(i) as to which any payment, or part thereof, remains unpaid for more
than 90 days from the invoice date of such Receivable;
(ii) which is a Bankrupt Receivable and (a) is not entitled to the
benefit of an Administrative Priority (regardless of the Outstanding
Balance of such Receivable) or (b) the Outstanding Balance of which,
together with all other Bankrupt Receivables of the same Obligor, is
greater than $500,000 (whether or not one or more of such Bankrupt
Receivables is entitled to an Administrative Priority); or
(iii) which, consistent with the Credit and Collection Policy, would be
written off the Seller's or an Originator's books as uncollectible.
"Delinquency Ratio" means, at the time any determination thereof is to
be made, the ratio, expressed as a percentage, computed by dividing (i) the
aggregate Outstanding Balance of all Pool Receivables that were Delinquent
Receivables at such time by (ii) the aggregate Outstanding Balance of all Pool
Receivables at such time.
"Delinquent Receivable" means a Receivable as to which any payment, or
part thereof, remains unpaid for 60 days or more from the original invoice date
thereof.
"Depositary Account" means a depositary account maintained at a
Depositary Bank, the primary purpose of which is to receive the proceeds of
Collections from the Seller or an Originator.
"Depositary Bank" means, at any time, any of the banks holding one or
more Depositary Accounts (as of the date hereof being those banks specified on
Schedule II hereof).
"Depositary Notice" means a notice, in substantially the form of
Exhibit F, from the Seller or Originator to a Depositary Bank.
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"Designated Obligor" means, at any time, each Obligor; provided,
however, that any Obligor shall, upon not less than three Business Days' notice
given to the Seller by the Administrative Agent at the instruction of any
Purchaser, cease to be a Designated Obligor.
"Dilution Horizon Ratio" means, as of the last day of any month, a
fraction, expressed as a percentage, the numerator of which is the aggregate
Outstanding Balance of all Pool Receivables as of such day, and the denominator
of which is the aggregate Outstanding Balance of all Eligible Receivables as of
such day.
"Dilution Ratio" means, as of any date of determination, a fraction,
expressed as a percentage, the numerator of which is the aggregate amount of
Dilutions for the most recently completed calendar month and the denominator of
which is the aggregate sales of the Originators for the prior calendar month.
"Dilution Reserve" means, as of any date, the product of (1) the
quotient of (x) the Dilution Reserve Percentage on such date and (y) 1 minus
such Dilution Reserve Percentage, and (2) the Total Aggregate Capital on such
date.
"Dilution Reserve Percentage" means, as of any date of determination,
the amount equal to
[(2.0 x ADR) + {(HDR - ADR) x (HDR/ADR)}] x DHR
where:
ADR = the average Dilution Ratio for the then most recently completed
twelve-month period.
HDR = the highest Dilution Ratio occurring during any of the twelve
months then most recently completed.
DHR = the Dilution Horizon Ratio as of such date.
"Dilutions" means the aggregate amount of any reductions and
cancellations of Receivables which have been reduced or canceled, respectively,
for any reason other than that (1) the Obligors have made payments thereon or
(2) the Seller has charged-off such Receivables for credit reasons in accordance
with the Credit and Collection Policy.
"Eligible Receivable" means, at any time, a Receivable:
(i) the Obligor of which is not an Affiliate of any of the parties
hereto;
(ii) which, at the time of the initial creation of a Receivable
Interest therein under this Agreement is not a Defaulted Receivable;
(iii) which is an obligation representing all or part of the sales
price of merchandise, insurance and services within the meaning of Section
3(c)(5) of the
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Investment Company Act of 1940, as amended, and the nature of which is such
that its purchase with the proceeds of notes would constitute a "current
transaction" within the meaning of Section 3(a)(3) of the Securities Act of
1933, as amended;
(iv) which is an "account" within the meaning of Section 9-106 of the
UCC of the applicable jurisdiction governing the perfection of the interest
in such Receivable created by a Receivable Interest;
(v) which arises in the ordinary course of an Originator's business
under a Contract which, together with such Receivable, is in full force and
effect and constitutes the legal, valid and binding obligation of the
Obligor of such Receivable and is not subject to any known dispute, offset,
counterclaim or defense whatsoever or any Adverse Claim other than those of
the Purchasers, the Secondary Purchasers and the Administrative Agent;
(vi) which, together with the Contract related thereto, does not
contravene or violate in any respect any laws, rules or regulations
applicable thereto (including, without limitation, laws, rules and
regulations relating to usury, truth in lending, fair credit billing, fair
credit reporting, equal credit opportunity, fair debt collection practices
and privacy) (other than any contravention or violation which would not
have a material adverse effect on the collectibility of such Receivable in
the full Outstanding Balance thereof) and with respect to which no party to
the Contract related thereto is in violation of any such law, rule or
regulation in any respect (other than any contravention or violation which
would not have a material adverse effect on the collectibility of such
Receivable in the full Outstanding Balance thereof);
(vii) which satisfies all applicable requirements of the Credit and
Collection Policy;
(viii) as to which, at the time of the initial creation of a Receivable
Interest therein under this Agreement, the Administrative Agent, at the
instruction of any Purchaser, has not notified the Seller that such
Receivable (or class of Receivables) is no longer acceptable for purchase
by the Purchasers hereunder;
(ix) as to which all right, title and interest of an Originator in such
Receivable was transferred to the Seller from such Originator pursuant to a
Transfer Agreement;
(x) which is denominated and payable in United States dollars in the
United States;
(xi) the Obligor of which is not the Obligor of any Receivable which
has been referred to the collection department of the Seller or an
Originator;
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(xii) as to which the Seller has good and marketable title thereto,
freely assignable by the Seller to the Administrative Agent for the benefit
of the Purchasers;
(xiii) which, if a Bankrupt Receivable, is entitled to the benefit of
an Administrative Priority and the Outstanding Balance of which, together
with all other Bankrupt Receivables of the same Obligor entitled to the
benefit of an Administrative Priority, is equal to or less than $500,000;
and
(xiv) the Obligor of which is a U.S. resident.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that is treated as a single employer with the Seller under Section
414 of the Code.
"Eurodollar Reserve Percentage" for any Purchaser and for any Fixed
Period means the reserve percentage applicable to such Purchaser, its Related
Secondary Purchaser or the bank or banks providing liquidity, back-up purchase
or credit support for the Purchaser during such Fixed Period under regulations
issued from time to time by the Board of Governors of the Federal Reserve System
(or any successor) (or, if more than one such percentage shall be so applicable,
the weighted daily averages of such percentages for those days in such Fixed
Period during which any such percentage shall be so applicable) for determining
the maximum reserve requirement of such Purchaser, its Related Secondary
Purchaser or the bank or banks providing liquidity, back-up purchase or credit
support for the Purchaser (including, but not limited to, any emergency,
supplemental or other marginal reserve requirement) with respect to liabilities
consisting of or including Eurocurrency liabilities (as that term is defined in
Regulation D of the Board of Governors of the Federal Reserve System as in
effect from time to time) having a term equal to such Fixed Period.
"Event of Termination" has the meaning specified in Article VII.
"Facility Termination Date" has the meaning specified in Section
2.01(i).
"Fee Letter" means that certain letter agreement among the Seller, the
Purchasers and the Secondary Purchasers dated October 13, 1999, as the same may,
from time to time, be amended, modified or supplemented.
"Fixed Period" means, with respect to any Receivable Interest in
respect of which Yield is computed by reference to the Adjusted LIBOR Rate, a
period from one to and including 30 days, as a Purchaser, after consultation
with the Seller, shall select, provided, that (i) any Fixed Period (other than
of one day) which would otherwise end on a day which is not a Business Day shall
be extended to the next succeeding Business Day, except that if such extension
would cause the last day of such Fixed Period to occur
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in the next succeeding month, the last day of such Fixed Period shall occur on
the immediately preceding Business Day; and (ii) in the case of any Fixed Period
for any Receivable Interest which commences before the Facility Termination Date
for such Receivable Interest and would otherwise end on a date occurring after
such Facility Termination Date, such Fixed Period shall end on such Facility
Termination Date.
"GAAP" means generally accepted accounting principles in the United
States of America.
"Government Obligor" means any Obligor that is an agency, a department,
an instrumentality or a political subdivision of the United States or of any
state or local government.
"Government Obligor Concentration Limit" means 5% or such other
percentage as shall be designated by the Administrative Agent in a writing
delivered to the Seller at the instruction of the Required Purchasers.
"Guarantee" of or by any Person (the "guarantor") means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic
effect of guaranteeing any Debt or other obligation of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, and including
any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Debt or other
obligation or to purchase (or to advance or supply funds for the purchase of )
any security for the payment thereof, (b) to purchase or lease property,
securities or services for the purpose of assuring the owner of such Debt or
other obligation of the payment thereof or (c) to maintain working capital,
equity capital or any other financial statement condition or liquidity of the
primary obligor so as to enable the primary obligor to pay such Debt or other
obligation; provided, that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The amount of any
Guarantee shall be deemed to be an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Guarantee is made or,
if not stated or determinable, the maximum reasonably anticipated liability in
respect thereof determined in good faith by the guarantor (assuming the
guarantor is required to perform thereunder).
"Investor Rate" for any day in a Settlement Period for any Receivable
Interest means
(a) the weighted average of
(i) the weighted average, determined on such day, of the sum of (a) the
discount rates on all Notes of such Purchaser issued at a discount
outstanding on such day (other than Notes the proceeds of which are used by
such Purchaser to (x) purchase receivables (other than the Receivables), or
extend financing secured thereby, at a fixed interest rate or (y) conduct
any arbitrage activities of such Purchaser) plus (b) the Dealer Fee with
respect to such Purchaser plus (c) other costs associated with funding
small or odd-lot amounts with respect to all receivable purchase or loan
facilities which are funded by Notes of such
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Purchaser (other then Notes the proceeds of which are used by such
Purchaser for the purposes described in clauses (x) and (y) above),
converted to an annual yield-equivalent rate on the basis of a 360-day
year;
(ii) the weighted average, determined on such day, of the sum of (a)
the annual interest rates payable on all interest-bearing Notes of such
Purchaser outstanding on such day (other than the Notes the proceeds of
which are used by such Purchaser for the purposes described in clauses (x)
and (y) of paragraph (i) above) plus (b) the Dealer Fee with respect to
such Purchaser plus (c) other costs associated with funding small or
odd-lot amounts with respect to all receivable purchase or loan facilities
which are funded by Notes of such Purchaser (other then Notes the proceeds
of which are used by such Purchaser for the purposes described in clauses
(x) and (y) in paragraph (i) above), on the basis of a 360-day year; and
(iii) the weighted average, determined on such day, of the Adjusted
LIBOR Rate on such day, plus 1.25%, to the extent that such Purchaser has
any borrowings outstanding under a Liquidity Facility on such day or such
Purchaser is the provider of such Liquidity Facility, on the basis of a
360-day year; and
(b) In addition to the foregoing, if the Seller shall request any
Purchase (other than a reinvestment Purchase) during any period of time
determined by the Administrative Agent in its sole discretion to result in
incrementally higher costs applicable to such Purchase, the Capital associated
with any such Purchase shall, during such period, be deemed to be funded by a
Purchaser in a special pool (which may include capital associated with other
receivable purchase or loan facilities) for purposes of determining such
additional costs.
"Investor Report" means a report, in substantially the form of Exhibit
A hereto (appropriately completed), furnished by the Collection Agent to each
Purchaser and the Administrative Agent pursuant to Section 6.02(g) hereof.
"Investor Report Date" means, with respect to each Settlement Period,
the 23rd day of the month immediately following a Settlement Date (or if such
day is not a Business Day, the next succeeding Business Day) or such other date
or dates as shall be notified to the Seller from time to time by the
Administrative Agent at the direction of the Required Purchasers.
"Liquidation Day" means, for any Receivable Interest, (i) each day
during a Settlement Period for such Receivable Interest on which the conditions
set forth in Section 3.02 are not satisfied (or expressly waived by the
Purchasers), provided such conditions remain unsatisfied (or are not expressly
waived by the Purchasers) during such Settlement Period, or (ii) each day which
occurs on or after the Reinvestment Termination Date for such Receivable
Interest.
"Liquidity Facilities" means each of the committed loan facilities,
lines of credit and other financial accommodations available to a Purchaser to
provide liquidity in support of such Purchaser's Notes and medium-term notes.
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"Liquidation Fee" means, for any Purchaser and for any Settlement
Period during which a Liquidation Day occurs, the amount, if any, by which (i)
the additional Yield (calculated without taking into account any Liquidation Fee
or any shortened duration of a Fixed Period pursuant to clause (ii) of the
definition thereof) which would have accrued during the remainder of such
Settlement Period on all reductions of Capital of the Receivable Interest during
such Settlement Period exceeds (ii) the income received by such Purchaser's
investing the proceeds of such reductions of Capital.
"Liquidation Yield Reserve" means, on any date, an amount equal to the
product of (1) the Total Aggregate Capital on such date, (2) the Adjusted LIBOR
Rate for a 30-day Fixed Period to commence on such date multiplied by 1.3 and
(3) a fraction having the sum of the Average Maturity plus the Collection Delay
Period (each as in effect at such date) as its numerator and 360 as its
denominator.
"Lock-Box Account" means a lock-box account maintained at a Lock-Box
Bank, the primary purpose of which is to receive Collections.
"Lock-Box Agreement" means an agreement, in substantially the form of
Exhibit B, among an Originator, the Administrative Agent and a Lock-Box Bank.
"Lock-Box Bank" means, at any time, any of the banks holding one or
more Lock-Box Accounts (as of the date hereof being those specified on Schedule
I hereof).
"Lock-Box Notice" means a notice, in substantially the form of
Attachment A to Exhibit B, from the Seller or an Originator to any Lock-Box
Bank.
"Loss Reserve" means, on any date, the product of (a) a fraction
expressed as a percentage, the numerator of which will equal 300% of the greater
of (i) the Concentration Limit for any Obligor (other than any Special
Concentration Limit) and (ii) the Default Ratio for the 12-month period
immediately preceding such date and the denominator of which will equal 1 minus
the numerator and (b) the Total Aggregate Capital on such date.
"Loss-to-Liquidation Ratio" means, at the time of any determination
thereof, a fraction, expressed as a percentage, the numerator of which is equal
to 1/3 of the aggregate Outstanding Balance (net of recoveries) of all
Receivables that were written-off of the books of the Seller or an Originator as
uncollectible in accordance with the Credit and Collection Policy during the
month most recently ended and during the immediately preceding two calendar
months and the denominator of which is equal to 1/3 of the aggregate Collections
received during the month most recently ended and during the immediately
preceding two calendar months less the aggregate amount of Collections deemed to
have been received during such period pursuant to Section 2.04(d).
"Mandatory Reduction" means the required reduction of the Aggregate
Capital of a Purchaser as a result of the occurrence of a Mandatory Reduction
Day.
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"Mandatory Reduction Amount" means, with respect to the Receivable
Interests of any Purchaser on any Mandatory Reduction Day, the lowest dollar
amount of a reduction in the Aggregate Capital of such Purchaser which is
necessary to cause such Receivable Interests (if greater than the Pro Rata Share
of such Purchaser to reduce to an amount equal to the Pro Rata Share of such
Purchaser.
"Mandatory Reduction Day" means each day during a Settlement Period on
which the Receivable Interests of a Purchaser exceed an amount equal to the Pro
Rata Share of such Purchaser.
"Member" means a Person who holds membership in ASCC other than as an
associate member.
"Moody's" means Moody's Investors Service, Inc.
"Net Receivables Pool Balance" means, at any time with respect to any
Receivables Pool, the Outstanding Balance of Eligible Receivables then in the
Receivables Pool reduced by the sum of (i) the Outstanding Balance of such
Eligible Receivables that have become Defaulted Receivables, (ii) the aggregate
amount by which the Outstanding Balance of Eligible Receivables (other than
Defaulted Receivables) of each Obligor then in the Receivables Pool exceeds the
Concentration Limit or Special Concentration Limit for such Obligor, and (iii)
the result of the aggregate amount by which the Outstanding Balance of Eligible
Receivables (other than Defaulted Receivables) of all Government Obligors then
in the Receivables Pool exceeds the product of (A) the Government Obligor
Concentration Limit and (B) the Outstanding Balance of the Eligible Receivables
then in the Receivables Pool, less the amount specified in clause (ii) with
respect to any Government Obligor.
"Notes" means, with respect to a Purchaser, commercial paper notes or
other short-term promissory notes issued by such Purchaser in the United States
commercial paper market from time to time.
"Obligor" means a Person obligated to make payments pursuant to a
Contract.
"Optional Reduction" means the election of the Seller to reduce the
Total Aggregate Capital by directing the Collection Agent and the Purchasers to
terminate temporarily the reinvestment of Collections.
"Optional Reduction Amount" means the dollar amount specified in a
notice given by the Seller in accordance with Section 2.01(c) hereof as being
the amount by which the Seller would like to reduce temporarily the Total
Aggregate Capital.
"Optional Reduction Day" means for each Receivable Interest, each day
during a Settlement Period on which a portion of the Collections which would
ordinarily be reinvested as a return of the Capital thereof are paid to the
Purchaser or held by the Collection Agent for the account of such Purchaser in
order to effect the reduction of the Capital with respect thereto.
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"Optional Reduction Effective Date" means the day on which the
Purchasers and the Collection Agent shall commence the temporary termination of
reinvestments of Collections pursuant to Section 2.01(c) hereof.
"Originator" means Georgia-Pacific and any direct or indirect
Subsidiary of Georgia-Pacific party to a Transfer Agreement and approved by the
Purchasers (as of the date hereof being those subsidiaries specified on Schedule
V hereof).
"Outstanding Balance" of any Receivable at any time means the then
outstanding principal balance thereof.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture or other entity, or a government or any political subdivision or agency
thereof.
"Pool Receivable" means a Receivable in a Receivables Pool.
"Potential Termination Event" means an event which, with the passage of
time or notice or both, would constitute an Event of Termination.
"Pro Rata Share" means, for each Purchaser other than ASCC, 33.333333%,
and, for ASCC, 33.333334%, or such other percentage for such Purchaser as shall
result from any reallocation in accordance with Section 2.01(d).
"Provisional Liquidation Day" means each day that would be a
Liquidation Day but for the proviso in clause (i) of the definition of
"Liquidation Day."
"Purchase" has the meaning specified in Section 2.01(a).
"Purchase Limit" means, for all Purchasers in the aggregate, an amount
equal to $750,000,000 initially, or such lesser amount as shall reflect any
reduction pursuant to Section 2.01(b), and for each Purchaser, its Pro Rata
Share of such aggregate amount. References to the unused portion of the Purchase
Limit shall mean, at any time, the Purchase Limit in effect at such time, less
the sum of the Total Aggregate Capital under this Agreement and the "Total
Aggregate Capital" under the Secondary Purchase Agreement. Furthermore, on any
day on which the Seller reduces the unused portion of (or terminates) the
"Commitment" under the Secondary Purchase Agreement, the Purchase Limit
automatically shall reduce by the same amount (or so terminate).
"Receivable" means the indebtedness of any Obligor under a Contract
(other than a Contract with respect to the sale by an Originator of gypsum at
the minehead) and includes the right to payment of any interest or finance
charges and other obligations of such Obligor with respect thereto.
"Receivable Interest" means, at any time, an undivided percentage
ownership interest of a Purchaser in (i) all then outstanding Pool Receivables
arising prior to the time of the most recent computation or recomputation of
such undivided
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percentage interest pursuant to Section 2.03, (ii) all Related Security with
respect to such Pool Receivables, and (iii) all Collections with respect to, and
other proceeds of, such Pool Receivables. Such undivided percentage interest
shall be a fraction, expressed as a percentage, the numerator of which is the
sum of (i) the Capital of such Receivable Interest at the time of computation
and (ii) a number equal to the product of (x) the Reserve and (y) a fraction,
expressed as a percentage, the numerator of which is the Capital of such
Receivable Interest, and the denominator of which is the Total Aggregate
Capital, and the denominator of which is the Net Receivables Pool Balance at the
time of computation. Each Receivable Interest shall be determined from time to
time pursuant to the provisions of Section 2.03.
"Receivables Pool" means at any time the aggregation of each then
outstanding Receivable in respect of which the Obligor is a Designated Obligor
at such time or was a Designated Obligor on the date of the initial creation of
an interest in such Receivable under this Agreement.
"Records" means, with respect to any Receivable, all Contracts and
other documents, books, records and other information (including, without
limitation, computer programs, tapes, disks, punch cards, data processing
software and related property and rights) relating to such Receivable and the
related Obligor.
"Reference Banks" means Canadian Imperial Bank of Commerce, Citibank,
N.A. and Bank One, NA (Chicago Office), or such other banks as the Purchasers
shall designate with the consent of the Seller.
"Reinvestment Termination Date" means, with respect to any Receivable
Interest, that Business Day which the Administrative Agent at the instruction of
any Purchaser so designates by notice to the Seller as being the first day on
which reinvestments will not be made with respect to such Receivable Interest.
"Related Secondary Purchaser" means, with respect to each Purchaser set
forth below, the Person set forth opposite its name.
ASCC Canadian Imperial Bank of Commerce
CAFCO Citibank, N.A.
Falcon Bank One, NA (Chicago Office)
"Related Security" means with respect to any Receivable:
(i) all of the Seller's interest in any merchandise (including returned
merchandise) relating to any sale giving rise to such Receivable;
(ii) all other security interests or liens and property subject thereto
from time to time purporting to secure payment of such Receivable, whether
pursuant to the Contract related to such Receivable or otherwise, together
with all financing statements describing any collateral securing such
Receivable;
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(iii) all guaranties, insurance and other agreements or arrangements of
whatever character from time to time supporting or securing payment of such
Receivable whether pursuant to the Contract related to such Receivable or
otherwise;
(iv) all Records relating to such Receivable.
"Required Purchasers" means, at a particular time, the Purchasers, the
aggregate Purchase Limit of which equals at least 66.666666% of the overall
Purchase Limit; provided, that the Purchase Limit for any Purchaser that has
breached a material provision of this Agreement shall be zero for so long as
such breach has not been cured.
"Reserve" means, on any date, the sum of (a) the Loss Reserve on such
date, (b) the Liquidation Yield Reserve on such date, (c) the Collection Agent
Fee Reserve, if any, on such date, and (d) the Dilution Reserve on such date.
"Responsible Officer" means, as to the Seller and the Originators, any
officer (including, for the purpose of this Agreement, any assistant secretary
and any assistant treasurer) of such entity or any person designated in writing
by any such officer.
"S&P" means Standard & Poor's Rating Services, a division of McGraw
Hill Companies, Inc., and any successor thereto.
"Sale Documents" means this Agreement, the Secondary Purchase
Agreement, the Transfer Agreement, the Consent and Acknowledgment, each Lock-Box
Agreement and the other documents delivered in connection herewith or therewith.
"Secondary Purchase Agreement" means the Amended and Restated
Receivables Purchase Agreement, dated as of the date hereof, among the Seller,
Georgia-Pacific, the Secondary Purchasers and Canadian Imperial Bank of
Commerce, as administrative agent, as the same may, from time to time, be
amended, modified or supplemented.
"Secondary Purchasers" means collectively Canadian Imperial Bank of
Commerce, Citibank, N.A. and Bank One, NA (Chicago Office)
"Settlement Date" means, the following:
(a) with respect to any Settlement Period in which the Investor Rate is
determined in accordance with paragraphs (i) or (ii) of the definition "Investor
Rate", the date which is the second Business Day following the end of such
Settlement Period;
(b) with respect to any Settlement Period in which the Purchaser Rate
is determined in accordance with paragraph (iii) of the definition "Investor
Rate", the last day of such Settlement Period;
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(c) if the Required Purchasers determine, in their sole discretion,
that (i) an Event of Termination or Potential Termination Event has occurred or
(ii) a Purchaser's commercial paper program is being liquidated, each day
designated as a Settlement Date by the Required Purchasers;
(d) each Business Day on which a Purchaser's Investment is reduced in
accordance with Section 2.01(b), (c) or (d); and
(e) any date on which a reduction in the Total Aggregate Capital is
required to prevent the sum of the Total Aggregate Capital and the "Total
Aggregate Capital" under the Secondary Purchase Agreement from exceeding the
Purchase Limit.
"Settlement Period" means a period equal to one calendar month,
provided, however, that the first Settlement Period shall commence on the date
hereof and terminate on the last day of the calendar month in which such
Settlement Period commenced.
"Solvent" means, when used with respect to any Person, that, as of any
date of determination, (a) the amount of the "present fair saleable value" of
the assets of such Person will, as of such date, exceed the amount of all
"liabilities of such Person, contingent or otherwise," as of such date, as such
quoted terms are determined in accordance with applicable federal and state laws
governing determinations of the insolvency of debtors, (b) the present fair
saleable value of the assets of such Person will, as of such date, be greater
than the amount that will be required to pay the liability of such Person on its
debts as such debts become absolute and matured, (c) such Person will not have,
as of such date, an unreasonably small amount of capital with which to conduct
its business, and (d) such Person will be able to pay its debts as they mature.
For purposes of this definition, (i) "debt" means liability on a "claim," and
(ii) "claim" means any (x) right to payment, whether or not such a right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y)
right to an equitable remedy for breach of performance if such breach gives rise
to a right to payment, whether or not such right to an equitable remedy is
reduced to judgment, fixed, contingent, matured or unmatured, disputed,
undisputed, secured or unsecured.
"Subsidiary" means, with respect to any Person, any corporation of
which more than 50% of the outstanding capital stock having ordinary voting
power to elect a majority of the board of directors (or others performing a
comparable function) of such corporation is at the time directly or indirectly
owned by such Person, by such Person and one or more other Subsidiaries of such
Person, or by one or more other Subsidiaries of such Person.
"Termination Date" means the earlier of (i) the Reinvestment
Termination Date and (ii) the Facility Termination Date.
"Total Aggregate Capital" means, at any time of determination, the sum
of the Aggregate Capital for the Purchasers.
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"Transfer Agreement" means each agreement, in substantially the form
attached hereto as Exhibit C, between the Seller and each Originator pursuant to
which the Seller will purchase Receivables from the Originators.
"UCC" means the Uniform Commercial Code as from time to time in effect
in the specified jurisdiction.
"Year 2000 Plan" has the meaning specified in Section 4.01(y).
"Year 2000 Problem" means, with respect to any Person, the risk that
computer applications in use by that Person cannot or will not: (a) handle date
information involving any and all dates before, during and/or after January 1,
2000, including accepting input, providing output and performing date
calculations in whole or in part; (b) operate accurately without interruption on
and in respect of any and all dates before, during and/or after January 1, 2000;
and (c) store and provide date input information without creating any ambiguity
as to the century.
"Yield" means for each Receivable Interest for any Settlement Period
IR x C x ED + LF
--
360
where:
C = the daily average (calculated at the close of business each
day) Capital of such Receivable Interest during such
Settlement Period
IR = Investor Rate for such Receivable Interest for such
Settlement Period
ED = the actual number of days elapsed during such Settlement
Period
LF = the Liquidation Fee, if any, for such Receivable Interest
for such Settlement Period;
provided, that no provision of this Agreement shall require the payment or
permit the collection of Yield in excess of the maximum permitted by applicable
law; and provided, further, that Yield for any Receivable Interest shall not be
considered paid by any distribution to the extent that at any time all or a
portion of such distribution is rescinded or must otherwise be returned for any
reason.
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SECTION 1.02 Other Terms. All accounting terms not specifically defined
herein shall be construed in accordance with generally accepted accounting
principles. All terms used in Article 9 of the UCC in the State of New York, and
not specifically defined herein, are used herein as defined in such Article 9.
ARTICLE II.
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 2.01 Purchase Facility.
(a) On the terms and conditions hereinafter set forth, each Purchaser
may, in its sole discretion, purchase Receivable Interests from the Seller from
time to time during the period from the date hereof to the Termination Date.
Each purchase (each, a "Purchase") of Receivable Interests with respect to a
Receivables Pool requested by the Seller shall be made by the Purchasers
electing to Purchase at such time simultaneously and ratably according to their
respective Pro Rata Shares. Under no circumstances shall a Purchaser make any
Purchase if after giving effect to such Purchase, such Purchaser's Aggregate
Capital, together with the Related Secondary Purchaser's "Aggregate Capital"
under the Secondary Purchase Agreement, would exceed such Purchaser's Purchase
Limit. Notwithstanding anything to the contrary contained herein, until such
time as the parties expressly agree, all Purchases of Receivable Interests
hereunder and under the Secondary Purchase Agreement shall be made with respect
to a single Receivables Pool.
(b) The Seller may, upon at least five Business Days' notice to the
Administrative Agent and the Purchasers, terminate in whole or reduce in part
the unused portion of the Purchase Limit; provided, that each partial reduction
shall be in the amount of at least $5,000,000 or an integral multiple thereof
and shall be applied pro rata among the Purchasers according to their Pro Rata
Shares; provided, further, that any partial reduction of the Purchase Limit for
any Purchaser must not result in a remaining Purchase Limit of less than
$25,000,000 or the Purchase Limit for such Purchaser shall be reduced to zero.
Any reductions in the Purchase Limit pursuant to this subsection (b) shall be
permanent.
(c) The Seller may, upon at least five Business Days' written notice to
the Administrative Agent and the Purchasers specifying an Optional Reduction
Amount and an Optional Reduction Effective Date, effect an Optional Reduction.
Commencing on the Optional Reduction Effective Date, the Collection Agent shall
cease the reinvestment of Collections for a period of time such that after
giving effect to the amount of Collections which are not reinvested in
accordance with the provisions of Section 2.04(b)(ii), the amount of Total
Aggregate Capital on the day immediately preceding the Optional Reduction
Effective Date is reduced by an amount equal to the Optional Reduction Amount.
Any Optional Reduction under this subsection (c) shall be applied pro rata among
the Purchasers according to their Pro Rata Shares. The Seller shall indemnify
any Purchaser for all losses, expenses and liabilities, if any (including,
without limitation, any loss or expense incurred by reason of the liquidation or
reemployment of deposits or other funds required by any Purchaser in connection
with such Purchaser's funding or maintenance of the Receivable Interests), which
such
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Purchaser may sustain as a result of any Optional Reduction pursuant to
this subsection (c).
(d) The Seller may, upon 60 days' prior written notice to the
Purchasers, request the reallocation of the Pro Rata Shares of the Purchasers;
provided, however, that the Seller shall not be able to request such
reallocation after the occurrence of an Event of Termination or a Potential
Termination Event. Any reallocation of a Purchaser's Pro Rata Share as in effect
prior to such reallocation which increases the Purchase Limit of such Purchaser
shall be at the sole discretion of such Purchaser and shall be effective only if
the Related Secondary Purchaser increases its "Commitment" under the Secondary
Purchase Agreement by an amount corresponding to the amount of the increase, if
any, in the Purchaser's Purchase Limit arising from such reallocation. If, as a
result of any reallocation, a Purchaser's Aggregate Capital exceeds its Pro Rata
Share (as proposed to be reallocated) of the Purchase Limit, such Purchaser
shall transfer a Receivable Interest or Receivables Interest computed on the
basis of such excess Capital to the Purchaser or Purchasers whose Pro Rata Share
has increased as a result of such reallocation in exchange for a cash payment in
an amount equal to the aggregate Capital of the Receivable Interests so
transferred.
(e) The Seller may, upon thirty days' prior written notice to the
Administrative Agent and the Purchasers and the written signed consent of the
Administrative Agent and the Purchasers, cease purchasing Receivables from any
Originator, and after the Seller ceases purchasing Receivables from such
Originator, such Originator shall no longer have the obligations of an
Originator for all purposes of this Agreement other than with respect to those
obligations which are expressly intended to survive the termination of this
Agreement, including, without limitation, the indemnities contained in Section
8.01 as incorporated by reference in the Consent and Acknowledgement to which
such Originator is a party. If, as a result of the Seller's decision to cease
purchasing Receivables from any Originator, the Required Purchasers determine,
in their sole discretion, that the Events of Termination in Section 7.01(j) are
no longer reasonable or protective, the Required Purchasers may modify the
provisions of such Section 7.01(j) with the consent of the Seller (which consent
shall not be unreasonably withheld or delayed).
(f) The Seller may, upon thirty days' prior written notice to the
Administrative Agent and the Purchasers and the written signed consent of the
Administrative Agent and the Purchasers (which consent shall not be unreasonably
withheld or delayed), cease purchasing from any Originator all Receivables
generated by any division of such Originator (an "Originator Division"), and
after the Seller ceases purchasing from such Originator all Receivables
generated by such Originator Division, any agreement arising thereafter between
such Originator and an Obligor pursuant to or under which such Obligor shall be
obligated to pay for merchandise, insurance or services provided by such
Originator Division, shall not be a "Contract" for purposes of this Agreement;
provided, that any Contract generated by such Originator Division prior to the
date the Seller ceases purchasing such Originator Division's Receivables shall
remain a "Contract" for purposes of this Agreement. If, as a result of the
Seller's decision to cease purchasing from any Originator all Receivables
generated by an
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Originator Division pursuant to this Section 2.01(f), the Required Purchasers
determine, in their sole discretion, that the Events of Termination in Section
7.01(j) are no longer reasonable or protective, the Required Purchasers may
modify the provisions of such Section 7.01(j) with the consent of the Seller
(which consent shall not be unreasonably withheld or delayed).
(g) The Seller may, upon ninety days' prior written notice to the
Administrative Agent and the Purchasers and the written signed consent of the
Administrative Agent and the Purchasers, commence purchasing from any Originator
all Receivables generated by any Originator Division, and after the Seller
commences purchasing from such Originator all Receivables generated by such
Originator Division, all related agreements between the Originator, and an
Obligor pursuant to or under which such Obligor shall be obligated to pay for
merchandise, insurance or service provided by such Originator Division shall be
"Contracts" for all purposes of this Agreement. If, as a result of the Seller's
decision to commence purchasing from any Originator all Receivables generated by
an Originator Division pursuant to this Section 2.01(g), the Required Purchasers
determine, in their sole discretion, that the Events of Termination in Section
7.01(j) are no longer reasonable or protective, the Required Purchasers may
modify the provisions of such Section 7.01(j) with the consent of the Seller
(which consent shall not be unreasonably withheld or delayed).
(h) If Georgia-Pacific sells or otherwise conveys or disposes of the
stock of any Originator, upon the effective date of such sale, such Originator
shall no longer be an Originator under this Agreement; provided, that, if the
Required Purchasers determine, in their sole discretion, that the Events of
Termination in Section 7.01(j) are no longer reasonable or protective as a
result of such sale, the Required Purchasers may modify the provisions of such
Section 7.01(j) with the consent of the Seller (which consent shall not be
unreasonably withheld or delayed).
(i) The Facility Termination Date shall be 364 days from the date
hereof; provided, that the Facility Termination Date may be extended for an
additional 364-day period at the end of each 364-day period from the date hereof
if the Seller gives each Purchaser written notice not later than 90 days prior
to each such annual anniversary (beginning with the first such period) and each
Purchaser provides the Seller with its written consent to such extension not
later than 60 days after receipt of the Seller's notice.
SECTION 2.02 Making Purchases.
(a) Each Purchase shall be made on at least three Business Days' notice
from the Seller to each Purchaser. Each such notice shall specify (i) the amount
requested to be paid to the Seller (which shall not be less than $5,000,000),
and (ii) the date of such Purchase (which shall be a Business Day). Each
Purchaser shall notify the Seller whether it has determined to make such
Purchase not later than 10:00 A.M., New York City time, on the second Business
Day prior to the proposed purchase date.
(b) On the date of each Purchase, each Purchaser shall, upon
satisfaction of the applicable conditions set forth in Section 3.01 and Section
3.02, make
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available to the Seller in same day funds, at the Seller's account with [Bank of
America N.A.], account number [12334-01430], an amount equal to the initial
Capital of such Receivable Interest purchased by the Purchaser. Each notice
given by the Seller pursuant to subsection (a) above shall be irrevocable and
binding on the Seller and the Seller shall indemnify each Purchaser against any
loss or expense incurred by such Purchaser as a result of any failure by the
Seller to accept the amount requested to be paid by such Purchaser, including,
without limitation, any loss (including loss of anticipated profits) or expense
incurred by such Purchaser by reason of the liquidation or reemployment of funds
acquired or requested by such Purchaser to fund such requested amount.
SECTION 2.03 Receivable Interest Percentage.
(a) Each Receivable Interest shall be initially computed on its date of
purchase. Thereafter, until the Reinvestment Termination Date for such
Receivable Interest, such Receivable Interest shall be automatically recomputed
(or deemed to be recomputed) on each day other than a Liquidation Day. Any
Receivable Interest as computed (or deemed recomputed) as of the close of
business on the day immediately succeeding the Reinvestment Termination Date for
such Receivable Interest shall remain constant at all times after such
Reinvestment Termination Date. Such Receivable Interest shall become zero when
the Capital thereof, Yield thereon and all other amounts due and payable to the
Purchasers and the Agent under and in connection with this Agreement shall have
been paid in full and the Collection Agent (if not the Seller or an Affiliate
thereof) shall have received the accrued Collection Agent Fee thereon.
(b) If any Receivable Interest would otherwise be reduced on any day on
account of newly arising Pool Receivables, the Purchasers may prevent such
reduction by notifying the Collection Agent on such day that the Receivables
Pool and the Net Receivables Pool Balance for such Receivable Interest will
include, with respect to Receivables arising as Pool Receivables on such day,
only such number or portion of such Receivables as shall cause such Receivable
Interest to remain constant. The remainder of such Receivables or portion
thereof shall be treated as Receivables arising on the next succeeding Business
Day (subject to reapplication of this subsection (b)).
(c) If any Investor Report indicates that the last day of the prior
Settlement Period was a Mandatory Reduction Day, the Collection Agent shall
promptly notify the Purchasers and the Seller and shall specify the Mandatory
Reduction Amount. In addition, if on any Business Day the Seller knows such day
to be a Mandatory Reduction Day, it shall promptly notify the Purchasers and the
Collection Agent and shall specify the Mandatory Reduction Amount. On the
Business Day next succeeding the Investor Report Date or such notification to
the Purchasers and the Collection Agent, unless the Seller can demonstrate to
the satisfaction of the Purchasers that such day is not a Mandatory Reduction
Day, the Seller shall pay to each Purchaser its full Mandatory Reduction Amount
to the extent that the Mandatory Reduction Amount represents Collections which
should have been set aside and held in the trust for such Purchaser pursuant to
Section 2.04 hereof but were previously deemed to be reinvested on behalf of
such Purchaser. If the full Mandatory Reduction Amount is not so paid, the
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Collection Agent shall continue the suspension of the reinvestment of
Collections on each Mandatory Reduction Day until such time that, after giving
effect to the amount of Collections which are not reinvested in accordance with
the provisions of Section 2.04(b)(ii) and the recomputation of the Receivable
Interests pursuant to Section 2.03, the amount of the Aggregate Capital of such
Purchaser on the day immediately preceding any Mandatory Reduction Day is
reduced by an amount equal to the Mandatory Reduction Amount for such Mandatory
Reduction Day. The Seller shall indemnify any Purchaser for all losses, expenses
and liabilities, if any (including, without limitation, any loss or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
required by such Purchaser in connection with such Purchaser's funding or
maintenance of the Receivable Interests), which such Purchaser may sustain as a
result of any Mandatory Reduction.
SECTION 2.04 Settlement Procedures.
(a) Collection of the Pool Receivables shall be administered by the
Collection Agent in accordance with the terms of this Agreement. The Seller
shall provide to the Collection Agent on a timely basis all information needed
for such administration, including notice of the occurrence of any Liquidation
Day or Provisional Liquidation Day and current computations of each Receivable
Interest.
(b) The Collection Agent shall, on each day on which Collections of
Pool Receivables are received by it with respect to any Receivable Interest
owned by a Purchaser:
(i) set aside and hold in trust for such Purchaser, out of the
percentage of such Collections represented by such Receivable Interest, an
amount equal to such Purchaser's Yield and Pro Rata Share of the Collection
Agent Fee and fees payable pursuant to the Fee Letter, if any, accrued
through such day for such Receivable Interest and not previously set aside;
provided, that notwithstanding the preceding clause, unless the
Administrative Agent shall have given notice at the direction of the
Required Purchasers to the contrary, such amounts may be commingled with
the Collection Agent's other funds prior to their payment to the
Purchasers;
(ii) if such day is neither a Liquidation Day nor a Provisional
Liquidation Day nor an Optional Reduction Day nor a Mandatory Reduction
Day, reinvest on behalf of such Purchaser the remainder of such percentage
of Collections, to the extent representing a return of Capital, by
recomputation of such Receivable Interest pursuant to Section 2.03;
(iii) if such day is a Liquidation Day or a Provisional Liquidation
Day, refrain from making reinvestments and set aside and hold in trust for
such Purchaser the entire remainder of such percentage of Collections;
provided, that amounts set aside and held in trust on any Provisional
Liquidation Day that is subsequently determined not to be a Liquidation Day
thereupon shall, to the extent representing a return of Capital, be
reinvested in accordance with the preceding subsection (ii);
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(iv) if such day is an Optional Reduction Day, set aside and hold in
trust for the Purchaser the entire remainder of such percentage of
Collections or, if the remainder of such Collections exceeds the remaining
amount of the Optional Reduction Amount, the portion of the remainder of
such Collections equal to such remaining amount of the Optional Reduction
Amount; provided, that, notwithstanding the preceding clause, unless the
Administrative Agent shall have given notice at the direction of the
Required Purchasers to the contrary, such amounts may be commingled with
the Collection Agent's other funds prior to their payment to the
Purchasers;
(v) if such day is a Mandatory Reduction Day, set aside and hold in
trust for the Purchaser the entire remainder of such percentage of
Collections, or if the remainder of such Collections exceeds the remaining
amount of the Mandatory Reduction Amount for such day, the portion of the
remainder of such Collections equal to such remaining amount of the
Mandatory Reduction Amount; provided, that, notwithstanding the preceding
clause, unless the Administrative Agent shall have given notice at the
direction of the Required Purchasers to the contrary, such amounts may be
commingled with the Collection Agent's other funds prior to their payment
to the Purchasers; and
(vi) release to the Seller for its own account any Collections in
excess of such amounts allocated pursuant to subsections (i) through (v)
above.
(c) The Collection Agent shall deposit into an account designated by
each Purchaser, on each Settlement Date, unless the Required Purchasers, in
their sole discretion, require more frequent deposits, all amounts held by the
Collection Agent for each Purchaser in accordance with Section 2.04(b), unless
deposited earlier as provided in the next succeeding sentence; provided,
however, if Collections have been commingled with the Collection Agent's other
funds prior to their payment to the Purchasers as permitted by the terms of this
Agreement, any deposits made pursuant to the preceding clause shall be made by
the Collection Agent from and to the extent of the Collections with respect to a
Receivable Interest owned by such Purchaser. If a Liquidation Day or a
Provisional Liquidation Day has occurred and is continuing, all amounts held by
the Collection Agent for each Purchaser in accordance with Section 2.04(b) shall
be deposited on the first Business Day following receipt by the Collection Agent
into an account designated by such Purchaser. The aggregate amount so deposited
with respect to a Receivable Interest owned by a Purchaser shall not exceed the
sum of such Purchaser's Capital of, and accrued Yield and Pro Rata Share of the
Collection Agent Fee, if any, on such Receivable Interest plus the aggregate of
any other amounts then owed by the Seller to such Purchaser hereunder. If the
amounts so deposited are insufficient to pay in full all amounts due to such
Purchaser hereunder, such amounts shall be applied in the following order of
priority (whether or not such funds are sufficient to pay in full all such
amounts): first to the Collection Agent (if other than Georgia-Pacific or its
designee) in payment of all accrued and unpaid Collection Agent Fee, if any,
second to such Purchaser in payment in full of all accrued and unpaid Yield,
third to such Purchaser in reduction to zero of the Aggregate Capital of such
Purchaser, fourth to such Purchaser in payment of any other amounts owed by
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the Seller to such Purchaser under this Agreement, fifth to the Administrative
Agent in payment of amounts owed by the Seller to the Administrative Agent under
this Agreement and sixth to the Collection Agent (if Georgia-Pacific or its
designee).
After the Capital and Yield with respect to a Receivable Interest, and
any other amounts payable by the Seller to the Purchasers or the Administrative
Agent hereunder, have been paid in full, all additional Collections with respect
to such Receivable Interest shall be paid to the Seller for its own account.
(d) For the purposes of this Section 2.04:
(i) if on any day the Outstanding Balance of any Pool Receivable is
reduced or adjusted as a result of any defective, rejected, returned,
repossessed or foreclosed merchandise or services, or any cash discount or
other adjustment made by the Seller or an Originator, or any right of
setoff is exercised by the Obligor thereunder, the Seller shall be deemed
to have received on such day a Collection of such Pool Receivable in the
amount of such reduction or adjustment;
(ii) if on any day either (w) any of the representations or warranties
contained in Sections 4.01(h) or 4.01(n) are no longer true with respect to
any Pool Receivable, (x) the Seller shall fail to perform or observe any
term, covenant or agreement contained in Section 5.01(d), or (y) the Seller
or any Originator or the Collection Agent (if Georgia-Pacific or an
Affiliate thereof) shall extend, amend or otherwise modify the terms of any
Pool Receivable, or amend, modify or waive the terms or conditions of the
Contract under which such Pool Receivable arises in a manner which
materially and adversely affects the collectibility of such Pool
Receivable, the Seller shall be deemed to have received on such day a
Collection of such Pool Receivable in full;
(iii) except as provided in subsection (i) or (ii) of this Section
2.04(d), or as otherwise required by applicable law or the relevant
Contract, all Collections received from an Obligor of any Receivable shall
be applied to the Receivables of such Obligor in order of the age of such
Receivables, starting with the oldest such Receivable, unless such Obligor
designates its payment for application to specific Receivables; and
(iv) if and to the extent any Purchaser shall be required for any
reason to pay over to an Obligor any amount received on its behalf
hereunder, such amount shall be deemed not to have been so received but
rather to have been retained by the Seller and, accordingly, such Purchaser
shall have a claim against the Seller for such amount, payable when and to
the extent that any distribution from or on behalf of such Obligor is made
in respect thereof.
SECTION 2.05 Fees.
(a) The Seller shall pay to the Purchasers fees in the amounts and at
the times specified in the Fee Letter.
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(b) The Collection Agent shall be paid a Collection Agent Fee as set
forth in Section 6.06 hereof.
(c) The Seller shall pay to the Administrative Agent a fee as
separately agreed between the Seller and the Administrative Agent.
Each Purchaser shall, on the first Business Day of each calendar month,
provide to the Seller and the Collection Agent a statement specifying, for the
most recently completed Settlement Period, the amount and calculation of such
Purchaser's Yield and Pro Rata Share of the fees payable pursuant to the Fee
Letter. The failure of any Purchaser to provide any such statement to the Seller
or the Collection Agent shall not relieve the Seller of its obligations to pay
such Purchaser's Yield or Pro Rata Share of such fees.
SECTION 2.06 Payments and Computations, Etc.
(a) All amounts to be paid or deposited by the Seller or the Collection
Agent hereunder shall be paid or deposited no later than 3:00 P.M. (New York
City time) on the day when due in same day funds to each Purchaser's account (as
designated by each such Purchaser).
(b) The Seller shall, to the extent permitted by law, pay on demand
from time to time interest on any amount not paid or deposited by the Seller or
the Collection Agent when due hereunder at an interest rate per annum equal to
2% per annum above the Base Rate in effect from time to time; provided, however,
that such interest rate shall not at any time exceed the maximum rate permitted
by applicable law.
(c) All computations of interest under subsection (b) above and all
computations of Yield, fees, and other amounts hereunder shall be made on the
basis of a year of 360 days and the actual number of days elapsed. Whenever any
payment or deposit to be made hereunder shall be due on a day other than a
Business Day, such payment or deposit shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
such payment or deposit.
SECTION 2.07 Dividing or Combining Receivable Interests. The Seller
may, on notice to and consent by a Purchaser received at least three Business
Days prior to the last day of any Settlement Period, divide any Receivable
Interest of such Purchaser into two or more Receivable Interests having
aggregate Capital equal to the Capital of such divided Receivable Interest. The
Seller may, on notice to and consent by a Purchaser received at least three
Business Days prior to the last day of any Settlement Period either (i) combine
two or more existing Receivable Interests of such Purchaser or (ii) combine an
existing Receivable Interest or existing Receivable Interests and a proposed
Receivable Interest, all of such Purchaser, in each case on such last day into a
single Receivable Interest having Capital equal to the aggregate Capital of such
existing Receivable Interest or such existing Receivable Interests and such
proposed Receivable Interest, as the case may be.
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SECTION 2.08 Yield Protection.
(a) If, after the date hereof, the adoption of any applicable law, rule
or regulation, or any change therein, including Regulation D of the Board of
Governors of the Federal Reserve System, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Purchaser or any Person controlling any thereof, any permitted assignee
under this Agreement or any Person maintaining any liquidity, purchase or credit
enhancement facility for any Purchaser (each of which being an "Affected Party")
with any request or directive (whether or not having the force of law) of any
such authority, central bank or comparable agency,
(A) shall subject an Affected Party to any tax (except for taxes on the
overall net income of such Affected Party), duty or other charge with respect to
the Receivable Interests or any right to make purchases, or shall change the
basis of taxation of payments to an Affected Party of its Capital or Yield or
any other amounts due under this Agreement in respect of its Capital or its
rights, if any, to make purchases; or
(B) shall impose, modify or deem applicable any reserve requirement
(including, without limitation, any reserve requirement imposed by the Board of
Governors of the Federal Reserve System, but excluding any reserve requirement,
if any, included in the determination of Yield), special deposit or similar
requirement against assets of, deposits with or for the account of, or credit
extended by, any Affected Party; or
(C) shall impose any other condition affecting the Receivable Interests
or the Purchaser's rights, if any, to make purchases;
and the result of any of the foregoing is (i) to increase the cost to, or, in
the case of Regulation D referred to above, to impose a cost on an Affected
Party funding or making or maintaining any Receivable Interest, or (ii) to
reduce the amount of any sum received or receivable by an Affected Party under
this Agreement with respect thereto, then within ten days after demand by such
Affected Party (which demand shall be accompanied by a statement setting forth
the basis for such demand), the Seller shall pay directly to such Affected Party
such additional amount or amounts as will compensate such Affected Party for
such additional or increased cost incurred or such reduction suffered.
(b) If an Affected Party shall reasonably determine that the adoption
of any applicable law, rule, regulation, directive or guideline regarding
capital adequacy, or any change in or phase-in of any applicable law, rule,
regulation, directive or guideline or in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by an Affected
Party with any request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on the
capital of any Affected Party as a consequence of its obligations hereunder or
arising in
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connection herewith to a level below that which any such Affected Party could
have achieved but for such adoption, change or compliance (taking into
consideration the policies of such Affected Party with respect to capital
adequacy) by an amount deemed by such Affected Party to be material, then from
time to time, within ten days after demand by such Affected Party, the Seller
shall pay to such Affected Party such additional amount or amounts as will
compensate such Affected Party for such reduction.
(c) Each Affected Party will promptly notify the Seller of any event of
which it has knowledge occurring after the date hereof which will entitle such
Affected Party to compensation pursuant to this Section 2.08. If an Affected
Party fails to give such notice within 90 days after it obtains actual knowledge
of such event and such result, such Affected Party shall be entitled to
compensation pursuant to this Section 2.08 only to the extent such additional
amount or reduction accrues on or after the date 90 days prior to the date on
which such Affected Party gives such notice.
(d) In determining any amount provided for in this Section 2.08, the
Affected Party may use any reasonable averaging and attribution methods. Any
Affected Party making a claim under this Section 2.08 shall submit to the Seller
a certificate as to such additional or increased cost or reduction, which
certificate shall be conclusive absent demonstrable error; provided, that the
failure to deliver any such certificate shall not affect the Affected Party's
right to payment hereunder unless notice as required by Section 2.08(c) has not
been given.
SECTION 2.09 Sharing of Payments, Etc. If any Purchaser shall obtain
any payment (whether voluntary, involuntary, through the exercise of any right
of setoff, or otherwise) on account of Pool Receivables covered by a Receivable
Interest (other than pursuant to Section 2.08) in excess of payments on account
of Pool Receivables allocable to such Receivable Interest, such Purchaser shall
forthwith purchase from the other Purchasers such participations in the Pool
Receivables as shall be necessary to cause such purchasing Purchaser to share
the excess payment ratably with each of them, provided, however, that if all or
any portion of each excess payment is thereafter recovered from such purchasing
Purchaser, such purchase from each Purchaser shall be rescinded and such
Purchaser shall repay to the purchasing Purchaser the purchase price to the
extent of such recovery together with an amount equal to each Purchaser's Pro
Rata Share of any interest or other amount paid or payable by the purchasing
Purchaser in respect of the total amount so recovered.
SECTION 2.10 Effect of Early Payments. In the event any Purchaser: (i)
has the Capital of a Receivable Interest reduced without compliance by the
Seller with the notice requirements hereunder or (ii) does not become subject to
a Mandatory Reduction or an Optional Reduction upon the occurrence of a
Mandatory Reduction Day or an Optional Reduction Day, then the Seller agrees to
pay to the relevant Purchaser an amount equal to the excess, if any, of:
(A) Yield that would have accrued during the remainder of the
Settlement Period or the tranche periods for Notes determined by such Purchaser
to relate to such Receivable Interest (as applicable) subsequent to the date of
such reduction (or in
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respect of clause (ii) above, the date such Mandatory Reduction or Optional
Reduction took effect pursuant to the occurrence of a Mandatory Reduction Day or
an Optional Reduction Day) on such Capital if such reduction or such Mandatory
Reduction Day or Optional Reduction Day had not occurred,
over
(B) the income, if any, actually received during the remainder of such
period by such Purchaser from investing the amount received as a reduction of
such Capital, in accordance with such Purchaser's normal investment policies.
All payments made pursuant to this Section 2.10 shall be due and payable
hereunder upon demand. The determinations made by any Purchaser pursuant to this
Section 2.10 shall be binding absent demonstrable error.
ARTICLE III.
CONDITIONS OF PURCHASES
SECTION 3.01 Conditions Precedent to Initial Purchase. The initial
Purchase of Receivable Interests under this Agreement is subject to the
conditions precedent that the Purchasers shall have received on or before the
date of such Purchase the following, each (unless otherwise indicated) dated
such date and in form and substance satisfactory to the Purchasers and the
Administrative Agent:
(a) Certificates of the Secretary or Assistant Secretary of the Seller
and each Originator certifying the names and true signatures of their respective
officers authorized to sign this Agreement and the other documents to be
delivered by them hereunder or in connection herewith, evidence of corporate
authorization of the transactions contemplated hereby, the articles of
incorporation (attached and appropriately certified by the Secretary of State of
the Seller's and each Originator's jurisdiction of incorporation) and the
by-laws and all amendments thereto of the Seller and each Originator.
(b) Executed financing statements (including any assignments of and
amendments to financing statements previously filed), to be filed on or before
the date of such initial Purchase under the UCC of all jurisdictions that the
Purchasers or the Administrative Agent may deem necessary or desirable in order
(i) to perfect the ownership interests contemplated by this Agreement and (ii)
to perfect the ownership interests of the Seller in the receivables purchased by
the Seller from the Originators pursuant to the Transfer Agreements.
(c) Executed UCC termination statements, if any, necessary to release
all security interests and other rights of any Person (other than the Purchasers
and the Secondary Purchasers) in the Receivables, Contracts or Related Security
previously granted by the Seller or any Originator.
(d) Evidence (including Uniform Commercial Code search reports) that
all Receivables and all proceeds thereof are free and clear of liens, security
interests,
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claims and encumbrances other than those held by the Purchasers and the
Secondary Purchasers.
(e) An executed Transfer Agreement and Consent and Acknowledgment from
each Originator.
(f) [Notices, in form the form of Exhibit F and Exhibit G to each
Depository Bank and each Concentration Bank, respectively.]
SECTION 3.02 Conditions Subsequent. The Seller shall, no later than
November 1, 1999, deliver to the Purchasers and the Administrative Agent:
(a) A favorable opinion of Troutman Sanders LLP, counsel for the Seller
and the Originators, in form and substance reasonably satisfactory to the
Purchasers.
(b) A favorable opinion of local counsel for each Originator which has
a principal place of business or, if such Originator has more than one principal
place of business, a chief executive office in a state other than Georgia, in
form and substance reasonably satisfactory to the Purchasers.
SECTION 3.03 Conditions Precedent to All Purchases and Reinvestments.
Each Purchase (including the initial Purchase) and each reinvestment shall be
subject to the further conditions precedent that (a) in the case of each
Purchase, the Collection Agent shall have delivered to the Purchasers and the
Administrative Agent on or prior to the date of such Purchase, in form and
substance satisfactory to the Purchasers, all Investor Reports as and when due
under Section 6.02(g) and, on or prior to the date of the initial Purchase, an
Investor Report containing then current information acceptable to the
Purchasers, and (b) on the date of each Purchase or reinvestment, the following
statements shall be true (and acceptance of the proceeds of such Purchase or
reinvestment shall be deemed a representation and warranty by the Seller that
such statements are then true):
(i) the representations and warranties contained in Article IV are
correct on and as of the date of such Purchase or reinvestment as though
made on and as of such date,
(ii) no event has occurred and is continuing, or would result from such
Purchase or reinvestment, that constitutes an Event of Termination or a
Potential Termination Event,
(iii) Georgia-Pacific is a Member,
(iv) the Internal Revenue Service shall not have filed a notice of lien
pursuant to Section 6323 of the Code with regard to any assets of the
Seller or any Originator, and the Pension Benefit Guaranty Corporation
shall not have filed a notice of lien pursuant to Section 4068 of ERISA
with regard to any assets of the Seller or any Originator, unless such
liens (1) have been suspended or (2)
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are being contested in good faith by the Seller or such Originator and have
been bonded in the full amount thereof; provided, however, that with
respect to any Originator, the amount of such lien shall be greater than
$50,000,000, and
(v) the Facility Termination Date shall not have occurred,
and (c) the Purchasers shall have received such other approvals, opinions or
documents as they may reasonably request.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 Representations and Warranties of the Seller and the
Collection Agent. Each of the Seller and the Collection Agent makes, with
respect to itself, the following representations and warranties to each
Purchaser and the Administrative Agent on the date of each Purchase and on the
date of each reinvestment as follows:
(a) It is duly incorporated, validly existing and in good standing
under the laws of its state of incorporation, and is duly qualified to do
business, and is in good standing, in every jurisdiction where the nature of its
business or the ownership of its properties requires it to be so qualified where
the failure to be so qualified could materially adversely affect its ability to
perform its obligations hereunder or under any Transfer Agreement or the
Secondary Purchase Agreement. As of the date hereof, Georgia-Pacific owns
directly or indirectly 100% of the issued and outstanding common stock of the
Seller.
(b) The execution, delivery and performance by the Seller and the
Collection Agent of the Sale Documents to which it is a party, and the Seller's
use of the proceeds of purchases and reinvestments, are within its corporate
powers, have been duly authorized by all necessary corporate action, do not
contravene or violate (i) its certificate of incorporation or articles of
incorporation or by-laws; or (ii) any law, rule or regulation or any contractual
restriction binding on or affecting it the breach of which could reasonably be
expected to have a material adverse effect on the Receivables or the transaction
contemplated hereby, or as may restrict or limit the assignment of Receivables
of Government Obligors, and do not result in or require the creation of any lien
(other than pursuant hereto and pursuant to the Secondary Purchase Agreement)
upon or with respect to any of its properties; and no transaction contemplated
hereby requires compliance with any bulk sales act or similar law. Each Sale
Document to which the Seller or the Collection Agent is a party has been duly
executed, authorized and delivered by the Seller or the Collection Agent, as the
case may be.
(c) Other than the filings of the financing statements under the UCC of
the jurisdictions that the Purchasers or the Administrative Agent deem
necessary, all of which, on or prior to the date of the initial Purchase
hereunder, will have been duly made and be in full force and effect, and other
than such filings, registrations and notices as may be required under applicable
law with respect to the assignment of Receivables of Government Obligors no
authorization or approval or other action by,
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and no notice to or filing with, any governmental authority or regulatory body
is required for the due execution, delivery and performance by the Seller or the
Collection Agent of this Agreement or any other Sale Document to which the
Seller or the Collection Agent is a party or for the perfection of or exercise
by the Purchaser of its rights and remedies under this Agreement or any other
Sale Document to be delivered hereunder.
(d) Each of this Agreement and each other Sale Document to which the
Seller or the Collection Agent is a party constitutes the legal, valid and
binding obligation of the Seller and the Collection Agent, respectively,
enforceable against the Seller and the Collection Agent in accordance with their
terms, except as such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws relating to or limiting
creditors' rights generally.
(e) The unaudited consolidated financial statements of the Collection
Agent and its subsidiaries as of July 3, 1999, copies of which have been
furnished to the Purchasers, fairly present the financial condition of the
Collection Agent and its subsidiaries as of such date and the consolidated
results of their operations for the period ended on such date, and have been
prepared in accordance with GAAP consistently applied in all material respects
by the Collection Agent and its subsidiaries throughout the period involved,
except as set forth in the notes thereto and there has been no material adverse
change in such financial position or operations as they existed as of such date.
(f) There is no pending or threatened action or proceeding affecting
the Seller or the Collection Agent or any of their respective subsidiaries or
properties before any court, governmental agency or arbitrator which could
reasonably be expected to materially adversely affect (i) the financial
condition or operations of the Seller or the Collection Agent and its
subsidiaries or (ii) the ability of the Seller or the Collection Agent to
perform their obligations under this Agreement or any other Sale Document to
which it is a party or (iii) the legality, validity or enforceability of this
Agreement or any other Sale Document to which it is a party or (iv) any
Purchaser's interest in the Pool Receivables generally or in any significant
portion of the Pool Receivables, the Related Security or the Collections with
respect thereto, or (v) the collectibility of the Pool Receivables generally or
of any significant portion of the Pool Receivables. Neither the Seller nor the
Collection Agent is in default with respect to any order of any court,
arbitrator or governmental body. No Event of Termination, or event which, with
the passage of time or the giving of notice, or both, would be an Event of
Termination, is continuing.
(g) No proceeds of any purchase or reinvestment will be used (i) for a
purpose which violates, or would be inconsistent with regulations T, U or X
promulgated by the Board of Governors of the Federal Reserve System from time to
time or (ii) to acquire any security in any transaction which is subject to
Section 13 and 14 of the Securities Exchange Act of 1934, as amended.
(h) Immediately prior to a Purchase hereunder, the Seller shall be the
legal and beneficial owner of the Pool Receivables and Related Security with
respect
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thereto (except with respect to Related Security and with respect to
Receivables of Government Obligors, the transfer of which may be limited by
applicable law), free and clear of any Adverse Claim, except as created by this
Agreement and the Secondary Purchase Agreement and the documents entered into in
connection herewith and therewith. This Agreement is effective to, and shall,
upon each purchase or reinvestment, transfer to each Purchaser (and each
Purchaser shall acquire from the Seller) a valid and perfected first priority
undivided percentage ownership interest to the extent of such Purchaser's
Receivable Interest in each Pool Receivable existing or hereafter arising and in
the Related Security and Collections with respect thereto, except as may be
limited by applicable law with respect to the Related Security and with respect
to Receivables of Government Obligors, free and clear of any Adverse Claim,
except as created by this Agreement and the Secondary Purchase Agreement and the
documents entered into in connection herewith and therewith. No effective
financing statement or other instrument similar in effect covering any Contract
or any Pool Receivable or the Related Security or Collections with respect
thereto is on file in any recording office, except those filed in favor of the
Administrative Agent pursuant to this Agreement and the Secondary Purchase
Agreement and those filed in favor of the Seller pursuant to a Transfer
Agreement. Upon the filing of UCC-1 financing statements naming the
Administrative Agent as secured party and the Seller as debtor, the
Administrative Agent, as agent for the Purchasers, shall have a first priority
perfected security interest in the Pool Receivables, Related Security and
Collections, to the extent of each Purchaser's Receivable Interest, to the
extent a security interest in such items of property can be perfected under the
UCC.
(i) Prior to a transfer pursuant to a Transfer Agreement, the related
Originator shall be the legal and beneficial owner of the Receivables and the
Related Security sold to the Seller pursuant to such Transfer Agreement free and
clear of any Adverse Claim. Each Transfer Agreement is effective to, and shall,
upon the creation of a Receivable owing to such Originator party to such
Transfer Agreement, transfer to the Seller (and the Seller shall acquire) from
such Originator all right, title and interest of such Originator in each such
Receivable and in the Related Security and Collections with respect thereto,
except as may be limited by applicable law with respect to the Related Security
and with respect to Receivables of Government Obligors, free and clear of any
Adverse Claim, except as contemplated by this Agreement and the Secondary
Purchase Agreement.
(j) Each Investor Report (if prepared by the Seller, an Originator or
one of their Affiliates, or to the extent that information contained therein is
supplied by the Seller, an Originator or an Affiliate), information, exhibit,
financial statement, document, book, record or report (other than projections
prepared in good faith) furnished or to be furnished at any time by a
Responsible Officer of the Seller or an Originator to the Administrative Agent
or the Purchasers in connection with this Agreement was, is, or will be accurate
in all material respects as of its date or (except as otherwise disclosed to the
Administrative Agent or the Purchasers, as the case may be, at such time) as of
the date so furnished, and no such document contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
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necessary in order to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
(k) The principal places of business and chief executive offices of the
Seller and the Originators, and the office where the Seller keeps its records
concerning the Receivables are, as of the date hereof, located at the addresses
referred to in Section 11.02 and on Schedule V hereof, respectively.
(l) The names and addresses of all Lock-Box Banks, Depositary Banks and
Concentration Banks, together with the account numbers of the Lock-Box Accounts,
the Depositary Accounts and the Concentration Accounts of the Seller and the
Originators at such Lock-Box Banks, such Depositary Banks and such Concentration
Banks, are, as of the date hereof, specified in Schedule I hereto, Schedule II
hereto and Schedule III hereto, respectively (or at such other Lock-Box Banks,
Depositary Banks or Concentration Banks and/or with such other Lock-Box
Accounts, Depositary Accounts or Concentration Accounts as have been notified to
the Administrative Agent and the Purchasers in writing in accordance herewith).
(m) Each purchase of a Receivable Interest and each reinvestment of
Collections in Pool Receivables hereunder, and each Purchase by the Seller from
an Originator of a Receivable under the Transfer Agreement to which such
Originator is a party, will constitute (i) a "current transaction" within the
meaning of Section 3(a)(3) of the Securities Act of 1933, as amended, and (ii) a
purchase or other acquisition of notes, drafts, acceptances, open accounts
receivable or other obligations representing part or all of the sales price of
merchandise, insurance or services within the meaning of Section 3(c)(5) of the
Investment Company Act of 1940, as amended.
(n) Each Pool Receivable at the time it first becomes covered by a
Receivable Interest, shall be an Eligible Receivable. Each Pool Receivable used
in computing the Net Receivables Pool Balance shall, at the time of such
computation, be an Eligible Receivable. No event has occurred which materially
and adversely affects the collectibility of the Pool Receivables generally or
the collectibility of a significant portion of the Pool Receivables.
(o) No event has occurred which could reasonably be expected to
materially adversely affect the operations of the Seller or the Collection Agent
and its subsidiaries considered on a consolidated basis as it existed as of July
3, 1999 or the ability of the Seller or the Collection Agent to perform its duty
to collect the Pool Receivables or the ability of the Seller or the Collection
Agent to perform its obligations under this Agreement or any other Sale Document
to which it is a party.
(p) With respect to each Receivable sold by an Originator to the Seller
and included in a Receivables Pool, the Seller shall have paid or promised to
pay to such Originator at the time of such sale an amount equal to the
Outstanding Balance of such Receivable.
(q) The Seller and each Originator are treating the conveyance of the
Receivables Interest in the Receivables, the Related Security and the
Collections under
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this Agreement and each sale of a Receivable under the Transfer Agreements,
respectively, as a sale for purposes of GAAP.
(r) Neither the Seller nor the Collection Agent has extended or
modified the terms of any Pool Receivable or the invoice under which any such
Pool Receivable arose except in accordance with the Credit and Collection
Policy.
(s) The obligations of the Seller hereunder to make payment in respect
of fees payable to the Purchasers, deemed Collections under Section 2.04(d) and
indemnities rank at least equally with Debt of the Seller which is not
contractually subordinated.
(t) Neither the Seller nor the Collection Agent has granted any Person
dominion and control of any Lock-Box Account, Depositary Account or
Concentration Account, or the right to take dominion and control of any Lock-Box
Account, Depositary Account or Concentration Account at a future time or upon
the occurrence of a future event.
(u) The transactions under this Agreement and the other Sale Documents
executed and delivered by the Seller do not and will not render the Seller not
Solvent.
(v) The Seller and the Collection Agent have filed or caused to be
filed all tax returns which, to their knowledge, are required to be filed or has
filed timely extensions therefor. The Seller and the Collection Agent have paid
all taxes and all assessments made against them or any of its property when due
and payable (other than any amount of tax the validity of which is currently
being contested in good faith by appropriate proceedings and with respect to
which reserves in accordance with GAAP have been provided on the books of the
Seller or the Collection Agent, as the case may be), and no tax lien has been
filed and, to the Seller's or the Collection Agent's knowledge, no claim is
being asserted, with respect to any such tax, fee or other charge, provided,
that, with respect to the Collection Agent (if Georgia-Pacific), the amount of
such claim is at least $75,000,000.
(w) Since April 15, 1999, there have been no changes to the Credit and
Collection Policy which could reasonably be expected to have materially
adversely affect the collectibility of any Receivable.
(x) Neither the Seller nor the Collection Agent is an "investment
company" or a company controlled by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
(y) The Seller and the Collection Agent shall have reviewed areas
within its business and operations which could be adversely affected by, and
have developed a plan (a "Year 2000 Plan") to address on a timely basis, the
Year 2000 Problem. The Seller and the Collection Agent shall take all actions
necessary to meet the schedule and goals of its Year 2000 Plan, and do not
anticipate that the Year 2000 Problem will have a material adverse effect on the
transaction.
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Upon discovery by the Seller, the Collection Agent, any Purchaser or
the Administrative Agent of a breach of any of the foregoing representations and
warranties, the party discovering such breach shall give prompt written notice
to the others.
ARTICLE V.
COVENANTS
SECTION 5.01 Covenants of the Seller and the Collection Agent. Until
the date on which no Capital of any Receivable Interest shall be outstanding and
no further Purchases are to be made under this Agreement:
(a) Compliance with Laws, Etc. Each of the Seller and the Collection
Agent shall comply in all material respects with its certificate of
incorporation and by-laws and all applicable laws, rules, regulations and orders
with respect to it, its properties, and all Receivables in which the Purchasers
have a Receivable Interest, and shall preserve and maintain its corporate
existence, rights, franchises, qualifications, and privileges in the
jurisdiction of its incorporation, and qualify and remain qualified in good
standing as a foreign corporation in each jurisdiction where the failure to be
so qualified could materially adversely affect its ability to perform its
obligations hereunder and under the other Sale Documents to which it is a party.
(b) Offices, Records and Books of Accounts. The Seller shall keep its
principal place of business and chief executive office at the address of the
Seller referred to in Section 11.02, or, upon 30 days' prior written notice to
the Administrative Agent and the Purchasers, at any other locations in a
jurisdiction where all action required by Section 6.05(a) shall have been taken.
The Seller and the Collection Agent shall maintain and implement administrative
and operating procedures (including, without limitation, an ability to recreate
records evidencing Pool Receivables and related Contracts in the event of the
destruction of the originals thereof), and keep and maintain all documents,
books, records and other information reasonably necessary or advisable for the
collection of all Pool Receivables (including, without limitation, records
adequate to permit the daily identification of each Pool Receivable and all
Collections of and adjustments to each existing Pool Receivable).
(c) Performance and Compliance with Contracts and Credit and Collection
Policy. The Seller and the Collection Agent shall, at their own respective
expense, timely and fully perform and comply with all material provisions,
covenants and other promises required to be observed by them under the Contracts
related to the Pool Receivables, and timely and fully comply in all material
respects with the Credit and Collection Policy in regard to each Pool Receivable
and the related Contract.
(d) Sales, Liens, Etc. Neither the Seller nor the Collection Agent
shall sell, assign (by operation of law or otherwise) or otherwise dispose of,
or create or suffer to exist any Adverse Claim (other than as contemplated
hereunder) upon or with respect to, any Pool Receivable, Related Security
(except returned or reclaimed merchandise), related Contract or Collections, or
upon or with respect to any account to which any Collections of any Pool
Receivable are sent, or assign any right to receive income in
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respect thereof, except as contemplated hereunder and under the Secondary
Purchase Agreement and the Transfer Agreements.
(e) Extension or Amendment of Receivables. Except as provided in
Section 6.02(c), neither the Seller nor the Collection Agent shall extend, amend
or otherwise modify the terms of any Pool Receivable, or amend, modify or waive
any term or condition of any Contract related thereto other than in accordance
with the Credit and Collection Policy, except with the prior written consent of
the Required Purchasers.
(f) Change in Business or Credit and Collection Policy. Neither the
Seller nor the Collection Agent shall make any change in the character of its
business or in the Credit and Collection Policy that could, in either case, have
a material adverse effect on (i) its business or properties, (ii) the ability of
the Seller or the Collection Agent to perform its obligations under this
Agreement or any Sale Document to which it is a party or (iii) the
collectibility of the Pool Receivables generally or of any significant portion
of the Pool Receivables.
(g) Audits. The Seller and the Collection Agent shall, at any
reasonable time, permit each Purchaser, or its agents or representatives, (i) to
examine and make copies of and abstracts from all Records in the possession or
under the control of the Seller or the Collection Agent relating to Pool
Receivables and the Related Security, including, without limitation, the related
Contracts, and (ii) to visit and inspect the offices and properties of the
Seller and the Collection Agent for the purpose of examining such materials
described in clause (i) above, and to discuss matters relating to the Seller's
and the Collection Agent's financial condition or the Pool Receivables and the
Related Security or the Seller's or the Collection Agent's performance hereunder
or under the Contracts with any of the officers or employees of the Seller or
the Collection Agent having knowledge of such matters.
(h) Change in Payment Instructions to Obligors. The Seller and the
Collection Agent shall not, and shall not permit any Originator to, add or
terminate any bank as a Lock-Box Bank or a Depositary Bank or as a Concentration
Bank from those listed in Schedule I hereto or Schedule II hereto or Schedule
III hereto, respectively, or make any change in its instructions to Obligors
regarding payments to be made to the Seller, the Collection Agent or an
Originator or payments to be made to any Lock-Box Bank or Depositary Bank,
unless the Administrative Agent and the Purchasers shall have received, at least
10 days before the proposed effective date therefor, written notice of such
addition, termination or change and, with respect to the addition of the
Lock-Box Bank, an executed Lock-Box Agreement from, and undated executed copies
of Lock-Box Notices to, such new Lock-Box Bank, and with respect to a Depositary
Bank, undated executed copies of Depositary Notices and, with respect to a
Concentration Bank, undated executed copies of Concentration Notices; provided,
however, that the Seller, the Collection Agent or an Originator shall be
permitted to make changes in instructions to Obligors regarding payments if such
new instructions require such Obligor to make payments to another existing
Lock-Box Account or Depositary Account.
(i) Deposits to Depositary Accounts and Concentration Accounts. The
Seller shall, and shall cause each Originator to, deposit, or cause to be
deposited, all
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Collections of Pool Receivables received by the Seller or an Originator into
Lock-Box Accounts, Depositary Accounts or Concentration Accounts.
(j) Reporting Requirements. The Seller will provide to the Purchasers
the following:
(i) as soon as available and in any event within 45 days after the end
of the first three quarters of each fiscal year of Georgia-Pacific, balance
sheets of Georgia-Pacific and its subsidiaries as of the end of such
quarter and statements of income and cash flows of Georgia-Pacific and its
subsidiaries for the period commencing at the end of the previous fiscal
year and ending with the end of such quarter, certified by the chief
financial officer of Georgia-Pacific;
(ii) as soon as available and in any event within 90 days after the end
of each fiscal year of Georgia-Pacific, a copy of the annual report for
such year for Georgia-Pacific and its subsidiaries, containing audited
financial statements for such year certified in a manner acceptable to the
Purchasers by Arthur Andersen & Co. or other independent public accountants
of recognized national standing acceptable to the Purchasers;
(iii) as soon as possible and in any event within five days after (i)
the occurrence of each Event of Termination or Potential Termination Event
of which the Seller has knowledge, (ii) any material change in the Credit
and Collection Policy or (iii) any action, proceeding or judgment affecting
the Seller or any Originator which could reasonably be expected to
materially adversely affect the Seller's or such Originator's (x) financial
condition or operations or (y) ability to perform their respective
obligations under the Sale Documents, or which could reasonably be expected
to affect the legality, validity or enforceability of any Sale Document or
of the Receivables Interest or the interest of the Seller in Receivables
purchased from any Originator under the Transfer Agreement, a statement of
a Responsible Officer of the Seller or his designee setting forth details
thereof and the action that the Originator has taken and proposes to take
with respect thereto, it being understood that the Originator shall
implement such reasonable procedures as shall be designed to ensure that
the Treasurer shall promptly become aware of any Event of Termination or
Potential Termination Event;
(iv) promptly after the sending or filing thereof, copies of all
reports that Georgia-Pacific sends to any of its security holders or its
creditors and copies of all reports and registration statements that
Georgia-Pacific or any subsidiary files with the Securities and Exchange
Commission or any national securities exchange;
(v) promptly after the filing or receipt thereof, copies of all
material reports and notices which the Seller, Georgia-Pacific or any ERISA
Affiliate files with or receives from the Internal Revenue Service under
ERISA or files with or receives from the Pension Benefit Guaranty
Corporation or the United States Department of Labor;
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(vi) promptly after the receipt thereof, copies of any notice of a tax
lien against any property of the Seller or any Originator which the Seller
or such Originator receives from the Internal Revenue Service;
(vii) at least 45 Business Days prior to any change in the Seller's or
an Originator's name, a notice setting forth the proposed name and the
effective date thereof;
(viii) on or prior to each Investor Report Date, a certificate signed
by a Responsible Officer of the Seller or his designee showing the
calculations necessary to determine compliance with this Agreement and
stating that, unless a statement required by clause (iii) above has been
furnished, to the best of his knowledge, after due inquiry, no Event of
Termination or Potential Termination Event has occurred; and
(ix) such other information documents, records or reports in respect of
the Receivables or the condition or operations, financial or otherwise, of
the Seller, Georgia-Pacific or any of its subsidiaries as the Purchasers or
the Administrative Agent may from time to time reasonably request.
(k) Purchase of Receivables from an Originator. With respect to any
Receivable sold by an Originator to the Seller and included in the Receivables
Pool, the Seller has paid or will have promised to pay such Originator an amount
equal to the Outstanding Balance of such Receivable.
(l) Collections received by an Originator. Upon notification from the
Administrative Agent, acting at the instruction of the Required Purchasers, the
Seller will cause each Originator to hold in trust and promptly turn over to the
Collection Agent any Collections received by such Originator on the Seller's
behalf.
(m) Change in Transfer Agreements. The Seller shall not, and shall not
permit any Originator to, amend, modify or waive any term or condition of this
Agreement or any Transfer Agreement or replace the "Servicer" under any Transfer
Agreement without the consent of all of the Purchasers.
(n) UCC Filings. The Seller shall, and shall cause each Originator to,
file and maintain in effect all filings, and take all such other actions, as may
be necessary to protect the validity and perfection of the Receivable Interest
and the Seller's interest in the Receivables purchased from such Originator
pursuant to a Transfer Agreement.
(o) Compliance with GAAP. The Seller shall treat the conveyance of the
Receivable Interests in the Receivables and the Collections under this Agreement
as a sale for purposes of GAAP.
(p) Deposit of Collections. The Seller shall not, and shall not permit
any Originator to, deposit or otherwise credit, or cause or permit to be so
deposited or credited, to any Lock-Box Accounts, Depositary Accounts or
Concentration Accounts cash or cash proceeds other than Collections.
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(q) No Modification. The Seller shall not amend or modify Articles
Third, Sixth, Seventh, Eighth, Eleventh or Twelfth of the Seller's certificate
of incorporation or Sections 1 and 2 of Article III or Article VIII of the
Seller's by-laws.
(r) Debt. The Seller shall not create, incur, assume or suffer to exist
any Debt or other liability whatsoever, except (i) obligations incurred under or
expressly contemplated by this Agreement, the Secondary Purchase Agreement or
the Transfer Agreements, (ii) liabilities incident to the maintenance of its
existence in good standing or (iii) operating expenses arising in the ordinary
course of business.
(s) Loans. The Seller shall not make or suffer to exist any loans or
advances to, or extend any credit to, or make any investments (by way of
transfer of property, contributions to capital, purchase of stock or securities
or evidences of Debt, acquisition of the business or assets, or otherwise) in,
any Person.
(t) Dissolution. The Seller shall not enter into any transaction of
merger or consolidation, or liquidate or dissolve itself (or suffer any
liquidation or dissolution), or acquire or be acquired by any Person, or convey,
sell, lease or otherwise dispose of all or substantially all of its property or
business, or cause or consent to an involuntary petition of bankruptcy to be
filed against it, except as provided for in this Agreement and the Secondary
Purchase Agreement.
(u) Indentures, Mortgages, etc. The Seller shall not become a party to,
or permit any of its properties to be bound by, any indenture, mortgage,
instrument, contract, agreement, lease or other undertaking, except this
Agreement, the Secondary Purchase Agreement and the other agreements executed
and delivered by the Seller in connection herewith and therewith.
(v) Restriction of Contract. The Seller shall not enter into, or be a
party to, any transaction with any of its Affiliates, except (i) the
transactions permitted or contemplated by this Agreement, the Secondary Purchase
Agreement and the Transfer Agreement, and (ii) other transactions (including,
without limitation, the lease of office space or computer equipment or software
by the Seller to or from an Affiliate) (A) in the ordinary course of business,
(B) pursuant to the reasonable requirements of the Seller's business, and (C)
upon fair and reasonable terms that are no less favorable to the Seller than
could be obtained in a comparable arm's-length transaction with a Person not an
Affiliate of the Seller.
(w) Agreed Procedures. On or before 15 months from the execution date
of this Agreement and annually thereafter, the Administrative Agent or a firm of
nationally recognized independent certified public accountants (who may render
other services to the Collection Agent or the Seller) shall, on an alternating
annual basis, furnish a report (which report shall cover, initially, the period
from the date of this Agreement to June 30, 2000, and thereafter the 12-month
period ending on June 30 of each subsequent year) to each Purchaser to the
effect that they have applied the procedures described in Schedule VIII and
examined certain documents and records relating to the servicing of the Pool
Receivables under this Agreement and that, based upon such procedures, nothing
has come to the attention of the Administrative Agent or
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such accountants, as the case may be, that caused them to believe that the
servicing (including, without limitation, the allocation of the Collections) has
not been conducted in compliance with the terms of this agreement, except for
such exceptions as they believe to be immaterial and such other exceptions as
shall be set forth in such statement, and in addition, each report shall set
forth the procedures performed. Any reasonable costs incurred by the
Administrative Agent or such accountants in connection with the preparation and
furnishing of such report shall be paid by the Seller promptly upon receipt by
the Seller of an invoice therefor.
(x) Separate Entity. The Seller hereby acknowledges that the Purchasers
are entering into the transactions contemplated by this Agreement in reliance
upon the Seller's identity as a separate legal entity from Georgia-Pacific or
any affiliate of Georgia-Pacific (a "GP Entity"). Therefore, from and after the
date of execution and delivery of this Agreement, the Seller shall take all
reasonable steps, including, without limitation, all steps that the Purchasers
may from time to time reasonably request, to maintain the Seller's identity as a
separate legal entity with assets and liabilities distinct from those of any
other GP Entity and not just a division of any GP Entity. Without limiting the
generality of the foregoing and in addition to and consistent with the covenant
set forth above, the Seller shall:
(i) require that all full-time employees of the Seller identify
themselves as such and not as employees of any GP Entity (including,
without limitation, by means of providing appropriate employees with
business identification cards identifying such employees as the Seller's
employees);
(ii) compensate all employees, consultants and agents directly, from
the Seller's bank accounts, for services provided to the Seller by such
employees, consultants and agents and, to the extent any employee,
consultant or agent of the Seller is also an employee, consultant or agent
of any GP Entity, allocate the compensation of such employee, consultant or
agent between the Seller and such GP Entity on a basis which reflects the
services rendered to the Seller and such GP Entity;
(iii) allocate all overhead expenses (including, without limitation,
telephone and other utility charges) for items shared between the Seller
and any GP Entity on the basis of actual use to the extent practicable and,
to the extent such allocation is not practicable, on a basis reasonably
related to actual use;
(iv) at all times have at least one member of its Board of Directors
who is not (A) a director, officer, employee or affiliate of any GP Entity,
(B) a direct or indirect legal or beneficial owner of more than one percent
(1%) of the capital stock of any GP Entity, (C) a creditor, supplier,
employee, officer, director, member of the immediate family, manager or
contractor of any GP Entity, or (D) a person who controls (whether
directly, indirectly or otherwise) any GP Entity or any creditor, supplier,
employee, officer, director, manager or contractor of any GP Entity (such
member, an "Independent Director"); provided, however, that a member of the
Board of Directors who otherwise meets the description of an Independent
Director shall not be disqualified from serving as an Independent
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Director if he or she is also an independent director of another
corporation that is a GP Entity with a certificate or articles of
incorporation substantially similar to the certificate of incorporation of
the Seller;
(v) ensure that all corporate actions are duly authorized by unanimous
vote of its Board of Directors;
(vi) maintain the Seller's books and records separate from those of any
GP Entity;
(vii) prepare its financial statements separately from those of other
GP Entities and insure that any consolidated financial statements of any GP
Entity that include the Seller have detailed notes clearly stating that the
Seller is a separate corporate entity and that its assets will be available
first and foremost to satisfy the claims of its creditors;
(viii) not commingle funds or other assets of the Seller with those of
any other GP Entity and not maintain bank accounts or other depository
accounts to which any GP Entity is an account party, into which any GP
Entity makes deposits or from which any GP Entity has the power to make
withdrawals;
(ix) not permit any GP Entity to pay any of the Seller's operating
expenses (except pursuant to allocation arrangements that comply with the
requirements of subparagraph (iii) of this Section 5.01(x)); and
(x) not permit the Seller to be named as an insured on the insurance
policy covering the property of any GP Entity, or enter into an agreement
with the holder of such policy whereby in the event of a loss in connection
with such property, proceeds are paid to the Seller.
(y) Coverage Ratio. The Seller shall not permit at any time the
Receivable Interests of any Purchaser to exceed such Purchaser's Pro Rata
Share or the aggregate Receivable Interest of all of the Purchasers to
exceed 100%.
(z) Year 2000 Compliance. No later than November 30, 1999, all computer
applications, which are related to or involved in the origination,
collection, management or servicing of the Pool Receivables will be able to
perform properly date-sensitive functions for all dates before, during
and/or after January 1, 2000, except to the extent that a failure to do so
could not reasonably be expected to have a material adverse effect on (i)
the business, assets, financial condition or operations of the Seller or
any Originator or (ii) the ability of the Seller or any Originator to
perform its respective obligations under this Agreement or any Transfer
Agreement, respectively.
(aa) Name Change. The Seller shall not change its name, except upon 45
Business Days' prior written notice to the Administrative Agent and the
Purchaser and the taking of all action required by Section 6.05(a).
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ARTICLE VI.
ADMINISTRATION AND COLLECTION
SECTION 6.01 Designation of Collection Agent. The administration and
collection of the Pool Receivables shall be conducted by such Person (the
"Collection Agent") so designated from time to time in accordance with this
Section 6.01. Georgia-Pacific is hereby designated as, and hereby agrees to
perform the duties and obligations of, the Collection Agent pursuant to the
terms of this Agreement. The Purchasers may at any time designate as Collection
Agent any Person (including a Purchaser or a Secondary Purchaser) to succeed
Georgia-Pacific or any successor Collection Agent, if such Person shall consent
and agree to the terms hereof. Unless the Required Purchasers determine in their
sole discretion that it would be impractical or inadvisable to do so, the
Purchasers shall give the Seller and the Collection Agent at least five Business
Days' notice of any such designation. The Collection Agent may, with the prior
consent of the Purchasers, subcontract with any other Person for the
administration and collection of all or a significant portion of the Pool
Receivables; provided, that the Collection Agent may, so long as it is
Georgia-Pacific, subcontract with an Originator for the administration and
collection of the Pool Receivables without the consent of the Purchasers;
provided, further, that Georgia-Pacific may, without the consent of the
Purchasers, subcontract with any other Person for the administration and
collection of Pool Receivables as authorized by the Credit and Collection
Policy. Any such subcontract shall not affect the Collection Agent's liability
for performance of its duties and obligations pursuant to the terms hereof.
SECTION 6.02 Duties of Collection Agent.
(a) The Collection Agent shall take or cause to be taken all such
actions as may be necessary or advisable to collect each Pool Receivable from
time to time, all in accordance with applicable laws, rules and regulations,
with reasonable care and diligence, and in accordance with the Credit and
Collection Policy. Each of the Seller, each Purchaser and the Administrative
Agent hereby appoints the Collection Agent, from time to time designated
pursuant to Section 6.01 hereof, as agent for itself and for the owners of
Receivable Interests to enforce their respective rights and interests in the
Pool Receivables, the Related Security and the related Contracts.
(b) The Collection Agent shall administer the Collections in accordance
with the procedures described herein and in Section 2.04. The Collection Agent
shall set aside and hold in trust for the account of the Seller and each
Purchaser, their respective shares of the Collections of Pool Receivables in
accordance with Section 2.04 but shall not be required, except either upon the
request of the Administrative Agent acting at the direction of the Required
Purchasers or upon the occurrence and during the continuance of an Event of
Termination or a Potential Termination Event, to segregate the funds
constituting each Purchaser's share of such Collections from the general funds
of the Collection Agent or the Seller prior to the remittance thereof in
accordance with Section 2.04. If the Collection Agent shall be required to
segregate Collections pursuant to the proceeding sentence, the Collection Agent
shall segregate and deposit with a bank (which may be Canadian Imperial Bank of
Commerce, Citibank, N.A. or Bank One, NA (Chicago Office)) designated by each
Purchaser such allocable share of Collections of
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Pool Receivables set aside for such Purchaser on the first Business Day
following receipt by the Collection Agent of such Collections.
(c) If no Event of Termination or Potential Termination Event shall
have occurred, the Collection Agent, may, in accordance with the Credit and
Collection Policy, extend the maturity or adjust the Outstanding Balance of any
Receivable as the Collection Agent deems appropriate to maximize Collections in
respect thereof; provided, that the extension or adjustment by the Collection
Agent of a Receivable which is a Defaulted Receivable or a Delinquent Receivable
shall not change the status of such Receivable for purposes of this Agreement.
(d) The Collection Agent shall hold in trust for the Seller and the
Purchasers, in accordance with their respective interests, all Records that
evidence or relate to Pool Receivables and shall, as soon as practicable upon
demand of the Administrative Agent acting at the direction of the Required
Purchasers, deliver or make available to the Administrative Agent all Records in
its possession which evidence or relate to Pool Receivables.
(e) The Collection Agent, shall as soon as practicable following
receipt thereof, turn over to the Seller (i) that portion of Collections of Pool
Receivables representing the Seller's undivided fractional ownership interest
therein, less all reasonable out-of-pocket costs and expenses of the Collection
Agent of servicing, administering and collecting the Pool Receivables to the
extent not covered by the Collection Agent Fee received by it, and (ii) any cash
collections or other cash proceeds received with respect to Receivables not
constituting Pool Receivables.
(f) The Collection Agent shall, from time to time at the request of a
Purchaser, furnish to such Purchaser (promptly after any such request) a
calculation of the amounts set aside for such Purchaser pursuant to Section 2.04
hereof.
(g) On or prior to each Investor Report Date, the Collection Agent
shall prepare and forward to each Purchaser and the Administrative Agent (i) an
Investor Report relating to each Receivable Interest outstanding on the
immediately preceding Settlement Date, and (ii) if requested by a Purchaser, a
listing by Obligor of all Pool Receivables outstanding on such Settlement Date,
together with an analysis of the aging of such Pool Receivables by Obligor and
such additional information as may be reasonably requested by such Purchaser.
Prior to the occurrence of an Event of Termination or a Potential Termination
Event, the Collection Agent will use its best efforts to provide the Purchasers
and the Administrative Agent with the information in clauses (i) and (ii) above
on a more frequent basis if reasonably requested by the Required Purchasers.
Following an Event of Termination or a Potential Termination Event, the
Collection Agent will provide the Purchasers and the Administrative Agent with
the information in clauses (i) and (ii) above on a more frequent basis if
required by the Required Purchasers.
(h) The Collection Agent will, to the extent permitted by applicable
law and with respect to any amount not paid by the Collection Agent when
required to be paid hereunder, pay on demand interest to each Purchaser at a
rate per annum equal to
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2% above the Base Rate, provided, however, that such interest rate will not at
any time exceed the maximum rate permitted by applicable law.
(i) The Collection Agent's authorization under this Agreement will
terminate after the Facility Termination Date, upon payment in full of all
amounts payable to the Purchasers and the Collection Agent under this Agreement.
SECTION 6.03 Rights of the Administrative Agent.
(a) Upon five days notice to the Seller, unless the Required Purchasers
determine in their sole discretion that it would be impracticable or inadvisable
to give such notice, the Administrative Agent at the direction of the Required
Purchasers is authorized at any time to date and to deliver to the Lock-Box
Banks, the Lock-Box Notices, to the Depositary Banks, the Depositary Notices and
to the Concentration Banks, the Concentration Notices delivered hereunder. The
Seller hereby transfers to the Administrative Agent, effective when the
Administrative Agent delivers such Lock-Box Notices, such Depositary Notices or
such Concentration Notices, as the case may be, the exclusive ownership and
control of such Lock-Box Accounts, such Depositary Accounts or such
Concentration Accounts. The Seller shall, and shall cause each Originator to,
take any actions reasonably requested by the Administrative Agent to effect such
transfer. In case any authorized signatory of the Seller or any Originator whose
signature appears on a Lock-Box Notice, a Depositary Notice or a Concentration
Notice shall cease to have such authority before the delivery of such Lock-Box
Notice, such Depositary Notice or a Concentration Notice, such signature shall
nevertheless be valid as if such authority had remained in force. The
Administrative Agent at the direction of the Required Purchasers may notify the
Obligors of Pool Receivables, at any time and at the Seller's expense, of the
ownership of Receivable Interests under this Agreement and may also direct that
payments of all amounts due or that become due under any or all Receivables be
made directly to the Administrative Agent or its designee. In furtherance of the
foregoing, the Administrative Agent shall, upon the direction of the Required
Purchasers, be entitled to take all such actions as it deems necessary or
advisable to exercise dominion and control over the collection and servicing of
the Pool Receivables including such action as shall be necessary or desirable to
cause all cash, checks and other instruments constituting Collections of Pool
Receivables to come into the possession of the Administrative Agent rather than
the Seller. Unless the Required Purchasers determine in their sole discretion
that it would be impractical or inadvisable to do so, the Purchasers must give
the Seller five days prior notice of any such action.
(b) At any time following the designation of a Collection Agent other
than Georgia-Pacific pursuant to Section 6.01:
(i) The Administrative Agent may, and at the direction of the Required
Purchasers shall, direct the Obligors of Pool Receivables that all payments
thereunder be made directly to the Administrative Agent or its designee.
(ii) The Seller shall, and shall cause each Originator to, at the
Administrative Agent's request and at the expense of the Seller and the
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Originators, notify each Obligor of Pool Receivables of the ownership of
Receivable Interests under this Agreement and direct that payments be made
directly to the Administrative Agent or a designee of the Administrative
Agent approved by the Required Purchasers.
(iii) The Seller shall, and shall cause each Originator to, at the
Administrative Agent's request (which shall be at the direction of the
Required Purchasers) and at the expense of the Seller and the Originators,
(A) assemble all of the Records that evidence or relate to the Pool
Receivables, and the related Contracts and Related Security, or that are
otherwise necessary or desirable to collect the Pool Receivables, and shall
make the same available to the Administrative Agent or its designee, at a
place selected by the Administrative Agent, and (B) segregate all cash,
checks and other instruments received by it from time to time constituting
Collections of Pool Receivables in a manner acceptable to the
Administrative Agent and the Required Purchasers and, promptly upon
receipt, remit all such cash, checks and instruments, duly endorsed or with
duly executed instruments of transfer, to the Administrative Agent or its
designee.
(iv) The Seller hereby authorizes the Administrative Agent to take any
and all steps in the Seller's name and on behalf of the Seller that are
necessary or desirable, in the determination of the Administrative Agent
and the Required Purchasers, to collect amounts due under the Pool
Receivables, including, without limitation, endorsing the Seller's name on
checks and other instruments representing Collections of Pool Receivables
and enforcing the Pool Receivables and the Related Security and related
Contracts.
SECTION 6.04 Responsibilities of the Seller. Anything herein to the
contrary notwithstanding:
(a) The Seller shall, and shall cause each Originator to, perform its
obligations under the Contracts related to the Pool Receivables to the same
extent as if Receivable Interests and Receivables had not been sold and the
exercise by the Administrative Agent and by the Purchasers of their rights
hereunder shall not release the Collection Agent, the Seller or any Originator
from any of their duties or obligations with respect to any Pool Receivables or
under the related Contracts; and
(b) Neither the Administrative Agent nor the Purchasers shall have any
obligation or liability with respect to any Pool Receivables or related
Contracts, nor shall any of them be obligated to perform the obligations of the
Seller or any Originator thereunder.
SECTION 6.05 Further Actions Evidencing Purchases.
(a) The Seller shall, and shall cause each Originator to, from time to
time, at their expense, promptly execute and deliver all further instruments and
documents, and take all further actions, that may be necessary or desirable, or
that the Administrative Agent or any Purchaser may reasonably request, to
perfect, protect or
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more fully evidence the Receivable Interests purchased hereunder, or to enable
any Purchaser or the Administrative Agent to exercise and enforce their
respective rights and remedies hereunder. Without limiting the foregoing, the
Seller and each Originator will upon the request of any Purchaser or the
Administrative Agent (i) execute and file such financing or continuation
statements, or amendments thereto, and such other instruments and documents,
that may be necessary or desirable, or that any Purchaser or the Administrative
Agent may reasonably request, to perfect, protect or evidence such Receivable
Interests; (ii) mark conspicuously each invoice evidencing each Pool Receivable
and the related Contract with a legend, acceptable to the Purchasers, evidencing
that Receivable Interests therein have been sold; and (iii) mark its master data
processing records evidencing such Pool Receivables and related Contracts with a
legend, acceptable to the Purchasers, evidencing that Receivable Interests
therein have been sold; provided that the actions specified in clauses (ii) and
(iii) may be directed by the Required Purchasers or the Administrative Agent
only upon the occurrence of an Event of Termination or a Potential Termination
Event.
(b) The Seller authorizes the Administrative Agent to file financing or
continuation statements, and amendments thereto, relating to the Pool
Receivables and the Related Security, the related Contracts and the Collections
with respect thereto without the signature of the Seller where permitted by law.
A photocopy or other reproduction of this Agreement shall be sufficient as a
financing statement where permitted by law.
(c) If the Collection Agent fails to perform any of its obligations
hereunder, any Purchaser or the Administrative Agent may (but shall not be
required to) perform, or cause performance of, such obligation; and such
Purchaser's or the Administrative Agent's costs and expenses incurred in
connection therewith shall be payable by the Seller (if the Collection Agent
that fails to so perform is Georgia-Pacific or an Affiliate thereof) as provided
in Section 8.01 or Section 9.04, as applicable.
SECTION 6.06 Collection Agent Fee. The Collection Agent shall be paid a
collection fee (the "Collection Agent Fee") of 1% per annum on the average daily
amount of the Total Aggregate Capital payable monthly in arrears on each
Settlement Date. The Collection Agent Fee shall be payable only from Collections
pursuant to, and subject to the priority of payment set forth in, Section 2.04.
ARTICLE VII.
EVENTS OF TERMINATION
SECTION 7.01 Events of Termination. If any of the following events
("Events of Termination") shall occur and be continuing:
(a) The Seller or the Collection Agent (if Georgia-Pacific or an
Affiliate thereof) shall fail (i) to perform or observe any term, covenant or
agreement hereunder (other than as referred to in clause (ii) and (iii) of this
subsection (a) or in Sections 5.01(c), 5.01(j) or 5.01(m)) and such failure
shall remain unremedied for three Business Days or (ii) to make any payment or
deposit required hereunder on the first Business Day after the due date thereof
or (iii) to perform or observe any term, covenant or
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agreement contained in Section 5.01(y) hereof and such failure shall remain
unremedied for two Business Days; or
(b) The Seller or the Collection Agent (if Georgia-Pacific or an
Affiliate thereof) shall fail to transfer to the Purchasers when requested any
rights pursuant hereto which the Seller or such Collection Agent then has; or
(c) Any representation or warranty made or deemed made by the Seller or
the Collection Agent (if Georgia-Pacific or an Affiliate thereof) (or any of its
Responsible Officers) in this Agreement or by any Originator (or any of its
Responsible Officers) in the Transfer Agreement or the Consent and
Acknowledgement to which it is a party or in any information or report delivered
by a Responsible Officer of the Seller or any Originator or the Collection Agent
(if Georgia-Pacific or an Affiliate thereof) pursuant hereto shall prove to have
been incorrect or untrue when made or deemed made or delivered; or
(d) The Seller or the Collection Agent (if Georgia-Pacific or an
Affiliate thereof) shall fail to perform or observe any term, covenant or
agreement contained in Sections 5.01(c), 5.01(j) or 5.01(m) hereof or any term,
covenant or agreement contained in any Transfer Agreement; or
(e) An Originator shall fail to perform or observe any term, covenant
or agreement contained in the Consent and Acknowledgment or the Transfer
Agreement to which such Originator is a party (other than a term, covenant or
agreement the breach of which would give rise to an Event of Termination
described in subsection (h) below), on its part to be performed or observed and
any such failure shall remain unremedied for 15 days after the earlier of (i)
the time the Seller or such Originator becomes aware or should have become aware
of such failure and (ii) the date written notice thereof shall have been given
to the Seller or such Originator, as the case may be, by any Purchaser or the
Administrative Agent; or
(f) The Seller or any Originator shall fail to pay when due any amount
in respect of any Debt and such failure shall continue after any applicable
grace period, or any other event shall occur or condition shall exist in respect
of such Debt and shall continue after any applicable grace period, the effect of
which is to cause (or permit any holder thereof to cause) such Debt to become
due and payable prior to the stated maturity thereof; provided, however, that
with respect to any Originator the amount of such Debt is at least $75,000,000;
or
(g) Any purchase or any reinvestment pursuant hereto shall for any
reason (other than pursuant to the terms hereof) cease to create, or any
Receivable Interest shall for any reason cease to be, a valid and perfected
first priority undivided percentage ownership interest in Receivables to the
extent of any Purchaser's Receivable Interest in each applicable Pool Receivable
and the Related Security and Collections with respect thereto, or this Agreement
shall for any reason cease to evidence the transfer to a Purchaser (or its
assignees or transferees) of legal and equitable right, title and interest to,
and ownership of, an undivided percentage ownership interest in any Pool
Receivable to the extent of such Purchaser's Receivable Interest or cease to
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evidence in any Purchaser legal and equitable title to, and ownership of, an
undivided percentage ownership interest in such Receivable and the Related
Security and Collection to the extent of the Receivable Interest of such
Purchaser, except as may be limited by applicable law with respect to the
Related Security and with respect to Pool Receivables of Government Obligors; or
(h) Any purchase pursuant to any Transfer Agreement shall for any
reason (other than pursuant to the term thereof) cease to create, or an interest
in any Receivable shall cease to be, a valid and perfected first priority
undivided percentage ownership interest in such Receivable and the Related
Security and Collections with respect thereto or the Transfer Agreement shall
for any reason cease to evidence the transfer to the Seller of all legal and
equitable right, title and interest of the relevant Originator to, and ownership
of, an undivided percentage ownership in any Receivable, except as may be
limited by applicable law with respect to the Related Security and with respect
to Receivables of Government Obligors; or
(i) The Seller, any Originator or the Collection Agent (if
Georgia-Pacific or an Affiliate thereof) shall generally not pay its debts as
such debts become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of creditors; or
any proceeding shall be instituted by or against the Seller, any Originator or
the Collection Agent (if Georgia-Pacific or an Affiliate thereof) seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition of
it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for relief
or the appointment of a receiver, trustee, custodian or other similar official
for it or for any substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it), either such
proceeding shall remain undismissed or unstayed for a period of 45 days, or any
of the actions sought in such proceeding (including an order for relief against,
or the appointment of a receiver, trustee, custodian or other similar official
for, it or for any substantial part of its property) shall occur; or the Seller
or any Originator shall take any corporate action to authorize any of the
actions set forth above in this subsection (i); or
(j) As of any Settlement Date, the Current Default Ratio shall exceed
5%, or the Delinquency Ratio shall exceed 10%, or the Loss-to-Liquidation Ratio
shall exceed .35%, or the Dilution Ratio shall exceed 7.5%, or the Average
Maturity for the related Settlement Period shall exceed 40 days; or
(k) There shall have occurred any material adverse change in the
financial condition or operations of Georgia-Pacific and its subsidiaries, taken
as a whole, as they existed as of July 3, 1999; or there shall have occurred any
event which has a reasonable likelihood of having a material adverse effect on
the collectibility of the Pool Receivables generally or any significant portion
of the Pool Receivables or the ability of the Seller, any Originator or the
Collection Agent to perform its duty to collect Pool Receivables generally or
otherwise perform its respective obligations hereunder or under any Transfer
Agreements or under any Consent and Acknowledgment; or
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(l) The Pension Benefit Guaranty Corporation shall file a notice of
lien pursuant to Section 4068 of ERISA with regard to any of the assets of the
Seller or any ERISA Affiliate, and such liens have not been suspended or have
not been bonded in the full amount thereof and are not being contested in good
faith by the Seller or such ERISA Affiliate; provided, however, that with
respect to any Originator, the amount of such lien shall be greater than
$50,000,000; or
(m) Georgia-Pacific shall fail to maintain long-term senior unsecured
debt ratings of at least BBB- by S&P and at least Baa3 by Moody's; or
(n) There shall have occurred a change of control of the Seller or any
Originator; provided, however, that a change of control of an Originator shall
not be an Event of Termination if after such change of control Georgia-Pacific
indirectly controls such Originator. A "change of control" shall mean the
failure of Georgia-Pacific to own directly or indirectly, with respect to the
Seller, 100% or, with respect to any Originator, at least 50% of either of the
then outstanding common shares of the Seller or any Originator or the combined
voting rights of the then outstanding voting securities of the Seller or any
Originator, as the case may be; or
(o) The failure of the Seller and the Required Purchasers to agree on
the amendment of subsection (j) of this Section 7.01 as contemplated by Section
2.01(e) upon the Seller's decision to cease purchasing Receivables from any
Originator, by Section 2.01(f) upon the Seller's decision to cease purchasing
Receivables from any Originator Division, by Section 2.01(g) upon the Seller's
decision to commence purchasing Receivables from any Originator Division and by
Section 2.01(h) upon the sale by Georgia-Pacific of the stock of any Originator,
in each case after the expiration of a period of 30 days after such cessation or
such sale; or
(p) The occurrence or declaration of an "Event of Termination" under
the Secondary Purchase Agreement, unless the same shall be cured or waived; or
(q) The occurrence or declaration of an "Event of Termination" under
any Transfer Agreement, unless the same shall be cured or waived with the
consent of all of the Purchasers;
then, and in any such event, at the direction of the Required Purchasers, the
Administrative Agent shall, by notice to the Seller, designate another Person to
succeed Georgia-Pacific as the Collection Agent, subject to the approval of the
Purchasers; provided, that automatically upon the occurrence of any event
(without any requirement for the passage of time or the giving of notice)
described in subsection (i) of this Section 7.01, the Termination Date shall
occur. Upon the occurrence of any Event of Termination, the Purchasers and the
Administrative Agent shall have, in addition to the rights and remedies which
they may have under this Agreement, all other rights and remedies provided after
default under the UCC and under other applicable law, which rights and remedies
shall be cumulative.
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ARTICLE VIII.
INDEMNIFICATION
SECTION 8.01 Indemnities by the Seller. Without limiting any other
rights that the Administrative Agent or the Purchasers or any Affiliate thereof
and their respective officers, directors, employees and agents (each, an
"Indemnified Party") may have hereunder or under applicable law, the Seller
hereby agrees to indemnify each Indemnified Party from and against any and all
claims, losses and liabilities (including reasonable attorneys fees and
expenses) (all of the foregoing being collectively referred to as "Indemnified
Amounts") arising out of or resulting from this Agreement or the use of proceeds
of purchases or reinvestments or the ownership of Receivable Interests or in
respect of any Receivable or any Contract, excluding, however, (a) Indemnified
Amounts to the extent resulting from gross negligence or willful misconduct on
the part of such Indemnified Party, (b) recourse for uncollectible Receivables
(except to the extent the Buyer has recourse against the Seller with respect to
such Receivable on grounds other than the noncollectability of the Receivable)
or (c) except as set forth below, any income taxes incurred by such Indemnified
Party arising out of or as a result of this Agreement or the ownership of
Receivable Interests or in respect of any Receivable or any Contract. Without
limitation of the generality of the foregoing, the Seller shall pay on demand to
each Indemnified Party any and all amounts necessary to indemnify such
Indemnified Party from and against any and all Indemnified Amounts relating to
or resulting from any of the following:
(i) the creation of a Receivable Interest in any Pool Receivable which
is not at the date of the creation of such Receivable Interest an Eligible
Receivable;
(ii) reliance on any representation or warranty made or deemed made by
the Seller or any Originator (or any of their respective Responsible
Officers) or any statement made by any Responsible Officer of the Seller or
any Originator under or in connection with this Agreement which shall have
been incorrect when made;
(iii) the failure by the Seller or any Originator to comply with any
applicable law, rule or regulation;
(iv) the failure to vest in a Purchaser an undivided percentage
ownership interest, to the extent of such Purchaser's Receivable Interest,
in the Receivables (including, without limitation, Receivables of
Government Obligors) in, or purporting to be in, the Receivables Pool and
the Related Security and Collections in respect thereof, free and clear of
any Adverse Claim other than as authorized hereunder;
(v) the failure to vest in the Seller all right, title and interest in
the Receivables purchased by the Seller from any Originator pursuant to a
Transfer Agreement, free and clear of any Adverse Claim other than as
authorized hereunder;
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(vi) the failure to have filed, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of any
applicable jurisdiction, under applicable law with respect to the
assignment of Receivables of Government Obligors or other applicable laws
with respect to any Receivables in, or purporting to be in, the Receivables
Pool and the Related Security and Collections in respect thereof, whether
at the time of any purchase or reinvestment or at any subsequent time;
(vii) any dispute, claim, offset or defense (other than discharge in
bankruptcy of the Obligor) of the Obligor to the payment of any Receivable
in, or purporting to be in, the Receivables Pool (including, without
limitation, a defense based on such Receivable or the related Contract not
being a legal, valid and binding obligation of such Obligor enforceable
against it in accordance with its terms), or any other claim resulting from
the sale of the merchandise or service related to such Receivable or the
furnishing or failure to furnish such merchandise or services;
(viii) any failure of the Seller or the Collection Agent (if
Georgia-Pacific or an Affiliate thereof), to perform their respective
duties or obligations in accordance with the provisions of this Agreement;
(ix) any products liability claim arising out of or in connection with
merchandise, insurance or services which are the subject of any Contract;
(x) any loss incurred by any Purchaser as a result of the Outstanding
Balance of all Pool Receivables from the same Obligor, expressed as a
percentage of the aggregate Outstanding Balance of Eligible Receivables,
being in excess of the Concentration Limit or, if applicable, Special
Concentration Limit for such Obligor;
(xi) the commingling of Collections of Pool Receivables at any time
with other funds;
(xii) any action or omission by the Seller or the Collection Agent (if
Georgia-Pacific or an Affiliate thereof) reducing or impairing the rights
of a Purchaser with respect to any Pool Receivable or the value of any Pool
Receivable, except in accordance with the Credit and Collection Policy;
(xiii) any failure of the Seller to give reasonably equivalent value to
any Originator in consideration of the transfer by such Originator to the
Seller of any Receivables, or any attempt by any Person to void any such
transfer under statutory provisions or common law or equitable action,
including, without limitation, any provision of the Bankruptcy Code;
(xiv) any reductions in the amount of a Pool Receivable the Obligor of
which is a Government Obligor, and the Related Security and Collections
with respect thereto, as the result of appropriation by the government or
the inability to collect any amount from a Government Obligor;
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(xv) any inability to collect the full Outstanding Balance of a Pool
Receivable which was entitled to an Administrative Priority as a result of
the Obligor's bankruptcy and which was included as an Eligible Receivable
as a result of such Administrative Priority;
(xvi) any investigation, litigation or proceeding related to or arising
from this Agreement, the transactions contemplated hereby, the use of the
proceeds of the Purchase, the ownership of the Receivable Interests or any
Pool Receivable, Related Security or Contract or any other investigation,
litigation or proceeding relating to the Seller or any Originator in which
any Indemnified Party becomes involved as a result of any of the
transactions contemplated hereby;
(xvii) all losses, expenses and liabilities, if any (including, without
limitation, any loss or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by any Purchaser in
connection with such Purchaser's funding or maintenance of the Receivable
Interests) which such Purchaser may sustain as the result of the
termination or reduction of any Receivable Interest or the failure by the
Seller or the Collection Agent (if Georgia-Pacific or an Affiliate thereof)
to make any payment of Capital when due;
(xviii) any inability to litigate any claim against any Obligor in
respect of any Pool Receivable as a result of such Obligor being immune
from civil and commercial law and suit on the grounds of sovereignty or
otherwise from any legal action, suit or proceeding;
(xix) any Event of Termination described in clause (i) of Section 7.01;
(xx) a Year 2000 Problem with respect to hardware or software systems
used by the Seller or the Collection Agent; or
(xxi) any loss incurred by any Purchaser on any Pool Receivable of a
Government Obligor.
SECTION 8.02 Contribution. If for any reason the indemnification
provided above in Section 8.01 (and subject to the exceptions set forth therein)
is unavailable to an Indemnified Party or is insufficient to hold an Indemnified
Party harmless, then the Seller shall contribute to the amount paid or payable
by such Indemnified Party as a result of such loss, claim or liability in such
proportion as is appropriate to reflect not only the relative benefits received
by such Indemnified Party on the one hand and the Seller on the other hand but
also the relative fault of such Indemnified Party as well as any other relevant
equitable considerations.
ARTICLE IX.
THE ADMINISTRATIVE AGENT
SECTION 9.01 Authorization and Action. Each Purchaser hereby appoints
and authorizes the Administrative Agent to take such action as agent on its
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behalf and to exercise such powers under this Agreement as are delegated to the
Administrative Agent by the terms hereof together with such powers as are
reasonably incidental thereto. As to any matters not expressly provided for by
this Agreement, the Administrative Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of any Purchaser, the Required Purchasers or all of the
Purchasers (and all references in this Agreement to the "Purchasers" shall be
deemed to mean "all of the Purchasers") as provided by this Agreement and such
instructions shall be binding upon all parties hereto and all assignees of the
Purchasers; provided, however, that the Administrative Agent shall not be
required to take any action which exposes the Administrative Agent to personal
liability or which is contrary to this Agreement or applicable law. The
Administrative Agent agrees to give to each Purchaser prompt notice of each
notice given to it by the Seller, or by it to the Seller, pursuant to the terms
of this Agreement. The appointment and authority of the Administrative Agent
hereunder shall terminate at the later to occur of (i) the payment to (A) each
Purchaser of its Aggregate Capital, accrued and unpaid Yield and all other
amounts due to such Purchaser hereunder and (B) the Administrative Agent of all
amounts due hereunder and (ii) the Facility Termination Date.
SECTION 9.02 UCC Filings. The Purchasers and the Seller expressly
recognize and agree that the Administrative Agent may be listed as the assignee
or secured party of record on the various UCC filings required to be made
hereunder in order to perfect the transfer of the Receivable Interests from the
Seller to the Purchasers, that such listing shall be for administrative
convenience only in creating a record or nominee owner to take certain actions
hereunder on behalf of the Purchasers and that such listing will not affect in
any way the status of the Purchasers as the beneficial owners of the Receivable
Interests. In addition, such listing shall impose no duties on the
Administrative Agent other than those expressly and specifically undertaken in
accordance with the provisions of this Article IX. In furtherance of the
foregoing, each Purchaser shall be entitled to enforce its rights created under
this Agreement without the need to conduct such enforcement through the
Administrative Agent except as provided herein.
SECTION 9.03 Administrative Agent's Reliance, Etc. Neither the
Administrative Agent nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with this Agreement, except for its or their own gross
negligence or willful misconduct. Without limitation of the generality of the
foregoing, the Administrative Agent (i) may consult with legal counsel
(including counsel for the Seller), independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (ii) makes no warranty or representation to any Person
and shall not be responsible to any Person for any statements, warranties or
representations (whether written or oral) made in or in connection with this
Agreement; (iii) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement on the part of the Seller, or of any
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Transfer Agreement on the part of the Seller or the Originator a party thereto,
or to inspect the property (including the books and records) of the Seller or
any Originator; (iv) shall not be responsible to any Purchaser for the due
execution, legality, validity, enforceability, genuineness, sufficiency or value
of this Agreement or any Transfer Agreement or any other instrument or document
furnished pursuant hereto; and (v) shall incur no liability under or in respect
of this Agreement by acting upon any notice, consent, certificate or other
instrument or writing (which may be by facsimile, telegram, cable or telex)
believed by it to be genuine and signed or sent by the proper party or parties.
SECTION 9.04 CIBC and Affiliates. With respect to any Pool Receivable
owned by CIBC, CIBC shall have the same rights and powers under this Agreement
and any document delivered pursuant hereto as would any Purchaser and may
exercise the same as though it were not the Administrative Agent. CIBC and its
Affiliates may generally engage in any kind of business with the Seller, any
Originator or any Obligor and any of their respective Affiliates and any Person
who may do business with or own securities of the Seller, any Originator or any
Obligor or any of their respective Affiliates, all as if CIBC were not the
Administrative Agent and without any duty to account therefor to any Purchaser.
SECTION 9.05 Purchasers' Purchase Decisions. Each Purchaser
acknowledges that it has, independently and without reliance upon the
Administrative Agent, any of its Affiliates or any other Purchaser and based on
such documents and information as it has deemed appropriate, made its own
evaluation and decision to enter into this Agreement and, if it so determines,
to purchase undivided ownership interests in Pool Receivables hereunder. Each
Purchaser also acknowledges that it will, independently and without reliance
upon the Administrative Agent, any of its Affiliates or any other Purchaser and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own decisions in taking or not taking action under
this Agreement.
SECTION 9.06 Successor Administrative Agent. The Administrative Agent
may resign at any time by giving 30 days' written notice thereof to the
Purchasers, the Seller, the Collection Agent and the Secondary Purchasers and
may be removed at any time with or without cause by the Required Purchasers.
Upon any such resignation or removal, the Purchasers shall have the right to
appoint a successor Administrative Agent approved by the Seller (which approval
will not be unreasonably withheld or delayed). If no successor Administrative
Agent shall have been so appointed by the Purchasers, and shall have accepted
such appointment, within 30 days after the retiring Administrative Agent's
giving of notice of resignation or the Purchasers' removal of the Administrative
Agent, then Georgia-Pacific shall appoint a Secondary Purchaser or such other
Person approved by the Purchasers (which approval will not be unreasonably
withheld or delayed) as a successor Administrative Agent. If such successor
Administrative Agent is not a Secondary Purchaser, such successor Administrative
Agent shall be (a) either (i) a commercial bank having a combined capital and
surplus of at least $250,000,000 or (ii) an Affiliate of such bank and (b)
experienced in the types of transactions contemplated by this Agreement. Upon
the acceptance of any
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appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations under this Agreement. After any retiring
Administrative Agent's resignation or removal hereunder as Administrative Agent,
the provisions of this Article IX shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Administrative Agent under this
Agreement.
ARTICLE X.
ASSIGNMENT OF RECEIVABLE INTERESTS
SECTION 10.01 Assignment.
(a) Each Purchaser (with respect to any Receivable Interest) may (i)
without the consent of the Seller, assign to another Purchaser, any Secondary
Purchaser, or to any vehicle organized by a Secondary Purchaser which is rated
at least A-1 by S&P and P-1 by Moody's and (ii) with the prior written consent
of the Seller (which consent shall not be unreasonably withheld or delayed), to
any other Person (such Person, and the Persons described in clause (i) above,
referred to herein as "Assignees"), and any such Assignee, may, without the
written consent of the Seller, assign to any Person described in clause (i)
hereof and may, with the prior written consent of the Seller (which consent
shall not be unreasonably withheld or delayed), assign to any other Person, any
Receivable Interest. Upon any assignment of a Receivable Interest, (i) the
Assignee shall become the owner of such Receivable Interest for all purposes of
this Agreement and (ii) the assignor thereof (the "Assignor") shall relinquish
its rights with respect to such Receivable Interest for all purposes of this
Agreement. Any assignments hereunder shall be upon such terms and conditions as
the Assignor and the Assignee may mutually agree. The parties thereto shall
deliver to the Administrative Agent an assignment agreement, in substantially
the form of Exhibit D hereto (an "Assignment"), duly executed by such parties,
and such Assignor shall promptly execute and deliver all further instruments and
documents, and take all further action, that the Assignee may reasonably request
in order to perfect, protect or more fully evidence the Assignee's right, title
and interest in and to any Receivable Interest assigned hereunder, and to enable
the Assignee to exercise or enforce any rights hereunder. Upon any assignment
pursuant to this Section 10.01, the Assignee thereof shall have all of the
rights and obligations (and only such rights and obligations) of a Purchaser
hereunder, and shall be subject to the same terms and conditions hereunder. The
Administrative Agent shall provide notice to the Seller of any assignment
hereunder.
SECTION 10.02 Effects of Assignment. By executing and delivering an
Assignment, the Assignor thereunder and the Assignee thereunder confirm to and
agree with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment, the Assignor makes no representation or warranty
and assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement, or any other agreement, instrument or document furnished pursuant
hereto; (ii) the Assignor makes no representation or
55
<PAGE>
warranty and assumes no responsibility with respect to the financial condition
of the Seller or any Originator or the performance or observance by the Seller
or any Originator of any of its obligations under this Agreement (in the case of
the Seller) or the Transfer Agreements (in the case of the Seller and the
Originators) or other agreement, instrument or document furnished pursuant
hereto; (iii) such Assignee confirms that it has received a copy of this
Agreement, together with copies of the financial statements referred to in
Section 4.01 and such other agreements, documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and to purchaser the pertinent Receivable Interests; (iv) such
Assignee will, independently and without reliance upon the Administrative Agent,
any Purchaser, any Secondary Purchaser or any of their Affiliates or such
Assignor and based on such agreements, documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (v) such Assignee appoints and
authorizes the Administrative Agent to take such action as agent on its behalf
and to exercise such powers under this Agreement as are delegated to the
Administrative Agent by the terms hereof, together with such powers as are
reasonably incidental thereto; (vi) such Assignee appoints as its agent the
Collection Agent from time to time designated pursuant to Section 6.01 to
enforce its respective rights and interests in and under the pertinent
Receivable Interests and the Related Security and related Contracts; and (vii)
such Assignee agrees that it will not institute against any Purchaser any
proceeding of the type referred to in Section 7.01(i).
ARTICLE XI.
MISCELLANEOUS
SECTION 11.01 Amendments, Etc. No amendment or waiver of any provision
of this Agreement or consent to any departure by the Seller or the Collection
Agent therefrom shall be effective unless in a writing signed by all of the
Purchasers or, where permitted under this Agreement, the Required Purchasers,
and then such amendment, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided,
however, that no amendment or waiver of Section 6.03 or of any other provision
of this Agreement which affects the rights or obligations of the Administrative
Agent shall be effective unless signed by the Administrative Agent. No failure
on the part of the Purchasers or the Administrative Agent to exercise, and no
delay in exercising, any right hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right hereunder preclude any other
or further exercise thereof or the exercise of any other right.
SECTION 11.02 Notices, Etc. All notices and other communications
hereunder shall, unless otherwise stated herein, be in writing (including
facsimile communication) and shall be delivered or sent by facsimile, to each
party hereto, at its address set forth under its name on the signature pages
hereof or at such other address as shall be designated by such party in a
written notice to the other parties hereto. Notices and communications by
facsimile shall be effective when sent, and notices and communications sent by
other means shall be effective when received.
56
<PAGE>
SECTION 11.03 Assignability; Termination.
(a) This Agreement and each Purchaser's rights herein (including
ownership of each Receivable Interest) shall be assignable by such Purchaser and
its respective successors and assigns in accordance with Section 10.01. The term
"Purchaser" shall include any owner by assignment or otherwise of a Receivable
Interest but shall not include any Person to whom a participation is granted.
The Seller may not assign its rights hereunder or any interest herein without
the prior written consent of the Purchasers.
(b) Any Purchaser may grant participations to any Person without the
consent or knowledge of the Seller, any other Purchaser or the Administrative
Agent; provided, that such grant will not affect the obligation, if any, of such
Purchaser hereunder nor the obligations of the Seller hereunder.
(c) The provisions of Sections 8.01, 11.04, 11.05, 11.06 and 11.07
survive any termination of this Agreement.
SECTION 11.04 Costs, Expenses and Taxes.
(a) In addition to the rights of indemnification granted under Section
8.01 hereof, the Seller agrees to pay on demand all reasonable costs and
expenses in connection with the preparation, execution, delivery and
administration (including periodic auditing of Pool Receivables) of this
Agreement and the other documents and agreements to be delivered hereunder,
including, without limitation, (i) the reasonable fees and expenses of Latham &
Watkins, counsel for the Purchasers, actually incurred with respect to the
preparation, execution and delivery of this Agreement, the Secondary Purchase
Agreement and the other documents and agreements to be delivered hereunder or
thereunder; (ii) the reasonable fees and out-of-pocket expenses of counsel for
the Administrative Agent actually incurred with respect to administration of
this Agreement, including without limitation, advising the Administrative Agent
as to its rights and remedies hereunder; and (iii) all costs and expenses, if
any (including reasonable counsel fees and expenses), in connection with the
enforcement or amendment of this Agreement and the other documents and
agreements to be delivered hereunder.
(b) In addition, the Seller shall pay on demand (i) any and all
reasonable costs and expenses actually incurred by any issuing and paying agent
or other Person responsible for the administration of each Purchaser's
commercial paper program in connection with the preparation, completion,
issuance, delivery or payment of commercial paper notes issued to fund the
purchase or maintenance of any Receivable Interest, and (ii) any and all stamp
and other taxes and fees payable in connection with the execution, delivery,
filing and recording of this Agreement or the other documents or agreements to
be delivered hereunder, and agrees to save each Indemnified Party harmless from
and against any liabilities with respect to or resulting from any delay in
paying or omission to pay such taxes and fees.
57
<PAGE>
(c) The Seller also shall pay on demand all other reasonable costs and
expenses and all taxes (excluding income taxes) actually incurred by a Purchaser
or any stockholder of a Purchaser ("Other Costs"), including (i) the costs of
auditing such Purchaser's books by certified public accountants and of rating
such Purchaser's commercial paper by independent financial rating agencies, (ii)
the taxes (excluding income taxes) resulting from such Purchaser's operations
and (iii) the reasonable fees and out-of-pocket expenses of counsel for such
Purchaser or any counsel for any shareholder of such Purchaser with respect to
advising such Purchaser or shareholder as to rights and remedies under this
Agreement, the enforcement of this Agreement or advising such Purchaser or
shareholder as to matters relating to such Purchaser's operations; provided,
that the Seller and any other persons who from time to time sell receivables or
interests therein to such Purchaser ("Other Sellers") each shall be liable for
such Other Costs ratably in accordance with the usage under their respective
facilities; provided, further, that (i) if such Other Costs are attributable to
the Seller and not attributable to any Other Seller, the Seller shall be solely
liable for such Other Costs and (ii) if such Other Costs are attributable to any
Other Seller and not attributable to the Seller in any way, the Seller shall not
be liable for any of such Other Costs.
SECTION 11.05 No Proceedings. The Seller, the Collection Agent and the
Administrative Agent each hereby agrees that it will not institute or join
against any Purchaser any proceeding of the type referred to in Section 7.01(i).
SECTION 11.06 Confidentiality. Unless otherwise required by applicable
law, rule or regulation or by court order or process, the Seller and the
Collection Agent agree to maintain the confidentiality of this Agreement (and
all drafts thereof) in communications with third parties and otherwise;
provided, that this Agreement may be disclosed to the Seller's and the
Collection Agent's legal counsel and auditors if they agree to hold it
confidential.
SECTION 11.07 No Recourse. The obligations of each Purchaser under this
Agreement or any other agreement, instrument, document or certificate executed
and delivered by or issued by such Purchaser or any officer thereof in
connection herewith are solely the corporate obligations of such Purchaser. No
recourse shall be had for payment of any fee or other obligation or claim
arising out of or relating to this Agreement or any other agreement, instrument,
document or certificate executed and delivered or issued by such Purchaser or
any officer in connection herewith, against any stockholder, employee, officer,
director or incorporator of such Purchaser. The provisions of this Section 11.07
shall survive the termination of this Agreement.
SECTION 11.08 Governing Law; Execution in Counterparts.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK (INCLUDING ITS APPLICABLE CONFLICT OF
LAWS RULES).
(b) This Agreement may be executed in any number of counterparts, each
of which when so executed shall be deemed to be an original and all of which
when taken together shall constitute one and the same agreement.
58
<PAGE>
SECTION 11.09 Construction of Agreement. It is the intention of each
Transfer Agreement that the conveyance by the applicable Originator to the
Seller of Receivables shall constitute a purchase and sale and not a secured
loan. It is the intention of this Agreement that the Purchases and reinvestments
shall convey to the Purchasers, to the extent of their Receivable Interests,
undivided ownership interests in the Pool Receivables and that each such
transaction shall constitute a purchase and sale and not a secured loan. If,
notwithstanding such intention, the conveyance of Receivables from any
Originator to the Seller pursuant to a Transfer Agreement shall ever be
characterized as a secured loan and not a sale, then the Seller shall be deemed
to have transferred to the Purchasers, in addition to the Receivable Interests,
all of the Seller's right, title and interest in, to and under the obligations
of such Originator deemed to be secured by a pledge of such Receivables, and, in
such event, this Agreement and the filings of the UCC statements referred to in
Section 3.01(b) shall be deemed to have granted (subject to the exceptions set
forth in Section 4.01 hereof), to the Purchasers a duly perfected security
interest prior to all other liens on and security interests in all of the
Seller's right, title, and interest in, to and under the obligations of such
Originator to the Seller deemed to be secured by such pledge, and the
Administrative Agent shall be deemed to be an independent custodian for purposes
of perfection of the security interest granted to the Seller. If the conveyance
of the Receivable Interests from the Seller to the Purchasers shall ever be
characterized as a secured loan and not a sale, it is the intention of this
Agreement that this Agreement shall constitute a security agreement under
applicable law, and that the Seller shall be deemed to have granted to the
Purchasers a duly perfected security interest in all of the Seller's right,
title and interest in, to and under the Pool Receivables, all payments on or
with respect to such Pool Receivables, all other rights relating to and payments
made in respect of the Pool Receivables, and all proceeds of any thereof prior
to all other liens on and security interests therein.
59
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
SELLER: G-P RECEIVABLES, INC.
By: /s/ Danny W. Huff
----------------------------
Treasurer
133 Peachtree Street, N.E.
Atlanta, Georgia 30348-5605
Attention: Treasurer
Facsimile No.: (404) 827-7076
COLLECTION AGENT: GEORGIA-PACIFIC CORPORATION
By: /s/ Danny W. Huff
-----------------------------
Name: Danny W. Huff
Title: Vice President
and Treasurer
133 Peachtree Street, N.E.
Atlanta, Georgia 30348-5605
Attention: Treasurer
Facsimile No.: (404) 827-7076
PURCHASERS: ASSET SECURITIZATION COOPERATIVE
CORPORATION
By: /s/ Dean Kurdyla
-----------------------------
Name: Dean Durdyla
Title: VP, Controller
c/o Canadian Imperial Bank of
Commerce
425 Lexington Avenue
New York, New York 10017
Attention: President
Facsimile No.: (212) 856-3643
<PAGE>
CORPORATE ASSET FUNDING COMPANY,
INC.
By: CITICORP NORTH AMERICA, INC.,
AS ATTORNEY-IN-FACT
By: /s/ Nancy Georgi Free
-----------------------------
Name: Nancy Georgi Free
Title: Vice President
500 W. Madison St., 7th Floor
Chicago, Illinois, 60661
Attention: Global Securitization
Department
Facsimile No.: (312) 627-3771
FALCON ASSET SECURITIZATION
CORPORATION
By: /s/ Julie C. Benda
------------------------------
Authorized Signatory
c/o Bank One, NA (Chicago Office)
1 Bank One Plaza
Suite 0079, 17th Floor
Chicago, Illinois 60670
Attention: Julie Benda
Facsimile No.: (312) 732-2231
ADMINISTRATIVE
AGENT: CANADIAN IMPERIAL BANK OF
COMMERCE,
as Administrative Agent
By: /s/ John Gevlin
------------------------------
Authorized Signatory
425 Lexington Avenue
New York, New York 10017
Attention: Asset Securitization
Group
Facsimile No.: (212) 856-3643
<PAGE>
SCHEDULE I
LOCK-BOX BANKS
[List names and addresses of all Lock-Box Banks and account
numbers of all Lock-Box Accounts of the Seller and the Originators at such
Lock-Box Banks.]
<PAGE>
SCHEDULE II
DEPOSITARY BANKS
[List names and addresses of all Depositary Banks and account
numbers of all Depositary Accounts of the Seller and the Originators at such
Depositary Banks.]
<PAGE>
SCHEDULE III
CONCENTRATION BANKS
[List names and addresses of all Concentration Banks and
account numbers of all Concentration Accounts of the Seller and the Originators
at such Concentration Banks.]
<PAGE>
SCHEDULE IV
CREDIT AND COLLECTION POLICY
<PAGE>
SCHEDULE V
ORIGINATORS
<PAGE>
SCHEDULE VI
GEORGIA-PACIFIC'S INTERESTS IN ORIGINATORS
[List each Originator and the percentage of issued and outstanding common stock
of such Originator owned directly and indirectly by Georgia-Pacific.]
Originator Direct Indirect
---------- ------ --------
<PAGE>
EXHIBIT A
[FORM OF INVESTOR REPORT]
<PAGE>
EXHIBIT B
[FORM OF LOCK-BOX AGREEMENT]
________________, 19__
[Name and Address of Lock-Box
Bank]
Gentlemen:
We refer to lock box account[s] number[s]. _______________
maintained with you (the "Lock-Box Account[s]") by us, [Seller or Originator]
(hereinafter, sometimes, the "Company"). We have entered into certain agreements
with [Canadian Imperial Bank of Commerce, Atlanta Agency], as administrative
agent (in such capacity, the "Administrative Agent") for Asset Securitization
Cooperative Corporation, Corporate Asset Funding Company, Inc. and Falcon Asset
Securitization Corporation, which require the execution and delivery of this
agreement by you.
By signing this agreement, you agree that on and after
delivery to you of a letter in the form of Attachment A hereto, the Lock-Box
Account[s] shall be maintained by you for the benefit of, and the amounts from
time to time therein held by you as agent for, the Administrative Agent on the
terms provided herein. Until the time of delivery of such letter, the Lock-Box
Account[s] are to be processed in accordance with the standard procedures
currently in effect. All service charges and fees with respect to the Lock-Box
Account[s] incurred by the Company shall be payable as currently arranged.
No changes shall be made by you and us to any agreement or
instructions regarding the Lock-Box Account[s] without the Administrative
Agent's prior written consent. Further, it is our understanding that you agree
to the following: you shall maintain the Lock-Box Account[s] as [a] segregated
account[s] from the Company's other accounts maintained with you, and you shall
refrain from commingling the funds deposited in such account with any other
funds of the Company; and that the location(s) of the Lock-Box Account(s) shall
not be changed without the consent of the Administrative Agent.
Upon delivery to you of a letter in the form of Attachment A
hereto, the Lock-Box Account[s] shall be under the sole dominion and control of
the Administrative Agent and be subject to written instructions from an officer
of the Administrative Agent. Once you have received such letter from the
Administrative Agent, you shall cooperate with the Administrative Agent in
taking control of the Lock-Box Account[s].
Notice from the Administrative Agent may be personally served,
sent by telex, facsimile or United States mail, certified return receipt
requested, to the address, telex or facsimile number set forth under your
signature to this agreement (or to such other address, telex or facsimile number
as you shall notify the Administrative Agent in writing). If notice is given by
telex or facsimile, it will be deemed to have been received
<PAGE>
when sent and the answerback or other form of confirmation received. All other
notices will be deemed to have been received when actually received, or in the
case of personal delivery, delivered. All notices shall be effective within one
business day following receipt. Notice from the Administrative Agent will be
signed by an authorized signatory of the Administrative Agent as appears in the
Administrative Agent's then current signature book. Instructions from the
Administrative Agent may include, but shall not be limited to:
(a) Notice of the establishment of a concentration account into
which all monies collected in the Lock-Box Account[s] shall thereafter be
transferred. Such transfers will be in accordance with your current availability
schedule for business checks and will encompass all collected deposits less any
deductions for returned items. You may be directed, upon instructions from the
Administrative Agent, to transfer into such concentration account all (or that
portion thereof as is specified in the instructions from the Administrative
Agent) of the proceeds of the cash, checks, drafts or other instruments
deposited into the Lock-Box Account(s) within [ ] business days of receipt by
you of such items. Transfers between the Lock-Box Account[s] and the
concentration account may be carried out using either Federal Funds transfers or
Automated Clearing House entries.
(b) The requirement of preparation of duplicate monthly bank
statements for the Lock-Box Account[s] for the Administrative Agent's audit
purposes mailed directly to an address specified by the Administrative Agent.
By signing this agreement, you agree that you shall not make
any charges or debits to the Lock-Box Accounts[s], or exercise any right of
set-off, banker's lien or any other right in favor of any person other than the
Administrative Agent, the Purchasers and the Secondary Purchasers with respect
thereto except as provided herein. The Company and the Administrative Agent
agree that you may debit the Lock-Box Account[s] for any items deposited in the
Lock-Box Account[s] which may be returned or otherwise not incurred by you in
providing lock-box services or otherwise in connection herewith; you may charge
the Lock-Box Account[s] as permitted herein in accordance with your customary
practice but only after attempting to recover funds by debit to other accounts
maintained by the Company with you.
You may terminate this agreement only upon thirty days prior
written notice to that effect to the Administrative Agent, by cancelling the
Lock-Box Account[s] maintained with you. Incoming mail addressed to the closed
Lock-Box(es) shall be forwarded in accordance with the Administrative Agent's
instructions. This agreement may also be terminated upon written notice to you
by the Administrative Agent stating that the agreements referenced in the first
paragraph hereof pursuant to which this agreement was obtained are no longer in
effect. Except as otherwise provided in this paragraph, this agreement may not
be terminated or amended without the written consent of the Administrative
Agent.
2
<PAGE>
This agreement shall inure to the benefit of and shall be
binding upon the respective successors and assigns of the parties hereto, but it
may not be assigned in whole or in part by any party without the prior written
consent of the other parties.
Very truly yours,
[SELLER OR ORIGINATOR]
By __________________________
Title:
[Address]
Attention:
Facsimile No.:
Agreed to:
[CANADIAN IMPERIAL BANK OF
COMMERCE, ATLANTA AGENCY],
as Administrative Agent
By____________________________
Title:
200 Galleria Parkway, N.W.
Atlanta, Georgia 30339
Attention: Credit Administration
Facsimile No.: (404) 955-1185
[LOCK-BOX BANK]
By____________________________
Title:
[Address]
Attention:
Facsimile No.:
3
<PAGE>
ATTACHMENT A TO
EXHIBIT B
[FORM OF LOCK-BOX NOTICE]
, 199_
[Lock-Box Bank]
[Address]
Ladies and Gentlemen:
We hereby notify you that, as contemplated by the Lock-Box
Agreement dated as of ____________, [1990] (the "Lock-Box Agreement") among you,
us and Canadian Imperial Bank of Commerce, Atlanta Agency (the "Administrative
Agent"), we have transferred exclusive ownership and control of our lock-box
account number[s] ______________ maintained with you (the "Lock-Box Account[s]")
to the Administrative Agent, 200 Galleria Parkway, N.W., Atlanta, Georgia 30338.
We hereby irrevocably instruct you to follow any instructions
given to you by the Administrative Agent with respect to the Lock-Box Account[s]
in accordance with the terms of the Lock-Box Agreement.
This Notice shall be governed by, and construed in accordance
with, the laws of the State of New York.
Very truly yours,
[NAME OF SELLER OR ORIGINATOR]
By:
Title:
<PAGE>
EXHIBIT D
[FORM OF TRANSFER AGREEMENT]
<PAGE>
EXHIBIT E
[FORM OF ASSIGNMENT AGREEMENT]
ASSIGNMENT AGREEMENT
Assignment dated __________, ___, made by the undersigned to
______________ pursuant to the Amended and Restated Receivables Purchase
Agreement dated as of October 13, 1999 (the "Agreement"; terms defined therein
being used herein as therein defined) among G-P Receivables, Inc.,
Georgia-Pacific Corporation, Asset Securitization Cooperative Corporation,
Corporate Asset Funding Company, Inc., Falcon Asset Securitization Corporation,
Canadian Imperial Bank of Commerce, as agent (the "Administrative Agent").
In consideration of the payment of $___________, being the
existing [Aggregate] Capital of the Receivable Interest[s], referred to below,
and of $________, being the [aggregate] unpaid accrued Yield for such Receivable
Interest[s], receipt of which payment is hereby acknowledged, the undersigned
hereby assigns to _____________ all of its right, title and interest in and to
the Receivable Interest[s] purchased by the undersigned in [a] Purchase[s] on
___________, 19__, [__________, 19__, [etc.]] under the Agreement.]
The Assignor (i) represents and warrants that it is the legal
and beneficial owner of the Receivable Interest[s] being assigned by it
hereunder and that such Receivable Interest[s] [is] [are] free and clear of any
Adverse Claim created by the Assignor; (ii) makes no representation or warranty
and assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Agreement, or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of the
Agreement or any other agreement, instrument or document furnished pursuant
thereto; and (iii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Seller or the
performance or observance by the Seller of any of its obligations under the
Agreement or any other agreement, instrument or document furnished pursuant
thereto.
The Assignee (i) confirms that it has received a copy of the
Agreement, together with copies of the financial statements referred to in
Section 4.01 thereof, and such other agreements, documents and information as it
has deemed appropriate to make its own credit analysis and decision to enter
into this Assignment and purchase the Receivable Interest[s]; (ii) agrees that
it will, independently and without reliance upon the Administrative Agent, any
of its Affiliates or the Assignor and based on such agreements, documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Agreement; (iii)
appoints and authorizes the Administrative Agent to take such action as agent on
its behalf and to exercise such powers under the Agreement as are delegated to
the Administrative Agent by the terms thereof, together with such powers as are
reasonably incidental thereto; (iv) appoints as its agent the Collection Agent
from time to time designated pursuant to Section 6.01 to enforce its respective
rights and interests in and under the Pool Receivables, the Related Security and
the related Contracts; and
<PAGE>
(v) agrees that it will not institute against any Purchaser any proceeding of
the type referred to in Section 7.01(i) of the Agreement so long as any Notes
issued by such Purchaser shall be outstanding or there shall not have elapsed
one year plus one day since the last day on which any such Notes shall have been
outstanding.
Following the execution of this Assignment by the Assignor and
the Assignee, it will be delivered to the Administrative Agent. The effective
date of this Assignment shall be the date above specified (the "Effective
Date").
As of the Effective Date, (i) the Assignee shall be and become
an owner in the Receivable Interest[s] referred to herein for all purposes of
the Agreement and (ii) the Assignor shall relinquish its rights with respect to
the Receivable Interest[s] for all purposes of the Agreement.
This Assignment shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the undersigned has caused this Assignment
to be duly executed and delivered by its duly authorized officer or agent as of
the date first written above.
[NAME OF ASSIGNOR]
By ________________________________
Title:
[NAME OF ASSIGNEE]
By ________________________________
Title:
EXHIBIT 10.12(ii)
AMENDMENT NUMBER ONE
TO THE
GEORGIA-PACIFIC CORPORATION
GEORGIA-PACIFIC GROUP
1997 LONG-TERM INCENTIVE PLAN
WHEREAS, pursuant to Section 8 of the Georgia-Pacific
Corporation/Georgia-Pacific Group 1997 Long-Term Incentive Plan ("Plan"), the
Board of Directors of Georgia-Pacific Corporation ("Corporation") has reserved
the right to amend the Plan at any time; and
WHEREAS, the Board desires to amend the Plan to permit the Compensation
Committee (in its sole discretion) to grant Awards under the Plan to any
employee of the Corporation or any subsidiary in which the Corporation has a
proprietary interest of more than 20%;
NOW THEREFORE, Subsection (z) of Section 2 of the Plan (the definition
of "Subsidiary") is hereby amended effective as of January 21, 2000 to read as
follows:
"(z) Subsidiary. "Subsidiary" means any corporation or other entity,
whether domestic or foreign, in which the Company has or obtains,
directly or indirectly, a proprietary interest of more than 20% by
reason of stock ownership or otherwise."
EXHIBIT 10.12(iii)
AMENDMENT NUMBER TWO
TO THE
GEORGIA-PACIFIC CORPORATION
GEORGIA-PACIFIC GROUP
1997 LONG-TERM INCENTIVE PLAN
WHEREAS, pursuant to Section 8 of the Georgia-Pacific
Corporation/Georgia-Pacific Group 1997 Long-Term Incentive Plan ("Plan"), the
Board of Directors of Georgia-Pacific Corporation ("Corporation") has reserved
the right, with the approval of the shareholders of the Corporation, to amend
the Plan to increase the number of shares available for grants and to extend the
term of the Plan; and
WHEREAS, the Board desires to amend the Plan to increase the number of
shares available for the grant of Awards under the Plan by an additional
7,000,000 shares and to extend the term of the Plan for an additional five
years;
NOW THEREFORE, the Board hereby amends the Plan as follows effective as
of the date of shareholder approval:
1. Section 4(b) of the Plan is amended to read as follows:
"(b) Plan Limitations. Subject to adjustment in accordance
with the provisions of Sections 4(d) and 9, the total number
of shares of Common Stock with respect to which Awards of
Options, Restricted Shares and/or unrestricted Common Stock
may be granted under the Plan may not exceed 16,000,000
shares, provided, however, that the total number of Restricted
Shares and Performance Award shares that may be granted as
Awards under this Plan may not exceed 4,000,000 shares."
2. The third full sentence in Section 16 of the Plan is amended to read as
follows:
"No new Awards shall be granted under this Plan after the
tenth anniversary of the Effective Date."
EXHIBIT 10.12(x)
GEORGIA-PACIFIC CORPORATION/GEORGIA-PACIFIC GROUP
1997 LONG-TERM INCENTIVE PLAN
EMPLOYEE STOCK OPTION AGREEMENT
------------------------------------- -----------------------------------------
Optionee: [First Middle Last]
Total Shares Under Option: [ ] shares
Option Price: $41.59 per share
Grant Date: January 21, 2000
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THIS AGREEMENT, dated as of the Grant Date stated above, by and between
Georgia-Pacific Corporation and the Optionee:
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Georgia-Pacific Corporation wishes to give the Optionee an
opportunity to acquire or enlarge the Optionee's equity ownership in
Georgia-Pacific Corporation for purposes of augmenting the Optionee's
proprietary interest in the success of Georgia-Pacific Corporation and, in
particular, its Georgia-Pacific Group;
WHEREAS, the options described in this Agreement have been granted
pursuant to, and are governed by, the Plan;
NOW, THEREFORE, Georgia-Pacific Corporation and the Optionee hereby
agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms shall
be defined as follows:
(a) AGENT means First Chicago Trust or any other entity designated by
the Plan Administrator to act as its administrative service provider.
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(b) BOARD OF DIRECTORS means the Board of Directors of Georgia-Pacific
Corporation.
(c) CAUSE means any of the actions or omissions specified in Section
2(d) of the Plan.
(d) CHANGE OF CONTROL has the meanings specified in Section 11(b) of
the Plan.
(e) CODE means the Internal Revenue Code of 1986, as amended from time
to time, or any statute which is a successor or replacement for such statute,
and the regulations promulgated thereunder.
(f) CORPORATION means Georgia-Pacific Corporation, its successors and
assigns, and any other corporation in an unbroken chain of corporations
beginning with Georgia-Pacific Corporation if each of the corporations other
than the last corporation in the unbroken chain owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
(g) COMMITTEE means the Compensation Committee of the Board of
Directors, or a subcommittee of such Committee, as the same may be constituted
from time to time.
(h) DISABILITY means "total disability" as defined under the long-term
disability program of the Georgia-Pacific Corporation Salaried Employees
Long-Term Disability Plan (whether or not the Optionee is covered under such
program).
(i) DISABILITY RETIREMENT DATE means the later of (i) the day the
Optionee's employment with the Corporation ends after the maximum period during
which salary continuation benefits from the Corporation because of illness or
injury are authorized in accordance with its then-current medical leave policy,
but only if the Optionee's Disability continues through that date, or (ii) the
day the Optionee's employment with the Corporation ends after the last day of a
personal leave of absence immediately following such period of salary
continuation, provided, that the Optionee has a Disability on such date. If the
Optionee is involuntarily terminated because of job elimination or facility
closure (or other reason approved by the Plan Administrator) while on a paid
medical leave based on a Disability or during a personal leave of absence
immediately following such medical leave, the Optionee will have a Disability
Retirement Date on the last day of the maximum period during which salary
continuation benefits from the Corporation because of illness or injury would
have been authorized in accordance with its then-current medical leave policy if
he had not been terminated (in the case of termination during a medical
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leave) or on the date of termination (in the case of termination during the
personal leave of absence), provided that he still has a Disability on such
date.
(j) EARLY RETIREMENT DATE means the Optionee's last day of active
employment by the Corporation after having attained at least age 55 (but not age
62) and having accrued at least 10 years of service for vesting purposes as
determined in accordance with the provisions of the Georgia-Pacific Corporation
Savings and Capital Growth Plan (or any successor tax-qualified retirement plan
maintained for salaried employees of the Corporation).
(k) EXERCISE AMOUNT means the sum of (a) the Option Price multiplied by
the number of vested options being exercised plus (b) an amount sufficient to
pay all applicable FICA and withholding taxes on the difference between the Fair
Market Value of Georgia-Pacific Group Stock for which the vested options are
being exercised (determined as of the exercise date) and their Option Price, as
calculated by the Plan Administrator or the Agent, if any.
(l) EXPIRATION DATE means the tenth anniversary of the Grant Date,
unless an earlier Expiration Date is established by operation of Section 5 of
this Agreement.
(m) FAIR MARKET VALUE is the mean between the high and low sales prices
of a share of Georgia-Pacific Group Stock on a particular date, as reported in
The Wall Street Journal, New York Stock Exchange - Composite Transactions, or as
reported in any successor quotation system adopted prospectively for this
purpose by the Plan Administrator in its discretion. If the date of
determination is not a trading date on the New York Stock Exchange, Fair Market
Value shall be determined using the high and low sales prices of a share of
Georgia-Pacific Group Stock on the next preceding trading date. The Fair Market
Value of Georgia-Pacific Group Stock shall be rounded to the nearest whole cent
(with 0.5 cent being rounded to the next higher whole cent).
(n) GEORGIA-PACIFIC GROUP STOCK means the class of the Corporation's
common stock, par value $0.80 per share, which has been designated by the
Corporation as the Georgia-Pacific Corporation--Georgia-Pacific Group Common
Stock.
(o) GRANT DATE means the date set forth on the first page of this
Agreement, upon which the options described in this Agreement were granted to
the Optionee.
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(p) NORMAL RETIREMENT DATE means the Optionee's last day of active
employment by the Corporation after having attained (i) at least age 62 (but not
age 65) and at least 10 years of service for vesting purposes as determined in
accordance with the provisions of the Georgia-Pacific Corporation Savings and
Capital Growth Plan (or any successor tax-qualified retirement plan maintained
for salaried employees of the Corporation) or (ii) at least age 65.
(q) OPTION PRICE means the price per share set forth on the first page
of this Agreement.
(r) OPTIONEE means the employee of the Corporation named on the first
page of this Agreement.
(s) PLAN means the Georgia-Pacific Corporation/Georgia-Pacific Group
1997 Long-Term Incentive Plan, as adopted by the Board of Directors on September
17, 1997, and approved by the Corporation's shareholders on December 16, 1997,
and as amended from time to time.
(t) PLAN ADMINISTRATOR means the Committee, provided, however, that to
the extent permitted by the Plan and authorized by the Committee, the Chief
Executive Officer of the Georgia-Pacific Corporation may act on behalf of the
Committee in executing the duties and responsibilities of the Plan
Administrator.
(u) REPRESENTATIVE means, in the event of the Optionee's Disability,
his duly authorized legal guardian or representative; or, in the event of the
Optionee's death, his estate, personal representative, or beneficiary as
designated pursuant to Section 6(e).
(v) TOTAL SHARES UNDER OPTION means the number of options granted to
the Optionee as set forth on the first page of this Agreement.
(w) VESTING DATE means any one of the dates upon which options granted
to the Optionee under this Agreement become exercisable in accordance with this
Agreement.
2. OPTION GRANT. Subject to the terms and conditions of this Agreement,
the Corporation hereby grants an option to the Optionee to purchase from the
Corporation, at the Option Price, the number of shares of Georgia-Pacific Group
Stock equal to the Total Shares Under Option.
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3. VESTING.
(a) REGULAR VESTING. Except as stated in Sections 3(b) and 3(c) of this
Agreement, the Optionee shall become vested in a percentage of the Total Shares
Under Option in accordance with the following schedule:
---------------------------------------- ----------------------------------
VESTING DATE PERCENTAGE OF TOTAL SHARES
UNDER OPTION
---------------------------------------- ----------------------------------
First anniversary of Grant Date 34%
---------------------------------------- ----------------------------------
Second anniversary of Grant Date 33%
---------------------------------------- ----------------------------------
Third anniversary of Grant Date 33%
---------------------------------------- ----------------------------------
The number of options granted to the Optionee under this Agreement which become
vested on a Vesting Date in accordance with the above schedule will be
determined by multiplying the Total Shares Under Option by the percentage
specified in the above schedule, and then rounding the resulting number up to
the nearest whole number, provided that the aggregate number of the Optionee's
vested options under this Agreement shall not exceed the Total Shares Under
Option.
(b) ACCELERATED VESTING. Notwithstanding the vesting schedule specified
in Section 3(a) of this Agreement, the Total Shares Under Option shall become
100% vested upon the earliest to occur of the following Vesting Dates:
(i) the Optionee's Normal Retirement Date;
(ii) the Optionee's Disability Retirement Date;
(iii) the date of the Optionee's death prior to his
termination of employment from the Corporation;
(iv) the date of a Change of Control; or
(v) subject to the approval of the Plan Administrator, the
Optionee's Early Retirement Date or the date of the
Optionee's involuntary termination of employment from
the Corporation, in either case due to (A) job
elimination, (B)
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plant closure, or (C) such other reason as may be
specifically approved by the Plan Administrator.
If more than one of the accelerated vesting rules specified in this Section 3(b)
can apply to the Optionee, the Optionee may elect in writing which vesting rule
will apply. The vesting rule elected by the Optionee will determine the
Expiration Date for the options affected by such accelerated vesting. If the
Optionee fails to make such an election within 30 days after being notified by
the Plan Administrator, the Optionee will be deemed to have elected the
available accelerated vesting rule which, first, vests the most options in the
Optionee or, second (if each accelerated vesting rule vests the same number of
options), provides the longest exercise period. Notwithstanding anything in this
Agreement to the contrary, except as otherwise provided in this Agreement in the
case of a Disability Retirement Date which occurs after Optionee's termination
of employment with the Company, no Vesting Date will occur - and no options may
vest - following termination of employment with the Company.
(c) TERMINATION FOR CAUSE. Notwithstanding anything in this Agreement
to the contrary, if the Corporation terminates the Optionee's employment for
Cause prior to a Change of Control, this Agreement shall be terminated and all
options granted to the Optionee under this Agreement shall be forfeited,
regardless of whether a Vesting Date has occurred on or before such termination
date, unless and to the extent that the Plan Administrator determines that such
forfeiture would violate applicable law.
4. EXERCISE OF OPTIONS.
(a) GENERAL. Except as otherwise specified by the Plan Administrator in
accordance with Sections 4(d) and 4(e), the Optionee (or his Representative, as
the case may be) may exercise the options granted under the Agreement, in whole
or in part, at any time on or after the Vesting Date for such options and prior
to their Expiration Date, by complying with the procedures described in this
Section 4. The Optionee shall forfeit all rights to any option under this
Agreement, whether or not then vested, which is not exercised prior to its
Expiration Date.
(b) EXERCISE PROCEDURE. The Optionee or his Representative (if
applicable) may exercise all or a portion of his vested options under this
Agreement by delivering notice to the Agent, or by
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complying with any alternative procedure which may be authorized by the Plan
Administrator from time to time. The notice to the Agent shall specify the
number of shares of Georgia-Pacific Group Stock that the Optionee desires to
purchase by exercise of his vested options, and shall include payment for the
Exercise Amount of such shares in one of the following ways:
(i) The Optionee may tender payment of the Exercise
Amount on the date of exercise in the form of cash,
certified check, bank draft, or postal or express
money order made payable to the order of the
Corporation and denominated in U.S. dollars; or
(ii) The Optionee may tender payment of the Exercise
Amount on the date of exercise in the form of shares
of Georgia-Pacific Group Stock having a Fair Market
Value on the date of exercise equal to the Exercise
Amount, if such shares were acquired upon exercise of
an option, they must have been held by the Optionee
for at least six months at the time of tender; or
(iii) The Optionee may tender payment of the Exercise
Amount on the date of exercise in a combination of
(A) shares of Georgia-Pacific Group Stock (subject to
the holding period described in paragraph (ii)
above); and (B) cash, certified check, bank draft, or
postal or express money order made payable to the
order of the Corporation and denominated in U.S.
dollars, equal to the difference between the Exercise
Amount and the Fair Market Value of the tendered
shares of Georgia-Pacific Group Stock on the date of
exercise; or
(iv) The Optionee may initiate a cashless exercise in
accordance with procedures promulgated by the Plan
Administrator or the Agent, if any.
(v) The Optionee may tender payment of the Exercise
Amount on the date of exercise in accordance with
such other method as the Plan Administrator shall
authorize.
Within 30 days after the date of such exercise, the Agent shall make available
to the Optionee a certificate registered in the Optionee's name or a book entry
in a depository institution for the Optionee's account,
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representing the aggregate number of shares of Georgia-Pacific Group Stock
purchased by the Optionee as a result of such exercise.
(c) EXERCISE OF OPTIONS FOLLOWING OPTIONEE'S DISABILITY OR DEATH.
(i) OPTIONEE'S DISABILITY. If the Optionee's Disability occurs
during a period in which he may exercise options under this Agreement, the
Optionee or, if applicable, the Optionee's Representative may exercise the
options before their Expiration Date with respect to any or all of the Total
Shares Under Option which are available for purchase under this Agreement by the
Optionee on his Disability Retirement Date (taking into account the accelerated
vesting provisions of Section 3(b)) and which had not been purchased by him
prior to such date.
(ii) OPTIONEE'S DEATH. If the Optionee's death occurs during a
period in which he may exercise options under this Agreement, the Optionee's
Representative may exercise the options before their Expiration Date with
respect to any or all of the Total Shares Under Option which are available for
purchase under this Agreement by the Optionee on the date of his death (taking
into account the accelerated vesting provisions of Section 3(b)) and which had
not been purchased by him prior to his death.
(d) EXERCISE OF OPTIONS DURING LEAVE OF ABSENCE. Notwithstanding any
provision of this Agreement to the contrary, if the Optionee is on a leave of
absence or is absent on military or government service at any time on or after
the Grant Date and prior to the Expiration Date, the Optionee may not exercise
any part of the Total Shares Under Option prior to the date the Optionee returns
to active employment with the Corporation, and vesting of any options under this
Agreement which would normally vest on a date during the absence shall be
postponed until the Optionee returns to active work at the end of the absence
(in which case, the date of return to active employment shall be a Vesting
Date). The provisions of this subsection (d) shall not affect any of Optionee's
rights in the event of his death, Disability, Early Retirement or Normal
Retirement or in the event of a Change of Control occurring during such an
absence.
(e) DEFERRAL OF EXERCISE OR DELIVERY OF SHARES. Notwithstanding any
provision in this Agreement to the contrary, if any law or regulation of any
governmental authority having jurisdiction in
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the matter requires the Corporation, Plan Administrator, Agent, Optionee, or
Representative to take any action or refrain from action in connection with the
exercise of any option under this Agreement or the delivery of shares of
Georgia-Pacific Group Stock to the Optionee, or to delay such exercise or
delivery, then the exercise or delivery of such shares shall be deferred until
such action has been taken or such restriction on action has been removed.
5. SPECIAL RULES GOVERNING THE EXPIRATION DATE. The Expiration Date for
options granted to the Optionee under this Agreement shall be subject to the
following special rules:
(a) TERMINATION OF EMPLOYMENT. If the Optionee voluntarily or
involuntarily terminates employment with the Corporation (for reasons other than
death, Change of Control or having reached his Normal Retirement Date, Early
Retirement Date or Disability Retirement Date), the Expiration Date for
exercising any options under this Agreement which were vested as of his date of
termination shall be the 90th day after the date of such termination; provided
that if the Optionee has a Disability or dies, or a Change of Control occurs,
prior to such 90th day, the Expiration Date for the Optionee's options under
this Agreement which were vested as of his date of termination shall be the
Expiration Date applicable to such Disability (subject to the rules stated in
Section 5(d)), death, or Change of Control, whichever is applicable.
(b) NORMAL RETIREMENT. If the Optionee terminates employment with the
Corporation on his Normal Retirement Date, the Expiration Date for exercising
his vested options under this Agreement shall be the last day of the 60th month
after the end of the month in which the Optionee's Normal Retirement Date
occurs.
(c) EARLY RETIREMENT. If the Optionee terminates employment with the
Corporation on his Early Retirement Date, the Expiration Date for exercising his
vested options under this Agreement shall be the last day of the 60th month
after the end of the month in which the Optionee's Early Retirement Date occurs.
(d) DISABILITY OR DISABILITY RETIREMENT. If the Optionee terminates
employment with the Corporation on his Disability Retirement Date, the
Expiration Date for exercising his vested options
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under this Agreement shall be the last day of the 36th month after the end of
the month in which the Optionee's Disability Retirement Date occurs. If the
Optionee has a Disability before the 90th day after terminating employment with
the Corporation (for reasons other than having reached his Normal Retirement
Date, Early Retirement Date, or Disability Retirement Date) and such Disability
continues through the end of the initial 90-day period, the Expiration Date for
exercising his vested options under this Agreement shall be the last day of the
36th month after the end of the month in which the Optionee's Disability occurs.
(e) OPTIONEE'S DEATH. If the Optionee dies while actively employed by
the Corporation or prior to the 90th day after the Optionee's termination of
employment with the Corporation (for reasons other than having reached his
Normal Retirement Date, Early Retirement Date, or Disability Retirement Date),
the Expiration Date for exercising his vested options under this Agreement shall
be the last day of the 36th month after the end of the month in which the
Optionee's death occurs.
(f) CHANGE OF CONTROL. The Expiration Date for all of the Optionee's
vested options shall be the tenth anniversary of the Grant Date if a Change of
Control takes place (i) while the Optionee is actively employed by the
Corporation; (ii) prior to the 90th day after the Optionee terminates employment
with the Corporation; or (iii) prior to the 90th day after the Optionee
terminates his employment with the Corporation on his Normal Retirement Date,
Early Retirement Date, Disability Retirement Date or date of death.
(g) MAXIMUM EXPIRATION DATE. Notwithstanding any provision in Section 5
of the Agreement to the contrary, no Expiration Date may extend beyond the tenth
anniversary of the Grant Date.
(h) TERMINATION DATE. The Optionee's date of termination of employment
from the Corporation shall be deemed for purposes of this Agreement to be the
later of (i) his last day of active work for the Corporation or (ii) his last
day on the active employee payroll of the Corporation, provided, however, that
for all purposes of this Agreement, the Optionee shall be deemed actively at
work during any period the Optionee is on approved paid medical leave.
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6. GENERAL PROVISIONS. The Optionee acknowledges that he has read,
understands and agrees with all of the provisions in this Agreement and the
Plan, including (but not limited to) the following:
(a) AUTHORITY OF PLAN ADMINISTRATOR. The Plan Administrator shall have
the authority to administer the Agreement and the Plan; to make all
determinations with respect to the construction and application of the
Agreement, the Plan, and the resolutions of the Board of Directors establishing
the Plan; to adopt and revise rules relating to the Agreement and the Plan; to
hire the Agent with respect to its administrative responsibilities under the
Agreement and the Plan; and to make other determinations which it believes are
necessary or advisable for the administration of the Agreement and the Plan. Any
dispute or disagreement which arises under this Agreement or the Plan shall be
resolved by the Plan Administrator in its absolute discretion. Any such
determination, interpretation, resolution, or other action by the Plan
Administrator shall be final, binding and conclusive with respect to the
Optionee and all other persons affected thereby.
(b) NOTICES. Any notice which is required or permitted under this
Agreement shall be in writing (unless otherwise specified in the Agreement or in
a writing from the Corporation or the Agent to the Optionee), and delivered
personally or by mail, postage prepaid, addressed as follows: (i) if to the
Corporation or the Agent, at l33 Peachtree Street, N.E., Atlanta, Georgia 30303,
Attention: Compensation Department, or at such other address as the Corporation
or the Agent by notice to the Optionee may have designated from time to time;
(ii) if to the Optionee, at the address indicated in the Optionee's then-current
personnel records, or at such other address as the Optionee by notice to the
Corporation may have designated from time to time. Such notice shall be deemed
given upon receipt.
(c) TAXATION. The Optionee shall be responsible for all applicable
withholding taxes and the employee share of FICA taxes with respect to
compensation income generated upon the exercise or surrender of his vested
options under this Agreement.
(d) NONTRANSFERABILITY. This Agreement and the options granted to the
Optionee hereto shall be nontransferable and shall not be sold, hypothecated or
otherwise assigned or conveyed by the Optionee to any other person, except as
specifically permitted in this Agreement. No assignment or transfer of this
Agreement or the rights represented thereby, whether voluntary or involuntary,
or by
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operation of law or otherwise, shall vest in the assignee or transferee any
interest or right whatsoever, except as specifically permitted in this
Agreement. The Agreement shall terminate, and be of no force or effect,
immediately upon any attempt to assign or transfer the Agreement or any of the
options to which the Agreement applies.
(e) DESIGNATION OF BENEFICIARY. The Optionee may designate a person or
persons to receive, in the event of his death, any rights to which he would be
entitled under this Agreement. Such a designation shall be filed with the Agent
in accordance with uniform procedures specified by the Plan Administrator. The
Optionee may change or revoke a beneficiary designation at any time by filing a
written statement of such change or revocation with the Agent in accordance with
uniform procedures specified by the Plan Administrator. No beneficiary
designation or change of beneficiary designation will be effective until notice
thereof is received. If an Optionee fails to designate a beneficiary or if the
beneficiary predeceases the Optionee, the Optionee shall be deemed not to have a
beneficiary for purposes of this Agreement.
(f) NO SHAREHOLDER RIGHTS. The Optionee shall have no rights as a
shareholder of the Corporation, and shall not be deemed to be a shareholder of
the Corporation for any purpose, as a result of the options granted to the
Optionee under this Agreement, until the earliest of the following dates: (i)
the date that the Corporation receives payment in full of the Exercise Price for
shares of Georgia-Pacific Group Stock because an option has been exercised in
accordance with this Agreement; or (ii) the date that shares of Georgia-Pacific
Group Stock have been issued or transferred to the Optionee following the
exercise of an option in accordance with this Agreement. The Optionee shall not
be entitled to any dividends or other rights for which the record date is prior
to the date of such issuance, transfer, or receipt.
(g) NOT AN EMPLOYMENT CONTRACT. This Agreement shall not be deemed to
limit or restrict the right of the Corporation to terminate the Optionee's
employment at any time, for any reason, with or without Cause, or to limit or
restrict the right of the Optionee to terminate his employment with the
Corporation at any time.
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(h) CORPORATE RESTRUCTURING/CAPITAL READJUSTMENTS. Nothing in this
Agreement shall abridge the rights or powers of the Corporation or its
stockholders reserved to them in Section 9(a) of the Plan, and in the event of
any extraordinary transaction with respect to or affecting Georgia-Pacific Group
Stock, adjustments to the number of options granted in this Agreement may be
made in accordance with the provisions of Section 9(b) of the Plan.
(i) AMENDMENT OR TERMINATION. This Agreement may be amended or
terminated at any time by the mutual agreement and written consent of the
Optionee and the Plan Administrator, but only to the extent permitted under the
Plan.
(j) NOT CONSIDERED INCENTIVE STOCK OPTIONS. The options granted under
this Agreement do not constitute and shall not be construed to constitute
"incentive stock options" with the meaning of section 422 of the Code.
(k) GOVERNING INSTRUMENT. This Agreement is subject to all terms and
conditions of the Plan and shall at all times be interpreted in a manner that is
consistent with the intent, purposes, and specific language of the Plan.
(l) SEVERABILITY. If any provision of this Agreement should be held
illegal or invalid for any reason by the Plan Administrator or court of
applicable jurisdiction, such determination shall not affect the other
provisions of this Agreement, and it shall be construed as if such provision had
never been included herein.
(m) HEADINGS/GENDER. Headings in this Agreement are for convenience
only and shall not be construed to be part of this Agreement. Any reference to
the masculine, feminine or neuter gender shall be a reference to other genders
as appropriate.
(n) GOVERNING LAW. This Agreement shall be construed, and its
provisions enforced and administered, in accordance with the laws of the State
of Georgia and, where applicable, federal law.
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IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed by its duly authorized officers under its corporate seal, and the
Optionee has executed this Agreement, as of the day and year first above
written.
GEORGIA-PACIFIC CORPORATION
By:
----------------------------------
A. D. Correll
Chairman, Chief Executive Officer
and President
ATTEST:
- ----------------------------------
Kenneth F. Khoury
Secretary
OPTIONEE
----------------------------------
Name:
-----------------------------
NOTE: PLEASE COMPLETE THE ATTACHED ACKNOWLEDGMENT OF RECEIPT AND
BENEFICIARY DESIGNATION FORM AND RETURN THEM TO:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
GEORGIA-PACIFIC STOCK OPTION PLAN
"PERSONAL AND CONFIDENTIAL"
P. O. BOX 2585
JERSEY CITY, NJ 07303-2585
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ACKNOWLEDGMENT OF RECEIPT AND BENEFICIARY DESIGNATION FORM
Under the terms of the Georgia-Pacific Corporation/Georgia-Pacific
Group 1997 Long-Term Incentive Plan ("1997 Georgia-Pacific Group LTIP"), you
have the right to designate a beneficiary to exercise certain rights that may
arise under those grants in the event of your death. IF YOU DO NOT DESIGNATE A
BENEFICIARY IN WRITING, THESE RIGHTS WILL PASS TO YOUR ESTATE UPON YOUR DEATH.
In order to allow you to decide affirmatively which outcome you desire and, in
the event you prefer to designate a beneficiary or beneficiaries other than your
estate, to name that beneficiary or those beneficiaries, the Corporation has
provided this form, which you may use to designate in writing the
beneficiary(ies) you desire. Of course, you may revoke and change your
beneficiary designations at any time by notifying First Chicago Trust in writing
at the address indicated below.
PLEASE TAKE TIME TO FILL OUT THIS FORM AND RETURN IT TO FIRST CHICAGO
TRUST AT THE FOLLOWING ADDRESS: FIRST CHICAGO TRUST, GEORGIA-PACIFIC STOCK
OPTION PLAN, "PERSONAL AND CONFIDENTIAL", P. O. BOX 2585, JERSEY CITY, NJ
07303-2585. BENEFICIARY DESIGNATIONS OR MODIFICATIONS OF BENEFICIARY
DESIGNATIONS SENT TO ANY OTHER ADDRESS WILL NOT BE EFFECTIVE UNTIL ACTUALLY
RECEIVED BY FIRST CHICAGO TRUST. THE CORPORATION HAS NO RESPONSIBILITY FOR
BENEFICIARY DESIGNATION FORMS WHICH ARE NOT SUBMITTED AS INDICATED ABOVE.
NOTE: You may designate multiple beneficiaries, in which case those living at
the time of your death will equally share the rights accorded to a beneficiary
for the particular grant(s) in question.
[ ] I designate my estate as my beneficiary under my 2000 grant under the
1997 Georgia-Pacific Group LTIP.
[ ] I designate the following person(s) as my beneficiary(ies) under my
2000 grant under the 1997 Georgia-Pacific Group LTIP:
<TABLE>
<CAPTION>
- ------------------------- ---------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
NAME ADDRESS RELATIONSHIP TO YOU SOCIAL SECURITY NUMBER
(IF KNOWN)
- ------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------- ---------------------------- ---------------------------- ----------------------------
</TABLE>
I ACKNOWLEDGE RECEIPT OF THE EXECUTED OPTION AGREEMENT EVIDENCING MY JANUARY 21,
2000, STOCK OPTION GRANT UNDER THE GEORGIA-PACIFIC CORPORATION/GEORGIA-PACIFIC
GROUP 1997 LONG-TERM INCENTIVE PLAN AND CONFIRM THAT THE BENEFICIARY(IES)
DESIGNATED ABOVE HAVE BEEN SELECTED BY ME IN FREE EXERCISE OF MY OWN DISCRETION.
Signature:____________________________
Printed Name:________________________
Date:________________________________
EXHIBIT 10.12(xi)
GEORGIA-PACIFIC CORPORATION/GEORGIA-PACIFIC GROUP
1997 LONG-TERM INCENTIVE PLAN
PERFORMANCE SHARE GRANT AGREEMENT
-------------------------------------------------------
Grantee: [First Middle Last]
Target Grant: [ ] shares
Performance Period January 1, 2000 through
December 31, 2002
Grant Date: January 21, 2000
-------------------------------------------------------
THIS AGREEMENT, dated as of the Grant Date stated above, by and between
Georgia-Pacific Corporation (the "Corporation") and the Grantee;
W I T N E S S E T H:
-------------------
WHEREAS, the Corporation wishes to give the Grantee an opportunity to
acquire or enlarge his/her equity ownership in the Corporation for purposes of
augmenting the Grantee's proprietary interest in the success of Georgia-Pacific
Corporation and, in particular, its Georgia-Pacific Group, and thereby focusing
Grantee's efforts on increasing shareholder value;
WHEREAS, the Performance Shares described in this Agreement have been
granted pursuant to, and are governed by, the Plan (as defined below);
NOW, THEREFORE, the Corporation and the Grantee hereby agree as
follows:
1. Performance Share Grant. Subject to the terms and conditions of this
Agreement, the Corporation hereby grants to Grantee a Target Grant of
Performance Shares as specified on the first page of this Agreement.
2. Award of Performance Shares. Subject to the restrictions described in
Sections 3, 4 and 5 of this Agreement, the Grantee will receive an
award of a specified percentage of his/her Target Grant of Performance
Shares as of the last day of the Performance Period if the percentile
ranking of the G-P Group's TSR for the Performance Period, when
compared to the TSR performance of the other Peer Group Companies for
the Performance Period, equals or exceeds the 30th percentile. The
following chart specifies the percentage of the Target Grant that will
be awarded depending upon the actual TSR percentile rating achieved by
G-P Group during the Performance Period:
<PAGE>
--------------------------------- ---------------------------------
ACHIEVED TSR PERCENTILE AWARD AS PERCENTAGE OF TARGET
GRANT
--------------------------------- ---------------------------------
Less than 30th 0%
--------------------------------- ---------------------------------
30th 50%
--------------------------------- ---------------------------------
40th 70%
--------------------------------- ---------------------------------
50th 90%
--------------------------------- ---------------------------------
60th 114%
--------------------------------- ---------------------------------
70th 138%
--------------------------------- ---------------------------------
80th 160%
--------------------------------- ---------------------------------
90th 180%
--------------------------------- ---------------------------------
100th 200%
--------------------------------- ---------------------------------
The percentage of the Target Grant awarded for achieved TSR percentiles which
lie between the data points specified in the chart will be determined by
interpolation. One hundred percent (100%) of the Target Grant will be awarded if
the G-P Group achieves a TSR performance during the Performance Period of 54.17.
The precise number of Performance Shares awarded to the Grantee under this
Agreement pursuant to this Section 2 will be determined by multiplying the
Target Grant by the percentage specified in the above chart (or determined
through interpolation based on the chart), and then rounding the resulting
number up to the nearest whole number.
3. Vesting.
(a) Regular Vesting. Except as stated in Sections 3(b) and 3(c) of
this Agreement, the Grantee shall become fully vested in
his/her Performance Shares awarded in accordance with Section
2 (if any) on the fifth anniversary of the Award Date.
(b) Accelerated Vesting. Notwithstanding the regular vesting rule
specified in Section 3(a) of this Agreement, Performance
Shares awarded pursuant to Section 2 shall become 100% vested
upon the earliest to occur of the following Vesting Dates:
(i) The Grantee's Normal or Early Retirement Date;
(ii) The Grantee's Disability Retirement Date;
(iii) The date of the Grantee's death prior to his
termination of employment from the Corporation;
(iv) the date of a Change of Control; or
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<PAGE>
(v) subject to the approval of the Committee, the date of
the Grantee's involuntary termination of employment
from the Corporation due to (A) job elimination or
(B) such other reason as may be specifically approved
by the Committee.
Except as otherwise provided in this Agreement in the case of a Disability
Retirement Date which occurs after Grantee's termination of employment with the
Corporation, no Vesting Date will occur - and no Performance Shares may vest -
following termination of employment with the Corporation.
(c) Termination for Cause. Notwithstanding anything in this
Agreement to the contrary, if the Corporation terminates the
Grantee's employment for Cause prior to a Change of Control,
this Agreement shall be terminated and all Performance Shares
granted to the Grantee under this Agreement shall be
forfeited, regardless of whether they have been awarded or a
Vesting Date has occurred on or before such termination date,
unless and to the extent that the Plan Administrator
determines that such forfeiture would violate applicable law.
4. Restrictions on Awarded Shares/Forfeitures. Performance Shares awarded
pursuant to Section 2 of this Agreement will be subject to the
following restrictions until their respective Vesting Dates:
(a) Forfeiture on Termination. Subject to Section 3, if the
Grantee's employment with the Corporation terminates for any
reason prior to the Vesting Date for awarded Performance
Shares, the Grantee shall forfeit all rights with respect to
the shares included in that award, and the certificates
evidencing such shares shall be null, void and of no effect as
of the date his/her employment terminates. Such shares shall
revert to the Corporation as treasury stock and may, in the
sole discretion of the Corporation, be cancelled or retained
as treasury stock.
(b) Nontransferability. Prior to the Vesting Date with respect to
awarded Performance Shares, such shares shall be
nontransferable and may not be sold, hypothecated or otherwise
assigned or conveyed by a Grantee to any party, except as
otherwise provided in Section 9(e).
(c) Additional Shares. Any shares of Stock accruing to awarded
Performance Shares as a result of any adjustment under Section
9(h) will be subject to the same restrictions (and have the
same Vesting Date) as the shares to which they accrue.
-3-
<PAGE>
5. Delivery of Shares.
(a) Awarded Shares. Performance Shares awarded pursuant to Section
2 of this Agreement shall be registered in the name of the
affected Grantee within sixty (60) days after the Award Date.
Such shares shall, however, be subject to the restrictions
described in Sections 3 and 4 of this Agreement until the
Vesting Date for such shares, and the certificates evidencing
the shares shall bear a legend noticing those restrictions
either specifically or by reference to the provisions of this
Agreement. Such shares, when issued in accordance with this
Agreement, shall be deemed to be fully paid and nonassessable.
Certificates representing such shares shall be held in the
custody of the Corporation (or the Agent). Each Grantee shall
supply the Corporation or the Agent (as instructed) with an
executed stock power with respect to each such stock
certificate.
(b) Vested Shares. Certificates representing awarded Performance
Shares (without the legend described in Section 4) which have
vested pursuant to Sections 3 shall be delivered to the
affected Grantee within ten (10) business days after the
Vesting Date with respect to such shares. At such time, the
stock powers described in Section 4 will be destroyed, and the
Grantee shall enjoy full shareholder and ownership rights with
respect to such shares.
6. Ownership Rights. Except as otherwise provided in Sections 4 and 5 of
this Agreement, upon receipt of an award of Performance Shares under
this Agreement, the Grantee shall exercise all ownership rights
(including, without limitation, the right to vote and the right to
receive dividends) with respect to such shares, provided that voting
and dividend rights with respect to the shares will be exercisable only
if the record date for determining shareholders entitled to vote, or to
receive dividends, falls on or after an Award Date and before the
effective date of a forfeiture of the shares under Section 4. The
Grantee shall have the same rights with respect to any shares of Stock
accruing to awarded Performance Shares as a result of any adjustment
under Sections 9(h).
7. Deferral of Exercise or Delivery of Shares. Notwithstanding any
provision in this Agreement to the contrary, if any law or regulation
of any governmental authority having jurisdiction in the matter
requires the Corporation, the Plan Administrator, the Agent or the
Grantee to take any action or refrain from action in connection with
the award of delivery of Performance Shares under this Agreement, or to
delay such award or delivery, then the award or delivery of such shares
shall be deferred until such action has been taken or such restriction
on action has been removed.
-4-
<PAGE>
8. Termination Date. The Grantees date of termination of employment from
the Corporation shall be deemed for purposes of this Agreement to be
the later of (i) his last day of active work for the Corporation or
(ii) his last day on the active employee payroll of the Corporation;
provided, however, that for all purposes of this Agreement, the Grantee
shall be deemed actively at work during any period the Grantee is on
approved paid medical leave or leave of absence; and provided, further,
that notwithstanding anything in this Section 8 to the contrary, if the
Grantee's employment terminates and accelerated vesting under Section
3(b)(ii) applies, the Grantee's termination date shall be his/her
Disability Retirement Date.
9. General Provisions. The Grantee acknowledges that he has read,
understands and agrees with all General of the provisions in this
Agreement and the Plan, including (but not limited to) the following:
Provisions. The Grantee acknowledges that he has read, understands and
agrees with all of the provisions in this Agreement and the Plan,
including (but not limited to) the following:
(a) Authority of Plan Administrator. The Plan Administrator shall
have the authority to administer the Agreement and the Plan;
to make all determinations with respect to the construction
and application of the Agreement, the Plan, and the
resolutions of the Board of Directors establishing the Plan;
to adopt and revise rules relating to the Agreement and the
Plan; to hire the Agent with respect to its administrative
responsibilities under the Agreement and the Plan; and to make
other determinations which it believes are necessary or
advisable for the administration of the Agreement and the
Plan. Any dispute or disagreement which arises under this
Agreement or the Plan shall be resolved by the Plan
Administrator in its absolute discretion. Any such
determination, interpretation, resolution, or other action by
the Plan Administrator shall be final, binding and conclusive
with respect to the Grantee and all other persons affected
thereby.
(b) Notices. Any notice which is required or permitted under this
Agreement shall be in writing (unless otherwise specified in
the Agreement or in a writing from the Corporation or the
Agent to the Grantee), and delivered personally or by mail,
postage prepaid, addressed as follows: (i) if to the
Corporation or the Agent, at l33 Peachtree Street, N.E.,
Atlanta, Georgia 30303, Attention: Compensation Department, or
at such other address as the Corporation or the Agent by
notice to the Grantee may have designated from time to time;
(ii) if to the Grantee, at the address indicated in the
Grantee's then-current personnel records, or at such other
address as the Grantee by notice to the Corporation may have
designated from time to time. Such notice shall be deemed
given upon receipt.
(c) Taxation. The Grantee shall be responsible for all applicable
income and withholding taxes and the employee share of FICA
taxes with respect to any compensation income generated upon
the award or vesting of his vested Performance Shares under
this Agreement.
-5-
<PAGE>
(d) Nontransferability. This Agreement and the Performance Shares
granted to the Grantee shall be nontransferable and shall not
be sold, hypothecated or otherwise assigned or conveyed by the
Grantee to any other person, except as specifically permitted
in this Agreement. No assignment or transfer of this Agreement
or the rights represented thereby, whether voluntary or
involuntary, or by operation of law or otherwise, shall vest
in the assignee or transferee any interest or right
whatsoever, except as specifically permitted in this
Agreement. The Agreement shall terminate, and be of no force
or effect, immediately upon any attempt to assign or transfer
the Agreement or any of the Performance Shares to which the
Agreement applies.
(e) Designation of Beneficiary. Notwithstanding anything in
Section 9(d) to the contrary, the Grantee may designate a
person or persons to receive, in the event of his death, any
rights to which he would be entitled under this Agreement.
Such a designation shall be filed with the Agent in accordance
with uniform procedures specified by the Plan Administrator.
The Grantee may change or revoke a Beneficiary designation at
any time by filing a written statement of such change or
revocation with the Agent in accordance with uniform
procedures specified by the Plan Administrator. No Beneficiary
designation or change of Beneficiary designation will be
effective until notice thereof is received. If an Grantee
fails to designate a Beneficiary or if the Beneficiary
predeceases the Grantee, the Grantee's estate shall be deemed
to be his/her Beneficiary for purposes of this Agreement.
(f) No Shareholder Rights. Except as otherwise specifically
provided in Section 6 of this Agreement (regarding shareholder
rights of the Grantee with respect to Performance Shares
awarded pursuant to Section 2), until Performance Shares have
vested in accordance with the provisions of Section 3 of the
Agreement, the Grantee shall have no rights as a shareholder
of the Corporation, and shall not be deemed to be a
shareholder of the Corporation for any purpose, as a result of
any grant or award of Performance Shares to the Grantee.
(g) Not an Employment Contract. This Agreement shall not be deemed
to limit or restrict the right of the Corporation to terminate
the Grantee's employment at any time, for any reason, with or
without Cause, or to limit or restrict the right of the
Grantee to terminate his employment with the Corporation at
any time.
(h) Corporate Restructuring/Capital Readjustments. Nothing in this
Agreement shall abridge the rights or powers of the
Corporation or its stockholders reserved to them in Section
9(a) of the Plan, and in the event of any extraordinary
transaction with respect to or affecting Georgia-Pacific Group
Stock, adjustments to the number of Performance Shares granted
in this Agreement may be made in accordance with the
provisions of Section 9(b) of the Plan.
(i) Fractional Shares. Notwithstanding anything in this Agreement
to the contrary, in the event that any adjustment to the
Target Grant or an award of Performance Shares or the
calculation of an award pursuant to this Agreement would
otherwise result in the creation of a fractional share
interest, the affected Target Grant or Performance Share award
shall be rounded up to the nearest whole share.
-6-
<PAGE>
(j) Amendment or Termination. This Agreement may be amended or
terminated at any time by the mutual agreement and written
consent of the Grantee and the Plan Administrator, but only to
the extent permitted under the Plan.
(k) Governing Instrument. This Agreement is subject to all terms
and conditions of the Plan and shall at all times be
interpreted in a manner that is consistent with the intent,
purposes, and specific language of the Plan.
(l) Severability. If any provision of this Agreement should be
held illegal or invalid for any reason by the Plan
Administrator or court of applicable jurisdiction, such
determination shall not affect the other provisions of this
Agreement, and it shall be construed as if such provision had
never been included herein.
(m) Headings/Gender. Headings in this Agreement are for
convenience only and shall not be construed to be part of this
Agreement. Any reference to the masculine, feminine or neuter
gender shall be a reference to other genders as appropriate.
(n) Governing Law. This Agreement shall be construed, and its
provisions enforced and administered, in accordance with the
laws of the State of Georgia and, where applicable, federal
law.
10. Definitions. For purposes of this Agreement, the following terms shall
be defined as follows:
(a) Agent means First Chicago Trust Corporation of New York or any
other entity designated by the Plan Administrator to act as
its administrative service provider.
(b) Agreement means this agreement between the Grantee and the
Corporation setting forth the terms and conditions of the
Performance Share grant described herein.
(c) Award Date means the date as of which Performance Shares are
awarded to the Grantee pursuant to Section 2.
(d) Beneficiary means the person(s) designated by the Grantee
pursuant to Section 9(e) of this Agreement to receive his/her
rights under this Agreement upon his/her death.
(e) Board of Directors means the Board of Directors of
Georgia-Pacific Corporation.
(f) Cause means any of the actions or omissions specified in
Section 2(d) of the Plan.
(g) Change of Control has the meanings specified in Section 11(b)
of the Plan.
(h) Committee means the Compensation Committee of the Board of
Directors, or a subcommittee of such Committee, as the same
may be constituted from time to time.
-7-
<PAGE>
(i) Corporation means Georgia-Pacific Corporation, its successors
and assigns, and any other corporation in an unbroken chain
of corporations beginning with Georgia-Pacific Corporation if
each of the corporations other than the last corporation in
the unbroken chain owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of
the other corporations in such chain.
(j) Disability means "total disability" as defined under the
long-term disability program of the Georgia-Pacific
Corporation Salaried Employees Long-Term Disability Plan
(whether or not the Grantee is covered under such program).
(k) Disability Retirement Date means the later of (i) the day the
Grantee's employment with the Corporation ends after the
maximum period during which salary continuation benefits from
the Corporation because of illness or injury are authorized in
accordance with its then-current medical leave policy, but
only if the Grantee's Disability continues through that date,
or (ii) the day the Grantee's employment with the Corporation
ends after the last day of a personal leave of absence
immediately following such period of salary continuation,
provided, that the Grantee has a Disability on such date. If
the Grantee is involuntarily terminated because of job
elimination or facility closure (or other reason approved by
the Plan Administrator) while on a paid medical leave based on
a Disability or during a personal leave of absence immediately
following such medical leave, the Grantee will have a
Disability Retirement Date on the last day of the maximum
period during which salary continuation benefits from the
Corporation because of illness or injury would have been
authorized in accordance with its then-current medical leave
policy if he had not been terminated (in the case of
termination during a medical leave) or on the date of
termination (in the case of termination during the personal
leave of absence), provided that he still has a Disability on
such date.
(l) Early Retirement Date means the Grantee's date of termination
from the Corporation after having attained at least age 62
(but not age 65) and having accrued at least 10 years of
service for vesting purposes as determined in accordance with
the provisions of the Georgia-Pacific Corporation Savings and
Capital Growth Plan (or any successor tax-qualified retirement
plan maintained for salaried employees of the Corporation).
(m) Fair Market Value is the mean between the high and low sales
prices of a share of Georgia-Pacific Group Stock on a
particular date, as reported in The Wall Street Journal, New
York Stock Exchange - Composite Transactions, or as reported
in any successor quotation system adopted prospectively for
this purpose by the Plan Administrator in its discretion. If
the date of determination is not a trading date on the New
York Stock Exchange, Fair Market Value shall be determined
using the high and low sales prices of a share of
Georgia-Pacific Group Stock on the next preceding trading
date. The Fair Market Value of Georgia-Pacific Group Stock
shall be rounded to the nearest whole cent (with 0.5 cent
being rounded to the next higher whole cent).
(n) Georgia-Pacific Group Stock or Stock means the class of the
Corporation's common stock, par value $0.80 per share, which
has been designated by the Corporation as the Georgia-Pacific
Corporation--Georgia-Pacific Group Common
-8-
<PAGE>
Stock.
(o) Grant Date means the date set forth on the first page of this
Agreement.
(p) Grantee means the employee of the Corporation named on the
first page of this Agreement.
(q) Normal Retirement Date means the Grantee's date of termination
from the Corporation after having attained at least age 65.
(r) Peer Group Companies means, for any Performance Period, the
companies included in the Standard & Poors Paper and Forest
Products Industry Index (but excluding the Corporation) on
January 1 of such Performance Period; provided, however that
if a Peer Group Company is not in existence as an independent
entity generating the types of public information needed for
TSR calculations under this Agreement both at the beginning
and the end of the Performance Period, that company shall be
disregarded for purposes of making awards under this
Agreement, notwithstanding its inclusion in the group of Peer
Group Companies otherwise applicable to such calculations.
(s) Performance Period means the period during which Total
Shareholder Return of the G-P Group and the Peer Group
Companies will be measured to determine whether any of the
Performance Shares will be awarded to Grantee pursuant to
Section 2, which period is specified on the first page of this
Agreement.
(t) Performance Shares means the restricted shares of Stock
granted under the terms and conditions of this Agreement.
(u) Plan means the Georgia-Pacific Corporation/Georgia-Pacific
Group 1997 Long-Term Incentive Plan, as adopted by the Board
of Directors on September 17, 1997, and approved by the
Corporation's shareholders on December 16, 1997, and as
amended from time to time.
(v) Plan Administrator means the Committee, provided, however,
that to the extent permitted by the Plan and authorized by the
Committee, the Chief Executive Officer of the Georgia-Pacific
Corporation may act on behalf of the Committee in executing
the duties and responsibilities of the Plan Administrator.
(w) Target Grant means the number of Performance Shares specified
on the first page of this Agreement.
(x) Total Shareholder Return or TSR means, for a given Performance
Period and a given common stock, the number determined by the
formula [(SB+SD)PE - 100] / 100, where (i) "SB" is the number
of shares of the common stock (including fractional shares)
that could be bought with an initial $100 investment at PB, or
$100 / PB; (ii) "SD" is the total number of shares of the
common stock (including fractional shares) (A) which are
distributed as stock dividends with respect to the common
stock during the Performance Period or (B) which could be
purchased with the cash dividends (or allocated portion of a
per share dividend) paid on SB shares of the common stock
during the Performance Period (and any additional shares or
fractional shares allocated in accordance with this
-9-
<PAGE>
subsection (ii) with respect to dividends paid during the
Performance Period but prior to the dividend in question),
determined in the case of each such dividend paid using the
closing price of the common stock on the trading date
coincident with or next preceding the date of payment of the
dividend; (iii) "PB" is the closing price of the common stock
on the last trading day before the first day of the
Performance Period; and (iv) "PE" is the closing price of the
common stock on the last trading day of the Performance
Period. In calculating the Total Shareholder Return for a
given common stock, the Plan Administrator will apply the
principles of Section 9(h) as if that section applied to the
common stock.
(y) Vesting Date means the date upon which the restrictions
contained in Section 4 lapse with respect to an award of
Performance Shares made in accordance with Section 2, which
date shall be determined in accordance with Section 3.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed by its duly authorized officers under its corporate seal, and the
Grantee has executed this Agreement, as of the day and year first above written.
GEORGIA-PACIFIC CORPORATION
By:_______________________________
A. D. Correll
Chairman, Chief Executive Officer
and President
ATTEST:
______________________________
Kenneth F. Khoury
Secretary
GRANTEE
___________________________________
Name:______________________________
NOTE: PLEASE COMPLETE THE ATTACHED ACKNOWLEDGMENT OF RECEIPT AND
BENEFICIARY DESIGNATION FORM AND RETURN THEM TO:
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<PAGE>
FIRST CHICAGO TRUST
GEORGIA-PACIFIC STOCK OPTION PLAN
"PERSONAL AND CONFIDENTIAL"
P. O. BOX 2585
JERSEY CITY, NJ 07303-2585
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<PAGE>
ACKNOWLEDGMENT OF RECEIPT AND BENEFICIARY DESIGNATION FORM
Under the terms of the Georgia-Pacific Corporation/Georgia-Pacific
Group 1997 Long-Term Incentive Plan ("1997 Georgia-Pacific Group LTIP"), you
have the right to designate a beneficiary to exercise certain rights that may
arise under your Performance Share grant in the event of your death. IF YOU DO
NOT DESIGNATE A BENEFICIARY IN WRITING, THESE RIGHTS WILL PASS TO YOUR ESTATE
UPON YOUR DEATH. In order to allow you to decide affirmatively which outcome you
desire and, in the event you prefer to designate a beneficiary or beneficiaries
other than your estate, to name that beneficiary or those beneficiaries, the
Corporation has provided this form, which you may use to designate in writing
the beneficiary(ies) you desire. Of course, you may revoke and change your
beneficiary designations at any time by notifying First Chicago Trust
Corporation in writing at the address indicated below.
PLEASE TAKE TIME TO FILL OUT THIS FORM AND RETURN IT TO FIRST CHICAGO
TRUST AT THE FOLLOWING ADDRESS: FIRST CHICAGO TRUST, GEORGIA-PACIFIC STOCK
OPTION PLAN, "PERSONAL AND CONFIDENTIAL", P. O. BOX 2585, JERSEY CITY, NJ
07303-2585. BENEFICIARY DESIGNATIONS OR MODIFICATIONS OF BENEFICIARY
DESIGNATIONS SENT TO ANY OTHER ADDRESS WILL NOT BE EFFECTIVE UNTIL ACTUALLY
RECEIVED BY FIRST CHICAGO TRUST. THE CORPORATION HAS NO RESPONSIBILITY FOR
BENEFICIARY DESIGNATION FORMS WHICH ARE NOT SUBMITTED AS INDICATED ABOVE.
NOTE: You may designate multiple beneficiaries, in which case those living at
the time of your death will equally share the rights accorded to a beneficiary
for the particular grant(s) in question.
[ ] I designate my estate as my beneficiary under my 2000 Performance Share
grants under the 1997 Georgia-Pacific Group LTIP.
[ ] I designate the following person(s) as my beneficiary(ies) under my 2000
Performance Share grants under the 1997 Georgia-Pacific Group LTIP:
- ------------------ -------------------- ---------------------- -----------------
NAME ADDRESS RELATIONSHIP TO YOU SOCIAL SECURITY
NUMBER (IF
KNOWN)
- ------------------ -------------------- ---------------------- -----------------
- ------------------ -------------------- ---------------------- -----------------
- ------------------ -------------------- ---------------------- -----------------
I ACKNOWLEDGE RECEIPT OF THE EXECUTED PERFORMANCE SHARE AGREEMENT EVIDENCING MY
JANUARY 21, 2000, PERFORMANCE SHARE GRANT UNDER THE GEORGIA-PACIFIC
CORPORATION/GEORGIA-PACIFIC GROUP 1997 LONG-TERM INCENTIVE PLAN AND CONFIRM THAT
THE BENEFICIARY(IES) DESIGNATED ABOVE HAVE BEEN SELECTED BY ME IN FREE EXERCISE
OF MY OWN DISCRETION.
<PAGE>
Signature:__________________ Printed Name:_________________________
Date:_______________________
EXHIBIT 10.13(ii)
AMENDMENT NUMBER ONE
TO THE
GEORGIA-PACIFIC CORPORATION
TIMBER GROUP
1997 LONG-TERM INCENTIVE PLAN
WHEREAS, pursuant to Section 8 of the Georgia-Pacific
Corporation/Timber Group 1997 Long-Term Incentive Plan ("Plan"), the Board of
Directors of Georgia-Pacific Corporation ("Corporation") has reserved the right,
with the approval of the shareholders of the Corporation, to amend the Plan to
increase the number of shares available for grants and to extend the term of the
Plan; and
WHEREAS, the Board desires to amend the Plan to increase the number of
shares available for the grant of Awards under the Plan by an additional
1,500,000 shares and to extend the term of the Plan for an additional five
years;
NOW THEREFORE, the Board hereby amends the Plan as follows effective as
of the date of shareholder approval:
1. Section 4(b) of the Plan is amended to read as follows:
"(b) Plan Limitations. Subject to adjustment in accordance
with the provisions of Sections 4(d) and 9, the total number
of shares of Common Stock with respect to which Awards of
Options, Restricted Shares and/or unrestricted Common Stock
may be granted under the Plan may not exceed 3,800,000 shares,
provided, however, that the total number of Restricted Shares
and Performance Award shares that may be granted as Awards
under this Plan may not exceed 950,000 shares."
2. The third full sentence in Section 16 of the Plan is amended
to read as follows:
"No new Awards shall be granted under this Plan after the
tenth anniversary of the Effective Date."
EXHIBIT 10.13(iv)
GEORGIA-PACIFIC CORPORATION/TIMBER GROUP
1997 LONG-TERM INCENTIVE PLAN
EMPLOYEE STOCK OPTION AGREEMENT
-----------------------------------------------------
Optionee: [First Middle Last]
Total Shares Under Option: [ ] shares
Option Price: $22.50 per share
Grant Date: January 21, 2000
-----------------------------------------------------
THIS AGREEMENT, dated as of the Grant Date stated above, by and between
Georgia-Pacific Corporation and the Optionee:
W I T N E S S E T H:
-------------------
WHEREAS, Georgia-Pacific Corporation wishes to give the Optionee an
opportunity to acquire or enlarge the Optionee's equity ownership in
Georgia-Pacific Corporation for purposes of augmenting the Optionee's
proprietary interest in the success of Georgia-Pacific Corporation and, in
particular, its business unit known as The Timber Company;
WHEREAS, the options described in this Agreement have been granted
pursuant to, and are governed by, the Plan;
NOW, THEREFORE, Georgia-Pacific Corporation and the Optionee hereby
agree as follows:
1. Definitions. For purposes of this Agreement, the following terms shall
be defined as follows:
(a) Agent means First Chicago Trust or any other entity designated
by the Plan Administrator to act as its administrative service
provider.
(b) Board of Directors means the Board of Directors of
Georgia-Pacific Corporation.
(c) Cause means any of the actions or omissions specified in
Section 2(d) of the Plan.
(d) Change of Control has the meanings specified in Section 11(b)
of the Plan.
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<PAGE>
(e) Code means the Internal Revenue Code of 1986, as amended from
time to time, or any statute which is a successor or
replacement for such statute, and the regulations promulgated
thereunder.
(f) Corporation means Georgia-Pacific Corporation, its successors
and assigns, and any other corporation in an unbroken chain of
corporations beginning with Georgia-Pacific Corporation if
each of the corporations other than the last corporation in
the unbroken chain owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of
the other corporations in such chain.
(g) Committee means the Compensation Committee of the Board of
Directors, or a subcommittee of such Committee, as the same
may be constituted from time to time.
(h) Disability means "total disability" as defined under the
long-term disability program of the Georgia-Pacific
Corporation Salaried Employees Long-Term Disability Plan
(whether or not the Optionee is covered under such program).
(i) Disability Retirement Date means the later of (i) the day the
Optionee's employment with the Corporation ends after the
maximum period during which salary continuation benefits from
the Corporation because of illness or injury are authorized in
accordance with its then-current medical leave policy, but
only if the Optionee's Disability continues through that date,
or (ii) the day the Optionee's employment with the Corporation
ends after the last day of a personal leave of absence
immediately following such period of salary continuation,
provided, that the Optionee has a Disability on such date. If
the Optionee is involuntarily terminated because of job
elimination or facility closure (or other reason approved by
the Plan Administrator) while on a paid medical leave based on
a Disability or during a personal leave of absence immediately
following such medical leave, the Optionee will have a
Disability Retirement Date on the last day of the maximum
period during which salary continuation benefits from the
Corporation because of illness or injury would have been
authorized in accordance with its then-current medical leave
policy if he had not been terminated (in the case of
termination during a medical leave) or on the date of
termination (in the case of termination during the personal
leave of absence), provided that he still has a Disability on
such date.
(j) Early Retirement Date means the Optionee's last day of active
employment by the Corporation after having attained at least
age 55 (but not age 62) and having accrued at least 10 years
of service for vesting purposes as determined in accordance
with the provisions of the Georgia-Pacific Corporation Savings
and Capital Growth Plan (or any successor tax-qualified
retirement plan maintained for salaried employees of the
Corporation).
(k) Exercise Amount means the sum of (a) the Option Price
multiplied by the number of vested options being exercised
plus (b) an amount sufficient to pay all applicable FICA and
withholding taxes on (i) the value of any dividend
equivalents, and (ii) the difference between the Fair Market
Value of Timber Group Stock for which the vested options are
being exercised (determined as of the exercise date) and their
Option Price, as calculated by the Plan Administrator or the
Agent, if any.
(l) Expiration Date means the tenth anniversary of the Grant Date,
unless an earlier Expiration Date is established by operation
of Section 5 of this Agreement.
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(m) Fair Market Value is the mean between the high and low sales
prices of a share of Timber Group Stock on a particular date,
as reported in The Wall Street Journal, New York Stock
Exchange - Composite Transactions, or as reported in any
successor quotation system adopted prospectively for this
purpose by the Plan Administrator in its discretion. If the
date of determination is not a trading date on the New York
Stock Exchange, Fair Market Value shall be determined using
the high and low sales prices of a share of Timber Group Stock
on the next preceding trading date. The Fair Market Value of
Timber Group Stock shall be rounded to the nearest whole cent
(with 0.5 cent being rounded to the next higher whole cent).
(n) Grant Date means the date set forth on the first page of this
Agreement, upon which the options described in this Agreement
were granted to the Optionee.
(o) Normal Retirement Date means the Optionee's last day of active
employment by the Corporation after having attained (i) at
least age 62 (but not age 65) and at least 10 years of service
for vesting purposes as determined in accordance with the
provisions of the Georgia-Pacific Corporation Savings and
Capital Growth Plan (or any successor tax-qualified retirement
plan maintained for salaried employees of the Corporation) or
(ii) at least age 65.
(p) Option Price means the price per share set forth on the first
page of this Agreement.
(q) Optionee means the employee of the Corporation named on the
first page of this Agreement.
(r) Plan means the Georgia-Pacific Corporation/Timber Group 1997
Long-Term Incentive Plan, as adopted by the Board of Directors
on September 17, 1997, and approved by the Corporation's
shareholders on December 16, 1997, and as amended from time to
time.
(s) Plan Administrator means the Committee, provided, however,
that to the extent permitted by the Plan and authorized by the
Committee, the Chief Executive Officer of the Georgia-Pacific
Corporation may act on behalf of the Committee in executing
the duties and responsibilities of the Plan Administrator.
(t) Representative means, in the event of the Optionee's
Disability, his duly authorized legal guardian or
representative; or, in the event of the Optionee's death, his
estate, personal representative, or beneficiary as designated
pursuant to Section 6(e).
(u) Timber Group Stock means the class of the Corporation's common
stock, par value $0.80 per share, which has been designated by
the Corporation as the Georgia-Pacific Corporation--Timber
Group Common Stock.
(v) Total Shares Under Option means the number of options granted
to the Optionee as set forth on the first page of this
Agreement.
(w) Vesting Date means any one of the dates upon which options
granted to the Optionee under this Agreement become
exercisable in accordance with this Agreement.
2. Option Grant. Subject to the terms and conditions of this Agreement,
the Corporation hereby grants an option to the Optionee to purchase
from the Corporation, at the
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<PAGE>
Option Price, the number of shares of Timber Group Stock equal to the
Total Shares Under Option. This option includes the right, upon
exercise of such option, to receive a dividend equivalent in the form
of additional shares of Timber Group Stock equal to 50% of the value of
the dividends declared and paid on the Total Shares Under Option from
the Grant Date through the exercise date.
3. Vesting.
(a) Regular Vesting. Except as stated in Sections 3(b) and 3(c) of
this Agreement, the Optionee shall become vested in a
percentage of the Total Shares Under Option in accordance with
the following schedule:
----------------------------------- ----------------------------
VESTING DATE PERCENTAGE OF TOTAL SHARES
UNDER OPTION
----------------------------------- ----------------------------
First anniversary of Grant Date 34%
----------------------------------- ----------------------------
Second anniversary of Grant Date 33%
----------------------------------- ----------------------------
Third anniversary of Grant Date 33%
----------------------------------- ----------------------------
The number of options granted to the Optionee under this Agreement which become
vested on a Vesting Date in accordance with the above schedule will be
determined by multiplying the Total Shares Under Option by the percentage
specified in the above schedule, and then rounding the resulting number up to
the nearest whole number, provided that the aggregate number of the Optionee's
vested options under this Agreement shall not exceed the Total Shares Under
Option.
(b) Accelerated Vesting. Notwithstanding the vesting schedule
specified in Section 3(a) of this Agreement, the Total Shares
Under Option shall become 100% vested upon the earliest to
occur of the following Vesting Dates:
(i) the Optionee's Normal Retirement Date;
(ii) the Optionee's Disability Retirement Date;
(iii) the date of the Optionee's death prior to his
termination of employment from the Corporation;
(iv) the date of a Change of Control; or
(v) subject to the approval of the Plan Administrator,
the Optionee's Early Retirement
-4-
<PAGE>
Date or the date of the Optionee's involuntary
termination of employment from the Corporation, in
either case due to (A) job elimination, (B)
plant closure, or (C) such other reason as may be
specifically approved by the Plan Administrator.
If more than one of the accelerated vesting rules specified in this Section 3(b)
can apply to the Optionee, the Optionee may elect in writing which vesting rule
will apply. The vesting rule elected by the Optionee will determine the
Expiration Date for the options affected by such accelerated vesting. If the
Optionee fails to make such an election within 30 days after being notified by
the Plan Administrator, the Optionee will be deemed to have elected the
available accelerated vesting rule which, first, vests the most options in the
Optionee or, second (if each accelerated vesting rule vests the same number of
options), provides the longest exercise period. Notwithstanding anything in this
Agreement to the contrary, except as otherwise provided in this Agreement in the
case of a Disability Retirement Date which occurs after Optionee's termination
of employment with the Company, no Vesting Date will occur - and no options may
vest - following termination of employment with the Company.
(c) Termination for Cause. Notwithstanding anything in this
Agreement to the contrary, if the Corporation terminates the
Optionee's employment for Cause prior to a Change of Control,
this Agreement shall be terminated and all options granted to
the Optionee under this Agreement shall be forfeited,
regardless of whether a Vesting Date has occurred on or before
such termination date, unless and to the extent that the Plan
Administrator determines that such forfeiture would violate
applicable law.
4. Exercise of Options.
(a) General. Except as otherwise specified by the Plan
Administrator in accordance with Sections 4(d) and 4(e), the
Optionee (or his Representative, as the case may be) may
exercise the options granted under the Agreement, in whole or
in part, at any time on or after the Vesting Date for such
options and prior to their Expiration Date, by complying with
the procedures described in this Section 4. The Optionee shall
forfeit all rights to any option under this Agreement, whether
or not then vested, which is not exercised prior to its
Expiration Date.
(b) Exercise Procedure. The Optionee or his Representative (if
applicable) may exercise all or a portion of his vested
options under this Agreement by delivering notice to the
Agent, or by complying with any alternative procedure which
may be authorized by the Plan Administrator from time to time.
The notice to the Agent shall specify the number of shares of
Timber Group Stock that the Optionee desires to purchase by
exercise of his vested options, and shall include payment for
the Exercise Amount of such shares in one of the following
ways:
(i) The Optionee may tender payment of the Exercise
Amount on the date of exercise in the form of cash,
certified check, bank draft, or postal or express
money order made payable to the order of the
Corporation and denominated in U.S. dollars; or
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<PAGE>
(ii) The Optionee may tender payment of the Exercise
Amount on the date of exercise in the form of shares
of Timber Group Stock having a Fair Market Value on
the date of exercise equal to the Exercise Amount, if
such shares were acquired upon exercise of an option,
they must have been held by the Optionee for at least
six months at the time of tender; or
(iii) The Optionee may tender payment of the Exercise
Amount on the date of exercise in a combination of
(A) shares of Timber Group Stock (subject to the
holding period described in paragraph (ii) above);
and (B) cash, certified check, bank draft, or postal
or express money order made payable to the order of
the Corporation and denominated in U.S. dollars,
equal to the difference between the Exercise Amount
and the Fair Market Value of the tendered shares of
Timber Group Stock on the date of exercise; or
(iv) The Optionee may initiate a cashless exercise in
accordance with procedures promulgated by the Plan
Administrator or the Agent, if any.
(v) The Optionee may tender payment of the Exercise
Amount on the date of exercise in accordance with
such other method as the Plan Administrator shall
authorize.
Within 30 days after the date of such exercise, the Agent shall make available
to the Optionee a certificate registered in the Optionee's name or a book entry
in a depository institution for the Optionee's account, representing the
aggregate number of shares of Timber Group Stock purchased by the Optionee as a
result of such exercise.
(c) Exercise of Options Following Optionee's Disability or Death.
(i) Optionee's Disability. If the Optionee's Disability
occurs during a period in which he may exercise
options under this Agreement, the Optionee or, if
applicable, the Optionee's Representative may
exercise the options before their Expiration Date
with respect to any or all of the Total Shares Under
Option which are available for purchase under this
Agreement by the Optionee on his Disability
Retirement Date (taking into account the accelerated
vesting provisions of Section 3(b)) and which had not
been purchased by him prior to such date.
(ii) Optionee's Death. If the Optionee's death occurs
during a period in which he may exercise options
under this Agreement, the Optionee's Representative
may exercise the options before their Expiration Date
with respect to any or all of the Total Shares Under
Option which are available for purchase under this
Agreement by the Optionee on the date of his death
(taking into account the accelerated vesting
provisions of Section 3(b)) and which had not been
purchased by him prior to his death.
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<PAGE>
(d) Exercise of Options During Leave of Absence. Notwithstanding
any provision of this Agreement to the contrary, if the
Optionee is on a leave of absence or is absent on military or
government service at any time on or after the Grant Date and
prior to the Expiration Date, the Optionee may not exercise
any part of the Total Shares Under Option prior to the date
the Optionee returns to active employment with the
Corporation, and vesting of any options under this Agreement
which would normally vest on a date during the absence shall
be postponed until the Optionee returns to active work at the
end of the absence (in which case, the date of return to
active employment shall be a Vesting Date). The provisions of
this subsection (d) shall not affect any of Optionee's rights
in the event of his death, Disability, Early Retirement or
Normal Retirement or in the event of a Change of Control
occurring during such an absence.
(e) Deferral of Exercise or Delivery of Shares. Notwithstanding
any provision in this Agreement to the contrary, if any law or
regulation of any governmental authority having jurisdiction
in the matter requires the Corporation, Plan Administrator,
Agent, Optionee, or Representative to take any action or
refrain from action in connection with the exercise of any
option under this Agreement or the delivery of shares of
Timber Group Stock to the Optionee, or to delay such exercise
or delivery, then the exercise or delivery of such shares
shall be deferred until such action has been taken or such
restriction on action has been removed.
5. Special Rules Governing the Expiration Date. The Expiration Date for
options granted to the Optionee under this Agreement shall be subject
to the following special rules:
(a) Termination of Employment. If the Optionee voluntarily or
involuntarily terminates employment with the Corporation (for
reasons other than death, Change of Control or having reached
his Normal Retirement Date, Early Retirement Date or
Disability Retirement Date), the Expiration Date for
exercising any options under this Agreement which were vested
as of his date of termination shall be the 90th day after the
date of such termination; provided that if the Optionee has a
Disability or dies, or a Change of Control occurs, prior to
such 90th day, the Expiration Date for the Optionee's options
under this Agreement which were vested as of his date of
termination shall be the Expiration Date applicable to such
Disability (subject to the rules stated in Section 5(d)),
death, or Change of Control, whichever is applicable.
(b) Normal Retirement. If the Optionee terminates employment with
the Corporation on his Normal Retirement Date, the Expiration
Date for exercising his vested options under this Agreement
shall be the last day of the 60th month after the end of the
month in which the Optionee's Normal Retirement Date occurs.
(c) Early Retirement. If the Optionee terminates employment with
the Corporation on his Early Retirement Date, the Expiration
Date for exercising his vested options under this Agreement
shall be the last day of the 60th month after the end of the
month in which the Optionee's Early Retirement Date occurs.
(d) Disability or Disability Retirement. If the Optionee
terminates employment with the Corporation on his Disability
Retirement Date, the Expiration Date for exercising his vested
options under this Agreement shall be the last day of the 36th
month after the end
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<PAGE>
of the month in which the Optionee's Disability Retirement
Date occurs. If the Optionee has a Disability before the 90th
day after terminating employment with the Corporation (for
reasons other than having reached his Normal Retirement Date,
Early Retirement Date, or Disability Retirement Date) and such
Disability continues through the end of the initial 90-day
period, the Expiration Date for exercising his vested options
under this Agreement shall be the last day of the 36th month
after the end of the month in which the Optionee's Disability
occurs.
(e) Optionee's Death. If the Optionee dies while actively employed
by the Corporation or prior to the 90th day after the
Optionee's termination of employment with the Corporation (for
reasons other than having reached his Normal Retirement Date,
Early Retirement Date, or Disability Retirement Date), the
Expiration Date for exercising his vested options under this
Agreement shall be the last day of the 36th month after the
end of the month in which the Optionee's death occurs.
(f) Change of Control. The Expiration Date for all of the
Optionee's vested options shall be the tenth anniversary of
the Grant Date if a Change of Control takes place (i) while
the Optionee is actively employed by the Corporation; (ii)
prior to the 90th day after the Optionee terminates employment
with the Corporation; or (iii) prior to the 90th day after the
Optionee terminates his employment with the Corporation on his
Normal Retirement Date, Early Retirement Date, Disability
Retirement Date or date of death.
(g) Maximum Expiration Date. Notwithstanding any provision in
Section 5 of the Agreement to the contrary, no Expiration Date
may extend beyond the tenth anniversary of the Grant Date.
(h) Termination Date. The Optionee's date of termination of
employment from the Corporation shall be deemed for purposes
of this Agreement to be the later of (i) his last day of
active work for the Corporation or (ii) his last day on the
active employee payroll of the Corporation, provided, however,
that for all purposes of this Agreement, the Optionee shall be
deemed actively at work during any period the Optionee is on
approved paid medical leave.
6. General Provisions. The Optionee acknowledges that he has read,
understands and agrees with all of the provisions in this Agreement and
the Plan, including (but not limited to) the following:
(a) Authority of Plan Administrator. The Plan Administrator shall
have the authority to administer the Agreement and the Plan;
to make all determinations with respect to the construction
and application of the Agreement, the Plan, and the
resolutions of the Board of Directors establishing the Plan;
to adopt and revise rules relating to the Agreement and the
Plan; to hire the Agent with respect to its administrative
responsibilities under the Agreement and the Plan; and to make
other determinations which it believes are necessary or
advisable for the administration of the Agreement and the
Plan. Any dispute or disagreement which arises under this
Agreement or the Plan shall be resolved by the Plan
Administrator in its absolute discretion. Any such
determination, interpretation, resolution, or other action by
the Plan Administrator shall be final, binding and conclusive
with respect to the Optionee and all other persons affected
thereby.
-8-
<PAGE>
(b) Notices. Any notice which is required or permitted under this
Agreement shall be in writing (unless otherwise specified in
the Agreement or in a writing from the Corporation or the
Agent to the Optionee), and delivered personally or by mail,
postage prepaid, addressed as follows: (i) if to the
Corporation or the Agent, at l33 Peachtree Street, N.E.,
Atlanta, Georgia 30303, Attention: Compensation Department, or
at such other address as the Corporation or the Agent by
notice to the Optionee may have designated from time to time;
(ii) if to the Optionee, at the address indicated in the
Optionee's then-current personnel records, or at such other
address as the Optionee by notice to the Corporation may have
designated from time to time. Such notice shall be deemed
given upon receipt.
(c) Taxation. The Optionee shall be responsible for all applicable
withholding taxes and the employee share of FICA taxes with
respect to compensation income generated upon the exercise or
surrender of his vested options under this Agreement.
(d) Nontransferability. This Agreement and the options granted to
the Optionee hereto shall be nontransferable and shall not be
sold, hypothecated or otherwise assigned or conveyed by the
Optionee to any other person, except as specifically permitted
in this Agreement. No assignment or transfer of this Agreement
or the rights represented thereby, whether voluntary or
involuntary, or by operation of law or otherwise, shall vest
in the assignee or transferee any interest or right
whatsoever, except as specifically permitted in this
Agreement. The Agreement shall terminate, and be of no force
or effect, immediately upon any attempt to assign or transfer
the Agreement or any of the options to which the Agreement
applies.
(e) Designation of Beneficiary. The Optionee may designate a
person or persons to receive, in the event of his death, any
rights to which he would be entitled under this Agreement.
Such a designation shall be filed with the Agent in accordance
with uniform procedures specified by the Plan Administrator.
The Optionee may change or revoke a beneficiary designation at
any time by filing a written statement of such change or
revocation with the Agent in accordance with uniform
procedures specified by the Plan Administrator. No beneficiary
designation or change of beneficiary designation will be
effective until notice thereof is received. If an Optionee
fails to designate a beneficiary or if the beneficiary
predeceases the Optionee, the Optionee shall be deemed not to
have a beneficiary for purposes of this Agreement.
(f) No Shareholder Rights. The Optionee shall have no rights as a
shareholder of the Corporation, and shall not be deemed to be
a shareholder of the Corporation for any purpose, as a result
of the options granted to the Optionee under this Agreement,
until the earliest of the following dates: (i) the date that
the Corporation receives payment in full of the Exercise Price
for shares of Timber Group Stock because an option has been
exercised in accordance with this Agreement; or (ii) the date
that shares of Timber Group Stock have been issued or
transferred to the Optionee following the exercise of an
option in accordance with this Agreement. The Optionee shall
not be entitled to any dividends or other rights for which the
record date is prior to the date of such issuance, transfer,
or receipt.
(g) Not an Employment Contract. This Agreement shall not be deemed
to limit or restrict the right of the Corporation to terminate
the Optionee's employment at any time, for any reason, with or
without Cause, or to limit or restrict the right of the
Optionee to terminate his employment with the Corporation at
any time.
-9-
<PAGE>
(h) Corporate Restructuring/Capital Readjustments. Nothing in this
Agreement shall abridge the rights or powers of the
Corporation or its stockholders reserved to them in Section
9(a) of the Plan, and in the event of any extraordinary
transaction with respect to or affecting Timber Group Stock,
adjustments to the number of options granted in this Agreement
may be made in accordance with the provisions of Section 9(b)
of the Plan.
(i) Amendment or Termination. This Agreement may be amended or
terminated at any time by the mutual agreement and written
consent of the Optionee and the Plan Administrator, but only
to the extent permitted under the Plan.
(j) Not Considered Incentive Stock Options. The options granted
under this Agreement do not constitute and shall not be
construed to constitute "incentive stock options" with the
meaning of section 422 of the Code.
(k) Governing Instrument. This Agreement is subject to all terms
and conditions of the Plan and shall at all times be
interpreted in a manner that is consistent with the intent,
purposes, and specific language of the Plan.
(l) Severability. If any provision of this Agreement should be
held illegal or invalid for any reason by the Plan
Administrator or court of applicable jurisdiction, such
determination shall not affect the other provisions of this
Agreement, and it shall be construed as if such provision had
never been included herein.
(m) Headings/Gender. Headings in this Agreement are for
convenience only and shall not be construed to be part of this
Agreement. Any reference to the masculine, feminine or neuter
gender shall be a reference to other genders as appropriate.
(n) Governing Law. This Agreement shall be construed, and its
provisions enforced and administered, in accordance with the
laws of the State of Georgia and, where applicable, federal
law.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be executed by
its duly authorized officers under its corporate seal, and the Optionee has
executed this Agreement, as of the day and year first above written.
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<PAGE>
GEORGIA-PACIFIC CORPORATION
By: /s/ A.D.CORRELL
------------------------------
A. D. Correll
Chairman, Chief Executive Officer
and President
ATTEST:
/s/ KENNETH F. KHOURY
- --------------------------------
Kenneth F. Khoury
Secretary
OPTIONEE
NOTE: PLEASE COMPLETE THE ATTACHED ACKNOWLEDGMENT OF RECEIPT AND
BENEFICIARY DESIGNATION FORM AND RETURN THEM TO:
FIRST CHICAGO TRUST
GEORGIA-PACIFIC STOCK OPTION PLAN
"PERSONAL AND CONFIDENTIAL"
P. O. BOX 2585
JERSEY CITY, NJ 07302-2585
<PAGE>
ACKNOWLEDGMENT OF RECEIPT AND BENEFICIARY DESIGNATION FORM
Under the terms of the Georgia-Pacific Corporation/Timber Group 1997
Long-Term Incentive Plan ("1997 Timber Group LTIP"), you have the right to
designate a beneficiary to exercise certain rights that may arise under those
grants in the event of your death. IF YOU DO NOT DESIGNATE A BENEFICIARY IN
WRITING, THESE RIGHTS WILL PASS TO YOUR ESTATE UPON YOUR DEATH. In order to
allow you to decide affirmatively which outcome you desire and, in the event you
prefer to designate a beneficiary or beneficiaries other than your estate, to
name that beneficiary or those beneficiaries, the Corporation has provided this
form, which you may use to designate in writing the beneficiary(ies) you desire.
Of course, you may revoke and change your beneficiary designations at any time
by notifying First Chicago Trust in writing at the address indicated below.
PLEASE TAKE TIME TO FILL OUT THIS FORM AND RETURN IT TO FIRST CHICAGO
TRUST AT THE FOLLOWING ADDRESS: FIRST CHICAGO TRUST, GEORGIA-PACIFIC STOCK
OPTION PLAN, "PERSONAL AND CONFIDENTIAL", P. O. BOX 2585, JERSEY CITY, NJ
07302-2585. BENEFICIARY DESIGNATIONS OR MODIFICATIONS OF BENEFICIARY
DESIGNATIONS SENT TO ANY OTHER ADDRESS WILL NOT BE EFFECTIVE UNTIL ACTUALLY
RECEIVED BY FIRST CHICAGO TRUST. THE CORPORATION HAS NO RESPONSIBILITY FOR
BENEFICIARY DESIGNATION FORMS WHICH ARE NOT SUBMITTED AS INDICATED ABOVE.
NOTE: You may designate multiple beneficiaries, in which case those living at
the time of your death will equally share the rights accorded to a beneficiary
for the particular grant(s) in question.
[ ] I designate my estate as my beneficiary under my 2000 grant under the 1997
Timber Group LTIP.
[ ] I designate the following person(s) as my beneficiary(ies) under my 2000
grant under the 1997 Timber Group LTIP:
- ------------------ ---------------- ---------------------- ------------------
NAME ADDRESS RELATIONSHIP TO YOU SOCIAL SECURITY
NUMBER (IF
KNOWN)
- ------------------ ---------------- ---------------------- ------------------
- ------------------ ---------------- ---------------------- ------------------
- ------------------ ---------------- ---------------------- ------------------
I ACKNOWLEDGE RECEIPT OF THE EXECUTED OPTION AGREEMENT EVIDENCING MY JANUARY 21,
2000, STOCK OPTION GRANT UNDER THE GEORGIA-PACIFIC CORPORATION/TIMBER GROUP 1997
LONG-TERM INCENTIVE PLAN AND CONFIRM THAT THE BENEFICIARY(IES) DESIGNATED ABOVE
HAVE BEEN SELECTED BY ME IN FREE EXERCISE OF MY OWN DISCRETION.
Signature:____________________________
Printed Name:________________________
Date:________________________________
EXHIBIT 10.15
JOINT VENTURE AGREEMENT
AMONG
GEORGIA-PACIFIC CORPORATION,
CHESAPEAKE CORPORATION,
WISCONSIN TISSUE MILLS INC., AND
GEORGIA-PACIFIC TISSUE, LLC
DATED AS OF OCTOBER 4, 1999
<PAGE>
TABLE OF CONTENTS
ARTICLE I ORGANIZATION OF THE COMPANY.......................................1
1.1 FORMATION OF THE COMPANY.............................................1
ARTICLE II CONTRIBUTION OF THE BUSINESSES...................................2
2.1 CONTRIBUTION OF ASSETS; ASSUMPTION OF LIABILITIES....................2
2.2 RETAINED G-P ASSETS AND LIABILITIES..................................3
2.3 RETAINED WISCO ASSETS AND LIABILITIES................................3
2.4 CLOSING OF TRANSACTION...............................................3
2.5 POST-CLOSING ADJUSTMENT..............................................6
2.6 TRANSFER TAXES AND RECORDING FEES....................................9
2.7 REQUIRED CONSENTS....................................................9
2.8 OWNERSHIP OF THE COMPANY; SPECIAL DISTRIBUTION......................10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF CSK PARTIES..................10
3.1 ORGANIZATION AND QUALIFICATION......................................11
3.2 CORPORATE AUTHORIZATION.............................................11
3.3 CONSENTS AND APPROVALS..............................................11
3.4 NON-CONTRAVENTION...................................................11
3.5 BINDING EFFECT......................................................12
3.6 FINANCIAL STATEMENTS: ABSENCE OF CERTAIN CHANGES....................12
3.7 LITIGATION AND CLAIMS...............................................13
3.8 TAXES...............................................................13
3.9 EMPLOYEES, PENSION AND OTHER BENEFIT PLANS..........................14
3.10 COMPLIANCE WITH LAWS...............................................17
3.11 ENVIRONMENTAL MATTERS..............................................17
3.12 INTELLECTUAL PROPERTY..............................................18
3.13 LABOR MATTERS......................................................19
3.14 CONTRACTS..........................................................20
3.15 REAL ESTATE LEASES.................................................21
3.16 ENTIRE BUSINESS; TITLE TO PROPERTY.................................21
3.17 FINDER'S FEES......................................................22
3.18 INSURANCE..........................................................22
3.19 NO UNDISCLOSED LIABILITIES.........................................22
3.20 NO MATERIAL ADVERSE CHANGE.........................................23
3.21 INDEBTEDNESS FOR BORROWED MONEY....................................24
3.22 KNOWLEDGE AS OF CLOSING DATE.......................................24
3.23 NO OTHER REPRESENTATIONS OR WARRANTIES.............................24
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF G-P...........................25
4.1 ORGANIZATION AND QUALIFICATION......................................25
4.2 CORPORATE AUTHORIZATION.............................................25
<PAGE>
4.3 CONSENTS AND APPROVALS..............................................25
4.4 NON-CONTRAVENTION...................................................25
4.5 BINDING EFFECT......................................................26
4.6 FINANCIAL STATEMENTS: ABSENCE OF CERTAIN CHANGES....................26
4.7 LITIGATION AND CLAIMS...............................................27
4.8 TAXES...............................................................27
4.9 EMPLOYEES, PENSION AND OTHER BENEFIT PLANS..........................28
4.10 COMPLIANCE WITH LAWS...............................................30
4.11 ENVIRONMENTAL MATTERS..............................................30
4.12 INTELLECTUAL PROPERTY..............................................31
4.13 LABOR MATTERS......................................................31
4.14 CONTRACTS..........................................................32
4.15 REAL ESTATE LEASES.................................................33
4.16 ENTIRE BUSINESS; TITLE TO PROPERTY.................................33
4.17 FINDER'S FEES......................................................33
4.18 INSURANCE..........................................................33
4.19 NO UNDISCLOSED LIABILITIES.........................................34
4.20 NO MATERIAL ADVERSE CHANGE.........................................34
4.21 INDEBTEDNESS FOR BORROWED MONEY....................................36
4.22 KNOWLEDGE AS OF CLOSING DATE.......................................36
4.23 ORGANIZATION OF COMPANY............................................36
4.24 AUTHORIZATION OF COMPANY...........................................36
4.25 ACTIVITIES OF COMPANY..............................................36
4.26 NO OTHER REPRESENTATIONS OR WARRANTIES.............................36
ARTICLE V COVENANTS........................................................36
5.1 COVENANTS REGARDING EMPLOYEES.......................................36
5.2 COMPLIANCE WITH WARN AND SIMILAR LAWS...............................37
5.3 FURTHER ASSURANCES..................................................37
5.4 USE OF G-P INTELLECTUAL PROPERTY AND CSK MARKS......................37
5.5 CERTAIN MATTERS RELATED TO RETAINED AND ASSUMED LIABILITIES.........37
5.6 INTERCOMPANY AGREEMENTS.............................................37
5.7 RECORDS AND RETENTION AND ACCESS....................................38
5.8 INSURANCE...........................................................38
5.9 SPECIAL CSK RETAINED LIABILITY......................................39
5.10 PREPARATION OF REGISTRATION STATEMENT..............................39
5.11 USE OF WISCO NAME..................................................39
5.12 PRORATION OF CERTAIN CHARGES.......................................39
ARTICLE VI CONDITIONS TO CLOSING...........................................40
[Intentionally Deleted].................................................40
ARTICLE VII SURVIVAL; INDEMNIFICATION......................................40
7.1 SURVIVAL............................................................40
7.2 INDEMNIFICATION BY G-P..............................................40
7.3 INDEMNIFICATION BY CSK..............................................41
7.4 INDEMNIFICATION BY THE COMPANY......................................42
7.5 INDEMNIFICATION PROCEDURES..........................................42
7.6 ACKNOWLEDGMENT REGARDING ENVIRONMENTAL LIABILITIES..................44
7.7 CHARACTERIZATION OF INDEMNIFICATION PAYMENTS........................44
<PAGE>
ARTICLE VIII TAX COVENANTS.................................................45
8.1 LIABILITY FOR TAXES.................................................45
8.2 PREPARATION OF TAX RETURNS..........................................46
8.3 AMENDED TAX RETURNS.................................................48
8.4 CARRY BACKS AND CARRY FORWARDS......................................48
8.5 ADDITIONAL TAX MATTERS..............................................49
8.6 TAX CONTROVERSIES; COOPERATION......................................50
ARTICLE IX TERMINATION.....................................................51
[Intentionally Deleted].................................................51
ARTICLE X MISCELLANEOUS....................................................51
10.1 NOTICES............................................................51
10.2 AMENDMENT; WAIVER..................................................52
10.3 ASSIGNMENT.........................................................52
10.4 ENTIRE AGREEMENT...................................................52
10.5 FULFILLMENT OF OBLIGATIONS.........................................52
10.6 PARTIES IN INTEREST................................................52
10.7 PUBLIC DISCLOSURE..................................................53
10.8 EXPENSES...........................................................53
10.9 SCHEDULES..........................................................53
10.10 BULK TRANSFER LAWS................................................53
10.11 GOVERNING LAW; SUBMISSION TO JURISDICTION; SELECTION OF FORUM.....53
10.12 COUNTERPARTS......................................................53
10.13 HEADINGS..........................................................53
10.14 SEVERABILITY......................................................54
10.15 INJUNCTIVE RELIEF.................................................54
ARTICLE XI DEFINITIONS AND TERMS...........................................54
11.1 SPECIFIC DEFINITIONS...............................................54
11.2 OTHER TERMS........................................................70
11.3 OTHER DEFINITIONAL PROVISIONS......................................70
<PAGE>
JOINT VENTURE AGREEMENT
This JOINT VENTURE AGREEMENT (the "Agreement") dated as of October 4,
1999, among Chesapeake Corporation, a Virginia corporation ("CSK"), Wisconsin
Tissue Mills Inc., a Delaware corporation and a wholly owned subsidiary of CSK
("WISCO"), Georgia-Pacific Corporation, a Georgia corporation ("G-P"), and
Georgia-Pacific Tissue, LLC, a Delaware limited liability company (the
"Company").
PRELIMINARY STATEMENTS
WHEREAS, G-P is engaged, in part, in the business of producing,
selling, licensing and manufacturing tissue products for the "away from home"
markets and certain related products (the "Commercial Tissue Business");
WHEREAS, G-P has determined that it will contribute certain assets and
liabilities of its Commercial Tissue Business to the Company;
WHEREAS, WISCO is engaged in the Commercial Tissue Business through
WISCO and its Contributed Subsidiaries (the "WISCO Business"); and
WHEREAS, G-P and CSK have determined that it is in the best interests
of their respective shareholders to engage in the Commercial Tissue Business
through a joint venture.
NOW, THEREFORE, G-P, the CSK Parties and the Company agree as follows:
ARTICLE I
ORGANIZATION OF THE COMPANY
1.1 FORMATION OF THE COMPANY. G-P has caused each of the following to
occur:
(a) ORGANIZATION OF THE COMPANY. The Company is organized as a
limited liability company under the laws of the State of
Delaware.
(b) ORGANIZATIONAL DOCUMENTS. The Company's Certificate of
Formation was filed with the Secretary of State of Delaware, a
copy of which is set forth as Exhibit 1.1A hereto.
ARTICLE II
CONTRIBUTION OF THE BUSINESSES
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2.1 CONTRIBUTION OF ASSETS; ASSUMPTION OF LIABILITIES. On the terms and
subject to the conditions set forth herein and in the Ancillary
Agreements, at the Closing the parties shall take the following
actions, which shall be deemed to take place simultaneously with the
execution of this Agreement as part of the Closing:
(a) WISCO CONTRIBUTION; ASSUMPTION OF LIABILITIES. (i) WISCO shall
contribute, convey, transfer, assign and deliver to the
Company, and the Company shall accept and acquire from WISCO,
all right, title and interest of the CSK Parties in and to the
WISCO Contributed Assets, free and clear of all Encumbrances
(other than Permitted Encumbrances); and (ii) WISCO shall
assign to the Company and the Company shall assume and agree
to pay, honor, discharge and perform the WISCO Assumed
Liabilities. The parties agree that the WISCO Assumed
Liabilities are intended to be, and the parties shall treat
them as, "qualified liabilities" under Section 1.707-5(a)(6)
of the Treasury Regulations unless different treatment is
required under applicable law.
(b) BORROWING BY THE COMPANY; SPECIAL DISTRIBUTION. The Company
will incur the Company Debt in such amounts and on such terms
as set forth on Exhibit 2.8A and will use the net proceeds of
the Company Debt solely (after deducting borrowing expenses
consisting of legal fees, accounting fees, printing fees,
filing fees and underwriting fees, not to exceed $8 million,
including refinancings and replacements thereof) to fund the
Special Distribution to WISCO in the amount of $755,200,000
which shall be declared and paid to WISCO immediately after
the contribution of the WISCO Contributed Assets in accordance
with Section 2.8 hereof. The parties agree that Company Debt
(other than amounts borrowed and used to pay expenses incurred
in connection with the related borrowing expenses) is
allocable to, and shall be allocated to, WISCO under Sections
1.752-2 and 1.707-5(b) of the Treasury Regulations.
(c) G-P CONTRIBUTION; ASSUMPTION OF LIABILITIES. (i) G-P shall
contribute, convey, transfer, assign and deliver to the
Company, and the Company shall accept and acquire from G-P,
all right, title and interest of G-P in and to the G-P
Contributed Assets, free and clear of all Encumbrances (other
than Permitted Encumbrances); and (ii) G-P shall assign to the
Company and the Company shall assume and agree to pay, honor,
discharge and perform the G-P Assumed Liabilities. The parties
agree that the G-P Assumed Liabilities are intended to be, and
the parties shall treat them as, "qualified liabilities" under
Section 1.707-5(a)(6) of the Treasury Regulations unless
different treatment is required under applicable law.
(d) ISSUANCE OF UNITS. The Company will issue to WISCO and G-P the
number of Units, evidencing their respective equity interests
in the Company, in accordance with Section 2.8(b) hereof.
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(e) OPERATING AGREEMENT. G-P and WISCO shall enter into an
Operating Agreement, substantially in the form of Exhibit 2.1E
hereto, the terms of which shall govern the management and
operations of the Company.
2.2 RETAINED G-P ASSETS AND LIABILITIES. Notwithstanding anything herein to
the contrary, (i) from and after the Closing each of G-P and its
Affiliates shall retain all of its direct or indirect right, title and
interest in and to, and there shall be excluded from the sale,
conveyance, assignment or transfer to the Company hereunder, the G-P
Retained Assets and the G-P Retained Liabilities, and (ii) the G-P
Retained Liabilities shall not be assumed by the Company hereunder.
2.3 RETAINED WISCO ASSETS AND LIABILITIES. Notwithstanding anything herein
to the contrary, (i) from and after the Closing each of the CSK Parties
and their Affiliates shall retain all of its direct or indirect right,
title and interest in and to, and there shall be excluded from the
sale, conveyance, assignment or transfer to the Company hereunder, the
WISCO Retained Assets and the WISCO Retained Liabilities, and (ii) the
WISCO Retained Liabilities shall not be assumed by the Company
hereunder.
2.4 CLOSING OF TRANSACTION. The Closing of the transactions contemplated by
this Agreement shall take place at the offices of G-P at 10:00 a.m.
(Atlanta time), on October 4, 1999, or at such other time and place as
the parties hereto may mutually agree. The date on which the Closing
occurs is called the "Closing Date." The Closing shall be deemed
effective at 12:01 a.m. (Atlanta time), on October 3, 1999 (the
"Effective Time"). To effect the steps set forth in Section 2.1 hereof,
the parties shall execute and deliver to each other and to third
parties, as appropriate, all documents reasonably necessary to effect
the Closing. Without limiting the generality of the foregoing,
(a) CSK PARTIES' DELIVERIES. The appropriate CSK Parties shall
execute and deliver:
(i) to the Company, limited warranty deeds, in form and
substance reasonably acceptable to G-P, transferring
all WISCO Owned Real Property to the Company;
(ii) to the Company, assignments, or where necessary
subleases, in form and substance reasonably
acceptable to G-P, assigning or subleasing to the
Company all WISCO Real Property Leases;
(iii) to the Company, assignments, in form and substance
reasonably acceptable to G-P, assigning to the
Company all WISCO Intellectual Property;
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(iv) to the Company, bills of sale, certificates of title,
assignments, and all other instruments of transfer,
in form and substance reasonably acceptable to G-P,
transferring to the Company all WISCO Contributed
Assets other than the WISCO Real Property or the
WISCO Intellectual Property which are being
transferred to the Company pursuant to the conveyance
documents described in clauses (i) - (iii) above;
(v) to the Company, such instruments of assumption and
other instruments or documents, in form and substance
reasonably acceptable to G-P, as may be necessary to
effect assignment of the WISCO Assumed Liabilities to
the Company;
(vi) to the Company or G-P, as appropriate, a duly
executed copy of each of the Ancillary Agreements to
which any CSK Party is a party;
(vii) to G-P and the Company, the opinion of Hunton &
Williams, counsel to the CSK Parties, substantially
in the form of Exhibit 2.4A(vii) hereto;
(viii) to the Company, evidence reasonably satisfactory to
G-P that all Encumbrances other than Permitted
Encumbrances on any of the WISCO Contributed Assets
have been released;
(ix) to the Company, stock certificates or other evidence
of ownership of each of the Contributed Subsidiaries,
in each case duly endorsed for transfer to the
Company;
(x) to G-P and the Company from WISCO, a duly executed
Operating Agreement;
(xi) to G-P, the WISCO Debt Indemnity;
(xii) to G-P, current title reports for all WISCO owned
Real Property;
(xiii) to G-P, evidence that all officers (other than
officers of WMex) and directors of the WISCO
Contributed Subsidiaries have resigned, effective as
of the Closing, except as G-P shall otherwise
request; and
(xiv) to G-P and/or the Company, as appropriate, such other
instruments or documents, in form and substance
reasonably acceptable to G-P, as may be necessary to
effect the Closing and the contribution of the WISCO
Contributed Assets in accordance with this Agreement.
4
<PAGE>
(b) G-P DELIVERIES. G-P shall execute and deliver:
(i) to the Company, limited warranty deeds, in
form and substance reasonably acceptable to
WISCO, transferring all G-P Owned Real
Property to the Company;
(ii) to the Company, assignments, or where
necessary subleases, in form and substance
reasonably acceptable to WISCO, assigning or
subleasing to the Company all G-P Real
Property Leases;
(iii) to the Company, a royalty free license,
substantially in the form set forth in
Schedule 5.4, licensing to the Company the
G-P Intellectual Property;
(iv) to the Company, bills of sale, certificates
of title, assignments, and all other
instruments of transfer, in form and
substance reasonably acceptable to WISCO,
transferring to the Company all G-P
Contributed Assets other than the G-P Real
Property or the G-P Intellectual Property
which are being transferred or licensed to
the Company pursuant to the conveyance
documents described in clauses (i) - (iii)
above;
(v) to the Company, such instruments of
assumption and other instruments or
documents, in form and substance reasonably
acceptable to WISCO, as may be necessary to
effect assignment of the G-P Assumed
Liabilities to the Company;
(vi) to the Company or WISCO, as appropriate, a
duly executed copy of each of the Ancillary
Agreements, including the G-P Guarantee, to
which G-P is a party;
(vii) to the Company, WISCO and CSK, a copy of the
opinion of the General Counsel of G-P,
substantially in the form of Exhibit
2.4B(vii) hereto;
(viii) to the Company, evidence reasonably
satisfactory to WISCO that all Encumbrances
other than Permitted Encumbrances on any of
the G-P Contributed Assets have been
released;
(ix) to WISCO and the Company, a duly executed
Operating Agreement;
(x) to WISCO, current title reports for all G-P
owned Real Property; and
(xi) to WISCO and/or the Company, as appropriate,
such other
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<PAGE>
instruments or documents, in form and
substance reasonably acceptable to WISCO, as
may be necessary to effect the Closing and
the contribution of the G-P Contributed
Assets in accordance with this Agreement.
(c) DELIVERIES BY THE COMPANY. The Company shall execute
and deliver:
(i) to the CSK Parties and G-P, such instruments
of assumption and other instruments or
documents, in form and substance reasonably
acceptable to WISCO and G-P, as may be
necessary to effect the Company's assumption
of the Assumed Liabilities;
(ii) to G-P or the CSK Parties, as appropriate, a
duly executed copy of each of the Ancillary
Agreements to which the Company is a party;
(iii) to G-P, certificates representing the number
of Units issuable to G-P as determined in
accordance with Section 2.8 hereof;
(iv) to WISCO, certificates representing the
number of Units issuable to WISCO as
determined in accordance with Section 2.8
hereof;
(v) to WISCO, the Special Distribution; and
(vi) to G-P and WISCO, as appropriate, such other
instruments or documents, in form and
substance reasonably acceptable to WISCO and
G-P, as may be necessary to effect the
Closing.
2.5 POST-CLOSING ADJUSTMENT
6
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(a) Within 90 days following the Closing, the Company shall
prepare, or cause to be prepared, and deliver to G-P and WISCO
a statement (the "Closing Working Capital Statement") which
shall set forth the Working Capital of each of the G-P
Business and the WISCO Business as of the Determination Date
(the "Closing Working Capital"). The amounts so computed shall
be used to determine the final amount of the Working Capital
of each of the Businesses (the "Post-Closing Adjustment"). The
Closing Working Capital Statement shall be prepared in
accordance with GAAP using the same principles, practices and
procedures that were used in preparing the WISCO Financial
Statements and the G-P Financial Statements.
(b) G-P, WISCO and their respective accountants and the Company's
accountants shall have 30 days after the delivery of the
Closing Working Capital Statement to review the Closing
Working Capital Statement. In the event that G-P or WISCO
determines that the Closing Working Capital for either party,
as derived from the Closing Working Capital Statement, has not
been determined on the basis set forth in Section 2.5(a), G-P
or WISCO shall inform the other in writing (the "Objection"),
setting forth a specific description of the basis of the
Objection and the adjustments to the Closing Working Capital
which either G-P or WISCO believes should be made, which
Objection must be delivered to the other party on or before
the last day of such 30-day period. The party receiving an
Objection shall then have 30 days to review and respond to the
Objection. The parties shall attempt in good faith to reach an
agreement with respect to any matters in dispute. If the
parties are unable to resolve all of their disagreements with
respect to the determination of the foregoing items within 45
days following the delivery of an Objection, they shall refer
their remaining differences to Ernst & Young LLP or such other
firm mutually agreed to by the parties (the "CPA Firm"), who
shall, acting as experts and not as arbitrators, determine in
accordance with this Agreement, and only with respect to the
remaining differences so submitted, whether and to what
extent, if any, the Closing Working Capital as derived from
the Closing Working Capital Statement requires adjustment. The
parties shall direct the CPA Firm to use its best efforts to
render its determination within 30 days after such submission.
The CPA Firm's determination shall be conclusive and binding
upon G-P, WISCO and the Company. The fees and disbursements of
the CPA Firm shall be paid one-half by G-P and one-half by
WISCO. G-P, the Company and WISCO shall make readily available
to the CPA Firm all relevant Books and Records and any work
papers (including those of the parties' respective
accountants) Relating to the Closing Working Capital Statement
and all other items reasonably requested by the CPA Firm. The
"Final Working Capital Statement" shall be deemed to be (i)
the Closing Working Capital Statement in the event that no
Objection is delivered by G-P or WISCO during the 30-day
period specified above, or (ii) if an objection is
7
<PAGE>
delivered by G-P or WISCO, the Closing Working Capital
Statement, as adjusted by either (A) the agreement of the
parties or (B) the CPA Firm.
(c) G-P and WISCO shall have the opportunity to participate in the
preparation of the Closing Working Capital Statement by (i)
observing the physical inventory taken in connection therewith
(which may begin prior to the Closing Date), (ii) attending
any audit planning meetings in connection therewith, (iii)
meeting with and discussing procedures with the Company and
its accountants, and (iv) otherwise having full access to all
information used by the Company in preparing the Closing
Working Capital Statement, including the Books and Records and
the work papers of its accountants (subject to execution of
any necessary waivers or indemnifications required by the
Company's accountants).
(d) In reviewing any Objection, G-P and WISCO and their respective
accountants shall have full access to all information used by
the other party in preparing such Objection, including the
work papers of the other party's and the Company's accountants
(subject to the reviewing party executing any necessary
waivers or indemnifications required by the objecting party's
accountants).
(e) If the Closing Working Capital of either Business as reflected
on the Final Working Capital Statement is less than
$32,515,000 with respect to the G-P Business or $73,218,000
with respect to the WISCO Business (the "Target Working
Capital"), then within 10 Business Days following issuance of
the Final Working Capital Statement, any party whose Closing
Working Capital is below its Target Working Capital shall (as
an additional contribution to the Company) make a payment in
immediately available funds to the Company equal to the
difference between such Business' Target Working Capital, plus
interest at the prime rate (as set forth in the "Money Rates"
section of The Wall Street Journal) on such amount from the
Closing Date through the date of payment. If the Closing
Working Capital of either Business as reflected on the Final
Working Capital Statement is greater than the Target Working
Capital of such Business, then within 10 Business Days
following issuance of the Final Working Capital Statement, the
Company shall refund such excess by (i) making a payment to
any party whose Closing Working Capital exceeded its Target
Working Capital, in immediately available funds, equal to such
excess to the extent of the sum of the amount of cash
theretofor contributed to the Company by such party plus the
amount of accounts receivable contributed by such party to and
collected by the Company, and (ii) if the excess is greater
than the amount described in (i), the remainder of the excess
shall be refunded by the Company's reassignment to such party
of accounts receivable (theretofor contributed by such party)
in an aggregate amount equal to such remainder. In addition,
the Company shall pay such party interest at the prime rate
(as
8
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set forth in the "Money Rates" section of The Wall Street
Journal) on such excess from the Closing Date through the date
of payment.
(f) In preparing the Closing Working Capital Statement, (i)
liabilities of the Company Related to this transaction shall
not be treated as liabilities, and (ii) no liabilities or
reserves shall be established for matters for which G-P, CSK
or the Company is (or but for the Cap or the Deductible would
be) entitled to indemnification hereunder.
(g) Any payments made to or from the Company pursuant to Section
2.5(e) shall not result in any change in the value of either
party's Business as set forth in Section 2.8 hereof or either
party's Capital Account or Percentage Interest (as both terms
are defined in the Operating Agreement).
2.6 TRANSFER TAXES AND RECORDING FEES. Each party shall be responsible for
any and all Taxes or fees imposed or incurred by reason of the transfer
of its Contributed Assets and Assumed Liabilities hereunder and/or the
filing or recording of any instruments necessary to effect the transfer
of its Contributed Assets and Assumed Liabilities hereunder, regardless
of when such Taxes or fees are levied or imposed, including sales, use,
value-added, excise, real estate transfer, lease assignment, stamp,
documentary and similar Taxes and fees (the "Transfer Cost"). To the
extent under applicable law the transferee is responsible for filing
Tax Returns in respect of Transfer Costs, the Company shall prepare all
such Tax Returns. The parties shall provide such certificates and other
information and otherwise cooperate to the extent reasonably required
to minimize Transfer Costs.
2.7 REQUIRED CONSENTS. Each of G-P and the CSK Parties shall use
commercially reasonable efforts to obtain, at its sole expense, each
Consent Related to its own Business listed on Schedule 3.3(a) for the
CSK Parties and Schedule 4.3(a) for G-P (other than those Consents
marked with an asterisk on either such Schedule), and any other
material Consent not listed on Schedule 3.3 or Schedule 4.3, if any, if
such Consent is required to operate such Business after Closing as such
Business has been operated over the 12-month period immediately prior
to Closing. If a party has not obtained a Consent (other than a
Required Consent), the Closing of the transactions contemplated by this
Agreement shall not constitute a transfer, or any attempted transfer,
of any Contract or asset, the transfer of which requires such Consent.
Rather, following the Closing, such party shall use commercially
reasonable efforts at its sole expense, and the other party (or
parties) and the Company shall cooperate in such efforts, to obtain
promptly such Consent or to enter into reasonable and lawful
arrangements (including subleasing or subcontracting if permitted)
reasonably acceptable to the other party to provide to the Company the
full economic (taking into account Tax Costs and benefits) and
operational benefits and liabilities and for substantially similar time
periods, as the Company would have had if such Consent had been
obtained as of Closing. Once such Consent for the transfer of a
Contributed
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Asset not transferred at the Closing is obtained, the party receiving
such Consent shall promptly transfer, or cause to be transferred, such
Contributed Asset to the Company for no additional consideration and
without changing any party's Capital Account or Percentage Interest (as
both terms are defined in the Operating Agreement).
2.8 OWNERSHIP OF THE COMPANY; SPECIAL DISTRIBUTION.
(a) The value of contributions of each of G-P and WISCO has been
determined by multiplying 7.38 by the actual 1998 EBITDA for
the G-P Business and the WISCO Business respectively. The
value of the WISCO Business for purposes of this Agreement
shall be $775,000,000 and the value of the G-P Business for
purposes of this Agreement shall be $376,400,000.
(b) Simultaneously with the Closing, the Company shall incur debt
in an amount sufficient to fund a special distribution to
WISCO (the "Company Debt") that will result in a reduction in
WISCO's Percentage Interest (as defined in the Operating
Agreement) in the Company to a 5% equity interest in the
Company (the "Special Distribution") immediately after payment
of the Special Distribution. The Company Debt shall be in such
amount and on such terms as is set forth on Exhibit 2.8A. G-P
shall provide to the Company's lenders a full and
unconditional guaranty of payment of the Company Debt
substantially in the form of Exhibit 2.8B hereto (the "G-P
Guarantee"). WISCO shall provide to G-P an indemnity
substantially in the form of Exhibit 2.8C hereto (the "WISCO
Debt Indemnity") indemnifying G-P against certain amounts
which may be incurred or paid by, or assessed against, G-P
under the G-P Guarantee.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CSK PARTIES
The CSK Parties represent and warrant to G-P and the Company as
follows:
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3.1 ORGANIZATION AND QUALIFICATION.
(a) Each of the CSK Parties is a corporation or limited liability
company, duly organized, validly existing and in good standing
under the laws of its state of organization as set forth on
Schedule 3.1. The CSK Parties collectively have all requisite
corporate or limited liability company power and authority to
own and operate the WISCO Contributed Assets and to carry on
the WISCO Business as currently conducted.
(b) Each of the CSK Parties is duly qualified to do business and
is in good standing as a foreign corporation or limited
liability company in the jurisdictions listed on Schedule 3.1,
which are the only jurisdictions where the ownership or
operation of the WISCO Contributed Assets or the conduct of
the WISCO Business requires such qualification, except where
the failure to be so qualified would not have a Material
Adverse Effect.
3.2 CORPORATE AUTHORIZATION. Each of the CSK Parties has full corporate
power and authority to execute and deliver this Agreement, and to
perform its obligations hereunder and under any agreement or contract
contemplated hereby, including the Ancillary Agreements. The execution,
delivery and performance by the CSK Parties of this Agreement and any
agreement or contract contemplated hereby has been duly and validly
authorized by all necessary corporate action and no additional
corporate authorization is required in connection with the execution,
delivery and performance by each of the CSK Parties of this Agreement
and any agreement or contract contemplated hereby.
3.3 CONSENTS AND APPROVALS. Except as specifically set forth in Schedule
3.3 or as required by the HSR Act, no Consent is required to be
obtained by the CSK Parties from, and no notice or filing is required
to be given by the CSK Parties to, or made by the CSK Parties with, any
Governmental Authority or other Person or under any Contract listed, or
required to be listed, on Schedule 3.14 in connection with the
execution, delivery and performance by the CSK Parties of this
Agreement, each of the Ancillary Agreements, any other agreement or
contract contemplated hereby and the contribution of the WISCO
Contributed Assets, except where the failure to obtain any such Consent
or Consents, give any such notice or notices or make any such filing or
filings would not have a Material Adverse Effect.
3.4 NON-CONTRAVENTION. Except as set forth on Schedule 3.3, the execution,
delivery and performance by the CSK Parties of this Agreement and each
of the Ancillary Agreements, and the consummation of the transactions
contemplated hereby and thereby, does not and will not (i) violate any
provision of the certificate of incorporation or bylaws of any of the
CSK Parties or any Contributed Subsidiary; (ii) subject to obtaining
the Consents referred to in Section 3.3, conflict with, or result in
the breach of, or constitute a default under, or result in the
termination, cancellation or
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acceleration (whether after the filing of notice or the lapse of time
or both) of any right or obligation of any of the CSK Parties or any
Contributed Subsidiary under, or to a loss of any benefit to which any
of the CSK Parties or any Contributed Subsidiary is entitled under, any
Contract or result in the creation of any Encumbrance (other than a
Permitted Encumbrance) upon any of the WISCO Contributed Assets; or
(iii) assuming compliance with the matters set forth in Section 3.3,
violate, or result in a breach of or constitute a default under any
Law, rule, regulation, judgment, injunction, order, decree or other
restriction of any court or Governmental Authority to which any of the
CSK Parties or any Contributed Subsidiary is subject, including any
Governmental Authorization, except in each case, such matter or matters
that would not have a Material Adverse Effect.
3.5 BINDING EFFECT. This Agreement constitutes, and each of the Ancillary
Agreements when executed and delivered by the parties thereto will
constitute, a valid and legally binding obligation of each of the CSK
Parties that is a party thereto, enforceable with respect to such party
in accordance with its terms, except as the enforceability thereof may
be limited or otherwise effected by bankruptcy, insolvency,
reorganization, moratorium and similar laws of general applicability
Relating to, or affecting, creditors rights and to general equity
principles.
3.6 FINANCIAL STATEMENTS: ABSENCE OF CERTAIN CHANGES.
(a) Attached as Schedule 3.6(a) are the following financial
statements of the WISCO Business: Unaudited Balance Sheet,
Statement of Income and Statement of Cash Flows, as of and for
(i) the years ended December 31, 1997 and 1998 (the "WISCO
Annual Financial Statements"); and (ii) the period ended April
30, 1999 (the "WISCO April Financial Statements").
(Collectively the financial statements described in this
Section 3.6(a) shall be referred to as the "WISCO Financial
Statements.")
(b) Exhibit 3.6(b) sets forth the line items and a definition for
each such line item contained in each of the WISCO Financial
Statements.
(c) The WISCO Financial Statements are true and correct in all
material respects, present fairly the combined financial
position and results of operation, divisional equity and cash
flows of the WISCO Business as of the dates and for the
periods presented, and were prepared in accordance with GAAP
applied on a basis consistent with past practice of the WISCO
Business. The WISCO Financial Statements reflect the
underlying Books and Records of the WISCO Business, which are
complete and accurate in all material respects. Except as
described on Schedule 3.6(c), consistent accounting policies
and accrual methods were used in all periods presented. All
non-recurring or unusual income or expense items over
$500,000, as reflected in the 1998 Statement of Income of
WISCO, have been disclosed
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in footnotes to the WISCO Financial Statements.
(d) Except as described in the notes to the WISCO Financial
Statements, all accounts receivable reflected on the WISCO
Financial Statements are bona fide receivables, accounted for
in accordance with GAAP (including, without limitation,
appropriate reserves), and represent amounts due with respect
to actual transactions in the operation of the WISCO Business;
it being understood that this representation shall not be
deemed to constitute a warranty or guaranty that all such
accounts receivable shall be collected.
3.7 LITIGATION AND CLAIMS. Except as disclosed on Schedule 3.7:
(a) There is no action (whether civil, criminal or
administrative), suit, demand, claim, dispute, hearing,
proceeding (including condemnation or other proceeding in
eminent domain) or investigation pending or, to the Knowledge
of any of the CSK Parties, threatened, Related to the WISCO
Business or any of the WISCO Contributed Assets or included in
the WISCO Assumed Liabilities, that individually or in the
aggregate is reasonably expected to have a Material Adverse
Effect.
(b) None of the WISCO Contributed Assets is subject to any order,
writ, judgment, award, injunction, or decree of or settlement
enforceable in any court or governmental or regulatory
authority of competent jurisdiction or any arbitrator or
arbitrators.
3.8 TAXES. Except as disclosed on Schedule 3.8:
(a) The CSK Parties have duly and timely filed (or have caused to
be duly and timely filed), taking into account any valid
extension of the time for filing, each Tax Return required to
be filed with any Tax Authority which includes or is based
upon the WISCO Contributed Assets, or the operations,
ownership or activities of the WISCO Business, and all Taxes
due and payable (whether or not shown on or required to be
shown on a Tax Return) have been paid prior to their due
dates; provided, however, that the representations and
warranties set forth in this paragraph are made only to the
extent that (i) such Taxes are or may become Encumbrances on
the WISCO Contributed Assets, or (ii) the Company is or may be
liable in the capacity of transferee of the Contributed
Assets.
(b) The CSK Parties have duly and timely filed (or have caused to
be duly and timely filed), taking into account any valid
extension of the time for filing, each Tax Return which
includes or is based upon the assets, operations, ownership or
activities of any of the WISCO Contributed Subsidiaries, and
all Taxes due and payable (whether or not shown on or required
to be shown on a Tax Return) have been paid prior to their due
dates.
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(c) None of the WISCO Contributed Assets, including the assets of
the WISCO Contributed Subsidiaries (i) is subject to any lien
(other than a Permitted Encumbrance) arising in connection
with any failure or alleged failure to pay any Taxes, (ii)
secures any debt the interest on which is tax-exempt under
Section 103(a) of the Code, (iii) is required to be or is
being depreciated under the alternative depreciation system
under Section 168(g)(2) of the Code, (iv) is "limited use
property" with the meaning of Revenue Procedure 76-30, or (v)
will be treated as owned by any other Person pursuant to the
provisions of former Section 168(f)(8) of the Code.
(d) The CSK Parties (with respect to the WISCO Business) or the
WISCO Contributed Subsidiaries have withheld and paid all
material Taxes required to have been withheld and paid in
connection with amounts paid or owing to any Employee,
independent contractor, creditor, shareholder or other party.
(e) There are no pending, proposed or, to the knowledge of WISCO,
threatened audits, assessments or claims from any Tax
Authority for deficiencies, penalties or interest against any
of the CSK Parties (with respect to the WISCO Contributed
Assets or the WISCO Business), any of the WISCO Contributed
Subsidiaries or any of their assets, operations or activities;
provided, however, that the representations and warranties set
forth in this paragraph are made only to the extent that (i)
such Taxes are or may become Encumbrances on the WISCO
Contributed Assets, or (ii) the Company is or may be liable in
the capacity of transferee of the Contributed Assets.
(f) No CSK Party nor any WISCO Contributed Subsidiary owns,
directly or indirectly, and none of the WISCO Contributed
Assets consists of, any interest in any entity classified as a
partnership for United States federal income Tax purposes.
(g) With respect to the WISCO Business, other than WMex, the CSK
Parties do not have and have not had a permanent establishment
in any foreign country as defined in any applicable Tax treaty
or convention between the United States and such foreign
country.
3.9 EMPLOYEES, PENSION AND OTHER BENEFIT PLANS.
(a) Schedule 3.9(a) lists all the Employees who, as of August 31,
1999, were employed by WISCO or the WISCO Contributed
Subsidiaries with respect to the WISCO Business, together with
their respective positions, years of
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employment, and rates of remuneration, as of August 31, 1999.
(b) Except as disclosed on Schedule 3.9(b), no CSK Party is a
party to nor does it sponsor, maintain, or contribute to any
Employee Plans that provide benefits to Employees or Retired
Employees of the WISCO Business.
(c) WISCO has delivered to G-P true, complete and up-to-date
copies of all documents embodying the CSK Plans including,
without limitation, all amendments thereto, all funding
agreements thereunder (including, but not limited to, trust
agreements), all summaries of such CSK Plans provided to
Employees, Retired Employees, directors, officers,
shareholders or their dependents with respect to the WISCO
Business, and all material communications received from or
sent to regulatory authorities within the prior two (2) plan
years with respect to each such CSK Plan as well as the most
recent valuation for each defined contribution retirement plan
maintained by any of the CSK Parties and the most recent
actuarial valuation for each of the CSK Plans for which such
valuations are required. The applicable CSK Party has
delivered to G-P a complete written description of all
unwritten CSK Plans, and will deliver such other documentation
with respect to any CSK Plan as is reasonably requested by
G-P.
(d) Except as disclosed on Schedule 3.9(d), no promise or
commitment has been made by any CSK Party (i) to amend any of
the CSK Plans or to provide increased benefits thereunder to
any Employees, Retired Employees, directors, officers,
shareholders of the WISCO Business or the WISCO Contributed
Subsidiaries, or their dependents, except pursuant to the
requirements, if any, of the CSK Plans or any collective
bargaining agreement, or (ii) to establish any new Employee
Plan. Except as disclosed on Schedule 3.9(d), no amendment to
any CSK Plan has been adopted by any CSK Party since June 30,
1999. Except as disclosed on Schedule 3.9(d), one or more of
the CSK Parties has the right pursuant to the terms of each
CSK Plan and all agreements Related to such plan unilaterally
to terminate such plan (or its participation in such plan) or
to amend the terms of such plan at any time except as provided
under a collective bargaining agreement. Except as disclosed
on Schedule 3.6(a) or Schedule 3.9(d) or as set forth in the
Human Resources Agreement, the transactions contemplated by
this Agreement will not result in any additional payments to,
or increase the vested interest of, any Employee, Retired
Employee, director, officer, shareholder, or their dependents
under any CSK Plan; and the transactions contemplated by this
Agreement will not result in any payment to any Employee or
Retired Employee, director, officer, or shareholder of any CSK
Party which will be subject to Section 280G of the Code.
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(e) Each CSK Plan has been established, maintained, and
administered in substantial compliance with its terms and all
related documents or agreements and in substantial compliance
with applicable provisions of ERISA, the Code, and other
applicable Laws.
(f) Except as disclosed on Schedule 3.9(f), all required employer
contributions, premium payments and employee contributions
under the CSK Plans have been made and remitted to the funding
agents or accrued or booked thereunder within the time
prescribed by any such CSK Plan and the Laws. All insurance
premiums required with respect to any CSK Plan, including any
premiums payable to the Pension Benefit Guarantee Corporation,
have been paid, made, accrued or booked within the time
prescribed by any such CSK Plan and the applicable Law. All
benefits, expenses and other amounts due and payable to or
under any CSK Plan, and all contributions, transfers or
payments required to be made to any CSK Plan, have been paid,
made, accrued or booked within the time prescribed by any such
CSK Plan and the Laws. Except as disclosed on Schedule 3.9(f),
all of the assets which have been set aside in a trust or
account (other than an account which is part of a CSK Party's
general assets) to satisfy any obligation under any CSK Plan
are shown on the books and records of each such trust and each
such account at their fair market value, such current fair
market value as of the last valuation date is equal to or
exceeds the present value of any obligation under the CSK
Plan, and the liabilities for all other obligations under any
CSK Plan are accurately set forth in the WISCO Financial
Statements.
(g) Except as disclosed on Schedule 3.9(g), there is no pending
or, to the Knowledge of the CSK Parties, threatened claim with
respect to a CSK Plan (other than routine and reasonable
claims for benefits made in the ordinary course of the WISCO
Business) or with respect to the terms and conditions of
employment or termination of employment by any Employee, or
Retired Employee, and no audit or investigation by any
governmental or other law enforcement agency is pending or has
been proposed with respect to any CSK Plan.
(h) Except as disclosed on Schedule 3.9(h), no CSK Plan is subject
to Title IV of ERISA. Neither any of the CSK Parties nor any
Related Person has incurred any material liability under or
pursuant to Title I or IV of ERISA or the penalty, excise tax
or joint and several liability provisions of the Code relating
to employee benefit plans and, to the Knowledge of the CSK
Parties, no event or condition has occurred or exists which
could result in any material liability to a CSK Party, such
Related Person or the Company or G-P under or pursuant to
Title I or IV of ERISA or such penalty, excise tax or joint
and several liability provisions of the Code. No CSK Plan has
incurred an "accumulated funding deficiency" within the
meaning of such sections of the Code and ERISA, whether or not
waived; and no such CSK
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Plan has been terminated. Except as disclosed on Schedule
3.9(h), none of the CSK Parties contribute to, nor do they
have any obligation to contribute to, a multiemployer plan as
defined in Section 4001(a)(3) of ERISA with regard to the
Employees or Retired Employees.
(i) Each of the CSK Plans that is intended to be qualified under
Section 401(a) of the Code, and the trust, if any, forming a
part thereof, has received a favorable determination letter
from the Internal Revenue Service as to the qualification of
its form under the Code and to the effect that each such trust
is exempt from taxation under Section 501(a) of the Code and,
to the Knowledge of the CSK Parties, nothing has occurred
since the date of such determination letter that adversely
affects such qualification or tax-exempt status. Except as
disclosed in Schedule 3.9(i), all reports and other documents
required to be filed with any governmental agency or
distributed to plan participants or beneficiaries (including,
but not limited to, actuarial reports, audits or Tax Returns)
have been duly filed or distributed on a timely basis, and
copies thereof have been or will be furnished to G-P prior to
the Closing.
3.10 COMPLIANCE WITH LAWS. Except as set forth in Schedule 3.10, the WISCO
Business is being conducted in compliance with all Laws applicable to
the WISCO Business and, as of the Closing, the Company will have
(subject to obtaining the Consents) all Governmental Authorizations
necessary for the conduct of the WISCO Business as currently conducted,
except for such non-compliance or the failure to obtain such Consent or
Consents which would not have a Material Adverse Effect; it being
understood that nothing in this representation is intended to address
any compliance issue that is the subject of the representations and
warranties set forth in Sections 3.7, 3.8, 3.9, 3.11, 3.12, or 3.13
hereof, and that the CSK Parties make no representations in this
Section 3.10 as to the transferability or assignability of any such
Governmental Authorizations. None of the CSK Parties has received
written notice that any material Governmental Authorization may be
suspended, revoked, modified or canceled.
3.11 ENVIRONMENTAL MATTERS.
(a) Schedule 3.11(a) sets forth a list of all material
Environmental Permits in connection with the WISCO Business.
(b) Except as would not have a Material Adverse Effect, or as
disclosed on Schedule 3.11(b):
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(i) The Environmental Permits are all the permits,
licenses, certificates and authorizations of, and
registrations with, any of the Environmental
Authorities pursuant to the Environmental Laws
necessary to conduct the WISCO Business substantially
as presently conducted. The Environmental Permits are
in full force and effect and the CSK Parties are in
compliance in all respects thereunder. The
consummation of the transactions contemplated
hereunder will not require any renewal, consent,
amendment or other action in connection with any of
the Environmental Permits. The CSK Parties are in
compliance with the Environmental Laws applicable to
the conduct of the WISCO Business.
(ii) There is no claim, suit, action or other proceeding,
including appeals and applications for review,
outstanding or pending against any CSK Party pursuant
to any of the Environmental Laws Relating to the
WISCO Business.
(iii) No CSK Party has any liability for any release,
spill, leakage, pumping, emission, emptying,
discharge, injection, escape, leaching, disposal or
dumping of any Hazardous Substances on or from any of
the WISCO Real Property, except in such manner or
quantity as would not constitute a violation of any
of the Environmental Laws or Environmental Permits.
(iv) The CSK Parties have maintained all records in
respect of the WISCO Business required by the
Environmental Laws and Environmental Permits in the
manner and for the time periods so required.
(v) Since June 30, 1994, no CSK Party has received any
notice of investigation or non-compliance or written
order from any of the Environmental Authorities,
including any notice of contamination or clean-up
requirements, pursuant to any of the Environmental
Laws with respect to the WISCO Business.
3.12 INTELLECTUAL PROPERTY
(a) Schedule 3.12 sets forth a list and description (including the
country of registration) of all issued or registered foreign and domestic
Intellectual Property currently (or, to the Knowledge of the CSK Parties, within
the last 12 months) used in the WISCO Business (other than "shrink wrap"
consumer software licenses). No third party has rights in, or otherwise has the
right to restrict use of, WISCO Intellectual Property owned by any CSK Party,
and, to the Knowledge of the CSK Parties, no third party has rights in, or
otherwise has the right to restrict
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the Company's use of, the WISCO Intellectual Property owned by any CSK Party as
of and following the Closing.
(b) To the Knowledge of the CSK Parties, no product, component,
method, process, or material (including computer software) used, sold or
manufactured by the WISCO Business infringes on, misappropriates, or otherwise
violates a valid and enforceable intellectual property right of any other
Person.
(c) There are no demands, actions or proceedings pending or, to
the Knowledge of the CSK Parties, threatened, against the CSK Parties Relating
to the WISCO Business alleging infringement, misappropriation, or violation of
any intellectual property right of any other Person, and, to the Knowledge of
the CSK Parties, no Person is infringing, misappropriating, challenging or
violating, the Intellectual Property owned by any CSK Party, except for
challenges, infringements, misappropriation or violations which, individually or
in the aggregate, would not have a Material Adverse Effect.
(d) All of the WISCO Intellectual Property will be transferred to
the Company at Closing, except to the extent certain Intellectual Property used
by the CSK Parties to provide services under the Transition Services Agreement
is specifically excluded thereunder. The CSK Parties agree that Intellectual
Property provided under the Transition Services Agreement will be provided to
the Company on and after Closing on the same terms and conditions under which it
was available to the WISCO Business prior to the Closing in accordance with the
terms of the Transition Services Agreement.
(e) Schedule 3.12(e) sets forth the CSK Parties' efforts at
addressing the Year 2000 issue in the WISCO Business. The information set forth
therein is accurate as of the date hereof, in all material respects. The CSK
Parties have developed and begun implementing a Project Plan to remediate and/or
replace Computer Systems that are used or relied upon in the WISCO Business but
are not Year 2000 Ready. Such remediation and/or replacement is scheduled to be
completed in 1999.
3.13 LABOR MATTERS. Except as disclosed on Schedule 3.13:
(a) As of the date hereof, none of the CSK Parties is a party to
any labor or collective bargaining agreement or similar agreement with respect
to Employees of the WISCO Business, no such Employees are represented by any
labor organization and, to the Knowledge of the CSK Parties, there are no
organizing or de-certification activities (including any demand for recognition
or certification proceedings pending or threatened to be brought or filed with
the National Labor Relations Board or other labor relations tribunal) involving
the WISCO Business;
(b) As of the date hereof, there are no strikes, work stoppages,
slowdowns, lockouts, unfair labor practice charges pending or, to the Knowledge
of the CSK Parties, threatened against or involving the Employees of the WISCO
Business;
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(c) Within the 90-day period immediately preceding the Effective
Time, no Employee of the WISCO Business has been laid off or terminated for
reasons other than a discharge for cause, voluntary resignation or retirement.
(d) There are no complaints, charges, claims or grievances against
the CSK Parties pending or, to the Knowledge of the CSK Parties, threatened to
be brought or filed with any Governmental Authority, arbitrator or court based
on or arising out of the employment by the CSK Parties of any Employee of the
WISCO Business, except for those which, individually or in the aggregate, would
not have a Material Adverse Effect;
(e) The CSK Parties are in compliance with all Laws Relating to
the employment of labor, including all such Laws Relating to wages, hours,
collective bargaining, discrimination, civil rights, safety and health,
immigration, workers' compensation, layoffs, and the collection and payment of
withholding and/or Social Security Taxes and similar Taxes, except where the
failure to be in compliance would not have a Material Adverse Effect; and
(f) The CSK Parties have given all notices required to be given
prior to the Closing Date under the Worker Adjustment and Retraining
Notification Act, 29 U.S.C. Section 2101 et seq. ("WARN"), or under any similar
provision of any federal, state, regional, foreign, or local Law, rule, or
regulation (referred to collectively with WARN as "WARN Obligations") Relating
to any plant closing or mass layoff that occurred during the 90 days immediately
preceding the Effective Time and pertaining to the WISCO Business.
3.14 CONTRACTS. Schedule 3.14 sets forth a list, as of the date
hereof, of each Contract that is Related to the WISCO Business other than (a)
WISCO Leased Real Property, which are listed on Schedule 3.15, and collective
bargaining agreements which are listed on Schedule 3.13, (b) purchase orders or
similar agreements for the purchase or sale of goods or services in the ordinary
course of business, (c) confidentiality agreements entered into in the ordinary
course of business in connection with the purchase and sale of Inventory, and
(d) any Contract which requires a payment or imposes an obligation on either
party thereto of less than $1,000,000 in the aggregate. Schedule 3.14 also
identifies any Contract that contains a non-compete covenant or similar
provision that could materially restrict the Company in its conduct of the WISCO
Business following Closing, any employment agreement with any Employee of the
WISCO Business, any employment agreement included in the WISCO Contributed
Assets or WISCO Assumed Liabilities, any Contract between any Affiliates of CSK,
on one hand, and any of the CSK Parties or any of the WISCO Contributed
Subsidiaries, on the other, any agreements Related to payments in lieu of taxes,
any agreement or license Related to Intellectual Property (other than "shrink
wrap" consumer software licenses), leases and license agreements for any
Computer Systems (other than "shrink wrap" consumer software licenses), all
material agreements for telecommunications voice (including without limitation,
local, long distance and toll free service) and data services, Internet access,
hosting and use services. Schedule 3.14 also identifies any Contract concerning
any environmental liability with respect to the WISCO Business. Each Contract
set forth on Schedule 3.14 is a valid and binding agreement of the applicable
CSK Party and, to the Knowledge of the CSK Parties, is in full force and effect.
Except as otherwise provided in Schedule 3.14, no CSK Party is, and, to their
Knowledge, no
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other party thereto is, in default in any material respect under
any Contract listed on Schedule 3.14 or any collective bargaining agreement
listed on Schedule 3.13.
3.15 REAL ESTATE LEASES. Schedule 3.15 sets forth a list, as of the
date hereof, of each written WISCO Real Estate Lease with a term of more than
one month that is Related to the WISCO Business. Each WISCO Real Estate Lease
set forth on Schedule 3.15 is a valid and binding agreement of a CSK Party and
is in full force and effect. There are no defaults by the applicable CSK Party
under any WISCO Real Estate Lease listed on Schedule 3.15 which defaults have
not been cured or waived and which would, individually or in the aggregate, have
a Material Adverse Effect.
3.16 ENTIRE BUSINESS; TITLE TO PROPERTY.
(a) Except as set forth in Schedule 3.16(a) and Schedule 3.6(a),
the WISCO Contributed Assets, the assets held by the WISCO Contributed
Subsidiaries, the WISCO Retained Assets (including cash and cash accounts,
disbursement accounts, invested securities and other short and medium term
investments, the CSK Marks and CSK Plans, and WISCO's and CSK's insurance
policies), and the rights specifically provided or made available to the Company
under the Ancillary Agreements, include all of the buildings, machinery,
equipment and other assets (whether tangible or intangible) necessary for the
Company immediately after Closing to conduct in all material respects the WISCO
Business as conducted as of the date hereof, and as conducted during the
12-month period prior to the date hereof (subject to changes expressly permitted
by the terms hereof to be made after the date hereof); provided, however, that
no representation is made as to the assignability of Government Authorizations.
(b) A CSK Party has good (and, in the case of its Owned Real
Property, marketable) title to, or a valid and binding leasehold interest in,
the WISCO Contributed Assets, free and clear of all Encumbrances, except (i) as
set forth in Schedule 3.16(b), and (ii) any Permitted Encumbrances.
(c) The capital structure of each of the WISCO Contributed
Subsidiaries is as set forth in Schedule 3.16(c). The shares of stock or
membership interests, as applicable, of the WISCO Contributed Subsidiaries
included in the WISCO Contributed Assets constitute 100% of the issued and
outstanding shares of stock or membership interests, as applicable, of each
WISCO Contributed Subsidiary. All shares of stock , membership interests or
other form of ownership of the WISCO Contributed Subsidiaries included in the
WISCO Contributed Assets are validly issued, fully paid and non-assessable.
Except as set forth on Schedule 3.16(c), (i) there are no options, warrants, or
similar rights to purchase any of the shares or membership interests of any of
the WISCO Contributed Subsidiaries, and no obligations binding upon any WISCO
Contributed Subsidiary to issue, sell, redeem, purchase or exchange any of its
capital stock or membership interests or any right relating thereto, and (ii)
there are no shareholders' agreements, voting agreements, voting trusts or other
agreements or rights of third parties with respect to or affecting any of the
WISCO Contributed Subsidiaries or any of their shares of stock or membership
interests, as applicable. Wisconsin Tissue Management, LLC has entered into no
agreements and conducted no business and contains only those assets and
liabilities specifically set forth in
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Schedule 3.16(c), except, in each case, as set forth in the Human Resources
Agreement. WMex assumed no liabilities or obligations of any other CSK Party
Related to or arising from the sale of its capital stock to WISCO. CSK has
provided G-P with true and correct copies of all documentation Related to such
sale.
(d) The WISCO Contributed Assets and the assets of the WISCO
Contributed Subsidiaries are in good operating condition and repair (subject to
normal wear and tear). Except as set forth on Schedule 3.16(d), the CSK Parties
have no Knowledge of any material structural or mechanical defects with respect
to any buildings, improvements or equipment included in the WISCO Contributed
Assets, which defects are reasonably likely to have a Material Adverse Effect.
(e) None of the WISCO Owned Real Property or the WISCO Leased Real
Property or other assets of the WISCO Business (except as set forth in the
Transition Services Agreement) are owned, used or occupied in whole or in part
by CSK or any of its Affiliates other than in connection with the operation of
the WISCO Business.
3.17. FINDER'S FEES. Except for Salomon Smith Barney & Co., whose
fees will be paid by CSK, there is no investment banker, broker or finder which
has been retained by or is authorized to act on behalf of any CSK Party who
might be entitled to any fee or commission from G-P or the Company in connection
with the transactions contemplated by this Agreement.
3.18 INSURANCE. Schedule 3.18 attached hereto sets forth the
following information with respect to each insurance policy to which any CSK
Party or a WISCO Contributed Subsidiary, with respect to the WISCO Business, has
been a party, a named insured, or otherwise the beneficiary of coverage at any
time within the past five years:
(a) the name of the insurer, the name of the policyholder, and the name
of each covered insured;
(b) the scope, period and amount of coverage; and
(c) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
Schedule 3.18 also describes any self insurance arrangements affecting
the WISCO Business. As of the date hereof, no CSK Party has received any written
notice of any retroactive premium increase or assessment applicable to the WISCO
Business. Except as disclosed on Schedule 3.18, all of such policies are in full
force and effect.
3.19 NO UNDISCLOSED LIABILITIES. With respect to the WISCO Business
no CSK Party has any obligations or liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise, whether or not known to such CSK Party,
whether due or to become due and regardless of when asserted) arising out of
transactions entered into at or prior to the Closing, or any action or inaction
at or prior to the Closing, or any state of facts existing at or prior to the
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Closing other than: (a) liabilities set forth on the WISCO Financial Statements
(including any notes thereto, if any); (b) liabilities and obligations arising
from or in connection with matters disclosed pursuant to the CSK Parties'
representations and warranties in this Agreement or in the Disclosure Schedules
(none of which, except as set forth on Schedule 3.7, is a liability resulting
from a breach of contract, breach of warranty, tort, infringement claim or
lawsuit), other than liabilities and obligations arising from or in connection
with matters disclosed pursuant to Section 3.11; (c) liabilities and obligations
arising from or in connection with matters disclosed pursuant to Section 3.11;
(d) liabilities and obligations which have arisen after April 30, 1999 in the
ordinary course of business (none of which, except as set forth on Schedule 3.7,
is a liability resulting from a breach of contract, breach of warranty, tort,
infringement claim or lawsuit); and (e) such other liabilities or obligations
that do not have a Material Adverse Effect.
3.20 NO MATERIAL ADVERSE CHANGE. Except as disclosed on Schedule
3.20, since April 30, 1999, the CSK Parties have conducted the WISCO Business in
the ordinary course and in a manner consistent with the practices applied during
the periods specified in the WISCO Financial Statements, and there has been no
Material Adverse Effect in the WISCO Business. Except as set forth on Schedule
3.20, and except as such does not have a Material Adverse Effect, no CSK Party
has with respect to the WISCO Business:
(a) been a party to any corporate reorganization, restructuring or
merger or amalgamation or amended its certificate or articles of incorporation
or bylaws;
(b) declared or paid any dividend or declared or made any other
distribution (whether in cash, stock or property) on any of the shares of its
capital stock;
(c) incurred or discharged any obligation or liability (whether
accrued, absolute or contingent) other than in the ordinary course of and in a
manner consistent with past practices for the WISCO Business;
(d) entered into any transaction, contract, agreement, indenture,
instrument or commitment other than in the ordinary course of and in a manner
consistent with past practices for the WISCO Business;
(e) suffered or incurred any material damage, destruction, loss or
liability (whether or not covered by any insurance);
(f) experienced any strike, lockout or other labor trouble such as
slow down or work stoppage, or any loss of any of its key Employees, customers,
suppliers or distributors;
(g) suffered any shortage or cessation or interruption of raw
materials, supplies or utilities that could have a Material Adverse Effect on
the WISCO Business;
(h) made any change in its accounting principles, policies and
practices as utilized in the preparation of the WISCO Financial Statements;
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(i) made any loan or advance, or assumed, guaranteed, endorsed or
otherwise become liable with respect to the liabilities or obligations of any
other Person or entity, or permitted any of its assets to be subjected to any
lien or security interest (except for Permitted Encumbrances);
(j) granted to any customer any allowance or discount or changed
its pricing, credit or payment policies other than in the ordinary course of and
in a manner consistent with past practices for the WISCO Business (except for
non-material variations therefrom in the aggregate);
(k) incurred any indebtedness, liability or obligation (absolute,
accrued, contingent or otherwise) other than in the ordinary course of and in a
manner consistent with past practices for the WISCO Business;
(l) sold, leased or otherwise disposed of any of its assets or any
right, title or interest therein other than in the ordinary course of and in a
manner consistent with past practices for the WISCO Business;
(m) made any payment to, or for the benefit of, any present or
former Employee, director, officer or shareholder otherwise than at the regular
rates payable to them, by way of salary, pension, bonus or other remuneration
consistent with past practices for the WISCO Business;
(n) committed to any capital expenditure project or made any
investment, in either case in excess of Five Hundred Thousand Dollars ($500,000)
not disclosed to G-P prior to the date of this Agreement; or
(o) authorized or agreed to do any of the foregoing matters referred to
in this Section 3.20.
3.21 INDEBTEDNESS FOR BORROWED MONEY. There is no indebtedness for
borrowed money included in the WISCO Assumed Liabilities.
3.22 KNOWLEDGE AS OF CLOSING DATE. The CSK Parties have no Knowledge,
as of the Closing Date, that any representation or warranty made by G-P in
Article IV (and related schedules) is untrue.
3.23 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the
representations and warranties contained in this Article III, no CSK Party nor
any other Person makes any other express or implied representation or warranty
on behalf of the CSK Parties.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF G-P
G-P represents and warrants to the CSK Parties and the Company as
follows:
4.1 ORGANIZATION AND QUALIFICATION. G-P is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Georgia and has all requisite corporate power and authority to own and operate
the G-P Contributed Assets and to carry on the G-P Business as currently
conducted. G-P is duly qualified to do business and is in good standing as a
foreign corporation in the jurisdictions listed on Schedule 4.1, which are the
only jurisdictions where the ownership or operation of the G-P Contributed
Assets or the conduct of the G-P Business requires such qualification, except
where the failure to be so qualified would not have a Material Adverse Effect.
4.2 CORPORATE AUTHORIZATION. G-P has full corporate power and
authority to execute and deliver this Agreement, and to perform its obligations
hereunder and under any agreement or contract contemplated hereby, including the
Ancillary Agreements. The execution, delivery and performance by G-P of this
Agreement and the agreements and contracts contemplated hereby has been duly and
validly authorized by all necessary corporate action and no additional corporate
authorization is required in connection with the execution, delivery and
performance by G-P of this Agreement and the agreements and contracts
contemplated hereby.
4.3 CONSENTS AND APPROVALS. Except as specifically set forth in
Schedule 4.3 or as required by the HSR Act, no Consent is required to be
obtained by G-P from, and no notice or filing is required to be given by G-P to
or made by G-P with, any Governmental Authority or other Person or under any
Contract listed, or required to be listed, on Schedule 4.14 in connection with
the execution, delivery and performance by G-P of this Agreement, each of the
Ancillary Agreements, any other agreement or contract contemplated hereby and
the contribution of the G-P Contributed Assets, except where the failure to
obtain any such Consent or Consents, give any such notice or notices or make any
such filing or filings would not have a Material Adverse Effect.
4.4 NON-CONTRAVENTION. Except as set forth on Schedule 4.3, the
execution, delivery and performance by G-P of this Agreement and each of the
Ancillary Agreements, and the consummation of the transactions contemplated
hereby and thereby, does not and will not (i) violate any provision of the
certificate of incorporation or bylaws of G-P; (ii) subject to obtaining the
Consents referred to in Section 4.3, conflict with, or result in the breach of,
or constitute a default under, or result in the termination, cancellation or
acceleration (whether after the filing of notice or the lapse of time or both)
of any right or obligation of G-P under, or to a loss of any benefit to which
G-P is entitled under, any Contract or result in the creation of any Encumbrance
(other than a Permitted Encumbrance) upon any of the G-P Contributed Assets; or
(iii) assuming compliance with the matters set forth in Section 4.3, violate, or
result in a breach of or constitute a default under any Law, rule, regulation,
judgment, injunction, order, decree or other restriction of any court or
Governmental Authority to which G-P is subject, including any Governmental
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Authorization, except in each case, such matter or matters that would not have a
Material Adverse Effect.
4.5 BINDING EFFECT. This Agreement constitutes, and each of the
Ancillary Agreements when executed and delivered by the parties thereto will
constitute, a valid and legally binding obligation of G-P, enforceable with
respect to G-P in accordance with its terms, except as the enforceability
thereof may be limited or otherwise effected by bankruptcy, insolvency,
reorganization, moratorium and similar laws of general applicability Relating
to, or affecting, creditors rights and to general equity principles.
4.6 FINANCIAL STATEMENTS; ABSENCE OF CERTAIN CHANGES.
(a) Attached as Schedule 4.6(a) are the following financial
statements of the G-P Business: Unaudited Balance Sheet, Statement of Income and
Statement of Cash Flows, as of and for (i) the years ended December 31, 1997 and
1998 (the "G-P Annual Financial Statements"); and (ii) the period ended April
30, 1999 (the "G-P April Financial Statements"). (Collectively the financial
statements described in this Section 4.6(a) shall be referred to as the "G-P
Financial Statements.")
(b) Exhibit 3.6(b) sets forth the line items and a definition for
each such line item contained in each of the G-P Financial Statements.
(c) The G-P Financial Statements are true and correct in all
material respects, present fairly the combined financial position and results of
operation, divisional equity and cash flows of the G-P Business as of the dates
and for the periods presented, and were prepared in accordance with GAAP applied
on a basis consistent with past practice of the G-P Business. The G-P Financial
Statements reflect the underlying Books and Records of the G-P Business, which
are complete and accurate in all material respects. Except as described in the
footnotes to the G-P Financial Statements, consistent accounting policies and
accrual methods were used in all periods presented. All non-recurring or unusual
income or expense items over $500,000, as reflected in the 1998 Statement of
Income of G-P, have been disclosed in footnotes to the G-P Financial Statements.
(d) Except as described in the notes to the G-P Financial
Statements, all accounts receivable reflected on the G-P Financial Statements
are bona fide receivables, accounted for in accordance with GAAP (including,
without limitation, appropriate reserves), representing amounts due with respect
to actual transactions in the operation of the G-P Business; it being understood
that this representation shall not be deemed to constitute a warranty or
guaranty that all such accounts receivable shall be collected.
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4.7 LITIGATION AND CLAIMS. Except as disclosed on Schedule 4.7:
(a) There is no action (whether civil, criminal or
administrative), suit, demand, claim, dispute, hearing, proceeding (including
condemnation or other proceeding in eminent domain) or investigation pending or,
to the Knowledge of G-P, threatened, Related to the G-P Business or any of the
G-P Contributed Assets or included in the G-P Assumed Liabilities, that
individually or in the aggregate is reasonably expected to have a Material
Adverse Effect.
(b) None of the G-P Contributed Assets is subject to any order,
writ, judgment, award, injunction, or decree of or settlement enforceable in any
court or governmental or regulatory authority of competent jurisdiction or any
arbitrator or arbitrators.
4.8 TAXES. Except as disclosed on Schedule 4.8:
(a) G-P has duly and timely filed (or has caused to be duly and
timely filed) taking into account any valid extension of the time for filing,
each Tax Return required to be filed with any Tax Authority which includes or is
based upon the G-P Contributed Assets, or the operations, ownership or
activities of the G-P Business, and all Taxes due and payable (whether or not
shown on or required to be shown on a Tax Return) have been paid prior to their
due dates; provided, however, that the representations and warranties set forth
in this paragraph are made only to the extent that (i) such Taxes are or may
become Encumbrances on the G-P Contributed Assets, or (ii) the Company is or may
be liable in the capacity of transferee of the Contributed Assets.
(b) G-P has duly and timely filed (or has caused to be duly and
timely filed), taking into account any valid extension of the time for filing,
each Tax Return which includes or is based upon the assets, operations,
ownership or activities of the G-P Business, and all Taxes due and payable
(whether or not shown on or required to be shown on a Tax Return) have been paid
prior to their due dates.
(c) None of the G-P Contributed Assets (i) is subject to any lien
(other than a Permitted Encumbrance) arising in connection with any failure or
alleged failure to pay any Taxes, (ii) secures any debt the interest on which is
Tax-exempt under Section 103(a) of the Code, (iii) is required to be or is being
depreciated under the alternative depreciation system under Section 168(g)(2) of
the Code, (iv) is "limited use property" with the meaning of Revenue Procedure
76-30, or (v) will be treated as owned by any other Person pursuant to the
provisions of former Section 168(f)(8) of the Code.
(d) G-P (with respect to the G-P Business) has withheld and paid
all material Taxes required to have been withheld and paid in connection with
amounts paid or owing to any Employee, independent contractor, creditor,
shareholder or other party.
(e) There are no pending, proposed or, to the Knowledge of G-P,
threatened audits, assessments or claims from any Tax Authority for
deficiencies, penalties or interest against G-P (with respect to the G-P
Contributed Assets or the G-P Business or any of its assets, operations
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or activities); provided, however, that the representations and warranties set
forth in this paragraph are made only to the extent that (i) such Taxes are or
may become Encumbrances on the G-P Contributed Assets, or (ii) the Company is or
may be liable in the capacity of transferee of the Contributed Assets.
(f) None of the G-P Contributed Assets consists of any interest in
any entity classified as a partnership for United States federal income Tax
purposes.
(g) With respect to the G-P Business, G-P does not have and has
not had a permanent establishment in any foreign country, as defined in any
applicable Tax treaty or convention between the United States and such foreign
country.
4.9 EMPLOYEES, PENSION AND OTHER BENEFIT PLANS.
(a) Schedule 4.9(a) lists all the Employees who, as of October 1,
1999, were employed by G-P with respect to the G-P Business, together with their
respective positions, years of employment, and rates of remuneration, as of
August 20, 1999.
(b) Except as disclosed on Schedule 4.9(b), G-P is not a party to
nor does it sponsor, maintain, or contribute to any Employee Plans that provide
benefits to Employees or Retired Employees of the G-P Business.
(c) G-P has delivered to CSK true, complete and up-to-date copies
of all documents embodying the G-P Plans including, without limitation, all
amendments thereto, all funding agreements thereunder (including, but not
limited to, trust agreements), all summaries of such G-P Plans provided to any
of their Employees, directors, officers, shareholders or their dependents with
respect to the G-P Business, as well as the most recent valuation for each
defined contribution retirement plan maintained by G-P and the most recent
actuarial valuation for each of the G-P Plans for which such valuations are
required. G-P has delivered to CSK a complete written description of all
unwritten G-P Plans, and will deliver such other documentation with respect to
any G-P Plan as is reasonably requested by CSK.
(d) Except as disclosed on Schedule 4.6(a) or Schedule 4.9(d) or
as set forth in the Human Resources Agreement, the transactions contemplated by
this Agreement will not result in any additional payments to, or increase the
vested interest of, any Employee, Retired Employee, director, officer,
shareholder, or their dependents under any G-P Plan; and the transactions
contemplated by this Agreement will not result in any payment to any Employee or
Retired Employee, director, officer, or shareholder of G-P which will be subject
to Section 280G of the Code.
(e) Each G-P Plan has been established, maintained and
administered in substantial compliance with its terms and all related documents
or agreements and in substantial compliance with applicable provisions of ERISA,
the Code, and other applicable Laws.
(f) Except as disclosed on Schedule 4.9(f), all required employer
contributions, premium payments and employee contributions under the G-P Plans
have been made and
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remitted to the funding agents or accrued or booked thereunder within the time
prescribed by any such G-P Plan and the Laws. All insurance premiums required
with respect to any G-P Plan, including any premiums payable to the Pension
Benefit Guarantee Corporation, have been paid, made, accrued or booked within
the time prescribed by any such G-P Plan and the applicable Law. All benefits,
expenses and other amounts due and payable to or under any G-P Plan, have been
paid, made, accrued or booked within the time prescribed by any such G-P Plan
and the Laws. Except as disclosed on Schedule 4.9(f), all of the assets which
have been set aside in a trust or account (other than an account which is part
of G-P's general assets) to satisfy any obligation under any G-P Plan are shown
on the books and records of each such trust and each such account at their fair
market value, such current fair market value as of the last valuation date is
equal to or exceeds the present value of any obligation under the G-P Plan, and
the liabilities for all other obligations under any G-P Plan are accurately set
forth in the G-P Financial Statements.
(g) Except as disclosed on Schedule 4.9(g), there is no pending
or, to the Knowledge of G-P, threatened claim with respect to a G-P Plan (other
than routine and reasonable claims for benefits made in the ordinary course of
the G-P Business) or with respect to the terms and conditions of employment or
termination of employment by any Employee, or Retired Employee, and no audit or
investigation by any governmental or other law enforcement agency is pending or
has been proposed with respect to any G-P Plan.
(h) Except as disclosed on Schedule 4.9(h), no G-P Plan is subject
to Title IV of ERISA. Neither G-P nor any Related Person has incurred any
material liability under or pursuant to Title I or IV of ERISA or the penalty,
excise tax or joint and several liability provisions of the Code Relating to
employee benefit plans and, to the Knowledge of G-P, no event or condition has
occurred or exists which could result in any material liability to G-P, such
Related Person or the Company or a CSK Party under or pursuant to Title I or IV
of ERISA or such penalty, excise tax or joint and several liability provisions
of the Code. No G-P Plan has incurred an "accumulated funding deficiency" within
the meaning of such sections of the Code and ERISA, whether or not waived; and
no such G-P Plan has been terminated. Except as disclosed on Schedule 4.9(h),
G-P does not contribute to, or have any obligation to contribute to, a
multiemployer plan as defined in Section 4001(a)(3) of ERISA with regard to the
Employees or Retired Employees.
(i) Each of the G-P Plans that is intended to be qualified under
Section 401(a) of the Code, and the trust, if any, forming a part thereof, has
received a favorable determination letter from the Internal Revenue Service as
to the qualification of its form under the Code and to the effect that each such
trust is exempt from taxation under Section 501(a) of the Code and, to the
Knowledge of G-P nothing has occurred since the date of such determination
letter that adversely affects such qualification or tax-exempt status. Except as
disclosed in Schedule 4.9(i), all reports and other documents required to be
filed with any governmental agency or distributed to plan participants or
beneficiaries (including, but not limited to, actuarial reports, audits or Tax
Returns) have been duly filed or distributed on a timely basis, and copies
thereof have been or will be furnished to CSK upon reasonable request.
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4.10 COMPLIANCE WITH LAWS. Except as set forth in Schedule 4.10,
the G-P Business is being conducted in compliance with all applicable Laws to
the G-P Business and, as of the Closing, the Company will have (subject to
obtaining the Consents) all Governmental Authorizations necessary for the
conduct of the G-P Business as currently conducted, except for such
non-compliance or the failure to obtain such Consent or Consents which would not
have a Material Adverse Effect; it being understood that nothing in this
representation is intended to address any compliance issue that is the subject
of the representations and warranties set forth in Sections 4.7, 4.8, 4.9, 4.11,
4.12, or 4.13 hereof, and that G-P makes no representations in this Section 4.10
as to the transferability or assignability of any such Governmental
Authorizations. G-P has not received written notice that any Governmental
Authorization may be suspended, revoked, materially modified or canceled.
4.11 ENVIRONMENTAL MATTERS.
(a) Schedule 4.11(a) sets forth a list of all material Environmental
Permits in connection with the G-P Business.
(b) Except as would not have a Material Adverse Effect, or as
disclosed on Schedule 4.11(b):
(i) The Environmental Permits are all the permits, licenses,
certificates and authorizations of, and registrations with, any of the
Environmental Authorities pursuant to the Environmental Laws necessary to
conduct the G-P Business substantially as presently conducted. The Environmental
Permits are in full force and effect and G-P is in compliance in all respects
thereunder. The consummation of the transactions contemplated hereunder will not
require any renewal, consent, amendment or other action in connection with any
of the Environmental Permits. G-P is in compliance with the Environmental Laws
applicable to the conduct of the G-P Business.
(ii) There is no claim, suit, action or other proceeding,
including appeals and applications for review, outstanding or pending against
G-P pursuant to any of the Environmental Laws Relating to the G-P Business.
(iii) G-P has no liability for any release, spill, leakage,
pumping, emission, empty, discharge, injection, escape, leaching, disposal or
dumping of any Hazardous Substances on or from any of the G-P Real Property,
except in such manner or quantity as would not constitute a violation of any of
the Environmental Laws or Environmental Permits.
(iv) G-P has maintained all records in respect of the G-P
Business required by the Environmental Laws and Environmental Permits, in the
manner and for the time periods as so required.
(v) Since June 30, 1994, G-P has received no notice of
investigation or non-compliance or written order from any of the Environmental
Authorities, including any notice of contamination or clean-up requirements,
pursuant to any of the Environmental Laws with respect to the G-P Business.
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(c) G-P has no liability for release of PCB's and other Hazardous
Substances into the Fox River, Wisconsin or its associated waterways.
4.12 INTELLECTUAL PROPERTY.
(a) Schedule 4.12 sets forth a list and description (including the
country of registration) of all issued or registered U.S., Canadian and Mexican
patents and trademarks comprising the owned G-P Intellectual Property currently
(or, to the Knowledge of G-P, within the last 12 months) used in the G-P
Business (other than "shrink wrap" consumer software licenses). No third party
has rights in, or otherwise has the right to restrict G-P's use of, G-P
Intellectual Property owned by G-P, and, to G-P's Knowledge, no third party has
rights in, or otherwise has the right to restrict the Company's use of the G-P
Intellectual Property as of and following the Closing.
(b) To the Knowledge of G-P, no product, component, method,
process, or material (including computer software) used, sold or manufactured by
the G-P Business infringes on, misappropriates, or otherwise violates a valid
and enforceable intellectual property right of any other Person.
(c) There are no demands, actions or proceedings pending or, to
the Knowledge of G-P, threatened, against G-P Relating to the G-P Business
alleging infringement, misappropriation or violation of any intellectual
property right of any other Person, and, to the Knowledge of G-P, no Person is
infringing, misappropriating, challenging, or violating, the Intellectual
Property owned by G-P, except for challenges, infringements, misappropriation or
violations which, individually or in the aggregate, would not have a Material
Adverse Effect.
(d) All of the G-P Intellectual Property will be licensed to the
Company at Closing, except to the extent certain Intellectual Property used by
G-P to provide services under the Operational Support Agreement is specifically
excluded thereunder. G-P agrees that Intellectual Property provided under the
Operational Support Agreement will be provided to the Company on and after
Closing on the same terms and conditions under which it was available to the G-P
Business prior to the Closing in accordance with the terms of the Transition
Services Agreement.
(e) Schedule 4.12(e) sets forth G-P's efforts at addressing the
Year 2000 issue in the G-P Business. The information set forth therein is
accurate as of the date hereof, in all material respects. G-P has developed and
begun implementing a Project Plan to remediate and/or replace Computer Systems
that are used or relied upon in the G-P Business but are not Year 2000 Ready.
Such remediation and/or replacement is scheduled to be completed in 1999.
4.13 LABOR MATTERS. Except as disclosed on Schedule 4.13:
(a) As of the date hereof, G-P is not a party to any labor or
collective bargaining agreement or similar agreement with respect to Employees
of the G-P Business, no such Employees are represented by any labor organization
and, to the Knowledge of G-P, there are no organizing or de-certification
activities (including any demand for recognition or certification
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proceedings pending or threatened to be brought or filed with the National Labor
Relations Board or other labor relations tribunal) involving the G-P Business;
(b) As of the date hereof, there are no strikes, work stoppages,
slowdowns, lockouts, unfair labor practice charges pending or, to the Knowledge
of G-P, threatened against or involving the Employees of the G-P Business;
(c) There are no complaints, charges, claims or grievances against G-P
pending or, to the Knowledge of G-P, threatened to be brought or filed with any
Governmental Authority, arbitrator or court based on or arising out of the
employment by G-P of any Employee of the G-P Business, except for those which,
individually or in the aggregate, would not have a Material Adverse Effect;
(d) G-P is in compliance with all Laws Relating to the employment of
labor, including all such Laws Relating to wages, hours, collective bargaining,
discrimination, civil rights, safety and health, immigration, workers'
compensation, layoffs, and the collection and payment of withholding and/or
Social Security Taxes and similar Taxes, except where the failure to be in
compliance would not have a Material Adverse Effect; and
(e) G-P has given all notices required to be given prior to the Closing
Date under WARN Obligations Relating to any plant closing or mass layoff that
occurred during the 90 days immediately preceding the Effective Time pertaining
to the G-P Business.
4.14 CONTRACTS. Schedule 4.14 sets forth a list, as of the date hereof,
of each Contract that is Related to the G-P Business other than (a) G-P Real
Property Leases, which are listed on Schedule 4.15, and collective bargaining
agreements, which are listed on Schedule 4.13, (b) purchase orders or similar
agreements for the purchase or sale of goods or services in the ordinary course
of business, (c) confidentiality agreements entered into in the ordinary course
of business in connection with the purchase and sale of Inventory, and (d) any
Contract which requires a payment or imposes an obligation on either party
thereto of less than $1,000,000 in the aggregate. Schedule 4.14 also identifies
any Contract that contains a non-compete covenant or similar provision that
could materially restrict the Company in its conduct of the G-P Business
following Closing, any employment agreement with any Employee of the G-P
Business, any employment agreement included in the G-P Contributed Assets or G-P
Assumed Liabilities, any Contract between any Affiliates of G-P, on one hand,
and G-P on the other hand, any agreements Related to payments in lieu of taxes,
any agreement or license Related to Intellectual Property (other than "shrink
wrap" consumer software licenses), leases and license agreements for any
Computer Systems (other than "shrink wrap" consumer software licenses), all
material agreements for telecommunications voice (including without limitation,
local, long distance and toll free service) and data services, Internet access,
hosting and use services. Each Contract set forth on Schedule 4.14 is a valid
and binding agreement of G-P and, to the Knowledge of G-P, is in full force and
effect. Except as otherwise provided in Schedule 4.14, G-P is not, and, to G-P's
Knowledge, no other party thereto is, in default in any material respect under
any Contract listed on Schedule 4.14 or any collective bargaining agreement
listed on Schedule 4.13.
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4.15 REAL ESTATE LEASES. Schedule 4.15 sets forth a list, as of the
date hereof, of each material written G-P Real Estate Lease with a term of more
than one month that is Related to the G-P Business. Each G-P Real Estate Lease
set forth on Schedule 4.15 is a valid and binding agreement of G-P and is in
full force and effect. There are no defaults under any G-P Real Estate Lease
listed on Schedule 4.15 which defaults have not been cured or waived and which
would, individually or in the aggregate, have a Material Adverse Effect.
4.16 ENTIRE BUSINESS; TITLE TO PROPERTY
(a) Except as set forth in Schedule 4.16(a) and Schedule 4.6(a),
the G-P Contributed Assets, the G-P Retained Assets (including cash and cash
accounts, disbursement accounts, invested securities and other short and medium
term investments, the G-P Marks, the G-P Plans, and G-P's insurance policies),
and the rights specifically provided or made available to the Company under the
Ancillary Agreements, include all of the buildings, machinery, equipment and
other assets (whether tangible or intangible) necessary for the Company
immediately after Closing to conduct in all material respects the G-P Business
as conducted as of the date hereof, and as conducted during the 12-month period
prior to the date hereof (subject to changes expressly permitted by the terms
hereof to be made after the date hereof); provided, however, that no
representation is made as to the assignability of Government Authorizations.
(b) G-P has good (and, in the case of its Owned Real Property,
marketable) title to, or a valid and binding leasehold interest in, the G-P
Contributed Assets, free and clear of all Encumbrances, except (i) as set forth
in Schedule 4.16(b) and (ii) any Permitted Encumbrances.
(c) G-P Contributed Assets do not include any equity interest in
any Subsidiary.
(d) The G-P Contributed Assets are in good operating condition and
repair (subject to normal wear and tear). Except as set forth on Schedule
4.16(d), to G-P's Knowledge, there are no material structural or mechanical
defects with respect to any buildings, improvements or equipment included in the
G-P Contributed Assets, which defects are reasonably likely to have a Material
Adverse Effect.
4.17 FINDER'S FEES. Except for Morgan Stanley Dean Witter Co.,
whose fees will be paid by G-P, there is no investment banker, broker or finder
which has been retained by or is authorized to act on behalf of G-P who might be
entitled to any fee or commission from G-P or the Company in connection with the
transactions contemplated by this Agreement.
4.18 INSURANCE. Schedule 4.18 attached hereto sets forth the
following information with respect to each insurance policy to which G-P, with
respect to the G-P Business, has been a party, a named insured, or otherwise the
beneficiary of coverage at any time with in the past five years:
(a) the name of the insurer, the name of the policyholder, and the name
of each covered insured;
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(b) the scope, period and amount of coverage; and
(c) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
Schedule 4.18 also describes any self insurance arrangements affecting the G-P
Business. As of the date hereof, G-P has not received any written notice of any
retroactive premium increase or assessment applicable to the G-P Business.
Except as disclosed on Schedule 4.18, all of such policies are in full force and
effect.
4.19 NO UNDISCLOSED LIABILITIES. With respect to the G-P Business,
G-P does not have any obligations or liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise, whether or not known to G-P, whether due
or to become due and regardless of when asserted) arising out of transactions
entered into at or prior to the Closing, or any action or inaction at or prior
to the Closing, or any state of facts existing at or prior to the Closing other
than: (a) liabilities set forth on G-P's Financial Statements (including any
notes thereto, if any); (b) liabilities and obligations arising from or in
connection with matters disclosed pursuant to G-P's representations and
warranties in this Agreement or in the Disclosure Schedules (none of which,
except as set forth on Schedule 4.7, is a liability resulting from a breach of
contract, breach of warranty, tort, infringement claim or lawsuit), other than
liabilities and obligations arising from or in connection with matters disclosed
pursuant to Section 4.11; (c) liabilities and obligations arising from or in
connection with matters disclosed pursuant to Section 4.11; (d) liabilities and
obligations which have arisen after April 30, 1999 in the ordinary course of
business (none of which, except as set forth on Schedule 4.7, is a liability
resulting from a breach of contract, breach of warranty, tort, infringement
claim or lawsuit); and (e) such other liabilities or obligations that do not
have a Material Adverse Effect.
4.20 NO MATERIAL ADVERSE CHANGE. Except as disclosed on Schedule 4.20,
since April 30, 1999, G-P has conducted the G-P Business in the ordinary course
and in a manner consistent with the practices applied during the periods
specified in the G-P Financial Statements, and there has been no Material
Adverse Effect in the G-P Business. Except as set forth on Schedule 4.20, and
except as such does not have a Material Adverse Effect, G-P has not with respect
to the G-P Business:
(a) been a party to any corporate reorganization, restructuring or
merger or amalgamation or amended its certificate or articles of incorporation
or bylaws;
(b) declared or paid any dividend or declared or made any other
distribution (whether in cash, stock or property) on any of the shares of its
capital stock;
(c) incurred or discharged any obligation or liability (whether
accrued, absolute or contingent) other than in the ordinary course of and in a
manner consistent with past practices for the G-P Business;
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(d) entered into any transaction, contract, agreement, indenture,
instrument or commitment other than in the ordinary course of and in a manner
consistent with past practices for the G-P Business;
(e) suffered or incurred any material damage, destruction, loss or
liability (whether or not covered by any insurance);
(f) experienced any strike, lockout or other labor trouble such as slow
down or work stoppage, or any loss of any of its key Employees, customers,
suppliers or distributors;
(g) suffered any shortage or cessation or interruption of raw
materials, supplies or utilities that could have a Material Adverse Effect on
the G-P Business;
(h) made any change in its accounting principles, policies and
practices as utilized in the preparation of the G-P Financial Statements;
(i) made any loan or advance, or assumed, guaranteed, endorsed or
otherwise become liable with respect to the liabilities or obligations of any
other Person or entity, or permitted any of its assets to be subjected to any
lien or security interest (except for Permitted Encumbrances);
(j) granted to any customer any allowance or discount or changed its
pricing, credit or payment policies other than in the ordinary course of and in
a manner consistent with past practices for the G-P Business (except for
non-material variations therefrom in the aggregate;
(k) incurred any indebtedness, liability or obligation (absolute,
accrued, contingent or otherwise) other than in the ordinary course of and in a
manner consistent with past practices for the G-P Business;
(l) sold, leased or otherwise disposed of any of its assets or any
right, title or interest therein other than in the ordinary course of and in a
manner consistent with past practices for the G-P Business;
(m) made any payment to, or for the benefit of, any present or former
Employee, director, officer or shareholder otherwise than at the regular rates
payable to them, by way of salary, pension, bonus or other remuneration
consistent with past practices for the G-P Business;
(n) committed to any capital expenditure project or made any
investment, in either case in excess of Five Hundred Thousand Dollars ($500,000)
not disclosed to CSK prior to the date of this Agreement; or
(o) authorized or agreed to do any of the foregoing matters referred to
in this Section 4.20.
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4.21 INDEBTEDNESS FOR BORROWED MONEY There is no indebtedness for
borrowed money included in the G-P Assumed Liabilities.
4.22 KNOWLEDGE AS OF CLOSING DATE. G-P has no Knowledge, as of the
Closing Date, that any representation or warranty made by the CSK Parties in
Article III (and related schedules) is untrue.
4.23 ORGANIZATION OF COMPANY. The Company is a limited liability
company, duly organized, validly existing and in good standing under the laws of
the State of Delaware.
4.24 AUTHORIZATION OF COMPANY. The Company has full limited liability
company power and authority to execute and deliver this Agreement, and to
perform its obligations hereunder and under any agreement or contract
contemplated hereby, including the Ancillary Agreements. The execution, delivery
and performance by the Company of this Agreement and the agreements and
contracts contemplated hereby has been duly and validly authorized and no
additional limited liability company authorization or consent is required in
connection with the execution, delivery and performance by the Company of this
Agreement and the agreements and contracts contemplated hereby.
4.25 ACTIVITIES OF COMPANY. Other than entering into this Agreement and
the agreements and contracts contemplated hereby, the Company has not entered
into any agreements or conducted any other business.
4.26 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the
representations and warranties contained in this Article IV, neither G-P, nor
any other Person makes any other express or implied representation or warranty
on behalf of G-P.
ARTICLE V
COVENANTS
5.1 COVENANTS REGARDING EMPLOYEES.
(a) At the Closing, G-P, the CSK Parties and the Company shall enter
into the Human Resources Agreement, and shall take all actions required by them
pursuant to such Human Resources Agreement.
(b) CSK shall retain sponsorship of the CSK Plans, and neither the
Company nor G-P shall be entitled to any assets or be liable for any obligations
of the CSK Plans except as provided in the Human Resources Agreement.
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(c) G-P shall retain sponsorship of the G-P Plans and no CSK Party
shall be entitled to any assets or be liable for any obligations of the G-P
Plans except as provided in the Human Resources Agreement.
5.2 COMPLIANCE WITH WARN AND SIMILAR LAWS. The Company will timely give
all notices required to be given with respect to WARN Obligations Relating to
actions taken on and after the Closing Date.
5.3 FURTHER ASSURANCES. At any time after the Closing Date, the CSK
Parties, G-P and the Company shall promptly execute, acknowledge and deliver any
other assurances or documents reasonably requested by the Company, G-P or the
CSK Parties, as the case may be, and necessary for them or it to satisfy their
or its respective obligations hereunder or obtain the benefits contemplated
hereby. Without limiting the generality of the foregoing, the Company agrees
that if any of the Contributed Subsidiaries are found to own assets that are not
part of the WISCO Contributed Assets, or if any Retained Assets are
inadvertently transferred to the Company, the Company shall transfer such assets
to G-P or the appropriate CSK Party, as applicable, at G-P's or such CSK Party's
expense, as applicable, but without consideration. If after the Closing either
the Company, a CSK Party or G-P identifies any assets of any CSK Party or G-P
that Relates to the Business and is not a Retained Asset of the CSK Party or GP,
the party retaining any such assets shall transfer such assets to the Company at
the transferring party's expense without further consideration.
5.4 USE OF G-P INTELLECTUAL PROPERTY AND CSK MARKS. At Closing, G-P
shall provide to the Company a non-exclusive license, substantially in the form
set forth in Schedule 5.4(a) hereto, to use the G-P Intellectual Property.
5.5 CERTAIN MATTERS RELATED TO RETAINED AND ASSUMED LIABILITIES.
(a) With respect to all Retained Liabilities and in particular
indemnification under Sections 7.2(a)(ii) and 7.3(a)(ii), the Company shall, at
the expense of the CSK Parties or G-P as applicable, provide reasonable
cooperation including providing the CSK Parties or G-P, as applicable, as
promptly as practicable with any notices and other information received by the
Company as well as all relevant materials, information and data requested by the
CSK Parties or G-P, as applicable, including reasonable access (without charge)
to Employees of the Company and to the Real Property.
(b) With respect to all Assumed Liabilities, G-P or the CSK Parties,
as the case may be, shall, at the Company's expense, reasonably cooperate with
the Company, provide the Company as promptly as possible with any notices and
other information received by such parties as well as all relevant materials,
information and data requested by the Company and shall grant the Company,
without charge, reasonable access to Employees of the CSK Parties or G-P, as
applicable.
5.6 INTERCOMPANY AGREEMENTS.
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(a) As of the Effective Time, G-P shall terminate and shall cause its
Affiliates to terminate, any and all agreements between G-P and its Affiliates
to the extent such agreements Relate to the G-P Business, except as contemplated
in the Ancillary Agreements. Without limiting the foregoing, all intercompany
loans between G-P and any of its Affiliates Relating to the G-P Business shall
be paid or otherwise eliminated prior to the Effective Time.
(b) As of the Effective Time, the CSK Parties shall terminate and shall
cause its Affiliates to terminate, any and all agreements between any of the CSK
Parties and its Affiliates to the extent such agreements Relate to the WISCO
Business, except as contemplated in the Ancillary Agreements. Without limiting
the foregoing, all intercompany loans between the CSK Parties and any of its
Affiliates Relating to the WISCO Business shall be paid or otherwise eliminated
prior to the Effective Time.
5.7 RECORDS AND RETENTION AND ACCESS. The Company shall keep and
preserve in an organized and retrievable manner the Books and Records it
receives from either party for at least seven years from the Closing Date. The
Company shall neither dispose of nor destroy such Books and Records without
first offering to turn over possession thereof to the party that contributed
such Books and Records by written notice to such party at least thirty (30) days
prior to the proposed date of such disposition or destruction. While such Books
and Records remain in existence, each party shall allow the other party, its
representatives, attorneys and accountants, at the requesting party's expense,
access to the Books and Records upon reasonable request and advance notice and
during normal business hours for the purpose of interviewing, examining and
copying in connection with such parties' preparation of financial statements.
5.8 INSURANCE.
(a) G-P and the CSK Parties shall use commercially reasonable efforts
to assign to the Company, to the fullest extent, all of the benefits and rights
under any insurance policies held by them and/or any of their Affiliates with
respect to any Losses arising out of, Related to or in connection with the
Contributed Assets, the Assumed Liabilities and their respective Businesses
(other than benefits and rights to the extent Related to Retained Assets or
Liabilities) with respect to events occurring prior to the Closing Date (it
being understood that to the extent rights under such insurance policies include
claims for Losses related to Contributed Assets, then such claims shall be
reflected as an insurance receivable on the Closing Working Capital Statement).
The Company shall have the right to such benefits and rights only to the extent
actually paid or payable, and exclusive of any deductibles (including pass
through deductibles for which either party or any Affiliate of such party is
required to reimburse the insurer). To the extent such assignment is not
permitted, G-P or the CSK Parties, as applicable, shall use commercially
reasonable efforts on the Company's behalf to obtain such proceeds or benefits
for the Company, or otherwise to provide the Company with the benefit equivalent
to that which would have been available had such assignment been permitted.
(b) The CSK Parties and G-P shall cooperate with the Company in
obtaining insurance policies for the Business to be in effect from and after
Closing. Notwithstanding such
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assistance, all decisions with respect to such policies shall be made solely by
the Company, and neither the CSK Parties nor G-P shall have any liability,
whether to the Company or to any other Person, whether as an advisor, broker or
otherwise, under any other theory, in connection with providing such assistance
and cooperation. The CSK Parties and G-P make no assurances whatsoever with
respect to such insurance coverage, including the availability or price thereof.
5.9 SPECIAL CSK RETAINED LIABILITY. Notwithstanding Section 2.1(a)
hereof, CSK shall retain and be solely responsible for, and CSK and WISCO shall
indemnify and hold harmless the Company, G-P and all G-P Affiliates from and
against, any and all costs, liabilities, damages, expenses or Losses of any kind
whatsoever which may be incurred by or assessed against any of them arising out
of or in any way related to the release, spill, leak, pumping, pouring,
emitting, emptying, discharge, injecting, escaping, leaching, dumping, disposal
or arranging for disposal (hereinafter "release") of (i) PCBs and/or any other
Hazardous Substance into, on or around the Fox River in Wisconsin and its
associated waterways by any CSK Parties, and (ii) PCBs into, on or around any
landfill, disposal site or dump located in Wisconsin, by CSK, WISCO or any of
their Affiliates or successors or predecessors in interest (the "Fox River
Liability"). The Company shall provide reasonable cooperation to CSK, WISCO and
their predecessors or successors in interest in their defense of any liability
for the release of PCBs and/or other Hazardous Substances into, on or around the
Fox River and its associated waterways, and all costs incurred by the Company in
so cooperating will be reimbursed to it by CSK or WISCO. Such indemnification
shall not be limited by any Survival Period, Deductible or WISCO Cap set forth
in Article VII. For purposes of this Section 5.9, the term "Fox River Liability"
shall not include liability for dumping or disposal of Hazardous Substances by
WISCO at the Vinland #1 and #2 disposal sites owned by WISCO.
5.10 PREPARATION OF REGISTRATION STATEMENT. As soon as practicable
after the execution and delivery of this Agreement, the Company and G-P shall
prepare and file with the Securities and Exchange Commission the Registration
Statement in connection with the registration under the Securities Act of debt
to be incurred by the Company to refinance the Company Debt. The CSK Parties
each shall cooperate to the extent such cooperation is reasonably required to
file such Registration Statement; provided that the CSK Parties shall not be
required to execute any documents other than a WISCO debt indemnity as
contemplated in the Operating Agreement.
5.11 USE OF WISCO NAME. As soon as practicable and in any event within
three months following the Closing, WISCO shall change its corporate name, and
immediately following the Closing neither WISCO, CSK nor any Subsidiary or
Affiliate of CSK shall make use of the names "Wisconsin Tissue Mills",
"Wisconsin Tissue" or "WISCO" or any names confusingly similar to such names
other than in connection with the defense of litigation.
5.12 PRORATION OF CERTAIN CHARGES. The following charges and payments
may be prorated on a per diem basis and apportioned between each party
transferring Contributed Assets on the one hand and the Company on the other, as
of the Closing Date: property taxes, utility charges, prepaid items, license and
permit fees, and similar charges imposed with respect to the Contributed Assets.
To the extent not reflected on the Final Working Capital Statement, each
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party transferring Contributed Assets shall be liable for (and shall reimburse
the Company to the extent the Company shall have paid) that portion of such
charges Relating to, or arising in respect to, periods on or prior to the
Closing Date, and the Company shall be liable for (and shall reimburse the Party
contributing such assets to the extent the contributing party shall have paid)
that portion of the charges Relating to, or arising in respect to, periods after
the Closing Date.
ARTICLE VI
CONDITIONS TO CLOSING
[Intentionally Deleted]
ARTICLE VII
SURVIVAL; INDEMNIFICATION
7.1 SURVIVAL. The representations and warranties contained in this
Agreement shall survive the Closing (regardless of any investigation, inquiry or
examination made by or on behalf of, or any Knowledge of any party hereto or the
acceptance of any party or on its behalf of a certificate and opinion) for the
respective periods (each, a "Survival Period") set forth in this Section 7.1.
All of the representations and warranties of the CSK Parties and G-P contained
in this Agreement and all claims and causes of action with respect thereto shall
terminate on April 30, 2001, except that (a) the representations and warranties
set forth in Section 3.11, 3.19(c) and 4.11(a)-(b) shall terminate upon the
expiration of the 36 month period commencing on the Closing Date, (b) the
representations and warranties set forth in Sections 3.8, 3.9, 3.12, and 4.8,
4.9, and 4.12 shall survive until the expiration of the applicable statute of
limitation (including any extension thereof), and (c) the representations and
warranties set forth in Sections 3.1, 3.2, 3.5, 3.17, and 4.1, 4.2, 4.5,
4.11(c), and 4.17 shall have no expiration date. Any claim for indemnification
for breach of a representation and warranty must be made during the applicable
Survival Period. In the event notice (within the meaning of Section 7.5(a)) of
any claim for indemnification for a breach of a representation or warranty is
given within the applicable Survival Period, an Indemnifying Party's obligations
with respect to such indemnification claim shall survive until such time as such
claim is finally resolved.
7.2 INDEMNIFICATION BY G-P.
(a) G-P shall indemnify, defend and hold harmless CSK, WISCO, their
Affiliates and, if applicable, their respective directors, officers,
shareholders, partners, members, attorneys, accountants, agents and Employees
and their heirs, successors and assigns (the "WISCO Indemnified Parties") and
the Company from, against and in respect of any damages, claims, losses,
charges, actions, suits, proceedings, deficiencies, Taxes, interest, penalties,
and reasonable costs and expenses (including reasonable attorneys' fees, removal
costs, remediation costs, closure costs, fines, penalties and expenses of
investigation and ongoing monitoring) (collectively, the "Losses") imposed on,
sustained, incurred or suffered by or asserted against any
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of the WISCO Indemnified Parties or the Company, directly or indirectly,
Relating to or arising out of:
(i) subject to Section 7.2(b), any breach of any representation or
warranty made by G-P in this Agreement;
(ii) the G-P Retained Liabilities; and
(iii) the breach of any covenant or agreement of G-P contained in
this Agreement.
(b) G-P shall not be liable to the WISCO Indemnified Parties or the
Company for any Losses with respect to the matters contained in Section
7.2(a)(i) (other than the representation in Section 4.6) until the Losses
therefrom first exceed an aggregate amount equal to $3,760,000 (the "G-P
Deductible"), and in that event, G-P shall be liable for all Losses in excess
thereof up to an aggregate amount equal to 50% of the value of the G-P Business
as set forth in Section 2.8(a) hereof (the "G-P Cap"); PROVIDED, HOWEVER, that
the G-P Deductible and the G-P Cap shall not apply to claims arising out of the
breach of a representation or warranty, if such representation or warranty was
made fraudulently by G-P or if such representation or warranty was, to the
Knowledge of G-P, false at the time made.
7.3 INDEMNIFICATION BY CSK.
(a) CSK and its Affiliates shall indemnify, defend and hold harmless
G-P, its Affiliates and, if applicable, their respective directors, officers,
shareholders, partners, members, lenders, attorneys, accountants, agents and
Employees and their heirs, successors and assigns (the "G-P Indemnified
Parties") and the Company from, against and in respect and to the extent of any
Losses imposed on, sustained, incurred or suffered by or asserted against each
of the G-P Indemnified Parties or the Company, directly or indirectly, Relating
to or arising out of:
(i) subject to Section 7.3(b), any breach of any representation or
warranty made by any CSK Party in this Agreement;
(ii) the WISCO Retained Liabilities; and
(iii) the breach of any covenant or agreement of any CSK Party
contained in this Agreement.
(b) CSK shall not be liable to the G-P Indemnified Parties or the
Company for any Losses with respect to the matters contained in Section
7.3(a)(i) (other than the representation in Section 3.6) until the Losses
therefrom first exceed an aggregate amount equal to $7,750,000 (the "WISCO
Deductible"), and in that event, WISCO shall be liable for all Losses in excess
thereof paid or suffered by G-P or the Company up to an aggregate amount equal
to 50% of the value of the WISCO Business as set forth in Section 2.8 hereof
(the "WISCO Cap"); PROVIDED, HOWEVER, that the WISCO Deductible and the WISCO
Cap shall not apply to claims arising out of the
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breach of a representation or warranty, if such representation or warranty was
made fraudulently by WISCO or if such representation or warranty was, to the
Knowledge of WISCO, false at the time made.
7.4 INDEMNIFICATION BY THE COMPANY.
The Company shall indemnify, defend and hold harmless the G-P
Indemnified Parties or the WISCO Indemnified Parties, as the case may be, from
and against and in respect and to the extent of any Losses imposed on,
sustained, incurred or suffered by or asserted against either the G-P
Indemnified Parties or the WISCO Indemnified Parties, directly or indirectly,
Relating to or arising out of (i) the breach of any covenant or agreement of the
Company in this Agreement; or (ii) the Assumed Liabilities; provided that the
Company shall have no indemnification obligations hereunder for any Losses
resulting from a payment of a claim made pursuant to clauses (i) and (ii) above
and incurred or suffered by any Person solely in such Person's capacity as a
member of the Company, equity owner or debt holder of the Company, including
Losses for diminution of the value of such equity, debt or member interest.
7.5 INDEMNIFICATION PROCEDURES.
(a) Any Indemnified Person making a claim for indemnification pursuant
to Section 7.2, 7.3 or 7.4 above (an "Indemnified Party") must give the party
from whom indemnification is sought (an "Indemnifying Party") notice of such
claim (in a manner consistent with Section 10.1 hereof) describing such claim
with reasonable particularity and the nature and amount of the Loss to the
extent that the nature and amount of such Loss is known at such time (an
"Indemnification Claim Notice") promptly after the Indemnified Party receives
any written notice of any action, lawsuit, proceeding, investigation or other
claim (a "Proceeding") against or involving the Indemnified Party by a
Governmental Authority or other third party or otherwise discovers the
liability, obligations or facts giving rise to such claim for indemnification;
provided that the failure to notify or delay in notifying an Indemnifying Party
will not relieve the Indemnifying Party of its obligations pursuant to Section
7.2, 7.3 or 7.4, as applicable, except to the extent that (and only to the
extent that) such failure shall have (i) caused or materially increased the
Indemnifying Party's liability, (ii) resulted in the forfeiture by the
Indemnifying Party of substantial rights and defenses or (iii) otherwise
materially prejudiced the Indemnifying Party.
(b) The Indemnifying Party shall have 30 days from the date the
Indemnification Claim Notice is deemed given pursuant to Section 10.1 hereof
(the "Notice Period") to notify the Indemnified Party (i) whether or not the
Indemnifying Party disputes the liability of the Indemnifying Party to the
Indemnified Party with respect to such claim or demand and (ii) whether or not
it desires to defend the Indemnified Party against such claim or demand.
(c) If (i) the Indemnifying Party agrees in writing that the subject
matter of the claim is subject to indemnification under this Article VII and
(ii) the claim for indemnification does not relate to a matter (A) that, if
determined adversely, could reasonably be expected to expose the Indemnified
Party to criminal prosecution or penalties, (B) that, if determined adversely,
could
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reasonably be expected to result in the imposition of a consent order,
injunction or decree which would significantly restrict the activity or conduct
of the Indemnified Party or any Affiliate thereof, or (C) as to which the
Indemnified Party shall have reasonably concluded, in good faith, after
consultation with the Indemnifying Party, that such representation is likely to
result in a conflict of interest or materially jeopardize the viability of such
defense, then the Indemnifying Party shall have the right to defend the
Indemnified Party by appropriate proceedings and shall have the sole power to
direct and control such defense. If any Indemnified Party desires to participate
in any such defense, it may do so at its sole cost and expense.
(d) If the claim relates to a matter for which both the Indemnifying
Party and any Indemnified Party could be liable or responsible hereunder, such
as a Loss for which both parties could be partially liable due to the applicable
Cap and the Deductible, the Indemnifying Party and the Indemnified Parties shall
cooperate in good faith in the defense of such action. In such event, no party
shall settle any claim without the prior consent of the other party (which
consent shall not be unreasonably withheld); provided, however, that neither an
Indemnified Party nor an Indemnifying Party shall be required to consent to any
settlement if the proposed settlement (i) does not provide for a full release of
all claims against such party, (ii) is on a basis which would result in the
imposition of a consent order, injunction or decree or any other restriction on
the activity or conduct of such party, or (iii) is on a basis which could, in
such party's judgment, expose such party to criminal liability or requires an
admission of wrongdoing by such party. If an Indemnified Party or an
Indemnifying Party does not consent to a definitive settlement proposed by the
other party (with respect to which a settlement agreement has been agreed to by
all parties other than such party) which settlement satisfies the foregoing
clauses (i) through (iii), then the party declining such settlement shall
thereafter have full control of the defense of such claim, and the maximum
liability of the party that proposed such settlement shall be as though such
matter had settled on the terms so proposed, including the amount of the
proposed settlement, together with all legal costs and expenses incurred in
connection with such matter through and including the proposed settlement date.
For purposes of Section 7.2 or 7.3, the actual amount of the Loss up to the
amount of such party's maximum liability (determined in accordance with the
preceding sentence) shall be the amount of the Loss of such Party for purposes
of determining whether the applicable Deductible has been met. Notwithstanding
anything in Section 7.2 or 7.3 to the contrary, if an Indemnified Party and all
other parties other than the Indemnifying Parties have reached a definitive
settlement agreement which satisfies the foregoing clauses (i) through (iii),
the amount of the Loss for purposes of determining whether the applicable Cap
has been met shall equal the amount contemplated by such definitive settlement
regardless of the actual amount of such Loss. If the parties agree to the
settlement, the relative liabilities of the parties for such Losses shall be
determined as provided in the other provisions of this Article VII.
(e) All costs and expenses incurred by the Indemnifying Party in
defending a claim or demand under Section 7.4(c), and all costs and expenses
incurred by the Indemnified Party in defending a claim or demand which the
Indemnifying Party has elected not to defend (including by virtue of its failure
to give timely notice to the Indemnified Party) or is not permitted to defend
under Section 7.4(c) shall be a liability of, and shall be paid by, the
Indemnifying Party, subject to any applicable Deductible and Cap.
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(f) To the extent the Indemnifying Party shall direct, control or
participate in the defense or settlement of any third-party claim or demand, the
Indemnified Party will give the Indemnifying Party and its counsel access to,
during normal business hours, the relevant business records and other documents,
and shall permit them to consult with the Employees and counsel of the
Indemnified Party. The Indemnifying Party and Indemnified Parties shall use
their best efforts in the defense of all such claims.
(g) In connection with the indemnification obligations set forth in
Sections 7.2(a)(ii) and 7.3(a)(ii), CSK Parties, G-P and the Company shall
comply with the obligations contained in Section 5.5.
7.6 ACKNOWLEDGMENT REGARDING ENVIRONMENTAL LIABILITIES. G-P and each of
the CSK Parties acknowledge the allocation of relative responsibility for
liabilities under Environmental Laws under this Agreement is a material term of
this Agreement, and that (i) they have taken such matters into consideration in
determining the financial and other terms of this transaction, and (ii) they
understand that the Company is accepting all risks resulting or arising in any
way from any known or unknown liabilities in connection with such matters
arising in connection with or in any way relating to the Businesses (other than
the Retained Environmental Liabilities of either G-P or the CSK Parties) and
that CSK and WISCO are retaining all risks Relating to the Retained
Environmental Liabilities and indemnifying G-P and the Company for certain
Losses Relating to environmental matters under Section 7.3(a) and Section 5.9.
G-P and the CSK Parties acknowledge that none of them shall have any claim of
any nature against the other or the other's Affiliates in connection with any
matters Relating to known or unknown soil or groundwater contamination or any
other claims under any Environmental Laws, other than as set forth herein.
7.7 CHARACTERIZATION OF INDEMNIFICATION PAYMENTS. (a) To the extent the
Company is an Indemnified Party, any payments to the Company pursuant to this
Article VII shall not result in an adjustment to any party's capital account in
the Company or percentage of ownership interest of the Company; and (b) all
amounts paid to G-P, or CSK, as the case may be, under this Article VII shall
not be treated as adjustments to the amount contributed to the Company by G-P or
CSK, pursuant to Section 2.4(a) or (b) hereof.
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ARTICLE VIII
TAX COVENANTS
8.1 LIABILITY FOR TAXES.
(a) CSK shall be liable for, and shall indemnify, defend and hold the
Company harmless from and against, and shall be entitled to all refunds of, any
and all Taxes imposed on or with respect to the WISCO Contributed Subsidiaries,
or their respective assets, operations or activities for any Pre-Closing Period,
except to the extent that any such Taxes are reflected on the Final Working
Capital Statement or result from a carryback from any Post-Closing Period;
provided, however, that the amount of any indemnity obligation of CSK shall be
reduced by the amount of any Tax Benefits (for any period) realized or to be
realized by the Company, G-P or its Affiliates, or any Contributed Subsidiary as
a result of any adjustment to a Tax item for any Pre-Closing Period.
(b) The Company shall be liable for, and shall indemnify, defend and
hold CSK harmless from and against, any and all Taxes imposed on or with respect
to the Contributed Subsidiaries or their respective operations, ownership,
assets or activities for any Post-Closing Period.
(c) Tax items shall be apportioned between Pre-Closing Periods and
Post-Closing Periods based on a closing of the Books and Records of the relevant
entity or entities as of the Closing Date (provided that (i) depreciation,
amortization and depletion for any Straddle Period shall be apportioned on a
daily pro rata basis and (ii) any Taxes imposed on a periodic basis (including
Real Property Taxes, but not including Taxes based on income and receipts) for
any Straddle Period shall be apportioned on a daily pro rata basis).
Notwithstanding anything to the contrary in the preceding sentence, the parties
agree that for U.S. federal income Tax purposes, Tax items for any Straddle
Period shall be apportioned between Pre-Closing Periods and Post-Closing Periods
in accordance with U.S. Treasury Regulation Section 1.1502-76(b), which
regulation shall be reasonably interpreted by the parties in a manner intended
to achieve the method of apportionment described in the preceding sentence.
Neither CSK nor G-P will exercise any option or election (including any election
to ratably allocate a Tax year's items under Treasury Regulation Section
1.1502-76(b) (2) (ii)) to allocate Tax items in a manner inconsistent with this
section.
(d) G-P shall be liable for, and shall indemnify, defend and hold the
Company harmless from and against, and shall be entitled to all refunds of, any
and all Taxes imposed on or with respect to the G-P Contributed Subsidiaries, or
their respective assets, operations or activities for any Pre-Closing Period,
except to the extent that any such Taxes are reflected on the Final Working
Capital Statement or result from a carryback from any Post-Closing Period;
provided, however, that the amount of any indemnity obligation of G-P shall be
reduced by the amount of any Tax Benefits (for any period) realized or to be
realized by the Company, CSK or its Affiliates, or any Contributed Subsidiary as
a result of any adjustment to a Tax item for any Pre-Closing Period.
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(e) The Company shall be liable for, and shall indemnify, defend and
hold G-P harmless from and against, any and all Taxes imposed on or with respect
to the Contributed Subsidiaries or their respective operations, ownership,
assets or activities for any Post-Closing Period.
(f) Tax items shall be apportioned between Pre-Closing Periods and
Post-Closing Periods based on a closing of the Books and Records of the relevant
entity or entities as of the Closing Date (provided that (i) depreciation,
amortization and depletion for any Straddle Period shall be apportioned on a
daily pro rata basis and (ii) any Taxes imposed on a periodic basis (including
Real Property Taxes, but not including Taxes based on income and receipts) for
any Straddle Period shall be apportioned on a daily pro rata basis).
Notwithstanding anything to the contrary in the preceding sentence, the parties
agree that for U.S. federal income Tax purposes, Tax items for any Straddle
Period shall be apportioned between Pre-Closing Periods and Post-Closing Periods
in accordance with U.S. Treasury Regulation Section 1.1502-76(b), which
regulation shall be reasonably interpreted by the parties in a manner intended
to achieve the method of apportionment described in the preceding sentence.
Neither G-P nor CSK will exercise any option or election (including any election
to ratably allocate a Tax year's items under Treasury Regulation Section
1.1502-76(b) (2) (ii)) to allocate Tax items in a manner inconsistent with this
section.
8.2 PREPARATION OF TAX RETURNS.
(a) CSK shall have the right and obligation to timely prepare and file,
and cause to be timely prepared and filed, when due (taking into account any
valid extension of the time for filing), any Tax Return that is required to
include the operations, ownership, assets or activities of WISCO, with respect
to the WISCO Contributed Assets, or of any WISCO Contributed Subsidiary for Tax
Periods ending on or before the Closing Date. CSK shall provide the Company with
copies of any such Tax Returns (to the extent that they relate to the WISCO
Contributed Assets or the Business and reasonably may have a material effect on
the Company's or its Affiliates' liability for Taxes) at least 30 days prior to
the due date (as extended) for filing such Tax Returns. In the event that the
Company reasonably determines that any such Tax Return should be modified, the
Company shall notify CSK of the Company's proposed modifications no later than
15 days from the date of receipt of such Tax Return. To the extent that CSK
disagrees with such modifications, the Company and CSK shall endeavor to agree
on the positions to be taken on such return. To the extent that they are unable
to do so, a CPA Firm (other than the regular auditor of CSK, G-P or the Company)
shall be retained to determine the position to be taken, with the fees and
expenses of such CPA Firm to be borne equally by WISCO and the Company. Any such
Tax Return which CSK is required to prepare under the terms hereof shall (to the
extent such Tax Return relates to the WISCO Contributed Assets or the Business
and reasonably may have a material effect on the Company or its Affiliates' Tax
liability) be prepared in accordance with past Tax accounting practices used
with respect to the Tax Returns in question (unless such past practices are no
longer permissible under the Applicable Tax Law), and to the extent any item is
not covered by such past practices (or such past practices are no longer
permissible under the Applicable Tax Law), in accordance with reasonable Tax
accounting practices selected by CSK. The Company shall have the right and
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obligation to timely prepare and file, or cause to be timely prepared and filed,
when due (taking into account any valid extension of the time for filing), all
Tax Returns that are required to include the operations, ownership, assets or
activities Related to the Business after the Closing Date or of any WISCO
Contributed Subsidiary for any Tax Period ending after the Closing Date
(including, solely with respect to the WISCO Contributed Subsidiaries, Straddle
Period Tax Returns). The Company shall provide CSK with copies of any Straddle
Period Tax Returns required to be filed by the Company hereunder at least 30
days prior to the due date (as extended) for filing such Tax Returns. In the
event CSK reasonably determines that any Straddle Period Tax Return should be
modified, CSK shall notify the Company of CSK's proposed modifications no later
than fifteen days from the date of receipt of such Tax Return. To the extent
that the Company disagrees with such modifications, the Company and CSK shall
endeavor to agree on the positions to be taken on such return. To the extent
that they are unable to do so, a CPA Firm (other than the regular auditor of
CSK, the Company or G-P) shall be retained to determine the position to be
taken, with the fees and expenses of such accounting firm to be borne equally by
CSK and the Company. Any Straddle Period Tax Return which the Company is
required to prepare under the terms hereof shall be prepared in accordance with
past Tax accounting practices used with respect to the Tax Returns in question
(unless such past practices are no longer permissible under the Applicable Tax
Law), and to the extent any item is not covered by such past practices (or such
past practices are no longer permissible under the Applicable Tax Law), in
accordance with reasonable Tax accounting practices selected by the Company and
CSK.
(b) CSK and the Company shall prepare and provide to each other such
Tax information as is reasonably requested by the other party with respect to
the operations, ownership, assets or activities of the WISCO Business, with
respect to the WISCO Contributed Assets, or of any WISCO Contributed Subsidiary
to the extent such information is relevant to any Tax Return which CSK or the
Company has the right and obligation hereunder to file.
(c) To the extent necessary to comply with the provisions of Section
8.1, as between CSK and the Company, the party not preparing a Tax Return shall
pay the party preparing such Tax Return an amount equal to the non-preparing
party's share of the Taxes shown on such Tax Return, if any, determined in
accordance with the principles of Section 8.1, not later than 2 Business Days
before the filing of such Tax Return.
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8.3 AMENDED TAX RETURNS.
(a) Any amended Tax Return or claim for Tax refund for any WISCO
Contributed Subsidiary for any Pre-Closing Period other than a Straddle Period
shall be filed, or caused to be filed, only by CSK, who shall not be obligated
to make (or cause to be made) such filing. CSK shall not, without the prior
written consent of the Company (which consent shall not be unreasonably withheld
or delayed), make or cause to be made, any such filing, to the extent such
filing, if accepted, reasonably might change the Tax liability of the Company or
any Affiliate of the Company for any Post-Closing Period. At the Company's
request, CSK shall file an amended Tax Return with respect to Taxes accrued on
the Final Working Capital Statement, except to the extent CSK reasonably
objects.
(b) Any amended Tax Return or claim for Tax refund for any Straddle
Period shall be filed by the party responsible for filing the original Tax
Return hereunder if either the Company or CSK so requests, except that such
filing shall not be done without the consent (which shall not be unreasonably
withheld or delayed) of the Company (if the request is made by CSK) or of CSK
(if the request is made by the Company).
(c) Any amended Tax Return or claim for Tax refund for any Post-Closing
Period other than a Straddle Period shall be filed, or caused to be filed, only
by the Company, who shall not be obligated to make (or cause to be made) such
filing. The Company shall not, without the prior written consent of CSK file, or
cause to be filed, any such filing to the extent that such filing, if accepted,
reasonably might change the Tax liability of CSK or any Affiliates of CSK for
any Pre-Closing Period or otherwise under this Agreement.
8.4 CARRY BACKS AND CARRY FORWARDS.
(a) Unless CSK, in its sole and absolute discretion, consents, the
Company shall not and shall not permit any WISCO Contributed Subsidiary to carry
back any Losses or credits accruing after the Closing Date to any Tax Return of
CSK, a WISCO Contributed Subsidiary, or any Affiliate of either CSK or a WISCO
Contributed Subsidiary for any Pre-Closing Period. To the extent permitted by
Applicable Tax Law, the Company shall and shall cause each WISCO Contributed
Subsidiary to make any elections and take all such actions necessary to avoid
any such carry back. To the extent that, under Applicable Tax Law, and with
CSK's consent, a WISCO Contributed Subsidiary carries back any Losses or credits
accruing after the Closing Date to any Tax Return of CSK or its Affiliates, CSK
shall pay to the Company the excess of the amount of (i) any Tax Benefit
actually realized by CSK and its Affiliates as a result of such carry back
promptly after such Tax Benefits are realized, over (ii) the amount of any Taxes
incurred by CSK and its Affiliates as a result of such carryback (including
without limitation, any Taxes incurred or to be incurred as a result of any
refund of Taxes or interest thereon). The amount of any Tax Benefit shall be
determined (i) by comparing the liability of CSK and its Affiliates for Taxes,
determined without the carry back, to the liability of CSK and its Affiliates
for Taxes, taking into account the carry back and (ii) by treating the carry
back as the last item claimed by CSK and its Affiliates in any given Tax Period.
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(b) CSK shall not be liable hereunder for any decrease to any net
operating loss carry forward or any other Tax attributes available to a WISCO
Contributed Subsidiary resulting from adjustments by any Tax Authority to any
item of income, deduction, credit, or exclusion on Tax Returns for which CSK is
responsible.
8.5 ADDITIONAL TAX MATTERS.
(a) As of the Closing Date, CSK shall cause all Tax allocation, Tax
sharing, Tax reimbursement and similar arrangements or agreements applicable to
the WISCO Business between CSK and any Affiliates, on the one hand, and any of
the WISCO Contributed Subsidiaries, on the other, to be extinguished and
terminated with respect to such WISCO Contributed Subsidiaries and any rights or
obligations existing under any such agreement or arrangement to be no longer
enforceable, except to the extent reflected on the Final Working Capital
Statement.
(b) After the Closing Date, the Company will cause appropriate
Employees of the WISCO Contributed Subsidiaries to prepare usual and customary
Tax Return packages with respect to the Tax Period beginning January 1, 1999 and
ending as of the Closing Date. The Company will use its commercially reasonable
efforts to cause such Tax Return packages to be delivered to CSK on or before
March 1, 2000, but in any event not later that May 1, 2000.
(c) CSK and G-P agree that the Company will acquire hereunder
substantially all of the property used in the WISCO Business and that in
connection therewith the Company will employ individuals who immediately before
the Closing Date were employed in such trade or business by WISCO or the WISCO
Contributed Subsidiaries. Accordingly, pursuant to the Alternate Procedure
permitted by Rev. Proc. 96-60, 1996-2 C.B. 399, provided that the applicable CSK
Party makes available to the Company all necessary payroll records for the
calendar year that includes the Closing Date, the Company will furnish a Form
W-2 to each Employee employed by the Company who had been employed by the WISCO
Business, disclosing all wages and other compensation paid for such calendar
year, and Taxes withheld therefrom, and WISCO and the applicable CSK Party will
be relieved of the responsibility to do so.
(d) If the Company or any WISCO Contributed Subsidiary receives a
refund with respect to Taxes of any WISCO Contributed Subsidiary attributable to
a Pre-Closing Period (other than a Tax refund accrued as an asset on the Final
Working Capital Statement) or a refund of Taxes accrued as a liability on the
Final Working Capital Statement, the Company shall pay, within the thirty (30)
days following the receipt of such Tax refund, the amount of such Tax refund
(reduced by the amount of any Taxes it incurs or will incur as a result of its
accrual or receipt of such refund or any interest thereon), to CSK. If CSK
receives a Tax refund with respect to Taxes of any WISCO Contributed Subsidiary
attributable to any Post-Closing Period or any Tax refund accrued as an asset on
the Final Working Capital Statement, CSK will pay, within thirty (30) days
following the receipt of such refund, the amount of such Tax refund (reduced by
the amount of any Taxes it incurs or will incur as a result of its accrual or
receipt of such refund or any interest thereon), to the Company. In the case of
any refund with respect to
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Taxes of a WISCO Contributed Subsidiary attributable to a Straddle Period, the
Tax refund shall be apportioned between Pre-Closing Periods and Post-Closing
Periods in accordance with the principles of Section 8.1(c) hereof; provided
that to the extent any Tax refund for a Straddle Period was accrued on the Final
Working Capital Statement, such refund shall be for the account of the Company.
8.6 TAX CONTROVERSIES; COOPERATION.
(a) CSK shall control any audit, dispute, administrative, judicial or
other proceeding Related to Tax Returns filed for Pre-Closing Periods, and the
Company shall control any audit, dispute, administrative, judicial or other
proceeding Related to Tax Returns filed for Post-Closing Periods and Straddle
Periods of any WISCO Contributed Subsidiary. Subject to the preceding sentence,
in the event an adverse determination may result in each party having
responsibility for any amount of Taxes, each party shall be entitled to fully
participate in that portion of the proceedings Relating to the Taxes with
respect to which it may incur liability hereunder. For purposes of this Section
8.6(a), the term "participation" shall include (i) participation in conferences,
meetings or proceedings with any Tax Authority, the subject matter of which
includes an item for which such party may have liability hereunder, (ii)
participation in appearances before any court or tribunal, the subject matter of
which includes an item for which a party may have liability hereunder, and (iii)
with respect to the matters described in the preceding clauses (i) and (ii),
participation in the submission and determination of the content of the
documentation, protests, memorandum of fact and law, briefs, and the conduct of
oral arguments and presentations.
(b) The Company and CSK shall not agree to settle any Tax liability or
compromise any claim with respect to Taxes, which settlement or compromise may
affect the liability for Taxes (or right to a Tax Benefit) hereunder of the
other party, without such other party's consent (which consent shall not be
unreasonably withheld or delayed).
(c) G-P and CSK shall bear their own expenses incurred in connection
with audits and other administrative judicial proceedings Relating to Taxes for
which such party or its Affiliates are liable.
(d) The CSK Parties, G-P, the Company, and the Contributed Subsidiaries
shall cooperate (and cause their Affiliates to cooperate) with each other and
with each other's agents, including accounting firms and legal counsel, in
connection with Tax matters Relating to the Contributed Assets or the
Contributed Subsidiaries, including (i) preparation and filing of Tax Returns,
(ii) determining the liability and amount of any Taxes due or the right to and
amount of any refund of Taxes, (iii) examinations of Tax Returns, and (iv) any
administrative or judicial proceeding in respect of Taxes assessed or proposed
to be assessed. Such cooperation shall include (without limitation) each party
making all information and documents in its possession relating to the
Contributed Subsidiaries available to the other party. The parties shall retain
all Tax Returns, schedules and work papers, and all material records and other
documents Relating thereto, until one year after the expiration of the
applicable statute of limitations (including, to the extent notified by any
party, any extension thereof) of the Tax Period to which such Tax
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Returns and other documents and information relate. Each of the parties shall
also make available to the other party, as reasonably requested and available,
personnel (including officers, directors, Employees and agents) responsible for
preparing, maintaining, and interpreting information and documents relevant to
Taxes, and personnel reasonably required as witnesses or for purposes of
providing information or documents in connection with any administrative or
judicial proceedings Relating to Taxes.
ARTICLE IX
TERMINATION
[Intentionally Deleted]
ARTICLE X
MISCELLANEOUS
10.1 NOTICES. All notices and other communications required or
permitted by this Agreement shall be in writing and shall be delivered by
personal delivery, by nationally recognized overnight carrier service, by
facsimile, by first class mail or by certified or registered mail, return
receipt requested, addressed to the party for whom it is intended at its address
below, or such other address as may be designated in writing hereafter by such
Person. Notices shall be deemed given one day after sent, if sent by overnight
courier; when delivered and receipted for, if hand delivered; when received, if
sent by facsimile or other electronic means or by first class mail; or when
receipted for (or upon the date of attempted delivery where delivery is refused
or unclaimed), if sent by certified or registered mail, return receipt
requested.
To G-P: GEORGIA-PACIFIC CORPORATION
133 Peachtree Street, N.E.
Atlanta, GA 30303
Attn: General Counsel
Facsimile: (404) 230-7543
To CSK or WISCO: CHESAPEAKE CORPORATION
1021 East Cary Street
Richmond, VA 23218-2350
Attn: General Counsel
Facsimile: (804) 697-1192
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To the Company: GEORGIA-PACIFIC TISSUE, LLC
55 Park Place
Atlanta, GA 30303
Attn: President
Facsimile: (404) 230-1763
With a copy to: GEORGIA-PACIFIC CORPORATION
133 Peachtree Street, N.E.
Atlanta, GA 30303
Attn: General Counsel
Facsimile: (404) 230-7543
10.2 AMENDMENT; WAIVER. Any provision of this Agreement may be amended
or waived if, and only if, such amendment or waiver is in writing and signed, in
the case of an amendment, by G-P, CSK and the Company, or in the case of a
waiver, by the party against whom the waiver is to be effective. No failure or
delay by any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by Law.
10.3 ASSIGNMENT. No party to this Agreement may assign any of its
rights or obligations under this Agreement without the prior written consent of
the other party hereto (which consent shall not be unreasonably withheld),
except that (i) G-P may collaterally assign its rights and obligations under
this Agreement to a lender as security for the Company Debt and (ii) following
Closing, G-P and CSK may assign their rights, but not their obligations, to any
Person to whom G-P or CSK may transfer their Units in the Company if permitted
under the Operating Agreement.
10.4 ENTIRE AGREEMENT. This Agreement (including the Preliminary
Statements, all Schedules and Exhibits hereto and the Ancillary Agreements)
contains the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings,
oral or written, with respect to such matters, except for the obligations of the
parties under the Confidentiality Agreement.
10.5 FULFILLMENT OF OBLIGATIONS. Any obligation of any party to any
other party under this Agreement or any of the Ancillary Agreements, which
obligation is performed, satisfied or fulfilled by an Affiliate of such party,
shall be deemed to have been performed, satisfied or fulfilled by such party.
10.6 PARTIES IN INTEREST. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
permitted assigns. Nothing in this Agreement, express or implied, is intended to
confer upon any Person other than G-P, the CSK Parties, the Company or their
respective successors or permitted assigns, any rights or remedies under or by
reason of this Agreement.
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10.7 PUBLIC DISCLOSURE. Notwithstanding anything herein to the
contrary, except as may be required to comply with the requirements of any
applicable Laws and the rules and regulations of any stock exchange upon which
the securities of one of the parties (or its Affiliate) is listed, no press
release or similar public announcement or communication shall, prior to the
Closing, be made or caused to be made concerning the execution or performance of
this Agreement unless specifically approved in advance by all parties hereto
which approval shall not be unreasonably withheld, conditioned or delayed.
10.8 EXPENSES. Except as otherwise expressly provided in this
Agreement, whether or not the transactions contemplated by this Agreement are
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be borne by the party incurring
such expenses.
10.9 SCHEDULES. The disclosure of any matter in any Disclosure Schedule
shall not be deemed to constitute an admission by G-P or the CSK Parties or to
otherwise imply that any such matter is material for the purposes of this
Agreement.
10.10 BULK TRANSFER LAWS. The parties acknowledge that none of them has
taken, and none of them intends to take, any action required to comply with any
applicable bulk sale or bulk transfer laws or similar laws; provided that the
CSK parties on the one hand and G-P on the other shall indemnify the other party
and the Company for any Losses arising from such non-compliance.
10.11 GOVERNING LAW; SUBMISSION TO JURISDICTION; SELECTION OF FORUM.
This Agreement shall be governed by, and construed in accordance with, the laws
of the State of Delaware. Each party hereto agrees that it shall bring any
action or proceeding in respect of any claim arising out of or Related to this
Agreement or the transactions contained in or contemplated by this Agreement,
whether in tort or contract or at law or in equity, exclusively in the United
States District Court or the state court sitting in New Castle County, Delaware
(the "Chosen Court") and (i) irrevocably submits to the exclusive jurisdiction
of the Chosen Court, (ii) waives any objection to laying venue in any such
action or proceeding in the Chosen Court, (iii) waives any objection that the
Chosen Courts are an inconvenient forum or do not have jurisdiction over any
party hereto, and (iv) agrees that service of process upon such party in any
such action or proceeding shall be effective if notice is given in accordance
with Section 10.1 of this Agreement.
10.12 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same Agreement.
10.13 HEADINGS. The heading references herein and the table of contents
hereto are for convenience purposes only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.
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10.14 SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any Person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
10.15 INJUNCTIVE RELIEF. The parties hereto acknowledge and agree that
in the event of breach or non-compliance with any of the provisions of this
Agreement monetary damages shall not constitute a sufficient remedy.
Consequently, in the event of such a breach, G-P, the Company, WISCO or CSK, as
the aggrieved party shall be entitled to injunctive or other equitable relief,
including specific performance, in order to enforce or prevent any violation of
such provisions, in addition to any other rights or remedies to which it may be
entitled at law or otherwise.
ARTICLE XI
DEFINITIONS AND TERMS
11.1 SPECIFIC DEFINITIONS. As used in this Agreement, the following
terms shall have the meanings set forth or as referenced below:
11.1.1 "AFFILIATES" shall mean, with respect to any Person, any Persons
directly or indirectly controlling, controlled by or under common control with,
such other Person as of the date on which, or at any time during the period for
which, the determination of affiliation is being made. For the purpose of this
definition, "control" means (i) the ownership or control of 50% or more of the
equity interest in any Person, or (ii) the ability to direct or cause the
direction of the management or affairs of a Person, whether through the direct
or indirect ownership of voting interests, by contract or otherwise.
11.1.2 "AGREEMENT" shall mean this Agreement (including the Preliminary
Statements set forth above and all Schedules and Exhibits), as the same may be
amended or supplemented from time to time in accordance with the terms hereof.
11.1.3 "ANCILLARY AGREEMENTS" shall mean the Human Resources Agreement,
the Operating Agreement, the Parent Roll Supply Agreement, the Management
Support Agreement, the Operational Support Agreement, the Transition Services
Agreement, the G-P Guarantee and the WISCO Debt Indemnity.
11.1.4 "APPLICABLE TAX LAW" shall mean any Law of any nation, state,
region, province, locality, municipality or other jurisdiction Relating to
Taxes, including regulations and
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other official pronouncements of any governmental entity or political
subdivision of such jurisdiction charged with interpreting such Laws.
11.1.5 "ASSUMED LIABILITIES" shall mean all debts, liabilities,
commitments, or obligations whatsoever, other than Retained Liabilities, Related
to either WISCO's or G-P's Business or Related to either WISCO's or G-P's
Contributed Assets, whether arising before or after the Closing and whether
known or unknown, fixed or contingent, including the following:
(i) all debts, liabilities, obligations or commitments Related to or
arising under the Contracts to the extent such Contracts are assigned to the
Company, including the Real Estate Leases;
(ii) all debts, liabilities, obligations or commitments Related to the
Real Property;
(iii) the current liabilities;
(iv) except for the Retained Environmental Liabilities, all liabilities
under Environmental Laws Related to the ownership, operation or conduct of the
Business or the Real Property; and
(v) all liabilities with respect to all actions, suits, proceedings,
disputes, claims or investigations Related to the Business or that otherwise are
Related to the Contributed Assets, at law, in equity or otherwise.
11.1.6 "BOOKS AND RECORDS" shall mean originals or true and correct
copies of all lists, files, data and databases and documents Relating to
customers, suppliers and products of the Business, the Contributed Assets, or
the Assumed Liabilities, all personnel records or files regarding any Employee
of the WISCO Business or the G-P Business as applicable, all environmental audit
reports (and similar documentation) and assessments with respect to the
Business, and all general ledgers and underlying books of original entry and
other financial records of the Business, except to the extent included in the
Retained Assets.
11.1.7 "BUSINESS" shall mean with respect to either G-P on the one
hand, or the CSK Parties on the other hand, its Commercial Tissue Business.
11.1.8 "BUSINESS DAY" shall mean any day other than a Saturday, a
Sunday or a day on which banks in New York City are authorized or obligated by
law or executive order to close.
11.1.9 "CHOSEN COURT" shall have the meaning set forth in Section
10.11.
11.1.10 "CLOSING" shall mean the closing of the transactions
contemplated by this Agreement.
11.1.11 "CLOSING DATE" shall have the meaning set forth in Section 2.4.
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11.1.12 "CLOSING WORKING CAPITAL" shall have the meaning set forth in
Section 2.5(a).
11.1.13 "CLOSING WORKING CAPITAL STATEMENT" shall have the meaning set
forth in Section 2.5(a).
11.1.14 "CODE" shall mean the Internal Revenue Code of 1986, as
amended.
11.1.15 "COMMERCIAL TISSUE BUSINESS" shall have the meaning set forth
in the Preliminary Statements to this Agreement.
11.1.16 "COMPANY" shall have the meaning set forth in the preamble to
this Agreement.
11.1.17 "COMPANY DEBT" shall have the meaning set forth in Section
2.8(b).
11.1.18 "COMPUTER SYSTEM" shall mean any and all computers (including
without limitation personal computers, mid-range computers and mainframes),
process and distributed control systems and software applications and operating
systems and any other hardware, equipment, and facilities and infrastructure
systems containing an embedded computer chip.
11.1.19 "CONFIDENTIALITY AGREEMENT" shall mean the Confidentiality
Agreement between CSK and G-P dated as of November 4, 1997, as amended by letter
dated June 11, 1999.
11.1.20 "CONSENT" shall mean any consent, approval, authorization,
waiver, permit, grant, franchise, concession, agreement, license, exemption or
order of, registration, certificate, declaration or filing with, or report or
notice to any Person, including any Governmental Authority, including those
identified on Schedules 3.3 and 4.3.
11.1.21 "CONTRACTS" shall mean all agreements, contracts, leases,
purchase orders, trade billback, refund and other arrangements, incentive
agreements, commitments, collective bargaining agreements, and licenses that are
related to the G-P Business or the WISCO Business or their respective
Contributed Assets or to which such Contributed Assets are subject, except to
the extent included in such party's Retained Assets.
11.1.22 "CONTRIBUTED ASSETS" shall mean all of the assets of a party
which Relate to the G-P Business or the WISCO Business, whether tangible or
intangible, real or personal, as they exist on the date hereof, with such
changes, deletions or additions thereto as may occur from the date hereof to the
Closing Date in the ordinary course of business or are otherwise permitted by
this Agreement (except, in each case, for the Retained Assets), including the
following:
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(i) the Real Property;
(ii) the Fixtures and Equipment;
(iii) the current assets;
(iv) in the case of WISCO, the WISCO Intellectual Property;
(v) the Books and Records;
(vi) the Contracts;
(vii) the stock or other ownership interests of the Contributed
Subsidiaries;
(viii) all Governmental Authorizations which are transferable without
obtaining any Consent; and
(ix) with respect to the WISCO Business, all computer hardware and
peripherals, audio-visual equipment, RF and barcode scanning and
telecommunications equipment, whether owned or leased by any of the CSK Parties,
and all software (including without limitation all operating system and
application software), whether owned or licensed by any of the CSK Parties.
11.1.23 "CPA FIRM" shall have the meaning set forth in Section 2.5(b).
11.1.24A "CSK" shall have the meaning set forth in the preamble to this
Agreement.
11.1.24B "CSK MARKS" shall mean any mark that is owned by CSK and that
is described in the license agreement between CSK and WISCO that is among the
Contracts assigned by WISCO to the Company at Closing pursuant to Section
2.4(a)(iv) hereof.
11.1.24C "CSK PARTIES" or "CSK PARTY" shall mean, as the context
requires, CSK, WISCO and the WISCO Contributed Subsidiaries, or as the context
requires, any one of the foregoing.
11.1.24D "CSK PLAN" shall mean those Employee Plans (including all
assets and liabilities Related to such Employee Plans) pursuant to which any
Employee or Retired Employee of the WISCO Business or the WISCO Contributed
Subsidiaries is entitled to benefits.
11.1.25 "DEDUCTIBLE" shall have the meaning set forth in Section
7.2(b).
11.1.26 "DETERMINATION DATE" as used in Section 2.5(a) shall mean the
Effective Time.
11.1.27 "DISCLOSURE SCHEDULES" shall mean the Disclosure Schedules
dated the date hereof delivered by G-P or the CSK Parties in connection with
this Agreement.
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11.1.28 "EFFECTIVE TIME" shall have the meaning set forth in Section
2.4.
11.1.29 "EMPLOYEE" shall mean, with respect to the G-P Business or the
WISCO Business, an individual who is employed by such party, whether salaried or
hourly and whether on lay-off or medical, family or other authorized leave of
absence; provided that, with respect to the G-P Business, Employee shall not
include any Employee located at G-P's Palatka, Florida, Crossett, Arkansas, Port
Hudson, Louisiana, Plattsburgh, New York or Bellingham, Washington facilities.
11.1.29A "EMPLOYEE PLANS" shall mean as to any party all "employee
welfare benefit plans" and "employee pension benefit plans" as respectively
defined in Sections 3(1) and 3(2) of ERISA, all employee benefit and pension
plans, all other bonus, deferred compensation, retirement, savings, excess
benefit, stock option or purchase, retention, termination, severance and
incentive plans, contracts, programs, funds, arrangements, policies, or
practices and all other plans, contracts, programs, funds, arrangements,
policies, or practices (whether voluntary or compulsory) that provide or may
provide money (other than as current salary or wages), services, property or
other benefits, whether written or oral and whether funded or unfunded,
including (without limitation) any that have been frozen or terminated since
April 30, 1999, and any trust, escrow or similar agreement related thereto,
whether written or oral and whether funded or unfunded, which are established
and maintained by any of the parties hereto with respect to any of their
Employees, Retired Employees, independent contractors, directors, officers,
shareholders, or their dependents or which are established or maintained by any
party (or any Person that together with any party is or would have been as of
the date of the Agreement treated as a single employer under Section 414 of the
Code) (the "Related Persons") or with respect to which any party or any
Affiliate thereof have made or are required to make payments, transfers or
contributions.
11.1.30 "ENCUMBRANCES" shall mean liens, charges, encumbrances,
security interests, options or any other restrictions or third-party rights,
including any required third party consents.
11.1.31A "ENVIRONMENT" means soil, land, water and air in their natural
state, including, without limitation, land surface or subsurface strata, surface
water, ground water and ambient air.
11.1.31B "ENVIRONMENTAL AUTHORITIES" means all federal, state or local
governmental bodies or regulatory agencies, foreign or domestic, charged with
enforcing any of the Environmental Laws.
11.1.31C "ENVIRONMENTAL LAW" shall mean any applicable federal, state,
local, common or foreign law, statute, ordinance, rule, regulation, code, order,
judgment, decree or injunction Relating to (i) the protection of the Environment
(including air, water vapor, surface water, groundwater, drinking water supply,
surface or subsurface land), (ii) the exposure to, or the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling,
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protection, release, spill or discharge or disposal of Hazardous Substances, or
(iii) workplace safety or health.
11.1.31D "ENVIRONMENTAL PERMITS" means all permits, licenses,
certificates and authorizations of, and registrations with, any of the
Environmental Authorities pursuant to any of the Environmental Laws, issued or
granted to any of the CSK Parties or G-P, as the context requires for the
purpose of conducting the WISCO Business or the G-P Business as presently
conducted.
11.1.32 "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and regulations promulgated thereunder.
11.1.33 "FINAL WORKING CAPITAL STATEMENT" shall have the meaning set
forth in Section 2.5(b).
11.1.34 "FINANCIAL STATEMENTS" shall mean the WISCO Financial
Statements, the G-P Financial Statements or both, as the context may require, as
defined in Sections 3.6 and 4.6 respectively.
11.1.35 "FIXTURES AND EQUIPMENT" shall mean all furniture, fixtures,
furnishings, machinery, vehicles, equipment (including computer hardware,
computer terminals, network servers, and research and development equipment) and
other tangible personal property Related to either the G-P Business or the WISCO
Business.
11.1.36 "FORMER FACILITY" shall mean a facility or property previously
owned or operated by a party or its predecessors in the conduct of the G-P
Business or the WISCO Business that is not located on the Real Property or the
Retained Real Property.
11.1.37 "FOX RIVER LIABILITY" shall have the meaning set forth in
Section 5.9.
11.1.38 "GAAP" shall mean United States generally accepted accounting
principles, consistently applied.
11.1.39A "G-P" shall have the meaning set forth in the preamble to this
Agreement.
11.1.39B "G-P APRIL FINANCIAL STATEMENTS" shall have the meaning set
forth in Section 4.6(a).
11.1.39C "G-P ASSUMED LIABILITIES" shall mean the Assumed Liabilities
transferred to the Company by G-P.
11.1.39D "G-P BUSINESS" shall mean all of the business of G-P conducted
at its Gary, Indiana, Battleboro, Vermont, and LaGrange, Georgia facilities,
together with certain assets and liabilities associated with its Crossett,
Arkansas, and Palatka, Florida facilities, as more fully described in Schedule
2.1(c) hereof.
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11.1.39E "G-P CAP" shall have the meaning set forth in Section 7.2(b).
11.1.39F "G-P CONTRIBUTED ASSETS" shall mean the Contributed Assets
transferred to the Company by G-P as set forth on Schedule 2.1(c).
11.1.39G "G-P FINANCIAL STATEMENTS" shall have the meaning set forth in
Section 4.6(a).
11.1.39H "G-P GUARANTEE" shall have the meaning set forth in Section
2.8(b).
11.1.39I "G-P INDEMNIFIED PARTIES" shall have the meaning set forth in
Section 7.3(a).
11.1.39J "G-P INTELLECTUAL PROPERTY" shall mean the Intellectual
Property of G-P.
11.1.39K "G-P OWNED REAL PROPERTY" shall mean the Owned Real Property
of the G-P Business.
11.1.39L "G-P PLAN" shall mean those Employee Plans (including all
assets and liabilities Related to such Employee Plans) of G-P or any Affiliate
of G-P pursuant to which any Employee or Retired Employee of the G-P Business is
entitled to benefits.
11.1.39M "G-P REAL PROPERTY" shall mean the Real Property of the G-P
Business.
11.1.39N "G-P REAL PROPERTY LEASES" shall mean the leases Relating to
the Leased Real Property of the G-P Business.
11.1.39O "G-P RETAINED ASSETS" shall mean the Retained Assets of the
G-P Business as described in Section 11.1.74 hereof.
11.1.39P "G-P RETAINED LIABILITIES" shall mean the Retained Liabilities
of the G-P Business.
11.1.40 "GOVERNMENTAL AUTHORITY" shall mean any nation or government,
any state, province or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, including any government authority,
agency, department, board, commission or instrumentality of the United States,
any State of the United States or any political subdivision thereof.
11.1.41 "GOVERNMENTAL AUTHORIZATIONS" shall mean all licenses, permits,
franchises, certificates of occupancy, other certificates and other
authorizations and approvals required to carry on a Business as currently
conducted under the applicable laws, ordinances or regulations of any
Governmental Authority.
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11.1.42 "HAZARDOUS SUBSTANCES" shall mean (i) petroleum, petroleum
byproducts and any petroleum fractions; (ii) any substance or any material
containing a substance, defined as hazardous or toxic or words of similar
meaning or effect under the following United States federal statutes and their
state counterparts, as well as such statutes' implementing regulations: the
Hazardous Materials Transportation Act, the Resource Conservation and Recovery
Act, the Comprehensive Environmental Response, Compensation and Liability Act,
the Clean Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the
Toxic Substances Control Act, the Federal Insecticide, Fungicide, and
Rodenticide Act, and the Clean Air Act; and (iii) any other materials as to
which liability or standards of conduct are imposed pursuant to any
Environmental Law.
11.1.43 "HSR ACT" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
11.1.44 "HUMAN RESOURCES AGREEMENT" shall mean an agreement to be
entered into on the Closing Date by and among G-P, WISCO, CSK and the Company
substantially in the form of Exhibit 11.1.44 attached hereto.
11.1.45 "INDEMNIFICATION CLAIM NOTICE" shall have the meaning set forth
in Section 7.5(a).
11.1.46 "INDEMNIFIED PARTIES" shall have the meaning set forth in
Section 7.5(a).
11.1.47 "INDEMNIFYING PARTY" shall have the meaning set forth in
Section 7.5(a).
11.1.48 "INTELLECTUAL PROPERTY" shall mean (except to the extent
included in the Retained Assets) the following intellectual property (and the
rights associated therewith) Related to the G-P Business or the WISCO Business
or their Contributed Assets:
(a) trademarks, service marks, brand names, certification marks, trade
dress, assumed names, Internet domain names, trade names and other indications
of origin, the goodwill associated with the foregoing and registrations in any
jurisdiction of, and applications in any jurisdiction to register, the foregoing
(including any extension, modification or renewal of any such registration or
application);
(b) patents, applications for patents (including provisional,
divisional, continuation, and continuation-in-part applications), and any
renewals, extensions or reissues thereof, in any jurisdiction;
(c) invention disclosures and innovations (whether or not patentable
and whether or not reduced to practice);
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(d) non-public information, trade secrets confidential information,
know how, proprietary technology and rights in any jurisdiction to limit the use
or disclosure thereof by any Person;
(e) copyrighted works and registrations or applications for
registration of copyrights in any jurisdiction, and any renewals or extensions
thereof;
(f) any similar intellectual property or proprietary rights; and
(g) any claims or causes of action arising out of or Related to any
infringement or misappropriation of any of the foregoing occurring before or
after the Closing.
11.1.49 "INVENTORY" shall mean all inventory held for resale in
connection with the G-P Business or the WISCO Business, all raw materials, work
in process, finished products, office supplies, storeroom inventory, spare parts
and equipment, wrapping, supply and packaging items, of such Business.
11.1.50 "IRS" shall mean the Internal Revenue Service.
11.1.51 "KNOWLEDGE" or any similar phrase means the actual knowledge
without investigation of those management employees of G-P, CSK and WISCO
identified on Exhibit 11.1.51.
11.1.52 "LAWS" shall mean any federal, state, foreign or local law,
statute, ordinance, rule, code, regulation, order, judgment or decree of any
Governmental Authority.
11.1.53 "LEASED REAL PROPERTY" shall mean all land (including, to the
extent included in any such lease, any timberlands and tree farms associated
with the Contributed Assets), buildings, fixtures and other Real Property leased
on the date hereof by a party or one of the Contributed Subsidiaries as lessee
pursuant to the Real Estate Leases used by the G-P Business or the WISCO
Business.
11.1.54 "LOSSES" shall have the meaning set forth in Section 7.2.
11.1.55 "MANAGEMENT SUPPORT AGREEMENT" shall mean the agreement
substantially in the form set forth as Exhibit 11.1.55 attached hereto between
G-P and the Company pursuant to which G-P shall supply management services to
the Company.
11.1.56 "MATERIAL ADVERSE EFFECT" shall mean any and all events,
changes or effects that have occurred which have a material adverse effect upon
the value of the Contributed Assets or the G-P Business or the WISCO Business,
as the case may be, taken as a whole, involving an aggregate amount equal to or
exceeding $350,000.
11.1.57 "NOTICE PERIOD" shall have the meaning set forth in Section
7.5(b).
11.1.58 "OBJECTION" shall have the meaning set forth in Section 2.5(b).
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11.1.59 "OPERATING AGREEMENT" shall mean that certain Operating
Agreement among G-P, CSK and the Company to be dated as of the Closing
substantially in the form of Exhibit 2.1E, that shall govern the rights and
obligations of the Members of the Company.
11.1.60 "OPERATIONAL SUPPORT AGREEMENT" shall mean the agreement
substantially in the form set forth as Exhibit 11.1.60 attached hereto by and
among G-P, WISCO, CSK and the Company.
11.1.61 "OWNED REAL PROPERTY" shall mean all land and all buildings,
fixtures, and other improvements owned by either the WISCO Business or the G-P
Business.
11.1.62 "PARENT ROLL SUPPLY AGREEMENT" shall mean the agreement
substantially in the form of Exhibit 11.1.62 attached hereto pursuant to which
G-P shall supply paper products to the Company.
11.1.63 "PERMITTED ENCUMBRANCES" shall mean, with respect to any
party's Encumbrances, (i) those expressly disclosed in the G-P or WISCO
Financial Statements; (ii) liens for Taxes (which are not related to income,
sales or withholding Taxes), assessments and other governmental charges not yet
due and payable or due but not delinquent as of the Closing Date or being
contested in good faith by appropriate proceedings and for which adequate
reserves have been established on the Final Working Capital Statement; (iii)
mechanic's, workmen's, repairmen's, warehousemen's, carriers, or other like
liens arising or incurred in the ordinary course of business for amounts which
are not delinquent and which will not individually or in the aggregate have a
Material Adverse Effect, original purchase price conditional sales contracts and
equipment leases with third parties entered into in the ordinary course of
business; (iv) with respect to either the G-P Real Property or the WISCO Real
Property, (A) easements, quasi-easements, licenses, covenants, rights-of-way and
other similar restrictions, including any other agreements, conditions,
restrictions, or other matters which would be shown by a current title report or
other similar report or listing, (B) any conditions that may be shown by a
current survey, title report or physical inspection, and (C) zoning, building
and other similar restrictions; and (v) Encumbrances not described in the
foregoing clauses (i) through (iv) and which, individually or in the aggregate,
would not have a Material Adverse Effect (all items included in the foregoing
clauses (i) through (v), including any matter set forth in Schedules 3.16(b) or
4.16(b), are referred to collectively herein as the "Permitted Encumbrances").
11.1.64 "PERSON" shall mean an individual, a corporation, a
partnership, an association, a trust or other entity or organization.
11.1.65 "POST-CLOSING PERIOD" shall mean, with respect to any
Contributed Subsidiary, any Tax Period commencing after the Closing Date and the
portion of any Straddle Period commencing after the Closing Date.
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11.1.66 "PRE-CLOSING PERIOD" shall-mean, with respect to any
Contributed Subsidiary, any Tax Period ending on or before the Closing Date and
the portion of any Straddle Period ending on the Closing Date.
11.1.67 "PROCEEDING" shall have the meaning set forth in Section
7.5(a).
11.1.68 "PROJECT PLAN" shall mean a plan to remediate and/or replace
Computer Systems that are not Year 2000 Ready.
11.1.69 "REAL ESTATE LEASES" shall mean those agreements pursuant to
which a party or one or more of its Contributed Subsidiaries leases, subleases,
licenses, or otherwise uses or licenses, Real Property, including land (and
everything growing upon the land, to the extent included in such Real Estate
Lease), buildings, structures and improvements thereon or appurtenances thereto,
which are identified on Schedules 3.15 and 4.15.
11.1.70 "REAL PROPERTY" shall mean the Owned Real Property and the
Leased Real Property.
11.1.71 "REGISTRATION STATEMENT" shall mean the Registration Statement
on Form S-1, or other appropriate form, including any pre-effective or
post-effective amendments or supplements thereto, filed with the Securities and
Exchange Commission by the Company under the Securities Act with respect to the
Company Debt.
11.1.72 "RELATED TO" OR "RELATING TO" shall mean primarily related to,
or used primarily in connection with.
11.1.73 "REQUIRED CONSENT" shall mean any Consents specifically
identified on Schedule 3.3 or Schedule 4.3 as a "Required Consent" and each
other material Consent, which may be a Consent listed on Schedule 3.3 or
Schedule 4.3.
11.1.74 "RETAINED ASSETS" shall mean
(i) the assets (including Real Property, tangible personal property,
accounts receivable, intellectual property and contracts) Related to all
businesses conducted by CSK or G-P and any of their respective Affiliates other
than the Commercial Tissue Business, provided, however, with respect to G-P, all
tangible assets located at G-P's Palatka, Florida, Crossett, Arkansas, Port
Hudson, Louisiana, Plattsburgh, New York, Bellingham, Washington and Atlanta,
Georgia facilities and any tangible asset used in part in the consumer tissue
business at G-P's offices located in Atlanta, Georgia shall constitute G-P
Retained Assets, except for the assets specifically listed on Schedule 2.1(c)
consisting of dedicated commercial tissue converting lines which shall be
included in the G-P Contributed Assets, and all G-P Intellectual Property;
(ii) the stock or other ownership interests of all Subsidiaries of
either G-P or CSK other than the Contributed Subsidiaries;
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(iii) all cash and cash accounts, disbursement accounts, outstanding
checks and disbursements, investment securities and other short-term and
medium-term investments and non-trade accounts receivable from either G-P or CSK
or their respective Affiliates and owing to the G-P Business or WISCO Business,
respectively;
(iv) all deferred Tax assets of G-P or CSK;
(v) all prepaid Taxes to the extent such prepaid Taxes are not
reflected on the Final Working Capital Statement;
(vi) all refunds of Taxes to the extent such Taxes are not reflected on
the Final Working Capital Statement;
(vii) all Tax Returns and related work papers of G-P, CSK or their
respective Affiliates;
(viii) all Books and Records which G-P or the CSK Parties are required
by law to retain, provided that G-P, CSK or WISCO shall provide the Company with
complete copies of such Books and Records;
(ix) all G-P Plans, all CSK Plans, and all assets of such Plans except
as contemplated by the Human Resources Agreement;
(x) all Governmental Authorizations to the extent not transferable
without obtaining a Consent;
(xi) the CSK Marks subject to the license assigned pursuant hereto;
(xii) the Retained Real Property and any financial instruments Related
to the Retained Real Property;
(xiii) all of G-P's or CSK's insurance policies, subject to the rights
of WISCO or any Contributed Subsidiary under such insurance policies of CSK and
the rights of the Company if any under such policies;
(xiv) all contracts between either G-P or CSK and their respective
Subsidiaries other than the Contributed Subsidiaries, including Georgia-Pacific
S.A.; and
(xv) those assets of the CSK Parties specifically identified on
Schedule 2.3.
11.1.75 "RETAINED ENVIRONMENTAL LIABILITIES" has the meaning set forth
in the definition of "Retained Liabilities."
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11.1.76 "RETAINED LIABILITIES" shall mean all of the following debts,
liabilities, commitments or obligations, whether arising before or after the
Closing and whether known or unknown, fixed or contingent:
(i) all liabilities Related to the Retained Assets;
(ii) all (A) liabilities under Environmental Laws with respect to any
Former Facility, (B) liabilities in connection with the Retained Real Property
and (C) with respect to WISCO and CSK, the Fox River Liability (collectively,
the "Retained Environmental Liabilities");
(iii) all liabilities which are retained by G-P or WISCO or CSK under
the Ancillary Agreements;
(iv) all liabilities under the G-P or CSK Plans, except to the extent
such liabilities are specifically assumed by the Company or G-P pursuant to the
Human Resources Agreement;
(v) all liabilities for Taxes imposed with respect to the taxable
periods, or portions thereof, ending on or before the Closing Date except to the
extent that any such Taxes are reflected on the Final Working Capital Statement;
(vi) all liabilities for non-trade accounts payable to CSK or G-P or
their respective Affiliates which arise prior to the Closing Date;
(vii) all liabilities for indebtedness for borrowed money and any other
obligation which are fixed as to amount and certainty as of the Closing or which
are secured by a lien that is not a Permitted Encumbrance on any of the
Contributed Assets, but not including liabilities under Contracts included in
the Contributed Assets and Assumed Liabilities;
(viii) all severance, termination, change of control and similar
agreements, payments, debts, obligations or liabilities with respect to any
director, officer, employee or consultant of G-P, the CSK Parties or any of
their Subsidiaries which exist as of or prior to the Closing (after taking into
account the transactions contemplated by this Agreement), other than (i)
obligations under any collective bargaining agreement, and (ii) obligations
under any severance employment, consulting, or other agreement entered into or
assumed by the Company;
(ix) all liabilities and obligations with respect to G-P's interest in
Georgia-Pacific S.A., including all contractual obligations;
(x) all liabilities and obligations that any party hereto agrees to
retain in any Ancillary Agreement;
(xi) all other liabilities and obligations for which CSK, WISCO or G-P
has expressly assumed responsibility pursuant to this Agreement or the Ancillary
Agreements;
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(xii) all debts, liabilities or obligations whatsoever, that do not
Relate to the G-P Business or the WISCO Business or that do not otherwise Relate
to the Contributed Assets; and
(xiii) all liabilities and obligations of the WISCO Business described
on Schedule 2.3.
11.1.77 "RETAINED REAL PROPERTY" shall mean the Real Property retained
by WISCO or G-P.
11.1.78 "RETIRED EMPLOYEE" means as to any party, former Employees who
retain rights under any of such party's Employee Plans.
11.1.79 "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
11.1.80 "STRADDLE PERIOD" shall mean, with respect to any Contributed
Subsidiary, any Tax Period that begins before and ends after the Closing Date.
11.1.81 "SPECIAL DISTRIBUTION" shall have the meaning set forth in
Section 2.8(b).
11.1.82 "SUBSIDIARY" shall mean, with respect to any Person, any
corporation, partnership, joint venture or other legal entity of which such
Person, either directly or through or together with any other Subsidiary of such
Person, owns any equity interests.
11.1.83 "SURVIVAL PERIOD" shall have the meaning set forth in Section
7.1.
11.1.84 "TARGET WORKING CAPITAL" shall have the meaning set forth in
Section 2.5(e).
11.1.85 "TAX" or "TAXES" shall mean all federal, state, local or
foreign taxes, including but not limited to income, gross receipts, windfall
profits, goods and services, value added, severance, property, production,
sales, use, license, excise, franchise, employment, withholding or similar
taxes, together with any interest, additions or penalties with respect thereto
and any interest in respect of such additions or penalties.
11.1.86 "TAX AUTHORITY" shall mean, with respect to any Tax, the
governmental entity or political subdivision thereof that imposes such Tax, and
the agency (if any) charged with the administration or collection of such Taxes
for such entity or subdivision.
11.1.87 "TAX BENEFIT" shall mean the amount by which a Person's Tax
liability is actually reduced (including any related interest actually received
from a Tax Authority in connection therewith).
11.1.88 "TAX PERIOD" shall mean, with respect to any Tax, the period
for which the Tax is reported as provided under Applicable Tax Laws.
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11.1.89 "TAX RETURN" shall mean, with respect to any Tax, any
information return with respect to such Tax, any report, statement, declaration
or document required to be filed under the Applicable Tax Law in respect of such
Tax, any claim for refund of Taxes paid, and any amendment or supplement to any
of the foregoing.
11.1.90 "TRANSFER COSTS" shall have the meaning set forth in Section
2.6.
11.1.91 "TRANSITION SERVICES AGREEMENT" shall mean the agreement
substantially in the form of Exhibit 11.1.91 attached hereto to be entered into
at the Closing among the Company, CSK and WISCO under which CSK and its
Affiliates will provide transition services requested by the Company in order to
allow it to operate the WISCO Business after the Closing in a manner consistent
with past practices.
11.1.92 "WARN" shall have the meaning set forth in Section 3.13(e).
11.1.93 "WARN OBLIGATIONS" shall have the meaning set forth in Section
3.13(e).
11.1.94A "WISCO" shall have the meaning set forth in the preamble to
this Agreement.
11.1.94B "WISCO APRIL FINANCIAL STATEMENTS" shall have the meaning set
forth in Section 3.6(a).
11.1.94C "WISCO ASSUMED LIABILITIES" shall mean all Assumed Liabilities
transferred to the Company by WISCO.
11.1.94D "WISCO BUSINESS" shall have the meaning set forth in the
Preliminary Statements to this Agreement.
11.1.94E "WISCO CAP" shall have the meaning set forth in Section
7.3(b).
11.1.94F "WISCO CONTRIBUTED ASSETS" shall mean all assets used directly
and predominantly in the Commercial Tissue Business conducted by CSK whether
directly or through WISCO or its Contributed Subsidiaries.
11.1.94G "WISCO CONTRIBUTED SUBSIDIARIES" shall mean the Contributed
Subsidiaries of WISCO as set forth on Schedule 3.16(c).
11.1.94H "WISCO DEBT INDEMNITY" shall have the meaning set forth in
Section 2.8(b).
11.1.94I "WISCO FINANCIAL STATEMENTS" shall have the meaning set forth
in Section 3.6(a).
11.1.94J "WISCO INDEMNIFIED PARTIES" shall have the meaning set forth
in Section 7.2(a).
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11.1.94K "WISCO INTELLECTUAL PROPERTY" shall mean the Intellectual
Property of WISCO (and CSK to the extent utilized in the WISCO Business) and
includes, without limitation, the WISCO Marks.
11.1.94L "WISCO LEASED REAL PROPERTY" shall mean the Leased Real
Property of WISCO.
11.1.94M "WISCO MARKS" shall mean any mark currently owned by the WISCO
Business and any mark owned by the CSK Parties that include the words, phrases
and names "Wisconsin Tissue Mills", "Wisconsin Tissue" or "WISCO", or any
variation thereof, and any trademark, service mark, trade dress, symbol or logo
using such words, phrases or names and any variation thereof.
11.1.94N "WISCO OWNED REAL PROPERTY" shall mean the Owned Real Property
Related to the WISCO Business.
11.1.94O "WISCO REAL PROPERTY" shall mean the Real Property used in
connection with the WISCO Business.
11.1.94P "WISCO REQUIRED CONSENT" shall mean the Required Consents
pursuant to the WISCO Business and set forth on Schedule 3.3.
11.1.94Q "WISCO RETAINED ASSETS" shall mean the Retained Assets of the
WISCO Business as described in Section 11.1.74 hereof.
11.1.94R "WISCO RETAINED LIABILITIES" shall mean the Retained
Liabilities of the WISCO Business.
11.1.95 "WMEX" shall mean Wisconsin Tissue de Mexico, S.A. de C.V., a
corporation organized under the laws of Mexico and a wholly owned subsidiary of
WISCO.
11.1.96 "WORKING CAPITAL" shall mean the excess of current assets over
current liabilities at the Determination Date on a consolidated basis as
determined in accordance with Section 2.5.
11.1.97 "YEAR 2000 READY" shall mean that the Computer System when used
in accordance with its associated documentation, will not be materially
adversely affected by date data but instead will process such date data
accurately with the implementation of a tested procedure, or is not Year 2000
compliant but will not cause any such processing problem. Year 2000 Ready also
means that the applicable Computer System when used in accordance with its
associated documentation will accurately process date data such that, no value
for a date prior to year 2028 will cause any interruption in processing;
date-based functionality operates consistently for dates prior to, during and
after Year 2000 (through year 2027); in all interfaces and data storage, the
century or any other date is specified either explicitly or by algorithms or
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<PAGE>
inferencing rules; and leap years will be accurately recognized and processed.
If implemented properly, the Project Plan should be successful in making all
material Computer Systems Year 2000 Ready, except to the extent that a Computer
System interfaces or exchanges data with other software, firmware, hardware or
other similar or related items of automated, computerized or software systems
that are not Year 2000 compliant.
11.2 OTHER TERMS. Other terms may be defined elsewhere in the text of
this Agreement, and unless otherwise indicated shall have such meanings
throughout this Agreement.
11.3 OTHER DEFINITIONAL PROVISIONS.
(a) The words "whereof", "herein", and "hereunder" and words of similar
import, when used in this Agreement, shall refer to this Agreement as a
whole and not to any particular provision of this Agreement. The word
"including" means "including without limitation."
(b) The terms defined in the singular shall have a comparable meaning
when used in the plural, and vice versa.
(c) The terms "dollars" and "$" shall mean United States dollars.
IN WITNESS WHEREOF, the parties have executed this Joint Venture
Agreement as of the date first written above.
WISCONSIN TISSUE MILLS INC.
By: /s/William T. Tolley
Name: William T. Tolley
Title: Vice President
GEORGIA-PACIFIC CORPORATION
By: /s/Michael C. Burandt
Name: Michael C. Burandt
Title: Senior Vice President -
Packaged Products
CHESAPEAKE CORPORATION
By: /s/William T. Tolley
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Name: William T. Tolley
Title: Senior Vice President - Finance
and Chief Financial Officer
GEORGIA-PACIFIC TISSUE, LLC
By: /s/Michael C. Burandt
Name: Michael C. Burandt
Title: Manager
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EXHIBIT 3.6(b)
-- The "Unaudited Balance Sheet" should be defined to include the
following line items, with specific representations for each line item:
-- Receivables (Represents amounts due from sales to outside
customers; determined in accordance with GAAP; stated at
estimated net realizable value with adequate reserves for
customer deductions, cash rebates, and uncollectible
accounts).
-- Inventories (Represents raw materials, operating supplies and
packaging materials, storeroom parts and supplies, work in
process, and finished goods held for resale; determined in
accordance with GAAP stated at cost without LIFO reserves, and
with adequate reserves for obsolescence).
-- Prepaid Expenses and Other Current Assets (all known prepaid
expenses, deferred expenses and other current assets; expected
to be amortized or settled within one year; excluding income
taxes and debt.
-- Current Assets (Represents the sum total of Receivables plus
Inventories plus Prepaid Expenses and Other Current Assets as
defined above).
-- Property, Plant and Equipment (Represents land, buildings,
machinery and equipment, and construction in progress; owned
or leased under capital leases; stated at cost less
accumulated depreciation in accordance with GAAP).
-- Other Noncurrent Assets (Represents all known other noncurrent
assets; excluding any noncurrent assets related to income
taxes and debt).
-- Total Assets (Represents the sum total of Current Assets plus
Property, Plant and Equipment plus Other Noncurrent Assets as
defined above).
-- Accounts Payable (Represents all known amounts payable to
vendors; payable within one year; incurred in the normal
conduct of business).
-- Accrued Expenses and Other Current Liabilities (Represents all
known other accrued expenses, deferred revenues and current
liabilities; expected to be amortized or settled within one
year; incurred in the normal conduct of business; including
adequate provision for the current portion of any loss
contingencies required to be accrued in accordance with SFAS
No. 5; excluding any liabilities related to income taxes and
debt).
-- Current Liabilities (Represents the sum total of Accounts
Payable plus Accrued Expenses and Other Current Liabilities as
defined above).
-- Long-term Liabilities (Represents all known long-term
liabilities; incurred in the normal conduct of business;
including adequate provision for the non-current portion of
any loss contingencies required to be accrued in accordance
with SFAS No. 5; excluding any liabilities related to income
taxes and debt).
-- Total Liabilities (Represents the sum total of Current
Liabilities plus Long-term Liabilities as defined above).
-- Equity (Represents Total Assets minus Total Liabilities as
defined above).
-- Total Liabilities and Equity (Represents the sum total of
Total Liabilities plus Equity as defined above).
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-- Working Capital (Represents Current Assets minus Current
Liabilities as defined above).
-- : The "Unaudited Statement of Income" should be defined to include the
following income statement line items, with specific representations
for each line item:
-- Net Sales (Represents net revenues from sales to outside
customers; determined in accordance with GAAP; excluding sales
to Affiliates).
-- Cost of Sales (Represents all known costs for procuring,
manufacturing and handling products sold to outside customers;
excluding depreciation and amortization expenses;
-- Selling, General and Administrative Expenses (Represents all
known selling, general and administrative expenses for the
period; excluding depreciation and amortization expenses);
-- Other Income (Represents all known other income for the
period).
-- Other Expense (Represents all known other expenses for the
period; excluding depreciation and amortization expenses;
excluding interest expense; and excluding income taxes).
-- Earnings Before Interest, Income Taxes, Depreciation and
Amortization (Represents Net Sales minus Cost of Sales minus
Selling, General and Administrative Expenses plus Other Income
minus Other Expense as defined above).
-- Depreciation and Amortization Expenses (Represents all known
depreciation and amortization expenses for the period,
including the depreciation expense component of tissue parent
roll manufacturing costs).
-- Earnings Before Interest and Income Taxes (Represents Earnings
Before Interest, Income Taxes, Depreciation and Amortization
minus Depreciation and Amortization Expenses as defined
above).
-- The "Unaudited Statement of Cash Flows" should be defined to include
the following cash flow statement line items:
-- Earnings Before Interest and Income Taxes (As defined above).
-- Depreciation and Amortization Expenses (As defined above).
-- Earnings Before Interest, Income Taxes, Depreciation and
Amortization (As defined above).
-- Income Tax Expense (Represents the provision for income taxes,
based on the estimated effective tax rate for the period).
-- Change in Working Capital (Represents Working Capital as of
the beginning of the period minus Working Capital as of the
end of the period).
-- Cash Provided by Operations (Represents Earnings Before
Interest, Income Taxes, Depreciation and Amortization minus
Income Tax Expense)
-- Capital Expenditures (Represents all known capitalizable
expenditures for property, plant and equipment in the period).
-- Other Investing Activities (Represents other cash provided or
used in the period, not reflected elsewhere in the Statement
of Free Cash Flows; excluding cash provided by or used for
financing activities).
<PAGE>
-- Free Cash Flow (Cash Provided by Operations minus Capital
Expenditures minus Other Investing Activities as defined
above).
<PAGE>
SCHEDULES AND EXHIBITS
SCHEDULES
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Schedule 2.1(c) G-P Contributed Assets
Schedule 2.3 WISCO Retained Assets and Retained Liabilities
Schedule 3.1 CSK Parties Qualifications
Schedule 3.3 WISCO Consent and Approvals
Schedule 3.6(a) Financial Statements
Schedule 3.6(c) Changes in Accounting Methods
Schedule 3.7 Litigation and Claims
Schedule 3.8 Taxes
Schedule 3.9(a) Employees
Schedule 3.9(b) Employee Plans
Schedule 3.9(d) Changes to Plans
Schedule 3.9(f) Funding of Plans
Schedule 3.9(g) Claims Regarding Plans
Schedule 3.9(h) Multi-Employer Plans
Schedule 3.9(i) Plan Documents
Schedule 3.10 Compliance with Laws
Schedule 3.11(a) Environmental Permits
Schedule 3.11(b) Environmental Matters
Schedule 3.12 Intellectual Property
Schedule 3.12(e) Year 2000
Schedule 3.13 Labor Matters
Schedule 3.14 Material Contracts
Schedule 3.15 WISCO Real Estate Leases
Schedule 3.16(a) Exceptions to Entire Business
Schedule 3.16(b) Encumbrances
Schedule 3.16(c) Contributed Subsidiaries
Schedule 3.16(d) Condition of Assets
Schedule 3.18 Insurance
Schedule 3.20 Material Adverse Change
Schedule 4.1 G-P Qualifications
Schedule 4.3 G-P Consent and Approvals
Schedule 4.6(a) Financial Statements
Schedule 4.7 Litigation and Claims
Schedule 4.8 Taxes
Schedule 4.9(a) Employees
Schedule 4.9(b) Employee Plans
Schedule 4.9(d) Changes to Plans
Schedule 4.9(f) Funding of Plans
Schedule 4.9(g) Claims Regarding Plans
Schedule 4.9(h) Multi-Employer Plans
<PAGE>
Schedule 4.9(i) Plan Documents
Schedule 4.10 Compliance with Laws
Schedule 4.11(a) Environmental Permits
Schedule 4.11(b) Environmental Matters
Schedule 4.12 Intellectual Property
Schedule 4.12(e) Year 2000
Schedule 4.13 Labor Matters
Schedule 4.14 Material Contracts
Schedule 4.15 G-P Real Estate Leases
Schedule 4.16(a) Exceptions to Entire Business
Schedule 4.16(b) Encumbrances
Schedule 4.16(c) Condition of Assets
Schedule 4.18 Insurance
Schedule 4.20 Material Adverse Changes
Schedule 5.4(a) G-P Intellectual Property
EXHIBITS
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Exhibit 1.1A Certificate of Formation
Exhibit 2.1E Form of Operating Agreement
Exhibit 2.4A(vii) Opinion of Hunton & Williams
Exhibit 2.4B(vii) Opinion of General Counsel of G-P
Exhibit 2.8A Company Debt Commitment Letter and Promissory Note
Exhibit 2.8B G-P Guarantee
Exhibit 2.8C WISCO Debt Indemnity
Exhibit 3.6(b) Financial Statement Line Items
Exhibit 11.1.44 Form of Human Resources Agreement
Exhibit 11.1.51 Individuals with Knowledge
Exhibit 11.1.55 Form of Management Support Agreement
Exhibit 11.1.60 Form of Operational Support Agreement
Exhibit 11.1.62 Form of Parent Roll Supply Agreement
Exhibit 11.1.91 Form of Transition Services Agreement
EXHIBIT 10.16
OPERATING AGREEMENT
OF
GEORGIA-PACIFIC TISSUE, LLC
Dated As Of:
October 4, 1999
<PAGE>
TABLE OF CONTENTS
Page No.
ARTICLE I DEFINITIONS AND TERMS
Section 1.1 . Certain Definitions 1
Section 1.2 Rules of Construction 10
ARTICLE II GENERAL MATTERS
Section 2.1 Formation 11
Section 2.2 Purpose and Business 11
Section 2.3 Offices 11
Section 2.4 Name 11
Section 2.5 Term 11
Section 2.6 Members 11
ARTICLE III FINANCIAL AND TAX MATTERS
Section 3.1 Capital Contributions 12
Section 3.2 Loans from Members 13
Section 3.3 Restrictions Relating to Capital; Company Property 13
Section 3.4 Tax Treatment 14
Section 3.5 Allocation of Profits 14
Section 3.6 Section 3.6 14
Section 3.7 Special Allocations 14
Section 3.8 Offsetting Special Allocations 16
Section 3.9 Other Allocation Rules. 16
Section 3.10 Tax Elections. 17
Section 3.11 Tax Allocations; Code Section 704(c). 17
Section 3.12 Tax Matters Member. 18
Section 3.13 Regular Distribution Policy 18
Section 3.14 Special Distribution. 18
Section 3.15 Accelerated Gains Tax Liability of WISCO. 18
Section 3.16 Sharing of Company Tax Benefits. 21
Section 3.17 Permanent Company Debt 23
ARTICLE IV MANAGEMENT
Section 4.1 General 25
Section 4.2 Board Composition 25
Section 4.3 Terms; Removal; Vacancies 25
Section 4.4 Notice; Quorum 25
Section 4.5 Voting 26
Section 4.6 TelephonicMeeting; Written Consents 26
Section 4.7 Committees of the Board; Officers 27
Section 4.8 Executionof Documents 27
Section 4.9 Reliance on Documents and Reports. 28
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Section 4.10 Standard of Care; Indemnification 28
Section 4.11 Member Action. 28
Section 4.12 Certain Transactions. 29
ARTICLE V ACCOUNTING, BOOKS AND RECORDS
Section 5.1 Fiscal Year 29
Section 5.2 Books and Records. 30
Section 5.3 Auditors. 30
Section 5.4 Reporting 30
Section 5.5 Banking. 30
Section 5.6 Tax Return Information. 30
Section 5.7 Delegation of Responsibility for Accounting and Reports. 31
ARTICLE VI CONFIDENTIALITY
Section 6.1 Confidentiality Obligation 31
Section 6.2 Exceptions from Confidentiality Obligation 32
Section 6.3 Employees, Agents and Advisers 32
Section 6.4 Return of Confidential Information 32
Section 6.5 Survival After Termination 33
ARTICLE VII TRANSFER OF UNITS; PUT AND CALL RIGHTS
Section 7.1 General 33
Section 7.2 Put and Call Rights 34
Section 7.3 Member Transfers 35
Section 7.4 Retirement. 35
ARTICLE VIII DISSOLUTION AND WINDING UP; BUY OUT RIGHTS
Section 8.1 Dissolution 35
Section 8.2 Winding Up. 36
Section 8.3 In-Kind Distributions 36
Section 8.4 Cancellation of Certificate of Formation 36
Section 8.5 Buy Out Rights. 37
ARTICLE IX CERTIFICATES EVIDENCING UNITS
Section 9.1 Certificates 37
Section 9.2 Register. 37
Section 9.3 New Certificates. 37
Section 9.4 Interest as a Security 37
Section 9.5 Legends 38
ARTICLE X MISCELLANEOUS
Section 10.1 Notices 38
Section 10.2 Amendment; Waiver 38
Section 10.3 Assignment. 39
Section 10.4 Entire Agreement 39
Section 10.5 Public Disclosure. 39
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Section 10.6 Parties in Interest. 39
Section 10.7 Governing Law; Submission to Jurisdiction;
Selection of Forum. 39
Section 10.8 Counterparts. 40
Section 10.9 Severability. 40
Section 10.10 Equitable Relief. 40
Section 10.11 No Agency. 40
Section 10.12 Limitation of Liability 40
Section 10.13 Non-Exclusive Business 40
Section 10.14 Dispute Resolution. 41
EXHIBIT A Form of Unit Certificate
SCHEDULE 1 Identification of Members
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<PAGE>
OPERATING AGREEMENT
OF
GEORGIA-PACIFIC TISSUE, LLC
THIS OPERATING AGREEMENT of GEORGIA-PACIFIC TISSUE, LLC, a Delaware
limited liability company (the "Company"), is made and entered into as of
October 4, 1999, among WISCONSIN TISSUE MILLS INC., a Delaware corporation and a
wholly owned subsidiary of Chesapeake Corporation ("WISCO"), GEORGIA-PACIFIC
CORPORATION, a Georgia corporation ("G-P"), and such other Persons that become
Members as herein provided.
RECITALS
WHEREAS, the Company, G-P, WISCO and certain WISCO Affiliates are
parties to that certain Joint Venture Agreement, dated as of October 4, 1999
(the "Joint Venture Agreement");
WHEREAS, pursuant to and subject to the terms and conditions of the
Joint Venture Agreement, each of WISCO and G-P will contribute, or cause to be
contributed, to the Company certain assets and liabilities in exchange for
equity interests in the Company;
WHEREAS, the Members desire to enter into this Agreement, which shall
constitute the limited liability company agreement of the Members under the
Delaware Act, for the purpose of setting forth the agreements of the Members as
to the affairs of the Company and the conduct of its business;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and undertakings contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS AND TERMS
SECTION 1.1 CERTAIN DEFINITIONS.
As used herein, the following terms shall have the meanings set forth
or as referenced below:
"Adjusted Capital Account Deficit" means, with respect to any Member,
the deficit balance, if any, in such Member's Capital Account as of the end of
the relevant Fiscal Year, after giving effect to the following adjustments:
(i) Add to such Capital Account any amounts which such Member is
treated as obligated to restore pursuant to Regulations Section
1.704-1(b)(2)(ii)(c) by virtue of such Member's guarantee or indemnity agreement
with respect to the Company Debt or is deemed to be obligated to restore
pursuant to the penultimate sentences of Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5); and
(ii) Subtract from such Capital Account the items described in
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and
1.704-1(b)(2)(ii)(d)(6) of the Regulations.
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The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations
and shall be interpreted consistently therewith.
"Adjusted Property" means any property the Carrying Value of which has
been adjusted pursuant to Section 3.5(e);
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under direct or indirect
common control with such first Person as of the date on which, or at any time
during the period for which, the determination of affiliation is being made. For
the purpose of this definition, "control" means (i) the direct or indirect
ownership or control of more than 50% of the voting stock or general partnership
interest or other voting interest in any Person, or (ii) the ability to direct
or cause the direction of the management or affairs of a Person, whether through
the direct or indirect ownership of voting interests, by contract or otherwise.
"Affiliate Member" shall have the meaning set forth in Section 7.3(a).
"Agreed Value" means the Fair Market Value of Contributed Assets;
provided that the initial Agreed Value of Contributed Assets that a Member is
obligated to transfer, or cause to be transferred, to the Company pursuant to
the Joint Venture Agreement shall be the amount set forth in, or determined
pursuant to, Section 3.1 of this Agreement.
"Agreement" shall mean this Operating Agreement, including the
schedules and exhibits hereto, as the same may be amended or supplemented from
time to time in accordance with the terms hereof.
"Ancillary Agreements" shall have the meaning set forth in the Joint
Venture Agreement.
"Board" means the governance board of the Company consisting of all
Managers or, as may be applicable, any duly appointed committee of the Board.
"Built In Gain" means, with respect to any Contributed Asset, the
excess of the Fair Market Value of such Contributed Asset on the Closing Date as
determined under Section 3.1(a) over the Company's adjusted basis for federal
income tax purposes in such Contributed Asset immediately following its
contribution to the Company.
"Business Day" means a day, other than a Saturday or Sunday, on which
banks generally are open in New York City for a full range of business.
"Call Price" shall have the meaning set forth in Section 7.2(b).
"Capital Account" means, with respect to any Member, the Capital
Account maintained for such Member in accordance with the following provisions:
(i) To each Member's Capital Account there shall be added the
amount of money and the initial Gross Asset Value of any property (other than
money) contributed to the Company by such Member (or its predecessors in
interest) with respect to the Interest in the Company held by such Member, such
Member's distributive share of Profits and any items in the nature of income or
gain which are specially allocated pursuant to Section 3.7 or Section 3.8, and
the amount of any Company liabilities assumed by such Member or which are
secured by any Company property distributed to such Member.
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(ii) From each Member's Capital Account there shall be subtracted
the amount of money and the Gross Asset Value of any property distributed to
such Member pursuant to any provision of this Agreement, such Member's
distributive share of Losses and any items in the nature of expense or loss
which are specially allocated pursuant to Section 3.7 or Section 3.8, and the
amount of any liabilities of such Member assumed by the Company or which are
secured by any property contributed by such Member to the Company.
(iii) In the event all or a portion of an Interest in the Company
is transferred in accordance with the terms of this Agreement, the transferee
shall succeed to the Capital Account of the transferor to the extent it relates
to the transferred Interest.
(iv) In determining the amount of any liability for purposes of
subparagraphs (i) and (ii) above, there shall be taken into account Code Section
752(c) and any other applicable provisions of the Code and Regulations.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner
consistent with such Regulations. In the event the Board shall determine that it
is necessary to modify the manner in which the Capital Accounts, or any debits
or credits thereto (including, without limitation, debits or credits relating to
liabilities which are secured by contributions or distributed property or which
are assumed by the Company or any Member) are computed in order to comply with
such Regulations, the Board may make such modification, provided that such
modification is not likely to have a material adverse effect on the amounts
distributed to any Member upon the dissolution of the Company. The Board also
shall (i) make any adjustments that are necessary or appropriate to maintain
equality between the Capital Accounts of the Members and the amount of Company
capital reflected on the Company's balance sheet, as computed for book purposes
in accordance with Regulations Section 1.704-1(b)(2)(iv)(q), and (ii) make any
appropriate modifications in the event unanticipated events might otherwise
cause this Agreement not to comply with Regulations Section 1.704-1(b), provided
that, to the extent that any such adjustment is inconsistent with other
provisions of this Agreement and would have a material adverse effect on any
Member, such adjustment shall require the consent of such Member.
"Capital Contribution" means, with respect to any Member, the amount of
cash and the Agreed Value of Contributed Assets contributed by such Member to
the Company in accordance with Section 3.1.
"Cash Balances" means all cash accounts on a balance sheet representing
paper currency and coins, negotiable money orders, checks and bank balances as
well as cash equivalents in the form of highly liquid securities with a known
market value and a maturity, when acquired, of less than three months.
"Certificate" means a certificate evidencing Units substantially in the
form of Exhibit A to this Agreement.
"Certificate of Formation" shall have the meaning set forth in Section
2.1.
"Closing" and "Closing Date" shall have the respective meanings set
forth in the Joint Venture Agreement.
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"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor to such statute.
"Commercial Tissue Business" shall have the meaning set forth in the
Joint Venture Agreement.
"Company" shall have the meaning set forth in the preamble hereto.
"Company Business" means the business intended to be carried on by the
Company Group, as described in Section 2.2 hereof.
"Company Debt" means the debt incurred by the Company on or about the
Closing Date solely to fund the Special Distribution, as further described in
Section 2.8(b) of the Joint Venture Agreement, and refinancing or replacement
therefor (including up to $8 million of related expenses, including legal fees,
accounting fees, printing fees, filing fees, and underwriting fees).
"Company Group" means the Company and any Subsidiaries of the Company
from time to time.
"Company Group Affiliate" means any Person that is an Affiliate of the
Company.
"Company Property" means any and all property of whatsoever nature,
tangible or intangible, real or personal, of the Company Group from time to
time.
"Confidential Information" shall have the meaning set forth in Section
6.1.
"Contributed Assets" means the property or other consideration (other
than cash) contributed to the Company in exchange for Units in the Company.
"CPA Firm" means the independent public auditor determined pursuant to
Section 5.3.
"CSK" means Chesapeake Corporation, a Virginia corporation, of which
WISCO is a wholly-owned subsidiary.
"CSK Group" means CSK, WISCO, and all other CSK Subsidiaries from time
to time.
"CSK Group Affiliate" means any Person that is an Affiliate of CSK.
"Debt" means any liability of the Company (including, without
limitation, liabilities to Members) for borrowed money, or any liability for the
payment of money by the Company in connection with any guarantees, surety
agreements, letters of credit, or other interest bearing liabilities evidenced
by any bond, debenture, note or other similar instrument, excluding any trade
liabilities or any non-interest bearing liabilities or obligations; capital
lease (but not operating lease) liabilities and other liabilities which are in
the nature of financing; and any interest bearing off-balance sheet liabilities
and the net liability of off balance sheet derivative contracts.
"Delaware Act" means the Delaware Limited Liability Company Act, 6 Del.
C.ss.ss. 18-101 et seq., as amended from time to time, and any successor to such
statute.
"Depreciation" means, for each Fiscal Year, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable for
federal income tax purposes with respect to
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an asset for such Fiscal Year, except that if the Gross Asset Value of an asset
differs from its adjusted basis for federal income tax purposes at the beginning
of such Fiscal Year, Depreciation shall be determined by the Board in the manner
described in Regulations Section 1.704-1(b)(2)(iv)(g)(3).
"Distributable Cash" means the amount of cash that the Board reasonably
determines is available for distribution to Members at any applicable time,
taking into account available cash and anticipated cash flow and current and
anticipated expenses of the Company and after setting aside reserves in an
amount reasonably deemed necessary to provide for the Company's planned capital
expenditures, debt service and working capital.
"EBITDA" means, at any time of determination as specified in this
Agreement, the earnings before interest, taxes, depreciation and amortization of
the Company Group, computed on a consolidated basis in accordance with GAAP
consistently applied, for the four fiscal quarters next preceding such date of
determination, excluding any one time, unusual or extraordinary items (and, if
determined at a time prior to the expiration of four fiscal quarters following
the Closing Date, then such EBITDA shall be deemed to be the EBITDA of the
Company Group for post-Closing completed fiscal quarters of the Company plus
combined EBITDA of the WISCO Business and the G-P Business for such number of
pre-Closing fiscal quarters as, together with the completed fiscal quarters of
the Company, shall equal four (4)).
"Exercise Notice" shall have the meaning set forth in Section 7.2(c).
"Fair Market Value" means, with respect to property, as of any date of
determination, the price for such property that could be negotiated in an
arm's-length free market transaction, for cash, between a willing seller and a
willing buyer, neither of whom is under pressure or compulsion to complete the
transaction, as of such date of determination, as determined in good faith by
the Board using a reasonable valuation method, which determination must include
the vote or consent of the WISCO Member; provided that if the full Board is
unable to reach such a determination with the vote or consent of the WISCO
Member, the WISCO Member and the G-P Member shall each select an independent and
nationally recognized accounting firm as its representative, and such accounting
firms shall select one independent and nationally recognized investment banking
firm, accounting firm or appraisal company as they deem appropriate and in the
best position to determine the Fair Market Value, whose determination of the
Fair Market Value shall be final and binding.
"Final Determination" means (i) a decision, judgment, decree or other
order by any court of competent jurisdiction, which binds WISCO or CSK and has
become final and not subject to further appeal, (ii) a closing agreement which
binds WISCO or CSK entered into under Section 7121 of the Code or any other
binding settlement agreement with the Internal Revenue Service entered into in
connection with or in contemplation of an administrative or judicial proceeding,
or (iii) the completion of Internal Revenue Service administrative proceedings
which binds WISCO or CSK and if a judicial contest is not or is no longer
available or, in the sole discretion of WISCO or CSK, is not to be commenced or
continued.
"Financing Agreements" means any agreement pursuant to which the
Company or any Company Affiliate incurs Debt.
"Fiscal Year" means the fiscal year of the Company as specified in 5.1.
"Formula Price" means, at any date of determination, the EBITDA of the
Company less Net Debt as of such date multiplied by 7.38.
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"G-P Books" means any books and records of G-P Related to calculation
of volume, price or cost allocation methodology for purposes of the Ancillary
Agreements.
"G-P Call" shall have the meaning set forth in Section 7.2(b).
"G-P Group" means G-P and its Subsidiaries from time to time.
"G-P Group Affiliate" means any Person that is an Affiliate of G-P.
"G-P Guarantee" shall have the meaning set forth in Section 3.17.
"G-P Member" means, collectively if more than one, the G-P Group
Affiliate(s) who from time to time is (are) Member(s) of the Company.
"Gross Asset Value" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed by a
Member to Company shall be the Agreed Value of such asset except as otherwise
provided in Section 3.1;
(ii) The Gross Asset Values of all Company assets shall be
adjusted to equal their respective gross Fair Market Values as of the following
times: (A) the acquisition of an additional Interest in the Company by any new
or existing Member in exchange for more than a de minimis capital contribution;
(B) the distribution by the Company to a Member of more than a de minimis amount
of money or other property as consideration for an Interest in the Company; and
(C) the liquidation of the Company within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g); provided, however, that adjustments pursuant to clauses
(A) and (B) above shall be made only if such adjustments are reasonably
necessary or appropriate to reflect the relative economic interests of the
Members in the Company;
(iii) The Gross Asset Value of any Company asset distributed to
any Member shall be adjusted to equal the gross Fair Market Value of such asset
on the date of distribution; and
(iv) The Gross Asset Values of Company assets shall be increased
(or decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent
that such adjustments are taken into account in determining Capital Accounts
pursuant to Regulation Section 1.704-1(b)(2)(iv)(m) and subparagraph (vi) of the
definition of "Profits" and "Losses" or Section 3.7(g); provided, however, that
Gross Asset Values shall not be adjusted pursuant to this subparagraph (iv) to
the extent the Board makes an adjustment pursuant to subparagraph (ii) that
would otherwise result in an adjustment pursuant to this subparagraph (iv).
If the Gross Asset Value of an asset has been determined or adjusted pursuant to
subparagraphs (i), (ii), or (iv), such Gross Asset Value shall thereafter be
adjusted by the Depreciation taken into account with respect to such asset for
purposes of computing Profits and Losses.
"Group" means the Company Group, the CSK Group or the G-P Group, or
both, as the context may require.
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"Independent Third Party" means any Person who, immediately prior to
the contemplated transaction, is not the owner of in excess of a 5% Percentage
Interest in the Company and who is not a Member of any such 5% Owner.
"Indemnitee" shall have the meaning set forth in Section 4.10.
"Interest" means the ownership interest of a Member in the Company
(which shall be considered personal property for all purposes), consisting of
(i) such Member's interest in profits, losses, allocations and distributions,
(ii) such Member's right to vote or grant or withhold consents with respect to
Company matters as provided herein or in the Delaware Act and (iii) such
Member's other rights and privileges as provided herein or under the Delaware
Act.
"Involuntary Dissolution Event" shall mean any event described in
Section 8.1(d) hereof if no Member filed a motion, petition, or other request
before a court or an administrative agency seeking a dissolution of the Company.
"Joint Venture Agreement" shall have the meaning set forth in the
recitals hereto.
"Law" means any federal, state, foreign or local law, constitutional
provision, code, statute, ordinance, rule, regulation, order, judgment or decree
of any governmental authority.
"Manager" means a person duly elected to the Board pursuant to the
provisions of Section 4.2 or Section 4.3 hereof. Each Manager shall constitute a
"manager" of the Company as such term is defined in Section 18-101 of the
Delaware Act.
"Members" mean WISCO and G-P and all other Persons admitted as
additional or substituted Members pursuant to this Agreement, so long as they
remain Members. Each Member shall constitute a "Member" of the Company, as such
term is defined in Section 18-101 of the Delaware Act.
"Net Debt" means, at any date of determination, the amount of all Debt
of the Company Group on such date, less all Cash Balances held by or on behalf
of any Company Group Member and less loans made to the Members as of such date.
"Nonrecourse Deductions" has the meaning set forth in Section
1.704-2(b)(1) and 1.704-2(c) of the Regulations.
"Obligations" shall have the meaning set forth in Section 3.17(b).
"Nonrecourse Liability" has the meaning set forth in Section
1.704-2(b)(3) of the Regulations.
"Option Closing" shall have the meaning set forth in Section 7.2(c).
"Option Right" shall have the meaning set forth in Section 7.2(c).
"Partner Nonrecourse Debt" has the same meaning as the term "partner
nonrecourse debt" set forth in Section 1.704-2(b)(4) of the Regulations.
"Partner Nonrecourse Debt Minimum Gain" means an amount, with respect
to each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that
would result if such Partner
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Nonrecourse Debt were treated as a Nonrecourse Liability, determined in
accordance with Section 1.704-2(i)(3) of the Regulations.
"Partner Nonrecourse Deductions" has the same meaning as the term
"partner nonrecourse deductions" set forth in Sections 1.704-2(i)(1) and
1.704-2(i)(2) of the Regulations.
"Partnership Minimum Gain" has the meaning set forth in Sections
1.704-2(b)(2) and 1.704-2(d) of the Regulations.
"Percentage Interests" means the respective proportions in which the
Members hold their Interests in the Company, determined for any Member as of any
date by dividing the number of Units held by such Member on such date by the
total number of Units outstanding and held by all Members as of such date.
"Permanent Company Debt" shall mean the indebtedness incurred by the
Company to refinance the Company Debt, as further described in Section 3.17
hereof, and shall include, where the context requires, any replacement or
refinancing thereof.
"Person" shall mean an individual, a corporation, a partnership, an
association, a trust, a limited liability company, a governmental authority or
any other entity or organization.
"Products" shall have the meaning set forth in Section 10.13(a).
"Profits" and "Losses" means, for each Fiscal Year, an amount equal to
the Company's taxable income or loss for such Fiscal Year, determined in
accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss, or deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
(i) Any income of the Company that is exempt from federal income
tax and not otherwise taken into account in computing Profits or Losses pursuant
to this definition of "Profits" and "Losses" shall be added to such taxable
income or loss;
(ii) Any expenditures of the Company described in Code Section
705(a)(2)(B), or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account
in computing Profits or Losses pursuant to this definition of "Profits" and
"Losses" shall be subtracted from such taxable income or loss;
(iii) In the event the Gross Asset Value of any Company asset is
adjusted pursuant to subparagraphs (ii) or (iii) of the definition of "Gross
Asset Value," the amount of such adjustment shall be taken into account as gain
or loss from the disposition of such asset for purposes of computing Profits or
Losses;
(iv) Gain or loss resulting from any disposition of property with
respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the property disposed
of, notwithstanding that the adjusted tax basis of such property differs from
its Gross Asset Value;
(v) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such Allocation Year,
computed in accordance with the definition of "Depreciation";
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(vi) To the extent an adjustment to the adjusted tax basis of any
Company asset pursuant to Code Section 734(b) or Code Section 743(b) is required
pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken into account
in determining Capital Accounts as a result of a distribution other than in
complete liquidation of a Member's Interest, the amount of such adjustment shall
be treated as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases the basis of the asset) from the
disposition of the asset and shall be taken into account for purposes of
computing Profits or Losses; and
(vii) Any items which are specially allocated pursuant to Section
3.7 or Section 3.8 shall not be taken into account in computing Profits or
Losses.
The amounts of the items of Company income, gain, loss or deduction available to
be specially allocated pursuant to Sections 3.7 and 3.8 shall be determined by
applying rules analogous to those set forth in subparagraphs (i) through (vi)
above.
"Put Price" shall have the meaning set forth in Section 7.2(a).
"Regulations" means the regulations promulgated by the U.S. Treasury
Department pursuant to the Code.
"Regulatory Allocations" shall have the meaning set forth in Section
3.8.
"Special Distribution" shall have the meaning set forth in Section
2.8(b) of the Joint Venture Agreement.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association, trust, limited liability company or other legal entity
or organization of which such person, either directly or indirectly or through
or together with any other Subsidiary of such Person, owns more than 50% of the
equity interests.
"Tax Matters Member" shall have the meaning set forth in Section 3.12.
"Tax Opinion" means an opinion of CSK's legal counsel or public
accounting firm to the effect that it is substantially more likely than not that
(1) the transfer of the WISCO Business constituted a sale to the Company (in
whole or in part) for federal income tax purposes, or (2) the Special
Distribution is taxable to WISCO in whole or in part. Such opinion must be based
upon an addition, amendment, or other modification to the Code or the
Regulations, the issuance by the Internal Revenue Service (or any other
administrative agency or authority having jurisdiction over the interpretation,
administration, or enforcement of federal income tax laws) of a ruling, notice,
or other administrative pronouncement, or the issuance or publication of a
decision by a court, in any such event occurring after the Closing but before
the eighth anniversary of the Closing Date.
"Transfer" shall have the meaning set forth in Section 7.1.
"Units" means the equal proportional units into which Interests in the
Company shall be divided, which term may include fractions of Units as well as
whole Units. Subject to the Capital Contribution obligations of the Members
hereunder, all Units issued hereunder shall be fully paid and non-assessable.
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"Voluntary Dissolution Event" shall mean any event described in Section
8.1 hereof other than an Involuntary Dissolution Event.
"Voluntary Dissolution Event Without WISCO's Consent" shall mean any
Voluntary Dissolution Event which is described in Section 8.1 hereof if the
event occurs without the consent of the WISCO Member. For this purpose, the
WISCO Member shall be deemed to have consented to (i) any action approved by the
Manager designated by the WISCO Member, (ii) any reduction of the WISCO Member's
(or the CSK Group's) ownership of the outstanding Units below 5% if such
reduction occurs because of an exercise of the WISCO Put, and (iii) the
dissolution of the Company under Section 8.1(d) hereof at the request of the
WISCO Member.
"WISCO" shall have the meaning set forth in the preamble hereto.
"WISCO Business" shall have the meaning set forth in the Joint Venture
Agreement.
"WISCO Indemnity Period" shall have the meaning set forth in Section
3.17.
"WISCO Manager" shall mean a Manager designated by the WISCO Member.
"WISCO Member" means, collectively if more than one, the CSK Group
Affiliate(s) which from time to time is (are) Member(s) of the Company.
"WISCO Put" shall have the meaning set forth in Section 7.2(a).
SECTION 1.2 RULES OF CONSTRUCTION.
(a) Words used herein, regardless of the number and gender used, shall
be deemed and construed to include any other number, singular or plural, and any
other gender, masculine, feminine or neuter, as the context requires, and, as
used herein, unless the context requires otherwise, the words "hereof",
"herein", and "hereunder" and words of similar import shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
(b) A reference to any statute or statutory provision shall be
construed as a reference to the same as it may have been, or may from time to
time be, amended, modified or re-enacted.
(c) The terms "dollars" and "$" shall mean United States dollars.
(d) The term "including" shall be deemed to mean "including without
limitation."
(e) Article and section headings used in this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(f) This Agreement is among financially sophisticated and knowledgeable
parties and is entered into by the parties in reliance upon the economic and
legal bargains contained herein and shall be interpreted and construed in a fair
and impartial manner without regard to such factors as the party who prepared,
or caused the preparation of, this Agreement or the relative bargaining power of
the parties.
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ARTICLE II
GENERAL MATTERS
SECTION 2.1 FORMATION.
The Members have caused the formation of the Company as a Delaware
Limited Liability Company pursuant to the Delaware Act by filing a Certificate
of Formation of the Company (the "Certificate of Formation") with the Delaware
Secretary of State in accordance with the Delaware Act and, in connection
therewith, each Member has contributed $10.00 to the capital of the Company
prior to the date hereof. The rights and liabilities of the Members shall be as
provided in the Delaware Act, except as otherwise provided in this Agreement.
SECTION 2.2 PURPOSES AND BUSINESS.
Except as may otherwise be approved by the Board (which approval must
include the affirmative vote or consent of the WISCO Manager), the purpose of
the Company and the Company Group shall be to engage in any lawful business in
any way related to the business of producing, licensing for production and
selling commercial tissue products and related products for the "away from home"
market, on a worldwide basis. The Company shall have all powers necessary or
desirable to accomplish the aforesaid purposes. In connection therewith, the
Company may engage in and enter into any and all activities, contracts and
agreements related or incident to the above-stated purposes as the Board may
determine to be appropriate from time to time. The Company shall have the power
to do all things necessary, appropriate, advisable, convenient, or incidental in
connection with the fulfillment of its business purposes. The Company shall not,
and shall not permit any of its Subsidiaries to, engage in any other activity or
business except to the extent approved by the Board (which approval must include
the affirmative vote or consent of the WISCO Manager).
SECTION 2.3 OFFICES.
(a) The principal executive offices of the Company shall be located at
55 Park Place, Atlanta, Georgia at the offices of G-P or such other location as
determined by the Board from time to time.
(b) The registered office of the Company in the State of Delaware is
located at Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware
19801. The registered agent of the Company for service of process at such
address is The Corporation Trust Company. Such registered office or registered
agent may be changed by the Board from time to time.
SECTION 2.4 NAME.
The name of the Company shall be Georgia-Pacific Tissue, LLC or such
other name as the Board may from time to time select.
SECTION 2.5 TERM.
The existence of the Company commenced on the date its Certificate of
Formation was filed with the Secretary of State of the State of Delaware, and
shall continue in perpetuity unless dissolved in accordance with Section 8.1.
SECTION 2.6 MEMBERS.
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The name and business or mailing address of each Member of the Company
are set forth on Schedule 1 to this Agreement. The Board shall cause Schedule 1
to be amended from time to time to reflect the addition or retirement of
Members, or transfers of Units, in accordance with the terms of this Agreement.
Except in connection with a permitted redemption or transfer of a Member's
entire Interest in accordance with the terms of this Agreement, no Member shall
have the right to retire from the Company prior to the termination of the
Company following dissolution and winding up.
ARTICLE III
FINANCIAL AND TAX MATTERS
SECTION 3.1 CAPITAL CONTRIBUTIONS.
(a) Simultaneously with the execution of this Agreement, WISCO is
contributing to the Company the WISCO Business, as defined and identified in the
Joint Venture Agreement, with an aggregate agreed value of $775,000,000 in
exchange for 5 Units, which number of Units reflects the Special Distribution.
Specifically, the various categories of assets comprising the Contributed Assets
of WISCO are as follows:
Shares of Wisconsin Tissue
de Mexico, S.A.
Shares of Wisconsin Tissue
Management LLC
Interest in Alsip Condominium Association
Working Capital
Land
Buildings
Equipment
Inventory
Goodwill
For purposes of maintaining the Company's books in accordance with Regulations
Section 1.704-1(b)(2)(iv), the initial Gross Asset Value of each asset within
each of the above categories shall be based on the relative Fair Market Values
of the assets within each category.
(b) Simultaneously with the execution of this Agreement, G-P is
contributing to the Company the G-P Contributed Assets, as defined and
identified in the Joint Venture Agreement, with an aggregate agreed value of
$376,400,000 in exchange for 95 Units, which number of Units reflects the
Special Distribution. Specifically, the various categories of assets comprising
the Contributed Assets of G-P are as follows:
Working Capital
Land
Buildings
Equipment
Inventory
Goodwill
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For purposes of maintaining the Company's books in accordance with Regulations
Section 1.704-1(b)(2)(iv), the initial Gross Asset Value of each asset within
each of the above categories shall be based on the relative Fair Market Values
of the assets within each category.
(c) Except as may otherwise be unanimously agreed to in writing by the
Members, the Members shall have no right or obligation to make any additional
Capital Contributions to the Company.
(d) Unless otherwise unanimously agreed by the Members, any additional
Capital Contributions made by the Members shall be made in accordance with the
Members' respective Percentage Interests, and additional Units shall be issued
in respect of any such additional Capital Contributions pro rata based on the
Members' respective Percentage Interests.
SECTION 3.2 LOANS FROM MEMBERS.
Loans by a Member to the Company shall not be considered Capital
Contributions. Such loans shall bear interest at arm's length market rates and
may contain other customary commercial terms as agreed by the Company and the
Member; provided, however, that any such loans shall be fully subordinated to
the Company Debt and the Permanent Company Debt in accordance with terms that
are reasonably acceptable to each Member. If any Member shall advance funds to
the Company in excess of the amounts required hereunder to be contributed by
such Member to the capital of the Company, such advances shall not increase the
Capital Account of such Member. The amounts of any such advances shall be a debt
of the Company to such Member and shall be payable or collectible only out of
Company assets in accordance with the terms and conditions upon which such
advances are made. The repayment of debt owed to a Member upon liquidation of
the Company shall be subject to the order of priority set forth in Section 8.2.
SECTION 3.3 RESTRICTIONS RELATING TO CAPITAL; COMPANY PROPERTY.
(a) Except as otherwise provided herein or by the Delaware Act, no
Member shall have the right to withdraw, or receive any return of, all or a
portion of such Member's Capital Contribution, nor shall any Member have the
right to demand and receive property other than cash in return for its Capital
Contribution, except as provided in Section 8.3(a).
(b) No interest shall be paid by the Company on Capital Contributions
or on balances in Members' Capital Accounts.
(c) All Company Property, whether contributed by a Member or otherwise
acquired by the Company, shall be owned by the Company as a separate legal
entity and no Member shall have any right of partition with respect to any
Company Property. The Board shall cause the Company to execute, file and record
such documents as may be necessary or appropriate to reflect the Company's
ownership of Company Property in appropriate public offices.
(d) No Member shall be liable to the Company or to any other Member to
restore any deficit balance in its Capital Account (except as may be required by
the Delaware Act) or to reimburse any other Member for any portion of such other
Member's investment in the Company. No Member shall have priority over any other
Member, either as to the return of its Capital Contribution or as to income,
losses, interest, returns, or distributions, except for the priority of the
WISCO Member with respect to the Special Distributions and as set forth in
Section 8.3(a).
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(e) The Company shall not enter into any transaction, other than the
Ancillary Agreements, with any Member or any Affiliate of any Member except on
arms length terms.
SECTION 3.4 TAX TREATMENT.
It is the intention of the Members that the Company shall be taxed as a
"partnership" for United States federal, state and local income tax purposes,
and, except as otherwise required by law, no Member shall take any action
inconsistent with the classification of the Company as a partnership for U.S.
tax purposes, including any action to cause the Company to be treated as an
association taxable as a corporation for U.S. tax purposes.
SECTION 3.5 ALLOCATION OF PROFITS.
After giving effect to the special allocations set forth in Sections
3.7 and 3.8, Profits for any Fiscal Year shall be allocated among the Members in
proportion to their respective Percentage Interests.
SECTION 3.6 ALLOCATION OF LOSSES.
After giving effect to the special allocations set forth in Sections
3.7 and 3.8, Losses for any Fiscal Year shall be allocated as set forth in
Section 3.6(a), subject to the limitation in Section 3.6(b).
(a) Losses for any Fiscal Year shall be allocated among the Members in
proportion to their respective Percentage Interests.
(b) The Losses allocated pursuant to Section 3.6(a) shall not exceed
the maximum amount of Losses that can be so allocated without causing any Member
to have an Adjusted Capital Account Deficit at the end of any Fiscal Year. In
the event some but not all of the Members would have Adjusted Capital Account
Deficits as a consequence of an allocation of Losses pursuant to Section 3.6(a),
the limitation set forth in this Section 3.6(b) shall be applied on a Member by
Member basis so as to allocate the maximum permissible Losses to each Member
under Section 1.704-1(b)(2)(ii)(d) of the Regulations.
SECTION 3.7 SPECIAL ALLOCATIONS.
The following special allocations shall be made in the following order:
(a) Minimum Gain Chargeback Except as otherwise provided in Section
1.704-2(f) of the Regulations, notwithstanding any other provision of this
Article III, if there is a net decrease in Partnership Minimum Gain during any
Fiscal Year, each Member shall be specially allocated items of Company income
and gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an
amount equal to such Member's share of the net decrease in Partnership Minimum
Gain, determined in accordance with Regulations Section 1.704-2(g). Allocations
pursuant to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Member pursuant thereto. The items to
be so allocated shall be determined in accordance with Sections 1.704-2(f)(6)
and 1.704-2(j)(2) of the Regulations. This Section 3.7(a) is intended to comply
with the minimum gain chargeback requirement in Section 1.704-2(f) of the
Regulations and shall be interpreted consistently therewith.
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(b) Partner Minimum Gain Chargeback. Except as otherwise provided in
Section 1.704-2(i)(4) of the Regulations, notwithstanding any other provision of
this Article III, if there is a net decrease in Partner Nonrecourse Debt Minimum
Gain attributable to a Partner Nonrecourse Debt during any Fiscal Year, each
Member who has a share of the Partner Nonrecourse Debt Minimum Gain attributable
to such Partner Nonrecourse Debt, determined in accordance with Section
1.704-2(i)(5) of the Regulations, shall be specially allocated items of Company
income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal
Years) in an amount equal to such Member's share of the net decrease in Partner
Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse Debt,
determined in accordance with Regulations Section 1.704-2(i)(4). Allocations
pursuant to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Member pursuant thereto. The items to
be so allocated shall be determined in accordance with Sections 1.704-2(i)(4)
and 1.704-2(j)(2) of the Regulations. This Section 3.7(b) is intended to comply
with the minimum gain chargeback requirement in Section 1.704-2(i)(4) of the
Regulations and shall be interpreted consistently therewith.
(c) Qualified Income Offset. In the event any Member unexpectedly
receives any adjustments, allocations, or distributions described in Section
1.704-1(b)(2)(ii)(d)(4), Section 1.704-1(b)(2)(ii)(d)(5) or Section
1.704-1(b)(2)(ii)(d)(6) of the Regulations, items of Company income and gain
shall be specially allocated to each such Member in an amount and manner
sufficient to eliminate, to the extent required by the Regulations, the Adjusted
Capital Account Deficit of such Member as quickly as possible, provided that an
allocation pursuant to this Section 3.7(c) shall be made only if and to the
extent that such Member would have an Adjusted Capital Account Deficit after all
other allocations provided for in this Article III have been tentatively made as
if this Section 3.7(c) were not in the Agreement.
(d) Gross Income Allocation. In the event any Member has a deficit
Capital Account at the end of any Fiscal Year which is in excess of the sum of
(i) the amount such Member is treated as obligated to restore pursuant to
Regulations Section 1.704-1(b)(2)(ii)(c) by virtue of such Partner's guarantee
or indemnity with respect to the Company Debt, and (ii) the amount such Member
is deemed to be obligated to restore pursuant to the penultimate sentences of
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such Member shall be
specially allocated items of Company income and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to this
Section 3.7(d) shall be made only if and to the extent that such Member would
have a deficit Capital Account in excess of such sum after all other allocations
provided for in this Article III have been made as if Section 3.7(c) and this
Section 3.7(d) were not in the Agreement.
(e) Partner Nonrecourse Deductions. Any Partner Nonrecourse Deductions
for any Fiscal Year shall be allocated to the Member who bears the economic risk
of loss with respect to the Partner Nonrecourse Debt to which such Partner
Nonrecourse Deductions are attributable in accordance with Regulations Section
1.704-2(i)(1).
(f) Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal Year
shall be allocated to the Members in proportion to their respective Percentage
Interests.
(g) Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code
Section 743(b) is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(2) or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be
taken into account in determining Capital Accounts as the result of a
distribution to a Member in complete liquidation of its interest in the Company,
the amount of such adjustment to Capital Accounts shall be treated as an item of
gain (if the adjustment increases the basis of the asset) or loss (if the
adjustment
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decreases such basis) and such gain or loss shall be specially allocated to the
Members in accordance with their Interests in the Company in the event that
Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Member to whom
such distribution was made in the event that Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
(h) In the event that the Company makes a distribution to WISCO
pursuant to Section 3.15 hereof, then WISCO shall be specially allocated items
of Company income and gain from each Fiscal Year in which such distribution is
made (and, if necessary, subsequent Fiscal Years in the case of distributions
under Section 3.15(a) or (b)) in an amount equal to the total of such
distributions made to WISCO.
SECTION 3.8 OFFSETTING SPECIAL ALLOCATIONS.
The allocations set forth in Sections 3.6(b), and 3.7(a), (b), (c),
(d), (e), (f), and (g) (the "Regulatory Allocations") are intended to comply
with certain requirements of the Regulations. It is the intent of the Members
that, to the extent possible, all Regulatory Allocations shall be offset either
with other Regulatory Allocations or with special allocations of other items of
Company income, gain, loss or deduction pursuant to this Section 3.8. Therefore,
notwithstanding any other provision of this Article III (other than the
Regulatory Allocations), the Board shall make such offsetting special
allocations of Company income, gain, loss or deduction in whatever manner it
determines appropriate so that, after such offsetting allocations are made, each
Member's Capital Account balance is, to the extent possible, equal to the
Capital Account balance such Member would have had if the Regulatory Allocations
were not part of the Agreement and all Company items were allocated pursuant to
Sections 3.5, 3.6(a) and 3.7(h). In exercising its discretion under this Section
3.8, the Board shall take into account future Regulatory Allocations under
Sections 3.7(a) and 3.7(b) that, although not yet made, are likely to offset
other Regulatory Allocations previously made under Sections 3.7(e) and 3.7(f).
SECTION 3.9 OTHER ALLOCATION RULES.
(a) Profits, Losses, and any other items of income, gain, loss or
deduction shall be allocated to the Members pursuant to this Article III as of
the last day of each Fiscal Year; provided that Profits, Losses and such other
items shall also be allocated at such times as the Gross Asset Values of Company
Property are adjusted pursuant to subparagraph (ii) of the definition of Gross
Asset Value.
(b) For purposes of determining the Profits, Losses, or any other items
allocable to any period, Profits, Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the Board using
any permissible method under Code Section 706 and the Regulations thereunder.
(c) All allocations to the Members pursuant to this Article III shall,
except as otherwise provided, be divided among them in proportion to their
respective Percentage Interests.
(d) The Members are aware of the income tax consequences of the
allocations made by this Article III and hereby agree to be bound by the
provisions of this Article III in reporting their shares of Company income and
loss for income tax purposes, except to the extent otherwise required by law.
(e) Solely for purposes of determining a Member's proportionate share
of the "excess nonrecourse liabilities" of the Company within the meaning of
Regulations
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Section 1.752-3(a)(3), the Members' interests in Company profits are
in proportion to their Percentage Interests.
(f) To the extent permitted by Section 1.704-2(h)(3) of the
Regulations, the Board shall endeavor to treat distributions as having been made
from the proceeds of a Nonrecourse Liability or a Partner Nonrecourse Debt only
to the extent that such distributions would cause or increase an Adjusted
Capital Account Deficit for any Member.
SECTION 3.10 TAX ELECTIONS.
The Company shall make the following elections on the appropriate tax
returns:
(a) to adopt the accrual method of accounting, if permitted by the
Code, and to keep the Company's books and records in a manner consistent
therewith;
(b) to elect to amortize the organizational expenses and the start-up
expenditures of the Company ratably over a period of sixty (60) months as
permitted by Sections 709(b) and 195(b) of the Code;
(c) if so requested by any Member, an election under Section 754 of the
Code to adjust the basis of the Company's property in the circumstances
described therein; and
(d) any other election not inconsistent with this Agreement or the
Joint Venture Agreement that the Tax Matters Member may deem appropriate and in
the best interests of the Members.
Neither the Company nor any Member may make an election for the Company to be
excluded from the application of the provisions of subchapter K of chapter 1 of
subtitle A of the Code or any similar provisions of applicable state law.
SECTION 3.11 TAX ALLOCATIONS; CODE SECTION 704(C).
In accordance with Code Section 704(c) and the Regulations thereunder,
income, gain, loss, and deduction with respect to any Contributed Asset shall,
solely for tax purposes, be allocated among the Members so as to take account of
any variation between the adjusted basis of such Contributed Asset to the
Company for federal income tax purposes and its initial Gross Asset Value
(computed in accordance with subparagraph (i) of the definition of "Gross Asset
Value").
In addition, in the event the Gross Asset Value of any Company asset is
adjusted pursuant to subparagraph (ii) of the definition of the "Gross Asset
Value," subsequent allocations of income, gain, loss, and deduction with respect
to such asset shall take account of any variation between the adjusted basis of
such asset for federal income tax purposes and its Gross Asset Value in the same
manner as under Code Section 704(c) and the Regulations thereunder.
The Company shall adopt and use only the "traditional method" permitted
by the Regulations under Code Section 704(c), and therefore shall not make any
curative allocations and/or remedial allocations. Allocations pursuant to this
Section 3.11 are solely for purposes of federal, state, and local taxes and
shall not affect, or in any way be taken into account in computing, any Member's
Capital Account or share of Profits, Losses, other items, or distributions
pursuant to any provision of this Agreement.
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Except as otherwise provided in this Agreement, all items of Company
income, gain, loss, deduction, and any other allocations not otherwise provided
for shall be divided among the Members in the same proportions as the Percentage
Interest for the Fiscal Year.
SECTION 3.12 TAX MATTERS MEMBER.
The Member having the highest Percentage Interest shall be the tax
matters partner (the "Tax Matters Member") of the Company pursuant to Section
6231(a)(7) of the Code. Such Member shall take such action as may be necessary
to cause each other Member to become a notice partner within the meaning of
Section 6223 of the Code. Such Member shall inform each other Member of all
significant matters that may come to its attention in its capacity as Tax
Matters Member by giving prompt notice thereof. The Company agrees to defend,
indemnify and hold harmless the Tax Matters Member from and against all claims
and damages relating to actions taken in good faith in discharging its
responsibilities as Tax Matters Member.
SECTION 3.13 REGULAR DISTRIBUTION POLICY.
(a) The Board shall determine from time to time, in its complete
discretion whether and to what extent the Company shall distribute any portion
of available Distributable Cash to Members; provided, however, that aside from
the Special Distribution, distributions declared or made on or before January 1,
2002 shall not exceed the Company's "net cash flow from operations" as
determined under Section 1.707-4(b), unless unanimously approved by the Members.
All funds distributed to the Members pursuant to this Section 3.12 shall be
distributed to them in accordance with their respective Percentage Interests.
(b) Subject to Section 8.3 hereof, to the extent that the Board
approves any distribution that consists of property of a type or in a form other
than cash, the types and forms of such property shall be allocated in an
equitable manner among the Members entitled thereto, such that each Member
shall, except for immaterial variances, receive the same type or form of
property.
(c) Any distributions to be made by the Company shall be made only to
the extent permitted by the Company Debt and any other Financing Agreements to
which any Company Group Affiliate is a party and only if and to the extent
permitted by applicable Law (including, without limitation, Sections 18-607 and
18-804 of the Delaware Act).
SECTION 3.14 SPECIAL DISTRIBUTION.
Simultaneous with the Closing, the Company shall use the net proceeds
of the Company Debt (after deducting borrowing expenses) to make the Special
Distribution to the WISCO Member in an amount that will result in the WISCO
Member's Percentage Interest equaling 5%. The amount of the Special Distribution
shall be determined in accordance with Section 2.1(b) of the Joint Venture
Agreement.
SECTION 3.15 ACCELERATED GAINS TAX LIABILITY OF WISCO.
(a) If (on one or more occasions) prior to the tenth anniversary of the
Closing Date, the Company sells or otherwise disposes of all or any part of the
WISCO Contributed Assets, and if WISCO therefore incurs and pays (either
directly or as an offset against a tax refund or overpayment of tax) federal
and/or state income tax liabilities (on a cumulative basis, taking into account
all such sales or other dispositions) exceeding $22 million as a result of the
allocation to it of income or gain(s)
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recognized by the Company from such sales or dispositions (up to the total Built
In Gain with respect to the WISCO Contributed Assets sold or disposed of,
determined by assuming, absent a Final Determination or receipt by CSK of a Tax
Opinion, that no income or gain is recognized by WISCO on the transfer of such
assets to the Company), then the Company shall distribute to WISCO (after each
such occasion and within 10 days after WISCO has demonstrated to the Company's
reasonable satisfaction the appropriate amount to be distributed) an amount of
money equal to the actual amount, if any, of WISCO's total federal and state
income tax liability in excess of $22 million resulting from the allocation to
it of income or gain so recognized by the Company. No distribution to WISCO
under this Section 3.15(a), however, shall be made with respect to the Company's
sale of inventory, the collection or disposition of accounts receivable, or the
retirement of other assets in the ordinary course of operating the WISCO
Business (it being understood that the disposition or partial liquidation of a
manufacturing facility or of any stock or other equity interest in any WISCO
Contributed Subsidiary shall not be considered to be a transaction in the
ordinary course of business) regardless of whether the $22 million limit
otherwise has been exceeded.
(b) (i) Subject to the compliance of WISCO with its obligations under
clause (ii) of this Section 3.15(b), if (on one or more occasions) the Company
or G-P (other than satisfying its obligations under the G-P Guarantee) pays all
or any part of the principal amount of the Permanent Company Debt prior to the
thirtieth (30th) anniversary of the Closing Date, or if the Company takes any
action prior to such thirtieth (30th) anniversary that would result in a
reduction, after the funding of the Permanent Company Debt, of the portion of
such debt for which WISCO "bears the economic risk of loss" within the meaning
of Section 1.752-2 of the Regulations, then the Company shall distribute to
WISCO (after each such occasion and within 10 days after WISCO has demonstrated
to the Company's reasonable satisfaction the appropriate amount to be
distributed) an amount of money equal to the actual increase, if any, in WISCO's
total federal and state income tax liability incurred and paid by WISCO (either
directly or as an offset against a tax refund or overpayment of tax) as a result
of such payment or other action by the Company. Similar principles shall apply
if the Company repays the principal amount of the Company Debt other than by
replacing such debt with the Permanent Company Debt as provided in Section 3.17
hereof. WISCO has determined that it "bears the economic risk of loss" within
such meaning for the Company Debt up to the amount of the Special Distribution
as of the Closing Date and acknowledges that it will need to make a similar
determination with respect to the Permanent Company Debt, and the Members
acknowledge that no distribution will be made pursuant to this Section 3.15(b)
to compensate WISCO for any tax liability attributable to the incorrectness of
WISCO's determinations.
(ii) The Members acknowledge that the Company shall replace the Company
Debt and may replace the Permanent Company Debt from time to time with other
indebtedness so long as (x) such replacement does not result in a reduction in
the total amount of Company indebtedness for which WISCO "bears the economic
risk of loss," (y) such indebtedness is on terms that are no less favorable to
the Company (taking into account the Company's credit rating) than prevailing
terms in the credit markets in all material respects at the time such
indebtedness is incurred, and (z) the Company shall have provided notice to
WISCO of the terms of such indebtedness as soon after agreeing to such terms as
is reasonably practicable. WISCO hereby agrees to cooperate to the extent
reasonably required to facilitate such one or more refinancings, including but
not limited to, executing agreements (in form and substance reasonably
satisfactory to WISCO) necessary for it to "bear the economic risk of loss" for
such replacement indebtedness in an amount not less than the Special
Distribution. In such event, any such replacement indebtedness (and any and all
subsequent replacement indebtedness) shall be treated as Permanent Company Debt
for purposes of this Section 3.15(b).
(c) For the avoidance of doubt, the Members acknowledge that no
distribution will be made pursuant to this Section 3.15 as a result of the
exercise of the WISCO Put, nor shall any
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distribution be made pursuant to this Section 3.15 to compensate WISCO for any
tax liability resulting from any treatment of the contribution of the WISCO
Contributed Assets to the Company as a sale in whole or in part for federal
and/or state income tax purposes (such treatment being evidenced by a Final
Determination or by a Tax Opinion). In making any determination of the
appropriate amount to be distributed pursuant to this Section 3.15, any effect
on WISCO's taxable income and/or gain resulting from any distribution made to
WISCO pursuant to this Section 3.15, or from any corresponding special
allocation of income under Section 3.7(h), shall be disregarded.
(d) If G-P purchases WISCO's Interest in the Company pursuant to
Section 7.2(b) hereof, or if a Voluntary Dissolution Event Without WISCO's
Consent occurs, then the Company shall distribute to WISCO an amount of money
equal to the lesser of the following two amounts: (i) the amount of federal and
state income tax liability that WISCO actually incurred and paid (either
directly or as an offset against a tax refund or overpayment of tax) as a result
of the income and/or gain it recognized on the sale of its Interest to G-P (or
an Affiliate of G-P) pursuant to Section 7.2(b) or Section 8.5(b) hereof, or
upon the receipt of distributions in liquidation of its Interest pursuant to
Section 8.2 hereof, or (ii) the amount of federal and state income tax liability
that WISCO would have incurred on the sale of its Interest to G-P (or an
Affiliate of G-P), or upon the receipt of distributions in liquidation of its
Interest, if the income or gain recognized from such sale or liquidation were an
amount equal to the excess of (x) the aggregate Built In Gain in all of the
WISCO Contributed Assets over (y) any such Built In Gain previously recognized
by WISCO. For purposes of clause (y) of the preceding sentence, the following
items shall be treated as recognized Built In Gain: (1) any gain actually
recognized by WISCO from action taken by the Company with respect to the Company
Debt if such action would give rise to a distribution obligation under Section
3.15(b) and (2) any Built In Gain in WISCO Contributed Assets consisting of
inventory or accounts receivable (whether or not recognized). For purposes of
this Section 3.15(d), in computing the amount of income and/or gain recognized
by WISCO on the sale its Interest pursuant to Section 7.2(b) or Section 8.5(b)
hereof, or upon the receipt of distributions in liquidation of its Interest
pursuant to Section 8.2 hereof, there shall be included in the amount realized
by WISCO the entire amount of Company Debt (including for this purpose the
Permanent Company Debt) for which WISCO "bears the economic risk of loss" within
the meaning of Section 1.752-2 of the Regulations immediately before such sale
or liquidation, regardless of whether the indemnity agreement or other
arrangement causing WISCO to "bear the economic risk of loss" remains in effect
after such sale or liquidation. The Company shall distribute to WISCO the amount
determined in this Section 3.15(d) within 10 days after WISCO has demonstrated
to the Company's reasonable satisfaction the amount to be distributed. If,
following a Voluntary Dissolution Event Without WISCO's Consent, the Company
does not have sufficient funds to make the distribution to WISCO required under
this Section 3.15(d), G-P shall pay WISCO the amount of any shortfall.
(e) If any distribution to WISCO pursuant to this Section 3.15 is
smaller than it otherwise would have been because the event triggering the
Company's obligation to make the distribution reduced, eliminated, or prevented
the creation of or addition to a net operating loss carryover, capital loss
carryover, tax credit carryover, or other tax attribute of WISCO (collectively,
a "WISCO Tax Attribute"), then the Company shall distribute to WISCO (within 10
days after WISCO has demonstrated to the Company's reasonable satisfaction the
amount to be distributed) an amount equal to any actual increase in WISCO's
federal and state income tax liability in one or more prior or subsequent
taxable years of WISCO, but only to the extent that such increased liability is
attributable to the decrease in such WISCO Tax Attribute.
(f) Upon the occurrence of an event requiring a distribution to WISCO
under Section 3.15(b) or (d), the amount of such distribution shall be increased
pursuant to this Section 3.15(f) if WISCO has theretofore incurred and paid
(either directly or as an offset against a tax refund or
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overpayment of tax), and has not been indemnified by the Company pursuant to
Section 3.15(a) (due to the $22 million limit), federal and/or state income tax
liabilities resulting from the allocation to WISCO of Built In Gain in the WISCO
Contributed Assets upon the Company's sale or other disposition of all or any
part of such assets. The amount of the increased distribution, if any, under
this Section 3.15(f) shall be determined by multiplying (i) the federal and/or
state income tax liabilities actually incurred and paid by WISCO (either
directly or as an offset against a tax refund or overpayment of tax) from asset
sales or other dispositions by the Company to the extent that such liabilities
were not indemnified by the Company under Section 3.15(a) by reason of the $22
million limit times (ii) the "Built In Gain Percentage." For purposes of this
Section 3.15(f), the "Built In Gain Percentage" in the case of a distribution to
WISCO pursuant to Section 3.15(b) is the percentage obtained by dividing (i) the
income or gain actually recognized by WISCO from action taken by the Company
with respect to the Company Debt or the Permanent Company Debt if such action
would give rise to a distribution obligation under Section 3.15(b) by (ii) the
aggregate Built In Gain in all of the WISCO Contributed Assets. In the case of a
distribution to WISCO pursuant to Section 3.15(d), the "Built In Gain
Percentage" is 100%.
(h) Notwithstanding anything to the contrary in this Section 3.15, no
distribution shall be made to WISCO pursuant to this Section 3.15 prior to the
day after the second anniversary of the Closing Date. If a distribution
otherwise would have been due to WISCO under this Section 3.15 before the second
anniversary of the Closing Date, the amount of the distribution shall be
increased by an amount computed like interest at the prime rate published in the
"Money Rates" table (or any successor thereto) of The Wall Street Journal from
time to time from the date such distribution otherwise would have been due.
(i) For purposes of applying this Section 3.15, the Company's adjusted
basis for federal and state income tax purposes in the stock of Wisconsin Tissue
de Mexico, S.A. de C.V. immediately after the contribution of such stock to the
Company shall be increased by the amount of any intercompany loss with respect
to such stock recognized by the CSK Group as a result of the contribution. WISCO
shall inform the Company of the amount of any such recognized loss on or before
September 15, 2000, and shall inform the Company of any adjustments to the
amount of such recognized loss promptly after any such adjustment is made
(whether by the CSK Group or by the Internal Revenue Service).
SECTION 3.16 SHARING OF COMPANY TAX BENEFITS.
(a) (i) The Members believe that the contribution of the WISCO Business
constitutes a nonrecognition transaction pursuant to Section 721(a) of the Code,
and the Members and the Company shall report and otherwise treat the transfer of
the WISCO Contributed Assets to the Company as solely a nonrecognition
transaction pursuant to Section 721(a) of the Code on all relevant tax returns
and reports unless there is a Final Determination to the contrary or CSK
receives a Tax Opinion to the contrary. In addition, unless there is a Final
Determination to the contrary or CSK receives a Tax Opinion to the contrary, the
Members and the Company agree to treat any excess of the Special Distribution
over WISCO's "allocable share" of the Company Debt (within the meaning of
Regulations Section 1.707-5(b)), and any excess of the Special Distribution over
WISCO's "allocable share" of the Permanent Company Debt (within the meaning of
Regulations Section 1.707-5(b)), as reimbursements of capital expenditures
incurred by WISCO with respect to the WISCO Contributed Assets during the
two-year period prior to the Closing Date to the extent permitted by Regulations
Section 1.707-4(d). If CSK receives a Tax Opinion or, prior to the eighth
anniversary of the Closing Date, there is a Final Determination that the
transfer of the WISCO Business to the Company constituted a sale to the Company
(in whole or in part) for federal income tax purposes, then WISCO and G-P shall
jointly
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determine the change in the Company's adjusted basis for federal income
tax purposes in the WISCO Contributed Assets (such change being referred to
herein as the "Sale Step-Up").
(ii) If the Company is dissolved because of an Involuntary Dissolution
Event and WISCO recognizes taxable income and/or gain resulting from the receipt
of liquidating distributions pursuant to Section 8.2 hereof or upon the sale of
its Interest pursuant to Section 8.5 hereof, then WISCO and G-P shall jointly
determine the change, if any, in the Company's (or G-P's) adjusted basis for
federal income tax purposes in the WISCO Contributed Assets (such change being
referred to herein as the "Involuntary Dissolution Step-Up," and together with
the Sale Step-Up, the "Step-Up").
(b) Within 10 days after G-P or an Affiliate of G-P files any federal
or state income tax return (including for this purpose any amended return or
claim for refund) with the Internal Revenue Service or the applicable state
income tax authority, G-P shall pay to WISCO an amount equal to one-half of the
net income tax benefit to G-P or the Affiliate reflected on such return to the
extent that such benefit is attributable to the Step-Up. In the case of any tax
return described in the preceding sentence in which a net operating loss or a
net capital loss is reported, the net income tax benefit attributable to the
Step-Up shall be determined as if each deduction or recognized loss of G-P (or
its Affiliate) claimed on such return were used in proportion to (i) the total
amount of deductions or losses claimed on such return BEFORE creating any net
operating loss or net capital loss, divided by (ii) the total amount of
deductions or losses claimed on such return (taking into account the amount of
deductions and losses resulting in a net operating loss or net capital loss for
the year). Any deduction resulting from a net operating loss carryover, and any
net capital loss carryover used to offset a recognized capital gain, shall be
treated as a deduction or loss attributable to the Step-Up in proportion to a
fraction, the numerator of which is any portion of a deduction or loss
attributable to the Step-Up that is deemed not to have been used previously and
the denominator of which is the total amount of the deduction resulting from the
net operating loss carryover or, as the case may be, the total amount of the
capital loss carryover that is used to offset a recognized capital gain. To the
extent that G-P or its Affiliate receives (either directly or as an offset
against a liability) a payment of interest or realizes a reduction in interest
expense as a result of filing a tax return described in the first sentence of
this Section 3.16(b), G-P shall pay to WISCO an amount computed in the same
manner as such interest on the amount described in such sentence.
(c) If CSK receives a Tax Opinion or, prior to the eighth anniversary
of the Closing Date, there is a Final Determination that the transfer of the
WISCO Business to the Company constituted a sale to the Company (in whole or in
part) for federal income tax purposes, and the WISCO Put is exercised in full
following receipt of such Tax Opinion or such Final Determination, G-P shall
continue to make payments to WISCO pursuant to Section 3.16(b) hereof until the
net income tax benefit attributable to the Step-Up is exhausted. If, however,
WISCO exercises the WISCO Put (in whole or in part) prior to CSK's receipt of a
Tax Opinion or prior to a Final Determination that the transfer of the WISCO
Business to the Company constituted a sale to the Company (in whole or in part)
for federal income tax purposes, G-P's payment obligation under Section 3.16(b)
shall not apply to any income tax deductions or losses attributable to the
Step-Up which are claimed in any taxable year (or portion thereof, determined by
pro rating the number of days in such taxable year) of G-P (or its Affiliate)
that occurs after the first such exercise of the WISCO Put.
(d) If G-P makes a payment to WISCO under this Section 3.16 and if
WISCO and G-P jointly determine that there should have been no change in the
basis of assets or that the change was more or less than the amount they
originally determined, then (i) the amount of G-P's income tax savings
previously determined shall be redetermined to reflect the correct change (or no
change) in the basis of assets, and (ii) WISCO shall refund to G-P or G-P shall
pay to WISCO, as appropriate, the difference between the total amount previously
paid by G-P to WISCO under this Section 3.16 and the total amount
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that should have been paid based on the redetermined tax savings. To facilitate
the application of this Section 3.16(d), each party shall promptly notify the
other of any event (of which the party becomes aware) that the party believes
likely would give rise to a redetermination under this Section 3.16(d).
SECTION 3.17 PERMANENT COMPANY DEBT.
The Company shall refinance the Company Debt (in accordance with
Section 3.15(b)(ii)) with new non-amortizing indebtedness that remains
outstanding for an aggregate term (taking into account the initial refinancing
and any subsequent refinancings) of 30 years from the maturity date of the
Company Debt (the "Permanent Company Debt"). The principal amount of the
Permanent Company Debt shall be equal to the Company Debt plus an amount of
expenses incurred in obtaining the Permanent Company Debt (including any
refinancings thereof) that does not exceed the difference between (i) $8,000,000
in the aggregate and (ii) the amount of any borrowing expenses that were
incurred to obtain the Company Debt and added to the principal amount thereof.
After deducting such expenses, the net proceeds of the Permanent Company Debt
shall be used solely to repay in full the principal amount of the Company Debt
(or, in the case of refinancings of Permanent Company Debt, such refinanced
Debt). In accordance with Section 3.15(b)(ii), WISCO hereby agrees to cooperate
to the extent reasonably required to facilitate the obtaining of the Permanent
Company Debt, including but not limited to, executing agreements (in form and
substance reasonably satisfactory to WISCO) necessary for it to "bear the
economic risk of loss" for such debt in an amount not less than the Special
Distribution. The Company agrees that the Permanent Company Debt shall be issued
pursuant to an indenture or credit agreement that contains covenants that are
substantially similar to those contained in the G-P Member's public bond
indenture dated March 1, 1983, from G-P to Chase Manhattan Bank National
Association, as trustee, a copy of which has been provided to the WISCO Member.
Further, the G-P Member shall fully and unconditionally guarantee all
refinancings of the Company Debt or Permanent Company Debt (such guarantee to be
in substance sufficient for G-P to bear the "economic risk of loss" for such
Debt, but for the WISCO Debt Indemnity (the "G-P Guarantee")), subject to an
indemnity from WISCO on substantially the same terms as the WISCO Debt
Indemnity.
In addition, at all times that WISCO is subject to any continuing
liability under a WISCO debt indemnity (the "WISCO Indemnity Period"), the
Company agrees (and each of the G-P Member and WISCO Member agrees to cause the
Company) to abide by the following covenants:
(a) Notwithstanding Section 3.13 hereof, in the event the Company or
any of its Subsidiaries sells any assets (other than sales of inventory in the
ordinary course of its business) or incurs any indebtedness in addition to the
Permanent Company Debt, the proceeds of such sales or borrowings may not be
distributed to Members, or loaned or contributed to any Person (including,
without limitation, Subsidiaries of the Company); provided, however, that the
Company or any of its Subsidiaries shall be permitted to lend such proceeds to
G-P or a Subsidiary of the Company (such loan to be evidenced by a G-P note or
Company Subsidiary note, as the case may be, that is not subordinated to G-P's
or such Company Subsidiary's, as the case may be, other senior unsecured debt).
(b) Neither the Company nor any of its Subsidiaries shall guarantee the
debt or other obligations (the "Obligations") of any other Person (including,
without limitation, Subsidiaries of the Company) other than in the ordinary
course, consistent with the past practices of either Business, except that (i)
the Company or such Subsidiary shall be permitted to guarantee the Obligations
of G-P (including, without limitation, Obligations pursuant to G-P's senior bank
credit agreement), and (ii) the Company or such Subsidiary shall be permitted to
guarantee the Obligations of other Persons, provided that, with respect to
clause (ii) hereof, G-P has also guaranteed such Obligations on terms that
provide that the beneficiaries of such guarantees will exhaust their rights and
remedies against G-P before
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exercising any rights or remedies against the Company or such Subsidiary, as the
case may be, pursuant to its guarantee.
(c) In addition to the negative pledge provisions to be included in the
indenture or credit agreement for the Permanent Company Debt, neither the
Company nor any Subsidiary of the Company shall grant any liens or encumbrances
on any of its assets to secure Obligations of any other Person (including,
without limitation, Subsidiaries of the Company), except (i) the Company or such
Subsidiary of the Company shall be permitted to grant liens to secure
Obligations of G-P, and (ii) the Company or such Subsidiary of the Company shall
be permitted to grant liens on its assets to secure Obligations of other
Persons, provided that with respect to clause (ii), G-P has guaranteed such
Obligations on terms that provide that the beneficiaries of such Obligations
will exhaust their rights and remedies against G-P before exercising any rights
or remedies with respect to the pledged assets of the Company or such Subsidiary
of the Company, as the case may be.
(d) In connection with the G-P guarantees referred to in the provisos
of clauses (b) and (c) of this section, G-P agrees to provide the WISCO Member
with the proposed form of such guarantee (which shall be the same in all
material respects as the actual guarantee entered into by G-P in connection with
the subject transaction) as soon as practicable, but in any event within five
(5) Business Days prior to G-P's execution of such guarantee.
(e) If the WISCO Debt Indemnity has terminated in accordance with its
terms, this Section 3.17 shall have no further effect.
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ARTICLE IV
MANAGEMENT
SECTION 4.1 GENERAL.
Subject to the delegation of rights and powers provided herein, the
Board shall have the sole right to manage the business of the Company and shall
have all powers and rights necessary, appropriate or advisable to effectuate and
carry out the purposes and business of the Company. No Member, by reason of its
status as such, shall have any authority to act for or bind the Company or
otherwise take part in the management of the Company, but shall have only the
right to vote on or approve the matters specifically provided herein or in the
Delaware Act (or hereafter specified by the Board) to be voted on or approved or
determined by the Members.
SECTION 4.2 BOARD COMPOSITION.
The Board shall consist of 5 Managers or such other number as the Board
shall determine. Each Member shall have the right to designate such number of
Managers (rounded up or down to the nearest whole number) as is in proportion to
its respective Percentage Interest; provided that the WISCO Member shall, so
long as it holds any Units in the Company, be entitled to appoint at least one
Manager to the Board. Each of CSK and G-P shall provide notice of its initial
designations of Managers in writing to the other on or prior to the Closing
Date. Each Manager shall hold office until such Manager's resignation, removal,
death or incapacity; provided, however, that if the number of Managers that a
Member is entitled to designate is reduced by reason of a change in Unit
ownership, the one or more affected Managers appointed by such Member shall
automatically cease to be Managers (if more than one, in the reverse order of
the date of their respective appointments).
SECTION 4.3 TERM; REMOVAL; VACANCIES.
Managers shall hold office at the pleasure of the Member that
designated them. Any Member may at any time, by written notice to the other
Members and the Company, remove (with or without cause) any Manager designated
by such Member. Subject to applicable Law and to the provisions of Section 4.2,
a Manager may not be removed except by written request of the Member that
designated the Manager. In the event a vacancy occurs on the Board for any
reason, the vacancy will be filled by the written designation of the Member that
designated the Manager creating the vacancy.
SECTION 4.4 NOTICE; QUORUM.
Meetings of the Board may be called by any Manager on two Business
Days' prior written notice to all Managers stating in general the purpose or
purposes thereof; provided, however, that any Manager may waive such notice
prior to, at or after the meeting. The presence in person of a majority of the
Managers shall constitute a quorum for the transaction of business at any
meeting of the Board. Each Member shall use its reasonable efforts to ensure
that a quorum is present at any duly convened meeting of the Board and each
Member may designate by written notice to the others an alternate to act in the
absence of any of its previously designated Managers at any such meeting. If at
any meeting of the Board a quorum is not present, a majority of the Managers
present may, without further notice, adjourn the meeting from time to time until
a quorum is obtained.
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SECTION 4.5 VOTING.
(a) Each Manager shall be entitled to cast one vote on each matter
considered by the Board. Except as otherwise expressly provided by this
Agreement, the act of a majority of the Managers present at any meeting at which
a quorum is present shall constitute an act of the Board.
(b) The following matters shall require, in addition to any other vote
required by applicable Law or as otherwise provided for herein, the affirmative
vote of a majority of the Board in attendance, which majority must include a
Manager designated by the WISCO Member:
(i) except as provided in Article VIII hereof, and subject to
applicable Law, any dissolution or liquidation of the Company;
(ii) any merger, consolidation, conversion or other
reorganization involving the Company, or the sale or other disposition of all or
substantially all of the assets of the Company in one transaction or a series of
related transactions;
(iii) the admission of an additional Member except as provided in
Section 7.1; and
(iv) any amendment to or waiver or termination of, any Ancillary
Agreement, which amendment or waiver or termination would have the effect of
adversely altering the methodology for establishing the price of goods or the
cost allocation of services provided to the Company in the Ancillary Agreements
(other than the Parent Roll Supply Agreement) or adversely amend or waive
Section 4.1 of the Parent Roll Supply Agreement or terminate the Parent Roll
Supply Agreement.
(c) Any Manager, when making any determination in such capacity,
including voting or acting by consent with respect to any matter, shall be
entitled to act in his or her discretion, considering only such interests and
factors as such Manager desires, and such Manager shall have no duty or
obligation to give any consideration to any interest of, or other factors
affecting, the Company or any Member. Further, a Manager may consider and act in
accordance with the interests of the Member appointing him or her, without
regard to the other interests or factors, including any fiduciary duties, when
acting on any matter presented to the Board for determination, and to the extent
permitted by the Delaware Limited Liability Company Act, the Members hereby
eliminate and waive any and all fiduciary duties and liabilities of the Manager
and their Affiliates to the Company and any other Members.
SECTION 4.6 TELEPHONIC MEETING; WRITTEN CONSENTS.
(a) Any meeting of the Board may be held by conference telephone or
similar communication equipment so long as all Managers participating in the
meeting can hear one another. All Managers participating by telephone or similar
communication equipment shall be deemed to be present in person at the meeting.
(b) Any action to be taken by the Managers at a meeting of the Board
may be taken without such meeting by the written consent of a majority of the
Managers then in office (or such higher number of Managers as is required take
such action under the terms of this Agreement or applicable Law). Any such
written consent may be executed and given by telecopy or similar electronic
means and shall be filed with the minutes of the proceedings of the Board. If
any action is so taken by the Board by the written consent of less than all of
the Managers, prior notice of the taking of such action shall be furnished to
each Manager, which notice shall include a copy of the proposed consent, as well
as any
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other information provided by the Company to any Manager with such consent
(provided that the effectiveness of such action shall not be impaired by any
delay or failure to furnish such notice).
SECTION 4.7 COMMITTEES OF THE BOARD; OFFICERS.
(a) The Managers may, by resolution (which resolution shall have been
approved by the WISCO Manager), delegate any of the Board's powers to one or
more committees of the Board, each consisting of one or more Managers (other
than the power to take the actions specified in Section 4.5(b)). The Board, by
resolution, may adopt further procedures relating to the conduct of business by
any of the committees established by it.
(b) The Company shall have such officers as shall be appointed by the
Board, each having such powers and duties as shall be provided by resolution of
the Board. In addition, the Board may appoint, employ or otherwise cause the
Company to contract with such other Persons for the transaction of the business
of the Company or the performance of services for or on behalf of the Company as
it shall determine in its discretion from time to time. The Board may delegate
to any officer of the Company or to any such other Person such authority to act
on behalf of the Company as the Board may from time to time determine
appropriate in its discretion. The salaries or other compensation, if any, of
the officers and agents of the Company shall be fixed from time to time by the
Board. The Managers shall not be responsible for any misconduct or negligence on
the part of any officer, agent or other Person to whom authority is delegated,
provided that such Person was appointed by the Managers with reasonable care.
SECTION 4.8 EXECUTION OF DOCUMENTS.
No Manager (acting solely in his capacity as such) shall have any
authority to bind the Company to any third party with respect to any action
except pursuant to a resolution authorizing such action. Any Manager or officer
of the Company, or any other persons specifically authorized by the Board, may
execute any contract or other agreement or document on behalf of the Company and
may execute on behalf of the Company and file with the Secretary of State of the
State of Delaware any certificates or filings provided for in the Delaware Act.
The filing of the Certificate of Formation with the Secretary of State of the
State of Delaware by the authorized person therein specified is hereby ratified
and confirmed.
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SECTION 4.9 RELIANCE ON DOCUMENTS AND REPORTS.
A Manager shall be fully protected in relying in good faith upon the
records of the Company and upon such information, opinions, reports or
statements presented to the Company by any of its other Managers, Members,
officers, employees or committees, or by any other Person, as to matters the
Manager reasonably believes are within such other Person's professional or
expert competence and who has been selected with reasonable care by or on behalf
of the Company (including, without limitation, information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits, or
losses of the Company or any other facts pertinent to the existence and amount
of assets from which distributions to Members might properly be paid). In
addition, the Managers may consult with legal counsel, accountants, appraisers,
management consultants, investment bankers and other consultants and advisors
selected by them, and reliance upon any opinion of any such Person as to matters
which the Managers reasonably believe to be within such Person's professional or
expert competence shall be full and complete protection in respect of any action
taken or suffered or omitted by the Managers hereunder in good faith and in
accordance with such opinion.
SECTION 4.10 STANDARD OF CARE; INDEMNIFICATION.
Subject to Section 4.5(c), in carrying out his duties, a Manager or
officer of the Company shall not be liable to the Company or to any Member for
any actions taken in good faith and reasonably believed by the Manager or
officer to be in, or not opposed to, the best interests of the Company Group, or
for errors of judgment, neglect or omission, including any losses sustained,
liabilities incurred, or benefits not derived by Members in connection with any
action or inaction of the Manager, provided, however, that a Manager or officer
shall be liable for his willful misconduct or gross negligence.
(a) Each Manager shall, and each officer at the discretion of the Board
may (as so indemnified, an "Indemnitee") be indemnified and held harmless by the
Company from and against any and all losses, claims, damages, liabilities,
expenses (including legal fees and disbursements), judgments, fines, settlements
and all other amounts arising from any and all claims, demands, actions, suits
or proceedings, civil, criminal, administrative or investigative, in which the
Indemnitee may be involved, or threatened to be involved, as a party or
otherwise by reason of his status as a Manager or officer, or his management of
the affairs of the Company, or which relate to the Company, its property,
business or affairs, whether or not the Indemnitee continues to be a Manager or
officer at the time any such liability or expense is paid or incurred, if the
Indemnitee (i) acted in good faith and in a manner he reasonably believed to be
in, or not opposed to, the best interests of the Company Group and, (ii) with
respect to any criminal proceeding, had no reasonable cause to believe his
conduct to be unlawful; provided however, that no Indemnitee shall be entitled
to indemnification if it shall be finally determined that such Indemnitee's act
or omission constituted willful misconduct or gross negligence.
(b) Expenses (including legal fees and disbursements) incurred in
defending any proceeding shall be paid by the Company in advance of the final
disposition of such proceeding upon receipt of an undertaking by or on behalf of
the Indemnitee to repay such amount if it is ultimately determined by a court of
competent jurisdiction that the Indemnitee is not entitled to be indemnified by
the Company as authorized hereunder.
SECTION 4.11 MEMBER ACTION.
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In the event that any matter is required to be submitted to the Members
for their approval under the terms of this Agreement or the Delaware Act, the
following provisions shall apply:
(a) The Members may vote on any such matter at a meeting to be held at
such time and place as shall be designated by the Board. Any meeting of the
Members may be held by conference telephone or similar communication equipment
so long as all Members participating in the meeting can hear one another. All
Members participating by telephone or similar communication equipment shall be
deemed to be present in person at the meeting. Members shall be given at least
three Business Days' prior notice of any meeting; provided that any Member may
waive such notice prior to, at or after the meeting. The notice shall specify
the place, date and hour of the meeting and the general nature of the business
to be transacted. Every Member entitled to vote or act on any matter at a
meeting of Members shall have the right to do so either in person or by proxy.
(b) Each Member shall be entitled to one vote for each Unit owned by
it. At any meeting of Members, the presence in person or by proxy of Members
having the right to vote more than 50% of the Units entitled to vote at such
meeting shall constitute a quorum for the transaction of business. Except as
otherwise required by this Agreement or applicable Law, the affirmative vote of
Members having the right to cast more than 50% of the votes present at a meeting
of Members at which a quorum is present is required to approve any action
requiring the Members' approval at such meeting.
(c) Any action that may be taken at any meeting of Members may be taken
without a meeting and without prior notice if a consent in writing setting forth
the action so taken is signed by all Members. Any such written consent may be
executed and given by telecopy or similar electronic means and such consents
shall be filed with the minutes of the proceedings of the Members.
SECTION 4.12 CERTAIN TRANSACTIONS.
(a) Without requirement of further consent or action of the Members or
Managers of the Company, the Company is authorized to enter into the Joint
Venture Agreement and each of the Ancillary Agreements and all other documents
and agreements to be delivered by the Company at the Closing pursuant to the
Joint Venture Agreement, to perform the Company's obligations thereunder, and to
consummate the transactions contemplated thereby, all of which actions are
approved, ratified and confirmed by the Members. Without limiting the foregoing,
it is understood and agreed that, pursuant to the Management Agreement (as
defined in the Joint Venture Agreement) G-P shall, subject to the authority of
the Board, be responsible for the management and operations of the Company.
(b) Notwithstanding anything herein to the contrary, prior to agreeing
to terminate any Ancillary Agreement (other than the Parent Roll Supply
Agreement, which may not be terminated at any time that WISCO is a Member of the
Company without the WISCO Manager's consent thereto), the Board must make a good
faith determination that it no longer requires the services provided by G-P in
such Ancillary Agreement.
ARTICLE V
ACCOUNTING, BOOKS AND RECORDS
SECTION 5.1 FISCAL YEAR.
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The fiscal year and fiscal periods of the Company shall be the same as
the fiscal year and fiscal periods of G-P, as the same may be changed or
modified from time to time. The G-P Member shall give the WISCO Member prompt
notice of any material change in the fiscal year or fiscal periods of G-P.
SECTION 5.2 BOOKS AND RECORDS.
The Company shall keep at its principal executive offices books and
records typically maintained by Persons engaged in similar businesses and which
shall set forth a true, and complete account of the Company Business and affairs
of the Company Group in all material respects. Such books and records shall be
kept in accordance with GAAP in a manner reasonably designed to provide such
information as well as permit preparation by Members of their Federal and State
tax returns and to calculate EBITDA of the Company. Each of the Members and
their respective authorized representatives (and with respect to the G-P Books
the WISCO Member) shall have the right, at all reasonable times and upon
reasonable advance written notice to the Company, at such Member's expense, to
inspect, audit and copy the books and records of the Company Group (and with
respect to the G-P Books the WISCO Member) for any purpose reasonably related to
the Member's interests as a Member of the Company. A Member requesting any such
access to books and records shall reimburse the Company or G-P, as the case may
be, for any costs reasonably incurred by it in connection therewith.
SECTION 5.3 AUDITORS.
The CPA Firm of the Company shall be the same firm used by G-P, as such
CPA Firm may be changed from time to time so long as it is an auditing firm of
national standing.
SECTION 5.4 REPORTING.
The Company shall use reasonable commercial efforts to deliver to each
Member (i) prior to each fiscal quarter, a quarterly forecast of the results of
operations of the Company Group for such quarter, and, as soon as practicable,
any material changes to such forecast; (ii) within 15 days after the close of
each fiscal quarter, estimated financial statements for the Company Group; (iii)
within 30 days after the close of each fiscal quarter, an Unaudited Balance
Sheet, Statement of Income and Statement of Cash Flows for the Company Group,
together with the notes related thereto; and (iv) within 60 days after the close
of each Fiscal Year, an Audited Balance Sheet, Statement of Income and Statement
of Cash Flows for the Company Group for such Fiscal Year, together with the
notes related thereto. The Members acknowledge and agree that the Members shall
have no recourse against the Company or each other in the event the forecast is
incorrect and that no Member shall be entitled to rely on such forecast for any
purpose.
SECTION 5.5 BANKING.
All funds of the Company received from any and all sources shall be
deposited in the Company's name in such separate checking or other such accounts
as shall be determined by the Board. In connection with the maintenance of such
bank accounts, the Board shall designate those individuals who will have
authority to write checks or otherwise disburse funds from such bank accounts on
behalf of the Company in connection with its activities. Nothing contained
herein shall be construed to limit the ability of the Company to obtain and
utilize cash management services pursuant to the Management Agreement, as
defined in the Joint Venture Agreement.
SECTION 5.6 TAX RETURN INFORMATION.
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The Company shall prepare all federal, foreign, state and local income
tax returns that the Company is required to file. Within 120 days following the
close of each Fiscal Year, the Company shall send or deliver to each Person that
was a Member at any time during such year such tax information as shall
reasonably be required for the preparation by such Person of its federal,
foreign, state and local income and other income tax returns.
SECTION 5.7 DELEGATION OF RESPONSIBILITY FOR ACCOUNTING AND REPORTS.
Subject to the provisions of Section 5.3, the Board may cause the
Company to contract with any other Person for the provision of any of the
accounting, cash management and tax services required under Article III or this
Article V and may pay reasonable compensation for such services.
ARTICLE VI
CONFIDENTIALITY
SECTION 6.1 CONFIDENTIALITY OBLIGATION.
The WISCO Member (and, in the case of Section 6.1(c) below, the
Company) shall use (and shall ensure that each of its Affiliates shall use) all
reasonable efforts to keep confidential (and to ensure that its officers,
employees, agents and professional and other advisers keep confidential) the
following ("Confidential Information"):
(a) all technical information, formulae, designs, specifications,
drawings, data, manuals, instructions and other know-how relating to the
products and technical processes of the Company Group, the Company Business or
the business of any other Member;
(b) any information which the WISCO Member may have or acquire before
or after the date of this Agreement with respect to the customers, business,
assets or affairs of any G-P Group Affiliate, or any Company Group Affiliate,
resulting from:
(i) negotiating this Agreement, the Joint Venture Agreement or
any other agreement referred to in or entered into pursuant to this Agreement or
the Joint Venture Agreement;
(ii) being a Member in the Company;
(iii) appointing Managers to the Board and their exercise of
their duties; or
(iv) exercising its rights or performing its obligations under
this Agreement;
(c) any information which the Company may have or acquire before or
after the date of this Agreement in relation to the customers, business, assets
or affairs of any G-P Group Affiliate or any CSK Group Affiliate resulting from
the exercise of its rights or performance of its obligations under this
Agreement, the Joint Venture Agreement or any other agreement referred to in or
entered into pursuant to this Agreement or the Joint Venture Agreement; or
(d) any information which such Member may have or acquire before or
after the date of this Agreement with respect to the customers, business, assets
or affairs of the Company Business.
The WISCO Member (and, in the case of Section 6.1(c), the Company)
shall not (and shall cause its Affiliates not to) disclose to any third party
any Confidential Information without the consent of the
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G-P Member. In performing its obligations under this Article VI, the WISCO
Member and the Company shall (and shall cause its Affiliates to) apply no lesser
confidentiality standards and procedures than it applies generally in relation
to its own confidential information. Notwithstanding anything herein to the
contrary, for purposes of this Agreement, the term Confidential Information
shall not include information of the type described in Sections 6.2(b) and
6.2(g).
SECTION 6.2 EXCEPTIONS FROM CONFIDENTIALITY OBLIGATION.
The obligation not to disclose Confidential Information to any third
party under this Article VI does not apply to:
(a) the disclosure (subject to Section 6.3) on a 'need to know' basis
to a company which is another CSK Group Member where the disclosure is for a
purpose reasonably incidental to this Agreement; including, without limitation,
as necessary for the performance of its obligations under any Ancillary
Agreement, in which case such company shall be subject to the confidentiality
obligations of Article VI in this Agreement;
(b) information which is independently developed by the WISCO Member or
acquired from a third party to the extent that it is acquired with the right to
disclose the same after the date hereof;
(c) the disclosure of information to the extent required to be
disclosed by law, any stock exchange regulation or any binding judgment, order
or requirement of any court or other competent authority (subject to the
obligation to consult with the G-P Member in advance and to take account of its
reasonable requirements);
(d) disclosure of information to lenders and rating agencies;
(e) the disclosure of information to any tax authority to the extent
reasonably required for the purposes of the tax affairs of the WISCO Member
concerned or any Member of its Group;
(f) the disclosure (subject to Section 6.3) in confidence to the WISCO
Member's professional advisers of information reasonably required to be
disclosed for a purpose reasonably incidental to this Agreement; or
(g) information which becomes within the public domain (otherwise than
as a result of a breach of Article VI).
SECTION 6.3 EMPLOYEES, AGENTS AND ADVISERS.
The WISCO Member shall inform (and shall ensure that each of its
Subsidiaries or Affiliates shall inform) any officer, employee or agent or any
professional or other adviser advising it in relation to the matters referred to
in this Agreement, or any other Person to whom it provides Confidential
Information, that such information is confidential and shall instruct them (i)
to keep it confidential and (ii) not to disclose it to any third party (other
than those persons to whom it has already been disclosed in accordance with the
terms of this Agreement). The disclosing Member is responsible for any breach of
this Article VI by the person to whom the Confidential Information is disclosed.
SECTION 6.4 RETURN OF CONFIDENTIAL INFORMATION.
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If the Company dissolves and terminates, either the WISCO Member or the
G-P Member may by notice to any other Member require the other Member to destroy
or return the first Member's (but not the Company's) Confidential Information.
In addition, if at any time either the WISCO Member or the G-P Member shall
cease directly or indirectly to be a Member, the other Member may, by notice to
the first Member, require the first Member to destroy or return the other
Member's Confidential Information. If so, the first Member shall (and shall
ensure that its Affiliates and its officers and employees shall):
(a) destroy or return all documents containing Confidential Information
which have been provided by or on behalf of the Member demanding the return of
Confidential Information; and
(b) destroy or return any copies of such documents and any document or
other record (including in electronic form) reproducing, containing or made from
or with reference to the Confidential Information
(except, in each case, for a record of any submission to or filings with
governmental, tax or regulatory authorities or papers required for a Member's
board or other corporate records or documents required in connection with
litigation). The first Member shall return or destroy the Confidential
Information as soon as practicable after receiving notice and, in the case of
destruction, shall provide a certificate of an officer of that Member confirming
that destruction.
(c) The provisions of Section 6.4(a) shall not apply in the event of a
dissolution and termination in which the Board has expressed its rights under
Section 8.3(a) hereof.
SECTION 6.5 SURVIVAL AFTER TERMINATION.
The provisions of this Section 6.5 shall survive the dissolution and
termination of the Company and any Transfer of a Member's Units. If either the
WISCO Member or the G-P Member shall cease to be a Member following a Transfer
of Units pursuant to this Agreement, then:
(a) the term Confidential Information for the purposes of this Article
VI shall extend to and include all Confidential Information held by CSK Group
Members or G-P Group Members (as the case may be) about the other (excluding the
Company) and the confidentiality obligations set out in Section 6.1 shall
(subject to Section 6.2) thereafter apply to each CSK Group Member ceasing to be
a Member (as the case may be) as if it were a Member; and
(b) the provisions of Section 6.4 relating to return or destruction of
Confidential Information shall similarly apply to such extended application of
the term Confidential Information, pursuant to Section 6.5(a), as if it were
Confidential Information of the remaining Member.
ARTICLE VII
TRANSFER OF UNITS; PUT AND CALL RIGHTS
SECTION 7.1 GENERAL.
Except as permitted by Section 7.2, or with the prior written consent
of all other Members, no Member will directly or indirectly (i) sell, assign,
pledge, encumber, hypothecate, dispose of or otherwise transfer (collectively,
"Transfer") any Units, or any interest in any Units, (ii) agree to any such
Transfer or (iii) permit or suffer any such interest to be subject to Transfer,
directly or indirectly, by
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merger or other operation of law, agreement or otherwise. Any purported Transfer
in any manner not permitted by this Article VII shall be null and void and shall
not be recognized or given effect by the Company or any Member; provided,
however, that a change of control of CSK or G-P shall not be deemed to be a
Transfer.
SECTION 7.2 PUT AND CALL RIGHTS.
(a) At any time on or after the third anniversary of the Closing Date,
the WISCO Member shall have a right to sell to G-P, or to obligate the Company
to redeem, in WISCO's sole discretion, all or any portion of the WISCO Member's
Units (the "WISCO Put") at a purchase or redemption price, as the case may be,
equal to the Formula Price multiplied by a fraction, the numerator of which
shall be the number of Units being sold or redeemed and the denominator of which
shall be the total number of Units of the Company then outstanding (the "Put
Price"); provided, however, that WISCO shall not have the right to exercise the
WISCO Put on more than (3) three occasions.
(b) At any time commencing after the tenth anniversary of the Closing,
G-P shall have the right to purchase, and the WISCO Member shall be obligated to
sell, all but not less than all of the Units owned by the WISCO Member (the "G-P
Call") at a purchase price equal to the Formula Price multiplied by a fraction,
the numerator of which shall be the number of Units then owned by the WISCO
Member and the denominator of which shall be the total number of Units of the
Company then outstanding (the "Call Price").
(c) In the event the WISCO Put or the G-P Call (either being referred
to as "Option Right") is exercised, the following procedure shall be applicable:
(i) The Member exercising its Option Right shall deliver a
written notice to the other Member and the Company (the "Exercise Notice").
(ii) The Exercise Notice shall: (a) specify the identity of each
Member electing to exercise an Option Right; (b) specify the number of Units to
be sold, purchased or redeemed pursuant to such Exercise Notice; and (c) be
executed by a duly authorized officer of such Member.
(iii) In the event of exercise of a WISCO Put, the G-P Member or
the Company, as specified in any Exercise Notice regarding such WISCO Put, shall
purchase and the WISCO Member shall sell the Units specified in the Exercise
Notice. In the event of exercise of the G-P Call, the WISCO Member shall sell
and the G-P Member shall purchase all Units owned by the WISCO Member.
(iv) The closing of a Transfer pursuant to exercise of an Option
Right (an "Option Closing") shall take place at a time and place to be
designated by mutual agreement between the Members; provided, however, that the
date designated for the Option Closing shall not be more than ten (10) Business
Days from the date of receipt by the Company of the Exercise Notice. At the
Option Closing, the WISCO Member shall deliver to the Company certificates
representing the Units subject to the Exercise Notice (free and clear of all
liens, charges and encumbrances) and the Company or the G-P Member, as
applicable, shall pay to the WISCO Member the Put Price or the Call Price, as
applicable, by cashier's or certified check payable to any such WISCO Member, or
by wire transfer of immediately available funds to an account designated by such
WISCO Member.
(v) At the Option Closing, the WISCO Member shall execute and
deliver such documents as reasonably requested by the G-P Member to fully
transfer title to the Units subject to
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such Exercise Notice, including documents representing and warranting good and
marketable title to such Units and that such Units are owned free and clear of
all liens, charges and encumbrances.
SECTION 7.3 MEMBER TRANSFERS.
(a) Upon not less than fifteen (15) days advance written notice to the
Company and effective as of the first day of the next calendar month, any Member
may Transfer any of the Units held by it to any of its Affiliates and such
transferee shall become a Member hereunder (an "Affiliate Member"), provided
that (i) such transferee shall execute a counterpart of this Agreement, agreeing
thereby to be bound by all of the provisions hereof and (ii) in the event that
such transferee would at any time thereafter cease to be an Affiliate of the CSK
Group or the G-P Group, as the case may be, then the Units so transferred to
such former Affiliate shall be Transferred back to CSK or G-P, or an Affiliate
of their respective Groups, as applicable, prior to such CSK Group Affiliate or
G-P Group Affiliate ceasing to be such (and if such transfer back does not occur
prior to the Affiliate ceasing to be such, the transaction which results in the
transferee ceasing to be an Affiliate shall be deemed a Transfer which is
subject to the restrictions of this Section 7.3).
(b) Notwithstanding anything herein to the contrary, G-P or an
Affiliate Member of G-P may transfer its Units or interests in its Units to any
third party at any time after the tenth anniversary of the date hereof, provided
that such transferee shall execute a counterpart of this Agreement, agreeing
thereby to be bound by all of the provisions hereof.
SECTION 7.4 RETIREMENT.
Any Member that Transfers all of its Units pursuant to the terms hereof
shall be deemed to have retired and to have ceased to be a Member as of the
effective date of such Transfer.
ARTICLE VIII
DISSOLUTION AND WINDING UP; BUY OUT RIGHTS
SECTION 8.1 DISSOLUTION.
Subject to Section 8.5 hereof, the Company may, at the sole discretion
of the Board, be dissolved and its affairs wound up and terminated upon the
first to occur of the following:
(a) the unanimous consent of all Members to dissolve the Company, it
being expressly understood that Section 18-801(a)(3) of the Delaware Act shall
not apply to the Company;
(b) the sale or other disposition of all or substantially all of the
assets of the Company in one transaction or a series of related transactions;
(c) the date the WISCO Member or the CSK Group holds less than 5% of
the outstanding Units; and
(d) the occurrence of an event causing a dissolution of the Company
under Section 18-801 of the Delaware Act, unless the Company is continued as
permitted under the Delaware Act.
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SECTION 8.2 WINDING UP.
If the Company is dissolved pursuant to Section 8.1, this Agreement
shall remain in full force and effect and shall continue to govern the rights
and obligations of the Members and Managers and the conduct of the Company
during the period of winding up the Company's affairs. The Board shall apply and
distribute the assets of the Company in the following order of priority (subject
to Section 8.3), unless otherwise required by mandatory provisions of applicable
law:
(a) to satisfy the Company Debt or the Permanent Company Debt;
(b) to other creditors, including Members who are creditors, to the
extent otherwise permitted by law, in satisfaction of the liabilities of the
Company (whether by payment, by the establishment of reserves of cash or other
assets of the Company for contingent liabilities in amounts, if any, determined
by the Board to be appropriate for such purposes or by other reasonable
provision for payment), other than liabilities for distributions to Members and
former Members under Sections 18-601 or 18-604 of the Delaware Act;
(c) to Members and former Members in satisfaction of liabilities for
distributions under 18-601 or 18-604 of the Delaware Act; and
(d) thereafter to the Members in proportion to the positive balances of
their respective Capital Accounts (determined after allocating all income, gain,
deduction, loss and other like items arising in connection with the liquidation
of Company assets and otherwise making all Capital Account adjustments required
under the definition of Capital Account);
SECTION 8.3 IN-KIND DISTRIBUTIONS.
In the event of a dissolution or winding up of the Company, the Board
shall, to the extent permitted by law, (a) distribute to the G-P Member the
amount required by Section 8.2 in kind, from the Company's assets, and to the
WISCO Member the amount required by Section 8.2 in cash, or (b) if the Board
determines (which determination must include the affirmative vote or consent of
the WISCO Manager) that a prompt sale of part or all of the Company's assets
would be impractical or would cause undue loss to the value of Company assets,
the Board may defer for a reasonable time (up to three (3) years) the
liquidation of any assets, except those necessary to timely satisfy liabilities
of the Company (other than those to Members), and/or may distribute to the
Members, in lieu of cash, as tenants in common, undivided interests in such
Company assets as the Board deems not suitable for liquidation. Any such in-kind
distributions shall be made in accordance with the priorities set forth in
Section 8.2 as if cash equal to the Fair Market Value of the distributed assets
were being distributed. Any such distributions in kind shall be subject to such
conditions relating to the disposition and management of such properties as are
reasonable and equitable and to any joint operating agreements or other
agreements governing the operation of such properties at such time. The
liquidating distributions to be made pursuant to this section shall be made
within the time set forth in Regulations Section 1.704-1(b)(2)(ii)(b)(2).
SECTION 8.4 CANCELLATION OF CERTIFICATE OF FORMATION.
Upon the completion of the distribution of Company Property as provided
in Sections 8.2 and 8.3, the Company shall be terminated, and the Board shall
cause the cancellation of the Certificate of Formation and all qualifications of
the Company as a foreign limited liability company and shall take such other
actions as may be necessary to terminate the Company.
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<PAGE>
SECTION 8.5 BUY OUT RIGHTS.
In the event of the occurrence of any of the events described in
Section 8.1, G-P shall have the option to either (a) cause the dissolution and
wind up the Company pursuant to this Article VIII; or (b) cause a Subsidiary of
G-P to purchase the Units held by the WISCO Member at a purchase price
calculated by multiplying the Formula Price times the WISCO Member's Percentage
Interest, in which case the Company shall not be dissolved; or (c) to the extent
legally permissible, take no action and continue the existence of the Company.
Such option shall be exercised, and notice of such exercise provided to the
WISCO Member, within 120 days after the occurrence of any of such events
described in Section 8.1.
ARTICLE IX
CERTIFICATES EVIDENCING UNITS
SECTION 9.1 CERTIFICATES.
The Units owned by each Member shall be evidenced by one or more
Certificates. Each Certificate shall be executed by such Managers or such
officers of the Company as the Board shall designate.
SECTION 9.2 REGISTER.
The Company shall keep or cause to be kept a register in which, subject
to such regulations as the Board may adopt, the Company will provide for the
registration of Units and the registration of Transfers of Units. Upon surrender
for registration of Transfer of any Certificate, and subject to the further
provisions of this Section 9.2 and Section 9.3 and the limitations on Transfer
contained elsewhere in this Agreement, the Company will cause the execution, in
the name of the registered holder or the designated transferee, of one or more
new Certificates, evidencing the same aggregate number of Units as did the
Certificate surrendered or such other number as is appropriate in the event such
Transfer is pursuant to exercise of an Option Right. Every Certificate
surrendered for registration of Transfer shall be duly endorsed, or be
accompanied by a written instrument of Transfer in form satisfactory to the
Board, duly executed by the registered holder thereof or such holder's
authorized attorney.
SECTION 9.3 NEW CERTIFICATES.
The Company shall issue a new Certificate in place of any Certificate
previously issued if the record holder of the Certificate (i) makes proof by
affidavit, in form and substance satisfactory to the Board, that a previously
issued Certificate has been lost, destroyed or stolen, (ii) requests the
issuance of a new Certificate before the Company has received notice that the
Certificate has been acquired by a purchaser for value in good faith and without
notice of an adverse claim, (iii) if requested by the Board, delivers to the
Company a bond, in form and substance satisfactory to the Board, with such
surety or sureties and with fixed or open liability as the Board may direct, to
indemnify the Company, as registrar, against any claim that may be made on
account of the alleged loss, destruction or theft of the Certificate, and (iv)
satisfies any other reasonable requirements imposed by the Board.
SECTION 9.4 INTEREST AS A SECURITY.
A Unit in the Company evidenced by a Certificate shall
constitute a security for all purposes of Article 8 of the Uniform Commercial
Code promulgated by the National Conference of
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Commissioners on Uniform State Laws, as in effect in Delaware or any other
applicable jurisdiction. Delaware law shall constitute the local law of the
Company's jurisdiction in its capacity as the issuer of Units.
SECTION 9.5 LEGENDS.
A copy of this Agreement shall be kept with the records of the Company.
Each of the Members hereby agrees that each outstanding Certificate shall bear a
conspicuous legend reading substantially as follows:
The Units represented by this Certificate have not been
registered under the Securities Act of 1933 or applicable
state and other securities laws and may not be sold, pledged,
hypothecated, encumbered, disposed of or otherwise transferred
without compliance with the Securities Act of 1933 or any
exemption thereunder and applicable state and other securities
laws. The Units represented by this Certificate are subject to
the restrictions on transfer and other provisions of an
Operating Agreement dated as of October 4, 1999 (as amended
from time to time, the "Agreement") by and among Company and
its Members, and may not be sold, pledged, hypothecated,
encumbered, disposed of or otherwise transferred except in
accordance therewith. A copy of the Agreement is on file at
the principal executive offices of the Company.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 NOTICES.
All notices and other communications required or permitted by this
Agreement shall be in writing and shall be delivered by personal delivery, by
nationally recognized overnight courier service, by facsimile, by first class
mail or by certified or registered mail, return receipt requested, addressed, to
any Member at its address as set forth on Schedule 1 (as the same may be updated
from time to time at the direction of such Member) or to the Company at 55 Park
Place, Atlanta, Georgia 30303 (or to such other address as the Company shall
have designated to each of the Members by written notice given in the manner
hereinabove set forth). Notices shall be deemed given one day after sent, if
sent by overnight courier; when delivered and receipted for, if hand delivered;
when received, if sent by facsimile or other electronic means or by first class
mail; or when receipted for (or upon the date of attempted delivery where
delivery is refused or unclaimed), if sent by certified or registered mail,
return receipt requested.
SECTION 10.2 AMENDMENT; WAIVER.
Any provision of this Agreement may, (i) in the case of an amendment,
be amended if, and only if, such amendment is in writing and signed by each
Member, or (ii) in the case of a waiver, be waived if such waiver is contained
in a writing, and signed by the party against whom the waiver is to be
effective. No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single
exercise thereof preclude any other or further exercise thereof or of any other
right, power or privilege. Except as otherwise provided rights and remedies
herein provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
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<PAGE>
SECTION 10.3 ASSIGNMENT.
Except as otherwise expressly provided herein, no party to this
Agreement may assign any of its rights or obligations under this Agreement
without the prior written consent of the other parties hereto.
SECTION 10.4 ENTIRE AGREEMENT.
This Agreement, the Joint Venture Agreement and the Ancillary
Agreements (including the schedules and exhibits hereto and thereto) contain the
entire agreement among the parties hereto with respect to the subject matter
hereof and supersede all prior agreements and understandings, oral or written,
with respect to such matters.
SECTION 10.5 PUBLIC DISCLOSURE.
Each Member hereby agrees that, except as may be required to comply
with the requirements of any applicable Laws or the rules and regulations of any
exchange upon which its securities (or the securities of one of its Affiliates)
are traded, it shall not make or permit to be made any press release or similar
public announcement or communication concerning the execution or performance of
this Agreement unless specifically approved in advance by all parties hereto,
which approval shall not be unreasonably withheld, conditioned or delayed. In
the event that, in the absence of such approval, legal counsel for any party is
of the opinion that a press release or similar public announcement or
communication is required by Law or by the rules and regulations of any exchange
on which such party's securities (or the securities of one of its Affiliates)
are traded, then such party may issue a public announcement limited solely to
that which legal counsel for such party advises is required under such Law or
such rules and regulations (and the party making any such announcement shall
provide a copy thereof to the other parties for review before issuing such
announcement).
SECTION 10.6 PARTIES IN INTEREST.
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns. Nothing in
this Agreement, express or implied, is intended to confer upon any Person other
than the Company, WISCO, G-P or their respective successors or permitted
assigns, any rights or remedies under or by reason of this Agreement. The
Company is executing this Agreement as a party, and this Agreement shall
constitute a contract among the Members and between the Company and each of the
Members.
SECTION 10.7 GOVERNING LAW; SUBMISSION TO JURISDICTION; SELECTION OF
FORUM.
This Agreement shall be governed by, and construed and enforced in
accordance with the laws of the State of Delaware without giving effect to any
choice of law provision or rule (whether of the State of Delaware or any other
jurisdiction) that would cause the application of the Laws of any jurisdiction
other than the internal Laws of the State of Delaware. Each of the Parties
agrees that any legal action between the parties, or any of them, relating to
this Agreement, the interpretation of the terms hereof or the performance hereof
or the consummation of the transactions contemplated hereby, whether in tort or
contract or at law or in equity, shall exclusively be brought in a Federal or
State Court located in New Castle County, Delaware, having jurisdiction of the
subject matter thereof, and each party irrevocably (i) consents to personal
jurisdiction in any such Federal or State Court, (ii) waives any objection to
laying venue in any such action or proceeding in any such Court, (iii) waives
any immunity from suit and any objection that any such Court is an inconvenient
forum or does not have jurisdiction
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<PAGE>
over any party hereto and (iv) agrees that service of complaint or other process
may be made by certified or registered mail addressed to such party at its
address determined in accordance with Section 10.1 of this Agreement.
SECTION 10.8 COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, and all of which shall constitute one and the
same Agreement.
SECTION 10.9 SEVERABILITY.
The provisions of this Agreement shall be deemed severable and the
invalidity or unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof. If any provision of this
Agreement, or the application thereof to any Person or any circumstance, is
invalid or unenforceable (i) a suitable and equitable provision shall be
substituted therefor in order to carry out, so far as may be valid and
enforceable, the intent and purpose of such invalid or unenforceable provision
and (ii) the remainder of this Agreement and the application of such provision
to other Persons or circumstances shall not be affected by such invalidity or
unenforceability, nor shall such invalidity or unenforceability affect the
validity or enforceability of such provision, or the application thereof, in any
other jurisdiction.
SECTION 10.10 EQUITABLE RELIEF.
Each party acknowledges that money damages would be inadequate to
protect against any actual or threatened breach of this Agreement by any party
and that each party shall be entitled to equitable relief, including specific
performance and/or injunction, without posting bond or other security, in order
to enforce or prevent any violations of the provisions of this Agreement.
SECTION 10.11 NO AGENCY.
This Agreement shall not constitute an appointment of any party as the
agent of any other party, nor shall any party have any right or authority to
assume, create or incur in any manner any obligation or other liability of any
kind, express or implied, against, in the name or on behalf of, any other party.
Nothing herein or in the transactions contemplated by this Agreement shall be
construed as, or deemed to be, the formation of a partnership by or among the
parties hereto (provided that nothing in this Section 10.11 shall affect the tax
treatment of the Company under Article III hereof).
SECTION 10.12 LIMITATION OF LIABILITY.
The debts, obligations and liabilities of the Company, whether arising
in contract, tort or otherwise, shall be solely the debts, obligations and
liabilities of the Company, and no Member, Manager or officer of the Company
shall be obligated personally for any such debt, obligation or liability of the
Company solely by reason of being a Member, Manager and/or officer.
SECTION 10.13 NON-EXCLUSIVE BUSINESS.
(a) Notwithstanding anything herein to the contrary, the parties hereto
agree that the Company shall not be the exclusive vehicle for G-P to engage in
the manufacture or sale of commercial tissue products or "away from home" tissue
products (the "Products"), or to engage in the Commercial Tissue Business and
that G-P shall have the right to engage in the manufacture or sale of Products
and
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<PAGE>
otherwise engage in the Commercial Tissue Business, whether directly or
through other Affiliates, without regard to the Company or any requirement that
G-P make such opportunity or Commercial Tissue Business available to the Company
in any way.
(b) Notwithstanding anything herein to the contrary, the parties hereto
agree that the Company may provide to any member of the G-P Group the right to
use intangible Company Property, and such member of the G-P Group will have no
obligation to reimburse the Company for such use.
(c) In the event G-P or a G-P Affiliate uses production equipment and
machines owned by the Company to produce products for G-P or a G-P Affiliate,
all costs, revenues and profits relating to such products shall be allocated to
the Company.
(d) In the event G-P or a G-P Affiliate uses production equipment or
machines it owns that are located in facilities owned or operated by the Company
to produce products for G-P or a G-P Affiliate, G-P shall reimburse to the
Company an amount equal to the allocated overhead (including facility costs)
determined pursuant to the cost allocation methodology set forth in Exhibit B to
the Operating Support Services Agreement.
SECTION 10.14 DISPUTE RESOLUTION.
Except as otherwise provided in this Agreement, any dispute among the
Members hereto, including disputes related to the Ancillary Agreements and the
review of G-P Books related thereto, shall be resolved by the Members through
good faith negotiations. If such dispute cannot be resolved by such negotiation
it shall be submitted to non-binding commercial arbitration pursuant to the
commercial arbitration rules then in effect of the American Arbitration
Association, before a panel of not less than three arbitrators. All costs and
expenses incurred in connection with such proceeding shall be shared equally by
the Members, however each Member shall bear the cost of its legal fees. Only
upon the conclusion of arbitration proceedings in which a decision was rendered
may the Members bring an action in connection with such dispute in the United
States District Court or the state court sitting in New Castle County, Delaware.
Each Member agrees to irrevocably submit to the exclusive jurisdiction of such
court and agrees to waive any objection to laying venue in such court or that
such court is an inconvenient forum or does not have jurisdiction over the
Member.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement
as of the date first written above.
GEORGIA-PACIFIC CORPORATION
By: /s/Michael C. Burandt
Name: Michael C. Burandt
Title: Senior Vice President - Packaged Products
WISCONSIN TISSUE MILLS INC.
By: /s/William T. Tolley
Name: William T. Tolley
Title: Senior Vice President -
Finance and Chief Financial Officer
Consented/Agreed To
By the Company as Referenced
In Section 10.6
GEORGIA-PACIFIC TISSUE, LLC
By: /s/Michael C. Burandt
Name: Michael C. Burandt
Title: Manager
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EXHIBIT 10.17
CREDIT AGREEMENT
AMONG
GEORGIA-PACIFIC CORPORATION
THE LENDERS NAMED HEREIN
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
AS ADMINISTRATIVE AGENT,
COMMERZBANK AG,
NEW YORK BRANCH,
AS DOCUMENTATION AGENT,
AND
THE CHASE MANHATTAN BANK
AND
CITIBANK, N.A.,
AS CO-SYNDICATION AGENTS
BANC OF AMERICA SECURITIES LLC,
SOLE BOOK MANAGER AND SOLE LEAD ARRANGER
$1,000,000,000
DATED AS OF JULY 22, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1 DEFINITIONS AND ACCOUNTING TERMS 1
1.01 Certain Defined Terms. 1
1.02 Computation of Time Periods. 14
1.03 Accounting Matters. 14
1.04 Certain Terms. 14
ARTICLE 2 AMOUNTS AND TERMS OF THE LOANS 15
2.01 Committed Loans. 15
2.02 Procedure for Committed Borrowings. 15
2.03 Bid Borrowings. 16
2.04 Procedure for Bid Borrowings. 17
2.05 Evidence of Indebtedness. 19
2.06 Optional Reduction of the Commitments. 19
2.07 Repayment. 19
2.08 Optional Prepayments. 20
2.09 Interest. 20
2.10 Default Interest. 21
2.11 Continuation and Conversion Elections for Committed Loans. 21
2.12 Termination of Prior Commitments. 22
ARTICLE 3 THE LETTERS OF CREDIT 22
3.02 Issuance, Amendment and Renewal of Letters of Credit. 24
3.03 Role of the Issuing Bank. 26
3.04 Obligations Absolute. 26
3.05 Cash Collateral Pledge. 27
3.06 Letter of Credit Fees. 27
3.07 International Standby Practices. 28
ARTICLE 4 FEES; PAYMENTS; TAXES 28
4.01 Fees. 28
4.02 Computation of Interest, Fees. 29
4.03 Payments by the Company. 29
4.04 Payments by the Lenders. 30
4.05 Taxes. 31
4.06 Sharing of Payments, Etc. 35
ARTICLE 5 CHANGES IN CIRCUMSTANCES, ETC. 35
5.01 Eurodollar Rate Protection. 35
5.02 Additional Interest on Eurodollar Loans. 35
5.03 Increased Costs. 36
5.04 Illegality. 36
5.05 Capital Adequacy. 36
5.06 Funding Losses. 37
5.07 Funding; Certificates of Lenders. 37
5.08 Change of Lending Office; Limitation on Increased Costs. 38
5.09 Replacement of Lenders. 38
<PAGE>
ARTICLE 6 REPRESENTATIONS AND WARRANTIES 39
6.01 Corporate Existence; Compliance with Law. 39
6.02 Corporate Power; Authorization. 39
6.03 Enforceable Obligations. 40
6.04 Taxes. 40
6.05 Financial Matters. 40
6.06 Litigation. 41
6.07 Subsidiaries. 41
6.08 Liens. 41
6.09 No Burdensome Restrictions; No Defaults. 41
6.10 Investment Company Act; Public Utility Holding Company Act. 41
6.11 Margin Regulations. 42
6.12 Environmental Matters. 42
6.13 Labor Matters. 44
6.14 ERISA Plans. 44
6.15 Y2K Review. 44
6.16 Swap Obligations. 44
6.17 Full Disclosure. 44
ARTICLE 7 CONDITIONS PRECEDENT 44
7.01 Conditions Precedent to the First Loan. 45
7.02 Additional Conditions Precedent to the First Loan. 46
7.03 Conditions Precedent to Each Committed Loan and Letter of Credit 46
7.04 Conditions Precedent to Each Bid Borrowing. 47
ARTICLE 8 AFFIRMATIVE COVENANTS 47
8.01 Application of Proceeds. 48
8.02 Compliance with Laws, Etc. 48
8.03 Payment of Taxes, Etc. 48
8.04 Maintenance of Insurance. 48
8.05 Preservation of Corporate Existence, Etc. 48
8.06 Access. 48
8.07 Keeping of Books. 48
8.08 Maintenance of Properties, Etc. 48
8.09 Financial Statements. 49
8.10 Reporting Requirements. 49
8.11 ERISA Plans. 50
8.12 Environmental Compliance; Notice. 50
8.13 New Subsidiaries. 50
ARTICLE 9 NEGATIVE COVENANTS 50
9.01 Liens, Etc. 50
9.02 Sale-Leaseback Transactions. 52
9.03 Mergers, Etc. 54
9.04 Transactions with Affiliates. 54
9.05 Accounting Changes. 54
9.06 Margin Regulations. 54
9.07 Negative Pledges, Etc. 54
9.08 Leverage Ratio. 54
ARTICLE 10 EVENTS OF DEFAULT 54
<PAGE>
10.01 Events of Default. 54
10.02 Remedies. 57
ARTICLE 11 THE AGENT 57
11.01 Appointment. 57
11.02 Delegation of Duties. 58
11.03 Liability of Agent. 58
11.04 Reliance by Agent. 58
11.05 Notice of Default. 59
11.06 Credit Decision. 59
11.07 Indemnification. 59
11.08 Agent in Individual Capacity. 60
11.09 Successor Agent. 60
11.10 Documentation, Co-Syndication, Managing Agents. 60
ARTICLE 12 MISCELLANEOUS 60
12.01 Notices, Etc. 60
12.02 Amendments, Etc. 61
12.03 No Waiver; Remedies. 62
12.04 Costs and Expenses. 62
12.05 Indemnity. 62
12.06 Right of Set-off. 63
12.07 Binding Effect. 63
12.08 Assignments, Participations, Etc. 64
12.09 Confidentiality. 65
12.10 Survival. 66
12.11 Severability. 66
12.12 Headings. 66
12.13 No Third Parties Benefited. 66
12.14 Governing Law. 66
12.15 Execution in Counterparts. 66
12.16 ENTIRE AGREEMENT. 66
12.17 WAIVER OF JURY TRIAL 69
</TABLE>
<PAGE>
SCHEDULES
Schedule Description
- -------- -----------
1.01(a) Commitments; Commitment Percentages
1.01(b) Lending Offices
6.02(d) Corporate Power; Authorizations
6.07 Subsidiaries
6.12 Environmental Matters
6.13 Labor Matters
6.14 ERISA
9.01 Existing Liens
EXHIBITS
Exhibit Description
- ------- -----------
2.02(a) Form of Notice of Borrowing
2.04(a) Form of Competitive Bid Request
2.05(b) Form of Promissory Note (Committed Loans)
2.05(c) Form of Promissory Note (Bid Loans)
2.11(b) Form of Notice of Conversion/Continuation
7.01(c) Form of Subsidiary Guaranty
7.01(d) Form of Opinion of Counsel for the Company
7.01(e) Form of Contribution Agreement
7.02(d) Form of Officer's Closing Certificate
8.09(c) Form of Compliance Certificate
12.08(b) Form of Assignment and Assumption Agreement
<PAGE>
CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of July 22, 1999 among
GEORGIA-PACIFIC CORPORATION, a Georgia corporation (the "Company"), the various
LENDERS that are, or may from time to time become, party hereto (the "Lenders")
and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as administrative
agent for the Lenders (in such capacity, the "Agent"), COMMERZBANK AG, NEW YORK
BRANCH, as Documentation Agent, and THE CHASE MANHATTAN BANK and CITIBANK, N.A.,
as Co-Syndication Agents.
WHEREAS, the Company, certain of the Lenders and the Agent are party to
the Credit Agreement, dated as of December 23, 1996, as amended (the "1996
Credit Agreement");
WHEREAS, the Company has terminated the commitments under the 1996
Credit Agreement and desires to enter into a new credit facility; and
WHEREAS, the Company has obtained commitments from the Lenders,
pursuant to which the Lenders are willing to make loans to the Company and to
provide certain other credit facilities to the Company (including a competitive
bid facility) in a maximum aggregate principal amount at any one time
outstanding not to exceed $1,000,000,000, on the terms and subject to the
conditions set forth herein;
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS AND ACCOUNTING TERMS
1.01 Certain Defined Terms. As used in this Agreement and in any
Schedules and Exhibits to this Agreement, the following terms have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"Adjusted Reference Rate" means the fluctuating interest rate per annum
equal to the higher of (a) the sum of the Federal Funds Rate plus 1/2% and (b)
the rate of interest (the "Reference Rate") publicly announced from time to time
by Bank of America at its executive offices, as its reference rate or prime
rate. The Reference Rate is a rate set by Bank of America based upon various
factors, including Bank of America's cost and desired return, general economic
conditions and other factors, and is used as a reference point for pricing some
loans, which may be priced at, above or below the Reference Rate. Any change in
the Reference Rate shall take effect at the opening of business on the day
specified in the public announcement of such change.
"Affiliate" means, with respect to any Person, any Subsidiary of such
Person and any other Person which, directly or indirectly, controls, or is
controlled by, or is under common control with, such Person (excluding any
trustee under, or any committee with responsibility for administering, any
Plan). A Person shall be deemed to control another Person if such Person
possesses, directly or indirectly, the power:
(a) to vote 10% or more of the securities having ordinary voting
power for the election of directors of such other Person; or
(b) to direct or cause the direction of the management and
policies of such other Person, whether through the ownership of voting
securities, by contract or otherwise.
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"Agent" means Bank of America in its capacity as administrative agent
for the Lenders, together with any successor thereto in such capacity.
"Agent-Related Persons" means Bank of America and any successor agent
arising under Section 11.09 and any successor letter of credit issuing bank
hereunder, together with their respective Affiliates (including, in the case of
Bank of America, the Arranger), and the officers, directors, employees, agents
and attorneys-in-fact of such Persons and Affiliates.
"Aggregate Tranche A Commitments" means the aggregate amount of the
Tranche A Commitments of all the Lenders as in effect from time to time.
"Aggregate Tranche B Commitments" means the aggregate amount of the
Tranche B Commitments of all the Lenders as in effect from time to time.
"Agreement" means this Credit Agreement.
"Arranger" means Banc of America Securities LLC.
"Assignee" means any Person which becomes a party to this Agreement
pursuant to Section 12.08.
"Available Tranche A Commitments" means, at any time, the excess, if
any, of the Aggregate Tranche A Commitments in effect at such time over the sum
of (a) the aggregate principal amount of all Tranche A Loans then outstanding,
plus (b) the aggregate principal amount of all Tranche A Bid Loans then
outstanding, plus (c) the outstanding Tranche A L/C Obligations.
"Available Tranche B Commitments" means, at any time, the excess, if
any, of the Aggregate Tranche B Commitments in effect at such time over the sum
of (a) the aggregate principal amount of all Tranche B Loans then outstanding,
plus (b) the aggregate principal amount of all Tranche B Bid Loans then
outstanding, plus (c), the aggregate principal amount of all 1996 Facility Bid
Loans then outstanding, plus (d) the outstanding Tranche B L/C Obligations.
"Bank of America" means Bank of America National Trust and Savings
Association, a national banking association and its successors by merger and
permitted assigns.
"Base Rate" has the meaning specified in Section 2.04(a)(iv).
"Base Rate Bid Loan" means any Bid Loan that bears interest at a rate
determined with reference to a Base Rate.
"Bid Borrowing" means an extension of credit hereunder consisting of
one or more Bid Loans made to the Company on the same day by one or more
Lenders.
"Bid Loan" means either a Tranche A Bid Loan or a Tranche B Bid Loan.
"Borrowing" means a Bid Borrowing or a Committed Borrowing.
"Business Day" means any day other than a Saturday, Sunday or other day
on which commercial banks in New York City, New York, or San Francisco,
California, are authorized or required by law to
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close and, if the applicable Business Day relates to any Eurodollar Loan, means
such a day on which dealings are carried on in the London interbank market.
"Cash Collateralize" means to pledge and deposit with or deliver to the
Agent, for the benefit of the Agent, the Issuing Bank and the Lenders, as
collateral for the L/C Obligations, cash or deposit account balances pursuant to
documentation in form and substance satisfactory to the Agent and the Issuing
Bank (which documents are hereby consented to by the Lenders). Derivatives of
such term shall have corresponding meaning. The Company hereby grants the Agent,
for the benefit of the Agent, the Issuing Bank and the Lenders, a security
interest in all such cash and deposit account balances. Cash collateral shall be
maintained in blocked, non-interest bearing deposit accounts at Bank of America.
"CERCLA" means the Comprehensive Environmental Response Compensation
and Liability Act of 1980.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.
"Closing Date" means the date on which all the conditions precedent set
forth in Sections 7.01 and 7.02 shall have been satisfied or waived.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment" means for any Lender, either its Tranche A Commitment or
Tranche B Commitment, as applicable.
"Commitments" means, for any Lender, the sum of its Tranche A
Commitment and Tranche B Commitment.
"Commitment Percentage" means, as to any Lender at any time, the
percentage of the aggregate Commitments represented by such Lender's Commitment
at such time, as set forth on Schedule 1.01(a), as such percentage may be
modified from time to time in accordance with Notices of Assignment delivered
hereunder pursuant to Section 12.08.
"Committed Borrowing" means an extension of credit hereunder consisting
of Tranche A Loans or Tranche B Loans (but not both) of the same type made on
the same day by the Lenders ratably according to their respective Commitment
Percentages and, in the case of Eurodollar Loans, having the same Interest
Periods.
"Committed Loan" means a Tranche A Loan or a Tranche B Loan by a Lender
to the Company pursuant to Section 2.01 and may be in the form of a Eurodollar
Loan or a Reference Rate Loan, each of which shall be a "type" of Committed
Loan.
"Company" has the meaning specified in the introduction to this
Agreement.
"Competitive Bid" means an offer by a Lender to make a Bid Loan in
accordance with Section 2.04(b).
"Competitive Bid Request" has the meaning specified in Section 2.04(a).
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"Contractual Obligation" means, with respect to any Person, any
provision of any security issued by such Person or of any agreement,
undertaking, contract, indenture, mortgage, deed of trust or other instrument to
which such Person is a party or by which it or any of its property is subject.
"Contribution Agreement" means the Contribution Agreement of even date
herewith between the Company and each of its Subsidiaries now or hereafter
parties to the Subsidiary Guaranty or the "Subsidiary Guaranty" as defined in
the North American Timber Agreement.
"Controlled Group" means all members of a controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which, together with the
Company, are treated as a single employer under Section 414(b) or 414(c) of the
Code or Section 4001 of ERISA.
"Debt Rating" means, on any date, the rating of the Company's senior
unsecured long-term Indebtedness, as most recently publicly announced by Moody's
and S&P, whichever is higher; provided, however, that if only one such rating is
available, the applicable interest rate or fee to be determined based on such
rating shall be determined solely by reference to such one rating.
"Default" means any event or condition which, with the giving of notice
or the lapse of time, or both, would become an Event of Default.
"Dollar" and "$" mean lawful money of the United States of America.
"EBITDA" means, as of the end of any Measurement Period, the sum of the
following, calculated for the Company and its Subsidiaries on a consolidated
basis: (a) net income (or net loss) for such period, plus (b) all amounts
treated as expenses for depreciation, interest and the non-cash amortization of
intangibles of any kind to the extent included in the determination of such net
income (or loss), plus (c) cost of timber sold by North American Timber
Corporation (to the extent it represents depletion) to the extent included in
the determination of such net income (or loss), plus (d) all accrued taxes on or
measured by income to the extent included in the determination of such net
income (or loss); provided, however, that net income (or loss) shall be computed
for these purposes without giving effect to extraordinary cash gains or
non-recurring, non-cash items.
"Eligible Assignee" means (a) a commercial bank organized under the
laws of the United States, or any state thereof, and having a combined capital
and surplus of at least $250,000,000; (b) a commercial bank organized under the
laws of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
country, and having a combined capital and surplus of at least $250,000,000,
provided that such bank is acting through a branch or agency located in the
United States; (c) a Person that is primarily engaged in the business of
commercial banking and that is (i) a Subsidiary of a Lender, (ii) a Subsidiary
of a Person of which a Lender is a Subsidiary, or (iii) a Person of which a
Lender is a Subsidiary; and (d) any other Person approved in writing by the
Company, the Agent, and the Issuing Bank.
"Environmental Laws" means all applicable federal, state or local
statutes, laws, ordinances, codes, rules and regulations (including consent
decrees and administrative orders) relating to public health and safety and
protection of the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974,
together with the regulations thereunder.
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"Eurocurrency Liabilities" has the meaning assigned to that term in
Regulation D of the Federal Reserve Board, as in effect from time to time.
"Eurodollar Loan" means any Committed Loan that bears interest at a
rate determined with reference to LIBOR.
"Eurodollar Reserve Percentage" means the maximum reserve percentage of
any Lender (expressed as a decimal) in effect on the date LIBOR for any Interest
Period is determined under regulations issued from time to time by the Federal
Reserve Board for determining the maximum reserve requirement (including any
emergency, supplemental or other marginal reserve requirement) with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities having
a term equal to such Interest Period.
"Event of Default" has the meaning specified in Section 10.01.
"Federal Funds Rate" means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Board (including any such
successor, "H.15(519)") for such day opposite the caption "Federal Funds
(Effective)." If on any relevant day such rate is not yet published in
H.15(519), the rate for such day will be the rate set forth in the daily
statistical release designated as the Composite 3:30 p.m. Quotations for U.S.
Government Securities, or any successor publication, published by the Federal
Reserve Bank of New York (including any such successor, the "Composite 3:30 p.m.
Quotations") for such day under the caption "Federal Funds Effective Rate".
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System.
"Fee Letter" means the letter agreement dated the Closing Date between
the Company and Bank of America regarding the payment of certain fees.
"Fixed Rate" means a fixed annual percentage rate.
"Fixed Rate Bid Loan" means any Bid Loan that bears interest determined
with reference to a Fixed Rate.
"Form 1001" has the meaning specified in Section 4.05(f)(i)(B).
"Form 4224" has the meaning specified in Section 4.05(f)(i)(A).
"Form W-8" has the meaning specified in Section 4.05(f)(i)(B).
"Form W-9" has the meaning specified in Section 4.05(f)(i)(A).
"Funded Indebtedness" means, for any day, the sum of (i) all
Indebtedness for Borrowed Money of the Company and its consolidated Subsidiaries
outstanding on such day plus (ii) the aggregate capital invested as of such day
by Persons other than the Company and its consolidated Subsidiaries in
receivables and other accounts sold to such Persons by the Company and its
consolidated Subsidiaries, excluding receivables and other accounts sold in
connection with the sale of a business or the sale of the assets and/or
operations generating such receivables and other accounts.
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"GAAP" means, as of any date of determination, generally accepted
accounting principles set forth in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board (or agencies with similar functions of comparable stature and
authority within the accounting profession) or in such other statements by such
other entity as may be in general use by significant segments of the accounting
profession.
"Governmental Authority" means any nation or government, any federal,
state, local or other political subdivision thereof and any central bank thereof
and any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Hazardous Material" means:
(a) any "hazardous substance", as defined by CERCLA;
(b) any "hazardous waste", as defined by the Resource Conservation
and Recovery Act, 42 U.S.C. Section 690, et seq., as in effect from
time to time;
(c) any petroleum product; or
(d) any pollutant or contaminant or hazardous, dangerous or toxic
chemical, material or substance within the meaning of any other
applicable federal, state or local law, regulation, ordinance, or
requirement (including consent decrees and administrative orders)
relating to or imposing liability or standards of conduct concerning
any hazardous, toxic or dangerous waste, substance or material, all as
amended or hereafter amended.
"Indebtedness" of any Person means, without duplication, the
consolidated Indebtedness for Borrowed Money of such Person and guaranties of
indebtedness of others provided by such Person, all as determined in accordance
with GAAP consistent with the accounting principles applied in the preparation
of the financial statements referred to in Section 6.05(a).
"Indebtedness for Borrowed Money" of any Person means, without
duplication,
(a) all indebtedness of such Person for borrowed money, including
the Company's Premium Equity Participating Security Units, whether or
not treated as indebtedness under GAAP, until such time as they are
converted into common stock of the Company;
(b) all obligations of such Person issued or assumed as the
deferred purchase price of property or services other than bank
overdrafts and trade accounts payable arising in the ordinary course of
business consistent with past practices;
(c) all obligations of such Person evidenced by notes, bonds,
debentures, commercial paper or similar instruments, including
obligations so evidenced incurred in connection with the acquisition of
property, assets or businesses;
(d) all indebtedness of such Person created or arising under any
conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies
of the seller or creditor under such agreement in the event of default
are limited to repossession or sale of such property);
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(e) all rental obligations of such Person under leases capitalized
under GAAP as disclosed in the financial statements delivered pursuant
to Section 8.09; and
(f) all indebtedness of such Person or of others referred to in
paragraphs (a) through (e) secured by (or for which the holder of such
indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien upon or in property (including accounts and
contract rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such indebtedness.
"Indemnified Party" has the meaning specified in Section 12.05(a).
"Interest Payment Date" means (a) (i) with respect to any Eurodollar
Loan, the last day of each Interest Period applicable to such Eurodollar Loan
and, with respect to any Interest Period of six months' duration, the date which
falls three months after the beginning of such Interest Period, and (ii) with
respect to any Reference Rate Loan, the last Business Day of each calendar
quarter and (b) with respect to any Bid Loan, the maturity date or dates
specified by the Company in the relevant Competitive Bid Request.
"Interest Period" means, with respect to any Eurodollar Loan, the
period commencing on the Business Day such Eurodollar Loan is disbursed or
continued as a Eurodollar Loan or on the date on which a Reference Rate Loan or
any portion thereof is converted into a Eurodollar Loan and ending on the date
one, two, three or six months thereafter, as selected by the Company in its
Notice of Borrowing or Notice of Conversion/Continuation; provided that:
(a) in the case of the continuation of a Eurodollar Loan pursuant
to Section 2.11, the Interest Period applicable after the continuation
of such Loan shall commence on the last day of the preceding Interest
Period;
(b) if any Interest Period would otherwise end on a day which is
not a Business Day, that Interest Period shall be extended to the next
succeeding Business Day, unless the result of such extension would be
to carry such Interest Period into another calendar month, in which
event such Interest Period shall end on the immediately preceding
Business Day;
(c) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of the calendar month at the
end of such Interest Period; and
(d) no Interest Period for any Eurodollar Loan shall extend beyond
the Tranche A Termination Date, in the case of a Borrowing of Tranche A
Loans, or the Tranche B Termination Date, in the case of a Borrowing of
Tranche B Loans.
"Investments" means all investments, whether by acquisition of stock or
indebtedness, or by loan, advance, transfer of property, capital contribution or
otherwise.
"Investments in Unrestricted Subsidiaries" means Investments made by
the Company or by any Restricted Subsidiary in Unrestricted Subsidiaries, net of
Investments made by Unrestricted Subsidiaries in the Company or any Restricted
Subsidiary. If any corporation which becomes a Restricted Subsidiary after the
date of this Agreement shall, at the time it becomes a Restricted Subsidiary,
have any Investments in an Unrestricted Subsidiary, such Investments shall be
deemed to be Investments made by
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the Company in such Unrestricted Subsidiary at the time such corporation becomes
a Restricted Subsidiary, in the amount at which such Investments are then
carried on the books of such corporation. If any corporation shall become an
Unrestricted Subsidiary after the date of this Agreement, the Investments of the
Company and its Restricted Subsidiaries in such corporation shall be deemed to
be Investments made at the time such corporation becomes an Unrestricted
Subsidiary, in the amount at which such Investments are then carried on the
books of the Company and its Restricted Subsidiaries.
"Issuance Date" has the meaning specified in subsection 3.01(a).
"Issue" means, with respect to any Letter of Credit, to issue or to
extend the expiry of, or to renew or increase the amount of, such Letter of
Credit; and the terms "Issued," "Issuing" and "Issuance" have corresponding
meanings.
"Issuing Bank" means Bank of America in its capacity as issuer of one
or more Letters of Credit hereunder.
"Lender" has the meaning specified in the introduction to this
Agreement and includes each Lender listed on the signature pages hereof and each
Assignee. References to the "Lenders" shall include Bank of America in its
capacity as Issuing Bank; for purposes of clarification only, to the extent that
Bank of America may have any rights or obligations in addition to those of the
Lenders due to its status as Issuing Bank, its status as such will be
specifically referenced.
"Lending Office" means, with respect to any Lender, (a) in the case of
a Committed Loan, the office or offices of such Lender specified as its
"Domestic Lending Office" or "Eurodollar Lending Office", as the case may be,
opposite its name on Schedule 1.01(b) or in the applicable Notice of Assignment,
or such other office or offices of such Lender as such Lender may from time to
time specify to the Company and the Agent and (b) in the case of a Bid Loan, the
office of such Lender notified by such Lender to the Company as its Lending
Office with respect to such Bid Loan or, if such Lender fails to so notify the
Company, such Lender's Domestic Lending Office.
"L/C Advance" means each Lender's participation in any L/C Borrowing in
accordance with its Commitment Percentage.
"L/C Amendment Application" means an application form for amendment of
outstanding standby letters of credit as shall at any time be in use at the
Issuing Bank, as the Issuing Bank shall request.
"L/C Application" means an application form for issuances of standby
letters of credit as shall at any time be in use at the Issuing Bank, as the
Issuing Bank shall request.
"L/C Borrowing" means an extension of credit resulting from a drawing
under any Letter of Credit which shall not have been reimbursed on the date when
made.
"L/C Commitment" means the commitment of the Issuing Bank to Issue, and
the commitment of the Lenders severally to participate in, Letters of Credit
from time to time Issued or outstanding under Article 3, in an aggregate amount
not to exceed on any date the amount of $150,000,000, as the same shall be
reduced as a result of a reduction in the L/C Commitment pursuant to Section
2.06. The L/C Commitment is a part of the combined Commitments, rather than a
separate, independent commitment.
"L/C Obligations" means at any time the sum of Tranche A L/C
Obligations and Tranche B L/C Obligations.
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"L/C-Related Documents" means the Letters of Credit, the L/C
Applications, the L/C Amendment Applications and any other document relating to
any Letter of Credit, including any of the Issuing Bank's standard-form
documents for Letter of Credit Issuances.
"Letter of Credit" means any Tranche A Letter of Credit or Tranche B
Letter of Credit.
"LIBOR" means, for any Interest Period:
(a) the rate of interest per annum (carried out to the fifth decimal
point) equal to the rate determined by the Agent to be the offered rate that
appears on the page of the Telerate Screen that displays an average British
Bankers Association Interest Settlement Rate (such page currently being page
number 3750) for deposits in dollars (for delivery on the first day of such
Interest Period) with a term equivalent to such Interest Period, determined as
of approximately 11:00 a.m. (London time) two Business Days prior to the first
day of such Interest Period; or
(b) in the event the rate referenced in the preceding subsection (a)
does not appear on such page or service or such page or service shall cease to
be available, the rate per annum (carried to the fifth decimal place) equal to
the rate determined by the Agent to be the offered rate on such other page or
other service that displays an average British Bankers Association Interest
Settlement Rate for deposits in dollars (for delivery on the first day of such
Interest Period) with a term equivalent to such Interest Period, determined as
of approximately 11:00 a.m. (London time) two Business Days prior to the first
day of such Interest Period; or
(c) in the event the rates referenced in the preceding subsections (a)
and (b) are not available, the rate per annum determined by the Agent as the
rate of interest at which dollar deposits (for delivery on the first day of such
Interest Period) in same-day funds in the approximate amount of the applicable
Committed Loan and with a term equivalent to such Interest Period would be
offered by its London Branch to major banks in the offshore dollar market at
their request at approximately 11:00 a.m. (London time) two Business Days prior
to the first day of such Interest Period.
"Lien" means any mortgage, security interest, pledge or lien.
"Loan" means a loan by a Lender to the Company pursuant to Article 2 or
Article 3 in the form of a Committed Loan, a Bid Loan, or an L/C Advance.
"Loan Documents" means this Agreement, the Subsidiary Guaranty, the
Contribution Agreement, the L/C Related Documents, and any promissory note
issued pursuant hereto.
"Loan Parties" means, collectively, the Company and each other Person
(other than the Agent and the Lenders) who is a party to a Loan Document.
"Material Adverse Effect" means, with respect to any event, act,
condition or occurrence of whatever nature (including any adverse determination
in any litigation, arbitration, or governmental investigation or proceeding),
whether singly or in conjunction with any other event or events, act or acts,
condition or conditions, occurrence or occurrences, whether or not related, a
material adverse change in, or a material adverse effect upon, any of (a) the
financial condition, operations, business or properties of the Company and its
Subsidiaries taken as a whole or (b) the legality, validity or enforceability of
any Loan Document.
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"Measurement Period" means a period consisting of four consecutive
fiscal quarters of the Company and ending on the last day of the most recently
completed fiscal quarter of the Company.
"Moody's" means Moody's Investors Services, Inc. or any successor to
the rating agency business thereof.
"Net Tangible Assets" means, at any date, the aggregate amount of
assets, including the amount of any receivables or other accounts of the Company
and its Subsidiaries sold in connection with any receivables sale transaction
(less applicable reserves and other properly deductible items) after deducting
therefrom (a) all current liabilities, (b) any item representing Investments in
Unrestricted Subsidiaries and (c) all goodwill, trade names, trademarks,
patents, unamortized debt discount and expenses and other like intangibles, all
of the foregoing as set forth on the then most recent consolidated balance sheet
of the Company and its Subsidiaries and computed in accordance with GAAP.
"Net Worth" means, at any date, the excess of Total Assets at such date
over Total Liabilities at such date.
"1996 Credit Agreement" has the meaning specified in the first recital
of this Agreement.
"1996 Facility Bid Loan" means any bid loan outstanding under the 1996
Credit Agreement on the Closing Date.
"North American Timber Agreement" means the Credit Agreement, dated as
of the date hereof, by and among North American Timber Corporation, the Lenders,
and Bank of America as the agent for the Lenders.
"Notice of Assignment" has the meaning specified in Section 12.08(b).
"Notice of Borrowing" has the meaning specified in Section 2.02(a).
"Notice of Conversion/Continuation" has the meaning specified in
Section 2.11(b).
"Obligations" means all Loans, L/C Obligations and other Indebtedness,
advances, debts, liabilities, obligations, covenants and duties owing by the
Company, or any other Loan Party to any Lender, the Agent, any Affiliate of any
Lender or the Agent or any Indemnified Party, of any kind or nature, present or
future, whether or not evidenced by any note, guaranty or other instrument, but
in each case only as arising under or in connection with this Agreement or under
or in connection with any other Loan Document, whether or not for the payment of
money, whether arising by reason of an extension of credit, loan, guaranty,
indemnification or in any other manner, whether direct or indirect (including
those acquired by assignment), absolute or contingent, due or to become due, now
existing or hereafter arising and however acquired. The term "Obligations"
includes all interest, charges, expenses, fees, attorneys' fees and
disbursements (including the allocated cost of in-house counsel) and any other
sum chargeable to the Company, or any other Loan Party under or in connection
with this Agreement or any other Loan Document.
"Other Taxes" has the meaning specified in Section 4.05(b).
"Participant" has the meaning specified in Section 12.08(d).
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"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan", as such term is defined in
Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan as defined in Section 4001(a)(3) of ERISA), and to which the
Company or any corporation, trade, or business that is, along with the Company,
a member of its Controlled Group, may have liability, including a reasonable
possibility of liability due to having been a substantial employer within the
meaning of Section 4063 of ERISA at any time during the preceding five years, or
by reason of being deemed to be a contributing sponsor under Section 4069 of
ERISA.
"Permitted Liens" means the Liens permitted or required by Section
9.01.
"Permitted Swap Obligations" means all obligations (contingent or
otherwise) of the Company or any Subsidiary existing or arising under Swap
Contracts, provided that such obligations are (or were) entered into by such
Person in the ordinary course of business for the purpose of directly mitigating
risks associated with liabilities, commitments or assets held or reasonably
anticipated by such Person, or changes in the value of securities issued by such
Person in conjunction with a securities repurchase program not otherwise
prohibited hereunder, and not for purposes of speculation or taking a "market
view".
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture or other entity, or a government or any political subdivision or agency
thereof.
"Plan" means each Pension Plan or Welfare Plan, and any other employee
benefit plan (within the meaning of Section 3(3) of ERISA) sponsored or
maintained by the Company or any Subsidiary of the Company.
"Principal Property" means any mill, manufacturing plant, manufacturing
facility or timberlands, owned by the Company and/or one or more Restricted
Subsidiaries and located within the continental United States of America;
provided, however, that the term "Principal Property" shall not include (a) any
such mill, plant, facility or timberlands or portion thereof (i) which is
financed by obligations issued by a State, a Territory or a possession of the
United States of America or any political subdivision of any of the foregoing,
or the District of Columbia, the interest on which is excludable from gross
income of the holders thereof pursuant to the provisions of Section 103(a)(1)
(but only if by reason of Section 103(b)(4)(E) or (F)) of the Internal Revenue
Code of 1954, as amended (or any predecessor or successor to such provision) as
in effect at the time of the issuance of such obligations, or (ii) which in the
opinion of the Company's Board of Directors is not of material importance to the
total business conducted by the Company and the Restricted Subsidiaries,
considered as a whole; or (b) any timberlands designated by the Company's Board
of Directors as being held primarily for development and/or sale rather than for
the production of timber; or (c) any minerals or mineral rights.
"Principal Subsidiary" means each of North American Timber Corp., a
Delaware corporation, Unisource Worldwide, Inc., a Delaware corporation, Great
Northern Nekoosa Corporation, a Maine corporation; Brunswick Pulp & Paper
Company, a Delaware corporation; Georgia-Pacific West, Inc., an Oregon
corporation; G-P Gypsum Corporation, a Delaware corporation; Leaf River Forest
Products, Inc., a Delaware corporation; Nekoosa Packaging Corporation, a
Delaware corporation, Nekoosa Papers Inc., a
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Wisconsin corporation, and any other Subsidiary having assets constituting at
least 10% of the Company's consolidated assets.
"Reference Rate" has the meaning specified in the definition of
Adjusted Reference Rate.
"Reference Rate Loan" means any Loan that bears interest at a rate
determined with reference to the Adjusted Reference Rate.
"Release" means a "release", as such term is defined in CERCLA.
"Replacement Lender" has the meaning specified in Section 5.09.
"Required Lenders" means at any time Lenders having 51% or more of the
Commitments and, if the Commitments have been terminated, Lenders holding 51% or
more of the then aggregate unpaid principal amount of the Loans made by the
Lenders.
"Requirement of Law" means, as to any Person, the charter and by-laws
or other organization or governing documents of such Person, and any law, rule
or regulation including the requirements of Environmental Laws and ERISA, the
Securities Act of 1933, the Securities Exchange Act of 1934, Regulations T, U
and X of the Federal Reserve Board or any order, decree or other determination
of an arbitrator or a court or other Governmental Authority applicable to or
binding upon such Person or any of its property or to which such Person or any
of its property is subject.
"Responsible Officer" means, with respect to any Person, the Chief
Executive Officer, the President, any Vice-Chairman or any of the Vice
Presidents or the Treasurer of such Person or, with respect to financial
matters, the Chief Financial Officer, the Executive Vice President-Finance and
Chief Financial Officer or the Vice President and Treasurer of such Person.
"Restricted Subsidiary" means any Subsidiary of the Company (a)
substantially all of the property of which is located within the continental
United States of America and (b) which itself, or together with the Company
and/or one or more other Restricted Subsidiaries, owns a Principal Property.
"Sale-Leaseback Transaction" has the meaning specified in Section 9.02.
"S&P" means Standard & Poor's or any successor to the rating agency
business thereof.
"Subsidiary" means, with respect to any Person, any corporation of
which more than 50% of the outstanding capital stock having ordinary voting
power to elect a majority of the board of directors (or others performing a
comparable function) of such corporation is at the time directly or indirectly
owned by such Person, by such Person and one or more other Subsidiaries of such
Person, or by one or more other Subsidiaries of such Person.
"Subsidiary Guaranty" has the meaning specified in Section 7.01(c).
"Swap Contract" means any agreement, whether or not in writing,
relating to any transaction that is a rate swap, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap or
option, bond, note or bill option, interest rate option, forward foreign
exchange transaction, cap, collar or floor transaction, currency swap,
cross-currency rate swap, swaption, currency option or any other, similar
transaction (including any option to enter into any of the foregoing) or any
combination of
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<PAGE>
the foregoing, and, unless the context otherwise clearly requires, any master
agreement relating to or governing any or all of the foregoing.
"Swap Termination Value" means, in respect of any one or more Swap
Contracts, after taking into account the effect of any legally enforceable
netting agreement relating to such Swap Contracts, (a) for any date on or after
the date such Swap Contracts have been closed out and termination value(s)
determined in accordance therewith, such termination value(s), and (b) for any
date prior to the date referenced in clause (a) the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, as determined by the Agent
based upon one or more mid-market or other readily available quotations provided
by any recognized dealer in such Swap Contracts (which may include any Lender).
"Taxes" has the meaning specified in Section 4.05(a).
"Total Assets" means, at any date, without duplication, the total
consolidated assets of the Company and its Subsidiaries, as determined in
accordance with GAAP.
"Total Liabilities" means, at any date, without duplication, the total
consolidated liabilities of the Company and its Subsidiaries, determined in
accordance with GAAP.
"Tranche A Bid Loan" means a Loan made by a Lender to the Company
pursuant to subsection 2.03(a) and may be a Base Rate Bid Loan or a Fixed Rate
Bid Loan.
"Tranche A Commitment" means for each Lender, as the context may
require, (a) the amount in dollars set forth on Schedule 1.01(a) opposite the
name of such Lender under the heading "Tranche A Commitments" or as otherwise
set forth in any Notice of Assignment, as such amount may be reduced pursuant to
Section 2.06 or as a result of one or more assignments pursuant to Section
12.08; or (b) the obligation of such Lender to extend credit to the Company
hereunder in the amount specified in the immediately preceding clause (a).
"Tranche A L/C Obligations" means at any time the sum of (a) the
aggregate undrawn amount of all Tranche A Letters of Credit then outstanding,
plus (b) the amount of all unreimbursed drawings under all Tranche A Letters of
Credit, including all outstanding L/C Borrowings made on account of Tranche A
Letters of Credit.
"Tranche A Letter of Credit" means any letter of credit Issued by the
Issuing Bank pursuant to Article 3 and allocated in the Company's request
therefor to the Tranche A Commitments.
"Tranche A Loan" has the meaning set forth in subsection 2.01(a).
"Tranche A Termination Date" means July 20, 2000.
"Tranche B Bid Loan" means a Loan made by a Lender to the Company
pursuant to subsection 2.03(b) and may be a Base Rate Bid Loan or a Fixed Rate
Bid Loan.
"Tranche B Commitment" means for each Lender, as the context may
require (a) the amount in dollars set forth on Schedule 1.01(a) opposite the
name of such Lender under the heading "Tranche B Commitments" or as otherwise
set forth in any Notice of Assignment, as such amount may be reduced pursuant to
Section 2.06 or as a result of one or more assignments pursuant to Section
12.08; or (b) the obligation of such Lender to extend credit to the Company
hereunder in the amount specified in the immediately preceding clause (b).
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<PAGE>
"Tranche B L/C Obligations" means at any time the sum of (a) the
aggregate undrawn amount of all Tranche B Letters of Credit then outstanding,
plus (b) the amount of all unreimbursed drawings under all Tranche B Letters of
Credit, including all outstanding L/C Borrowings made on account of Tranche B
Letters of Credit.
"Tranche B Letter of Credit" means any letter of credit Issued by the
Issuing Bank pursuant to Article 3 and allocated in the Company's request
therefor to the Tranche B Commitments.
"Tranche B Loan" has the meaning set forth in Section 2.01(b).
"Tranche B Termination Date" means July 22, 2004.
"Unrestricted Subsidiary" means any Subsidiary of the Company other
than a Restricted Subsidiary.
"Utilization Fee" has the meaning specified in Section 4.01(a).
"Value" means, with respect to a Sale-Leaseback Transaction, as of any
particular time, the amount equal to the greater of (a) the net proceeds of the
sale or transfer of the property leased pursuant to such Sale-Leaseback
Transaction or (b) the fair value in the opinion of the Board of Directors of
the Company of such property at the time of entering into such Sale-Leaseback
Transaction, in either case divided first by the number of full years of the
term of the lease and then multiplied by the number of full years of such term
remaining at the time of determination, without regard to any renewal or
extension options contained in the lease.
"Welfare Plan" means a "welfare plan", as such term is defined in
Section (3)(1) of ERISA.
1.02 Computation of Time Periods. In this Agreement, in the computation
of periods of time from a specified date to a later specified date, the word
"from" means "from and including" and the words "to" and "until" each means "to
but excluding."
1.03 Accounting Matters. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP, and all financial statements
referred to in Sections 8.09(a) and (b) shall be prepared in accordance with
GAAP; provided, however, that all computations determining compliance with
Article 8 shall use accounting principles consistent with those applied in the
preparation of the financial statements of the Company referred to in Section
6.05(a). The parties hereto agree that to the extent that any change in GAAP
affects the calculation of the financial covenant contained herein, the Agent
(at the direction of the Required Lenders) and the Company shall negotiate in
good faith to amend such financial covenant to account for such changes in GAAP.
1.04 Certain Terms. The meanings of defined terms are equally
applicable to the singular and plural forms of the defined terms.
The words "herein", "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole, including the Exhibits and Schedules
hereto, and not to any particular Article, Section, paragraph or clause in this
Agreement. The word "including" when used herein is not intended to be exclusive
and means "including, without limitation." References herein to an Article,
Section, paragraph or clause shall refer to the appropriate Article, Section,
paragraph or clause in this Agreement.
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<PAGE>
Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments shall be
deemed to include all subsequent amendments and other modifications thereto, but
only to the extent such amendments and other modifications are not prohibited by
the terms of any Loan Document, and (ii) references to any statute or regulation
are to be construed as including all statutory and regulatory provisions
consolidating, amending, replacing, supplementing or interpreting the statute or
regulation.
ARTICLE 2
AMOUNTS AND TERMS OF THE LOANS
2.01 Committed Loans.
(a) Tranche A Loans. Each Lender severally agrees, on the terms and
subject to the conditions hereinafter set forth, to make one or more Committed
Loans to the Company on any Business Day during the period commencing on the
Closing Date and ending on the Business Day next preceding the Tranche A
Termination Date (each such loan, a "Tranche A Loan"), in an aggregate principal
amount at any time outstanding which does not exceed such Lender's Tranche A
Commitment; provided, however, that after giving effect to any Committed
Borrowing of Tranche A Loans, (i) the aggregate principal amount of all Tranche
A Loans then outstanding, plus (ii) the aggregate principal amount of all
Tranche A Bid Loans then outstanding, plus (iii) the outstanding Tranche A L/C
Obligations shall not exceed the Aggregate Tranche A Commitments. Any principal
amount of the Tranche A Loans which is repaid or prepaid by the Company may be
reborrowed within the limitations set forth in this Section 2.01(a).
(b) Tranche B Loans. Each Lender severally agrees, on the terms and
subject to the conditions hereinafter set forth, to make one or more Committed
Loans to the Company on any Business Day during the period commencing on the
Closing Date and ending on the Business Day next preceding the Tranche B
Termination Date (each such loan, a "Tranche B Loan"), in an aggregate principal
amount at any time outstanding which does not exceed such Lender's Tranche B
Commitment.; provided, however, that after giving effect to any Committed
Borrowing of Tranche B Loans, (i) the aggregate principal amount of all Tranche
B Loans then outstanding, plus (ii) the aggregate principal amount of all
Tranche B Bid Loans then outstanding, plus (iii) the aggregate principal amount
of all 1996 Facility Bid Loans then outstanding, plus (vi) the outstanding
Tranche B L/C Obligations shall not exceed the Aggregate Tranche B Commitments.
Any principal amount of the Tranche B Loans which is repaid or prepaid by the
Company may be reborrowed within the limitations set forth in this Section
2.01(b).
2.02 Procedure for Committed Borrowings.
(a) Each Committed Borrowing shall be made on notice, delivered by the
Company to the Agent not later than 12:00 noon (New York City time) at least (i)
four Business Days prior to the date of such proposed Borrowing, in the case of
Eurodollar Loans, and (ii) one Business Day prior to the date of such proposed
Borrowing, in the case of Reference Rate Loans. Each such notice of a Committed
Borrowing (a "Notice of Borrowing") shall be irrevocable and shall be delivered
by facsimile, in substantially the form of Exhibit 2.02(a), specifying therein:
(i) the date of such Borrowing, which shall be a Business Day;
(ii) the amount of such Borrowing which, in the case of a
Borrowing of Eurodollar Loans, shall be in the amount of $20,000,000 or
an integral multiple of $10,000,000 in excess
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<PAGE>
thereof and, in the case of a Borrowing of Reference Rate Loans, shall
be in the amount of $10,000,000 or an integral multiple of $5,000,000
in excess thereof and shall not, in any case, exceed the unused
Aggregate Tranche A Commitments or Aggregate Tranche B Commitments, as
applicable, set forth in Section 2.01(a) or (b), respectively, on the
date such Borrowing is made (after giving effect to each payment and
prepayment made on such date);
(iii) whether such Borrowing is to be of Tranche A Loans or
Tranche B Loans;
(iv) whether such Borrowing is to be comprised of Eurodollar Loans
or Reference Rate Loans; and
(v) if such Borrowing is to be comprised of Eurodollar Loans, the
duration of the initial Interest Period applicable to such Loans.
If the Notice of Borrowing shall fail to specify the duration of the initial
Interest Period for any Committed Borrowing comprised of Eurodollar Loans, such
Interest Period shall be one month.
(b) Upon receipt of a Notice of Borrowing, the Agent shall promptly
notify each Lender thereof and of the amount of such Lender's share of such
Borrowing determined on the basis of such Lender's Commitment Percentage. Each
Lender shall make available to the Agent the amount of its ratable share of such
Borrowing in the manner and at the time set forth in Section 4.04(a).
(c) After giving effect to any Committed Borrowing, there shall not be
more than seven different Interest Periods in effect.
(d) Unless any applicable condition specified in Article 7 has not been
satisfied or waived, the Agent will make the funds received from the Lenders
promptly available to the Company by crediting the account of the Company on the
books of Bank of America, or such other account as shall have been specified by
the Company, with the aggregate of the amounts made available to the Agent by
the Lenders and in like funds as received by the Agent.
2.03 Bid Borrowings.
(a) In addition to Committed Borrowings pursuant to Section 2.01, each
Lender severally agrees that the Company may, as set forth in Section 2.04, from
time to time on any Business Day during the period commencing on the Closing
Date and ending on the Business Day next preceding the Tranche A Termination
Date request the Lenders to submit offers to make Tranche A Bid Loans to the
Company; provided, however, that the Lenders may, but shall have no obligation
to, submit such offers and the Company may, but shall have no obligation to,
accept any such offers; and provided, further, that at no time shall (a)(i) the
aggregate principal amount of all Tranche A Bid Loans made by all Lenders then
outstanding plus (ii) the aggregate principal amount of all Tranche A Loans then
outstanding plus (iii) the outstanding Tranche A L/C Obligations exceed (b) the
Aggregate Tranche A Commitments.
(b) In addition to Committed Borrowings pursuant to Section 2.01, each
Lender severally agrees that the Company may, as set forth in Section 2.04, from
time to time on any Business Day during the period commencing on the Closing
Date and ending on the Business Day next preceding the Tranche B Termination
Date request the Lenders to submit offers to make Tranche B Bid Loans to the
Company; provided, however, that the Lenders may, but shall have no obligation
to, submit such offers and the Company may, but shall have no obligation to,
accept any such offers; and provided, further, that at no time shall (a)(i) the
aggregate principal amount of all Tranche B Bid Loans made by all Lenders then
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outstanding plus (ii) the aggregate principal amount of all Tranche B Loans then
outstanding plus (iii) the aggregate principal amount of all 1996 Facility Bid
Loans then outstanding plus (vi) the outstanding Tranche B L/C Obligations
exceed (b) the Aggregate Tranche B Commitments.
2.04 Procedure for Bid Borrowings.
(a) The Company may request a Bid Borrowing hereunder by delivering to
the Agent by facsimile not later than 11:00 a.m. (New York City time) at least
(i) four Business Days prior to the date of the proposed Borrowing, in the case
of a request for Base Rate Bid Loans, and (ii) two Business Days (or, in the
event the Company desires that Competitive Bids be furnished on the date of the
proposed Bid Borrowing, one Business Day) prior to the date of the proposed Bid
Borrowing in the case of a request for Fixed Rate Bid Loans, a solicitation for
Bid Loans (a "Competitive Bid Request"), in substantially the form of Exhibit
2.04(a) specifying therein:
(i) the date of such Bid Borrowing, which shall be a Business Day;
(ii) the aggregate amount of such Bid Borrowing, which shall be a
minimum amount of $10,000,000 in excess thereof and shall not, in the
case of a Tranche A Bid Borrowing, exceed the Available Tranche A
Commitments on the date such proposed Borrowing is made (after giving
effect to each payment and prepayment made on such date) or, in the
case of a Tranche B Bid Borrowing, exceed the Available Tranche B
Commitments on the date such proposed Borrowing is made (after giving
effect to each payment and prepayment made on such date);
(iii) the maturity date or dates for the partial or complete
repayment of each Bid Loan to be made as part of such Bid Borrowing
(none of which shall occur after the Tranche B Termination Date) and,
in the case of each partial repayment, the amount thereof;
(iv) whether the Bid Loans requested are Tranche A Bid Loans or
Tranche B Bid Loans, and whether the Bid Loans requested are Base Rate
Bid Loans or Fixed Rate Bid Loans and, in the case of Base Rate Bid
Loans, the basis of calculation of such interest rate (the "Base Rate")
to be used by the Lenders in determining the rate or rates of interest
to be offered by them; and
(v) any other terms to be applicable to such Bid Borrowing
(including the extent to which terms similar to Section 4.05 shall be
applicable to such Bid Borrowing).
The Agent shall promptly notify each Lender of its receipt of a Competitive Bid
Request by sending such Lender by facsimile a copy of such Competitive Bid
Request.
(b) (i) Each Lender may, in response to a Competitive Bid Request, at
its option, irrevocably submit a Competitive Bid containing an offer to make one
or more Bid Loans at a rate or rates of interest specified by such Lender in its
sole discretion. Each Competitive Bid must be submitted to the Company before
10:00 a.m. (New York City time) (A) three Business Days prior to the date of the
proposed Bid Borrowing, in the case of a request for Base Rate Bid Loans, and
(B) one Business Day prior to the date of the proposed Bid Borrowing (or, in the
event the Company desires that Competitive Bids be furnished on the date of the
proposed Bid Borrowing, on the date of such proposed Borrowing), in the case of
a request for Fixed Rate Bid Loans.
(ii) Each Competitive Bid (which shall be by telephone, promptly
confirmed in writing) shall specify:
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(A) the minimum amount of each Bid Loan for which such
Competitive Bid is being made (which shall be at least $5,000,000)
and the maximum amount thereof (which may exceed such Lender's
Tranche A Commitment or its Tranche B Commitment);
(B) the rate or rates of interest per annum offered for each
Bid Loan, which, in the case of a Base Rate Bid Loan, shall be
expressed as a margin to be added to, or subtracted from, the Base
Rate specified by the Company in its Bid Request; and
(C) the applicable Lending Office of the quoting Lender.
(iii) Any Competitive Bid may be disregarded if it:
(A) does not specify all of the information required by
Section 2.04(b)(ii);
(B) contains qualifying, conditional or similar language;
(C) proposes terms other than, or in addition to, those set
forth in the applicable Competitive Bid Request; or
(D) arrives after the time set forth in Section 2.04(b)(i).
(c) Not later than 11:00 a.m. (New York City time) three Business Days
prior to the date of the proposed Bid Borrowing, in the case of a Borrowing of
Base Rate Bid Loans, and 11:00 a.m. (New York City time) one Business Day prior
to the date of the proposed Bid Borrowing (or, in the event the Company desires
that Competitive Bids be furnished on the date of the proposed Bid Borrowing, on
the date of such proposed Borrowing), in the case of a Borrowing of Fixed Rate
Bid Loans, the Company shall either
(i) cancel such Bid Borrowing by giving the Agent and the Lenders
notice thereof (which notice may be given by telephone and confirmed in
writing by facsimile) or
(ii) accept one or more of the offers made by any Lender or
Lenders pursuant to Section 2.04(b), in its sole discretion, by giving
notice (which notice may be given by telephone, confirmed in writing by
facsimile) to such Lenders of the amount of each Bid Loan (which amount
shall be equal to or greater than the minimum amount, and equal to or
less than the maximum amount, notified to the Company by such Lender
for such Bid Loan pursuant to Section 2.04(b)) to be made by each such
Lender as part of such Bid Borrowing, and reject any remaining offers
made by giving the Lenders notice (which notice may be given by
telephone, confirmed in writing by facsimile) to that effect; provided,
however, that to the extent that the Company elects to accept one or
more Competitive Bids submitted by Lenders for a given Interest Period,
the Company shall accept such Competitive Bids on the basis of
ascending interest rates; and, provided, further, that in the event the
Company does not, before the time stated above, either cancel the
proposed Bid Borrowing pursuant to Section 2.04(c)(i) or accept one or
more of the offers pursuant to this Section 2.04(c)(ii), such Bid
Borrowing shall be deemed cancelled and provided, further, that in the
event the Company accepts one or more of the offers pursuant to this
Section 2.04(c)(ii) but does not expressly reject the remaining offers,
such offers shall be deemed rejected. The Company shall promptly notify
the Agent of the date and amount of any proposed Bid Borrowing.
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(d) For purposes of Sections 2.01, 2.06 and 4.01(a), each outstanding
Bid Loan (and until repayment in full thereof, each 1996 Facility Bid Loan)
shall be deemed to utilize the Tranche A Commitments of each Lender, in the case
of Tranche A Bid Loans, or the Tranche B Commitments of each Lender, in the case
of Tranche B Bid Loans, whether or not such Lender has made such Bid Loan, by an
amount equal to such Lender's Commitment Percentage times the amount of such Bid
Loan (or 1996 Facility Bid Loan).
(e) The rights of any Lender under the 1996 Credit Agreement which is
also a Lender under this Agreement and which has made 1996 Facility Bid Loans
that are outstanding on the Closing Date shall terminate on the Closing Date and
such Lender shall have the same rights with respect to its 1996 Facility Bid
Loans as if such 1996 Facility Bid Loans were Bid Loans hereunder.
2.05 Evidence of Indebtedness.
(a) Each Lender, with respect to amounts payable to it hereunder, and
the Agent, with respect to all amounts payable hereunder in respect of Committed
Borrowings, shall maintain on its books in accordance with its usual practice,
loan accounts and control accounts, respectively, setting forth each Committed
Loan and, in the case of each Lender having made a Bid Loan, each such Bid Loan,
the applicable interest rate and the amounts of principal, interest and other
sums paid and payable by the Company from time to time hereunder with respect
thereto; provided, however, that the failure by any Lender to record any such
amount on its books shall not affect the obligations of the Company with respect
thereto. In the case of any dispute, action or proceeding relating to any amount
payable hereunder, the entries in each such account shall be prima facie
evidence of such amount, absent manifest error. In case of any discrepancy
between the entries in the Agent's books and any Lender's books, such Lender's
books shall be considered correct in the absence of manifest error.
(b) Notwithstanding the foregoing, if any Lender shall so request for
purposes of Section 12.08(a)(iii), the obligation to repay the Committed Loans
shall also be evidenced by a promissory note in the form of Exhibit 2.05(b).
(c) The obligation to repay a Bid Loan shall also, if so requested by
the Lender making such Bid Loan in its Competitive Bid, be evidenced by a
promissory note in the form of Exhibit 2.05(c).
2.06 Optional Reduction of the Commitments. The Company shall have the
right, upon at least four Business Days' prior notice to the Agent (which notice
shall be irrevocable), at any time permanently to terminate the remaining
Commitments in whole or reduce ratably in part the unused portions of the
Commitments of the Lenders, allocated between Tranche A Commitments or Tranche B
Commitments, as the Company may elect; provided, however, that each partial
reduction shall be in the aggregate amount of $20,000,000 or an integral
multiple of $10,000,000 in excess thereof. No reduction in the Commitments shall
reduce the L/C Commitment until the aggregate Commitments are reduced to
$150,000,000, after which each reduction in the Commitments shall reduce the L/C
Commitment dollar for dollar. The Agent shall promptly notify each Lender of its
receipt of any notice under this Section 2.06.
2.07 Repayment.
(a) The Committed Loans. The Company agrees to repay to the Agent for
the account of the Lenders the outstanding principal amount of all Tranche A
Loans on the Tranche A Termination Date.
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The Company agrees to repay to the Agent for the account of the Lenders the
outstanding principal amount of all Tranche B Loans on the Tranche B Termination
Date.
(b) The Bid Loans. The Company agrees to repay to each Lender which has
made a Bid Loan on the maturity date of such Bid Loan (as each such maturity
date shall have been specified by the Company in the applicable Competitive Bid
Request pursuant to Section 2.04(a)(iii)) the unpaid principal amount of such
Bid Loan then due and payable (each such amount being as specified for such date
in such Competitive Bid Request pursuant to Section 2.04(a)(iii)).
2.08 Optional Prepayments.
(a) Subject to Section 5.06(a), the Company may, upon (i) at least four
Business Days' prior notice to the Agent, in the case of a prepayment of
Eurodollar Loans, and (ii) at least one Business Day's prior notice to the
Agent, in the case of a prepayment of Reference Rate Loans, stating the proposed
date and aggregate principal amount of the prepayment, prepay, ratably among the
Lenders in accordance with their Commitment Percentages, the outstanding
principal amount of the Committed Loans, in whole or in part, together with
accrued interest to the date of such prepayment on the principal amount prepaid.
(b) Each partial prepayment of Committed Loans shall, in the case of
Eurodollar Loans, be in the aggregate principal amount of $20,000,000 or an
integral multiple of $10,000,000 in excess thereof, and, in the case of
Reference Rate Loans, be in the aggregate principal amount of $10,000,000 or an
integral multiple of $5,000,000 in excess thereof; provided, however, that, if
the aggregate amount of Eurodollar Loans comprised in the same Committed
Borrowing would be reduced as a result of any voluntary prepayment to an amount
less than $20,000,000, such Eurodollar Loans shall automatically convert into
Reference Rate Loans on the last day of the then current Interest Period.
(c) If a notice of prepayment is given, such notice shall be
irrevocable and the principal amount stated in such notice, together with
accrued interest thereon and any amount payable pursuant to Section 5.06(a),
shall be due and payable on the date specified in such notice. The Agent shall
promptly notify each Lender of its receipt of any notice of prepayment under
this Section 2.08.
(d) Bid Loans may not be prepaid.
2.09 Interest.
(a) Each Committed Loan shall bear interest on the outstanding
principal amount thereof from the date when made until paid in full, at the
option of the Company, as set forth in its Notice of Borrowing or in its Notice
of Conversion/Continuation,
(i) if such Loan is a Reference Rate Loan, at a rate per annum
equal to the Adjusted Reference Rate; or
(ii) if such Loan is a Eurodollar Loan, at a rate per annum equal
to the sum of (A) LIBOR plus (B) the applicable margin, as follows:
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<TABLE>
<CAPTION>
Debt Rating Applicable Margin
----------- on Eurodollar Loans
Moody's S&P Tranche A Loans / Tranche B Loans
------- --- ---------------------------------
<S> <C> <C> <C>
Baal or higher or BBB+ or higher 0.525% / 0.500%
--
Baa2 or BBB 0.625% / 0.600%
--
Baa3 or BBB- 0.725% / 0.700%
--
Bal or BB+ 1.075% / 1.050%
--
Ba2 or lower and BB or lower 1.275% / 1.250%
---
</TABLE>
provided, however, that if at any time no Debt Rating is available, the
applicable margin shall be 1.275% per annum for Tranche A Loans and 1.250% per
annum for Tranche B Loans.
(b) Any change in the applicable margin due to a change in the
applicable Debt Rating shall be effective on the effective date of such change
in the applicable Debt Rating and shall apply to all Eurodollar Loans that are
outstanding at any time during the period commencing on the effective date of
such change in applicable Debt Rating and ending on the date immediately
preceding the effective date of the next such change in applicable Debt Rating.
In the event of a split rating, the higher rating will apply; if the Debt
Ratings are split by more than one level, one level above the lower rating will
apply.
(c) Accrued interest shall be paid on each Interest Payment Date (and,
after maturity, on demand), on the date of repayment or prepayment of any
Committed Loan on the amount repaid or prepaid and, in the case of any Reference
Rate Loan, on each date such Loan is converted into a Eurodollar Loan.
(d) The Company shall pay to each Lender which has made a Bid Loan
interest on the unpaid principal amount of such Bid Loan from the date when made
until paid in full, on each Interest Payment Date (and, after maturity, on
demand), at the rate of interest specified by such Lender in its Competitive Bid
pursuant to Section 2.04(b)(ii)(B).
2.10 Default Interest. During the continuation of any Event of Default
pursuant to Section 10.01(a), the Company shall pay interest (after as well as
before judgment to the extent permitted by law) on the principal amount of all
Committed Loans outstanding and on all other Obligations of the Company due and
unpaid (other than Bid Loans), at a rate per annum which is determined by
increasing the interest rate then in effect by 2% per annum for the principal
amount of the Eurodollar Loans outstanding and at a rate per annum equal to the
Adjusted Reference Rate plus 2% for any other Obligation due hereunder (other
than Bid Loans).
2.11 Continuation and Conversion Elections for Committed Loans.
(a) The Company may upon irrevocable written notice to the Agent:
(i) elect to convert, on any Business Day, all or any portion of
outstanding Reference Rate Loans (in the aggregate amount of
$20,000,000 or an integral multiple of $10,000,000 in excess thereof)
into Eurodollar Loans;
(ii) elect to convert, on the last day of any Interest Period
therefor, all or any portion of outstanding Eurodollar Loans comprising
the same Borrowing (in the aggregate amount of $10,000,000 or an
integral multiple of $5,000,000 in excess thereof) into Reference Rate
Loans; or
(iii) elect to continue, on the last day of any Interest Period
therefor, any Eurodollar Loans;
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provided, however, that if the aggregate amount of outstanding Eurodollar Loans
comprised in the same Borrowing would be reduced as a result of any conversion
of part thereof to Reference Rate Loans to an amount less than $20,000,000, such
Eurodollar Loans shall automatically convert into Reference Rate Loans on the
last day of the Interest Period on which such conversion occurs.
(b) The Company shall deliver a notice of conversion or continuation (a
"Notice of Conversion/Continuation"), in substantially the form of Exhibit
2.11(b), to the Agent not later than 12:00 noon (New York City time) (i) four
Business Days prior to the proposed date of conversion or continuation, if the
Committed Loans or any portion thereof are to be converted into or continued as
Eurodollar Loans, and (ii) one Business Day prior to the proposed date of
conversion, if the Committed Loans or any portion thereof are to be converted
into Reference Rate Loans.
Each such Notice of Conversion/Continuation shall be irrevocable and shall be
made by facsimile, specifying therein:
(i) the proposed date of conversion or continuation;
(ii) the aggregate amount of Committed Loans to be converted or
continued;
(iii) whether such Committed Loans are Tranche A Loans or Tranche
B Loans; and
(iv) the duration of the applicable Interest Period if such
Committed Loans are Eurodollar Loans.
(c) If, on the fourth Business Day prior to the expiration of any
Interest Period applicable to Eurodollar Loans, the Company shall have failed to
select a new Interest Period to be applicable to such Eurodollar Loans, the
Company shall be deemed to have elected to convert such Eurodollar Loans into
Reference Rate Loans effective as of the last day of such Interest Period.
(d) Upon receipt of a Notice of Conversion/Continuation, the Agent
shall promptly notify each Lender thereof. All conversions and continuations
shall be made ratably among the Lenders based on their Commitment Percentages of
the Committed Loans with respect to which such notice was given.
(e) Notwithstanding any other provision contained in this Agreement,
after giving effect to any conversion or continuation of any Committed Loans,
there shall not be more than seven different Interest Periods for Committed
Loans in effect.
2.12 Termination of Prior Commitments. The Company and each of the
Lenders agree that the "Commitments" (as defined in the 1996 Credit Agreement)
will terminate as of the Closing Date, and each Lender waives the notice
requirement set forth in Section 2.08(a) of the 1996 Credit Agreement regarding
such termination.
ARTICLE 3
THE LETTERS OF CREDIT
3.01 The Letter of Credit Subfacility.
(a) On the terms and conditions set forth herein (i) the Issuing
Bank agrees, (A) from time to time on any Business Day during the period from
the Closing Date to the Tranche A Termination
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Date to issue Tranche A Letters of Credit for the account of the Company, and to
amend or renew Tranche A Letters of Credit previously issued by it, in
accordance with subsections 3.02(c) and 3.02(d), (B) from time to time on any
Business Day during the period from the Closing Date to the Tranche B
Termination Date to issue Tranche B Letters of Credit for the account of the
Company, and to amend or renew Tranche B Letters of Credit previously issued by
it, in accordance with subsections 3.02(c) and 3.02(d), and (C) to honor drafts
under the Letters of Credit; and (ii) the Lenders severally agree to purchase an
irrevocable and unconditional participation in each Letter of Credit Issued for
the account of the Company; provided, that the Issuing Bank shall not be
obligated to Issue, and no Lender shall be obligated to participate in, any
Letter of Credit if as of the date of Issuance of such Letter of Credit (the
"Issuance Date"), after giving effect to any requested Loans, (A) (1) the
aggregate principal amount of all Tranche A Loans then outstanding plus (2) the
aggregate principal amount of all Tranche A Bid Loans then outstanding plus (3)
the outstanding Tranche A L/C Obligations exceeds the Aggregate Tranche A
Commitments; (B) (1) the aggregate principal amount of all Tranche B Loans then
outstanding plus (2) the aggregate principal amount of all Tranche B Bid Loans
then outstanding plus (3) the aggregate principal amount of all 1996 Facility
Bid Loans then outstanding plus (4) the outstanding Tranche B L/C Obligations
exceeds the Aggregate Tranche B Commitments; or (C) the total amount of L/C
Obligations exceeds the L/C Commitment. Within the foregoing limits, and subject
to the other terms and conditions hereof, the Company's ability to obtain
Letters of Credit shall be fully revolving, and, accordingly, the Company may,
during the foregoing period, obtain Letters of Credit to replace Letters of
Credit which have expired or which have been drawn upon and reimbursed.
(b) The Issuing Bank is under no obligation to Issue any Letter of
Credit if:
(i) any order, judgment or decree of any Governmental Authority or
arbitrator shall by its terms purport to enjoin or restrain the Issuing
Bank from Issuing such Letter of Credit, or any Requirement of Law
applicable to the Issuing Bank or any request or directive (whether or
not having the force of law) from any Governmental Authority with
jurisdiction over the Issuing Bank shall prohibit, or request that the
Issuing Bank refrain from, the Issuance of letters of credit generally
or such Letter of Credit in particular or shall impose upon the Issuing
Bank with respect to such Letter of Credit any restriction, reserve or
capital requirement (for which the Issuing Bank is not otherwise
compensated hereunder) not in effect on the Closing Date, or shall
impose upon the Issuing Bank any unreimbursed loss, cost or expense
which was not applicable on the Closing Date and which the Issuing Bank
in good faith deems material to it;
(ii) the Issuing Bank has received written notice from any Lender,
the Agent or the Company, on or prior to the Business Day prior to the
requested date of Issuance of such Letter of Credit, that one or more
of the applicable conditions contained in Article 7 is not then
satisfied;
(iii) the expiry date of any requested Letter of Credit is (A)
more than one year after the date of Issuance, unless the Required
Lenders have approved such expiry date in writing, (B) after the
Tranche A Termination Date, in the case of a Tranche A Letter of
Credit, unless all of the Lenders have approved such expiry date in
writing, or (C) after the Tranche B Termination Date, in the case of a
Tranche B Letter of Credit, unless all of the Lenders have approved
such expiry date in writing;
(iv) the expiry date of any requested Letter of Credit is prior to
the maturity date of any financial obligation to be supported by the
requested Letter of Credit;
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(v) any requested Letter of Credit does not provide for drafts, or
is not otherwise in form and substance acceptable to the Issuing Bank,
or the Issuance of a Letter of Credit shall violate any applicable
policies of the Issuing Bank;
(vi) any standby Letter of Credit is for the purpose of supporting
the Issuance of any Letter of Credit by any other Person; or
(vii) such Letter of Credit is in a face amount less than $100,000
or is denominated in a currency other than dollars.
3.02 Issuance, Amendment and Renewal of Letters of Credit.
(a) Each Letter of Credit shall be issued upon the irrevocable written
request of the Company received by the Issuing Bank (with a copy sent by the
Company to the Agent) at least four days (or such shorter time as the Issuing
Bank may agree in a particular instance in its sole discretion) prior to the
proposed date of issuance. Each such request for issuance of a Letter of Credit
shall be by facsimile, confirmed immediately in an original writing, in the form
of an L/C Application, and shall specify in form and detail satisfactory to the
Issuing Bank: (i) the proposed date of issuance of the Letter of Credit (which
shall be a Business Day); (ii) the face amount of the Letter of Credit; (iii)
the expiry date of the Letter of Credit; (iv) the name and address of the
beneficiary thereof; (v) the documents to be presented by the beneficiary of the
Letter of Credit in case of any drawing thereunder; (vi) the full text of any
certificate to be presented by the beneficiary in case of any drawing
thereunder; (vii) whether such Letter of Credit should be allocated to the
Tranche A Commitments or the Tranche B Commitments; and (viii) such other
matters as the Issuing Bank may require.
(b) At least two Business Days prior to the Issuance of any Letter of
Credit, the Issuing Bank will confirm with the Agent (by telephone or in
writing) that the Agent has received a copy of the L/C Application or L/C
Amendment Application from the Company and, if not, the Issuing Bank will
provide the Agent with a copy thereof. Unless the Issuing Bank has received
notice on or before the Business Day immediately preceding the date the Issuing
Bank is to issue a requested Letter of Credit from the Agent (i) directing the
Issuing Bank not to issue such Letter of Credit because such issuance is not
then permitted under subsection 3.01(b)(iii) as a result of the limitations set
forth in clauses (A) through (B) thereof or subsection 3.01(b)(ii); or (ii) that
one or more conditions specified in Article 7 are not then satisfied; then,
subject to the terms and conditions hereof, the Issuing Bank shall, on the
requested date, issue a Letter of Credit for the account of the Company in
accordance with the Issuing Bank's usual and customary business practices.
(c) From time to time while a Letter of Credit is outstanding and prior
to the Tranche A Termination Date (in the case of Tranche A Letters of Credit)
or the Tranche B Termination Date (in the case of Tranche B Letters of Credit),
the Issuing Bank will, upon the written request of the Company received by the
Issuing Bank (with a copy sent by the Company to the Agent) at least five days
(or such shorter time as the Issuing Bank may agree in a particular instance in
its sole discretion) prior to the proposed date of amendment, amend any Letter
of Credit issued by it. Each such request for amendment of a Letter of Credit
shall be made by facsimile, confirmed immediately in an original writing, made
in the form of an L/C Amendment Application and shall specify in form and detail
satisfactory to the Issuing Bank: (i) the Letter of Credit to be amended; (ii)
the proposed date of amendment of the Letter of Credit (which shall be a
Business Day); (iii) the nature of the proposed amendment; and (iv) such other
matters as the Issuing Bank may require. The Issuing Bank shall be under no
obligation to amend any Letter of Credit if: (A) the Issuing Bank would have no
obligation at such time to issue such Letter of Credit in its
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amended form under the terms of this Agreement; or (B) the beneficiary of any
such letter of Credit does not accept the proposed amendment to the Letter of
Credit. The Agent will promptly notify the Banks of the receipt by it of any L/C
Application or L/C Amendment Application.
(d) The Issuing Bank and the Lenders agree that, while a Letter of
Credit is outstanding and prior to the Tranche A Termination Date (in the case
of Tranche A Letters of Credit) or the Tranche B Termination Date (in the case
of Tranche B Letters of Credit), at the option of the Company and upon the
written request of the Company received by the Issuing Bank (with a copy sent by
the Company to the Agent) at least five days (or such shorter time as the
Issuing Bank may agree in a particular instance in its sole discretion) prior to
the proposed date of notification of renewal, the Issuing Bank shall be entitled
to authorize the renewal of any Letter of Credit issued by it. Each such request
for renewal of a Letter of Credit shall be made by facsimile, confirmed
immediately in an original writing, in the form of an L/C Amendment Application,
and shall specify in form and detail satisfactory to the Issuing Bank: (i) the
Letter of Credit to be renewed; (ii) the proposed date of notification of
renewal of the Letter of Credit (which shall be a Business Day); (iii) the
revised expiry date of the Letter of Credit; and (iv) such other matters as the
Issuing Bank may require. The Issuing Bank shall be under no obligation so to
renew any Letter of Credit if: (A) the Issuing Bank would have no obligation at
such time to issue or amend such Letter of Credit in its renewed form under the
terms of this Agreement; or (B) the beneficiary of any such Letter of Credit
does not accept the proposed renewal of the Letter of Credit. If any outstanding
Letter of Credit shall provide that it shall be automatically renewed unless the
beneficiary thereof receives notice from the Issuing Bank that such Letter of
Credit shall not be renewed, and if at the time of renewal the Issuing Bank
would be entitled to authorize the automatic renewal of such Letter of Credit in
accordance with this subsection 3.02(d) upon the request of the Company but the
Issuing Bank shall not have received any L/C Amendment Application from the
Company with respect to such renewal or other written direction by the Company
with respect thereto, the Issuing Bank shall (unless such renewal would cause
the expiry date thereof to extend beyond the Tranche A Termination Date, in the
case of a Tranche A Letter of Credit, or the Tranche B Termination Date, in the
case of a Tranche B Letter of Credit) nonetheless be permitted to allow such
Letter of Credit to renew, and the Company and the Lenders hereby authorize such
renewal, and, accordingly, the Issuing Bank shall be deemed to have received an
L/C Amendment Application from the Company requesting such renewal.
(e) The Issuing Bank may, at its election (or as required by the Agent
at the direction of the Required Lenders), deliver any notices of termination or
other communications to any Letter of Credit beneficiary or transferee, and take
any other action as necessary or appropriate, at any time and from time to time,
in order to cause the expiry date of such Letter of Credit to be a date not
later than the Tranche A Termination Date, in the case of a Tranche A Letter of
Credit, or in order to cause the expiry date of such Letter of Credit to be a
date not later than the Tranche B Termination Date, in the case of a Tranche B
Letter of Credit.
(f) This Agreement shall control in the event of any conflict with any
L/C-Related Document (other than any Letter of Credit).
(g) The Issuing Bank will also deliver to the Agent, concurrently or
promptly following its delivery of a Letter of Credit, or amendment to or
renewal of a Letter of Credit, to an advising bank or a beneficiary, a true and
complete copy of each such Letter of Credit or amendment to or renewal of a
Letter of Credit.
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3.03 Role of the Issuing Bank.
(a) Each Lender and the Company agree that, in paying any drawing under
a Letter of Credit, the Issuing Bank shall not have any responsibility to obtain
any document (other than any sight draft and certificates expressly required by
the Letter of Credit) or to ascertain or inquire as to the validity or accuracy
of any such document or the authority of the Person executing or delivering any
such document.
(b) No Agent-Related Person nor any of the respective correspondents,
participants or assignees of the Issuing Bank shall be liable to any Lender for:
(i) any action taken or omitted in connection herewith at the request or with
the approval of the Lenders (including the Required Lenders, as applicable);
(ii) any action taken or omitted in the absence of gross negligence or willful
misconduct; or (iii) the due execution, effectiveness, validity or
enforceability of any L/C-Related Document.
(c) The Company hereby assumes all risks of the acts or omissions of
any beneficiary or transferee with respect to its use of any Letter of Credit;
provided, however, that this assumption is not intended to, and shall not,
preclude the Company's pursuing such rights and remedies as it may have against
the beneficiary or transferee at law or under any other agreement. No
Agent-Related Person, nor any of the respective correspondents, participants or
assignees of the Issuing Bank, shall be liable or responsible for any of the
matters described in subsections 3.04(a) through (g); provided, however,
anything in such clauses to the contrary notwithstanding, that the Company may
have a claim against the Issuing Bank, and the Issuing Bank may be liable to the
Company, to the extent, but only to the extent, of any direct, as opposed to
consequential or exemplary, damages suffered by the Company which the Company
proves were caused by the Issuing Bank's willful misconduct or gross negligence
or the Issuing Bank's willful failure to pay under any Letter of Credit after
the presentation to it by the beneficiary of a sight draft and certificate(s)
strictly complying with the terms and conditions of a Letter of Credit. In
furtherance and not in limitation of the foregoing: (i) the Issuing Bank may
accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary; and (ii) the Issuing Bank shall not be responsible
for the validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign a Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason.
3.04 Obligations Absolute. The obligations of the Company under this
Agreement and any L/C-Related Document to reimburse the Issuing Bank for a
drawing under a Letter of Credit, and to repay any L/C Borrowing and any drawing
under a Letter of Credit converted into Revolving Loans, shall be unconditional
and irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement and each such other L/C-Related Document under all circumstances,
including the following:
(a) any lack of validity or enforceability of this Agreement or any
L/C-Related Document;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the obligations of the Company in respect of any
Letter of Credit or any other amendment or waiver of or any consent to departure
from all or any of the L/C-Related Documents;
(c) the existence of any claim, set-off, defense or other right that
the Company may have at any time against any beneficiary or any transferee of
any Letter of Credit (or any Person for whom any such beneficiary or any such
transferee may be acting), the Issuing Bank or any other Person, whether in
connection with this Agreement, the transactions contemplated hereby or by the
L/C-Related Documents or any unrelated transaction;
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(d) any draft, demand, certificate or other document presented under
any Letter of Credit proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in any
respect; or any loss or delay in the transmission or otherwise of any document
required in order to make a drawing under any Letter of Credit;
(e) any payment by the Issuing Bank under any Letter of Credit against
presentation of a draft or certificate that does not strictly comply with the
terms of any Letter of Credit; or any payment made by the Issuing Bank under any
Letter of Credit to any Person purporting to be a trustee in bankruptcy,
debtor-in-possession, assignee for the benefit of creditors, liquidator,
receiver or other representative of or successor to any beneficiary or any
transferee of any Letter of Credit, including any arising in connection with any
Insolvency Proceeding;
(f) any exchange, release or non-perfection of any collateral, or any
release or amendment or waiver of or consent to departure from any other
guarantee, for all or any of the obligations of the Company in respect of any
Letter of Credit; or
(g) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including any other circumstance that might
otherwise constitute a defense available to, or a discharge of, the Company or a
guarantor.
3.05 Cash Collateral Pledge. Upon the request of the Agent or the
Required Lenders, (a) if the Issuing Bank has honored any full or partial
drawing request on any Letter of Credit and such drawing has resulted in an L/C
Borrowing hereunder, (b) if, as of the Tranche A Termination Date, any Tranche A
Letters of Credit may for any reason remain outstanding and partially or wholly
undrawn, or (c) if, as of the Tranche B Termination Date, any Tranche B Letters
of Credit may for any reason remain outstanding and partially or wholly undrawn,
then, the Company shall immediately Cash Collateralize the L/C Obligations in an
amount equal to such L/C Obligations.
3.06 Letter of Credit Fees.
(a) The Company shall pay to the Agent for the account of each of the
Lenders a letter of credit fee with respect to the Tranche A Letters of Credit
equal to the applicable margin above LIBOR then in effect under Section 2.09 for
Tranche A Eurodollar Loans for each day such Tranche A Letters of Credit are
outstanding, computed on a quarterly basis in arrears on the last Business Day
of each calendar quarter and based upon Tranche A Letters of Credit outstanding
for that quarter as calculated by the Agent. The Company shall pay to the Agent
for the account of each of the Lenders a letter of credit fee with respect to
the Tranche B Letters of Credit equal to the applicable margin above LIBOR then
in effect under Section 2.09 for Tranche B Eurodollar Loans for each day such
Tranche B Letters of Credit are outstanding, computed on a quarterly basis in
arrears on the last Business Day of each calendar quarter and based upon Tranche
B Letters of Credit outstanding for that quarter as calculated by the Agent.
Such letter of credit fees shall be due and payable quarterly in arrears on the
last Business Day of each calendar quarter during which Letters of Credit are
outstanding, commencing on the first such quarterly date to occur after the
Closing Date, through the Tranche B Termination Date (or such later date upon
which the outstanding Letters of Credit shall expire), with the final payment to
be made on the Tranche A Termination Date (or such later expiration date), in
the case of Tranche A Letters of Credit and on the Tranche B Termination Date
(or such later expiration date), in the case of Tranche B Letters of Credit.
(b) The Company shall pay to the Issuing Bank a letter of credit
fronting fee for each Letter of Credit Issued by the Issuing Bank equal to
0.125% of the face amount (or increased face amount, as the
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case may be) of such Letter of Credit. Such Letter of Credit fronting fee shall
be due and payable on each date of Issuance of a Letter of Credit.
(c) The Company shall pay to the Issuing Bank from time to time on
demand the normal issuance, presentation, amendment and other processing fees,
and other standard costs and charges, of the Issuing Bank relating to standby
letters of credit as from time to time in effect.
3.07 International Standby Practices. The International Standby
Practices as published by the International Chamber of Commerce most recently at
the time of issuance of any Letter of Credit shall (unless otherwise expressly
provided in the Letters of Credit) apply to the Letters of Credit.
ARTICLE 4
FEES; PAYMENTS; TAXES
4.01 Fees.
(a) Utilization Fee. The Company shall pay to the Agent for the account
of each Lender a utilization fee ("Utilization Fee") on the actual daily
aggregate principal amount of such Lender's Committed Loans then outstanding
hereunder with respect to each day on which the principal amount of all
Committed Loans then outstanding is equal to or exceeds 33% of the aggregate
Commitments (each such day a "Utilization Fee Day"). Such fee shall be computed
with respect to each Utilization Fee Day at a rate equal to 0.125% per annum,
and shall accrue with respect to each Utilization Fee Day occurring on and after
the Closing Date to the later to occur of (A) the Tranche B Termination Date and
(B) the date on which all Loans and interest thereon are paid in full and the
Commitments hereunder terminated, and, to the extent accrued during such period,
shall be due and payable quarterly in arrears on the last Business Day of each
calendar quarter (commencing on September 30, 1999) through the later to occur
of (X) the Tranche B Termination Date and (Y) the date on which all Loans, L/C
Obligations and interest thereon are paid in full and the Commitments hereunder
terminated, with the final payment to be made on the latest to occur of such
dates.
(b) Facility Fee.
(i) The Company agrees to pay to the Agent for the account of each
Lender, a facility fee from the Closing Date until the Tranche B
Termination Date at a rate per annum times the Tranche A Commitment and
the Tranche B Commitment of such Lender (regardless of utilization
thereof) as follows:
Debt Rating Facility Fee
----------- ------------
Moody's S&P Tranche A / Tranche B
------- --- ---------------------
Baal or higher or BBB+ or higher 0.100% / 0.125%
--
Baa2 or BBB 0.125% / 0.150%
--
Baa3 or BBB- 0.150% / 0.175%
--
Bal or BB+ 0.175% / 0.200%
--
Ba2 or lower and BB or lower 0.225% / 0.250%
---
provided, however, that if at any time no Debt Rating is available, the
facility fee shall be 0.225% per annum for Tranche A Commitments and
0.250% per annum for Tranche B Commitments. In
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the event of a split rating, the higher rating will apply; if the Debt
Ratings are split by more than one level, one level above the lower
rating will apply.
(ii) The facility fee shall be payable (A) quarterly in arrears on
the last Business Day of each calendar quarter, commencing with the
calendar quarter ending on September 30, 1999, (B) on any date of
reduction or termination of the Commitments and (C) on the Tranche B
Termination Date.
(c) Agency Fee. The Company agrees to pay to the Agent for its account
an agency fee in such amounts and at such times as are set forth in the Fee
Letter.
4.02 Computation of Interest, Fees.
(a) All computations of interest payable in respect of Reference Rate
Loans shall be made on the basis of a year of 365 days or 366 days, as the case
may be, and actual days elapsed. All computations of interest in respect of
Eurodollar Loans and Bid Loans and all computations of fees under this Agreement
shall be made on the basis of a year of 360 days and actual days elapsed.
Interest and fees shall accrue during each period during which interest or such
fees are computed from the first day thereof to the last day thereof.
(b) Each determination of an interest rate by the Agent pursuant to any
provision of this Agreement shall be conclusive and binding on the Company and
the Lenders in the absence of manifest error. The Agent, upon determining LIBOR
for any Interest Period, shall promptly notify the Company and the Lenders
thereof.
4.03 Payments by the Company.
(a) The Company shall make each payment hereunder not later than 1:00
p.m. (New York City time) on the day when due (i) in respect of any Committed
Loan, to the Agent or (ii) in respect of any Bid Loan, to the Lender which made
such Bid Loan, without defense, setoff or counterclaim, in dollars and in
immediately available funds to such account in the continental United States of
America as the Agent shall specify from time to time by notice to the Company
or, in the case of a Bid Loan made by a Lender, to the Lending Office of such
Lender. The Agent will promptly after receiving any payment in respect of any
Committed Loan from the Company cause to be distributed like funds to the
Lenders ratably based on their Commitment Percentages (other than amounts
payable to any Lender or any amounts payable pursuant to Section 3.05, 4.02,
4.03, 4.04, 4.05 or 4.06) for the account of their respective Lending Offices.
Any payment which is received by the Agent later than 1:00 p.m. (New York City
time), as confirmed by Federal Reserve wire number, shall be deemed to have been
received on the immediately succeeding Business Day.
(b) Whenever any payment of a Committed Loan (and, unless otherwise
stated in the relevant Competitive Bid Request, a Bid Loan) shall be stated to
be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or fees, as the case may be;
provided, however, that if such extension would cause payment of principal of or
interest on Eurodollar Loans to be made in the next calendar month, such payment
shall be made on the immediately preceding Business Day.
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(c) Unless the Agent shall have received notice from the Company prior
to the date on which any payment is due to the Lenders hereunder that the
Company will not make such payment in full, the Agent may assume that the
Company has made such payment in full to the Agent on such date, and the Agent
may, in reliance upon such assumption, cause to be distributed to each Lender on
such due date an amount equal to the amount then due such Lender. If and to the
extent the Company shall not have so made such payment in full to the Agent,
each Lender shall repay to the Agent forthwith on demand the excess of the
amount distributed to such Lender over the amount, if any, paid by the Company
for the account of such Lender, together with interest thereon at the Federal
Funds Rate, for each day from the date such amount is distributed to such Lender
until the date such Lender repays such amount to the Agent; provided, however,
that if any Lender shall fail to repay such amount within three Business Days
after demand therefor, such Lender shall, from and after such third Business Day
until payment is made to the Agent, pay interest thereon at a rate per annum
equal to the sum of the Adjusted Reference Rate plus 1%.
4.04 Payments by the Lenders.
(a) Not later than 12:00 noon (New York City time) on the date of each
proposed Committed Borrowing, each Lender shall make available to the Agent to
such account as the Agent shall specify from time to time in immediately
available funds for the account of the Company, the amount of such Lender's
Commitment Percentage of such Borrowing.
(b) Unless the Agent shall have received notice from a Lender at least
one Business Day prior to the date of any proposed Committed Borrowing that such
Lender will not make available to the Agent for the account of the Company, the
amount of such Lender's Commitment Percentage of such Borrowing, the Agent may
assume that such Lender has made such amount available to the Agent on the date
of such Borrowing, and the Agent may, in reliance upon such assumption, make
available to the Company on such date a corresponding amount. If and to the
extent any Lender shall not have made such full amount available to the Agent,
and the Agent in such circumstances makes available to the Company such amount,
such Lender shall, within two Business Days following the date of such
Borrowing, make such amount available to the Agent, together with interest
thereon for each day from and including the date of such Borrowing, at a rate
per annum equal to the Federal Funds Rate. If such amount is so made available,
such payment to the Agent shall constitute such Lender's Committed Loan on the
date of such Borrowing for all purposes of this Agreement. If such amount is not
made available to the Agent within two Business Days following the date of such
Borrowing, the Agent shall notify the Company of such failure to fund, and, on
the third Business Day following the date of such Borrowing, the Company shall
pay to the Agent such amount, together with interest thereon for each day
elapsed since the date of such Borrowing, at a rate per annum equal to the
interest rate applicable at the time to the Loans comprising such Borrowing.
Nothing contained in this Section 4.04(b) shall relieve any Lender which has
failed to make available its Commitment Percentage of any Committed Borrowing
hereunder from its obligation to do so in accordance with the terms hereof.
(c) The failure of any Lender to make any Committed Loan on the date of
any Committed Borrowing shall not relieve any other Lender of its obligation, if
any, hereunder to make a Committed Loan on the date of such Borrowing pursuant
to the provisions contained herein, but no Lender shall be responsible for the
failure of any other Lender to make the Loan to be made by such other Lender on
the date of any Committed Borrowing.
(d) If the Company accepts one or more of the offers made by any Lender
or Lenders pursuant to Section 2.04(c)(ii), each such Lender which is to make a
Bid Loan as part of any Bid
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Borrowing shall before 12:00 noon (New York City time) on the date of such
proposed Bid Borrowing (or before 2:00 p.m. (New York City time) on the date of
such Bid Borrowing in the case of a Fixed Rate Bid Loan) make available to the
Company at such Lender's Lending Office such Lender's portion of such Bid
Borrowing in immediately available funds. The Company will promptly notify the
Agent of the total amount of Bid Loans made in connection with such Bid
Borrowing, each date on which all or any part of such Bid Loans shall mature and
the principal amount which shall mature on each such date, and the Agent will,
in turn, promptly notify each Lender of the amount of such Bid Borrowing and the
relevant maturity date or dates of the Bid Loans comprised in such Bid
Borrowing.
4.05 Taxes.
(a) Subject to Section 4.05(g), any and all payments by the Company to
the Agent for its account and for the account of any Lender under this Agreement
(other than on account of a Bid Loan, except to the extent otherwise specified
as being applicable to any such Bid Loan) shall be made free and clear of, and
without deduction or withholding for, any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto incurred in connection with any Borrowing pursuant to this
Agreement, excluding (i) such taxes (including income taxes or franchise taxes
or branch profit taxes) as are imposed on or measured by such Lender's or the
Agent's, as the case may be, net income and (ii) such taxes as are imposed by a
jurisdiction other than the United States of America or any political
subdivision thereof and that would not have been imposed but for the existence
of a connection between such Lender or the Agent and the jurisdiction imposing
such taxes (other than a connection arising principally by reason of this
Agreement) (all such non-excluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as "Taxes").
(b) In addition, the Company agrees to pay any present or future stamp
or documentary taxes or any other sales, excise or property taxes, charges or
similar levies which arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement (other than on account of a Bid Loan, except to the extent otherwise
specified as being applicable to any such Bid Loan) or any other Loan Document
(hereinafter referred to as "Other Taxes").
(c) Subject to Section 4.05(g), the Company agrees to indemnify and
hold harmless each Lender and the Agent for the full amount of Taxes or Other
Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 4.05) paid by such Lender or the Agent, as the case
may be, and any liability (including penalties, interest, additions to tax and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted; provided, however, that each
Lender and the Agent agree to contest in good faith in cooperation with the
Company any Taxes or Other Taxes that such Lender or the Agent, as the case may
be, in consultation with the Company has determined have been incorrectly
asserted. This indemnification shall be made within 30 days from the date such
Lender or the Agent, as the case may be, makes written demand therefor.
(d) If the Company shall be required by law to deduct or withhold any
Taxes or Other Taxes from or in respect of any sum payable hereunder to any
Lender or the Agent, then, subject to Section 4.05(g),
(i) the sum payable shall be increased as may be necessary so that
after making all required deductions (including deductions applicable
to additional sums payable under this Section 4.05), such Lender or the
Agent, as the case may be, receives an amount equal to the sum it would
have received had no such deductions been made;
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(ii) the Company shall make such deductions; and
(iii) the Company shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with
applicable law.
(e) Within 30 days after the date of any payment by the Company of
Taxes or Other Taxes under this Section 4.05, the Company will furnish to the
Agent, for the account of each Lender receiving a payment from which Taxes or
Other Taxes were deducted, the original or a certified copy of a receipt
evidencing payment thereof, or other evidence of payment reasonably satisfactory
to the Agent.
(f) Each Lender that is other than a United States Person as defined in
the Code hereby agrees that:
(i) it shall, no later than the Closing Date (or, in the case of a
Lender which becomes a party hereto pursuant to Section 12.08 after the
Closing Date, the date upon which such Lender becomes a party hereto)
deliver to the Agent (two (2) originals) and to the Company (one (1)
original):
(A) if its Lending Office is located in the United
States of America, accurate and complete signed originals of
Internal Revenue Service Form 4224 or any successor thereto
("Form 4224") and Internal Revenue Service Form W-9 or any
successor thereto ("Form W-9"), and/or
(B) if its Lending Office is located outside the
United States of America, accurate and complete signed
originals of Internal Revenue Service Form 1001 or any
successor thereto ("Form 1001") and Internal Revenue Service
Form W-8 or any successor thereto ("Form W-8");
in each case indicating that such Lender is on the date of delivery
thereof entitled to receive payments of principal, interest and fees
for the account of such Lending Office or Offices under this Agreement
free from withholding of United States Federal income tax;
(ii) if at any time such Lender changes its Lending Office or
Offices or selects an additional Lending Office, it shall, at the same
time or reasonably promptly thereafter but only to the extent the forms
previously delivered by it hereunder are no longer effective, deliver
to the Agent (two originals) and to the Company (one original) in
replacement for the forms previously delivered by it hereunder:
(A) if such changed or additional Lending Office is located
in the United States of America, accurate and complete signed
originals of Form 4224 and Form W-9; or
(B) otherwise, accurate and complete signed originals of Form
1001 and Form W-8,
in each case indicating that such Lender is on the date of delivery
thereof entitled to receive payments of principal, interest and fees
for the account of such changed or additional Lending Office under this
Agreement free from withholding of United States Federal income tax;
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(iii) it shall, before or promptly after the occurrence of any
event (including the passing of time and, as provided above, any event
mentioned in clause (ii)) requiring a change in the most recent Form
4224, Form W-9, Form 1001 or Form W-8 previously delivered by such
Lender and if no change in law shall have occurred since the date of
delivery of such most recent form that would make the delivery of
replacement forms hereunder unlawful, deliver to the Agent (two
originals) and to the Company (one original) accurate and complete
signed originals of Form 4224 and Form W-9 or Form 1001 and Form W-8
(or any successor forms) in replacement for the forms previously
delivered by such Lender; and
(iv) it shall, promptly upon the request of the Company to that
effect, deliver to the Agent and the Company such other accurate and
complete forms or similar documentation as may be required from time to
time by any applicable law, treaty, rule or regulation in order to
establish such Lender's tax status for withholding purposes or may
otherwise be appropriate to eliminate or minimize any Taxes on payments
under this Agreement.
(g) The Company shall not be required to pay any amounts pursuant to
Section 4.05(a), 4.05(b), 4.05(d), or 4.05(i) to any Lender for the account of
any Lending Office of such Lender in respect of any sum payable hereunder:
(i) if the obligation to pay such additional amounts would not
have arisen but for a failure by such Lender to comply with its
obligations under Section 4.05(f) in respect of such Lending Office;
(ii) if such Lender shall have delivered to the Agent a Form 4224
and a Form W-9 in respect of such Lending Office pursuant to Section
4.05(f)(i)(A), 4.05(f)(ii)(A) or 4.05(f)(iii) and such Lender shall not
be entitled to exemption from deduction or withholding of United States
Federal income tax in respect of the payment of such sum by the Company
hereunder for the account of such Lending Office for any reason other
than a change in United States law or regulations or in the official
interpretation of such law or regulations by any Governmental Authority
charged with the interpretation or administration thereof (whether or
not having the force of law) after the date of delivery of such Form
4224 and Form W-9; provided, however, that if, notwithstanding such
change in law, a Lender would be legally able to provide such other
forms or information as would reduce or eliminate United States
withholding taxes applicable to payments made hereunder, such Lender
shall, if requested by the Company, timely provide such forms or other
information to the Company, and the Company shall not be required to
pay any amounts pursuant to Section 4.05(a), 4.05(c) or 4.05(d) to the
extent such amount would not have been owed but for a failure of such
Lender to comply with its obligations under this proviso; or
(iii) if such Lender shall have delivered to the Company a Form
1001 and a Form W-8 in respect of such Lending Office pursuant to
Section 4.05(f)(i)(B), 4.05(f)(ii)(B) or 4.05(f)(iii) and such Lender
shall not be entitled to exemption from deduction or withholding of
United States Federal income tax in respect of the payment of such sum
by the Company hereunder for the account of such Lending Office for any
reason other than a change in United States law or regulations or any
applicable tax treaty or regulations or in the official interpretation
of any such law, treaty or regulations by any Governmental Authority
charged with the interpretation or administration thereof (whether or
not having the force of law) after the date of delivery of such Form
1001 and Form W-8; provided, however, that if, notwithstanding such
change in law, a Lender would be legally able to provide such other
forms or information as would reduce or eliminate United States
withholding taxes applicable to payments made
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hereunder, such Lender shall, if requested by the Company, timely
provide such forms or other information to the Company, and the Company
shall not be required to pay any amounts pursuant to Section 4.05(a),
4.05(c) or 4.05(d) to the extent such amount would not have been owed
but for a failure of such Lender to comply with its obligations under
this proviso.
(h) Each Lender shall use reasonable efforts to avoid or minimize any
amounts which might otherwise be payable pursuant to this Section 4.05;
provided, however, that such efforts shall not include the taking of any actions
by a Lender that would result in any tax, cost or other expense to such Lender
(other than a tax, cost or expense for which such Lender shall have been
reimbursed or indemnified by the Company pursuant to this Agreement or
otherwise) or any action which would in the reasonable opinion of such Lender
have an adverse effect upon its financial condition, operations, business or
properties.
(i) Each Lender agrees to indemnify the Agent and hold the Agent
harmless for the full amount of any and all present or future Taxes, Other Taxes
and related liabilities (including penalties, interest, additions to tax and
expenses, and any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable to Agent under this Section 4.05(i)) which are imposed on or with
respect to principal, interest or fees payable to such Lender hereunder and
which are not paid by the Company pursuant to this Section 4.05, whether or not
such Taxes, Other Taxes or related liabilities were correctly or legally
asserted. This indemnification shall be made within 30 days from the date the
Agent makes written demand therefor.
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4.06 Sharing of Payments, Etc. If, other than as provided in Section
3.05, 4.02, 4.03, 4.04, 4.05 or 4.06, any Lender shall obtain any payment
(whether voluntary, involuntary, through the exercise of any right of set-off or
otherwise) on account of any Committed Loan made by it or, after the occurrence
and during the continuation of an Event of Default pursuant to Section 10.01(a),
in respect of any Obligation owing to it (including with respect to any Bid
Loan), in excess of its Commitment Percentage of payments on account of the
Committed Loans or, after the occurrence and during the continuation of an Event
of Default pursuant to Section 10.01(a), in excess of its pro rata share of all
Obligations, such Lender shall forthwith purchase from the other Lenders such
participations in the Committed Loans made by them or, after the occurrence and
during the continuation of an Event of Default pursuant to Section 10.01(a), in
all Obligations owing to them, as shall be necessary to cause such purchasing
Lender to share the excess payment ratably with each of the other Lenders
according to their Commitment Percentages or, after the occurrence and during
the continuation of an Event of Default pursuant to Section 10.01(a), their pro
rata shares of all Obligations then owing to them; provided, however, that if
all or any portion of such excess payment is thereafter recovered from such
purchasing Lender, such purchase by such Lender from each other Lender shall be
rescinded and each other Lender shall repay to the purchasing Lender the
purchase price to the extent of such recovery together with an amount equal to
such paying Lender's pro rata share (according to the proportion of (a) the
amount of such paying Lender's required repayment to the purchasing Lender to
(b) the total amount so recovered from the purchasing Lender) of any interest or
other amount paid or payable by the purchasing Lender in respect of the total
amount so recovered. The Company agrees that any Lender so purchasing a
participation from another Lender pursuant to the provisions of this Section
4.06 may, to the fullest extent permitted by law, exercise all its rights of
payment (including the right of set-off) with respect to such participation as
fully as if such Lender were the direct creditor of the Company in the amount of
such participation. If under any applicable bankruptcy, insolvency or other
similar law, any Lender receives a secured claim in lieu of a setoff to which
this Section 4.06 applies, such Lender shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent with
the rights of the Lenders entitled under this Section 4.06 to share in the
benefits of any recovery on such secured claim.
ARTICLE 5
CHANGES IN CIRCUMSTANCES; ETC.
5.01 Eurodollar Rate Protection. If with respect to any Interest Period
for Eurodollar Loans, either (a) the Agent or the Required Lenders determine
that for any reason adequate and reasonable means do not exist for ascertaining
LIBOR for such Interest Period; or (b) by the first day of such Interest Period,
the Required Lenders notify the Agent that LIBOR for such Interest Period will
not adequately reflect the cost to the Required Lenders of making such
Eurodollar Loans or funding or maintaining their respective Eurodollar Loans for
such Interest Period, the Agent shall forthwith so notify the Company and the
Lenders, whereupon the obligations of the Lenders to make or continue Loans as
Eurodollar Loans or to convert Reference Rate Loans into Eurodollar Loans shall
be suspended until the Agent shall notify the Company and the Lenders that the
circumstances causing such suspension no longer exist and any then outstanding
Eurodollar Loans shall at the end of the then current Interest Period for such
Loans be converted into Reference Rate Loans.
5.02 Additional Interest on Eurodollar Loans. The Company shall pay to
each Lender, on demand of such Lender, as long as such Lender shall be required
under regulations of the Federal Reserve Board to maintain reserves with respect
to liabilities or assets consisting of or including Eurocurrency Liabilities,
additional interest on the unpaid principal amount of each Eurodollar Loan of
such Lender
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from the date such Eurodollar Loan is made until such principal amount is paid
in full, at a rate per annum equal at all times to the remainder obtained by
subtracting (a) LIBOR for the Interest Period for such Eurodollar Loan from (b)
the rate obtained by dividing such LIBOR by a percentage equal to 100% minus the
Eurodollar Reserve Percentage of such Lender for such Interest Period, payable
on each Interest Payment Date for such Eurodollar Loan.
5.03 Increased Costs. If, due to either (a) the introduction of or any
change (other than any change by way of imposition of or increase in reserve
requirements covered by Section 5.02) in or in the interpretation of any law or
regulation after the date hereof (except to the extent such introduction, change
or interpretation affects Taxes or Other Taxes) or (b) the compliance with any
guideline or request issued after the date hereof (except to the extent such
guideline or request affects Taxes or Other Taxes) from any central bank or
other Governmental Authority (whether or not having the force of law), there
shall be any increase in the cost to any Lender of agreeing to make or making,
funding or maintaining any Eurodollar Loans or participating in Letters of
Credit or, in the case of the Issuing Bank, any increase in the cost to the
Issuing Bank of agreeing to issue, issuing or maintaining any Letter of Credit
or of agreeing to make or making, funding or maintaining any unpaid drawing
under any Letter of Credit, then the Company shall, subject to Section 5.08(b),
be liable for, and shall from time to time, upon demand therefor by such Lender
to the Company through the Agent, pay to the Agent for the account of such
Lender, additional amounts as are sufficient to compensate such Lender for such
increased costs. For purposes of this Section 5.03, the term "Taxes" shall have
the meaning specified in Section 4.05(a) without regard to the exclusions set
forth in Section 4.05(a).
5.04 Illegality. Notwithstanding any other provision of this Agreement,
if the introduction of any Requirement of Law, or in the interpretation or
administration of any Requirement of Law shall, after the date hereof, make it
unlawful, or any central bank or other Governmental Authority shall assert that
it is unlawful, for any Lender or its applicable Lending Office to make or
continue Committed Loans as Eurodollar Loans or to convert Reference Rate Loans
into Eurodollar Loans, then, on notice thereof and demand therefor by such
Lender to the Company through the Agent, (a) the obligation of such Lender to
make or to continue Committed Loans as Eurodollar Loans or to convert Reference
Rate Loans into Eurodollar Loans shall terminate and (b) the Company shall
forthwith prepay in full all Eurodollar Loans of such Lender then outstanding,
together with interest accrued thereon, either on the last day of the then
current Interest Period applicable to each such Eurodollar Loan if such Lender
may lawfully continue to maintain such Eurodollar Loan to such day, or
immediately if such Lender may not lawfully continue to maintain such Eurodollar
Loan to such day, unless the Company, on or prior to the date on which it would
otherwise be required to prepay such Eurodollar Loan, converts all Eurodollar
Loans of all Lenders then outstanding into Reference Rate Loans.
5.05 Capital Adequacy. In the event that any Lender shall determine
that the compliance with any law, rule or regulation regarding capital adequacy,
or any change therein or in the interpretation or application thereof or
compliance by such Lender (or its Lending Office) or any corporation controlling
such Lender with any request or directive regarding capital adequacy (whether or
not having the force of law) from any central bank or other Governmental
Authority, affects or would affect the amount of capital required or expected to
be maintained by such Lender or any corporation controlling such Lender and such
Lender (taking into consideration such Lender's or such corporation's policies
with respect to capital adequacy and such Lender's or such corporation's desired
return on capital) determines that the amount of such capital is increased as a
consequence of such Lender's obligation under this Agreement, then the Company
shall, subject to Section 5.08(b), be liable for and shall from time to time,
upon demand therefor by such Lender through the Agent, pay to the Agent for the
account of such Lender such additional amounts as are sufficient to compensate
such Lender for such increase.
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5.06 Funding Losses.
(a) If the Company makes any payment or prepayment of principal with
respect to any Eurodollar Loan (including payments made after any acceleration
thereof) or converts any Loan from a Eurodollar Loan to a Reference Rate Loan on
any day other than the last day of an Interest Period applicable thereto, the
Company shall pay to each Lender, upon demand therefor by such Lender, the
amount (if any) by which (i) the present value of the additional interest which
would have been payable on the amount so received had it not been received until
the last day of such Interest Period exceeds (ii) the present value of the
interest which would have been recoverable by such Lender by placing such amount
so received on deposit in the London interbank market for a period starting on
the date on which it was so received and ending on the last day of such Interest
Period. For purposes of determining present value under this Section 5.06(a),
interest amounts shall be discounted at a rate equal to the sum of (A) LIBOR
determined two Business Days before the date on which such principal amount is
received for an amount substantially equal to the amount received and for a
period commencing on the date of such receipt and ending on the last day of the
relevant Interest Period, plus (B) the percentage above LIBOR payable in respect
of such Eurodollar Loan pursuant to Section 2.09(a)(ii).
(b) If the Company fails to prepay, borrow, convert or continue any
Eurodollar Loan after a notice of prepayment, borrowing, conversion or
continuation has been given (or is deemed to have been given) to any Lender, the
Company shall reimburse each Lender, upon demand therefor by such Lender, for
any resulting loss and expense incurred by it, including any loss incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
such Lender from third parties to fund any Eurodollar Loan.
(c) If for any reason any Lender receives all or part of the principal
amount of a Bid Loan owed to it prior to the scheduled maturity date thereof,
the Company shall, on demand by such Lender, pay such Lender the amount (if any)
by which (i) the present value of the additional interest which would have been
payable on the amount so received had it not been received until such maturity
date exceeds (ii) the present value of the interest which would have been
recoverable by such Lender by placing such amount so received on deposit in the
London interbank market for a period starting on the date on which it was so
received and ending on such maturity date. For purposes of determining present
value under this Section 5.06(c), interest amounts shall be discounted at a rate
equal to the sum of (A) LIBOR determined two Business Days before the date on
which such principal amount is received for an amount substantially equal to the
amount received and for a period commencing on the date of such receipt and
ending on such maturity date, plus (B) the percentage above LIBOR payable in
respect of Eurodollar Loans constituting Tranche A Loans pursuant to Section
2.09(a)(ii).
5.07 Funding; Certificates of Lenders.
(a) Each Lender may fulfill its obligation to make, continue or convert
Loans into Eurodollar Loans by causing one of its foreign branches or Affiliates
(or an international banking facility created by such Lender) to make or
maintain such Eurodollar Loans; provided, however, that such Eurodollar Loans
shall in such event be deemed to have been made and to be held by such Lender
and the obligation of the Company to repay such Eurodollar Loans shall be to
such Lender for the account of such foreign branch, Affiliate or international
banking facility. In addition, the Company hereby consents and agrees that, for
purposes of any determination to be made pursuant to Section 5.01, 5.02, 5.03,
5.04 or 5.06, it shall be conclusively assumed that each Lender elected to fund
all Eurodollar Loans by purchasing dollar deposits in the interbank eurodollar
market for its Eurodollar Lending Office.
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(b) Any Lender claiming reimbursement or compensation pursuant to
Sections 4.05, 5.02, 5.03, 5.05 and/or 5.06 shall deliver to the Company through
the Agent a certificate setting forth in reasonable detail the basis for
computing the amount payable to such Lender hereunder and such certificate shall
be conclusive and binding on the Company in the absence of manifest error. The
Company shall pay to any Lender claiming compensation or reimbursement from the
Company pursuant to Sections 5.02, 5.03, 5.05 or 5.06 the amount requested by
such Lender no later than five Business Days after such demand.
5.08 Change of Lending Office; Limitation on Increased Costs.
(a) Each Lender agrees that upon the occurrence of any event giving
rise to the operation of Section 4.05(c) or (d) or Sections 5.02, 5.03, 5.04 or
5.05 with respect to such Lender, it will use commercially reasonable efforts
(consistent with its internal policy and legal and regulatory restrictions) to
minimize the imposition of any costs and expenses pursuant to such Sections and
to designate a different Lending Office for any Loans affected by such event
with the object of avoiding the consequence of the event giving rise to the
operation of such Section. Nothing in this Section 5.08 shall affect or postpone
any of the obligations of the Company or the right of any Lender provided in
Section 4.05(c) or (d) or Sections 5.02, 5.03, 5.04 or 5.05.
(b) Notwithstanding the provisions of Sections 4.05(c), 4.05(d), 5.02,
5.03 and 5.05, the Company shall only be obligated to compensate any Lender for
any amount arising or occurring during (i) any time or period commencing (A) in
the case of Section 4.05(c) or (d), not more than six months and (B) in the case
of Sections 5.02, 5.03 or 5.05, not more than three months, prior to the date on
which such Lender notifies the Agent and the Company that such Lender proposes
to demand such compensation and (ii) any time or period during which, because of
the unannounced retroactive application of any statute, regulation or other
basis, such Lender could not have known that such amount might arise or accrue.
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5.09 Replacement of Lenders. The Company may from time to time for
reasonable cause, as determined by the management of the Company, including
invocation of any provision of this Article 5 by any Lender, designate one or
more banks (any such bank so designated being herein called a "Replacement
Lender") willing, in its or their sole discretion, to purchase all of the
Committed Loans of any one or more Lenders and each such Lender's rights
hereunder (other than any such rights with respect to Bid Loans), without
recourse to or warranty by, or expense to, such Lender for a purchase price
equal to the outstanding principal amount of the Committed Loans payable to such
Lender plus any accrued but unpaid interest on such Committed Loans and accrued
but unpaid Utilization Fees and facility fees in respect of such Lender's
Commitment, if any, and any other amounts payable to such Lender under this
Agreement or any other Loan Document (other than with respect to Bid Loans),
including any amount payable pursuant to Section 5.06 as though such Lender's
Eurodollar Loans were being prepaid on the date of such purchase, and to assume
all the obligations of such Lender hereunder (other than with respect to Bid
Loans), and, upon such purchase, such Lender shall no longer be a party hereto
or have any rights hereunder (except those that pertain to its Bid Loans and
those that survive full payment hereunder) and shall be relieved from all
obligations to the Company hereunder, and the Replacement Lender shall succeed
to the rights and obligations of such Lender hereunder (other than with respect
to Bid Loans).
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders and the Agent to enter into this
Agreement and to induce the Lenders to extend their Commitments and to make
Loans, the Company represents and warrants to the Lenders and the Agent as
follows:
6.01 Corporate Existence; Compliance with Law. The Company and each
Restricted Subsidiary:
(a) is a corporation duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation;
(b) is duly qualified as a foreign corporation and in good standing
under the laws of each jurisdiction in which the character of the properties
owned or held under lease by it or the nature of the business transacted by it
requires such qualification except where the failure to be so qualified is not
likely to have a Material Adverse Effect;
(c) has all requisite corporate power and authority to own, pledge,
mortgage, hold under lease and operate its properties and to conduct its
business as now or currently proposed to be conducted; and
(d) is in compliance with all Requirements of Law applicable to it and
its business except for such non-compliance which is not likely to have a
Material Adverse Effect.
6.02 Corporate Power; Authorization. The execution, delivery and
performance by each Loan Party of the Loan Documents to which such Loan Party is
a party:
(a) are within the respective corporate powers of such Loan Party;
(b) have been, or prior to such execution will have been, duly
authorized by all necessary corporate action, including the consent of
shareholders where required;
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(c) do not:
(i) contravene the articles or certificate of incorporation or
by-laws of such Loan Party;
(ii) violate any other Requirement of Law;
(iii) conflict with or result in the breach of, or constitute a
default under, any Contractual Obligation of such Loan Party, except
for such conflicts, breaches or defaults which are not likely to have a
Material Adverse Effect and which do not subject any Lender or the
Agent to any criminal liability or any material civil liability; or
(iv) result in the creation or imposition of any Lien upon any of
the property of any Loan Party; and
(d) do not require the consent of, authorization by, approval of or
notice to, or filing or registration with, any Governmental Authority or any
other Person other than (i) as of the Closing Date, those which have been
obtained, made or given and which are fully disclosed on Schedule 6.02(d) and
(ii) those which are not required to be obtained, made or given as of the
Closing Date but which will be obtained, made or given as and when required.
6.03 Enforceable Obligations. This Agreement and each other Loan
Document to which any Loan Party is a party have been duly executed and
delivered by such Loan Party. This Agreement is, and each other Loan Document
when delivered hereunder will be, legal, valid and binding obligations of each
Loan Party, a party thereto, enforceable against each such Loan Party in
accordance with their respective terms except as such enforcement may be limited
by applicable bankruptcy, insolvency, reorganization or other similar laws
relating to or limiting creditors' rights generally.
6.04 Taxes. As of the Closing Date, the Company and each Restricted
Subsidiary have filed all federal, state, local and foreign tax returns which
are required to have been filed in any jurisdiction and have paid all taxes
shown to be due thereon or otherwise assessed, to the extent the same have
become due and payable and before they have become delinquent, except for any
taxes and assessments the amount, applicability or validity of which is
currently being contested in good faith by appropriate proceedings and with
respect to which the Company has set aside on its books reserves (adequate in
accordance with, and segregated to the extent required by, GAAP) and the
non-filing or non-payment of which is not likely to have a Material Adverse
Effect.
6.05 Financial Matters.
(a) The consolidated balance sheet of the Company and its Subsidiaries
as of the last day of the fiscal year ended on December 31, 1998, and the
related consolidated statements of income and cash flows of the Company and its
Subsidiaries for such fiscal year, all with reports thereon by Arthur Andersen &
Co., independent public accountants, copies of which have been delivered to the
Agent and each Lender prior to the execution of this Agreement, fairly present
the consolidated financial position of the Company and its Subsidiaries as of
the date of said balance sheet and the consolidated results of their operations
for the period covered by said statements of income and cash flows, and have
been prepared in accordance with GAAP consistently applied in all material
respects by the Company and its Subsidiaries throughout the period involved,
except as set forth in the notes thereto. There are no material liabilities,
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contingent or otherwise, of the Company or any Subsidiary not reflected in the
consolidated balance sheet as of December 31, 1998 or in the notes thereto which
are required to be disclosed therein.
(b) Since December 31, 1998, there has been no Material Adverse Effect
and no development which is likely to have a Material Adverse Effect, except as
reflected in the Company's periodic reports filed with the Securities and
Exchange Commission prior to the Closing Date.
(c) There is no material obligation, contingent liability or liability
for taxes, long-term leases or unusual forward or long-term commitments which is
not reflected in the December 31, 1998 consolidated financial statements of the
Company and its Subsidiaries or in the notes thereto which are required by GAAP
to be disclosed therein and no liability reflected in such notes is likely to
have a Material Adverse Effect.
6.06 Litigation. As of the Closing Date, there are no pending or, to
the knowledge of the Company, threatened, actions or proceedings affecting the
Company or any Restricted Subsidiary before any court or other Governmental
Authority or any arbitrator that are likely to have a Material Adverse Effect.
6.07 Subsidiaries.
(a) Set forth on Schedule 6.07 is a complete and correct list of all
Restricted Subsidiaries and Unrestricted Subsidiaries of the Company as of the
Closing Date, showing, as to each such Subsidiary, the correct name thereof, the
jurisdiction of its incorporation and the percentage of shares of each class of
its securities outstanding owned by the Company and each other Subsidiary of the
Company.
(b) (i) All of the outstanding shares of securities of each of the
Subsidiaries of the Company listed on Schedule 6.07 have been validly issued,
are fully paid and nonassessable and are owned by the Company or another
Subsidiary of the Company, free and clear of any Lien, except as otherwise
permitted hereunder, and (ii) no Subsidiary of the Company owns any shares of
securities of the Company.
6.08 Liens. As of the Closing Date, there are no Liens of any nature
whatsoever on any properties owned by the Company or any Restricted Subsidiary
other than Permitted Liens.
6.09 No Burdensome Restrictions; No Defaults.
(a) As of the Closing Date, neither the Company nor any Restricted
Subsidiary is a party to any Contractual Obligation the performance of which is
likely to have a Material Adverse Effect.
(b) As of the Closing Date, no provision or provisions of any
applicable Requirement of Law has or is likely to have a Material Adverse
Effect.
(c) Neither the Company nor any Restricted Subsidiary is in default
under or with respect to any Contractual Obligation which default is likely to
have a Material Adverse Effect.
(d) No Default or Event of Default has occurred and is continuing.
6.10 Investment Company Act; Public Utility Holding Company Act. No
Loan Party is an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company", as such
terms are defined in the Investment Company Act of 1940, as amended,
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or a "holding company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act of 1935,
as amended. The making of the Loans by the Lenders, the application of the
proceeds and repayment thereof by the Company and the consummation of the
transactions contemplated by the Loan Documents will not violate any provision
applicable to any Loan Party of (a) the Investment Company Act of 1940, as
amended, or (b) any rule, regulation or order issued by the Securities and
Exchange Commission thereunder.
6.11 Margin Regulations. No part of the proceeds of any Loan will be
used in violation of Regulation T, U, or X of the Federal Reserve Board. After
giving effect to the application of the proceeds of the Loans (including the
Loans to be made on the Closing Date) less than twenty-five percent (25%) of the
assets of the Company, individually and on a consolidated basis with its
Subsidiaries, consists of margin stock. The Company is not engaged principally,
or as one of its important activities, in the business of extending credit for
the purpose of purchasing or carrying margin stock. Terms for which meanings are
provided in Regulation U of the Federal Reserve Board or any regulations
substituted therefor, as from time to time in effect, are used in this Section
6.11 with such meanings.
6.12 Environmental Matters. Except as set forth on Schedule 6.12:
(a) all facilities and property (including underlying groundwater)
presently owned or leased by the Company or any of its Subsidiaries have been,
and continue to be, owned or leased by the Company and its Subsidiaries in
material compliance with all Environmental Laws, except for such non-compliance
as is not likely to have a Material Adverse Effect;
(b) there are no pending or threatened
(i) claims, complaints, notices or requests for information
received by the Company or any of its Subsidiaries with respect to any
alleged violation of any Environmental Law which are likely to have a
Material Adverse Effect, or
(ii) claims, complaints, notices or inquiries to the Company or
any of its Subsidiaries regarding potential liability under any
Environmental Law which are likely to have a Material Adverse Effect;
(c) except for Releases of Hazardous Materials which occurred after the
date that the Company or any of its Subsidiaries sold, transferred, assigned or
otherwise disposed of its interests in any previously owned or leased property,
there have been no Releases of Hazardous Materials at, on or under any property
now or previously owned or leased by the Company or any of its Subsidiaries that
are likely to have a Material Adverse Effect;
(d) the Company and its Subsidiaries have been issued and are in
material compliance with all permits, certificates, approvals, licenses and
other authorizations relating to environmental matters and necessary or
desirable for their businesses except for such non-compliance as is not likely
to have a Material Adverse Effect;
(e) (i) no property presently owned or leased by the Company or any of
its Subsidiaries, and (ii) to the best of the knowledge of the Company, no
property previously owned or leased by the Company or any of its Subsidiaries,
is listed or proposed for listing on the National Priorities List pursuant to
CERCLA or on any similar published state list of sites requiring investigation
or clean-up;
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(f) to the knowledge of the Company, there are no underground storage
tanks, active or abandoned, including petroleum storage tanks, on or under any
property now or previously owned or leased by the Company or any of its
Subsidiaries that are likely to have a Material Adverse Effect;
(g) neither the Company nor any of its Subsidiaries has directly
transported or directly arranged for the transportation of any Hazardous
Material to any location which is listed or proposed for listing on the National
Priorities List pursuant to CERCLA, on the CERCLIS or on any similar published
state list or which is the subject of federal, state or local enforcement
actions or other investigations which may lead to claims against the Company or
such Subsidiary for any remedial work, damage to natural resources or personal
injury, including claims under CERCLA, except for such claims which are not
likely to have a Material Adverse Effect;
(h) there are no polychlorinated biphenyls or friable asbestos present
at any property now or previously owned or leased by the Company or any of its
Subsidiaries that are likely to have a Material Adverse Effect; and
(i) to the knowledge of the Company, no conditions exist at, on or
under any property now or previously owned or leased by the Company or any of
its Subsidiaries which, with the passage of time, or the giving of notice or
both, are likely to have a Material Adverse Effect.
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6.13 Labor Matters. Except as set forth on Schedule 6.13, there are no
strikes or other labor disputes or grievances or charges or complaints with
respect to any employee or group of employees pending or, to the knowledge of
the Company, threatened against the Company or any Restricted Subsidiary which
are likely to have a Material Adverse Effect.
6.14 ERISA Plans. During the twelve-consecutive-month period prior to
the Closing Date, no steps have been taken to terminate any Pension Plan (other
than a standard termination as defined in Section 4041(b) of ERISA for which a
commitment to make the terminating Pension Plan sufficient is not required), and
no contribution failure has occurred with respect to any Pension Plan sufficient
to give rise to a Lien under Section 302(f) of ERISA. Other than liability for
benefit payments or contributions in the ordinary course, no condition exists or
event or transaction has occurred with respect to any Plan which is likely to
result in the incurrence by the Company or any member of the Controlled Group of
any material liability, fine or penalty. Each Plan complies with the applicable
provisions of ERISA and the Code, except where such non-compliance is not likely
to have a Material Adverse Effect. Except as disclosed on Schedule 6.14, neither
the Company nor any Subsidiary of the Company has any material contingent
liability with respect to any post-retirement benefit under a Welfare Plan,
other than liability for continuation coverage described in Part 6 of Subtitle B
of Title I of ERISA.
6.15 Y2K Review. On the basis of a comprehensive review and assessment
of the Company's and its Subsidiaries' systems and equipment and due inquiry
made of the Company's and its Subsidiaries' material suppliers, vendors and
customers, the Company's Responsible Officers are of the view that the "Year
2000 problem" (i.e., the inability of computers, as well as embedded microchips
in non-computing devices, to perform properly date-sensitive functions with
respect to certain dates prior to and after December 31, 1999), including costs
of remediation, will not result in a Material Adverse Effect. The Company and
its Subsidiaries have developed feasible contingency plans adequately to ensure
uninterrupted and unimpaired business operation in the event of failure of their
own or a third party's systems or equipment due to the Year 2000 problem,
including those of vendors, customers and suppliers, as well as a general
failure of or interruption in its communications and delivery infrastructure.
6.16 Swap Obligations. Neither the Company nor any of its Subsidiaries
has incurred any outstanding obligations under any Swap Contracts, other than
Permitted Swap Obligations. The Company has undertaken its own independent
assessment of its consolidated assets, liabilities and commitments and has
considered appropriate means of mitigating and managing risks associated with
such matters and has not relied on any swap counterparty or any Affiliate of any
swap counterparty in determining whether to enter into any Swap Contract.
6.17 Full Disclosure. None of the representations or warranties made by
the Company or any Restricted Subsidiary in the Loan Documents as of the date
such representations and warranties are made or deemed made, and none of the
statements contained in any exhibit, report, statement or certificate furnished
by or on behalf of the Company or any Restricted Subsidiary in connection with
the Loan Documents (including the offering and disclosure materials delivered by
or on behalf of the Company to the Lenders prior to the Closing Date), contains
any untrue statement of a material fact or omits any material fact required to
be stated therein or otherwise necessary to make the statements made therein, in
light of the circumstances under which they are made, not misleading as of the
time when made or delivered.
ARTICLE 7
CONDITIONS PRECEDENT
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7.01 Conditions Precedent to the First Loan. The obligation of each
Lender to make its initial Loan and the obligation of the Issuing Bank to Issue
its initial Letter of Credit is subject to the satisfaction of the condition
precedent that the Agent shall have received the following, each, unless
otherwise specified below, dated as of the Closing Date, in form and substance
satisfactory to the Agent and its counsel:
(a) Board Resolutions; Incumbency Certificates. A certificate of the
Secretary or an Assistant Secretary of each Loan Party certifying (i) the
resolutions of the Board of Directors of such Loan Party approving each Loan
Document to which such Loan Party is a party and the transactions contemplated
hereby and thereby, (ii) all documents evidencing other necessary corporate
action, if any, by each Loan Party with respect to each Loan Document and (iii)
the names and signatures of the officers authorized to act with respect to each
Loan Document executed by it, upon which certificate the Agent and each Lender
may conclusively rely until they shall have received a further certificate of
the Secretary or Assistant Secretary of such Loan Party canceling or amending
such prior certificate;
(b) Articles of Incorporation; By-Laws and Good Standing. Each of the
following documents:
(i) the articles or certificate of incorporation of each Loan
Party as in effect on the Closing Date, certified (A) by the Secretary
of State of the state of incorporation of such Loan Party as of a date
reasonably close to the Closing Date, and (B) by the Secretary or an
Assistant Secretary of such Loan Party as of the Closing Date, and the
by-laws of each Loan Party, as in effect on the Closing Date, certified
by the Secretary or an Assistant Secretary of such Loan Party as of the
Closing Date; and
(ii) a good standing certificate for each Loan Party from the
Secretary of State of the state of incorporation of such Loan Party as
of a date reasonably close to the Closing Date;
(c) Subsidiary Guaranty. A guaranty, duly executed by each Principal
Subsidiary, in substantially the form of Exhibit 7.01(c) (the "Subsidiary
Guaranty");
(d) Legal Opinion. A favorable opinion addressed to the Agent and all
Lenders from counsel to the Company and its Subsidiaries, in substantially the
form of Exhibit 7.01(d) (which opinion the Company and its Subsidiaries hereby
expressly instruct such counsel to prepare and deliver);
(e) Contribution Agreement. A duly executed copy of the Contribution
Agreement, in substantially the form of Exhibit 7.01(e) (the "Contribution
Agreement"); and
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(f) Termination of the 1996 Credit Agreement. Evidence satisfactory to
the Agent that the 1996 Credit Agreement and the commitments of the lenders
thereunder shall have been terminated and all committed loans owing to the
lenders thereunder shall have been paid in full; provided, however, that the
obligations of the Company with respect to the 1996 Facility Bid Loans
outstanding on the Closing Date shall survive the termination of the 1996 Credit
Agreement and such 1996 Facility Bid Loans shall be repaid when due in
accordance with their respective terms.
7.02 Additional Conditions Precedent to the First Loan. The obligation
of each Lender to make its initial Loan and the obligation of the Issuing Bank
to Issue its initial Letter of Credit is subject to the further conditions
precedent that:
(a) No Material Adverse Effect. Since December 31, 1998, there shall
have been no Material Adverse Effect and no development which is likely to have
a Material Adverse Effect, except as reflected in the Company's periodic reports
filed with the Securities and Exchange Commission prior to the Closing Date.
(b) Margin Regulations. All Loans made by the Lenders shall be in full
compliance with all applicable Requirements of Law, including Regulations T, U
and X of the Federal Reserve Board.
(c) Fees Costs and Expenses. The Company shall have paid all fees
referred to in Section 4.01 to the extent then due and payable and all
reasonable costs and expenses referred to in Section 12.04 (including legal fees
and expenses) and any indemnity pursuant to Section 12.05 which, in each case,
may be then due and payable.
(d) Company Officer's Certificate. The Company shall have delivered to
the Agent a certificate from a Responsible Officer of the Company in
substantially the form of Exhibit 7.02(d) as to the satisfaction of the
conditions set forth in this Section 7.02 and to the effect that on the Closing
Date, the representations and warranties contained in Article 6 are correct.
(e) North American Timber Agreement. All conditions precedent described
in Sections 7.01 and 7.02 of the North American Timber Agreement shall have been
satisfied.
7.03 Conditions Precedent to Each Committed Loan and Letter of Credit.
The obligation of each Lender to make any Committed Loan (including its initial
Committed Loan) and the obligation of the Issuing Bank to Issue any Letter of
Credit (including the initial Letter of Credit) shall be subject to the further
conditions precedent that:
(a) Notice of Borrowing. The Agent shall have received a Notice of
Borrowing as required by Section 2.02 or in the case of any Issuance of any
Letter of Credit, the Issuing Bank and the Agent shall have received an L/C
Application or L/C Amendment Application, as required under Section 3.02.
(b) Accuracy of Representations; No Default; Etc. The following
statements shall be true on the date of each Committed Loan or Issuance Date, as
the case may be, before and after giving effect thereto:
(i) The representations and warranties contained in Article 6 are
correct on and (except for representations and warranties relating
solely to a particular point in time and, after the initial Committed
Borrowing, other than under Section 6.05(b)) as of such date as though
made on and as of such date; and
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(ii) No Default or Event of Default has occurred and is continuing
or would result from such Committed Loan being made or Letter of Credit
being Issued on such date.
(c) Other Assurances. The Agent shall have received such other
approvals, opinions or documents as any Lender through the Agent may reasonably
request related to the transactions contemplated hereby.
7.04 Conditions Precedent to Each Bid Borrowing. The obligation of each
Lender which is to make a Bid Loan in connection with a Bid Borrowing (including
the initial Bid Borrowing) to make such Bid Loan shall be subject to the further
conditions precedent:
(a) Promissory Notes. If so requested by such Lender, the Company shall
have delivered to such Lender a promissory note in the form of Exhibit 2.05(c)
evidencing the Indebtedness of the Company in respect of such Bid Loan.
(b) Accuracy of Representations; No Default; Etc. The following
statements shall be true on the date of each Bid Borrowing, before and after
giving effect thereto and to the application of the proceeds from the Bid Loans
being made on such date:
(i) The representations and warranties contained in Article 6 are
correct on and (except for representations and warranties relating
solely to a particular point in time and other than under Section
6.05(b) as of such date as though made on and as of such date; and
(ii) No Default or Event of Default has occurred and is continuing
or would result from such Bid Loan being made on such date.
ARTICLE 8
AFFIRMATIVE COVENANTS
The Company agrees that as long as the obligations of the Lenders to
make Loans shall remain in effect or any Letter of Credit remain outstanding and
until all Obligations shall have been paid or performed in full, unless the
Required Lenders shall otherwise consent in writing:
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8.01 Application of Proceeds. The Company will apply the proceeds of
the Loans for general corporate purposes.
8.02 Compliance with Laws, Etc. The Company will comply, and cause each
of its Subsidiaries to comply, in all material respects with all applicable
Requirements of Law except for such non-compliance as is being contested in good
faith by appropriate proceedings or is not likely to have a Material Adverse
Effect.
8.03 Payment of Taxes, Etc. The Company will pay and discharge, and
cause each of its Subsidiaries to pay and discharge, before the same shall
become delinquent, all lawful claims and all taxes, assessments and governmental
charges or levies except where contested in good faith, by proper proceedings,
if adequate reserves therefor have been established on the books of the Company
in accordance with, and to the extent required by, GAAP, or if such non-payment
(individually and in the aggregate with all other such non-payments) is not
likely to have a Material Adverse Effect.
8.04 Maintenance of Insurance. The Company will maintain, and cause
each of its Subsidiaries to maintain, insurance with responsible and reputable
insurance companies or associations in such amounts and covering such risks as
is usually carried by companies engaged in similar businesses and owning similar
properties in the same general areas in which the Company and such Subsidiaries
operate; provided, however, that the Company and its Subsidiaries may
self-insure to the extent that the Company or any such Subsidiary may in its
discretion determine; and provided, further, that the Company may maintain
insurance on behalf of any of its Subsidiaries. Without limiting the generality
of the foregoing, the Company will, and will cause each of its Subsidiaries to,
maintain insurance coverages that are at least substantially the same as the
insurance coverages maintained on the Closing Date.
8.05 Preservation of Corporate Existence, Etc. The Company will
preserve and maintain, and cause each Restricted Subsidiary to preserve and
maintain, its corporate existence, rights (charter and statutory), and
franchises, except as permitted under Section 9.03 or except to the extent that
the failure by the Company or any such Restricted Subsidiary to comply with the
foregoing is not likely to have a Material Adverse Effect.
8.06 Access. The Company will from time to time, during normal business
hours upon reasonable notice, or, if a Default or an Event of Default shall have
occurred and be continuing, at any time upon notice to an officer of the Company
having at least the rank of Vice President, permit the Agent, any Lender and any
agent or representative thereof, to examine and make copies of and abstracts
from the records and books of account of, and visit the properties of, the
Company and any of its Subsidiaries, and to discuss the affairs, finances and
accounts of the Company and any of its Subsidiaries with any of their respective
officers.
8.07 Keeping of Books. The Company will keep proper books of record and
account, in which full and correct entries, on a consolidated basis for the
Company and its Subsidiaries, shall be made of all financial transactions and
the assets and business of the Company and its Subsidiaries in accordance with
GAAP consistently applied.
8.08 Maintenance of Properties, Etc. The Company will maintain and
preserve, and cause each of its Subsidiaries to maintain and preserve, all of
its properties in good repair, working order and condition, and from time to
time make or cause to be made all necessary and proper repairs, renewals,
replacements and improvements so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that nothing in this Section 8.08 shall
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prevent the Company or any of its Subsidiaries from discontinuing the
maintenance or preservation of any of its properties if such discontinuance is,
in the opinion of the Company, desirable in the conduct of its business and is
not likely to have a Material Adverse Effect.
8.09 Financial Statements. The Company will furnish to the Agent, with
sufficient copies for the Lenders:
(a) as soon as available and in any event within 45 days after the end
of each of the first three quarters of each fiscal year of the Company,
consolidated balance sheets of the Company and its Subsidiaries as of the end of
such quarter and the related statements of income and cash flows for such
quarter and for the period commencing at the end of the previous fiscal year and
ending with the end of such quarter;
(b) as soon as available and in any event within 90 days after the end
of each fiscal year of the Company, audited consolidated balance sheets of the
Company and its Subsidiaries as of the end of such year and the related
consolidated statements of income, changes in shareholders' equity and cash
flows for the period commencing at the end of the previous fiscal year and
ending with the end of such year; and
(c) at the same time it furnishes each set of financial statements
pursuant to subsections 8.09(a) and (b), (i) a certificate of a Responsible
Officer of the Company to the effect that no Default or Event of Default has
occurred and is continuing (or if any Default or Event of Default has occurred
and is continuing, describing the same in reasonable detail and the action which
the Company proposes to take with respect thereto) and (ii) a compliance
certificate in substantially the form of Exhibit 8.09(c).
8.10 Reporting Requirements. The Company will furnish to the Agent,
with sufficient copies for the Lenders:
(a) promptly and in any event within three Business Days after the
Company becomes aware of the existence of any Default or Event of Default,
notice by telephone or facsimile specifying the nature of such Default or Event
of Default, which notice, if given by telephone, shall be promptly confirmed in
writing within five Business Days;
(b) promptly after the sending or filing thereof, copies of all reports
which the Company sends to its security holders generally and copies of all
reports and registration statements which the Company or any of its Subsidiaries
files with the Securities and Exchange Commission or any national securities
exchange (including the Company's Quarterly Report on Form 10-Q and Annual
Report on Form 10-K);
(c) promptly but not later than three Business Days after the Company
becomes aware of any change by Moody's or S&P in its Debt Rating, notice by
telephone or facsimile of such change; and
(d) such other information respecting the business, prospects,
properties, operations or condition, financial or otherwise of the Company or
any of its Subsidiaries as any Lender through the Agent may from time to time
reasonably request.
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8.11 ERISA Plans. The Company will maintain and operate, and cause each
Subsidiary to maintain and operate, each Plan in material compliance with ERISA
and the Code and all applicable regulations thereunder.
8.12 Environmental Compliance; Notice. The Company will, and will cause
each of its Subsidiaries to:
(a) endeavor to use and operate all of its facilities and properties in
substantial compliance with all Environmental Laws, keep all necessary permits,
approvals, certificates, licenses and other authorizations relating to
environmental matters in effect and remain in substantial compliance therewith,
and handle all Hazardous Materials in substantial compliance with all applicable
Environmental Laws;
(b) promptly upon receipt of all written claims, complaints, notices or
inquiries relating to the condition of its facilities and properties or
compliance with Environmental Laws, evaluate such claims, complaints, notices
and inquiries and forward copies of (i) all such claims, complaints, notices and
inquiries which individually are likely to have a Material Adverse Effect and
(ii) all such claims, complaints, notices and inquiries, arising from a single
occurrence which together are likely to have a Material Adverse Effect, and
endeavor to promptly resolve all such actions and proceedings relating to
compliance with Environmental Laws; and
(c) provide such information and certifications which the Agent may
reasonably request from time to time to evidence compliance with this Section
8.12.
8.13 New Subsidiaries. If the Company or any of its Subsidiaries at any
time after the date hereof acquires, forms, or establishes any Principal
Subsidiary or any Subsidiary becomes a Principal Subsidiary, the Company shall
cause any such Principal Subsidiary to promptly (a) execute and deliver to Agent
each of the Subsidiary Guaranty and the Contribution Agreement; and (b) provide
such evidence of due authorization, execution, and delivery of such Loan
Documents as the Agent or the Required Lenders may reasonably require.
ARTICLE 9
NEGATIVE COVENANTS
The Company agrees that as long as the obligations of the Lenders to
make Loans shall remain in effect and until all Obligations shall have been paid
or performed in full, unless the Required Lenders shall otherwise consent in
writing:
9.01 Liens, Etc. The Company shall not create or assume and shall not
permit any Restricted Subsidiary to create or assume, any Lien upon or with
respect to any of its Principal Properties or shares of capital stock or
Indebtedness of any Restricted Subsidiary, whether now owned or hereafter
acquired, without making effective provision, and the Company in such case will
make or cause to be made effective provision, whereby the Obligations shall be
secured by such Lien equally and ratably with any and all other Indebtedness or
obligations thereby secured, so long as such other Indebtedness or obligations
shall be so secured; provided, however, that the foregoing shall not apply to
any of the following:
(a) Liens existing on the Closing Date and set forth on Schedule 9.01;
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(b) Liens on any Principal Property acquired, constructed or improved
after the date of this Agreement which are created or assumed contemporaneously
with, or within 120 days after, or pursuant to financing arrangements for which
a firm commitment is made by a bank, insurance company or other lender or
investor (not including the Company or any Restricted Subsidiary) within 120
days after, the completion of such acquisition, construction or improvement to
secure or provide for the payment of any part of the purchase price of such
property or the cost of such construction or improvement, or, in addition to
Liens contemplated by Sections 9.01(c) and 9.01(d), Liens on any Principal
Property existing at the time of acquisition thereof; provided, however, that in
the case of any such acquisition, construction or improvement the Lien shall not
apply to any property theretofore owned by the Company and/or one or more
Restricted Subsidiaries other than, in the case of such construction or
improvement, any theretofore unimproved real property on which the property so
constructed, or the improvement, is located;
(c) Liens on property or shares of capital stock or indebtedness of a
corporation existing at the time such corporation is merged into or consolidated
with the Company or a Restricted Subsidiary or existing at the time of a sale,
lease or other disposition of the properties of a corporation as an entirety or
substantially as an entirety to the Company, or to a Restricted Subsidiary;
(d) Liens on property or shares of capital stock of a corporation
existing at the time such corporation becomes a Restricted Subsidiary;
(e) Liens to secure Indebtedness of a Restricted Subsidiary to the
Company or one or more Restricted Subsidiaries;
(f) Liens in favor of the United States of America or any State
thereof, or any department, agency or political subdivision of the United States
of America or any State thereof, to secure partial, progress, advance or other
payments pursuant to any contract or statute or to secure any Indebtedness
incurred for the purpose of financing all or any part of the purchase price or
the cost of constructing or improving the property subject to such Liens;
(g) Liens on timberlands in connection with an arrangement under which
the Company 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;
(h) Liens created or assumed in the ordinary course of the business of
exploring for, developing or producing oil, gas or other minerals (including in
connection with borrowings of money for such purposes) on, or on any interest
in, or on any proceeds from the sale of, property acquired or held for the
purpose of exploring for, developing or producing oil, gas or other minerals, or
production therefrom, or proceeds of such production, or material or equipment
located on such property;
(i) Liens in favor of any customer arising in respect of performance
deposits and partial, progress, advance or other payments made by or on behalf
of such customer for goods produced or to be produced or for services rendered
or to be rendered to such customer in the ordinary course of business, which
Liens shall not exceed the amount of such deposits or payments;
(j) Liens on the property of the Company or any Restricted Subsidiary
incurred or pledges and deposits made in the ordinary course of business in
connection with worker's compensation, unemployment insurance, old-age pensions
and other social security benefits other than in respect of employer plans
subject to ERISA;
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(k) Liens pertaining to receivables or other accounts sold by the
Company or any of its Restricted Subsidiaries pursuant to a receivables sale
transaction in favor of the purchaser or purchasers of such receivables or other
accounts;
(l) purchase money liens or purchase money security interests upon or
in any other property acquired by the Company or any Restricted Subsidiary in
the ordinary course of business to secure the purchase price of such property or
to secure Indebtedness incurred solely for the purpose of financing the
acquisition of such property;
(m) extensions, renewals and replacements of Liens referred to in
Section 9.01(a) through (l) or this Section 9.01(m), provided, however, that the
Indebtedness secured thereby shall not exceed the principal amount of the
Indebtedness so secured at the time of such extension, renewal or replacement,
and such extension, renewal or replacement shall be limited to all or part of
the property or assets which secured the Lien extended, renewed or replaced
(plus improvements on such property);
(n) Liens imposed by law, such as workers', materialmen's, mechanics',
warehousemen's, carriers', lessors', vendors' and other similar Liens incurred
by the Company or any Restricted Subsidiary arising in the ordinary course of
business which secure its obligations to any Person;
(o) Liens created by or resulting from any litigation or proceedings
which are being contested in good faith by appropriate proceedings; Liens
arising out of judgments or awards against the Company and/or one or more
Restricted Subsidiaries with respect to which the Company and/or such Restricted
Subsidiary or Restricted Subsidiaries are in good faith prosecuting an appeal or
proceedings for review; or Liens incurred by the Company and/or one or more
Restricted Subsidiaries for the purpose of obtaining a stay or discharge in the
course of any legal proceeding to which the Company and/or such Restricted
Subsidiary or Restricted Subsidiaries are a party;
(p) Liens for taxes, assessments or other governmental charges or
levies, either not yet due and payable or to the extent that non-payment thereof
shall be permitted by Section 7.03, landlord's liens on property held under
lease and tenants' rights under leases;
(q) zoning restrictions, easements, licenses, reservations,
restrictions on the use of real property or minor irregularities of title
incident thereto which do not materially impair the value of any parcel of
property material to the operation of the business of the Company and its
Restricted Subsidiaries taken as a whole or the value of such property for the
purpose of such business; and
(r) Liens arising in connection with Sale-Leaseback Transactions
permitted by Section 9.02.
9.02 Sale-Leaseback Transactions. The Company shall not, and shall not
permit any Restricted Subsidiary to, enter into any arrangement with any Person
providing for the leasing by the Company and/or one or more Restricted
Subsidiaries of any Principal Property (except for temporary leases for a term,
including any renewal thereof, of not more than three years and except for
leases between the Company and one or more Restricted Subsidiaries or between
Restricted Subsidiaries) which property has been or is to be sold or transferred
by the Company and/or such Restricted Subsidiary or Restricted Subsidiaries to
such Person (a "Sale-Leaseback Transaction") unless (a) the Company and/or such
Restricted Subsidiary or Restricted Subsidiaries would be entitled to incur
Indebtedness secured by a Lien on such property without equally and ratably
securing the Obligations pursuant to the provisions of Section 9.01, or (b) the
Company shall apply or cause to be applied an amount equal to the Value of such
Sale-Leaseback Transaction within 120 days of the effective date of any
arrangement (i) to the retirement
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of Indebtedness for Borrowed Money incurred or assumed by the Company or any
Restricted Subsidiary (other than indebtedness for borrowed money owed to the
Company and/or one or more Restricted Subsidiaries) which by its terms matures
on, or is extendable or renewable at the option of the obligor to, a date more
than 12 months after the date of the incurrence or assumption of such
indebtedness and which is senior in right of payment to, or ranks pari passu
with, the Loans, or (ii) to the purchase of other property which will constitute
"Principal Property" having a fair value in the opinion of the Board of
Directors of the Company at least equal to the Value of such Sale-Leaseback
Transaction, or (c) the Company shall use the net proceeds to repay Loans
hereunder.
Notwithstanding the provisions of Sections 9.01 and 9.02, the Company
and any one or more of its Restricted Subsidiaries may nevertheless create or
assume Liens which would otherwise require securing of the Obligations under
said provisions, and enter into Sale-Leaseback Transactions without compliance
with either Section 9.02(b) or 9.02(c), provided that the aggregate amount of
all such Liens and Sale-Leaseback Transactions permitted by this Section 9.02 at
any time outstanding (as measured by the sum of (a) all Indebtedness secured by
all such Liens then outstanding or to be so created or assumed, but excluding
secured Indebtedness permitted under the exceptions in Section 9.01, and (b) the
Value of all such Sale-Leaseback Transactions then outstanding or to be so
entered into, but excluding such transactions in which indebtedness is retired
or property is purchased or Loans are repaid) shall not exceed 10% of Net
Tangible Assets.
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9.03 Mergers, Etc. The Company shall not merge or consolidate with or
into, or convey, transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of its
assets, whether now owned or hereafter acquired, to any Person; provided,
however, that the Company may merge or consolidate with or into any corporation
(whether or not affiliated with the Company) or convey, transfer, lease or
otherwise dispose of all or substantially all of its assets, to any other
corporation (whether or not affiliated with the Company) authorized to acquire
or operate the same, so long as (a) either (x) in the case of such merger or
consolidation, the Company is the surviving corporation or (y) if either (i) in
the case of such merger or consolidation, if the Company is not the surviving
corporation, or (ii) upon any such conveyance, transfer, lease or other
disposition, the surviving or transferee corporation expressly assumes the due
and punctual payment of all Obligations according to their terms and the due and
punctual performance and observance of all of the covenants and conditions of
this Agreement to be performed by the Company; and (b) after giving effect to
such transaction, no Default or Event of Default exists and the Company or such
surviving Person, as applicable, has demonstrated its compliance with Section
9.08 to the reasonable satisfaction of the Required Lenders.
9.04 Transactions with Affiliates. The Company shall not enter into or
be a party to, or permit any of its Restricted Subsidiaries to enter into or be
a party to, any transaction with any Affiliate of the Company except (a) as may
be permitted under Sections 9.01, 9.02, or 9.03 or (b) transactions in the
ordinary course of business which are not likely to have a Material Adverse
Effect.
9.05 Accounting Changes. The Company (a) shall not make, or permit any
of its Subsidiaries to make, any significant change in accounting treatment and
reporting practices except as permitted or required by GAAP or the Securities
and Exchange Commission and (b) shall not designate a different fiscal year
other than a fiscal year that ends on the closest Saturday to December 31 of
each year.
9.06 Margin Regulations. The Company shall not use the proceeds of any
Loan in violation of Regulation T, U or X of the Board of Governors of the
Federal Reserve System.
9.07 Negative Pledges, Etc. The Company shall not, and shall not permit
any Restricted Subsidiary to, enter into any agreement prohibiting compliance by
the Company with the provisions of the introduction to Section 9.01 or
restricting the ability of the Company or any other Loan Party to amend or
otherwise modify this Agreement or any other Loan Document.
9.08 Leverage Ratio. The Company shall not permit the ratio of (a)
Funded Indebtedness on the last day of any fiscal quarter to (b) EBITDA for the
Measurement Period ending on such date (in each case calculated on a
consolidated basis for the Company and its consolidated Subsidiaries) to be
greater than 4.50 to 1.00.
ARTICLE 10
EVENTS OF DEFAULT
10.01 Events of Default. The term "Event of Default" shall mean any of
the events set forth in this Section 10.01.
(a) Non-Payment. The Company shall (i) fail to pay any principal of any
Loan when the same shall become due and payable; or (ii) fail to pay any
interest on any Loan or fail to pay any fee due under this Agreement within
three Business Days after the same shall become due and payable; or
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(b) Representations and Warranties. Any representation or warranty made
by the Company in this Agreement or by any Loan Party in any other Loan Document
or in any certificate, document or financial or other statement delivered at any
time under or in connection with this Agreement or any other Loan Document shall
prove to have been incorrect or untrue in any material respect when made or
deemed made; or
(c) Specific Defaults. The Company shall fail to perform or observe any
term, covenant or agreement contained in Sections 8.01, 8.05, 8.06 or 8.10(a) or
Article 9; or
(d) Other Defaults. The Company shall fail to perform or observe any
other term or covenant contained in this Agreement or any Loan Party shall fail
to perform any other term or covenant in any other Loan Document, and such
Default shall continue unremedied for a period of 30 days after the date upon
which written notice thereof shall have been given to the Company by the Agent;
or
(e) Default under Other Agreements. Any default shall occur and be
continuing under the terms applicable to:
(i) any Funded Indebtedness or any Indebtedness or items of
Indebtedness of the Company or any of its Subsidiaries (other than
under this Agreement or any other Loan Document) which Funded
Indebtedness or Indebtedness, as the case may be, has an aggregate
outstanding principal amount of $75,000,000 or more, or
(ii) under one or more Swap Contracts of the Company or any of its
Subsidiaries resulting in aggregate Swap Termination Values of the
Company and its Subsidiaries of $75,000,000 or more and,
in either of the above cases, such default shall:
(A) consist of the failure to pay such Indebtedness or such
net obligations when due (whether at scheduled maturity, upon
early termination, by required prepayment, acceleration, demand or
otherwise) after giving effect to any applicable grace period; or
(B) result in, or continue unremedied and unwaived for a
period of time sufficient to permit, the acceleration of such
Indebtedness or the early termination of any such Swap Contract;
or
(f) Bankruptcy or Insolvency. The Company or any Restricted Subsidiary
shall:
(i) generally fail to pay, or admit in writing its inability to
pay, its debts as they become due;
(ii) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect;
(iii) seek the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of
its property or consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against it;
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(iv) make a general assignment for the benefit of creditors; or
(v) take any corporate action to authorize any of the foregoing;
or
(g) Involuntary Proceedings. An involuntary case or other proceeding
shall be commenced against the Company or any Restricted Subsidiary seeking
liquidation, reorganization or other relief with respect to it or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any-substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed for a
period of 60 days; or an order for relief shall be entered against the Company
or any Restricted Subsidiary under the federal bankruptcy laws as now or
hereafter in effect; or
(h) Monetary Judgments. One or more judgments or orders for the payment
of money exceeding in the aggregate $75,000,000 shall be rendered against the
Company or any of its Subsidiaries and either (i) enforcement proceedings shall
have been initiated by any creditor upon such judgment or order or (ii) such
judgment or order shall continue unsatisfied or unstayed for a period of 30
days; or
(i) Pension Plans. Any of the following events shall occur with respect
to any Pension Plan:
(i) the institution of any steps by the Company, any member of its
Controlled Group or any other Person to terminate a Pension Plan if, as
a result of such termination, the Company or any such member could
reasonably expect to be required to make a contribution to such Pension
Plan, or could reasonably expect to incur a liability or obligation to
such Pension Plan or the PBGC, in excess of $75,000,000; or
(ii) a contribution failure occurs with respect to any Pension
Plan which gives rise to a Lien under Section 302(f) of ERISA with
respect to a liability or obligation in excess of $75,000,000; or
(j) Change in Control. The acquisition by any Person or group (within
the meaning of Rule 13d-5 of the Securities and Exchange Commission under the
Securities Exchange Act of 1934), or two or more Persons acting in concert, of
beneficial ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Securities Exchange Act of 1934) of either (i)
33-1/3% or more of the outstanding shares of voting stock of the Company or (ii)
the power to direct or cause the direction of the management and policies of the
Company, whether through the ownership of voting securities, by contract or
otherwise; or
(k) Impairment of Certain Documents. Except as otherwise expressly
permitted in any Loan Document, any of the Loan Documents shall terminate or
cease in whole or in part to be the legally valid, binding, and enforceable
obligation of the relevant Loan Party, or such Loan Party or any Person acting
for or on behalf of any Loan Party, contests such validity, binding effect or
enforceability, or purports to revoke any Loan Document; or
(l) North American Timber Agreement. An "Event of Default" shall exist
as defined in the North American Timber Agreement.
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10.02 Remedies. If any Event of Default shall have occurred and be
continuing:
(a) The Agent shall at the request of, or may with the consent of, the
Required Lenders, declare the Commitments and the commitment of the Issuing Bank
to Issue Letters of Credit to be terminated, whereupon the Commitments and such
commitment shall forthwith be terminated; and/or
(b) The Agent shall at the request of, and may with the consent of, the
Required Lenders, declare an amount equal to the maximum aggregate amount that
is or at any time thereafter may become available for drawing under any
outstanding Letters of Credit (whether or not any beneficiary shall have
presented, or shall be entitled at such time to present, the drafts or other
documents required to draw under such Letters of Credit) to be immediately due
and payable, which amount the Company shall immediately Cash Collateralize in
full, and declare the unpaid principal amount of all outstanding Loans, all
interest accrued and unpaid thereon and all other Obligations payable hereunder
or under any other Loan Document to be immediately due and payable, whereupon
the Loans, all such interest and all such Obligations shall become and be
forthwith due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby expressly waived by the Company; and/or
(c) The Agent shall at the request of, and may with the consent of, the
Required Lenders, exercise all rights and remedies available to it as Agent
under any Loan Document;
provided, however, that upon the occurrence of any Event of Default specified in
Section 10.01(f)(ii) or Section 10.01(g) or in the event of an actual or deemed
entry of an order for relief with respect to the Company or any of its
Subsidiaries under any bankruptcy, insolvency or other similar law now or
hereafter in effect, the Commitments and the commitment of the Issuing Bank to
Issue Letters of Credit shall automatically terminate and the unpaid principal
amount of all outstanding Loans and all interest accrued thereon and all other
Obligations shall automatically become due and payable without further action of
the Agent or any Lender.
ARTICLE 11
THE AGENT
11.01 Appointment. Each Lender hereby irrevocably appoints, designates
and authorizes the Agent to take such action on its behalf under the provisions
of this Agreement and each other Loan Document and to exercise such powers and
perform such duties as are expressly delegated to it by the terms of this
Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
contained elsewhere in this Agreement or in any other Loan Document, the Agent
shall not have any duties or responsibilities except those expressly set forth
herein or any fiduciary relationship with any Lender, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or any other Loan Document or otherwise exist against the
Agent. Without limiting the generality of the foregoing sentence, the use of the
term "agent" in this Agreement with reference to the Agent is not intended to
connote any fiduciary or other implied (or express) obligations arising under
agency doctrine of any applicable law. Instead, such term is used merely as a
matter of market custom, and is intended to create or reflect only an
administrative relationship between independent contracting parties.
The Issuing Bank shall act on behalf of the Lenders with respect to any
Letters of Credit Issued by it and the documents associated therewith until such
time and except for so long as the Agent may agree at the request of the
Required Lenders to act for such Issuing Bank with respect thereto; provided,
however, that the Issuing Bank shall have all of the benefits and immunities (i)
provided to the Agent in
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this Article 11 with respect to any acts taken or omissions suffered by the
Issuing Bank in connection with Letters of Credit Issued by it or proposed to be
Issued by it and the application and agreements for letters of credit pertaining
to the Letters of Credit as fully as if the term "Agent", as used in this
Article 11, included the Issuing Bank with respect to such acts or omissions,
and (ii) as additionally provided in this Agreement with respect to the Issuing
Bank.
11.02 Delegation of Duties. The Agent may execute any of its duties
under this Agreement or any other Loan Document by or through its employees,
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties.
11.03 Liability of Agent. None of the Agent-Related Persons shall be
(a) liable for any action taken or omitted to be taken by any of them under or
in connection with this Agreement or any other Loan Document (except for its own
gross negligence or willful misconduct) or (b) responsible in any manner to any
of the Lenders for any recital, statement, representation or warranty made by
the Company or any of its officers contained in this Agreement or by any Loan
Party or any officer of any thereof in any other Loan Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Agent under or in connection with, this Agreement or any
other Loan Document or for the value of any collateral or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document or for any failure of the Company or any other Loan
Party to perform its obligations hereunder or thereunder. No Agent-Related
Person shall be under any obligation to any Lender to ascertain or to inquire as
to the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document or to inspect the
properties, books or records of the Company or any of its Subsidiaries.
11.04 Reliance by Agent.
(a) The Agent shall be entitled to rely, and shall be fully protected
in relying, upon any writing, resolution, notice, consent, certificate,
affidavit, letter, facsimile, or telephone message, statement or other document
or conversation believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons and upon any advice and
statements of legal counsel (including counsel to the Company), independent
accountants and other experts selected by the Agent. The Agent shall be fully
justified in failing or refusing to take any action under this Agreement or any
other Loan Document unless it shall first receive such advice or concurrence of
the Required Lenders as it deems appropriate and, if it so requests, it shall
first be indemnified to its satisfaction by the Lenders against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. Except to the extent expressly provided in
Section 12.02, the Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement or any other Loan Document in
accordance with a request or the consent of the Required Lenders and such
request or consent and any action taken or failure to act pursuant thereto shall
be binding upon all the Lenders and all future holders of the Loans or any
portion thereof.
(b) For purposes of determining compliance with the conditions
specified in Sections 7.01 and 7.02, each Lender shall be deemed to have
consented to, approved or accepted or to be satisfied with each document or
other matter required thereunder to be consented to or approved by or acceptable
or satisfactory to the Lenders unless an officer of the Agent responsible for
the transactions contemplated by the Loan Documents shall have received notice
from such Lender prior to the initial Borrowing specifying its objection thereto
and either such objection shall not have been withdrawn by notice to the Agent
to that effect or such Lender shall not have made available to the Agent such
Lender's Commitment Percentage of such Borrowing.
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11.05 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default, except
with respect to defaults in the payment of principal, interest and fees payable
to the Agent for the account of the Lenders, unless the Agent shall have
received notice from a Lender or the Company referring to this Agreement or any
other Loan Document, describing such Default or Event of Default and stating
that such notice is a "notice of default". In the event that the Agent receives
such a notice, the Agent shall give notice thereof to the Lenders. The Agent
shall take such action with respect to such Default or Event of Default as shall
be requested by the Required Lenders in accordance with Article 10; provided,
however, that unless and until the Agent shall have received any such request
from the Required Lenders, the Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable in the best interests of the
Lenders.
11.06 Credit Decision. Each Lender expressly acknowledges that no
Agent-Related Person has made any representation or warranty to it and that no
act by the Agent hereinafter taken, including any review of the affairs of the
Company and its Subsidiaries, shall be deemed to constitute any representation
or warranty by any Agent-Related Person to any Lender. Each Lender represents to
the Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
properties, operations or condition, financial or otherwise, and
creditworthiness of the Company and its Subsidiaries and made its own decision
to enter into this Agreement and extend credit to the Company hereunder. Each
Lender also represents that it will, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement,
and to make such investigations as it deems necessary to inform itself as to the
business, prospects, properties, operations or condition, financial or
otherwise, and creditworthiness of the Company and its Subsidiaries. Except for
notices, reports and other documents expressly required to be furnished to the
Lenders by the Agent hereunder, no Agent-Related Person shall not have any duty
or responsibility to provide any Lender with any credit or other information
concerning the business, prospects, properties, operations or condition,
financial or otherwise, and creditworthiness of the Company and its Subsidiaries
which may come into the possession of any Agent-Related Person.
11.07 Indemnification. The Lenders agree to indemnify the Agent-Related
Person (to the extent not reimbursed by or on behalf of the Company and without
limiting the obligation of the Company to do so), ratably according to the
respective amounts of their outstanding Loans, or, if no Loans are outstanding,
their Commitments, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses and
disbursements of any kind whatsoever which may at any time (including at any
time after the repayment of the Loans and all other Obligations) be imposed on,
incurred by or asserted against any Agent-Related Person in any way relating to
or arising out of this Agreement or any other Loan Document or any document
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by any
Agent-Related Person under or in connection with any of the foregoing; provided,
however, that no Lender shall be liable for the payment to any Agent-Related
Person of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
solely from any Agent-Related Person's gross negligence or willful misconduct.
Without limiting the generality of the foregoing, each Lender agrees to
reimburse the Agent-Related Persons promptly upon demand for its ratable share
of any out-of-pocket expenses and reasonable fees of counsel (including the
allocated cost of in-house counsel) incurred by the Agent-Related Person in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiation, legal
proceedings or otherwise) of, or legal advice in respect
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of its or the Lenders' rights or responsibilities under, this Agreement, any
other Loan Document or any document contemplated by or referred to herein to the
extent that any Agent-Related Person is not reimbursed for such expenses by or
on behalf of the Company.
11.08 Agent in Individual Capacity. Bank of America and its Affiliates
may make loans to, issue, amend, renew (or participate in) letters of credit for
the account of, accept deposits from, acquire equity interests in and generally
engage in any kind of banking, trust, financial advisory or other business with
the Company and its Subsidiaries and their respective Affiliates as though Bank
of America were not the Agent hereunder. With respect to its Loans, Bank of
America shall have the same rights and powers under this Agreement as any Lender
and may exercise the same as though it were not the Agent or the Issuing Bank,
and the terms "Lender" and "Lenders" shall include Bank of America in its
individual capacity.
11.09 Successor Agent. The Agent may resign at any time by giving
written notice thereof to the Lenders and the Company and may be removed at any
time with or without cause by the Required Lenders. Upon any such resignation or
removal, the Required Lenders shall have the right to appoint a successor Agent
which shall be a commercial bank organized, chartered or licensed under the laws
of the United States of America or of any State thereof having combined capital
and surplus of at least $500,000,000. If no successor Agent shall have been so
appointed by the Required Lenders, and shall have accepted such appointment
within 30 days after the notice of resignation or the removal of the retiring
Agent, then the retiring Agent may, on behalf of the Lenders, with the consent
of the Company which consent shall not be unreasonably withheld or delayed,
appoint a successor Agent, which shall be a commercial bank organized or
chartered under the laws of the United States of America or of any State thereof
having a combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its future duties and obligations under this Agreement and the
other Loan Documents. After any retiring Agent's resignation or removal
hereunder as Agent, the provisions of this Article 11 and Sections 12.04 and
12.05 shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was Agent under this Agreement and the other Loan Documents.
Notwithstanding the foregoing, however, Bank of America may not be removed as
the Agent at the request of the Required Lenders unless Bank of America shall
also simultaneously be replaced as "Issuing Bank" hereunder pursuant to
documentation in form and substance reasonably satisfactory to Bank of America.
11.10 Documentation, Co-Syndication, Managing Agents. None of the
Lenders identified on the facing page or signature pages of this Agreement as a
"Documentation Agent," "Co-Syndication Agent," or "Managing Agent" shall have
any right, power, obligation, liability, responsibility, or duty under this
Agreement other than those applicable to all Lenders as such. Without limiting
the foregoing, none of the Lenders so identified as "Documentation Agent,"
"Co-Syndication Agent," or "Managing Agent" shall have or be deemed to have any
fiduciary relationship with any Lender. Each Lender acknowledges that it has not
relied, and will not rely, on any of the Lenders so identified in deciding to
enter into this Agreement or in taking or not taking action hereunder.
ARTICLE 12
MISCELLANEOUS
12.01 Notices, Etc. All notices, requests and other communications
provided to any party under this Agreement shall, except as otherwise expressly
specified herein, be in writing (including by facsimile) and mailed by overnight
delivery, transmitted by facsimile or delivered: if to the Company, to
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its address specified on the signature pages hereof; if to any Lender, to its
Domestic Lending Office specified opposite its name on Schedule 1.01(b); and, if
to the Agent, to its address specified on the signature pages hereof; or, as to
the Company or the Agent, at such other address as shall be designated by such
party in a written notice to the other parties and, as to each other party, at
such other address as shall be designated by such party in a written notice to
the Company and the Agent. All such notices and communications shall be
effective, if transmitted by facsimile, when transmitted, or, if mailed by
overnight delivery or delivered, upon delivery, except that (a) notices and
facsimile communications to the Agent pursuant to Articles 2 or 11 shall not be
effective until received by the Agent, (b) any notice by facsimile to the Agent
must be confirmed by telephone or mail, and (c) notices pursuant to Article 3 to
the Issuing Bank shall not be effective until actually received by the Issuing
Bank at the address specified for the "Issuing Bank" on the applicable signature
page hereof.
12.02 Amendments, Etc. No amendment or waiver of any provision of this
Agreement or of any other Loan Document, and no consent to any departure by the
Company or any other Loan Party herefrom or therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Required Lenders
and, in the case of amendments, the Company, and then any such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given; provided, however, that
(a) no amendment, waiver or consent shall, unless in writing and signed
by all the Lenders and, in the case of amendments, the Company, do any of the
following:
(i) increase the Commitments of the Lenders (other than by
assignment); provided, however, that any Lender may increase its own
Commitment without the consent of the other Lenders;
(ii) reduce the principal of, or interest (other than under
Section 2.10) on, the Committed Loans or reduce the amount of any fees
payable hereunder;
(iii) postpone any date fixed for any payment of principal of, or
interest on, the Committed Loans or any fees payable hereunder;
(iv) modify any requirement hereunder that any particular action
be taken by all of the Lenders or by the Required Lenders or change the
percentage of the Commitments or of the aggregate unpaid principal
amount of the Loans which shall be required for the Lenders or any of
them to take any action hereunder;
(v) terminate the Subsidiary Guaranty and/or the Contribution
Agreement;
(vi) amend or waive the provisions of Sections 7.01 or 7.02; or
(vii) amend this Section 12.02;
(b) no amendment, waiver or consent which affects the rights or duties
of the Agent under this Agreement or any other Loan Document shall become
effective unless signed by the Agent in addition to the Required Lenders or all
the Lenders, as the case may be;
(c) No amendment, waiver or consent which affect the rights or duties
of the Issuing Bank under the Agreement or any L/C-Related Document relating to
any Letter of Credit Issued or to be Issued
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by it shall become effective unless signed by the Issuing Bank in addition to
the Required Lenders or all the Lenders, as the case may be; and
(d) no amendment, waiver or consent which affects the principal amount,
the rate of interest or the maturity date of any outstanding Bid Loan shall
become effective without the consent of the Agent and the Lender having made
such Bid Loan in addition to the Required Lenders or all the Lenders, as the
case may be.
12.03 No Waiver; Remedies. No failure on the part of any Lender or the
Agent to exercise, and no delay in exercising, any right, remedy, power or
privilege hereunder or under any other Loan Document shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right, remedy,
power or privilege preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
12.04 Costs and Expenses. The Company agrees to pay on demand:
(a) all out-of-pocket costs and expenses incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modification and amendment of the Loan Documents and any other document to be
delivered hereunder or thereunder or in connection with the transactions
contemplated hereby or thereby, including the out-of-pocket expenses and
reasonable fees of counsel for the Agent (including local counsel which may be
retained by the Agent and the allocated cost of in-house counsel) with respect
thereto and with respect to advising the Agent as to its rights and
responsibilities under the Loan Documents;
(b) all out-of-pocket costs and expenses incurred by the Agent or any
Lender in connection with the preservation of any rights under any Loan Document
or in connection with any restructuring or "work-out" of any of the Obligations
(whether through negotiations, legal proceedings or otherwise), including the
out-of-pocket expenses and reasonable fees of counsel for the Agent (including
the allocated cost of in-house counsel);
(c) all out-of-pocket costs and expenses incurred by the Agent or any
Lender in connection with the enforcement of any of the Obligations, including
the out-of-pocket expenses and reasonable fees of counsel for the Agent or such
Lender (including the allocated cost of in-house counsel);
(d) all out-of-pocket costs and expenses incurred by the Agent in
connection with due diligence, transportation, use of computers, duplication,
search reports and all filing and recording fees; and
(e) to each Lender being replaced pursuant to Section 5.09, the
reasonable out-of-pocket expenses and reasonable fees of counsel (including the
allocated cost of in-house counsel) not exceeding $5,000 in connection with such
replacement.
12.05 Indemnity.
(a) The Company agrees to indemnify and hold harmless the Agent-Related
Persons, and each Lender and each of their Affiliates and all directors,
officers, employees, agents and advisors of all of the foregoing (each, an
"Indemnified Party") from and against any and all claims, actions, proceedings,
suits, damages, losses, liabilities, costs, expenses and disbursements,
including the out-of-pocket expenses and reasonable fees of counsel (including
the allocated cost of in-house counsel) which may be incurred
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by or asserted against any Indemnified Party as a result of any investigation,
litigation, suit, action or proceeding (regardless of whether an Indemnified
Party is a party thereto) arising out of, relating to, or in connection with
this Agreement, any other Loan Document or any transaction or proposed
transaction (whether or not consummated) financed or to be financed, in whole or
in part, directly or indirectly, with the proceeds of any Borrowing (other than
costs of the type covered by Section 12.04) or any other transaction
contemplated hereby; except to the extent such claim, damage, loss, liability,
cost or expense has resulted primarily from such Indemnified Party's gross
negligence or willful misconduct as determined by a final judgment of a court of
competent jurisdiction. Notwithstanding any other provision contained in this
Agreement, this indemnity shall not be limited in any way by the passage of time
or the occurrence of any event.
(b) The Agent, the Arranger and each Lender agree that if any
investigation, litigation, suit, action or proceeding is asserted or threatened
in writing or instituted against it or any other Indemnified Party, or any
remedial, removal or response action is requested of it or any other Indemnified
Party, for which the Agent, the Arranger or any Lender may desire indemnity or
defense hereunder, the Agent, the Arranger or such Lender shall promptly notify
the Company thereof in writing and agree, to the extent appropriate, to consult
with the Company with a view to minimizing the cost to the Company of its
obligations under this Section 12.05. The Company will not be required to pay
the fees and expenses of more than one counsel for the Indemnified Parties
unless the employment of separate counsel has been authorized by the Company, or
unless any Indemnified Party reasonably concludes that there may be defenses
available to it which are not available to the other Indemnified Parties or that
there is a conflict between its interests and those of the other Indemnified
Parties.
(c) No action taken by legal counsel chosen by the Agent, the Arranger
or any Lender in defending against any such investigation, litigation, suit,
action or proceeding or requested remedial, removal or response action shall
vitiate or in any way impair the obligations and duties of the Company hereunder
to indemnify and hold harmless each Indemnified Party; provided, however, that
if the Company is required to indemnify any Indemnified Party pursuant hereto,
neither the Agent nor the Arranger nor any Lender will settle or compromise any
such investigation, litigation, suit, action or proceeding without the prior
written consent of the Company (which consent shall not be unreasonably withheld
or delayed) so long as the Company has provided evidence reasonably satisfactory
to the Agent, the Arranger or such Lender that the Company and its Subsidiaries
on a consolidated basis do not at such time have a negative Net Worth.
12.06 Right of Set-off. Upon the occurrence and during the continuation
of any Event of Default, each Lender is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any
and all deposits in whatever currency (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by such Lender to or for the credit or the account of the Company against any
and all of the Obligations, whether or not such Lender shall have made any
demand under this Agreement. Each Lender agrees promptly to notify the Company
after any such set-off and application made by such Lender; provided, however,
that the failure to give such notice shall not affect the validity of such
set-off and application. The rights of each Lender under this Section 12.06 are
in addition to any other right or remedy (including any other right of set-off)
which such Lender may have under applicable law or under any Loan Document.
12.07 Binding Effect. This Agreement shall become effective when a
counterpart hereof shall have been executed by the Agent and counterparts hereof
executed by the Company and each Lender shall have been received by the Agent
and notice thereof shall have been given by the Agent to the other parties
hereto and thereafter shall be binding upon and inure to the benefit of the
Company, the Agent and
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each Lender and their respective successors and assigns; provided, however, that
(a) except as permitted under clause (b)(ii) of Section 9.03, the Company may
not assign or transfer its rights or obligations hereunder without the prior
written consent of all the Lenders and (b) the rights of assignment and transfer
of the rights and obligations of the Lenders hereunder are subject to the
provisions of Section 12.08.
12.08 Assignments, Participations, Etc.
(a) Subject to Sections 12.08(b) and 12.08(e):
(i) Any Lender may with the prior consent of the Company, the
Agent, and the Issuing Bank (which consents will not be unreasonably
withheld and which consent of the Company shall not be required if a
Default or Event of Default exists) at any time assign to one or more
Eligible Assignees all or any fraction of its Commitment and
outstanding Committed Loans in a minimum amount of $25,000,000 and in
multiples of $1,000,000 in excess thereof or, if its Commitment is less
than $25,000,000, in the amount of its Commitment.
(ii) Any Lender may without the prior consent of the Company
assign to another Lender all or any fraction of its Commitment and
outstanding Committed Loans in a minimum amount of $5,000,000 and in
multiples of $1,000,000 in excess thereof or, if the Commitment is less
than $5,000,000, in the amount of its Commitment.
(iii) Any Lender may at any time assign all or any portion of its
rights under this Agreement and any note issued pursuant to Section
2.05 to a Federal Reserve Bank; provided, however, that no such
assignment shall release any Lender from its obligations hereunder.
(iv) Any Lender, if so requested by the Company under Section
5.09, shall assign to another Eligible Assignee its entire Commitment
and all outstanding Committed Loans.
(v) Except as provided in Section 12.08(a)(iii), no Lender may
assign any Bid Loans made by it hereunder except to another Lender or
to any other Person to which it is also assigning all or a fraction of
its Commitment and outstanding Committed Loans pursuant to Section
12.08(a)(i).
(b) No assignment shall become effective, and the Company and the Agent
shall be entitled to continue to deal solely and directly with each Lender in
connection with the interests so assigned by such Lender to an Assignee, until
(i) such Lender and such Assignee shall have executed an Assignment and
Assumption Agreement substantially in the form of Exhibit 12.08(b) and written
notice of such assignment, payment instructions, addresses, and related
information with respect to such Assignee shall have been given to the Company
and the Agent by such Lender and such Assignee, in substantially the form of
Attachment A to Exhibit 12.08 (a "Notice of Assignment"); (ii) a processing fee
in the amount of $3,500 shall have been paid to the Agent by the assignor Lender
or the Assignee; and (iii) either (A) five Business Days shall have elapsed
after receipt by the Agent of the items referred to in clauses (i) and (ii) or
(B) if earlier, the Agent has notified the assignor Lender and the Assignee of
its receipt of the items mentioned in clauses (i) and (ii) and that it has
acknowledged the assignment by countersigning the Notice of Assignment.
(c) From and after the effective date of any assignment hereunder, (i)
the Assignee thereunder shall be deemed automatically to have become a party
hereto and, to the extent that rights
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and obligations hereunder have been assigned to such Assignee by the assignor
Lender, shall have the rights and obligations of a Lender hereunder and under
each other Loan Document, and (ii) the assignor Lender, to the extent that
rights and obligations hereunder have been assigned by it to the Assignee, shall
be released from its future obligations hereunder and under each other Loan
Document.
(d) Subject to Section 12.08(e), any Lender may at any time sell to one
or more financial institutions or other Persons (each of such Persons being
herein called a "Participant") participating interests in any of the Loans, its
Commitment or other interests of such Lender hereunder; provided, however, that
(i) no participation contemplated in this Section 12.08(d) shall
relieve such Lender from its Commitment or its other obligations
hereunder or under any other Loan Document;
(ii) such Lender shall remain solely responsible for the
performance of its Commitment and such other obligations;
(iii) the Company, the Agent, and the Issuing Bank shall continue
to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement and each other
Loan Document; and
(iv) no Participant, unless such Participant is an Affiliate of
such Lender, shall be entitled to require such Lender to take or
refrain from taking any action hereunder or under any other Loan
Document, except that such Lender may agree with any Participant that
such Lender will not, without such Participant's consent, take any
action of the type described in Section 12.02.
The Company acknowledges and agrees that each Participant, for purposes
of Sections 4.05, 4.06, 5.02, 5.03, 5.05, 5.06 or 12.06, shall be considered a
Lender; provided, however, that for purposes of Sections 4.05, 5.02, 5.03, 5.05
and 5.06, no Participant shall be entitled to receive any payment or
compensation in excess of that to which such Participant's selling Lender would
have been entitled with respect to the amount of such Participant's
participation interest if such Lender had not sold such participation interest.
(e) No assignment (other than an assignment made pursuant to Section
12.08(a)(iii)) or participation of any Committed Loans, or Commitments shall be
effective, and shall instead be null and void, unless it represents an
assignment of or participation in identical percentages of a Lender's
outstanding Tranche A Loans, Tranche B Loans, Tranche A Commitment, Tranche B
Commitment, "Tranche A Loans," "Tranche B Loans," "Tranche A Commitment" and
"Tranche B Commitment" (as those quoted terms are defined in the North American
Timber Agreement).
12.09 Confidentiality. Each Lender agrees that all nonpublic
information provided to it by the Company or by the Agent on behalf of the
Company in connection with this Agreement or any other Loan Document or the
transactions contemplated hereby or thereby will be held and treated by such
Lender, its agents, directors, Affiliates, officers and employees in confidence
and further agrees and undertakes that neither it nor any of its Affiliates
shall use any such information for any purpose or in any manner other than
pursuant to the terms contemplated by this Agreement or relating to other
business transactions between the Company and such Lender. Any Lender may
disclose such information (a) at the request of any bank regulatory authority or
in connection with an examination of such Lender by any such authority or
examiner; (b) pursuant to subpoena or other court process; (c) when required to
do so in
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accordance with the provisions of any applicable law; (d) at the written request
or the express direction of any other agency of any State of the United States
of America or of any other jurisdiction in which such Lender conducts its
business; and (e) to such Lender's independent auditors, counsel and other
professional advisors. Notwithstanding the foregoing, the Company authorizes
each Lender to disclose to any Participant or Assignee and any prospective
Participant or Assignee such financial and other information in such Lender's
possession concerning the Company or its Subsidiaries which has been delivered
to the Lenders pursuant to this Agreement or any other Loan Document or which
has been delivered to the Lenders by the Company in connection with the Lenders'
credit evaluation of the Company and its Subsidiaries prior to entering into
this Agreement; provided that such Participant or Assignee or prospective
Participant or Assignee agrees in writing to such Lender to keep such
information confidential to the same extent as required of the Lenders
hereunder.
12.10 Survival. The obligations of the Company under Sections 4.05,
5.02, 5.03, 5.05, 5.06, 12.04 and 12.05, and the obligations of the Lenders
under Sections 4.05(i) and 11.07, shall in each case survive the repayment of
the Loans and all other Obligations and the termination of this Agreement and
the Commitments; provided, however, that no request for reimbursement pursuant
to such Sections (other than Sections 12.04(b) and (c) and 12.05) may be made
more than six months after the termination of this Agreement and the
Commitments. The representations and warranties made by the Company in this
Agreement and by each Loan Party in each other Loan Document shall survive the
execution and delivery of this Agreement and such other Loan Document.
12.11 Severability. Any provision of this Agreement or any other Loan
Document which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.
12.12 Headings. The various headings of this Agreement are inserted for
convenience only and shall not affect the meaning or interpretation of this
Agreement or any provisions hereof.
12.13 No Third Parties Benefited. This Agreement is made and entered
into for the sole protection and legal benefit of the Company, the Lenders, the
Agent and the Agent-Related Persons, and their permitted successors and assigns,
and no other Person shall be a direct or indirect legal beneficiary of, or have
any direct or indirect cause of action or claim in connection with, this
Agreement or any of the other Loan Documents.
12.14 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
12.15 Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto on separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
12.16 ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
EMBODY THE ENTIRE AGREEMENT AND UNDERSTANDING AMONG THE COMPANY, THE LENDERS AND
THE AGENT AND SUPERSEDE ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS AND
UNDERSTANDINGS OF SUCH PERSONS, VERBAL OR WRITTEN, RELATING TO THE SUBJECT
MATTER HEREOF EXCEPT FOR THE FEE LETTER AND ANY PRIOR ARRANGEMENTS MADE WITH
RESPECT TO THE PAYMENT
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BY THE COMPANY OF (OR ANY INDEMNIFICATION FOR) ANY FEES, COSTS OR EXPENSES
PAYABLE TO OR INCURRED (OR TO BE INCURRED) BY OR ON BEHALF OF THE AGENT OR THE
LENDERS.
12.17 WAIVER OF JURY TRIAL. EACH OF THE AGENT, THE LENDERS AND THE
COMPANY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING
OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING
INTO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
GEORGIA-PACIFIC CORPORATION
By: /s/Danny W. Huff
Name:
Title: Vice President and Treasurer
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION,
as Agent, Issuing Bank, and as Lender
By: /s/Michael Balok
Name:
Title: Managing Director
COMMERZBANK AG,
NEW YORK BRANCH,
as Documentation Agent
By: /s/Harry P. Yergey
Name:
Title: SVP & Manager
By: /s/Brian J. Campbell
Name:
Title: Vice President
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THE CHASE MANHATTAN BANK,
as Co-Syndication Agent
By: /s/ Peter S. Predun
Name:
Title: Vice President
CITIBANK, N.A.,
as Co-Syndication Agent
By: /s/David L. Harris
Name:
Title: Vice President
THE BANK OF NEW YORK,
as Managing Agent
By: /s/David C. Siegel
Name:
Title: Vice President
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
By: /s/M. R. Marron
Name:
Title: Vice President & Manager
CIBC INC.
By: /s/Nora Q. Catiis
Name:
Title: Executive Director
CIBC World Markets Corp. As Agent
FIRST NATIONAL BANK OF CHICAGO,
as Managing Agent
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By: /s/David T. McNeela
Name:
Title: Vice President
HSBC BANK USA,
as Managing Agent
By: /s/Jeremy P. Bollington
Name:
Title: Vice President
THE SANWA BANK, LIMITED, NEW YORK BRANCH
By: /s/Masahito Okubo
Name:
Title: Vice President
THE SUMITOMO BANK, LIMITED
By: /s/C. Michael Garrido
Name:
Title: Senior Vice President
SUNTRUST BANK, ATLANTA,
as Managing Agent
By: /s/W. David Wisdom
Name:
Title: Vice President
TORONTO DOMINION (TEXAS), INC.,
as Managing Agent
By: /s/Sheila M. Conley
Name:
Title: Vice President
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UBS AG, STAMFORD BRANCH,
as Managing Agent
By: /s/Paul R. Morrison
Name:
Title: Executive Director
By: /s/Andrew N. Taylor
Name:
Title: Associate Director
WACHOVIA BANK NA,
as Managing Agent
By: /s/Anne L. Sayles
Name:
Title: Vice President
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EXHIBIT 10.18
CREDIT AGREEMENT
among
NORTH AMERICAN TIMBER CORP.
THE LENDERS NAMED HEREIN
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent,
COMMERZBANK AG,
NEW YORK BRANCH,
as Documentation Agent,
THE CHASE MANHATTAN BANK and CITIBANK, N.A.,
as Co-Syndication Agents
and
BANC OF AMERICA SECURITIES LLC,
Sole Book Manager and Sole Lead Arranger,
$1,000,000,000
Dated as of July 22, 1999
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS AND ACCOUNTING TERMS
1.01 Certain Defined Terms. 1
1.02 Computation of Time Periods. 14
1.03 Accounting Matters 14
1.04 Certain Terms 14
ARTICLE 2 AMOUNTS AND TERMS OF THE LOANS
2.01 Committed Loans. 14
2.02 Procedure for Committed Borrowings 15
2.03 Bid Borrowings 16
2.04 Procedure for Bid Borrowings 16
2.05 Evidence of Indebtedness 18
2.06 Optional Reduction of the Commitments 18
2.07 Repayment 19
2.08 Optional Prepayments 19
2.09 Interest 19
2.10 Default Interest 20
2.11 Continuation and Conversion Elections for Committed
Loans. 20
ARTICLE 3 THE LETTERS OF CREDIT
3.01 The Letter of Credit Subfacility 21
3.02 Issuance, Amendment and Renewal of Letters of Credit 23
3.03 Role of the Issuing Bank. 24
3.04 Obligations Absolute. 25
3.05 Cash Collateral Pledge 26
3.06 Letter of Credit Fees. 26
3.07 International Standby Practices. 26
ARTICLE 4 FEES; PAYMENTS; TAXES
4.01 Fees. 27
4.02 Computation of Interest, Fees. 27
4.03 Payments by the Company. 28
4.04 Payments by the Lenders 28
4.05 Taxes 29
4.06 Sharing of Payments, Etc. 33
ARTICLE 5 CHANGES IN CIRCUMSTANCES; ETC.
5.01 Eurodollar Rate Protection 33
5.02 Additional Interest on Eurodollar Loans. 33
5.03 Increased Costs. 34
5.04 Illegality 34
5.05 Capital Adequacy. 34
5.06 Funding Losses. 34
5.07 Funding; Certificates of Lenders. 35
i
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5.08 Change of Lending Office; Limitation on Increased Costs 36
5.09 Replacement of Lenders 36
ARTICLE 6 REPRESENTATIONS AND WARRANTIES
6.01 Corporate Existence; Compliance with Law. 36
6.02 Corporate Power; Authorization 37
6.03 Enforceable Obligations. 37
6.04 Taxes 38
6.05 Financial Matters 38
6.06 Litigation 38
6.07 Subsidiaries 38
6.08 Liens 38
6.09 No Burdensome Restrictions; No Defaults. 38
6.10 Investment Company Act; Public Utility Holding Company
Act 39
6.11 Margin Regulations. 39
6.12 Environmental Matters. 39
6.13 Labor Matters 40
6.14 ERISA Plans. 40
6.15 Y2K Review 40
6.16 Swap Obligations 41
6.17 Full Disclosure 41
ARTICLE 7 CONDITIONS PRECEDENT
7.01 Conditions Precedent to the First Loan 41
7.02 Additional Conditions Precedent to the First Loan 42
7.03 Conditions Precedent to Each Committed Loan and
Letter of Credit 42
7.04 Conditions Precedent to Each Bid Borrowing. 43
ARTICLE 8 AFFIRMATIVE COVENANTS
8.01 Application of Proceeds 43
8.02 Compliance with Laws, Etc. 43
8.03 Payment of Taxes, Etc. 43
8.04 Maintenance of Insurance 44
8.05 Preservation of Corporate Existence, Etc. 44
8.06 Access 44
8.07 Keeping of Books 44
8.08 Maintenance of Properties, Etc. 44
8.09 Financial Statements. 44
8.10 Reporting Requirements. 45
8.11 ERISA Plans 45
8.12 Environmental Compliance; Notice 45
8.13 New Subsidiaries. 46
ARTICLE 9 NEGATIVE COVENANTS
9.01 Liens, Etc. 46
9.02 Sale-Leaseback Transactions. 48
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9.03 Mergers, Etc. 48
9.04 Transactions with Affiliates. 49
9.05 Accounting Changes. 49
9.06 Margin Regulations. 49
9.07 Negative Pledges, Etc 49
9.08 Leverage Ratio 49
ARTICLE 10 EVENTS OF DEFAULT
10.01 Events of Default 49
10.02 Remedies. 51
ARTICLE 11 THE AGENT
11.01 Appointment. 52
11.02 Delegation of Duties 52
11.03 Liability of Agent 52
11.04 Reliance by Agent 53
11.05 Notice of Default 53
11.06 Credit Decision. 53
11.07 Indemnification 54
11.08 Agent in Individual Capacity 54
11.09 Successor Agent 54
11.10 Documentation, Co-Syndication, Managing Agents 55
ARTICLE 12 MISCELLANEOUS
12.01 Notices, Etc. 55
12.02 Amendments, Etc. 55
12.03 No Waiver; Remedies 56
12.04 Costs and Expenses 56
12.05 Indemnity 57
12.06 Right of Set-off. 58
12.07 Binding Effect 58
12.08 Assignments, Participations, Etc. 58
12.09 Confidentiality 60
12.10 Survival 60
12.11 Severability 60
12.12 Headings 61
12.13 No Third Parties Benefited. 61
12.14 Governing Law 61
12.15 Execution in Counterparts 61
12.16 ENTIRE AGREEMENT 61
12.17 WAIVER OF JURY TRIAL 61
SCHEDULES
Schedule Description
- -------- -----------
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1.01(a) Commitments; Commitment Percentages
1.01(b) Lending Offices
6.02(d) Corporate Power; Authorizations
6.12 Environmental Matters
6.13 Labor Matters
6.14 ERISA
9.01 Existing Liens
EXHIBITS
Exhibit Description
- ------- -----------
2.02(a) Form of Notice of Borrowing
2.04(a) Form of Competitive Bid Request
2.05(b) Form of Promissory Note (Committed Loans)
2.05(c) Form of Promissory Note (Bid Loans)
2.11(b) Form of Notice of Conversion/Continuation
7.01(c) Form of Parent Guaranty
7.01(d) Form of Opinion of Counsel for the Company
7.01(e) Form of Contribution Agreement
7.02(d) Form of Officer's Closing Certificate
8.09(c) Form of Compliance Certificate
8.13(a) Form of Subsidiary Guaranty
12.08(b) Form of Assignment and Assumption Agreement
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CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of July 22, 1999 among NORTH
AMERICAN TIMBER CORP., a Delaware corporation (the "Company"), the various
LENDERS that are, or may from time to time become, party hereto (the "Lenders")
and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as administrative
agent for the Lenders (in such capacity, the "Agent"), COMMERZBANK AG, NEW YORK
BRANCH, as Documentation Agent, and THE CHASE MANHATTAN BANK and CITIBANK, N.A.,
as Co-Syndication Agents.
WHEREAS, the Company has obtained commitments from the Lenders,
pursuant to which the Lenders are willing to make loans to the Company and to
provide certain other credit facilities to the Company (including a competitive
bid facility) in a maximum aggregate principal amount at any one time
outstanding not to exceed $1,000,000,000, on the terms and subject to the
conditions set forth herein;
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS AND ACCOUNTING TERMS
1.01 Certain Defined Terms. As used in this Agreement and in any
Schedules and Exhibits to this Agreement, the following terms have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"Adjusted Reference Rate" means the fluctuating interest rate per annum
equal to the higher of (a) the sum of the Federal Funds Rate plus 1/2% and (b)
the rate of interest (the "Reference Rate") publicly announced from time to time
by Bank of America at its executive offices, as its reference rate or prime
rate. The Reference Rate is a rate set by Bank of America based upon various
factors, including Bank of America's cost and desired return, general economic
conditions and other factors, and is used as a reference point for pricing some
loans, which may be priced at, above or below the Reference Rate. Any change in
the Reference Rate shall take effect at the opening of business on the day
specified in the public announcement of such change.
"Affiliate" means, with respect to any Person, any Subsidiary of such
Person and any other Person which, directly or indirectly, controls, or is
controlled by, or is under common control with, such Person (excluding any
trustee under, or any committee with responsibility for administering, any
Plan). A Person shall be deemed to control another Person if such Person
possesses, directly or indirectly, the power:
(a) to vote 10% or more of the securities having ordinary
voting power for the election of directors of such other Person; or
(b) to direct or cause the direction of the management and
policies of such other Person, whether through the ownership of voting
securities, by contract or otherwise.
"Agent" means Bank of America in its capacity as administrative agent
for the Lenders, together with any successor thereto in such capacity.
"Agent-Related Persons" means Bank of America and any successor agent
arising under Section 11.09 and any successor letter of credit issuing bank
hereunder, together with their respective
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Affiliates (including, in the case of Bank of America, the Arranger), and the
officers, directors, employees, agents and attorneys-in-fact of such Persons and
Affiliates.
"Aggregate Tranche A Commitments" means the aggregate amount of the
Tranche A Commitments of all the Lenders as in effect from time to time.
"Aggregate Tranche B Commitments" means the aggregate amount of the
Tranche B Commitments of all the Lenders as in effect from time to time.
"Agreement" means this Credit Agreement.
"Arranger" means Banc of America Securities LLC.
"Assignee" means any Person which becomes a party to this Agreement
pursuant to Section 12.08.
"Available Tranche A Commitments" means, at any time, the excess, if
any, of the Aggregate Tranche A Commitments in effect at such time over the sum
of (a) the aggregate principal amount of all Tranche A Loans then outstanding,
plus (b) the aggregate principal amount of all Tranche A Bid Loans then
outstanding, plus (c) the outstanding Tranche A L/C Obligations.
"Available Tranche B Commitments" means, at any time, the excess, if
any, of the Aggregate Tranche B Commitments in effect at such time over the sum
of (a) the aggregate principal amount of all Tranche B Loans then outstanding,
plus (b) the aggregate principal amount of all Tranche B Bid Loans then
outstanding, plus (c) the outstanding Tranche B L/C Obligations.
"Bank of America" means Bank of America National Trust and Savings
Association, a national banking association and its successors by merger and
permitted assigns.
"Base Rate" has the meaning specified in Section 2.04(a)(iv).
"Base Rate Bid Loan" means any Bid Loan that bears interest at a rate
determined with reference to a Base Rate.
"Bid Borrowing" means an extension of credit hereunder consisting of
one or more Bid Loans made to the Company on the same day by one or more
Lenders.
"Bid Loan" means either a Tranche A Bid Loan or a Tranche B Bid Loan.
"Borrowing" means a Bid Borrowing or a Committed Borrowing.
"Business Day" means any day other than a Saturday, Sunday or other day
on which commercial banks in New York City, New York, or San Francisco,
California, are authorized or required by law to close and, if the applicable
Business Day relates to any Eurodollar Loan, means such a day on which dealings
are carried on in the London interbank market.
"Cash Collateralize" means to pledge and deposit with or deliver to the
Agent, for the benefit of the Agent, the Issuing Bank and the Lenders, as
collateral for the L/C Obligations, cash or deposit account balances pursuant to
documentation in form and substance satisfactory to the Agent and the Issuing
Bank (which documents are hereby consented to by the Lenders). Derivatives of
such term shall have corresponding meaning. The Company hereby grants the Agent,
for the benefit of the Agent, the Issuing
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Bank and the Lenders, a security interest in all such cash and deposit account
balances. Cash collateral shall be maintained in blocked, non-interest bearing
deposit accounts at Bank of America.
"CERCLA" means the Comprehensive Environmental Response Compensation
and Liability Act of 1980.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.
"Closing Date" means the date on which all the conditions precedent set
forth in Sections 7.01 and 7.02 shall have been satisfied or waived.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment" means for any Lender, either its Tranche A Commitment or
Tranche B Commitment, as applicable.
"Commitments" means, for any Lender, the sum of its Tranche A
Commitment and Tranche B Commitment.
"Commitment Percentage" means, as to any Lender at any time, the
percentage of the aggregate Commitments represented by such Lender's Commitment
at such time, as set forth on Schedule 1.01(a), as such percentage may be
modified from time to time in accordance with Notices of Assignment delivered
hereunder pursuant to Section 12.08.
"Committed Borrowing" means an extension of credit hereunder consisting
of Tranche A Loans or Tranche B Loans (but not both) of the same type made on
the same day by the Lenders ratably according to their respective Commitment
Percentages and, in the case of Eurodollar Loans, having the same Interest
Periods.
"Committed Loan" means a Tranche A Loan or a Tranche B Loan by a Lender
to the Company pursuant to Section 2.01 and may be in the form of a a Eurodollar
Loan or a Reference Rate Loan, each of which shall be a "type" of Committed
Loan.
"Company" has the meaning specified in the introduction to this
Agreement.
"Competitive Bid" means an offer by a Lender to make a Bid Loan in
accordance with Section 2.04(b).
"Competitive Bid Request" has the meaning specified in Section 2.04(a).
"Contractual Obligation" means, with respect to any Person, any
provision of any security issued by such Person or of any agreement,
undertaking, contract, indenture, mortgage, deed of trust or other instrument to
which such Person is a party or by which it or any of its property is subject.
"Contribution Agreement" means the Contribution Agreement of even date
herewith between the Parent and each of its Subsidiaries (including the Company)
now or hereafter parties to the Subsidiary Guaranty or the "Subsidiary Guaranty"
as defined in the Georgia-Pacific Agreement.
"Controlled Group" means all members of a controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which,
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together with the Company, are treated as a single employer under Section 414(b)
or 414(c) of the Code or Section 4001 of ERISA.
"Debt Rating" means, on any date, the rating of the Parent's senior
unsecured long-term Indebtedness, as most recently publicly announced by Moody's
and S&P, whichever is higher; provided, however, that if only one such rating is
available, the applicable interest rate or fee to be determined based on such
rating shall be determined solely by reference to such one rating.
"Default" means any event or condition which, with the giving of notice
or the lapse of time, or both, would become an Event of Default.
"Dollar" and "$" mean lawful money of the United States of America.
"EBITDA" means, as of the end of any Measurement Period, the sum of the
following, calculated for the Parent and its Subsidiaries on a consolidated
basis: (a) net income (or net loss) for such period, plus (b) all amounts
treated as expenses for depreciation, interest and the non-cash amortization of
intangibles of any kind to the extent included in the determination of such net
income (or loss), plus (c) cost of timber harvested by the Company (to the
extent it represents depletion) to the extent included in the determination of
such net income (or loss), plus (d) all accrued taxes on or measured by income
to the extent included in the determination of such net income (or loss);
provided, however, that net income (or loss) shall be computed for these
purposes without giving effect to extraordinary cash gains or non-recurring,
non-cash items.
"Eligible Assignee" means (a) a commercial bank organized under the
laws of the United States, or any state thereof, and having a combined capital
and surplus of at least $250,000,000; (b) a commercial bank organized under the
laws of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
country, and having a combined capital and surplus of at least $250,000,000,
provided that such bank is acting through a branch or agency located in the
United States; (c) a Person that is primarily engaged in the business of
commercial banking and that is (i) a Subsidiary of a Lender, (ii) a Subsidiary
of a Person of which a Lender is a Subsidiary, or (iii) a Person of which a
Lender is a Subsidiary; and (d) any other Person approved in writing by the
Company, the Agent, and the Issuing Bank.
"Environmental Laws" means all applicable federal, state or local
statutes, laws, ordinances, codes, rules and regulations (including consent
decrees and administrative orders) relating to public health and safety and
protection of the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974,
together with the regulations thereunder.
"Eurocurrency Liabilities" has the meaning assigned to that term in
Regulation D of the Federal Reserve Board, as in effect from time to time.
"Eurodollar Loan" means any Committed Loan that bears interest at a
rate determined with reference to LIBOR.
"Eurodollar Reserve Percentage" means the maximum reserve percentage of
any Lender (expressed as a decimal) in effect on the date LIBOR for any Interest
Period is determined under regulations issued from time to time by the Federal
Reserve Board for determining the maximum reserve requirement (including any
emergency, supplemental or other marginal reserve requirement) with respect
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to liabilities or assets consisting of or including Eurocurrency Liabilities
having a term equal to such Interest Period.
"Event of Default" has the meaning specified in Section 10.01.
"Federal Funds Rate" means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Board (including any such
successor, "H.15(519)") for such day opposite the caption "Federal Funds
(Effective)." If on any relevant day such rate is not yet published in
H.15(519), the rate for such day will be the rate set forth in the daily
statistical release designated as the Composite 3:30 p.m. Quotations for U.S.
Government Securities, or any successor publication, published by the Federal
Reserve Bank of New York (including any such successor, the "Composite 3:30 p.m.
Quotations") for such day under the caption "Federal Funds Effective Rate".
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System.
"Fee Letter" means the letter agreement dated the Closing Date between
the Company and Bank of America regarding the payment of certain fees.
"Fixed Rate" means a fixed annual percentage rate.
"Fixed Rate Bid Loan" means any Bid Loan that bears interest determined
with reference to a Fixed Rate.
"Form 1001" has the meaning specified in Section 4.05(f)(i)(B).
"Form 4224" has the meaning specified in Section 4.05(f)(i)(A).
"Form W-8" has the meaning specified in Section 4.05(f)(i)(B).
"Form W-9" has the meaning specified in Section 4.05(f)(i)(A).
"Funded Indebtedness" means, for any day, the sum of (i) all
Indebtedness for Borrowed Money of the Company and its consolidated Subsidiaries
outstanding on such day plus (ii) the aggregate capital invested as of such day
by Persons other than the Company and its consolidated Subsidiaries in
receivables and other accounts sold to such Persons by the Company and its
consolidated Subsidiaries, excluding receivables and other accounts sold in
connection with the sale of a business or the sale of the assets and/or
operations generating such receivables and other accounts.
"GAAP" means, as of any date of determination, generally accepted
accounting principles set forth in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board (or agencies with similar functions of comparable stature and
authority within the accounting profession) or in such other statements by such
other entity as may be in general use by significant segments of the accounting
profession.
"Georgia-Pacific Agreement" means the Credit Agreement, dated as of the
date hereof, by and among the Parent, Bank of America, and the Lenders.
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"Governmental Authority" means any nation or government, any federal,
state, local or other political subdivision thereof and any central bank thereof
and any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Hazardous Material" means:
(a) any "hazardous substance", as defined by CERCLA;
(b) any "hazardous waste", as defined by the Resource
Conservation and Recovery Act, 42 U.S.C. Section 690, et seq., as in
effect from time to time;
(c) any petroleum product; or
(d) any pollutant or contaminant or hazardous, dangerous or
toxic chemical, material or substance within the meaning of any other
applicable federal, state or local law, regulation, ordinance, or
requirement (including consent decrees and administrative orders)
relating to or imposing liability or standards of conduct concerning
any hazardous, toxic or dangerous waste, substance or material, all as
amended or hereafter amended.
"Indebtedness" of any Person means, without duplication, the
consolidated Indebtedness for Borrowed Money of such Person and guaranties of
indebtedness of others provided by such Person, all as determined in accordance
with GAAP consistent with the accounting principles applied in the preparation
of the financial statements referred to in Section 6.05(a).
"Indebtedness for Borrowed Money" of any Person means, without
duplication,
(a) all indebtedness of such Person for borrowed money,
including the Company's Premium Equity Participating Security Units,
whether or not treated as indebtedness under GAAP, until such time as
they are converted into common stock of the Company;
(b) all obligations of such Person issued or assumed as the
deferred purchase price of property or services other than bank
overdrafts and trade accounts payable arising in the ordinary course of
business consistent with past practices;
(c) all obligations of such Person evidenced by notes, bonds,
debentures, commercial paper or similar instruments, including
obligations so evidenced incurred in connection with the acquisition of
property, assets or businesses;
(d) all indebtedness of such Person created or arising under
any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies
of the seller or creditor under such agreement in the event of default
are limited to repossession or sale of such property);
(e) all rental obligations of such Person under leases
capitalized under GAAP as disclosed in the financial statements
delivered pursuant to Section 8.09; and
(f) all indebtedness of such Person or of others referred to
in paragraphs (a) through (e) secured by (or for which the holder of
such indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien upon or in property (including accounts and
contract rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such indebtedness.
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"Indemnified Party" has the meaning specified in Section 12.05(a).
"Interest Payment Date" means (a) (i) with respect to any Eurodollar
Loan, the last day of each Interest Period applicable to such Eurodollar Loan
and, with respect to any Interest Period of six months' duration, the date which
falls three months after the beginning of such Interest Period, and (ii) with
respect to any Reference Rate Loan, the last Business Day of each calendar
quarter and (b) with respect to any Bid Loan, the maturity date or dates
specified by the Company in the relevant Competitive Bid Request.
"Interest Period" means, with respect to any Eurodollar Loan, the
period commencing on the Business Day such Eurodollar Loan is disbursed or
continued as a Eurodollar Loan or on the date on which a Reference Rate Loan or
any portion thereof is converted into a Eurodollar Loan and ending on the date
one, two, three or six months thereafter, as selected by the Company in its
Notice of Borrowing or Notice of Conversion/Continuation; provided that:
(a) in the case of the continuation of a Eurodollar Loan
pursuant to Section 2.11, the Interest Period applicable after the
continuation of such Loan shall commence on the last day of the
preceding Interest Period;
(b) if any Interest Period would otherwise end on a day which
is not a Business Day, that Interest Period shall be extended to the
next succeeding Business Day, unless the result of such extension would
be to carry such Interest Period into another calendar month, in which
event such Interest Period shall end on the immediately preceding
Business Day;
(c) any Interest Period that begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of the calendar month at the
end of such Interest Period; and
(d) no Interest Period for any Eurodollar Loan shall extend
beyond the Tranche A Termination Date, in the case of a Borrowing of
Tranche A Loans, or the Tranche B Termination Date, in the case of a
Borrowing of Tranche B Loans.
"Investments" means all investments, whether by acquisition of stock or
indebtedness, or by loan, advance, transfer of property, capital contribution or
otherwise.
"Investments in Unrestricted Subsidiaries" means Investments made by
the Company or by any Restricted Subsidiary in Unrestricted Subsidiaries, net of
Investments made by Unrestricted Subsidiaries in the Company or any Restricted
Subsidiary. If any corporation which becomes a Restricted Subsidiary after the
date of this Agreement shall, at the time it becomes a Restricted Subsidiary,
have any Investments in an Unrestricted Subsidiary, such Investments shall be
deemed to be Investments made by the Company in such Unrestricted Subsidiary at
the time such corporation becomes a Restricted Subsidiary, in the amount at
which such Investments are then carried on the books of such corporation. If any
corporation shall become an Unrestricted Subsidiary after the date of this
Agreement, the Investments of the Company and its Restricted Subsidiaries in
such corporation shall be deemed to be Investments made at the time such
corporation becomes an Unrestricted Subsidiary, in the amount at which such
Investments are then carried on the books of the Company and its Restricted
Subsidiaries.
"Issuance Date" has the meaning specified in subsection 3.01(a).
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"Issue" means, with respect to any Letter of Credit, to issue or to
extend the expiry of, or to renew or increase the amount of, such Letter of
Credit; and the terms "Issued," "Issuing" and "Issuance" have corresponding
meanings.
"Issuing Bank" means Bank of America in its capacity as issuer of one
or more Letters of Credit hereunder.
"Lender" has the meaning specified in the introduction to this
Agreement and includes each Lender listed on the signature pages hereof and each
Assignee. References to the "Lenders" shall include Bank of America in its
capacity as Issuing Bank; for purposes of clarification only, to the extent that
Bank of America may have any rights or obligations in addition to those of the
Lenders due to its status as Issuing Bank, its status as such will be
specifically referenced.
"Lending Office" means, with respect to any Lender, (a) in the case of
a Committed Loan, the office or offices of such Lender specified as its
"Domestic Lending Office" or "Eurodollar Lending Office", as the case may be,
opposite its name on Schedule 1.01(b) or in the applicable Notice of Assignment,
or such other office or offices of such Lender as such Lender may from time to
time specify to the Company and the Agent and (b) in the case of a Bid Loan, the
office of such Lender notified by such Lender to the Company as its Lending
Office with respect to such Bid Loan or, if such Lender fails to so notify the
Company, such Lender's Domestic Lending Office.
"L/C Advance" means each Lender's participation in any L/C Borrowing in
accordance with its Commitment Percentage.
"L/C Amendment Application" means an application form for amendment of
outstanding standby letters of credit as shall at any time be in use at the
Issuing Bank, as the Issuing Bank shall request.
"L/C Application" means an application form for issuances of standby
letters of credit as shall at any time be in use at the Issuing Bank, as the
Issuing Bank shall request.
"L/C Borrowing" means an extension of credit resulting from a drawing
under any Letter of Credit which shall not have been reimbursed on the date when
made.
"L/C Commitment" means the commitment of the Issuing Bank to Issue, and
the commitment of the Lenders severally to participate in, Letters of Credit
from time to time Issued or outstanding under Article 3, in an aggregate amount
not to exceed on any date the amount of $150,000,000, as the same shall be
reduced as a result of a reduction in the L/C Commitment pursuant to Section
2.06. The L/C Commitment is a part of the combined Commitments, rather than a
separate, independent commitment.
"L/C Obligations" means at any time the sum of Tranche A L/C
Obligations and Tranche B L/C Obligations.
"L/C-Related Documents" means the Letters of Credit, the L/C
Applications, the L/C Amendment Applications and any other document relating to
any Letter of Credit, including any of the Issuing Bank's standard-form
documents for Letter of Credit Issuances.
"Letter of Credit" means any Tranche A Letter of Credit or Tranche B
Letter of Credit.
"LIBOR" means, for any Interest Period:
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(a) the rate of interest per annum (carried out to the fifth decimal
point) equal to the rate determined by the Agent to be the offered rate that
appears on the page of the Telerate Screen that displays an average British
Bankers Association Interest Settlement Rate (such page currently being page
number 3750) for deposits in dollars (for delivery on the first day of such
Interest Period) with a term equivalent to such Interest Period, determined as
of approximately 11:00 a.m. (London time) two Business Days prior to the first
day of such Interest Period; or
(b) in the event the rate referenced in the preceding subsection (a)
does not appear on such page or service or such page or service shall cease to
be available, the rate per annum (carried to the fifth decimal place) equal to
the rate determined by the Agent to be the offered rate on such other page or
other service that displays an average British Bankers Association Interest
Settlement Rate for deposits in dollars (for delivery on the first day of such
Interest Period) with a term equivalent to such Interest Period, determined as
of approximately 11:00 a.m. (London time) two Business Days prior to the first
day of such Interest Period; or
(c) in the event the rates referenced in the preceding subsections (a)
and (b) are not available, the rate per annum determined by the Agent as the
rate of interest at which dollar deposits (for delivery on the first day of such
Interest Period) in same-day funds in the approximate amount of the applicable
Committed Loan and with a term equivalent to such Interest Period would be
offered by its London Branch to major banks in the offshore dollar market at
their request at approximately 11:00 a.m. (London time) two Business Days prior
to the first day of such Interest Period.
"Lien" means any mortgage, security interest, pledge or lien.
"Loan" means a loan by a Lender to the Company pursuant to Article 2 or
Article 3 in the form of a Committed Loan, a Bid Loan, or an L/C Advance.
"Loan Documents" means this Agreement, the Subsidiary Guaranty, the
Parent Guaranty, the Contribution Agreement, the L/C Related Documents, and any
promissory note issued pursuant hereto.
"Loan Parties" means, collectively, the Company and each other Person
(other than the Agent and the Lenders) who is a party to a Loan Document.
"Material Adverse Effect" means, with respect to any event, act,
condition or occurrence of whatever nature (including any adverse determination
in any litigation, arbitration, or governmental investigation or proceeding),
whether singly or in conjunction with any other event or events, act or acts,
condition or conditions, occurrence or occurrences, whether or not related, a
material adverse change in, or a material adverse effect upon, any of (a) the
financial condition, operations, business or properties of the Company and its
Subsidiaries taken as a whole or (b) the legality, validity or enforceability of
any Loan Document.
"Measurement Period" means a period consisting of four consecutive
fiscal quarters of the Company and ending on the last day of the most recently
completed fiscal quarter of the Company.
"Moody's" means Moody's Investors Services, Inc. or any successor to
the rating agency business thereof.
"Net Tangible Assets" means, at any date, the aggregate amount of
assets, including the amount of any receivables or other accounts of the Company
and its Subsidiaries sold in connection with any receivables sale transaction
(less applicable reserves and other properly deductible items) after deducting
therefrom (a) all current liabilities, (b) any item representing Investments in
Unrestricted Subsidiaries and
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(c) all goodwill, trade names, trademarks, patents, unamortized debt discount
and expenses and other like intangibles, all of the foregoing as set forth on
the then most recent consolidated balance sheet of the Company and its
Subsidiaries and computed in accordance with GAAP.
"Net Worth" means, at any date, the excess of Total Assets at such date
over Total Liabilities at such date.
"Notice of Assignment" has the meaning specified in Section 12.08(b).
"Notice of Borrowing" has the meaning specified in Section 2.02(a).
"Notice of Conversion/Continuation" has the meaning specified in
Section 2.11(b).
"Obligations" means all Loans, L/C Obligations and other Indebtedness,
advances, debts, liabilities, obligations, covenants and duties owing by the
Company, or any other Loan Party to any Lender, the Agent, any Affiliate of any
Lender or the Agent or any Indemnified Party, of any kind or nature, present or
future, whether or not evidenced by any note, guaranty or other instrument, but
in each case only as arising under or in connection with this Agreement or under
or in connection with any other Loan Document, whether or not for the payment of
money, whether arising by reason of an extension of credit, loan, guaranty,
indemnification or in any other manner, whether direct or indirect (including
those acquired by assignment), absolute or contingent, due or to become due, now
existing or hereafter arising and however acquired. The term "Obligations"
includes all interest, charges, expenses, fees, attorneys' fees and
disbursements (including the allocated cost of in-house counsel) and any other
sum chargeable to the Company, or any other Loan Party under or in connection
with this Agreement or any other Loan Document.
"Other Taxes" has the meaning specified in Section 4.05(b).
"Parent" means Georgia-Pacific Corporation.
"Parent Guaranty" has the meaning specified in Section 7.01(c).
"Participant" has the meaning specified in Section 12.08(d).
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan", as such term is defined in
Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan as defined in Section 4001(a)(3) of ERISA), and to which the
Company or any corporation, trade, or business that is, along with the Company,
a member of its Controlled Group, may have liability, including a reasonable
possibility of liability due to having been a substantial employer within the
meaning of Section 4063 of ERISA at any time during the preceding five years, or
by reason of being deemed to be a contributing sponsor under Section 4069 of
ERISA.
"Permitted Liens" means the Liens permitted or required by Section
9.01.
"Permitted Swap Obligations" means all obligations (contingent or
otherwise) of the Company or any Subsidiary existing or arising under Swap
Contracts, provided that such obligations are (or were) entered into by such
Person in the ordinary course of business for the purpose of directly mitigating
risks associated with liabilities, commitments or assets held or reasonably
anticipated by such Person, or
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changes in the value of securities issued by such Person in conjunction with a
securities repurchase program not otherwise prohibited hereunder, and not for
purposes of speculation or taking a "market view".
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture or other entity, or a government or any political subdivision or agency
thereof.
"Plan" means each Pension Plan or Welfare Plan, and any other employee
benefit plan (within the meaning of Section 3(3) of ERISA) sponsored or
maintained by the Company or any Subsidiary of the Company.
"Principal Property" means any mill, manufacturing plant, manufacturing
facility or timberlands, owned by the Company and/or one or more Restricted
Subsidiaries and located within the continental United States of America;
provided, however, that the term "Principal Property" shall not include (a) any
such mill, plant, facility or timberlands or portion thereof (i) which is
financed by obligations issued by a State, a Territory or a possession of the
United States of America or any political subdivision of any of the foregoing,
or the District of Columbia, the interest on which is excludable from gross
income of the holders thereof pursuant to the provisions of Section 103(a)(1)
(but only if by reason of Section 103(b)(4)(E) or (F)) of the Internal Revenue
Code of 1954, as amended (or any predecessor or successor to such provision) as
in effect at the time of the issuance of such obligations, or (ii) which in the
opinion of the Company's Board of Directors is not of material importance to the
total business conducted by the Company and the Restricted Subsidiaries,
considered as a whole; or (b) any timberlands designated by the Company's Board
of Directors as being held primarily for development and/or sale rather than for
the production of timber; or (c) any minerals or mineral rights.
"Principal Subsidiary" means any Subsidiary of the Company having
assets constituting at least 10% of the Company's consolidated assets.
"Reference Rate" has the meaning specified in the definition of
Adjusted Reference Rate.
"Reference Rate Loan" means any Loan that bears interest at a rate
determined with reference to the Adjusted Reference Rate.
"Release" means a "release", as such term is defined in CERCLA.
"Replacement Lender" has the meaning specified in Section 5.09.
"Required Lenders" means at any time Lenders having 51% or more of the
Commitments and, if the Commitments have been terminated, Lenders holding 51% or
more of the then aggregate unpaid principal amount of the Loans made by the
Lenders.
"Requirement of Law" means, as to any Person, the charter and by-laws
or other organization or governing documents of such Person, and any law, rule
or regulation including the requirements of Environmental Laws and ERISA, the
Securities Act of 1933, the Securities Exchange Act of 1934, Regulations T, U
and X of the Federal Reserve Board or any order, decree or other determination
of an arbitrator or a court or other Governmental Authority applicable to or
binding upon such Person or any of its property or to which such Person or any
of its property is subject.
"Responsible Officer" means, with respect to any Person, the Chief
Executive Officer, the President, any Vice-Chairman or any of the Vice
Presidents or the Treasurer of such Person or, with
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respect to financial matters, the Chief Financial Officer, the Executive Vice
President-Finance and Chief Financial Officer or the Vice President and
Treasurer of such Person.
"Restricted Subsidiary" means any Subsidiary of the Company (a)
substantially all of the property of which is located within the continental
United States of America and (b) which itself, or together with the Company
and/or one or more other Restricted Subsidiaries, owns a Principal Property.
"Sale-Leaseback Transaction" has the meaning specified in Section 9.02.
"S&P" means Standard & Poor's or any successor to the rating agency
business thereof.
"Subsidiary" means, with respect to any Person, any corporation of
which more than 50% of the outstanding capital stock having ordinary voting
power to elect a majority of the board of directors (or others performing a
comparable function) of such corporation is at the time directly or indirectly
owned by such Person, by such Person and one or more other Subsidiaries of such
Person, or by one or more other Subsidiaries of such Person.
"Subsidiary Guaranty" means a guaranty in the form attached as Exhibit
8.13(a).
"Swap Contract" means any agreement, whether or not in writing,
relating to any transaction that is a rate swap, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap or
option, bond, note or bill option, interest rate option, forward foreign
exchange transaction, cap, collar or floor transaction, currency swap,
cross-currency rate swap, swaption, currency option or any other, similar
transaction (including any option to enter into any of the foregoing) or any
combination of the foregoing, and, unless the context otherwise clearly
requires, any master agreement relating to or governing any or all of the
foregoing.
"Swap Termination Value" means, in respect of any one or more Swap
Contracts, after taking into account the effect of any legally enforceable
netting agreement relating to such Swap Contracts, (a) for any date on or after
the date such Swap Contracts have been closed out and termination value(s)
determined in accordance therewith, such termination value(s), and (b) for any
date prior to the date referenced in clause (a) the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, as determined by the Agent
based upon one or more mid-market or other readily available quotations provided
by any recognized dealer in such Swap Contracts (which may include any Lender).
"Taxes" has the meaning specified in Section 4.05(a).
"Total Assets" means, at any date, without duplication, the total
consolidated assets of the Company and its Subsidiaries, as determined in
accordance with GAAP.
"Total Liabilities" means, at any date, without duplication, the total
consolidated liabilities of the Company and its Subsidiaries, determined in
accordance with GAAP.
"Tranche A Bid Loan" means a Loan made by a Lender to the Company
pursuant to subsection 2.03(a) and may be a Base Rate Bid Loan or a Fixed Rate
Bid Loan.
"Tranche A Commitment" means for each Lender, as the context may
require, (a) the amount in dollars set forth on Schedule 1.01(a) opposite the
name of such Lender under the heading "Tranche A Commitments" or as otherwise
set forth in any Notice of Assignment, as such amount may be reduced pursuant to
Section 2.06 or as a result of one or more assignments pursuant to Section
12.08; or (b) the
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obligation of such Lender to extend credit to the Company hereunder in the
amount specified in the immediately preceding clause (a).
"Tranche A L/C Obligations" means at any time the sum of (a) the
aggregate undrawn amount of all Tranche A Letters of Credit then outstanding,
plus (b) the amount of all unreimbursed drawings under all Tranche A Letters of
Credit, including all outstanding L/C Borrowings made on account of Tranche A
Letters of Credit.
"Tranche A Letter of Credit" means any letter of credit Issued by the
Issuing Bank pursuant to Article 3 and allocated in the Company's request
therefor to the Tranche A Commitments.
"Tranche A Loan" has the meaning set forth in subsection 2.01(a).
"Tranche A Termination Date" means July 20, 2000.
"Tranche B Bid Loan" means a Loan made by a Lender to the Company
pursuant to subsection 2.03(b) and may be a Base Rate Bid Loan or a Fixed Rate
Bid Loan.
"Tranche B Commitment" means for each Lender, as the context may
require (a) the amount in dollars set forth on Schedule 1.01(a) opposite the
name of such Lender under the heading "Tranche B Commitments" or as otherwise
set forth in any Notice of Assignment, as such amount may be reduced pursuant to
Section 2.06 or as a result of one or more assignments pursuant to Section
12.08; or (b) the obligation of such Lender to extend credit to the Company
hereunder in the amount specified in the immediately preceding clause (b).
"Tranche B L/C Obligations" means at any time the sum of (a) the
aggregate undrawn amount of all Tranche B Letters of Credit then outstanding,
plus (b) the amount of all unreimbursed drawings under all Tranche B Letters of
Credit, including all outstanding L/C Borrowings made on account of Tranche B
Letters of Credit.
"Tranche B Letter of Credit" means any letter of credit Issued by the
Issuing Bank pursuant to Article 3 and allocated in the Company's request
therefor to the Tranche B Commitments.
"Tranche B Loan" has the meaning set forth in Section 2.01(b).
"Tranche B Termination Date" means July 22, 2004.
"Unrestricted Subsidiary" means any Subsidiary of the Company other
than a Restricted Subsidiary.
"Utilization Fee" has the meaning specified in Section 4.01(a).
"Value" means, with respect to a Sale-Leaseback Transaction, as of any
particular time, the amount equal to the greater of (a) the net proceeds of the
sale or transfer of the property leased pursuant to such Sale-Leaseback
Transaction or (b) the fair value in the opinion of the Board of Directors of
the Company of such property at the time of entering into such Sale-Leaseback
Transaction, in either case divided first by the number of full years of the
term of the lease and then multiplied by the number of full years of such term
remaining at the time of determination, without regard to any renewal or
extension options contained in the lease.
"Welfare Plan" means a "welfare plan", as such term is defined in
Section (3)(1) of ERISA.
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1.02 Computation of Time Periods. In this Agreement, in the computation
of periods of time from a specified date to a later specified date, the word
"from" means "from and including" and the words "to" and "until" each means "to
but excluding."
1.03 Accounting Matters. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP, and all financial statements
referred to in Sections 8.09(a) and (b) shall be prepared in accordance with
GAAP; provided, however, that all computations determining compliance with
Article 8 shall use accounting principles consistent with those applied in the
preparation of the financial statements of the Company referred to in Section
6.05(a). The parties hereto agree that to the extent that any change in GAAP
affects the calculation of the financial covenant contained herein, the Agent
(at the direction of the Required Lenders) and the Company shall negotiate in
good faith to amend such financial covenant to account for such changes in GAAP.
1.04 Certain Terms. The meanings of defined terms are equally
applicable to the singular and plural forms of the defined terms.
The words "herein", "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole, including the Exhibits and Schedules
hereto, and not to any particular Article, Section, paragraph or clause in this
Agreement. The word "including" when used herein is not intended to be exclusive
and means "including, without limitation." References herein to an Article,
Section, paragraph or clause shall refer to the appropriate Article, Section,
paragraph or clause in this Agreement.
Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments shall be
deemed to include all subsequent amendments and other modifications thereto, but
only to the extent such amendments and other modifications are not prohibited by
the terms of any Loan Document, and (ii) references to any statute or regulation
are to be construed as including all statutory and regulatory provisions
consolidating, amending, replacing, supplementing or interpreting the statute or
regulation.
ARTICLE 2
AMOUNTS AND TERMS OF THE LOANS
2.01 Committed Loans.
(a) Tranche A Loans. Each Lender severally agrees, on the terms and
subject to the conditions hereinafter set forth, to make one or more Committed
Loans to the Company on any Business Day during the period commencing on the
Closing Date and ending on the Business Day next preceding the Tranche A
Termination Date (each such loan, a "Tranche A Loan"), in an aggregate principal
amount at any time outstanding which does not exceed such Lender's Tranche A
Commitment; provided, however, that after giving effect to any Committed
Borrowing of Tranche A Loans, (i) the aggregate principal amount of all Tranche
A Loans then outstanding, plus (ii) the aggregate principal amount of all
Tranche A Bid Loans then outstanding, plus (iii) the outstanding Tranche A L/C
Obligations shall not exceed the Aggregate Tranche A Commitments. Any principal
amount of the Tranche A Loans which is repaid or prepaid by the Company may be
reborrowed within the limitations set forth in this Section 2.01(a).
(b) Tranche B Loans. Each Lender severally agrees, on the terms and
subject to the conditions hereinafter set forth, to make one or more Committed
Loans to the Company on any Business Day during the period commencing on the
Closing Date and ending on the Business Day next preceding the Tranche B
Termination Date (each such loan, a "Tranche B Loan"), in an aggregate principal
amount at any time outstanding which does not exceed such Lender's Tranche B
Commitment.; provided,
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however, that after giving effect to any Committed Borrowing of Tranche B Loans,
(i) the aggregate principal amount of all Tranche B Loans then outstanding, plus
(ii) the aggregate principal amount of all Tranche B Bid Loans then outstanding,
plus (iii) the outstanding Tranche B L/C Obligations shall not exceed the
Aggregate Tranche B Commitments. Any principal amount of the Tranche B Loans
which is repaid or prepaid by the Company may be reborrowed within the
limitations set forth in this Section 2.01(b).
2.02 Procedure for Committed Borrowings.
(a) Each Committed Borrowing shall be made on notice, delivered by the
Company to the Agent not later than 12:00 noon (New York City time) at least (i)
four Business Days prior to the date of such proposed Borrowing, in the case of
Eurodollar Loans, and (ii) one Business Day prior to the date of such proposed
Borrowing, in the case of Reference Rate Loans. Each such notice of a Committed
Borrowing (a "Notice of Borrowing") shall be irrevocable and shall be delivered
by facsimile, in substantially the form of Exhibit 2.02(a), specifying therein:
(i) the date of such Borrowing, which shall be a Business Day;
(ii) the amount of such Borrowing which, in the case of a
Borrowing of Eurodollar Loans, shall be in the amount of $20,000,000 or
an integral multiple of $10,000,000 in excess thereof and, in the case
of a Borrowing of Reference Rate Loans, shall be in the amount of
$10,000,000 or an integral multiple of $5,000,000 in excess thereof and
shall not, in any case, exceed the unused Aggregate Tranche A
Commitments or Aggregate Tranche B Commitments, as applicable, set
forth in Section 2.01(a) or (b), respectively, on the date such
Borrowing is made (after giving effect to each payment and prepayment
made on such date);
(iii) whether such Borrowing is to be of Tranche A Loans or
Tranche B Loans;
(iv) whether such Borrowing is to be comprised of Eurodollar
Loans or Reference Rate Loans; and
(v) if such Borrowing is to be comprised of Eurodollar Loans,
the duration of the initial Interest Period applicable to such Loans.
If the Notice of Borrowing shall fail to specify the duration of the initial
Interest Period for any Committed Borrowing comprised of Eurodollar Loans, such
Interest Period shall be one month.
(b) Upon receipt of a Notice of Borrowing, the Agent shall promptly
notify each Lender thereof and of the amount of such Lender's share of such
Borrowing determined on the basis of such Lender's Commitment Percentage. Each
Lender shall make available to the Agent the amount of its ratable share of such
Borrowing in the manner and at the time set forth in Section 4.04(a).
(c) After giving effect to any Committed Borrowing, there shall not be
more than seven different Interest Periods in effect.
(d) Unless any applicable condition specified in Article 7 has not been
satisfied or waived, the Agent will make the funds received from the Lenders
promptly available to the Company by crediting the account of the Company on the
books of Bank of America, or such other account as shall have been specified by
the Company, with the aggregate of the amounts made available to the Agent by
the Lenders and in like funds as received by the Agent.
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2.03 Bid Borrowings.
(a) In addition to Committed Borrowings pursuant to Section 2.01, each
Lender severally agrees that the Company may, as set forth in Section 2.04, from
time to time on any Business Day during the period commencing on the Closing
Date and ending on the Business Day next preceding the Tranche A Termination
Date request the Lenders to submit offers to make Tranche A Bid Loans to the
Company; provided, however, that the Lenders may, but shall have no obligation
to, submit such offers and the Company may, but shall have no obligation to,
accept any such offers; and provided, further, that at no time shall (a)(i) the
aggregate principal amount of all Tranche A Bid Loans made by all Lenders then
outstanding plus (ii) the aggregate principal amount of all Tranche A Loans then
outstanding plus (iii) the outstanding Tranche A L/C Obligations exceed (b) the
Aggregate Tranche A Commitments.
(b) In addition to Committed Borrowings pursuant to Section 2.01, each
Lender severally agrees that the Company may, as set forth in Section 2.04, from
time to time on any Business Day during the period commencing on the Closing
Date and ending on the Business Day next preceding the Tranche B Termination
Date request the Lenders to submit offers to make Tranche B Bid Loans to the
Company; provided, however, that the Lenders may, but shall have no obligation
to, submit such offers and the Company may, but shall have no obligation to,
accept any such offers; and provided, further, that at no time shall (a)(i) the
aggregate principal amount of all Tranche B Bid Loans made by all Lenders then
outstanding plus (ii) the aggregate principal amount of all Tranche B Loans then
outstanding plus (iii) the outstanding Tranche B L/C Obligations exceed (b) the
Aggregate Tranche B Commitments.
2.04 Procedure for Bid Borrowings.
(a) The Company may request a Bid Borrowing hereunder by delivering to
the Agent by facsimile not later than 11:00 a.m. (New York City time) at least
(i) four Business Days prior to the date of the proposed Borrowing, in the case
of a request for Base Rate Bid Loans, and (ii) two Business Days (or, in the
event the Company desires that Competitive Bids be furnished on the date of the
proposed Bid Borrowing, one Business Day) prior to the date of the proposed Bid
Borrowing in the case of a request for Fixed Rate Bid Loans, a solicitation for
Bid Loans (a "Competitive Bid Request"), in substantially the form of Exhibit
2.04(a) specifying therein:
(i) the date of such Bid Borrowing, which shall be a Business
Day;
(ii) the aggregate amount of such Bid Borrowing, which shall
be a minimum amount of $10,000,000 in excess thereof and shall not, in
the case of a Tranche A Bid Borrowing, exceed the Available Tranche A
Commitments on the date such proposed Borrowing is made (after giving
effect to each payment and prepayment made on such date) or, in the
case of a Tranche B Bid Borrowing, exceed the Available Tranche B
Commitments on the date such proposed Borrowing is made (after giving
effect to each payment and prepayment made on such date);
(iii) the maturity date or dates for the partial or complete
repayment of each Bid Loan to be made as part of such Bid Borrowing
(none of which shall occur after the Tranche B Termination Date) and,
in the case of each partial repayment, the amount thereof;
(iv) whether the Bid Loans requested are Tranche A Bid Loans
or Tranche B Bid Loans, and whether the Bid Loans requested are Base
Rate Bid Loans or Fixed Rate Bid Loans and, in the case of Base Rate
Bid Loans, the basis of calculation of such interest rate (the "Base
Rate") to be used by the Lenders in determining the rate or rates of
interest to be offered by them; and
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(v) any other terms to be applicable to such Bid
Borrowing (including the extent to which terms similar to Section 4.05
shall be applicable to such Bid Borrowing).
The Agent shall promptly notify each Lender of its receipt of a Competitive Bid
Request by sending such Lender by facsimile a copy of such Competitive Bid
Request.
(b) (i) Each Lender may, in response to a Competitive Bid Request, at
its option, irrevocably submit a Competitive Bid containing an offer to make one
or more Bid Loans at a rate or rates of interest specified by such Lender in its
sole discretion. Each Competitive Bid must be submitted to the Company before
10:00 a.m. (New York City time) (A) three Business Days prior to the date of the
proposed Bid Borrowing, in the case of a request for Base Rate Bid Loans, and
(B) one Business Day prior to the date of the proposed Bid Borrowing (or, in the
event the Company desires that Competitive Bids be furnished on the date of the
proposed Bid Borrowing, on the date of such proposed Borrowing), in the case of
a request for Fixed Rate Bid Loans.
(ii) Each Competitive Bid (which shall be by telephone,
promptly confirmed in writing) shall specify:
(A) the minimum amount of each Bid Loan for which
such Competitive Bid is being made (which shall be at least
$5,000,000) and the maximum amount thereof (which may exceed
such Lender's Tranche A Commitment or its Tranche B
Commitment);
(B) the rate or rates of interest per annum offered
for each Bid Loan, which, in the case of a Base Rate Bid Loan,
shall be expressed as a margin to be added to, or subtracted
from, the Base Rate specified by the Company in its Bid
Request; and
(C) the applicable Lending Office of the quoting
Lender.
(iii) Any Competitive Bid may be disregarded if it:
(A) does not specify all of the information required
by Section 2.04(b)(ii);
(B) contains qualifying, conditional or similar
language;
(C) proposes terms other than, or in addition to,
those set forth in the applicable Competitive Bid Request; or
(D) arrives after the time set forth in Section
2.04(b)(i).
(c) Not later than 11:00 a.m. (New York City time) three Business Days
prior to the date of the proposed Bid Borrowing, in the case of a Borrowing of
Base Rate Bid Loans, and 11:00 a.m. (New York City time) one Business Day prior
to the date of the proposed Bid Borrowing (or, in the event the Company desires
that Competitive Bids be furnished on the date of the proposed Bid Borrowing, on
the date of such proposed Borrowing), in the case of a Borrowing of Fixed Rate
Bid Loans, the Company shall either
(i) cancel such Bid Borrowing by giving the Agent and the
Lenders notice thereof (which notice may be given by telephone and
confirmed in writing by facsimile) or
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(ii) accept one or more of the offers made by any Lender or
Lenders pursuant to Section 2.04(b), in its sole discretion, by giving
notice (which notice may be given by telephone, confirmed in writing by
facsimile) to such Lenders of the amount of each Bid Loan (which amount
shall be equal to or greater than the minimum amount, and equal to or
less than the maximum amount, notified to the Company by such Lender
for such Bid Loan pursuant to Section 2.04(b)) to be made by each such
Lender as part of such Bid Borrowing, and reject any remaining offers
made by giving the Lenders notice (which notice may be given by
telephone, confirmed in writing by facsimile) to that effect; provided,
however, that to the extent that the Company elects to accept one or
more Competitive Bids submitted by Lenders for a given Interest Period,
the Company shall accept such Competitive Bids on the basis of
ascending interest rates; and, provided, further, that in the event the
Company does not, before the time stated above, either cancel the
proposed Bid Borrowing pursuant to Section 2.04(c)(i) or accept one or
more of the offers pursuant to this Section 2.04(c)(ii), such Bid
Borrowing shall be deemed cancelled and provided, further, that in the
event the Company accepts one or more of the offers pursuant to this
Section 2.04(c)(ii) but does not expressly reject the remaining offers,
such offers shall be deemed rejected. The Company shall promptly notify
the Agent of the date and amount of any proposed Bid Borrowing.
(d) For purposes of Sections 2.01, 2.06 and 4.01(a), each outstanding
Bid Loan shall be deemed to utilize the Tranche A Commitments of each Lender, in
the case of Tranche A Bid Loans, or the Tranche B Commitments of each Lender, in
the case of Tranche B Bid Loans, whether or not such Lender has made such Bid
Loan, by an amount equal to such Lender's Commitment Percentage times the amount
of such Bid Loan.
2.05 Evidence of Indebtedness.
(a) Each Lender, with respect to amounts payable to it hereunder, and
the Agent, with respect to all amounts payable hereunder in respect of Committed
Borrowings, shall maintain on its books in accordance with its usual practice,
loan accounts and control accounts, respectively, setting forth each Committed
Loan and, in the case of each Lender having made a Bid Loan, each such Bid Loan,
the applicable interest rate and the amounts of principal, interest and other
sums paid and payable by the Company from time to time hereunder with respect
thereto; provided, however, that the failure by any Lender to record any such
amount on its books shall not affect the obligations of the Company with respect
thereto. In the case of any dispute, action or proceeding relating to any amount
payable hereunder, the entries in each such account shall be prima facie
evidence of such amount, absent manifest error. In case of any discrepancy
between the entries in the Agent's books and any Lender's books, such Lender's
books shall be considered correct in the absence of manifest error.
(b) Notwithstanding the foregoing, if any Lender shall so request for
purposes of Section 12.08(a)(iii), the obligation to repay the Committed Loans
shall also be evidenced by a promissory note in the form of Exhibit 2.05(b).
(c) The obligation to repay a Bid Loan shall also, if so requested by
the Lender making such Bid Loan in its Competitive Bid, be evidenced by a
promissory note in the form of Exhibit 2.05(c).
2.06 Optional Reduction of the Commitments. The Company shall have the
right, upon at least four Business Days' prior notice to the Agent (which notice
shall be irrevocable), at any time permanently to terminate the remaining
Commitments in whole or reduce ratably in part the unused portions of the
Commitments of the Lenders, allocated between Tranche A Commitments or Tranche B
Commitments, as the Company may elect; provided, however, that each partial
reduction shall be in the aggregate amount of $20,000,000 or an integral
multiple of $10,000,000 in excess thereof. No reduction
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in the Commitments shall reduce the L/C Commitment until the aggregate
Commitments are reduced to $150,000,000, after which each reduction in the
Commitments shall reduce the L/C Commitment dollar for dollar. The Agent shall
promptly notify each Lender of its receipt of any notice under this Section
2.06.
2.07 Repayment.
(a) The Committed Loans. The Company agrees to repay to the Agent for
the account of the Lenders the outstanding principal amount of all Tranche A
Loans on the Tranche A Termination Date. The Company agrees to repay to the
Agent for the account of the Lenders the outstanding principal amount of all
Tranche B Loans on the Tranche B Termination Date.
(b) The Bid Loans. The Company agrees to repay to each Lender which has
made a Bid Loan on the maturity date of such Bid Loan (as each such maturity
date shall have been specified by the Company in the applicable Competitive Bid
Request pursuant to Section 2.04(a)(iii)) the unpaid principal amount of such
Bid Loan then due and payable (each such amount being as specified for such date
in such Competitive Bid Request pursuant to Section 2.04(a)(iii)).
2.08 Optional Prepayments.
(a) Subject to Section 5.06(a), the Company may, upon (i) at least four
Business Days' prior notice to the Agent, in the case of a prepayment of
Eurodollar Loans, and (ii) at least one Business Day's prior notice to the
Agent, in the case of a prepayment of Reference Rate Loans, stating the proposed
date and aggregate principal amount of the prepayment, prepay, ratably among the
Lenders in accordance with their Commitment Percentages, the outstanding
principal amount of the Committed Loans, in whole or in part, together with
accrued interest to the date of such prepayment on the principal amount prepaid.
(b) Each partial prepayment of Committed Loans shall, in the case of
Eurodollar Loans, be in the aggregate principal amount of $20,000,000 or an
integral multiple of $10,000,000 in excess thereof, and, in the case of
Reference Rate Loans, be in the aggregate principal amount of $10,000,000 or an
integral multiple of $5,000,000 in excess thereof; provided, however, that, if
the aggregate amount of Eurodollar Loans comprised in the same Committed
Borrowing would be reduced as a result of any voluntary prepayment to an amount
less than $20,000,000, such Eurodollar Loans shall automatically convert into
Reference Rate Loans on the last day of the then current Interest Period.
(c) If a notice of prepayment is given, such notice shall be
irrevocable and the principal amount stated in such notice, together with
accrued interest thereon and any amount payable pursuant to Section 5.06(a),
shall be due and payable on the date specified in such notice. The Agent shall
promptly notify each Lender of its receipt of any notice of prepayment under
this Section 2.08.
(d) Bid Loans may not be prepaid.
2.09 Interest.
(a) Each Committed Loan shall bear interest on the outstanding
principal amount thereof from the date when made until paid in full, at the
option of the Company, as set forth in its Notice of Borrowing or in its Notice
of Conversion/Continuation,
(i) if such Loan is a Reference Rate Loan, at a rate per annum
equal to the Adjusted Reference Rate; or
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(ii) if such Loan is a Eurodollar Loan, at a rate per annum
equal to the sum of (A) LIBOR plus (B) the applicable margin, as
follows:
Applicable Margin
Debt on Eurodollar Loans
Moody's Rating S&P Tranche A Loans/Tranche B Loans
------- ------ --- -------------------------------
Baal or higher or BBB+ or higher 0.525% / 0.500%
Baa2 or BBB 0.625% / 0.600%
Baa3 or BBB- 0.725% / 0.700%
Bal or BB+ 1.075% / 1.050%
Ba2 or lower and BB or lower 1.275% / 1.250%
provided, however, that if at any time no Debt Rating is available, the
applicable margin shall be 1.275% per annum for Tranche A Loans and 1.250% per
annum for Tranche B Loans.
(b) Any change in the applicable margin due to a change in the
applicable Debt Rating shall be effective on the effective date of such change
in the applicable Debt Rating and shall apply to all Eurodollar Loans that are
outstanding at any time during the period commencing on the effective date of
such change in applicable Debt Rating and ending on the date immediately
preceding the effective date of the next such change in applicable Debt Rating.
In the event of a split rating, the higher rating will apply; if the Debt
Ratings are split by more than one level, one level above the lower rating will
apply.
(c) Accrued interest shall be paid on each Interest Payment Date (and,
after maturity, on demand), on the date of repayment or prepayment of any
Committed Loan on the amount repaid or prepaid and, in the case of any Reference
Rate Loan, on each date such Loan is converted into a Eurodollar Loan.
(d) The Company shall pay to each Lender which has made a Bid Loan
interest on the unpaid principal amount of such Bid Loan from the date when made
until paid in full, on each Interest Payment Date (and, after maturity, on
demand), at the rate of interest specified by such Lender in its Competitive Bid
pursuant to Section 2.04(b)(ii)(B).
2.10 Default Interest. During the continuation of any Event of Default
pursuant to Section 10.01(a), the Company shall pay interest (after as well as
before judgment to the extent permitted by law) on the principal amount of all
Committed Loans outstanding and on all other Obligations of the Company due and
unpaid (other than Bid Loans), at a rate per annum which is determined by
increasing the interest rate then in effect by 2% per annum for the principal
amount of the Eurodollar Loans outstanding and at a rate per annum equal to the
Adjusted Reference Rate plus 2% for any other Obligation due hereunder (other
than Bid Loans).
2.11 Continuation and Conversion Elections for Committed Loans.
(a) The Company may upon irrevocable written notice to the Agent:
(i) elect to convert, on any Business Day, all or any portion
of outstanding Reference Rate Loans (in the aggregate amount of
$20,000,000 or an integral multiple of $10,000,000 in excess thereof)
into Eurodollar Loans;
(ii) elect to convert, on the last day of any Interest Period
therefor, all or any portion of outstanding Eurodollar Loans comprising
the same Borrowing (in the aggregate amount of
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$10,000,000 or an integral multiple of $5,000,000 in excess thereof)
into Reference Rate Loans; or
(iii) elect to continue, on the last day of any Interest
Period therefor, any Eurodollar Loans;
provided, however, that if the aggregate amount of outstanding Eurodollar Loans
comprised in the same Borrowing would be reduced as a result of any conversion
of part thereof to Reference Rate Loans to an amount less than $20,000,000, such
Eurodollar Loans shall automatically convert into Reference Rate Loans on the
last day of the Interest Period on which such conversion occurs.
(b) The Company shall deliver a notice of conversion or continuation (a
"Notice of Conversion/Continuation"), in substantially the form of Exhibit
2.11(b), to the Agent not later than 12:00 noon (New York City time) (i) four
Business Days prior to the proposed date of conversion or continuation, if the
Committed Loans or any portion thereof are to be converted into or continued as
Eurodollar Loans, and (ii) one Business Day prior to the proposed date of
conversion, if the Committed Loans or any portion thereof are to be converted
into Reference Rate Loans.
Each such Notice of Conversion/Continuation shall be irrevocable and shall be
made by facsimile, specifying therein:
(i) the proposed date of conversion or continuation;
(ii) the aggregate amount of Committed Loans to be
converted or continued;
(iii) whether such Committed Loans are Tranche A Loans or
Tranche B Loans; and
(iv) the duration of the applicable Interest Period if
such Committed Loans are Eurodollar Loans.
(c) If, on the fourth Business Day prior to the expiration of any
Interest Period applicable to Eurodollar Loans, the Company shall have failed to
select a new Interest Period to be applicable to such Eurodollar Loans, the
Company shall be deemed to have elected to convert such Eurodollar Loans into
Reference Rate Loans effective as of the last day of such Interest Period.
(d) Upon receipt of a Notice of Conversion/Continuation, the Agent
shall promptly notify each Lender thereof. All conversions and continuations
shall be made ratably among the Lenders based on their Commitment Percentages of
the Committed Loans with respect to which such notice was given.
(e) Notwithstanding any other provision contained in this Agreement,
after giving effect to any conversion or continuation of any Committed Loans,
there shall not be more than seven different Interest Periods for Committed
Loans in effect.
ARTICLE 3
THE LETTERS OF CREDIT
3.01 The Letter of Credit Subfacility.
(a) On the terms and conditions set forth herein (i) the Issuing Bank
agrees, (A) from time to time on any Business Day during the period from the
Closing Date to the Tranche A Termination
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Date to issue Tranche A Letters of Credit for the account of the Company, and to
amend or renew Tranche A Letters of Credit previously issued by it, in
accordance with subsections 3.02(c) and 3.02(d), (B) from time to time on any
Business Day during the period from the Closing Date to the Tranche B
Termination Date to issue Tranche B Letters of Credit for the account of the
Company, and to amend or renew Tranche B Letters of Credit previously issued by
it, in accordance with subsections 3.02(c) and 3.02(d), and (C) to honor drafts
under the Letters of Credit; and (ii) the Lenders severally agree to purchase an
irrevocable and unconditional participation in each Letter of Credit Issued for
the account of the Company; provided, that the Issuing Bank shall not be
obligated to Issue, and no Lender shall be obligated to participate in, any
Letter of Credit if as of the date of Issuance of such Letter of Credit (the
"Issuance Date"), after giving effect to any requested Loans, (A) (1) the
aggregate principal amount of all Tranche A Loans then outstanding plus (2) the
aggregate principal amount of all Tranche A Bid Loans then outstanding plus (3)
the outstanding Tranche A L/C Obligations exceeds the Aggregate Tranche A
Commitments; (B) (1) the aggregate principal amount of all Tranche B Loans then
outstanding plus (2) the aggregate principal amount of all Tranche B Bid Loans
then outstanding plus (3) the outstanding Tranche B L/C Obligations exceeds the
Aggregate Tranche B Commitments; or (C) the total amount of L/C Obligations
exceeds the L/C Commitment. Within the foregoing limits, and subject to the
other terms and conditions hereof, the Company's ability to obtain Letters of
Credit shall be fully revolving, and, accordingly, the Company may, during the
foregoing period, obtain Letters of Credit to replace Letters of Credit which
have expired or which have been drawn upon and reimbursed.
(b) The Issuing Bank is under no obligation to Issue any Letter of
Credit if:
(i) any order, judgment or decree of any Governmental
Authority or arbitrator shall by its terms purport to enjoin or
restrain the Issuing Bank from Issuing such Letter of Credit, or any
Requirement of Law applicable to the Issuing Bank or any request or
directive (whether or not having the force of law) from any
Governmental Authority with jurisdiction over the Issuing Bank shall
prohibit, or request that the Issuing Bank refrain from, the Issuance
of letters of credit generally or such Letter of Credit in particular
or shall impose upon the Issuing Bank with respect to such Letter of
Credit any restriction, reserve or capital requirement (for which the
Issuing Bank is not otherwise compensated hereunder) not in effect on
the Closing Date, or shall impose upon the Issuing Bank any
unreimbursed loss, cost or expense which was not applicable on the
Closing Date and which the Issuing Bank in good faith deems material to
it;
(ii) the Issuing Bank has received written notice from any
Lender, the Agent or the Company, on or prior to the Business Day prior
to the requested date of Issuance of such Letter of Credit, that one or
more of the applicable conditions contained in Article 7 is not then
satisfied;
(iii) the expiry date of any requested Letter of Credit is (A)
more than one year after the date of Issuance, unless the Required
Lenders have approved such expiry date in writing, (B) after the
Tranche A Termination Date, in the case of a Tranche A Letter of
Credit, unless all of the Lenders have approved such expiry date in
writing, or (C) after the Tranche B Termination Date, in the case of a
Tranche B Letter of Credit, unless all of the Lenders have approved
such expiry date in writing;
(iv) the expiry date of any requested Letter of Credit is
prior to the maturity date of any financial obligation to be supported
by the requested Letter of Credit;
(v) any requested Letter of Credit does not provide for
drafts, or is not otherwise in form and substance acceptable to the
Issuing Bank, or the Issuance of a Letter of Credit shall violate any
applicable policies of the Issuing Bank;
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(vi) any standby Letter of Credit is for the purpose of
supporting the Issuance of any Letter of Credit by any other Person; or
(vii) such Letter of Credit is in a face amount less than
$100,000 or is denominated in a currency other than dollars.
3.02 Issuance, Amendment and Renewal of Letters of Credit.
(a) Each Letter of Credit shall be issued upon the irrevocable written
request of the Company received by the Issuing Bank (with a copy sent by the
Company to the Agent) at least four days (or such shorter time as the Issuing
Bank may agree in a particular instance in its sole discretion) prior to the
proposed date of issuance. Each such request for issuance of a Letter of Credit
shall be by facsimile, confirmed immediately in an original writing, in the form
of an L/C Application, and shall specify in form and detail satisfactory to the
Issuing Bank: (i) the proposed date of issuance of the Letter of Credit (which
shall be a Business Day); (ii) the face amount of the Letter of Credit; (iii)
the expiry date of the Letter of Credit; (iv) the name and address of the
beneficiary thereof; (v) the documents to be presented by the beneficiary of the
Letter of Credit in case of any drawing thereunder; (vi) the full text of any
certificate to be presented by the beneficiary in case of any drawing
thereunder; (vii) whether such Letter of Credit should be allocated to the
Tranche A Commitments or the Tranche B Commitments; and (viii) such other
matters as the Issuing Bank may require.
(b) At least two Business Days prior to the Issuance of any Letter of
Credit, the Issuing Bank will confirm with the Agent (by telephone or in
writing) that the Agent has received a copy of the L/C Application or L/C
Amendment Application from the Company and, if not, the Issuing Bank will
provide the Agent with a copy thereof. Unless the Issuing Bank has received
notice on or before the Business Day immediately preceding the date the Issuing
Bank is to issue a requested Letter of Credit from the Agent (i) directing the
Issuing Bank not to issue such Letter of Credit because such issuance is not
then permitted under subsection 3.01(b)(iii) as a result of the limitations set
forth in clauses (A) through (C) thereof or subsection 3.01(b)(ii); or (ii) that
one or more conditions specified in Article 7 are not then satisfied; then,
subject to the terms and conditions hereof, the Issuing Bank shall, on the
requested date, issue a Letter of Credit for the account of the Company in
accordance with the Issuing Bank's usual and customary business practices.
(c) From time to time while a Letter of Credit is outstanding and prior
to the Tranche A Termination Date (in the case of Tranche A Letters of Credit)
or the Tranche B Termination Date (in the case of Tranche B Letters of Credit),
the Issuing Bank will, upon the written request of the Company received by the
Issuing Bank (with a copy sent by the Company to the Agent) at least five days
(or such shorter time as the Issuing Bank may agree in a particular instance in
its sole discretion) prior to the proposed date of amendment, amend any Letter
of Credit issued by it. Each such request for amendment of a Letter of Credit
shall be made by facsimile, confirmed immediately in an original writing, made
in the form of an L/C Amendment Application and shall specify in form and detail
satisfactory to the Issuing Bank: (i) the Letter of Credit to be amended; (ii)
the proposed date of amendment of the Letter of Credit (which shall be a
Business Day); (iii) the nature of the proposed amendment; and (iv) such other
matters as the Issuing Bank may require. The Issuing Bank shall be under no
obligation to amend any Letter of Credit if: (A) the Issuing Bank would have no
obligation at such time to issue such Letter of Credit in its amended form under
the terms of this Agreement; or (B) the beneficiary of any such letter of Credit
does not accept the proposed amendment to the Letter of Credit. The Agent will
promptly notify the Banks of the receipt by it of any L/C Application or L/C
Amendment Application.
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(d) The Issuing Bank and the Lenders agree that, while a Letter of
Credit is outstanding and prior to the Tranche A Termination Date (in the case
of Tranche A Letters of Credit) or the Tranche B Termination Date (in the case
of Tranche B Letters of Credit), at the option of the Company and upon the
written request of the Company received by the Issuing Bank (with a copy sent by
the Company to the Agent) at least five days (or such shorter time as the
Issuing Bank may agree in a particular instance in its sole discretion) prior to
the proposed date of notification of renewal, the Issuing Bank shall be entitled
to authorize the renewal of any Letter of Credit issued by it. Each such request
for renewal of a Letter of Credit shall be made by facsimile, confirmed
immediately in an original writing, in the form of an L/C Amendment Application,
and shall specify in form and detail satisfactory to the Issuing Bank: (i) the
Letter of Credit to be renewed; (ii) the proposed date of notification of
renewal of the Letter of Credit (which shall be a Business Day); (iii) the
revised expiry date of the Letter of Credit; and (iv) such other matters as the
Issuing Bank may require. The Issuing Bank shall be under no obligation so to
renew any Letter of Credit if: (A) the Issuing Bank would have no obligation at
such time to issue or amend such Letter of Credit in its renewed form under the
terms of this Agreement; or (B) the beneficiary of any such Letter of Credit
does not accept the proposed renewal of the Letter of Credit. If any outstanding
Letter of Credit shall provide that it shall be automatically renewed unless the
beneficiary thereof receives notice from the Issuing Bank that such Letter of
Credit shall not be renewed, and if at the time of renewal the Issuing Bank
would be entitled to authorize the automatic renewal of such Letter of Credit in
accordance with this subsection 3.02(d) upon the request of the Company but the
Issuing Bank shall not have received any L/C Amendment Application from the
Company with respect to such renewal or other written direction by the Company
with respect thereto, the Issuing Bank shall (unless such renewal would cause
the expiry date thereof to extend beyond the Tranche A Termination Date, in the
case of a Tranche A Letter of Credit, or the Tranche B Termination Date, in the
case of a Tranche B Letter of Credit) nonetheless be permitted to allow such
Letter of Credit to renew, and the Company and the Lenders hereby authorize such
renewal, and, accordingly, the Issuing Bank shall be deemed to have received an
L/C Amendment Application from the Company requesting such renewal.
(e) The Issuing Bank may, at its election (or as required by the Agent
at the direction of the Required Lenders), deliver any notices of termination or
other communications to any Letter of Credit beneficiary or transferee, and take
any other action as necessary or appropriate, at any time and from time to time,
in order to cause the expiry date of such Letter of Credit to be a date not
later than the Tranche A Termination Date, in the case of a Tranche A Letter of
Credit, or in order to cause the expiry date of such Letter of Credit to be a
date not later than the Tranche B Termination Date, in the case of a Tranche B
Letter of Credit.
(f) This Agreement shall control in the event of any conflict with any
L/C-Related Document (other than any Letter of Credit).
(g) The Issuing Bank will also deliver to the Agent, concurrently or
promptly following its delivery of a Letter of Credit, or amendment to or
renewal of a Letter of Credit, to an advising bank or a beneficiary, a true and
complete copy of each such Letter of Credit or amendment to or renewal of a
Letter of Credit.
3.03 Role of the Issuing Bank.
(a) Each Lender and the Company agree that, in paying any drawing under
a Letter of Credit, the Issuing Bank shall not have any responsibility to obtain
any document (other than any sight draft and certificates expressly required by
the Letter of Credit) or to ascertain or inquire as to the validity or accuracy
of any such document or the authority of the Person executing or delivering any
such document.
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(b) No Agent-Related Person nor any of the respective correspondents,
participants or assignees of the Issuing Bank shall be liable to any Lender for:
(i) any action taken or omitted in connection herewith at the request or with
the approval of the Lenders (including the Required Lenders, as applicable);
(ii) any action taken or omitted in the absence of gross negligence or willful
misconduct; or (iii) the due execution, effectiveness, validity or
enforceability of any L/C-Related Document.
(c) The Company hereby assumes all risks of the acts or omissions of
any beneficiary or transferee with respect to its use of any Letter of Credit;
provided, however, that this assumption is not intended to, and shall not,
preclude the Company's pursuing such rights and remedies as it may have against
the beneficiary or transferee at law or under any other agreement. No
Agent-Related Person, nor any of the respective correspondents, participants or
assignees of the Issuing Bank, shall be liable or responsible for any of the
matters described in subsections 3.04(a) through (g); provided, however,
anything in such clauses to the contrary notwithstanding, that the Company may
have a claim against the Issuing Bank, and the Issuing Bank may be liable to the
Company, to the extent, but only to the extent, of any direct, as opposed to
consequential or exemplary, damages suffered by the Company which the Company
proves were caused by the Issuing Bank's willful misconduct or gross negligence
or the Issuing Bank's willful failure to pay under any Letter of Credit after
the presentation to it by the beneficiary of a sight draft and certificate(s)
strictly complying with the terms and conditions of a Letter of Credit. In
furtherance and not in limitation of the foregoing: (i) the Issuing Bank may
accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary; and (ii) the Issuing Bank shall not be responsible
for the validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign a Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason.
3.04 Obligations Absolute. The obligations of the Company under this
Agreement and any L/C-Related Document to reimburse the Issuing Bank for a
drawing under a Letter of Credit, and to repay any L/C Borrowing and any drawing
under a Letter of Credit converted into Revolving Loans, shall be unconditional
and irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement and each such other L/C-Related Document under all circumstances,
including the following:
(a) any lack of validity or enforceability of this Agreement or any
L/C-Related Document;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the obligations of the Company in respect of any
Letter of Credit or any other amendment or waiver of or any consent to departure
from all or any of the L/C-Related Documents;
(c) the existence of any claim, set-off, defense or other right that
the Company may have at any time against any beneficiary or any transferee of
any Letter of Credit (or any Person for whom any such beneficiary or any such
transferee may be acting), the Issuing Bank or any other Person, whether in
connection with this Agreement, the transactions contemplated hereby or by the
L/C-Related Documents or any unrelated transaction;
(d) any draft, demand, certificate or other document presented under
any Letter of Credit proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in any
respect; or any loss or delay in the transmission or otherwise of any document
required in order to make a drawing under any Letter of Credit;
(e) any payment by the Issuing Bank under any Letter of Credit against
presentation of a draft or certificate that does not strictly comply with the
terms of any Letter of Credit; or any payment made by the Issuing Bank under any
Letter of Credit to any Person purporting to be a trustee in
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bankruptcy, debtor-in-possession, assignee for the benefit of creditors,
liquidator, receiver or other representative of or successor to any beneficiary
or any transferee of any Letter of Credit, including any arising in connection
with any Insolvency Proceeding;
(f) any exchange, release or non-perfection of any collateral, or any
release or amendment or waiver of or consent to departure from any other
guarantee, for all or any of the obligations of the Company in respect of any
Letter of Credit; or
(g) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including any other circumstance that might
otherwise constitute a defense available to, or a discharge of, the Company or a
guarantor.
3.05 Cash Collateral Pledge. Upon the request of the Agent or the
Required Lenders, (a) if the Issuing Bank has honored any full or partial
drawing request on any Letter of Credit and such drawing has resulted in an L/C
Borrowing hereunder, (b) if, as of the Tranche A Termination Date, any Tranche A
Letters of Credit may for any reason remain outstanding and partially or wholly
undrawn, or (c) if, as of the Tranche B Termination Date, any Tranche B Letters
of Credit may for any reason remain outstanding and partially or wholly undrawn,
then, the Company shall immediately Cash Collateralize the L/C Obligations in an
amount equal to such L/C Obligations.
3.06 Letter of Credit Fees.
(a) The Company shall pay to the Agent for the account of each of the
Lenders a letter of credit fee with respect to the Tranche A Letters of Credit
equal to the applicable margin above LIBOR then in effect under Section 2.09 for
Tranche A Eurodollar Loans for each day such Tranche A Letters of Credit are
outstanding, computed on a quarterly basis in arrears on the last Business Day
of each calendar quarter and based upon Tranche A Letters of Credit outstanding
for that quarter as calculated by the Agent. The Company shall pay to the Agent
for the account of each of the Lenders a letter of credit fee with respect to
the Tranche B Letters of Credit equal to the applicable margin above LIBOR then
in effect under Section 2.09 for Tranche B Eurodollar Loans for each day such
Tranche B Letters of Credit are outstanding, computed on a quarterly basis in
arrears on the last Business Day of each calendar quarter and based upon Tranche
B Letters of Credit outstanding for that quarter as calculated by the Agent.
Such letter of credit fees shall be due and payable quarterly in arrears on the
last Business Day of each calendar quarter during which Letters of Credit are
outstanding, commencing on the first such quarterly date to occur after the
Closing Date, through the Tranche B Termination Date (or such later date upon
which the outstanding Letters of Credit shall expire), with the final payment to
be made on the Tranche A Termination Date (or such later expiration date), in
the case of Tranche A Letters of Credit and on the Tranche B Termination Date
(or such later expiration date), in the case of Tranche B Letters of Credit.
(b) The Company shall pay to the Issuing Bank a letter of credit
fronting fee for each Letter of Credit Issued by the Issuing Bank equal to
0.125% of the face amount (or increased face amount, as the case may be) of such
Letter of Credit. Such Letter of Credit fronting fee shall be due and payable on
each date of Issuance of a Letter of Credit.
(c) The Company shall pay to the Issuing Bank from time to time on
demand the normal issuance, presentation, amendment and other processing fees,
and other standard costs and charges, of the Issuing Bank relating to standby
letters of credit as from time to time in effect.
3.07 International Standby Practices. The International Standby
Practices as published by the International Chamber of Commerce most recently at
the time of issuance of any Letter of Credit shall (unless otherwise expressly
provided in the Letters of Credit) apply to the Letters of Credit.
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ARTICLE 4
FEES; PAYMENTS; TAXES
4.01 Fees.
(a) Utilization Fee. The Company shall pay to the Agent for the account
of each Lender a utilization fee ("Utilization Fee") on the actual daily
aggregate principal amount of such Lender's Committed Loans then outstanding
hereunder with respect to each day on which the principal amount of all
Committed Loans then outstanding is equal to or exceeds 33% of the aggregate
Commitments (each such day a "Utilization Fee Day"). Such fee shall be computed
with respect to each Utilization Fee Day at a rate equal to 0.125% per annum,
and shall accrue with respect to each Utilization Fee Day occurring on and after
the Closing Date to the later to occur of (A) the Tranche B Termination Date and
(B) the date on which all Loans and interest thereon are paid in full and the
Commitments hereunder terminated, and, to the extent accrued during such period,
shall be due and payable quarterly in arrears on the last Business Day of each
calendar quarter (commencing on September 30, 1999) through the later to occur
of (X) the Tranche B Termination Date and (Y) the date on which all Loans, L/C
Obligations and interest thereon are paid in full and the Commitments hereunder
terminated, with the final payment to be made on the latest to occur of such
dates.
(b) Facility Fee.
(i) The Company agrees to pay to the Agent for the account of
each Lender, a facility fee from the Closing Date until the Tranche B
Termination Date at a rate per annum times the Tranche A Commitment and
the Tranche B Commitment of such Lender (regardless of utilization
thereof) as follows:
Debt Rating Facility Fee
----------- ------------
Moody's S&P Tranche A / Tranche B
------- --- ---------------------
Baal or higher or BBB+ or higher 0.100% / 0.125%
Baa2 or BBB 0.125% / 0.150%
Baa3 or BBB- 0.150% / 0.175%
Bal or BB+ 0.175% / 0.200%
Ba2 or lower and BB or lower 0.225% / 0.250%
provided, however, that if at any time no Debt Rating is available, the
facility fee shall be 0.225% per annum for Tranche A Commitments and
0.250% per annum for Tranche B Commitments. In the event of a split
rating, the higher rating will apply; if the Debt Ratings are split by
more than one level, one level above the lower rating will apply.
(ii) The facility fee shall be payable (A) quarterly in
arrears on the last Business Day of each calendar quarter, commencing
with the calendar quarter ending on September 30, 1999, (B) on any date
of reduction or termination of the Commitments and (C) on the Tranche B
Termination Date.
(c) Agency Fee. The Company agrees to pay to the Agent for its account
an agency fee in such amounts and at such times as are set forth in the Fee
Letter.
4.02 Computation of Interest, Fees.
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(a) All computations of interest payable in respect of Reference Rate
Loans shall be made on the basis of a year of 365 days or 366 days, as the case
may be, and actual days elapsed. All computations of interest in respect of
Eurodollar Loans and Bid Loans and all computations of fees under this Agreement
shall be made on the basis of a year of 360 days and actual days elapsed.
Interest and fees shall accrue during each period during which interest or such
fees are computed from the first day thereof to the last day thereof.
(b) Each determination of an interest rate by the Agent pursuant to any
provision of this Agreement shall be conclusive and binding on the Company and
the Lenders in the absence of manifest error. The Agent, upon determining LIBOR
for any Interest Period, shall promptly notify the Company and the Lenders
thereof.
4.03 Payments by the Company.
(a) The Company shall make each payment hereunder not later than 1:00
p.m. (New York City time) on the day when due (i) in respect of any Committed
Loan, to the Agent or (ii) in respect of any Bid Loan, to the Lender which made
such Bid Loan, without defense, setoff or counterclaim, in dollars and in
immediately available funds to such account in the continental United States of
America as the Agent shall specify from time to time by notice to the Company
or, in the case of a Bid Loan made by a Lender, to the Lending Office of such
Lender. The Agent will promptly after receiving any payment in respect of any
Committed Loan from the Company cause to be distributed like funds to the
Lenders ratably based on their Commitment Percentages (other than amounts
payable to any Lender or any amounts payable pursuant to Section 3.05, 4.02,
4.03, 4.04, 4.05 or 4.06) for the account of their respective Lending Offices.
Any payment which is received by the Agent later than 1:00 p.m. (New York City
time), as confirmed by Federal Reserve wire number, shall be deemed to have been
received on the immediately succeeding Business Day.
(b) Whenever any payment of a Committed Loan (and, unless otherwise
stated in the relevant Competitive Bid Request, a Bid Loan) shall be stated to
be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or fees, as the case may be;
provided, however, that if such extension would cause payment of principal of or
interest on Eurodollar Loans to be made in the next calendar month, such payment
shall be made on the immediately preceding Business Day.
(c) Unless the Agent shall have received notice from the Company prior
to the date on which any payment is due to the Lenders hereunder that the
Company will not make such payment in full, the Agent may assume that the
Company has made such payment in full to the Agent on such date, and the Agent
may, in reliance upon such assumption, cause to be distributed to each Lender on
such due date an amount equal to the amount then due such Lender. If and to the
extent the Company shall not have so made such payment in full to the Agent,
each Lender shall repay to the Agent forthwith on demand the excess of the
amount distributed to such Lender over the amount, if any, paid by the Company
for the account of such Lender, together with interest thereon at the Federal
Funds Rate, for each day from the date such amount is distributed to such Lender
until the date such Lender repays such amount to the Agent; provided, however,
that if any Lender shall fail to repay such amount within three Business Days
after demand therefor, such Lender shall, from and after such third Business Day
until payment is made to the Agent, pay interest thereon at a rate per annum
equal to the sum of the Adjusted Reference Rate plus 1%.
4.04 Payments by the Lenders.
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(a) Not later than 12:00 noon (New York City time) on the date of each
proposed Committed Borrowing, each Lender shall make available to the Agent to
such account as the Agent shall specify from time to time in immediately
available funds for the account of the Company, the amount of such Lender's
Commitment Percentage of such Borrowing.
(b) Unless the Agent shall have received notice from a Lender at least
one Business Day prior to the date of any proposed Committed Borrowing that such
Lender will not make available to the Agent for the account of the Company, the
amount of such Lender's Commitment Percentage of such Borrowing, the Agent may
assume that such Lender has made such amount available to the Agent on the date
of such Borrowing, and the Agent may, in reliance upon such assumption, make
available to the Company on such date a corresponding amount. If and to the
extent any Lender shall not have made such full amount available to the Agent,
and the Agent in such circumstances makes available to the Company such amount,
such Lender shall, within two Business Days following the date of such
Borrowing, make such amount available to the Agent, together with interest
thereon for each day from and including the date of such Borrowing, at a rate
per annum equal to the Federal Funds Rate. If such amount is so made available,
such payment to the Agent shall constitute such Lender's Committed Loan on the
date of such Borrowing for all purposes of this Agreement. If such amount is not
made available to the Agent within two Business Days following the date of such
Borrowing, the Agent shall notify the Company of such failure to fund, and, on
the third Business Day following the date of such Borrowing, the Company shall
pay to the Agent such amount, together with interest thereon for each day
elapsed since the date of such Borrowing, at a rate per annum equal to the
interest rate applicable at the time to the Loans comprising such Borrowing.
Nothing contained in this Section 4.04(b) shall relieve any Lender which has
failed to make available its Commitment Percentage of any Committed Borrowing
hereunder from its obligation to do so in accordance with the terms hereof.
(c) The failure of any Lender to make any Committed Loan on the date of
any Committed Borrowing shall not relieve any other Lender of its obligation, if
any, hereunder to make a Committed Loan on the date of such Borrowing pursuant
to the provisions contained herein, but no Lender shall be responsible for the
failure of any other Lender to make the Loan to be made by such other Lender on
the date of any Committed Borrowing.
(d) If the Company accepts one or more of the offers made by any Lender
or Lenders pursuant to Section 2.04(c)(ii), each such Lender which is to make a
Bid Loan as part of any Bid Borrowing shall before 12:00 noon (New York City
time) on the date of such proposed Bid Borrowing (or before 2:00 p.m. (New York
City time) on the date of such Bid Borrowing in the case of a Fixed Rate Bid
Loan) make available to the Company at such Lender's Lending Office such
Lender's portion of such Bid Borrowing in immediately available funds. The
Company will promptly notify the Agent of the total amount of Bid Loans made in
connection with such Bid Borrowing, each date on which all or any part of such
Bid Loans shall mature and the principal amount which shall mature on each such
date, and the Agent will, in turn, promptly notify each Lender of the amount of
such Bid Borrowing and the relevant maturity date or dates of the Bid Loans
comprised in such Bid Borrowing.
4.05 Taxes.
(a) Subject to Section 4.05(g), any and all payments by the Company to
the Agent for its account and for the account of any Lender under this Agreement
(other than on account of a Bid Loan, except to the extent otherwise specified
as being applicable to any such Bid Loan) shall be made free and clear of, and
without deduction or withholding for, any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto incurred in connection with any Borrowing pursuant to this
Agreement, excluding (i) such taxes (including income taxes or franchise taxes
or branch profit taxes) as are imposed on or measured by such Lender's or the
Agent's, as the case
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may be, net income and (ii) such taxes as are imposed by a jurisdiction other
than the United States of America or any political subdivision thereof and that
would not have been imposed but for the existence of a connection between such
Lender or the Agent and the jurisdiction imposing such taxes (other than a
connection arising principally by reason of this Agreement) (all such
non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes").
(b) In addition, the Company agrees to pay any present or future stamp
or documentary taxes or any other sales, excise or property taxes, charges or
similar levies which arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement (other than on account of a Bid Loan, except to the extent otherwise
specified as being applicable to any such Bid Loan) or any other Loan Document
(hereinafter referred to as "Other Taxes").
(c) Subject to Section 4.05(g), the Company agrees to indemnify and
hold harmless each Lender and the Agent for the full amount of Taxes or Other
Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 4.05) paid by such Lender or the Agent, as the case
may be, and any liability (including penalties, interest, additions to tax and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted; provided, however, that each
Lender and the Agent agree to contest in good faith in cooperation with the
Company any Taxes or Other Taxes that such Lender or the Agent, as the case may
be, in consultation with the Company has determined have been incorrectly
asserted. This indemnification shall be made within 30 days from the date such
Lender or the Agent, as the case may be, makes written demand therefor.
(d) If the Company shall be required by law to deduct or withhold any
Taxes or Other Taxes from or in respect of any sum payable hereunder to any
Lender or the Agent, then, subject to Section 4.05(g),
(i) the sum payable shall be increased as may be necessary so
that after making all required deductions (including deductions
applicable to additional sums payable under this Section 4.05), such
Lender or the Agent, as the case may be, receives an amount equal to
the sum it would have received had no such deductions been made;
(ii) the Company shall make such deductions; and
(iii) the Company shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with
applicable law.
(e) Within 30 days after the date of any payment by the Company of
Taxes or Other Taxes under this Section 4.05, the Company will furnish to the
Agent, for the account of each Lender receiving a payment from which Taxes or
Other Taxes were deducted, the original or a certified copy of a receipt
evidencing payment thereof, or other evidence of payment reasonably satisfactory
to the Agent.
(f) Each Lender that is other than a United States Person as defined in
the Code hereby agrees that:
(i) it shall, no later than the Closing Date (or, in the case
of a Lender which becomes a party hereto pursuant to Section 12.08
after the Closing Date, the date upon which such Lender becomes a party
hereto) deliver to the Agent (two (2) originals) and to the Company
(one (1) original):
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(A) if its Lending Office is located in the United
States of America, accurate and complete signed originals of
Internal Revenue Service Form 4224 or any successor thereto
("Form 4224") and Internal Revenue Service Form W-9 or any
successor thereto ("Form W-9"), and/or
(B) if its Lending Office is located outside the
United States of America, accurate and complete signed
originals of Internal Revenue Service Form 1001 or any
successor thereto ("Form 1001") and Internal Revenue Service
Form W-8 or any successor thereto ("Form W-8");
in each case indicating that such Lender is on the date of delivery
thereof entitled to receive payments of principal, interest and fees
for the account of such Lending Office or Offices under this Agreement
free from withholding of United States Federal income tax;
(ii) if at any time such Lender changes its Lending Office or
Offices or selects an additional Lending Office, it shall, at the same
time or reasonably promptly thereafter but only to the extent the forms
previously delivered by it hereunder are no longer effective, deliver
to the Agent (two originals) and to the Company (one original) in
replacement for the forms previously delivered by it hereunder:
(A) if such changed or additional Lending Office is
located in the United States of America, accurate and complete
signed originals of Form 4224 and Form W-9; or
(B) otherwise, accurate and complete signed originals
of Form 1001 and Form W-8,
in each case indicating that such Lender is on the date of delivery
thereof entitled to receive payments of principal, interest and fees
for the account of such changed or additional Lending Office under this
Agreement free from withholding of United States Federal income tax;
(iii) it shall, before or promptly after the occurrence of any
event (including the passing of time and, as provided above, any event
mentioned in clause (ii)) requiring a change in the most recent Form
4224, Form W-9, Form 1001 or Form W-8 previously delivered by such
Lender and if no change in law shall have occurred since the date of
delivery of such most recent form that would make the delivery of
replacement forms hereunder unlawful, deliver to the Agent (two
originals) and to the Company (one original) accurate and complete
signed originals of Form 4224 and Form W-9 or Form 1001 and Form W-8
(or any successor forms) in replacement for the forms previously
delivered by such Lender; and
(iv) it shall, promptly upon the request of the Company to
that effect, deliver to the Agent and the Company such other accurate
and complete forms or similar documentation as may be required from
time to time by any applicable law, treaty, rule or regulation in order
to establish such Lender's tax status for withholding purposes or may
otherwise be appropriate to eliminate or minimize any Taxes on payments
under this Agreement.
(g) The Company shall not be required to pay any amounts pursuant to
Section 4.05(a), 4.05(b), 4.05(d), or 4.05(i) to any Lender for the account of
any Lending Office of such Lender in respect of any sum payable hereunder:
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(i) if the obligation to pay such additional amounts would not
have arisen but for a failure by such Lender to comply with its
obligations under Section 3.05(f) in respect of such Lending Office;
(ii) if such Lender shall have delivered to the Agent a Form
4224 and a Form W-9 in respect of such Lending Office pursuant to
Section 4.05(f)(i)(A), 4.05(f)(ii)(A) or 4.05(f)(iii) and such Lender
shall not be entitled to exemption from deduction or withholding of
United States Federal income tax in respect of the payment of such sum
by the Company hereunder for the account of such Lending Office for any
reason other than a change in United States law or regulations or in
the official interpretation of such law or regulations by any
Governmental Authority charged with the interpretation or
administration thereof (whether or not having the force of law) after
the date of delivery of such Form 4224 and Form W-9; provided, however,
that if, notwithstanding such change in law, a Lender would be legally
able to provide such other forms or information as would reduce or
eliminate United States withholding taxes applicable to payments made
hereunder, such Lender shall, if requested by the Company, timely
provide such forms or other information to the Company, and the Company
shall not be required to pay any amounts pursuant to Section 4.05(a),
4.05(c) or 4.05(d) to the extent such amount would not have been owed
but for a failure of such Lender to comply with its obligations under
this proviso; or
(iii) if such Lender shall have delivered to the Company a
Form 1001 and a Form W-8 in respect of such Lending Office pursuant to
Section 4.05(f)(i)(B), 4.05(f)(ii)(B) or 4.05(f)(iii) and such Lender
shall not be entitled to exemption from deduction or withholding of
United States Federal income tax in respect of the payment of such sum
by the Company hereunder for the account of such Lending Office for any
reason other than a change in United States law or regulations or any
applicable tax treaty or regulations or in the official interpretation
of any such law, treaty or regulations by any Governmental Authority
charged with the interpretation or administration thereof (whether or
not having the force of law) after the date of delivery of such Form
1001 and Form W-8; provided, however, that if, notwithstanding such
change in law, a Lender would be legally able to provide such other
forms or information as would reduce or eliminate United States
withholding taxes applicable to payments made hereunder, such Lender
shall, if requested by the Company, timely provide such forms or other
information to the Company, and the Company shall not be required to
pay any amounts pursuant to Sections 4.05(a), 4.05(c) or 4.05(d) to the
extent such amount would not have been owed but for a failure of such
Lender to comply with its obligations under this proviso.
(h) Each Lender shall use reasonable efforts to avoid or minimize any
amounts which might otherwise be payable pursuant to this Section 4.05;
provided, however, that such efforts shall not include the taking of any actions
by a Lender that would result in any tax, cost or other expense to such Lender
(other than a tax, cost or expense for which such Lender shall have been
reimbursed or indemnified by the Company pursuant to this Agreement or
otherwise) or any action which would in the reasonable opinion of such Lender
have an adverse effect upon its financial condition, operations, business or
properties.
(i) Each Lender agrees to indemnify the Agent and hold the Agent
harmless for the full amount of any and all present or future Taxes, Other Taxes
and related liabilities (including penalties, interest, additions to tax and
expenses, and any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable to Agent under this Section 4.05(i)) which are imposed on or with
respect to principal, interest or fees payable to such Lender hereunder and
which are not paid by the Company pursuant to this Section 4.05, whether or not
such Taxes, Other Taxes or related liabilities were correctly or legally
asserted. This indemnification shall be made within 30 days from the date the
Agent makes written demand therefor.
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4.06 Sharing of Payments, Etc. If, other than as provided in Sections
3.05, 4.02, 4.03, 4.04, 4.05 or this 4.06, any Lender shall obtain any payment
(whether voluntary, involuntary, through the exercise of any right of set-off or
otherwise) on account of any Committed Loan made by it or, after the occurrence
and during the continuation of an Event of Default pursuant to Section 10.01(a),
in respect of any Obligation owing to it (including with respect to any Bid
Loan), in excess of its Commitment Percentage of payments on account of the
Committed Loans or, after the occurrence and during the continuation of an Event
of Default pursuant to Section 10.01(a), in excess of its pro rata share of all
Obligations, such Lender shall forthwith purchase from the other Lenders such
participations in the Committed Loans made by them or, after the occurrence and
during the continuation of an Event of Default pursuant to Section 10.01(a), in
all Obligations owing to them, as shall be necessary to cause such purchasing
Lender to share the excess payment ratably with each of the other Lenders
according to their Commitment Percentages or, after the occurrence and during
the continuation of an Event of Default pursuant to Section 10.01(a), their pro
rata shares of all Obligations then owing to them; provided, however, that if
all or any portion of such excess payment is thereafter recovered from such
purchasing Lender, such purchase by such Lender from each other Lender shall be
rescinded and each other Lender shall repay to the purchasing Lender the
purchase price to the extent of such recovery together with an amount equal to
such paying Lender's pro rata share (according to the proportion of (a) the
amount of such paying Lender's required repayment to the purchasing Lender to
(b) the total amount so recovered from the purchasing Lender) of any interest or
other amount paid or payable by the purchasing Lender in respect of the total
amount so recovered. The Company agrees that any Lender so purchasing a
participation from another Lender pursuant to the provisions of this Section
4.06 may, to the fullest extent permitted by law, exercise all its rights of
payment (including the right of set-off) with respect to such participation as
fully as if such Lender were the direct creditor of the Company in the amount of
such participation. If under any applicable bankruptcy, insolvency or other
similar law, any Lender receives a secured claim in lieu of a setoff to which
this Section 4.06 applies, such Lender shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent with
the rights of the Lenders entitled under this Section 4.06 to share in the
benefits of any recovery on such secured claim.
ARTICLE 5
CHANGES IN CIRCUMSTANCES; ETC.
5.01 Eurodollar Rate Protection. If with respect to any Interest Period
for Eurodollar Loans, , either (a) the Agent or the Required Lenders determine
that for any reason adequate and reasonable means do not exist for ascertaining
LIBOR for such Interest Period; or (b) by the first day of such Interest Period,
the Required Lenders notify the Agent that LIBOR for such Interest Period will
not adequately reflect the cost to the Required Lenders of making such
Eurodollar Loans or funding or maintaining their respective Eurodollar Loans for
such Interest Period, the Agent shall forthwith so notify the Company and the
Lenders, whereupon the obligations of the Lenders to make or continue Loans as
Eurodollar Loans or to convert Reference Rate Loans into Eurodollar Loans shall
be suspended until the Agent shall notify the Company and the Lenders that the
circumstances causing such suspension no longer exist and any then outstanding
Eurodollar Loans shall at the end of the then current Interest Period for such
Loans be converted into Reference Rate Loans.
5.02 Additional Interest on Eurodollar Loans. The Company shall pay to
each Lender, on demand of such Lender, as long as such Lender shall be required
under regulations of the Federal Reserve Board to maintain reserves with respect
to liabilities or assets consisting of or including Eurocurrency Liabilities,
additional interest on the unpaid principal amount of each Eurodollar Loan of
such Lender from the date such Eurodollar Loan is made until such principal
amount is paid in full, at a rate per annum equal at all times to the remainder
obtained by subtracting (a) LIBOR for the Interest Period for such
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Eurodollar Loan from (b) the rate obtained by dividing such LIBOR by a
percentage equal to 100% minus the Eurodollar Reserve Percentage of such Lender
for such Interest Period, payable on each Interest Payment Date for such
Eurodollar Loan.
5.03 Increased Costs. If, due to either (a) the introduction of or any
change (other than any change by way of imposition of or increase in reserve
requirements covered by Section 5.02) in or in the interpretation of any law or
regulation after the date hereof (except to the extent such introduction, change
or interpretation affects Taxes or Other Taxes) or (b) the compliance with any
guideline or request issued after the date hereof (except to the extent such
guideline or request affects Taxes or Other Taxes) from any central bank or
other Governmental Authority (whether or not having the force of law), there
shall be any increase in the cost to any Lender of agreeing to make or making,
funding or maintaining any Eurodollar Loans or participating in Letters of
Credit or, in the case of the Issuing Bank, any increase in the cost to the
Issuing Bank of agreeing to issue, issuing or maintaining any Letter of Credit
or of agreeing to make or making, funding or maintaining any unpaid drawing
under any Letter of Credit, then the Company shall, subject to Section 5.08(b),
be liable for, and shall from time to time, upon demand therefor by such Lender
to the Company through the Agent, pay to the Agent for the account of such
Lender, additional amounts as are sufficient to compensate such Lender for such
increased costs. For purposes of this Section 5.03, the term "Taxes" shall have
the meaning specified in Section 4.05(a) without regard to the exclusions set
forth in Section 4.05(a).
5.04 Illegality. Notwithstanding any other provision of this Agreement,
if the introduction of any Requirement of Law, or in the interpretation or
administration of any Requirement of Law shall, after the date hereof, make it
unlawful, or any central bank or other Governmental Authority shall assert that
it is unlawful, for any Lender or its applicable Lending Office to make or
continue Committed Loans as Eurodollar Loans or to convert Reference Rate Loans
into Eurodollar Loans, then, on notice thereof and demand therefor by such
Lender to the Company through the Agent, (a) the obligation of such Lender to
make or to continue Committed Loans as Eurodollar Loans or to convert Reference
Rate Loans into Eurodollar Loans shall terminate and (b) the Company shall
forthwith prepay in full all Eurodollar Loans of such Lender then outstanding,
together with interest accrued thereon, either on the last day of the then
current Interest Period applicable to each such Eurodollar Loan if such Lender
may lawfully continue to maintain such Eurodollar Loan to such day, or
immediately if such Lender may not lawfully continue to maintain such Eurodollar
Loan to such day, unless the Company, on or prior to the date on which it would
otherwise be required to prepay such Eurodollar Loan, converts all Eurodollar
Loans of all Lenders then outstanding into Reference Rate Loans.
5.05 Capital Adequacy. In the event that any Lender shall determine
that the compliance with any law, rule or regulation regarding capital adequacy,
or any change therein or in the interpretation or application thereof or
compliance by such Lender (or its Lending Office) or any corporation controlling
such Lender with any request or directive regarding capital adequacy (whether or
not having the force of law) from any central bank or other Governmental
Authority, affects or would affect the amount of capital required or expected to
be maintained by such Lender or any corporation controlling such Lender and such
Lender (taking into consideration such Lender's or such corporation's policies
with respect to capital adequacy and such Lender's or such corporation's desired
return on capital) determines that the amount of such capital is increased as a
consequence of such Lender's obligation under this Agreement, then the Company
shall, subject to Section 5.08(b), be liable for and shall from time to time,
upon demand therefor by such Lender through the Agent, pay to the Agent for the
account of such Lender such additional amounts as are sufficient to compensate
such Lender for such increase.
5.06 Funding Losses.
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(a) If the Company makes any payment or prepayment of principal with
respect to any Eurodollar Loan (including payments made after any acceleration
thereof) or converts any Loan from a Eurodollar Loan to a Reference Rate Loan on
any day other than the last day of an Interest Period applicable thereto, the
Company shall pay to each Lender, upon demand therefor by such Lender, the
amount (if any) by which (i) the present value of the additional interest which
would have been payable on the amount so received had it not been received until
the last day of such Interest Period exceeds (ii) the present value of the
interest which would have been recoverable by such Lender by placing such amount
so received on deposit in the London interbank market for a period starting on
the date on which it was so received and ending on the last day of such Interest
Period. For purposes of determining present value under this Section 5.06(a),
interest amounts shall be discounted at a rate equal to the sum of (A) LIBOR
determined two Business Days before the date on which such principal amount is
received for an amount substantially equal to the amount received and for a
period commencing on the date of such receipt and ending on the last day of the
relevant Interest Period, plus (B) the percentage above LIBOR payable in respect
of such Eurodollar Loan pursuant to Section 2.09(a)(ii).
(b) If the Company fails to prepay, borrow, convert or continue any
Eurodollar Loan after a notice of prepayment, borrowing, conversion or
continuation has been given (or is deemed to have been given) to any Lender, the
Company shall reimburse each Lender, upon demand therefor by such Lender, for
any resulting loss and expense incurred by it, including any loss incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
such Lender from third parties to fund any Eurodollar Loan.
(c) If for any reason any Lender receives all or part of the principal
amount of a Bid Loan owed to it prior to the scheduled maturity date thereof,
the Company shall, on demand by such Lender, pay such Lender the amount (if any)
by which (i) the present value of the additional interest which would have been
payable on the amount so received had it not been received until such maturity
date exceeds (ii) the present value of the interest which would have been
recoverable by such Lender by placing such amount so received on deposit in the
London interbank market for a period starting on the date on which it was so
received and ending on such maturity date. For purposes of determining present
value under this Section 5.06(c), interest amounts shall be discounted at a rate
equal to the sum of (A) LIBOR determined two Business Days before the date on
which such principal amount is received for an amount substantially equal to the
amount received and for a period commencing on the date of such receipt and
ending on such maturity date, plus (B) the percentage above LIBOR payable in
respect of Eurodollar Loans constituting Tranche A Loans pursuant to Section
2.09(a)(ii).
5.07 Funding; Certificates of Lenders.
(a) Each Lender may fulfill its obligation to make, continue or convert
Loans into Eurodollar Loans by causing one of its foreign branches or Affiliates
(or an international banking facility created by such Lender) to make or
maintain such Eurodollar Loans; provided, however, that such Eurodollar Loans
shall in such event be deemed to have been made and to be held by such Lender
and the obligation of the Company to repay such Eurodollar Loans shall be to
such Lender for the account of such foreign branch, Affiliate or international
banking facility. In addition, the Company hereby consents and agrees that, for
purposes of any determination to be made pursuant to Sections 5.01, 5.02, 5.03,
5.04 or 5.06, it shall be conclusively assumed that each Lender elected to fund
all Eurodollar Loans by purchasing dollar deposits in the interbank eurodollar
market for its Eurodollar Lending Office.
(b) Any Lender claiming reimbursement or compensation pursuant to
Sections 4.05, 5.02, 5.03, 5.05 and/or 5.06 shall deliver to the Company through
the Agent a certificate setting forth in reasonable detail the basis for
computing the amount payable to such Lender hereunder and such certificate shall
be conclusive and binding on the Company in the absence of manifest error. The
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Company shall pay to any Lender claiming compensation or reimbursement from the
Company pursuant to Sections 5.02, 5.03, 5.05 or 5.06 the amount requested by
such Lender no later than five Business Days after such demand.
5.08 Change of Lending Office; Limitation on Increased Costs.
(a) Each Lender agrees that upon the occurrence of any event giving
rise to the operation of Section 4.05(c) or (d) or Sections 5.02, 5.03, 5.04 or
5.05 with respect to such Lender, it will use commercially reasonable efforts
(consistent with its internal policy and legal and regulatory restrictions) to
minimize the imposition of any costs and expenses pursuant to such Sections and
to designate a different Lending Office for any Loans affected by such event
with the object of avoiding the consequence of the event giving rise to the
operation of such Section. Nothing in this Section 5.08 shall affect or postpone
any of the obligations of the Company or the right of any Lender provided in
Section 4.05(c) or (d) or Sections 5.02, 5.03, 5.04 or 5.05.
(b) Notwithstanding the provisions of Sections 4.05(c), 4.05(d), 5.02,
5.03 and 5.05, the Company shall only be obligated to compensate any Lender for
any amount arising or occurring during (i) any time or period commencing (A) in
the case of Section 4.05(c) or (d), not more than six months and (B) in the case
of Sections 5.02, 5.03 or 5.05, not more than three months, prior to the date on
which such Lender notifies the Agent and the Company that such Lender proposes
to demand such compensation and (ii) any time or period during which, because of
the unannounced retroactive application of any statute, regulation or other
basis, such Lender could not have known that such amount might arise or accrue.
5.09 Replacement of Lenders. The Company may from time to time for
reasonable cause, as determined by the management of the Company, including
invocation of any provision of this Article 5 by any Lender, designate one or
more banks (any such bank so designated being herein called a "Replacement
Lender") willing, in its or their sole discretion, to purchase all of the
Committed Loans of any one or more Lenders and each such Lender's rights
hereunder (other than any such rights with respect to Bid Loans), without
recourse to or warranty by, or expense to, such Lender for a purchase price
equal to the outstanding principal amount of the Committed Loans payable to such
Lender plus any accrued but unpaid interest on such Committed Loans and accrued
but unpaid Utilization Fees and facility fees in respect of such Lender's
Commitment, if any, and any other amounts payable to such Lender under this
Agreement or any other Loan Document (other than with respect to Bid Loans),
including any amount payable pursuant to Section 5.06 as though such Lender's
Eurodollar Loans were being prepaid on the date of such purchase, and to assume
all the obligations of such Lender hereunder (other than with respect to Bid
Loans), and, upon such purchase, such Lender shall no longer be a party hereto
or have any rights hereunder (except those that pertain to its Bid Loans and
those that survive full payment hereunder) and shall be relieved from all
obligations to the Company hereunder, and the Replacement Lender shall succeed
to the rights and obligations of such Lender hereunder (other than with respect
to Bid Loans).
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders and the Agent to enter into this
Agreement and to induce the Lenders to extend their Commitments and to make
Loans, the Company represents and warrants to the Lenders and the Agent as
follows:
6.01 Corporate Existence; Compliance with Law. The Company and each
Restricted Subsidiary:
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(a) is a corporation duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation;
(b) is duly qualified as a foreign corporation and in good standing
under the laws of each jurisdiction in which the character of the properties
owned or held under lease by it or the nature of the business transacted by it
requires such qualification except where the failure to be so qualified is not
likely to have a Material Adverse Effect;
(c) has all requisite corporate power and authority to own, pledge,
mortgage, hold under lease and operate its properties and to conduct its
business as now or currently proposed to be conducted; and
(d) is in compliance with all Requirements of Law applicable to it and
its business except for such non-compliance which is not likely to have a
Material Adverse Effect.
6.02 Corporate Power; Authorization. The execution, delivery and
performance by each Loan Party of the Loan Documents to which such Loan Party is
a party:
(a) are within the respective corporate powers of such Loan Party;
(b) have been, or prior to such execution will have been, duly
authorized by all necessary corporate action, including the consent of
shareholders where required;
(c) do not:
(i) contravene the articles or certificate of incorporation or
by-laws of such Loan Party;
(ii) violate any other Requirement of Law;
(iii) conflict with or result in the breach of, or constitute
a default under, any Contractual Obligation of such Loan Party, except
for such conflicts, breaches or defaults which are not likely to have a
Material Adverse Effect and which do not subject any Lender or the
Agent to any criminal liability or any material civil liability; or
(iv) result in the creation or imposition of any Lien upon any
of the property of any Loan Party; and
(d) do not require the consent of, authorization by, approval of or
notice to, or filing or registration with, any Governmental Authority or any
other Person other than (i) as of the Closing Date, those which have been
obtained, made or given and which are fully disclosed on Schedule 6.02(d) and
(ii) those which are not required to be obtained, made or given as of the
Closing Date but which will be obtained, made or given as and when required.
6.03 Enforceable Obligations. This Agreement and each other Loan
Document to which any Loan Party is a party have been duly executed and
delivered by such Loan Party. This Agreement is, and each other Loan Document
when delivered hereunder will be, legal, valid and binding obligations of each
Loan Party, a party thereto, enforceable against each such Loan Party in
accordance with their respective terms except as such enforcement may be limited
by applicable bankruptcy, insolvency, reorganization or other similar laws
relating to or limiting creditors' rights generally.
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6.04 Taxes. As of the Closing Date, the Company and each Restricted
Subsidiary have filed all federal, state, local and foreign tax returns which
are required to have been filed in any jurisdiction and have paid all taxes
shown to be due thereon or otherwise assessed, to the extent the same have
become due and payable and before they have become delinquent, except for any
taxes and assessments the amount, applicability or validity of which is
currently being contested in good faith by appropriate proceedings and with
respect to which the Company has set aside on its books reserves (adequate in
accordance with, and segregated to the extent required by, GAAP) and the
non-filing or non-payment of which is not likely to have a Material Adverse
Effect.
6.05 Financial Matters.
(a) The consolidated balance sheet of the Company and its Subsidiaries
as of the last day of the fiscal year ended on December 31, 1998, and the
related consolidated statements of income and cash flows of the Company and its
Subsidiaries for such fiscal year, all with reports thereon by Arthur Andersen &
Co., independent public accountants, copies of which have been delivered to the
Agent and each Lender prior to the execution of this Agreement, fairly present
the consolidated financial position of the Company and its Subsidiaries as of
the date of said balance sheet and the consolidated results of their operations
for the period covered by said statements of income and cash flows, and have
been prepared in accordance with GAAP consistently applied in all material
respects by the Company and its Subsidiaries throughout the period involved,
except as set forth in the notes thereto. There are no material liabilities,
contingent or otherwise, of the Company or any Subsidiary not reflected in the
consolidated balance sheet as of December 31, 1998 or in the notes thereto which
are required to be disclosed therein.
(b) Since December 31, 1998, there has been no Material Adverse Effect
and no development which is likely to have a Material Adverse Effect, except as
reflected in the Company's periodic reports filed with the Securities and
Exchange Commission prior to the Closing Date.
(c) There is no material obligation, contingent liability or liability
for taxes, long-term leases or unusual forward or long-term commitments which is
not reflected in the December 31, 1998 consolidated financial statements of the
Company and its Subsidiaries or in the notes thereto which are required by GAAP
to be disclosed therein and no liability reflected in such notes is likely to
have a Material Adverse Effect.
6.06 Litigation. As of the Closing Date, there are no pending or, to
the knowledge of the Company, threatened, actions or proceedings affecting the
Company or any Restricted Subsidiary before any court or other Governmental
Authority or any arbitrator that are likely to have a Material Adverse Effect.
6.07 Subsidiaries. As of the Closing Date, the Company has no
Subsidiaries.
6.08 Liens. As of the Closing Date, there are no Liens of any nature
whatsoever on any properties owned by the Company or any Restricted Subsidiary
other than Permitted Liens.
6.09 No Burdensome Restrictions; No Defaults.
(a) As of the Closing Date, neither the Company nor any Restricted
Subsidiary is a party to any Contractual Obligation the performance of which is
likely to have a Material Adverse Effect.
(b) As of the Closing Date, no provision or provisions of any
applicable Requirement of Law has or is likely to have a Material Adverse
Effect.
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(c) Neither the Company nor any Restricted Subsidiary is in default
under or with respect to any Contractual Obligation which default is likely to
have a Material Adverse Effect.
(d) No Default or Event of Default has occurred and is continuing.
6.10 Investment Company Act; Public Utility Holding Company Act. No
Loan Party is an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company", as such
terms are defined in the Investment Company Act of 1940, as amended, or a
"holding company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act of 1935,
as amended. The making of the Loans by the Lenders, the application of the
proceeds and repayment thereof by the Company and the consummation of the
transactions contemplated by the Loan Documents will not violate any provision
applicable to any Loan Party of (a) the Investment Company Act of 1940, as
amended, or (b) any rule, regulation or order issued by the Securities and
Exchange Commission thereunder.
6.11 Margin Regulations. No part of the proceeds of any Loan will be
used in violation of Regulation T, U, or X of the Federal Reserve Board. After
giving effect to the application of the proceeds of the Loans (including the
Loans to be made on the Closing Date) less than twenty-five percent (25%) of the
assets of the Company, individually and on a consolidated basis with its
Subsidiaries, consists of margin stock. The Company is not engaged principally,
or as one of its important activities, in the business of extending credit for
the purpose of purchasing or carrying margin stock. Terms for which meanings are
provided in Regulation U of the Federal Reserve Board or any regulations
substituted therefor, as from time to time in effect, are used in this Section
6.11 with such meanings.
6.12 Environmental Matters. Except as set forth on Schedule 6.12:
(a) all facilities and property (including underlying groundwater)
presently owned or leased by the Company or any of its Subsidiaries have been,
and continue to be, owned or leased by the Company and its Subsidiaries in
material compliance with all Environmental Laws, except for such non-compliance
as is not likely to have a Material Adverse Effect;
(b) there are no pending or threatened
(i) claims, complaints, notices or requests for information
received by the Company or any of its Subsidiaries with respect to any
alleged violation of any Environmental Law which are likely to have a
Material Adverse Effect, or
(ii) claims, complaints, notices or inquiries to the Company
or any of its Subsidiaries regarding potential liability under any
Environmental Law which are likely to have a Material Adverse Effect;
(c) except for Releases of Hazardous Materials which occurred after the
date that the Company or any of its Subsidiaries sold, transferred, assigned or
otherwise disposed of its interests in any previously owned or leased property,
there have been no Releases of Hazardous Materials at, on or under any property
now or previously owned or leased by the Company or any of its Subsidiaries that
are likely to have a Material Adverse Effect;
(d) the Company and its Subsidiaries have been issued and are in
material compliance with all permits, certificates, approvals, licenses and
other authorizations relating to environmental matters and
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necessary or desirable for their businesses except for such non-compliance as is
not likely to have a Material Adverse Effect;
(e) (i) no property presently owned or leased by the Company or any of
its Subsidiaries, and (ii) to the best of the knowledge of the Company, no
property previously owned or leased by the Company or any of its Subsidiaries,
is listed or proposed for listing on the National Priorities List pursuant to
CERCLA or on any similar published state list of sites requiring investigation
or clean-up;
(f) to the knowledge of the Company, there are no underground storage
tanks, active or abandoned, including petroleum storage tanks, on or under any
property now or previously owned or leased by the Company or any of its
Subsidiaries that are likely to have a Material Adverse Effect;
(g) neither the Company nor any of its Subsidiaries has directly
transported or directly arranged for the transportation of any Hazardous
Material to any location which is listed or proposed for listing on the National
Priorities List pursuant to CERCLA, on the CERCLIS or on any similar published
state list or which is the subject of federal, state or local enforcement
actions or other investigations which may lead to claims against the Company or
such Subsidiary for any remedial work, damage to natural resources or personal
injury, including claims under CERCLA, except for such claims which are not
likely to have a Material Adverse Effect;
(h) there are no polychlorinated biphenyls or friable asbestos present
at any property now or previously owned or leased by the Company or any of its
Subsidiaries that are likely to have a Material Adverse Effect; and
(i) to the knowledge of the Company, no conditions exist at, on or
under any property now or previously owned or leased by the Company or any of
its Subsidiaries which, with the passage of time, or the giving of notice or
both, are likely to have a Material Adverse Effect.
6.13 Labor Matters. Except as set forth on Schedule 6.13, there are no
strikes or other labor disputes or grievances or charges or complaints with
respect to any employee or group of employees pending or, to the knowledge of
the Company, threatened against the Company or any Restricted Subsidiary which
are likely to have a Material Adverse Effect.
6.14 ERISA Plans. During the twelve-consecutive-month period prior to
the Closing Date, no steps have been taken to terminate any Pension Plan (other
than a standard termination as defined in Section 4041(b) of ERISA for which a
commitment to make the terminating Pension Plan sufficient is not required), and
no contribution failure has occurred with respect to any Pension Plan sufficient
to give rise to a Lien under Section 302(f) of ERISA. Other than liability for
benefit payments or contributions in the ordinary course, no condition exists or
event or transaction has occurred with respect to any Plan which is likely to
result in the incurrence by the Company or any member of the Controlled Group of
any material liability, fine or penalty. Each Plan complies with the applicable
provisions of ERISA and the Code, except where such non-compliance is not likely
to have a Material Adverse Effect. Except as disclosed on Schedule 6.14, neither
the Company nor any Subsidiary of the Company has any material contingent
liability with respect to any post-retirement benefit under a Welfare Plan,
other than liability for continuation coverage described in Part 6 of Subtitle B
of Title I of ERISA.
6.15 Y2K Review. On the basis of a comprehensive review and assessment
of the Company's and its Subsidiaries' systems and equipment and due inquiry
made of the Company's and its Subsidiaries' material suppliers, vendors and
customers, the Company's Responsible Officers are of the view that the "Year
2000 problem" (i.e., the inability of computers, as well as embedded microchips
in non-computing devices, to perform properly date-sensitive functions with
respect to certain dates prior to and after
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December 31, 1999), including costs of remediation, will not result in a
Material Adverse Effect. The Company and its Subsidiaries have developed
feasible contingency plans adequately to ensure uninterrupted and unimpaired
business operation in the event of failure of their own or a third party's
systems or equipment due to the Year 2000 problem, including those of vendors,
customers and suppliers, as well as a general failure of or interruption in its
communications and delivery infrastructure.
6.16 Swap Obligations. Neither the Company nor any of its Subsidiaries
has incurred any outstanding obligations under any Swap Contracts, other than
Permitted Swap Obligations. The Company has undertaken its own independent
assessment of its consolidated assets, liabilities and commitments and has
considered appropriate means of mitigating and managing risks associated with
such matters and has not relied on any swap counterparty or any Affiliate of any
swap counterparty in determining whether to enter into any Swap Contract.
6.17 Full Disclosure. None of the representations or warranties made by
the Company or any Restricted Subsidiary in the Loan Documents as of the date
such representations and warranties are made or deemed made, and none of the
statements contained in any exhibit, report, statement or certificate furnished
by or on behalf of the Company or any Restricted Subsidiary in connection with
the Loan Documents (including the offering and disclosure materials delivered by
or on behalf of the Company to the Lenders prior to the Closing Date), contains
any untrue statement of a material fact or omits any material fact required to
be stated therein or otherwise necessary to make the statements made therein, in
light of the circumstances under which they are made, not misleading as of the
time when made or delivered.
ARTICLE 7
CONDITIONS PRECEDENT
7.01 Conditions Precedent to the First Loan. The obligation of each
Lender to make its initial Loan and the obligation of the Issuing Bank to Issue
its initial Letter of Credit is subject to the satisfaction of the condition
precedent that the Agent shall have received the following, each, unless
otherwise specified below, dated as of the Closing Date, in form and substance
satisfactory to the Agent and its counsel:
(a) Board Resolutions; Incumbency Certificates. A certificate of the
Secretary or an Assistant Secretary of each Loan Party certifying (i) the
resolutions of the Board of Directors of such Loan Party approving each Loan
Document to which such Loan Party is a party and the transactions contemplated
hereby and thereby, (ii) all documents evidencing other necessary corporate
action, if any, by each Loan Party with respect to each Loan Document and (iii)
the names and signatures of the officers authorized to act with respect to each
Loan Document executed by it, upon which certificate the Agent and each Lender
may conclusively rely until they shall have received a further certificate of
the Secretary or Assistant Secretary of such Loan Party canceling or amending
such prior certificate;
(b) Articles of Incorporation; By-Laws and Good Standing. Each of the
following documents:
(i) the articles or certificate of incorporation of each Loan
Party as in effect on the Closing Date, certified (A) by the Secretary
of State of the state of incorporation of such Loan Party as of a date
reasonably close to the Closing Date, and (B) by the Secretary or an
Assistant Secretary of such Loan Party as of the Closing Date, and the
by-laws of each Loan Party, as in effect on the Closing Date, certified
by the Secretary or an Assistant Secretary of such Loan Party as of the
Closing Date; and
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(ii) a good standing certificate for each Loan Party from the
Secretary of State of the state of incorporation of such Loan Party as
of a date reasonably close to the Closing Date;
(c) Parent Guaranty. A guaranty, duly executed by the Parent, in
substantially the form of Exhibit 7.01(c) (the "Parent Guaranty").
(d) Legal Opinion. A favorable opinion addressed to the Agent and all
Lenders from counsel to the Company, in substantially the form of Exhibit
7.01(d) (which opinion the Company hereby expressly instruct such counsel to
prepare and deliver); and
(e) Contribution Agreement. A duly executed copy of the Contribution
Agreement, in substantially the form of Exhibit 7.01(e) (the "Contribution
Agreement").
7.02 Additional Conditions Precedent to the First Loan. The obligation
of each Lender to make its initial Loan and the obligation of the Issuing Bank
to Issue its initial Letter of Credit is subject to the further conditions
precedent that:
(a) No Material Adverse Effect. Since December 31, 1998, there shall
have been no Material Adverse Effect and no development which is likely to have
a Material Adverse Effect, except as reflected in the Company's periodic reports
filed with the Securities and Exchange Commission prior to the Closing Date.
(b) Margin Regulations. All Loans made by the Lenders shall be in full
compliance with all applicable Requirements of Law, including Regulations T, U
and X of the Federal Reserve Board.
(c) Fees Costs and Expenses. The Company shall have paid all fees
referred to in Section 4.01 to the extent then due and payable and all
reasonable costs and expenses referred to in Section 12.04 (including legal fees
and expenses) and any indemnity pursuant to Section 12.05 which, in each case,
may be then due and payable.
(d) Company Officer's Certificate. The Company shall have delivered to
the Agent a certificate from a Responsible Officer of the Company in
substantially the form of Exhibit 7.02(d) as to the satisfaction of the
conditions set forth in Section 7.02 and to the effect that on the Closing Date,
the representations and warranties contained in Article 6 are correct.
(e) Georgia-Pacific Agreement. All conditions precedent described in
Sections 7.01 and 7.02 of the Georgia-Pacific Agreement shall have been
satisfied.
7.03 Conditions Precedent to Each Committed Loan and Letter of Credit.
The obligation of each Lender to make any Committed Loan (including its initial
Committed Loan) and the obligation of the Issuing Bank to Issue any Letter of
Credit (including the initial Letter of Credit) shall be subject to the further
conditions precedent that:
(a) Notice of Borrowing. The Agent shall have received a Notice of
Borrowing as required by Section 2.02 or in the case of any Issuance of any
Letter of Credit, the Issuing Bank and the Agent shall have received an L/C
Application or L/C Amendment Application, as required under Section 3.02.
(b) Accuracy of Representations; No Default; Etc. The following
statements shall be true on the date of each Committed Loan or Issuance Date, as
the case may be, before and after giving effect thereto:
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(i) The representations and warranties contained in Article 6
are correct on and (except for representations and warranties relating
solely to a particular point in time and, after the initial Committed
Borrowing, other than under Section 6.05(b)) as of such date as though
made on and as of such date; and
(ii) No Default or Event of Default has occurred and is
continuing or would result from such Committed Loan being made or
Letter of Credit being Issued on such date.
(c) Other Assurances. The Agent shall have received such other
approvals, opinions or documents as any Lender through the Agent may reasonably
request related to the transactions contemplated hereby.
7.04 Conditions Precedent to Each Bid Borrowing. The obligation of each
Lender which is to make a Bid Loan in connection with a Bid Borrowing (including
the initial Bid Borrowing) to make such Bid Loan shall be subject to the further
conditions precedent:
(a) Promissory Notes. If so requested by such Lender, the Company shall
have delivered to such Lender a promissory note in the form of Exhibit 2.05(c)
evidencing the Indebtedness of the Company in respect of such Bid Loan.
(b) Accuracy of Representations; No Default; Etc. The following
statements shall be true on the date of each Bid Borrowing, before and after
giving effect thereto and to the application of the proceeds from the Bid Loans
being made on such date:
(i) The representations and warranties contained in Article 6
are correct on and (except for representations and warranties relating
solely to a particular point in time and other than under Section
6.05(b)) as of such date as though made on and as of such date; and
(ii) No Default or Event of Default has occurred and is
continuing or would result from such Bid Loan being made on such date.
ARTICLE 8
AFFIRMATIVE COVENANTS
The Company agrees that as long as the obligations of the Lenders to
make Loans shall remain in effect or any Letter of Credit remain outstanding and
until all Obligations shall have been paid or performed in full, unless the
Required Lenders shall otherwise consent in writing:
8.01 Application of Proceeds. The Company will apply the proceeds of
the Loans for general corporate purposes.
8.02 Compliance with Laws, Etc. The Company will comply, and cause each
of its Subsidiaries to comply, in all material respects with all applicable
Requirements of Law except for such non-compliance as is being contested in good
faith by appropriate proceedings or is not likely to have a Material Adverse
Effect.
8.03 Payment of Taxes, Etc. The Company will pay and discharge, and
cause each of its Subsidiaries to pay and discharge, before the same shall
become delinquent, all lawful claims and all taxes, assessments and governmental
charges or levies except where contested in good faith, by proper proceedings,
if adequate reserves therefor have been established on the books of the Company
in
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accordance with, and to the extent required by, GAAP, or if such non-payment
(individually and in the aggregate with all other such non-payments) is not
likely to have a Material Adverse Effect.
8.04 Maintenance of Insurance. The Company will maintain, and cause
each of its Subsidiaries to maintain, insurance with responsible and reputable
insurance companies or associations in such amounts and covering such risks as
is usually carried by companies engaged in similar businesses and owning similar
properties in the same general areas in which the Company and such Subsidiaries
operate; provided, however, that the Company and its Subsidiaries may
self-insure to the extent that the Company or any such Subsidiary may in its
discretion determine; and provided, further, that the Company may maintain
insurance on behalf of any of its Subsidiaries. Without limiting the generality
of the foregoing, the Company will, and will cause each of its Subsidiaries to,
maintain insurance coverages that are at least substantially the same as the
insurance coverages maintained on the Closing Date.
8.05 Preservation of Corporate Existence, Etc. The Company will
preserve and maintain, and cause each Restricted Subsidiary to preserve and
maintain, its corporate existence, rights (charter and statutory), and
franchises, except as permitted under Section 9.03 or except to the extent that
the failure by the Company or any such Restricted Subsidiary to comply with the
foregoing is not likely to have a Material Adverse Effect.
8.06 Access. The Company will from time to time, during normal business
hours upon reasonable notice, or, if a Default or an Event of Default shall have
occurred and be continuing, at any time upon notice to an officer of the Company
having at least the rank of Vice President, permit the Agent, any Lender and any
agent or representative thereof, to examine and make copies of and abstracts
from the records and books of account of, and visit the properties of, the
Company and any of its Subsidiaries, and to discuss the affairs, finances and
accounts of the Company and any of its Subsidiaries with any of their respective
officers.
8.07 Keeping of Books. The Company will keep proper books of record and
account, in which full and correct entries, on a consolidated basis for the
Company and its Subsidiaries, shall be made of all financial transactions and
the assets and business of the Company and its Subsidiaries in accordance with
GAAP consistently applied.
8.08 Maintenance of Properties, Etc. The Company will maintain and
preserve, and cause each of its Subsidiaries to maintain and preserve, all of
its properties in good repair, working order and condition, and from time to
time make or cause to be made all necessary and proper repairs, renewals,
replacements and improvements so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that nothing in this Section 8.08 shall prevent the Company or any of
its Subsidiaries from discontinuing the maintenance or preservation of any of
its properties if such discontinuance is, in the opinion of the Company,
desirable in the conduct of its business and is not likely to have a Material
Adverse Effect.
8.09 Financial Statements. The Company will furnish to the Agent, with
sufficient copies for the Lenders:
(a) as soon as available and in any event within 45 days after the end
of each of the first three quarters of each fiscal year of the Company,
consolidated balance sheets of the Company and its Subsidiaries as of the end of
such quarter and the related statements of income and cash flows for such
quarter and for the period commencing at the end of the previous fiscal year and
ending with the end of such quarter;
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(b) as soon as available and in any event within 90 days after the end
of each fiscal year of the Company, audited consolidated balance sheets of the
Company and its Subsidiaries as of the end of such year and the related
consolidated statements of income, changes in shareholders' equity and cash
flows for the period commencing at the end of the previous fiscal year and
ending with the end of such year; and
(c) at the same time it furnishes each set of financial statements
pursuant to subsections 8.09(a) and (b), (i) a certificate of a Responsible
Officer of the Company to the effect that no Default or Event of Default has
occurred and is continuing (or if any Default or Event of Default has occurred
and is continuing, describing the same in reasonable detail and the action which
the Company proposes to take with respect thereto) and (ii) a compliance
certificate in substantially the form of Exhibit 8.09(c).
8.10 Reporting Requirements. The Company will furnish to the Agent,
with sufficient copies for the Lenders:
(a) promptly and in any event within three Business Days after the
Company becomes aware of the existence of any Default or Event of Default,
notice by telephone or facsimile specifying the nature of such Default or Event
of Default, which notice, if given by telephone, shall be promptly confirmed in
writing within five Business Days;
(b) promptly after the sending or filing thereof, copies of all reports
which the Company sends to its security holders generally and copies of all
reports and registration statements which the Company or any of its Subsidiaries
files with the Securities and Exchange Commission or any national securities
exchange (including the Company's Quarterly Report on Form 10-Q and Annual
Report on Form 10-K);
(c) promptly but not later than three Business Days after the Company
becomes aware of any change by Moody's or S&P in its Debt Rating, notice by
telephone or facsimile of such change; and
(d) such other information respecting the business, prospects,
properties, operations or condition, financial or otherwise of the Company or
any of its Subsidiaries as any Lender through the Agent may from time to time
reasonably request.
8.11 ERISA Plans. The Company will maintain and operate, and cause each
Subsidiary to maintain and operate, each Plan in material compliance with ERISA
and the Code and all applicable regulations thereunder.
8.12 Environmental Compliance; Notice. The Company will, and will cause
each of its Subsidiaries to:
(a) endeavor to use and operate all of its facilities and properties in
substantial compliance with all Environmental Laws, keep all necessary permits,
approvals, certificates, licenses and other authorizations relating to
environmental matters in effect and remain in substantial compliance therewith,
and handle all Hazardous Materials in substantial compliance with all applicable
Environmental Laws;
(b) promptly upon receipt of all written claims, complaints, notices or
inquiries relating to the condition of its facilities and properties or
compliance with Environmental Laws, evaluate such claims, complaints, notices
and inquiries and forward copies of (i) all such claims, complaints, notices and
inquiries which individually are likely to have a
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Material Adverse Effect and (ii) all such claims, complaints, notices and
inquiries, arising from a single occurrence which together are likely to have a
Material Adverse Effect, and endeavor to promptly resolve all such actions and
proceedings relating to compliance with Environmental Laws; and
(c) provide such information and certifications which the Agent may
reasonably request from time to time to evidence compliance with this Section
8.12.
8.13 New Subsidiaries. If the Company at any time after the date hereof
acquires, forms, or establishes any Principal Subsidiary or any Subsidiary
becomes a Principal Subsidiary, the Company shall cause any such Principal
Subsidiary to promptly (a) execute and deliver to Agent the Subsidiary Guaranty
and the Contribution Agreement; and (b) provide such evidence of due
authorization, execution, and delivery of such Loan Documents as the Agent or
the Required Lenders may reasonably require.
ARTICLE 9
NEGATIVE COVENANTS
The Company agrees that as long as the obligations of the Lenders to
make Loans shall remain in effect and until all Obligations shall have been paid
or performed in full, unless the Required Lenders shall otherwise consent in
writing:
9.01 Liens, Etc. The Company shall not create or assume and shall not
permit any Restricted Subsidiary to create or assume, any Lien upon or with
respect to any of its Principal Properties or shares of capital stock or
Indebtedness of any Restricted Subsidiary, whether now owned or hereafter
acquired, without making effective provision, and the Company in such case will
make or cause to be made effective provision, whereby the Obligations shall be
secured by such Lien equally and ratably with any and all other Indebtedness or
obligations thereby secured, so long as such other Indebtedness or obligations
shall be so secured; provided, however, that the foregoing shall not apply to
any of the following:
(a) Liens existing on the Closing Date and set forth on Schedule 9.01;
(b) Liens on any Principal Property acquired, constructed or improved
after the date of this Agreement which are created or assumed contemporaneously
with, or within 120 days after, or pursuant to financing arrangements for which
a firm commitment is made by a bank, insurance company or other lender or
investor (not including the Company or any Restricted Subsidiary) within 120
days after, the completion of such acquisition, construction or improvement to
secure or provide for the payment of any part of the purchase price of such
property or the cost of such construction or improvement, or, in addition to
Liens contemplated by Sections 9.01(c) and 9.01(d), Liens on any Principal
Property existing at the time of acquisition thereof; provided, however, that in
the case of any such acquisition, construction or improvement the Lien shall not
apply to any property theretofore owned by the Company and/or one or more
Restricted Subsidiaries other than, in the case of such construction or
improvement, any theretofore unimproved real property on which the property so
constructed, or the improvement, is located;
(c) Liens on property or shares of capital stock or indebtedness of a
corporation existing at the time such corporation is merged into or consolidated
with the Company or a Restricted Subsidiary or existing at the time of a sale,
lease or other disposition of the properties of a corporation as an entirety or
substantially as an entirety to the Company, or to a Restricted Subsidiary;
(d) Liens on property or shares of capital stock of a corporation
existing at the time such corporation becomes a Restricted Subsidiary;
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(e) Liens to secure Indebtedness of a Restricted Subsidiary to the
Company or one or more Subsidiaries;
(f) Liens in favor of the United States of America or any State
thereof, or any department, agency or political subdivision of the United States
of America or any State thereof, to secure partial, progress, advance or other
payments pursuant to any contract or statute or to secure any Indebtedness
incurred for the purpose of financing all or any part of the purchase price or
the cost of constructing or improving the property subject to such Liens;
(g) Liens on timberlands in connection with an arrangement under which
the Company 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;
(h) Liens created or assumed in the ordinary course of the business of
exploring for, developing or producing oil, gas or other minerals (including in
connection with borrowings of money for such purposes) on, or on any interest
in, or on any proceeds from the sale of, property acquired or held for the
purpose of exploring for, developing or producing oil, gas or other minerals, or
production therefrom, or proceeds of such production, or material or equipment
located on such property;
(i) Liens in favor of any customer arising in respect of performance
deposits and partial, progress, advance or other payments made by or on behalf
of such customer for goods produced or to be produced or for services rendered
or to be rendered to such customer in the ordinary course of business, which
Liens shall not exceed the amount of such deposits or payments;
(j) Liens on the property of the Company or any Restricted Subsidiary
incurred or pledges and deposits made in the ordinary course of business in
connection with worker's compensation, unemployment insurance, old-age pensions
and other social security benefits other than in respect of employer plans
subject to ERISA;
(k) Liens pertaining to receivables or other accounts sold by the
Company or any of its Restricted Subsidiaries pursuant to a receivables sale
transaction in favor of the purchaser or purchasers of such receivables or other
accounts;
(l) purchase money liens or purchase money security interests upon or
in any other property acquired by the Company or any Restricted Subsidiary in
the ordinary course of business to secure the purchase price of such property or
to secure Indebtedness incurred solely for the purpose of financing the
acquisition of such property;
(m) extensions, renewals and replacements of Liens referred to in
Section 9.01(a) through (l) or this Section 9.01(m), provided, however, that the
Indebtedness secured thereby shall not exceed the principal amount of the
Indebtedness so secured at the time of such extension, renewal or replacement,
and such extension, renewal or replacement shall be limited to all or part of
the property or assets which secured the Lien extended, renewed or replaced
(plus improvements on such property);
(n) Liens imposed by law, such as workers', materialmen's, mechanics',
warehousemen's, carriers', lessors', vendors' and other similar Liens incurred
by the Company or any Restricted Subsidiary arising in the ordinary course of
business which secure its obligations to any Person;
(o) Liens created by or resulting from any litigation or proceedings
which are being contested in good faith by appropriate proceedings; Liens
arising out of judgments or awards against the Company and/or one or more
Restricted Subsidiaries with respect to which the Company and/or such
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Restricted Subsidiary or Restricted Subsidiaries are in good faith prosecuting
an appeal or proceedings for review; or Liens incurred by the Company and/or one
or more Restricted Subsidiaries for the purpose of obtaining a stay or discharge
in the course of any legal proceeding to which the Company and/or such
Restricted Subsidiary or Restricted Subsidiaries are a party;
(p) Liens for taxes, assessments or other governmental charges or
levies, either not yet due and payable or to the extent that non-payment thereof
shall be permitted by Section 7.03, landlord's liens on property held under
lease and tenants' rights under leases;
(q) zoning restrictions, easements, licenses, reservations,
restrictions on the use of real property or minor irregularities of title
incident thereto which do not materially impair the value of any parcel of
property material to the operation of the business of the Company and its
Restricted Subsidiaries taken as a whole or the value of such property for the
purpose of such business; and
(r) Liens arising in connection with Sale-Leaseback Transactions
permitted by Section 9.02.
9.02 Sale-Leaseback Transactions. The Company shall not, and shall not
permit any Restricted Subsidiary to, enter into any arrangement with any Person
providing for the leasing by the Company and/or one or more Restricted
Subsidiaries of any Principal Property (except for temporary leases for a term,
including any renewal thereof, of not more than three years and except for
leases between the Company and one or more Restricted Subsidiaries or between
Restricted Subsidiaries) which property has been or is to be sold or transferred
by the Company and/or such Restricted Subsidiary or Restricted Subsidiaries to
such Person (a "Sale-Leaseback Transaction") unless (a) the Company and/or such
Restricted Subsidiary or Restricted Subsidiaries would be entitled to incur
Indebtedness secured by a Lien on such property without equally and ratably
securing the Obligations pursuant to the provisions of Section 9.01, or (b) the
Company shall apply or cause to be applied an amount equal to the Value of such
Sale-Leaseback Transaction within 120 days of the effective date of any
arrangement (i) to the retirement of Indebtedness for Borrowed Money incurred or
assumed by the Company or any Restricted Subsidiary (other than indebtedness for
borrowed money owed to the Company and/or one or more Restricted Subsidiaries)
which by its terms matures on, or is extendable or renewable at the option of
the obligor to, a date more than 12 months after the date of the incurrence or
assumption of such indebtedness and which is senior in right of payment to, or
ranks pari passu with, the Loans, or (ii) to the purchase of other property
which will constitute "Principal Property" having a fair value in the opinion of
the Board of Directors of the Company at least equal to the Value of such
Sale-Leaseback Transaction, or (c) the Company shall use the net proceeds to
repay Loans hereunder.
Notwithstanding the provisions of Sections 9.01 and 9.02, the Company
and any one or more of its Restricted Subsidiaries may nevertheless create or
assume Liens which would otherwise require securing of the Obligations under
said provisions, and enter into Sale-Leaseback Transactions without compliance
with either Section 9.02(b) or 9.02(c), provided that the aggregate amount of
all such Liens and Sale-Leaseback Transactions permitted by this Section 9.02 at
any time outstanding (as measured by the sum of (a) all Indebtedness secured by
all such Liens then outstanding or to be so created or assumed, but excluding
secured Indebtedness permitted under the exceptions in Section 9.01, and (b) the
Value of all such Sale-Leaseback Transactions then outstanding or to be so
entered into, but excluding such transactions in which indebtedness is retired
or property is purchased or Loans are repaid) shall not exceed 10% of Net
Tangible Assets.
9.03 Mergers, Etc. The Company shall not merge or consolidate with or
into, or convey, transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of its
assets, whether now owned or hereafter acquired, to any Person; provided,
however, that the Company may merge or consolidate with or into any corporation
(whether or not
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affiliated with the Company) or convey, transfer, lease or otherwise dispose of
all or substantially all of its assets, to any other corporation (whether or not
affiliated with the Company) authorized to acquire or operate the same, so long
as (a) either (x) in the case of such merger or consolidation, the Company is
the surviving corporation or (y) if either (i) in the case of such merger or
consolidation, if the Company is not the surviving corporation, or (ii) upon any
such conveyance, transfer, lease or other disposition, the surviving or
transferee corporation expressly assumes the due and punctual payment of all
Obligations according to their terms and the due and punctual performance and
observance of all of the covenants and conditions of this Agreement to be
performed by the Company; and (b) after giving effect to such transaction, no
Default or Event of Default exists and the Company or such surviving Person, as
applicable, has demonstrated its compliance with Section 9.08 to the reasonable
satisfaction of the Required Lenders.
9.04 Transactions with Affiliates. The Company shall not enter into or
be a party to, or permit any of its Restricted Subsidiaries to enter into or be
a party to, any transaction with any Affiliate of the Company except (a) as may
be permitted under Sections 9.01, 9.02 or 9.03 or (b) transactions in the
ordinary course of business which are not likely to have a Material Adverse
Effect.
9.05 Accounting Changes. The Company (a) shall not make, or permit any
of its Subsidiaries to make, any significant change in accounting treatment and
reporting practices except as permitted or required by GAAP or the Securities
and Exchange Commission and (b) shall not designate a different fiscal year
other than a fiscal year that ends on the closest Saturday to December 31 of
each year.
9.06 Margin Regulations. The Company shall not use the proceeds of any
Loan in violation of Regulation T, U or X of the Board of Governors of the
Federal Reserve System.
9.07 Negative Pledges, Etc. The Company shall not, and shall not permit
any Restricted Subsidiary to, enter into any agreement prohibiting compliance by
the Company with the provisions of the introduction to Section 9.01 or
restricting the ability of the Company or any other Loan Party to amend or
otherwise modify this Agreement or any other Loan Document.
9.08 Leverage Ratio. The Company shall not permit the ratio of (a)
Funded Indebtedness on the last day of any fiscal quarter to (b) EBITDA for the
Measurement Period ending on such date (in each case calculated on a
consolidated basis for the Company and its consolidated Subsidiaries) to be
greater than 4.50 to 1.00.
ARTICLE 10
EVENTS OF DEFAULT
10.01 Events of Default. The term "Event of Default" shall mean any of
the events set forth in this Section 10.01.
(a) Non-Payment. The Company shall (i) fail to pay any principal of any
Loan when the same shall become due and payable; or (ii) fail to pay any
interest on any Loan or fail to pay any fee due under this Agreement within
three Business Days after the same shall become due and payable; or
(b) Representations and Warranties. Any representation or warranty made
by the Company in this Agreement or by any Loan Party in any other Loan Document
or in any certificate, document or financial or other statement delivered at any
time under or in connection with this Agreement or any other Loan Document shall
prove to have been incorrect or untrue in any material respect when made or
deemed made; or
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(c) Specific Defaults. The Company shall fail to perform or observe any
term, covenant or agreement contained in Sections 8.01, 8.05, 8.06, or 8.10(a)
or Article 9; or
(d) Other Defaults. The Company shall fail to perform or observe any
other term or covenant contained in this Agreement or any Loan Party shall fail
to perform any other term or covenant in any other Loan Document, and such
Default shall continue unremedied for a period of 30 days after the date upon
which written notice thereof shall have been given to the Company by the Agent;
or
(e) Default under Other Agreements. Any default shall occur and be
continuing under the terms applicable to:
(i) any Funded Indebtedness or any Indebtedness or items of
Indebtedness of the Company or any of its Subsidiaries (other than
under this Agreement or any other Loan Document) which Funded
Indebtedness or Indebtedness, as the case may be, has an aggregate
outstanding principal amount of $75,000,000 or more, or
(ii) under one or more Swap Contracts of the Company or any of
its Subsidiaries resulting in aggregate Swap Termination Values of the
Company and its Subsidiaries of $75,000,000 or more and,
in either of the above cases, such default shall:
(A) consist of the failure to pay such Indebtedness
or such net obligations when due (whether at scheduled
maturity, upon early termination, by required prepayment,
acceleration, demand or otherwise) after giving effect to any
applicable grace period; or
(B) result in, or continue unremedied and unwaived
for a period of time sufficient to permit, the acceleration of
such Indebtedness or the early termination of any such Swap
Contract; or
(f) Bankruptcy or Insolvency. The Company or any Restricted Subsidiary
shall:
(i) generally fail to pay, or admit in writing its inability
to pay, its debts as they become due;
(ii) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect;
(iii) seek the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of
its property or consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against it;
(iv) make a general assignment for the benefit of creditors;
or
(v) take any corporate action to authorize any of the
foregoing; or
(g) Involuntary Proceedings. An involuntary case or other proceeding
shall be commenced against the Company or any Restricted Subsidiary seeking
liquidation, reorganization or other relief with
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respect to it or its debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any-substantial part of
its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 60 days; or an order for relief shall
be entered against the Company or any Restricted Subsidiary under the federal
bankruptcy laws as now or hereafter in effect; or
(h) Monetary Judgments. One or more judgments or orders for the payment
of money exceeding in the aggregate $75,000,000 shall be rendered against the
Company or any of its Subsidiaries and either (i) enforcement proceedings shall
have been initiated by any creditor upon such judgment or order or (ii) such
judgment or order shall continue unsatisfied or unstayed for a period of 30
days; or
(i) Pension Plans. Any of the following events shall occur with respect
to any Pension Plan:
(i) the institution of any steps by the Company, any member of
its Controlled Group or any other Person to terminate a Pension Plan
if, as a result of such termination, the Company or any such member
could reasonably expect to be required to make a contribution to such
Pension Plan, or could reasonably expect to incur a liability or
obligation to such Pension Plan or the PBGC, in excess of $75,000,000;
or
(ii) a contribution failure occurs with respect to any Pension
Plan which gives rise to a Lien under Section 302(f) of ERISA with
respect to a liability or obligation in excess of $75,000,000; or
(j) Change in Control. The acquisition by any Person or group (within
the meaning of Rule 13d-5 of the Securities and Exchange Commission under the
Securities Exchange Act of 1934), or two or more Persons acting in concert, of
beneficial ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Securities Exchange Act of 1934) of either (i)
33-1/3% or more of the outstanding shares of voting stock of the Company or (ii)
the power to direct or cause the direction of the management and policies of the
Company, whether through the ownership of voting securities, by contract or
otherwise; or
(k) Impairment of Certain Documents. Except as otherwise expressly
permitted in any Loan Document, any of the Loan Documents shall terminate or
cease in whole or in part to be the legally valid, binding, and enforceable
obligation of the relevant Loan Party, or such Loan Party or any Person acting
for or on behalf of any Loan Party, contests such validity, binding effect or
enforceability, or purports to revoke any Loan Document; or
(l) Georgia-Pacific Agreement. An "Event of Default" shall exist as
defined in the Georgia-Pacific Agreement.
10.02 Remedies. If any Event of Default shall have occurred and be
continuing:
(a) The Agent shall at the request of, or may with the consent of, the
Required Lenders, declare the Commitments and the commitment of the Issuing Bank
to Issue Letters of Credit to be terminated, whereupon the Commitments and such
commitment shall forthwith be terminated; and/or
(b) The Agent shall at the request of, and may with the consent of, the
Required Lenders, declare an amount equal to the maximum aggregate amount that
is or at any time thereafter may become available for drawing under any
outstanding Letters of Credit (whether or not any beneficiary shall have
presented, or shall be entitled at such time to present, the drafts or other
documents required to draw under such Letters of Credit) to be immediately due
and payable, which amount the Company shall
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immediately Cash Collateralize in full, and declare the unpaid principal amount
of all outstanding Loans, all interest accrued and unpaid thereon and all other
Obligations payable hereunder or under any other Loan Document to be immediately
due and payable, whereupon the Loans, all such interest and all such Obligations
shall become and be forthwith due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived by
the Company; and/or
(c) The Agent shall at the request of, and may with the consent of, the
Required Lenders, exercise all rights and remedies available to it as Agent
under any Loan Document;
provided, however, that upon the occurrence of any Event of Default specified in
Section 10.01(f)(ii) or Section 10.01(g) or in the event of an actual or deemed
entry of an order for relief with respect to the Company or any of its
Subsidiaries under any bankruptcy, insolvency or other similar law now or
hereafter in effect, the Commitments and the commitment of the Issuing Bank to
Issue Letters of Credit shall automatically terminate and the unpaid principal
amount of all outstanding Loans and all interest accrued thereon and all other
Obligations shall automatically become due and payable without further action of
the Agent or any Lender.
ARTICLE 11
THE AGENT
11.01 Appointment. Each Lender hereby irrevocably appoints, designates
and authorizes the Agent to take such action on its behalf under the provisions
of this Agreement and each other Loan Document and to exercise such powers and
perform such duties as are expressly delegated to it by the terms of this
Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
contained elsewhere in this Agreement or in any other Loan Document, the Agent
shall not have any duties or responsibilities except those expressly set forth
herein or any fiduciary relationship with any Lender, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or any other Loan Document or otherwise exist against the
Agent. Without limiting the generality of the foregoing sentence, the use of the
term "agent" in this Agreement with reference to the Agent is not intended to
connote any fiduciary or other implied (or express) obligations arising under
agency doctrine of any applicable law. Instead, such term is used merely as a
matter of market custom, and is intended to create or reflect only an
administrative relationship between independent contracting parties.
The Issuing Bank shall act on behalf of the Lenders with respect to any
Letters of Credit Issued by it and the documents associated therewith until such
time and except for so long as the Agent may agree at the request of the
Required Lenders to act for such Issuing Bank with respect thereto; provided,
however, that the Issuing Bank shall have all of the benefits and immunities (i)
provided to the Agent in this Article 11 with respect to any acts taken or
omissions suffered by the Issuing Bank in connection with Letters of Credit
Issued by it or proposed to be Issued by it and the application and agreements
for letters of credit pertaining to the Letters of Credit as fully as if the
term "Agent", as used in this Article 11, included the Issuing Bank with respect
to such acts or omissions, and (ii) as additionally provided in this Agreement
with respect to the Issuing Bank.
11.02 Delegation of Duties. The Agent may execute any of its duties
under this Agreement or any other Loan Document by or through its employees,
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties.
11.03 Liability of Agent. None of the Agent-Related Persons shall be
(a) liable for any action taken or omitted to be taken by any of them under or
in connection with this Agreement or any other Loan Document (except for its own
gross negligence or willful misconduct) or (b) responsible in any manner to
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any of the Lenders for any recital, statement, representation or warranty made
by the Company or any of its officers contained in this Agreement or by any Loan
Party or any officer of any thereof in any other Loan Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Agent under or in connection with, this Agreement or any
other Loan Document or for the value of any collateral or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document or for any failure of the Company or any other Loan
Party to perform its obligations hereunder or thereunder. No Agent-Related
Person shall be under any obligation to any Lender to ascertain or to inquire as
to the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document or to inspect the
properties, books or records of the Company or any of its Subsidiaries.
11.04 Reliance by Agent.
(a) The Agent shall be entitled to rely, and shall be fully protected
in relying, upon any writing, resolution, notice, consent, certificate,
affidavit, letter, facsimile, or telephone message, statement or other document
or conversation believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons and upon any advice and
statements of legal counsel (including counsel to the Company), independent
accountants and other experts selected by the Agent. The Agent shall be fully
justified in failing or refusing to take any action under this Agreement or any
other Loan Document unless it shall first receive such advice or concurrence of
the Required Lenders as it deems appropriate and, if it so requests, it shall
first be indemnified to its satisfaction by the Lenders against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. Except to the extent expressly provided in
Section 12.02, the Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement or any other Loan Document in
accordance with a request or the consent of the Required Lenders and such
request or consent and any action taken or failure to act pursuant thereto shall
be binding upon all the Lenders and all future holders of the Loans or any
portion thereof.
(b) For purposes of determining compliance with the conditions
specified in Sections 7.01 and 7.02, each Lender shall be deemed to have
consented to, approved or accepted or to be satisfied with each document or
other matter required thereunder to be consented to or approved by or acceptable
or satisfactory to the Lenders unless an officer of the Agent responsible for
the transactions contemplated by the Loan Documents shall have received notice
from such Lender prior to the initial Borrowing specifying its objection thereto
and either such objection shall not have been withdrawn by notice to the Agent
to that effect or such Lender shall not have made available to the Agent such
Lender's Commitment Percentage of such Borrowing.
11.05 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default, except
with respect to defaults in the payment of principal, interest and fees payable
to the Agent for the account of the Lenders, unless the Agent shall have
received notice from a Lender or the Company referring to this Agreement or any
other Loan Document, describing such Default or Event of Default and stating
that such notice is a "notice of default". In the event that the Agent receives
such a notice, the Agent shall give notice thereof to the Lenders. The Agent
shall take such action with respect to such Default or Event of Default as shall
be requested by the Required Lenders in accordance with Article 10; provided,
however, that unless and until the Agent shall have received any such request
from the Required Lenders, the Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable in the best interests of the
Lenders.
11.06 Credit Decision. Each Lender expressly acknowledges that no
Agent-Related Person has made any representation or warranty to it and that no
act by the Agent hereinafter taken, including any
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review of the affairs of the Company and its Subsidiaries, shall be deemed to
constitute any representation or warranty by any Agent-Related Person to any
Lender. Each Lender represents to the Agent that it has, independently and
without reliance upon any Agent-Related Person and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, properties, operations or condition,
financial or otherwise, and creditworthiness of the Company and its Subsidiaries
and made its own decision to enter into this Agreement and extend credit to the
Company hereunder. Each Lender also represents that it will, independently and
without reliance upon any Agent-Related Person and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement, and to make such investigations as it deems necessary to inform
itself as to the business, prospects, properties, operations or condition,
financial or otherwise, and creditworthiness of the Company and its
Subsidiaries. Except for notices, reports and other documents expressly required
to be furnished to the Lenders by the Agent hereunder, no Agent-Related Person
shall not have any duty or responsibility to provide any Lender with any credit
or other information concerning the business, prospects, properties, operations
or condition, financial or otherwise, and creditworthiness of the Company and
its Subsidiaries which may come into the possession of any Agent-Related Person.
11.07 Indemnification. The Lenders agree to indemnify the Agent-Related
Person (to the extent not reimbursed by or on behalf of the Company and without
limiting the obligation of the Company to do so), ratably according to the
respective amounts of their outstanding Loans, or, if no Loans are outstanding,
their Commitments, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses and
disbursements of any kind whatsoever which may at any time (including at any
time after the repayment of the Loans and all other Obligations) be imposed on,
incurred by or asserted against any Agent-Related Person in any way relating to
or arising out of this Agreement or any other Loan Document or any document
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by any
Agent-Related Person under or in connection with any of the foregoing; provided,
however, that no Lender shall be liable for the payment to any Agent-Related
Person of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
solely from any Agent-Related Person's gross negligence or willful misconduct.
Without limiting the generality of the foregoing, each Lender agrees to
reimburse the Agent-Related Persons promptly upon demand for its ratable share
of any out-of-pocket expenses and reasonable fees of counsel (including the
allocated cost of in-house counsel) incurred by the Agent-Related Person in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiation, legal
proceedings or otherwise) of, or legal advice in respect of its or the Lenders'
rights or responsibilities under, this Agreement, any other Loan Document or any
document contemplated by or referred to herein to the extent that any
Agent-Related Person is not reimbursed for such expenses by or on behalf of the
Company.
11.08 Agent in Individual Capacity. Bank of America and its Affiliates
may make loans to, issue, amend, renew (or participate in) letters of credit for
the account of, accept deposits from, acquire equity interests in and generally
engage in any kind of banking, trust, financial advisory or other business with
the Company and its Subsidiaries and their respective Affiliates as though Bank
of America were not the Agent hereunder. With respect to its Loans, Bank of
America shall have the same rights and powers under this Agreement as any Lender
and may exercise the same as though it were not the Agent or the Issuing Bank,
and the terms "Lender" and "Lenders" shall include Bank of America in its
individual capacity.
11.09 Successor Agent. The Agent may resign at any time by giving
written notice thereof to the Lenders and the Company and may be removed at any
time with or without cause by the Required Lenders. Upon any such resignation or
removal, the Required Lenders shall have the right to appoint a
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successor Agent which shall be a commercial bank organized, chartered or
licensed under the laws of the United States of America or of any State thereof
having combined capital and surplus of at least $500,000,000. If no successor
Agent shall have been so appointed by the Required Lenders, and shall have
accepted such appointment within 30 days after the notice of resignation or the
removal of the retiring Agent, then the retiring Agent may, on behalf of the
Lenders, with the consent of the Company which consent shall not be unreasonably
withheld or delayed, appoint a successor Agent, which shall be a commercial bank
organized or chartered under the laws of the United States of America or of any
State thereof having a combined capital and surplus of at least $500,000,000.
Upon the acceptance of any appointment as Agent hereunder by a successor Agent,
such successor Agent shall succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Agent, and the retiring Agent
shall be discharged from its future duties and obligations under this Agreement
and the other Loan Documents. After any retiring Agent's resignation or removal
hereunder as Agent, the provisions of this Article 11 and Sections 12.04 and
12.05 shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was Agent under this Agreement and the other Loan Documents.
Notwithstanding the foregoing, however, Bank of America may not be removed as
the Agent at the request of the Required Lenders unless Bank of America shall
also simultaneously be replaced as "Issuing Bank" hereunder pursuant to
documentation in form and substance reasonably satisfactory to Bank of America.
11.10 Documentation, Co-Syndication, Managing Agents. None of the
Lenders identified on the facing page or signature pages of this Agreement as a
"Documentation Agent," "Co-Syndication Agent," or "Managing Agent" shall have
any right, power, obligation, liability, responsibility, or duty under this
Agreement other than those applicable to all Lenders as such. Without limiting
the foregoing, none of the Lenders so identified as "Documentation Agent,"
"Co-Syndication Agent," or "Managing Agent" shall have or be deemed to have any
fiduciary relationship with any Lender. Each Lender acknowledges that it has not
relied, and will not rely, on any of the Lenders so identified in deciding to
enter into this Agreement or in taking or not taking action hereunder.
ARTICLE 12
MISCELLANEOUS
12.01 Notices, Etc. All notices, requests and other communications
provided to any party under this Agreement shall, except as otherwise expressly
specified herein, be in writing (including by facsimile) and mailed by overnight
delivery, transmitted by facsimile or delivered: if to the Company, to its
address specified on the signature pages hereof; if to any Lender, to its
Domestic Lending Office specified opposite its name on Schedule 1.01(b); and, if
to the Agent, to its address specified on the signature pages hereof; or, as to
the Company or the Agent, at such other address as shall be designated by such
party in a written notice to the other parties and, as to each other party, at
such other address as shall be designated by such party in a written notice to
the Company and the Agent. All such notices and communications shall be
effective, if transmitted by facsimile, when transmitted, or, if mailed by
overnight delivery or delivered, upon delivery, except that (a) notices and
facsimile communications to the Agent pursuant to Articles 2 or 11 shall not be
effective until received by the Agent, (b) any notice by facsimile to the Agent
must be confirmed by telephone or mail, and (c) notices pursuant to Article 3 to
the Issuing Bank shall not be effective until actually received by the Issuing
Bank at the address specified for the "Issuing Bank" on the applicable signature
page hereof.
12.02 Amendments, Etc. No amendment or waiver of any provision of this
Agreement or of any other Loan Document, and no consent to any departure by the
Company or any other Loan Party herefrom or therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Required Lenders
and, in the case of amendments, the Company, and then any such waiver or consent
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shall be effective only in the specific instance and for the specific purpose
for which given; provided, however, that
(a) no amendment, waiver or consent shall, unless in writing and signed
by all the Lenders and, in the case of amendments, the Company, do any of the
following:
(i) increase the Commitments of the Lenders (other than by
assignment); provided, however, that any Lender may increase its own
Commitment without the consent of the other Lenders;
(ii) reduce the principal of, or interest (other than under
Section 2.10) on, the Committed Loans or reduce the amount of any fees
payable hereunder;
(iii) postpone any date fixed for any payment of principal of,
or interest on, the Committed Loans or any fees payable hereunder;
(iv) modify any requirement hereunder that any particular
action be taken by all of the Lenders or by the Required Lenders or
change the percentage of the Commitments or of the aggregate unpaid
principal amount of the Loans which shall be required for the Lenders
or any of them to take any action hereunder;
(v) terminate the Subsidiary Guaranty and/or the Contribution
Agreement or release the Parent Guaranty;
(vi) amend or waive the provisions of Sections 7.01 or 7.02;
or
(vii) amend this Section 12.02;
(b) no amendment, waiver or consent which affects the rights or duties
of the Agent under this Agreement or any other Loan Document shall become
effective unless signed by the Agent in addition to the Required Lenders or all
the Lenders, as the case may be;
(c) No amendment, waiver or consent which affect the rights or duties
of the Issuing Bank under the Agreement or any L/C-Related Document relating to
any Letter of Credit Issued or to be Issued by it shall become effective unless
signed by the Issuing Bank in addition to the Required Lenders or all the
Lenders, as the case may be; and
(d) no amendment, waiver or consent which affects the principal amount,
the rate of interest or the maturity date of any outstanding Bid Loan shall
become effective without the consent of the Agent and the Lender having made
such Bid Loan in addition to the Required Lenders or all the Lenders, as the
case may be.
12.03 No Waiver; Remedies. No failure on the part of any Lender or the
Agent to exercise, and no delay in exercising, any right, remedy, power or
privilege hereunder or under any other Loan Document shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right, remedy,
power or privilege preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
12.04 Costs and Expenses. The Company agrees to pay on demand:
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(a) all out-of-pocket costs and expenses incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modification and amendment of the Loan Documents and any other document to be
delivered hereunder or thereunder or in connection with the transactions
contemplated hereby or thereby, including the out-of-pocket expenses and
reasonable fees of counsel for the Agent (including local counsel which may be
retained by the Agent and the allocated cost of in-house counsel) with respect
thereto and with respect to advising the Agent as to its rights and
responsibilities under the Loan Documents;
(b) all out-of-pocket costs and expenses incurred by the Agent or any
Lender in connection with the preservation of any rights under any Loan Document
or in connection with any restructuring or "work-out" of any of the Obligations
(whether through negotiations, legal proceedings or otherwise), including the
out-of-pocket expenses and reasonable fees of counsel for the Agent (including
the allocated cost of in-house counsel);
(c) all out-of-pocket costs and expenses incurred by the Agent or any
Lender in connection with the enforcement of any of the Obligations, including
the out-of-pocket expenses and reasonable fees of counsel for the Agent or such
Lender (including the allocated cost of in-house counsel);
(d) all out-of-pocket costs and expenses incurred by the Agent in
connection with due diligence, transportation, use of computers, duplication,
search reports and all filing and recording fees; and
(e) to each Lender being replaced pursuant to Section 5.09, the
reasonable out-of-pocket expenses and reasonable fees of counsel (including the
allocated cost of in-house counsel) not exceeding $5,000 in connection with such
replacement.
12.05 Indemnity.
(a) The Company agrees to indemnify and hold harmless the Agent-Related
Persons, and each Lender and each of their Affiliates and all directors,
officers, employees, agents and advisors of all of the foregoing (each, an
"Indemnified Party") from and against any and all claims, actions, proceedings,
suits, damages, losses, liabilities, costs, expenses and disbursements,
including the out-of-pocket expenses and reasonable fees of counsel (including
the allocated cost of in-house counsel) which may be incurred by or asserted
against any Indemnified Party as a result of any investigation, litigation,
suit, action or proceeding (regardless of whether an Indemnified Party is a
party thereto) arising out of, relating to, or in connection with this
Agreement, any other Loan Document or any transaction or proposed transaction
(whether or not consummated) financed or to be financed, in whole or in part,
directly or indirectly, with the proceeds of any Borrowing (other than costs of
the type covered by Section 12.04) or any other transaction contemplated hereby;
except to the extent such claim, damage, loss, liability, cost or expense has
resulted primarily from such Indemnified Party's gross negligence or willful
misconduct as determined by a final judgment of a court of competent
jurisdiction. Notwithstanding any other provision contained in this Agreement,
this indemnity shall not be limited in any way by the passage of time or the
occurrence of any event.
(b) The Agent, the Arranger and each Lender agree that if any
investigation, litigation, suit, action or proceeding is asserted or threatened
in writing or instituted against it or any other Indemnified Party, or any
remedial, removal or response action is requested of it or any other Indemnified
Party, for which the Agent, the Arranger or any Lender may desire indemnity or
defense hereunder, the Agent, the Arranger or such Lender shall promptly notify
the Company thereof in writing and agree, to the extent appropriate, to consult
with the Company with a view to minimizing the cost to the Company of its
obligations under this Section 12.05. The Company will not be required to pay
the fees and expenses of
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more than one counsel for the Indemnified Parties unless the employment of
separate counsel has been authorized by the Company, or unless any Indemnified
Party reasonably concludes that there may be defenses available to it which are
not available to the other Indemnified Parties or that there is a conflict
between its interests and those of the other Indemnified Parties.
(c) No action taken by legal counsel chosen by the Agent, the Arranger
or any Lender in defending against any such investigation, litigation, suit,
action or proceeding or requested remedial, removal or response action shall
vitiate or in any way impair the obligations and duties of the Company hereunder
to indemnify and hold harmless each Indemnified Party; provided, however, that
if the Company is required to indemnify any Indemnified Party pursuant hereto,
neither the Agent nor the Arranger nor any Lender will settle or compromise any
such investigation, litigation, suit, action or proceeding without the prior
written consent of the Company (which consent shall not be unreasonably withheld
or delayed) so long as the Company has provided evidence reasonably satisfactory
to the Agent, the Arranger or such Lender that the Company and its Subsidiaries
on a consolidated basis do not at such time have a negative Net Worth.
12.06 Right of Set-off. Upon the occurrence and during the continuation
of any Event of Default, each Lender is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any
and all deposits in whatever currency (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by such Lender to or for the credit or the account of the Company against any
and all of the Obligations, whether or not such Lender shall have made any
demand under this Agreement. Each Lender agrees promptly to notify the Company
after any such set-off and application made by such Lender; provided, however,
that the failure to give such notice shall not affect the validity of such
set-off and application. The rights of each Lender under this Section 12.06 are
in addition to any other right or remedy (including any other right of set-off)
which such Lender may have under applicable law or under any Loan Document.
12.07 Binding Effect. This Agreement shall become effective when a
counterpart hereof shall have been executed by the Agent and counterparts hereof
executed by the Company and each Lender shall have been received by the Agent
and notice thereof shall have been given by the Agent to the other parties
hereto and thereafter shall be binding upon and inure to the benefit of the
Company, the Agent and each Lender and their respective successors and assigns;
provided, however, that (a) except as permitted under clause (b) of Section
9.03, the Company may not assign or transfer its rights or obligations hereunder
without the prior written consent of all the Lenders and (b) the rights of
assignment and transfer of the rights and obligations of the Lenders hereunder
are subject to the provisions of Section 12.08.
12.08 Assignments, Participations, Etc.(a) Subject to Sections 12.08(b)
and 12.08(e):
(i) Any Lender may with the prior consent of the Company, the
Agent, and the Issuing Bank (which consents will not be unreasonably
withheld and which consent of the Company shall not be required if a
Default or Event of Default exists) at any time assign to one or more
Eligible Assignees all or any fraction of its Commitment and
outstanding Committed Loans in a minimum amount of $25,000,000 and in
multiples of $1,000,000 in excess thereof or, if its Commitment is less
than $25,000,000, in the amount of its Commitment.
(ii) Any Lender may without the prior consent of the Company
assign to another Lender all or any fraction of its Commitment and
outstanding Committed Loans in a minimum amount of $5,000,000 and in
multiples of $1,000,000 in excess thereof or, if the Commitment is less
than $5,000,000, in the amount of its Commitment.
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(iii) Any Lender may at any time assign all or any portion of
its rights under this Agreement and any note issued pursuant to Section
2.05 to a Federal Reserve Bank; provided, however, that no such
assignment shall release any Lender from its obligations hereunder.
(iv) Any Lender, if so requested by the Company under Section
5.09, shall assign to another Eligible Assignee its entire Commitment
and all outstanding Committed Loans.
(v) Except as provided in Section 12.08(a)(iii), no Lender may
assign any Bid Loans made by it hereunder except to another Lender or
to any other Person to which it is also assigning all or a fraction of
its Commitment and outstanding Committed Loans pursuant to Section
12.08(a)(i).
(b) No assignment shall become effective, and the Company and the Agent
shall be entitled to continue to deal solely and directly with each Lender in
connection with the interests so assigned by such Lender to an Assignee, until
(i) such Lender and such Assignee shall have executed an Assignment and
Assumption Agreement substantially in the form of Exhibit 12.08(b) and written
notice of such assignment, payment instructions, addresses, and related
information with respect to such Assignee shall have been given to the Company
and the Agent by such Lender and such Assignee, in substantially the form of
Attachment A to Exhibit 12.08 (a "Notice of Assignment"); (ii) a processing fee
in the amount of $3,500 shall have been paid to the Agent by the assignor Lender
or the Assignee; and (iii) either (A) five Business Days shall have elapsed
after receipt by the Agent of the items referred to in clauses (i) and (ii) or
(B) if earlier, the Agent has notified the assignor Lender and the Assignee of
its receipt of the items mentioned in clauses (i) and (ii) and that it has
acknowledged the assignment by countersigning the Notice of Assignment.
(c) From and after the effective date of any assignment hereunder, (i)
the Assignee thereunder shall be deemed automatically to have become a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to such Assignee by the assignor Lender, shall have the rights and
obligations of a Lender hereunder and under each other Loan Document, and (ii)
the assignor Lender, to the extent that rights and obligations hereunder have
been assigned by it to the Assignee, shall be released from its future
obligations hereunder and under each other Loan Document.
(d) Subject to Section 12.08(e), any Lender may at any time sell to one
or more financial institutions or other Persons (each of such Persons being
herein called a "Participant") participating interests in any of the Loans, its
Commitment or other interests of such Lender hereunder; provided, however, that
(i) no participation contemplated in this Section 12.08(d)
shall relieve such Lender from its Commitment or its other obligations
hereunder or under any other Loan Document;
(ii) such Lender shall remain solely responsible for the
performance of its Commitment and such other obligations;
(iii) the Company, the Agent, and the Issuing Bank shall
continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under this Agreement and each
other Loan Document; and
(iv) no Participant, unless such Participant is an Affiliate
of such Lender, shall be entitled to require such Lender to take or
refrain from taking any action hereunder or under any other Loan
Document, except that such Lender may agree with any Participant that
such Lender
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will not, without such Participant's consent, take any action of the
type described in Section 12.02.
The Company acknowledges and agrees that each Participant, for purposes
of Sections 4.05, 4.06, 5.02, 5.03, 5.05, 5.06 or 12.06, shall be considered a
Lender; provided, however, that for purposes of Sections 4.05, 5.02, 5.03, 5.05
and 5.06, no Participant shall be entitled to receive any payment or
compensation in excess of that to which such Participant's selling Lender would
have been entitled with respect to the amount of such Participant's
participation interest if such Lender had not sold such participation interest.
(e) No assignment (other than an assignment made pursuant to Section
12.08(a)(iii)) or participation of any Committed Loans, or Commitments shall be
effective, and shall instead be null and void, unless it represents an
assignment of or participation in identical percentages of a Lender's
outstanding Tranche A Loans, Tranche B Loans, Tranche A Commitment, Tranche B
Commitment, "Tranche A Loans," "Tranche B Loans," "Tranche A Commitment" and
"Tranche B Commitment" (as those quoted terms are defined in the North American
Timber Agreement).
12.09 Confidentiality. Each Lender agrees that all nonpublic
information provided to it by the Company or by the Agent on behalf of the
Company in connection with this Agreement or any other Loan Document or the
transactions contemplated hereby or thereby will be held and treated by such
Lender, its agents, directors, Affiliates, officers and employees in confidence
and further agrees and undertakes that neither it nor any of its Affiliates
shall use any such information for any purpose or in any manner other than
pursuant to the terms contemplated by this Agreement or relating to other
business transactions between the Company and such Lender. Any Lender may
disclose such information (a) at the request of any bank regulatory authority or
in connection with an examination of such Lender by any such authority or
examiner; (b) pursuant to subpoena or other court process; (c) when required to
do so in accordance with the provisions of any applicable law; (d) at the
written request or the express direction of any other agency of any State of the
United States of America or of any other jurisdiction in which such Lender
conducts its business; and (e) to such Lender's independent auditors, counsel
and other professional advisors. Notwithstanding the foregoing, the Company
authorizes each Lender to disclose to any Participant or Assignee and any
prospective Participant or Assignee such financial and other information in such
Lender's possession concerning the Company or its Subsidiaries which has been
delivered to the Lenders pursuant to this Agreement or any other Loan Document
or which has been delivered to the Lenders by the Company in connection with the
Lenders' credit evaluation of the Company and its Subsidiaries prior to entering
into this Agreement; provided that such Participant or Assignee or prospective
Participant or Assignee agrees in writing to such Lender to keep such
information confidential to the same extent as required of the Lenders
hereunder.
12.10 Survival. The obligations of the Company under Sections 4.05,
5.02, 5.03, 5.05, 5.06, 12.04 and 12.05, and the obligations of the Lenders
under Sections 4.05(i) and 11.07, shall in each case survive the repayment of
the Loans and all other Obligations and the termination of this Agreement and
the Commitments; provided, however, that no request for reimbursement pursuant
to such Sections (other than Sections 12.04(b) and (c) and 12.05) may be made
more than six months after the termination of this Agreement and the
Commitments. The representations and warranties made by the Company in this
Agreement and by each Loan Party in each other Loan Document shall survive the
execution and delivery of this Agreement and such other Loan Document.
12.11 Severability. Any provision of this Agreement or any other Loan
Document which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.
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12.12 Headings. The various headings of this Agreement are inserted for
convenience only and shall not affect the meaning or interpretation of this
Agreement or any provisions hereof.
12.13 No Third Parties Benefited. This Agreement is made and entered
into for the sole protection and legal benefit of the Company, the Lenders, the
Agent and the Agent-Related Persons, and their permitted successors and assigns,
and no other Person shall be a direct or indirect legal beneficiary of, or have
any direct or indirect cause of action or claim in connection with, this
Agreement or any of the other Loan Documents.
12.14 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
12.15 Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto on separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
12.16 ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
EMBODY THE ENTIRE AGREEMENT AND UNDERSTANDING AMONG THE COMPANY, THE LENDERS AND
THE AGENT AND SUPERSEDE ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS AND
UNDERSTANDINGS OF SUCH PERSONS, VERBAL OR WRITTEN, RELATING TO THE SUBJECT
MATTER HEREOF EXCEPT FOR THE FEE LETTER AND ANY PRIOR ARRANGEMENTS MADE WITH
RESPECT TO THE PAYMENT BY THE COMPANY OF (OR ANY INDEMNIFICATION FOR) ANY FEES,
COSTS OR EXPENSES PAYABLE TO OR INCURRED (OR TO BE INCURRED) BY OR ON BEHALF OF
THE AGENT OR THE LENDERS.
12.17 WAIVER OF JURY TRIAL. EACH OF THE AGENT, THE LENDERS AND THE
COMPANY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING
OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING
INTO THIS AGREEMENT.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
NORTH AMERICAN TIMBER CORP.
By: /s/Danny W. Huff
Name:
Title: Vice President and Treasurer
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION,
as Agent, Issuing Bank, and as Lender
By: /s/Michael Balok
Name:
Title: Managing Director
COMMERZBANK AG,
NEW YORK BRANCH,
as Documentation Agent
By: /s/Harry P. Yergey
Name:
Title: SVP & Manager
By: /s/Brian J. Campbell
Name:
Title: Vice President
THE CHASE MANHATTAN BANK,
as Co-Syndication Agent
By: /s/ Peter S. Predun
Name:
Title: Vice President
CITIBANK, N.A.,
as Co-Syndication Agent
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By: /s/David L. Harris
Name:
Title: Vice President
THE BANK OF NEW YORK,
as Managing Agent
By: /s/David C. Siegel
Name:
Title: Vice President
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
By: /s/M. R. Marron
Name:
Title: Vice President & Manager
CIBC INC.
By: /s/Nora Q. Catiis
Name:
Title: Executive Director
CIBC World Markets Corp. As Agent
FIRST NATIONAL BANK OF CHICAGO,
as Managing Agent
By: /s/David T. McNeela
Name:
Title: Vice President
HSBC BANK USA,
as Managing Agent
By: /s/Jeremy P. Bollington
Name:
Title: Vice President
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THE SANWA BANK, LIMITED, NEW YORK BRANCH
By: /s/Masahito Okubo
Name:
Title: Vice President
THE SUMITOMO BANK, LIMITED
By: /s/C. Michael Garrido
Name:
Title: Senior Vice President
SUNTRUST BANK, ATLANTA,
as Managing Agent
By: /s/W. David Wisdom
Name:
Title: Vice President
TORONTO DOMINION (TEXAS), INC.,
as Managing Agent
By: /s/Sheila M. Conley
Name:
Title: Vice President
UBS AG, STAMFORD BRANCH,
as Managing Agent
By: /s/Paul R. Morrison
Name:
Title: Executive Director
By: /s/Andrew N. Taylor
Name:
Title: Associate Director
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WACHOVIA BANK NA,
as Managing Agent
By: /s/Anne L. Sayles
Name:
Title: Vice President
65
EXHIBIT 10.19
PARENT GUARANTY
THIS PARENT GUARANTY (the "Guaranty"), dated as of July 22, 1999, is
made by GEORGIA-PACIFIC CORPORATION, a Georgia corporation (the "Guarantor"), in
favor of BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national
banking association, as administrative agent (in such capacity, the "Agent"),
and each of the financial institutions from time to time party to the Credit
Agreement (as hereinafter defined) (collectively, the "Lenders").
RECITALS:
A. Pursuant to the Credit Agreement, dated as of July 22, 1999 (together
with all amendments, supplements, and other modifications, if any, from
time to time thereafter made thereto, the "Credit Agreement"), among
North American Timber Corp., a Delaware corporation ("NAT"), as
borrower, the Lenders, the Agent, Commerzbank AG, New York Branch, as
Documentation Agent, and The Chase Manhattan Bank and Citibank, N.A. as
Co-Syndication Agents, the Lenders have extended commitments (the
"Commitments") to make loans (the "Loans") to NAT, and to extend other
financial accommodations to or for the account of NAT, which Loans and
other financial accommodations are to be unconditionally guaranteed by
Guarantor.
B. As a condition precedent to the initial Loan under the Credit
Agreement, Guarantor is required to execute and deliver this Guaranty.
C. Guarantor has duly authorized the execution, delivery, and performance
of this Guaranty.
D. It is in the best interests of Guarantor to execute this Guaranty
inasmuch as NAT is a wholly-owned subsidiary of Guarantor.
In consideration of the foregoing, and other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, and in
order to induce the Lenders to make the Loans (including the initial Loans) to
NAT pursuant to the Credit Agreement, Guarantor agrees, for the benefit of each
Lender, as follows:
ARTICLE 1
DEFINITIONS
Unless otherwise defined herein or the context otherwise requires,
terms used in this Guaranty have the meanings provided in the Credit Agreement.
ARTICLE 2
GUARANTY PROVISIONS
SECTION 2.1 Guaranty. Guarantor hereby absolutely, unconditionally,
and irrevocably:
(a) guarantees the full and punctual payment when due, whether
at stated maturity, by required prepayment, declaration, acceleration,
demand, or otherwise, of all Obligations of NAT now or hereafter
existing under the Credit Agreement and each other Loan Document to
which it is or may become a party, whether for principal, interest,
fees, expenses, or
<PAGE>
otherwise (including all such amounts which would become due but for
the operation of the automatic stay under Section 362(a) of the United
States Bankruptcy Code, 11 U.S.C. 362(a)), and the operation of
Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11
U.S.C. 502(b) and 506(b) (the "Guaranteed Obligations"); and
(b) indemnifies and holds harmless the Agent and each Lender
for any and all out-of-pocket costs and expenses (including the
out-of-pocket expenses and reasonable fees of counsel and the allocated
cost of in-house counsel retained by the Agent or such Lender) incurred
by the Agent or such Lender in preserving and enforcing any rights
under this Guaranty.
This Guaranty constitutes a guaranty of payment when due and not of collection
or of performance, and Guarantor specifically agrees that it shall not be
necessary or required that the Agent or any Lender exercise any right, assert
any claim or demand, or enforce any remedy whatsoever against NAT or any other
Person before or as a condition to the obligations of Guarantor hereunder.
SECTION 2.2 Acceleration of Guaranty. Guarantor agrees that, in the
event of the occurrence and continuance of an Event of Default and the
acceleration of the Obligations in accordance with the terms of the Credit
Agreement, Guarantor will pay to the Agent and the Lenders forthwith the full
amount of the Obligations.
SECTION 2.3 Guaranty Absolute, etc. This Guaranty shall in all respects
be a continuing, absolute, unconditional, and irrevocable guaranty of payment,
and shall remain in full force and effect until all Guaranteed Obligations have
been paid in cash in full, and all Commitments shall have terminated. Guarantor
guarantees that the Guaranteed Obligations will be paid strictly in accordance
with the terms of the Credit Agreement and each other Loan Document under which
they arise, regardless of any law, regulation, or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of the
Agent or any Lender with respect thereto. The liability of Guarantor under this
Guaranty shall be absolute, unconditional, and irrevocable irrespective of:
(a) any lack of validity, legality, or enforceability of the
Credit Agreement or any other Loan Document;
(b) the failure of the Agent or any Lender:
(i) to assert any claim or demand or to enforce any right
or remedy against NAT, any other Loan Party, or any other
Person (including any other guarantor) under the provisions of
the Credit Agreement, any other Loan Document, or otherwise;
or
(ii) to exercise any right or remedy against any other
guarantor of, or any collateral securing, any Guaranteed
Obligations;
(c) any change in the time, manner, or place of payment of, or
in any other term of, all or any of the Guaranteed Obligations, or any
other extension, compromise, or renewal of any Guaranteed Obligations;
(d) any reduction, limitation, impairment, or termination of
the Guaranteed Obligations for any reason, including any claim of
waiver, release, surrender, alteration, or compromise, and shall not be
subject to (and Guarantor hereby waives any right to or claim of) any
defense or setoff, counterclaim, recoupment, or termination whatsoever
by reason of the invalidity, illegality, nongenuineness, irregularity,
compromise, unenforceability of, or any other
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event or occurrence affecting, the Guaranteed Obligations or otherwise;
(e) any amendment to, rescission, waiver, or other
modification of, or any consent to departure from, any of the terms of
the Credit Agreement or any other Loan Document;
(f) any addition, exchange, release, surrender, or
non-perfection of any collateral, or any amendment to or waiver or
release or addition of, or consent to departure from, any other
guaranty, held by the Agent or any Lender securing any of the
Guaranteed Obligations; or
(g) any other circumstance which might otherwise constitute a
defense available to, or a legal or equitable discharge of, NAT, any
surety, or any guarantor.
SECTION 2.4 Reinstatement, etc. Guarantor agrees that this Guaranty
shall continue to be effective or be reinstated, as the case may be, if at any
time any payment (in whole or in part) of any of the Obligations is rescinded or
must otherwise be restored by the Agent or any Lender, upon the insolvency,
bankruptcy, or reorganization of NAT or otherwise, all as though such payment
had not been made.
SECTION 2.5 Waiver, etc. Guarantor hereby waives promptness, diligence,
notice of acceptance, and any other notice with respect to any of the Guaranteed
Obligations or any other Loan Party and this Guaranty and any requirement that
the Agent or any Lender protect, secure, perfect, or insure any security
interest or lien, or any property subject thereto, or exhaust any right or take
any action against NAT, any other Loan Party, or any other Person or any
collateral securing the Guaranteed Obligations, as the case may be.
SECTION 2.6 Subordination. Until such time as the Guaranteed
Obligations have been paid and performed in full and the period of time has
expired during which any payment made by NAT, Guarantor, or any other guarantor
of the Guaranteed Obligations to Agent may be subsequently invalidated, declared
to be fraudulent or preferential, set aside, or required to be repaid by Agent
or paid over to a trustee, receiver, or any other entity, whether under any
bankruptcy act or otherwise (any such payment being hereinafter referred to as a
"Preferential Payment"), any claim or other rights which Guarantor may now have
or hereafter acquire against NAT or such other guarantor that arises from the
existence or performance of Guarantor's obligations under this Guaranty or any
other agreement (all such claims and rights being hereinafter referred to as
"Guarantor's Conditional Rights"), including, without limitation, any right of
subrogation, reimbursement, exoneration, contribution, or indemnification, any
right to participate in any claim or remedy of Agent or such other guarantor or
any collateral which Agent now has or hereafter acquires, whether or not such
claim, remedy or right arises in equity or under contract, statute, or common
law, by any payment made hereunder or otherwise, including, without limitation,
the right to take or receive from NAT or such other guarantor, directly or
indirectly, in cash or other property or by setoff or in any other manner,
payment, or security on account of such claim or other rights, shall be
subordinate to Agent's right to full payment and performance of the Guaranteed
Obligations, and Guarantor shall not enforce Guarantor's Conditional Rights
until such time as the Guaranteed Obligations have been paid and performed in
full and the period of time has expired during which any payment made by NAT or
Guarantor to Agent may be determined to be a Preferential Payment.
SECTION 2.7 Successors, Transferees and Assigns; Transfers of Loans,
etc. This Guaranty shall:
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(a) be binding upon Guarantor and its successors, transferees, and
assigns; and
(b) inure to the benefit of and be enforceable by the Agent and each
Lender.
Without limiting the generality of subsection (b), any Lender may assign or
otherwise transfer (in whole or in part) any Loan held by it to any other
Person, and such other Person shall thereupon become vested with all rights and
benefits in respect thereof granted to such Lender under any Loan Document
(including this Guaranty) or otherwise, subject, however, to any contrary
provisions in such assignment or transfer, and to the provisions of Article 11
and Section 12.08 of the Credit Agreement.
SECTION 2.8 Payments Free and Clear of Taxes, etc. Guarantor hereby
agrees that:
(a) Subject to paragraph (e) below, any and all payments made
by Guarantor hereunder to or for the account of the Agent or any Lender
(other than on account of a Bid Loan, except to the extent otherwise
specified as being applicable to any such Bid Loan) shall be made in
accordance with Section 3.03 of the Credit Agreement free and clear of,
and without deduction or withholding for, any and all present or future
taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding (i) such taxes (including
income taxes or franchise taxes or branch profit taxes) as are imposed
on or measured by the Agent's or such Lender's net income and (ii) such
taxes as are imposed by a jurisdiction other than the United States of
America or any political subdivision thereof and that would not have
been imposed but for the existence of a connection between the Agent or
such Lender and the jurisdiction imposing such taxes (other than a
connection arising principally by reason of the Credit Agreement or
this Guaranty) (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings, and liabilities being hereinafter
referred to as "Taxes"). If Guarantor shall be required ----- by law to
deduct or withhold any Taxes from or in respect of any sum payable
hereunder to the Agent or any Lender:
(i) the sum payable shall be increased as may be necessary
so that after making all required deductions (including
deductions applicable to additional sums payable under this
Section 2.8) the Agent or such Lender receives an amount equal
to the sum it would have received had no such deductions been
made;
(ii) Guarantor shall make such deductions; and
(iii) Guarantor shall pay the full amount deducted to the
relevant taxation authority or other governmental authority in
accordance with applicable law.
(b) Guarantor shall pay any present or future stamp or
documentary taxes or any other sales, excise, or property taxes,
charges, or similar levies which arise from any payment made hereunder
or from the execution, delivery, or registration of, or otherwise with
respect to, this Guaranty (other than on account of a Bid Loan, except
to the extent otherwise specified as being applicable to such Bid Loan)
(hereinafter referred to as "Other Taxes").
(c) Subject to subsection (e) below, Guarantor hereby
indemnifies and holds harmless the Agent and each Lender for the full
amount of Taxes or Other Taxes (including any Taxes or Other Taxes
imposed by any jurisdiction on amounts payable under this Section 2.8)
paid by the Agent or such Lender and any liability (including
penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted; provided, however, that the Agent and each Lender
agree to contest
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in good faith any Taxes or Other Taxes that the Agent or such Lender,
in its sole discretion, believes have been incorrectly asserted. A
certificate as to the amount demanded by the Agent or any Lender, or
the Agent on behalf of any Lender, absent manifest error, shall be
binding and conclusive.
(d) Within 30 days after the date of any payment of Taxes or
Other Taxes, Guarantor shall furnish to the Agent the original or a
certified copy of a receipt evidencing payment thereof or other
evidence of payment reasonably satisfactory to the Agent.
(e) Each Lender shall, promptly upon the request of Guarantor
to that effect, deliver to the Agent and Guarantor such accurate and
complete forms or similar documentation as may be required from time to
time by any applicable law, treaty, rule or regulation in order to
establish (if appropriate) such Lender's tax status for withholding
purposes or may otherwise be appropriate to eliminate or minimize any
Taxes on payments under this Guaranty. The provisions of Sections
4.05(f), (g), (h), and (i) of the Credit Agreement are hereby
incorporated by reference into this Guaranty as if fully stated herein,
except that each reference to the "Company" contained therein shall be
deemed to be a reference to the "Guarantor" for purposes of this
Guaranty.
(f) Without prejudice to the survival of any other agreement
of Guarantor hereunder, the agreements and obligations of Guarantor
contained in this Section 2.8 shall survive the payment in full of the
principal of and interest on the Loans.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties. Guarantor hereby makes each
of the representations and warranties made by NAT in the Credit Agreement.
ARTICLE 4
COVENANTS, ETC.
SECTION 4.1 Affirmative Covenants. Guarantor covenants and agrees that,
so long as any portion of the Obligations shall remain unpaid or any Lender
shall have any outstanding Commitment, Guarantor will, unless the Required
Lenders shall otherwise consent in writing, cause NAT to duly keep, perform, and
observe for the benefit of the Agent and the Lenders each and every covenant set
forth in Article 8 of the Credit Agreement (all of which covenants, together
with related definitions and ancillary provisions, are hereby incorporated
herein by reference as if such terms were set forth herein in full), without
regard to any termination of the Credit Agreement.
SECTION 4.2 Negative Covenants. Guarantor covenants and agrees that, so
long as any portion of the Obligations shall remain unpaid or any Lender shall
have any outstanding Commitment, Guarantor will, unless the Required Lenders
shall otherwise consent in writing, cause NAT to duly keep, perform, and observe
for the benefit of the Agent and the Lenders each and every covenant set forth
in Article 9 of the Credit Agreement (all of which covenants, together with
related definitions and ancillary provisions, are hereby incorporated herein by
reference as if such terms were set forth herein in full), without regard to any
termination of the Credit Agreement.
ARTICLE 5
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MISCELLANEOUS PROVISIONS
SECTION 5.1 Loan Document. This Guaranty is a Loan Document executed
pursuant to the Credit Agreement and shall (unless otherwise expressly indicated
herein) be construed, administered and applied in accordance with the terms and
provisions thereof, including Article 12 of the Credit Agreement.
SECTION 5.2 Binding on Successors, Transferees and Assigns; Assignment.
In addition to, and not in limitation of, Section 2.8, this Guaranty shall be
binding upon Guarantor and its successors, transferees, and assigns and shall
inure to the benefit of and be enforceable by the Agent, each Lender, and their
respective successors, transferees, and assigns (to the full extent provided
pursuant to Section 2.8); provided, however, that Guarantor may not assign any
of its obligations hereunder.
SECTION 5.3 Amendment, etc. No amendment to or waiver of any provision
of this Guaranty, nor consent to any departure by Guarantor herefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Guarantor, the Agent and consented to by the Required Lenders (or, as provided
in Section 12.02(e) of the Credit Agreement, all Lenders), and then such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given.
SECTION 5.4 Addresses for Notices to Guarantor. All notices and other
communications hereunder to Guarantor shall be in writing (including by
facsimile) and mailed by overnight delivery, transmitted by facsimile, or
delivered to it, addressed to it at the address set forth below its signature
hereto or at such other address as shall be designated by Guarantor in a written
notice to the Agent at the address specified in the Credit Agreement complying
as to delivery with the terms of this Section 5.4. All such notices and other
communications shall be effective, if transmitted by facsimile when transmitted
or, if mailed by overnight delivery or delivered, upon delivery, addressed as
aforesaid
SECTION 5.5 No Waiver; Remedies. In addition to, and not in limitation
of, Sections 2.3 and 2.6, no failure on the part of the Agent or any Lender to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
SECTION 5.6 Section Captions. Section captions used in this Guaranty
are for convenience of reference only, and shall not affect the construction of
this Guaranty.
SECTION 5.7 Setoff. In addition to, and not limitation of, any rights
of the Agent or any Lender under applicable law, the Agent and each Lender
shall, upon the occurrence and during the continuance of any Event of Default,
have the right to appropriate and apply to the payment of the obligations of
Guarantor owing to it hereunder, whether or not then due, any and all balances,
credits, deposits, accounts or moneys of Guarantor then or thereafter maintained
with the Agent or such Lender; provided, however, that any such appropriation
and application shall be subject to the provisions of Section 4.06 of the Credit
Agreement. Each Lender agrees promptly to notify Guarantor after any such setoff
and application made by such party; provided, however, that the failure to give
such notice shall not affect the validity of such setoff and application. The
rights of the Agent and each Lender under this Section 5.7 are in addition to
any other right or remedy (including any other right of set off) which the Agent
or such Lender may have.
SECTION 5.8 Severability. Wherever possible each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this
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Guaranty shall be prohibited by or invalid under such law, such provision shall
be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Guaranty.
SECTION 5.9 Governing Law, etc. THIS GUARANTY SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. THIS GUARANTY AND
THE OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE AGREEMENT AND UNDERSTANDING AMONG
THE PARTIES TO THE LOAN DOCUMENTS WITH RESPECT TO THE SUBJECT MATTER THEREOF AND
SUPERSEDE ALL PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO, EXCEPT
FOR THE FEE LETTER AND ANY PRIOR ARRANGEMENT MADE WITH RESPECT TO THE PAYMENT BY
ANY LENDER OF (OR ANY INDEMNIFICATION FOR) ANY FEES, COSTS OR EXPENSES PAYABLE
TO OR INCURRED (OR TO BE INCURRED) BY OR ON BEHALF OF THE AGENT OR ANY LENDER.
SECTION 5.10 Waiver of Jury Trial. GUARANTOR HEREBY KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY EAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS GUARANTY. GUARANTOR ACKNOWLEDGES AND AGREES THAT IT HAS
RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS ENTERING INTO THE CREDIT
AGREEMENT.
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IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
GEORGIA-PACIFIC CORPORATION
/s/Danny W. Huff
By: Danny W. Huff
Title: Vice President and Treasurer
Address: Georgia-Pacific Corporation
133 Peachtree Street, N.E.
Atlanta, GA 30348-5605
Attn: Treasurer's Department
Facsimile: 404-230-5598
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EXHIBIT 10.20
SUBSIDIARY GUARANTY
THIS SUBSIDIARY GUARANTY (the "Guaranty"), dated as of July 22, 1999,
is made by NORTH AMERICAN TIMBER CORP., a Delaware corporation; UNISOURCE
WORLDWIDE, INC., a Delaware corporation; GREAT NORTHERN NEKOOSA CORPORATION, a
Maine corporation; BRUNSWICK PULP & PAPER COMPANY, a Delaware corporation;
GEORGIA-PACIFIC WEST, INC., an Oregon corporation; G-P GYPSUM CORPORATION, a
Delaware corporation; LEAF RIVER FOREST PRODUCTS, INC., a Delaware corporation;
NEKOOSA PACKAGING CORPORATION, a Delaware corporation; and NEKOOSA PAPERS INC.,
a Wisconsin corporation (collectively, the "Guarantors" and, individually, a
"Guarantor"), in favor of BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, a national banking association, as administrative agent (in such
capacity, the "Agent") for each of the Lenders (as defined below).
RECITALS:
A. Pursuant to the Credit Agreement, dated as of July 22, 1999 (together
with all amendments, supplements, and other modifications, if any, from
time to time thereafter made thereto, the "Credit Agreement"), among
Georgia-Pacific Corporation, a Georgia corporation ("Georgia-Pacific")
as borrower, the various commercial lending and other financial
institutions (individually, a "Lender" and, collectively, the
"Lenders") as are, or may from time to time become, party thereto, the
Agent, Commerzbank AG, New York Branch, as Documentation Agent, and The
Chase Manhattan Bank and Citibank, N.A. as Co-Syndication Agents, the
Lenders have extended commitments (the "Commitments") to make loans
(the "Loans") to Georgia-Pacific, and to extend other financial
accommodations to or for the account of Georgia-Pacific, which Loans
and other financial accommodations are to be unconditionally guaranteed
by each Principal Subsidiary of Georgia-Pacific (which Principal
Subsidiaries are the Guarantors hereunder).
B. As a condition precedent to the initial Loan under the Credit
Agreement, each Guarantor is required to execute and deliver this
Guaranty.
C. Each Guarantor has duly authorized the execution, delivery, and
performance of this Guaranty.
D. It is in the best interests of each Guarantor to execute this Guaranty
inasmuch as such Guarantor will derive substantial direct and indirect
benefits from the Loans made to Georgia-Pacific by the Lenders under
the Credit Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, and in order to induce the Lenders to make Loans
(including the initial Loans) to Georgia-Pacific pursuant to the Credit
Agreement, each Guarantor agrees, for the benefit of each Lender, as follows:
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ARTICLE 1
DEFINITIONS
Unless otherwise defined herein or the context otherwise requires,
terms used in this Guaranty, including its preamble and recitals, have the
meanings provided in the Credit Agreement.
ARTICLE 2
GUARANTY PROVISIONS
SECTION 2.1 Guaranty. Each Guarantor, jointly and severally, hereby
absolutely, unconditionally, and irrevocably:
(a) guarantees the full and punctual payment when due, whether
at stated maturity, by required prepayment, declaration, acceleration,
demand, or otherwise, of all Obligations of Georgia-Pacific and each
other Loan Party (other than such Guarantor) now or hereafter existing
under the Credit Agreement and each other Loan Document to which it is
or may become a party, whether for principal, interest, fees, expenses,
or otherwise (including all such amounts which would become due but for
the operation of the automatic stay under Section 362(a) of the United
States Bankruptcy Code, 11 U.S.C. 362(a)), and the operation of
Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11
U.S.C. 502(b) and 506(b)); and
(b) indemnifies and holds harmless the Agent and each Lender
for any and all out-of-pocket costs and expenses (including the
out-of-pocket expenses and reasonable fees of counsel and the allocated
cost of in-house counsel retained by the Agent or such Lender) incurred
by the Agent or such Lender in preserving and enforcing any rights
under this Guaranty;
provided, however, that each Guarantor shall be liable under this Guaranty for
the maximum amount of such liability that can be hereby incurred without
rendering this Guaranty, as it relates to such Guarantor, voidable under
applicable law relating to fraudulent obligations, fraudulent conveyance, or
fraudulent transfer, and not for any greater amount. This Guaranty constitutes a
guaranty of payment when due and not of collection or of performance, and each
Guarantor specifically agrees that it shall not be necessary or required that
the Agent or any Lender exercise any right, assert any claim or demand, or
enforce any remedy whatsoever against Georgia-Pacific, any other Loan Party, or
any other Person before or as a condition to the obligations of each Guarantor
hereunder.
SECTION 2.2 Acceleration of Guaranty. Subject to the proviso of Section
2.1, each Guarantor agrees that, in the event of the occurrence and continuance
of an Event of Default and the acceleration of the Obligations in accordance
with the terms of the Credit Agreement, each Guarantor will pay to the Agent and
the Lenders forthwith the full amount of the Obligations.
SECTION 2.3 Guaranty Absolute, etc. This Guaranty shall in all respects
be a continuing, absolute, unconditional, and irrevocable guaranty of payment,
and shall remain in full force and effect until all Obligations of
Georgia-Pacific and each other Loan Party have been paid in cash in full, and
all Commitments shall have terminated. Each Guarantor guarantees that the
Obligations of Georgia-Pacific and each other Loan Party will be paid strictly
in accordance with the terms of the Credit Agreement and each other Loan
Document under which they arise, regardless of any law, regulation, or order now
or hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Agent or any Lender with respect thereto. The liability of each
Guarantor under this Guaranty shall be absolute, unconditional, and irrevocable
irrespective of:
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(a) any lack of validity, legality, or enforceability of the
Credit Agreement or any other Loan Document;
(b) the failure of the Agent or any Lender:
(i) to assert any claim or demand or to enforce any right
or remedy against Georgia-Pacific, any other Loan Party, or
any other Person (including any other guarantor) under the
provisions of the Credit Agreement, any other Loan Document,
or otherwise; or
(ii) to exercise any right or remedy against any other
guarantor of, or any collateral securing, any Obligations of
Georgia-Pacific or any other Loan Party;
(c) any change in the time, manner, or place of payment of, or
in any other term of, all or any of the Obligations of Georgia-Pacific
or any other Loan Party, or any other extension, compromise, or renewal
of any Obligations of Georgia-Pacific or any other Loan Party;
(d) any reduction, limitation, impairment, or termination of
the Obligations of Georgia-Pacific or any other Loan Party for any
reason, including any claim of waiver, release, surrender, alteration,
or compromise, and shall not be subject to (and each Guarantor hereby
waives any right to or claim of) any defense or setoff, counterclaim,
recoupment, or termination whatsoever by reason of the invalidity,
illegality, nongenuineness, irregularity, compromise, unenforceability
of, or any other event or occurrence affecting, the Obligations of
Georgia-Pacific or any other Loan Party or otherwise;
(e) any amendment to, rescission, waiver, or other
modification of, or any consent to departure from, any of the terms of
the Credit Agreement or any other Loan Document;
(f) any addition, exchange, release, surrender, or
non-perfection of any collateral, or any amendment to or waiver or
release or addition of, or consent to departure from, any other
guaranty, held by the Agent or any Lender securing any of the
Obligations of Georgia-Pacific or any other Loan Party; or
(g) any other circumstance which might otherwise constitute a
defense available to, or a legal or equitable discharge of,
Georgia-Pacific, any other Loan Party, any surety, or any guarantor.
SECTION 2.4 Reinstatement, etc. Each Guarantor agrees that this
Guaranty shall continue to be effective or be reinstated, as the case may be, if
at any time any payment (in whole or in part) of any of the Obligations is
rescinded or must otherwise be restored by the Agent or any Lender, upon the
insolvency, bankruptcy, or reorganization of Georgia-Pacific, any other Loan
Party, or otherwise, all as though such payment had not been made.
SECTION 2.5 Waiver, etc. Each Guarantor hereby waives promptness,
diligence, notice of acceptance, and any other notice with respect to any of the
Obligations of Georgia-Pacific or any other Loan Party and this Guaranty and any
requirement that the Agent or any Lender protect, secure, perfect, or insure any
security interest or lien, or any property subject thereto, or exhaust any right
or take any action against Georgia-Pacific, any other Loan Party, or any other
Person (including any other guarantor) or any collateral securing the
Obligations of Georgia-Pacific or any other Loan Party, as the case may be.
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SECTION 2.6 Subordination. Until such time as the Guaranteed
Obligations have been paid and performed in full and the period of time has
expired during which any payment made by Georgia-Pacific, a Guarantor, or any
other guarantor of the Guaranteed Obligations to Agent may be subsequently
invalidated, declared to be fraudulent or preferential, set aside, or required
to be repaid by Agent or paid over to a trustee, receiver, or any other entity,
whether under any bankruptcy act or otherwise (any such payment being
hereinafter referred to as a "Preferential Payment"), any claim or other rights
which any Guarantor may now have or hereafter acquire against Georgia-Pacific or
such other guarantor that arises from the existence or performance of any
Guarantor's obligations under this Guaranty or any other agreement (all such
claims and rights being hereinafter referred to as "Guarantor's Conditional
Rights"), including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution, or indemnification, any right to
participate in any claim or remedy of Agent or such other guarantor or any
collateral which Agent now has or hereafter acquires, whether or not such claim,
remedy or right arises in equity or under contract, statute, or common law, by
any payment made hereunder or otherwise, including, without limitation, the
right to take or receive from Georgia-Pacific or such other guarantor, directly
or indirectly, in cash or other property or by setoff or in any other manner,
payment, or security on account of such claim or other rights, shall be
subordinate to Agent's right to full payment and performance of the Guaranteed
Obligations, and each Guarantor shall not enforce Guarantor's Conditional Rights
until such time as the Guaranteed Obligations have been paid and performed in
full and the period of time has expired during which any payment made by
Georgia-Pacific or a Guarantor to Agent may be determined to be a Preferential
Payment.
SECTION 2.7 Successors, Transferees and Assigns; Transfers of Loans,
etc. This Guaranty shall:
(a) be binding upon each Guarantor, and its successors,
transferees, and assigns; and
(b) inure to the benefit of and be enforceable by the Agent
and each Lender.
Without limiting the generality of subsection (b), any Lender may assign or
otherwise transfer (in whole or in part) any Loan held by it to any other
Person, and such other Person shall thereupon become vested with all rights and
benefits in respect thereof granted to such Lender under any Loan Document
(including this Guaranty) or otherwise, subject, however, to any contrary
provisions in such assignment or transfer, and to the provisions of Section
12.08 and Article 11 of the Credit Agreement.
SECTION 2.8 Payments Free and Clear of Taxes, etc. Each Guarantor
hereby agrees that:
(a) Subject to paragraph (e) below, any and all payments made by each
Guarantor hereunder to or for the account of the Agent or any Lender (other than
on account of a Bid Loan, except to the extent otherwise specified as being
applicable to any such Bid Loan) shall be made in accordance with Section 3.03
of the Credit Agreement free and clear of, and without deduction or withholding
for, any and all present or future taxes, levies, imposts, deductions, charges
or withholdings, and all liabilities with respect thereto, excluding (i) such
taxes (including income taxes or franchise taxes or branch profit taxes) as are
imposed on or measured by the Agent's or such Lender's net income and (ii) such
taxes as are imposed by a jurisdiction other than the United States of America
or any political subdivision thereof and that would not have been imposed but
for the existence of a connection between the Agent or such Lender and the
jurisdiction imposing such taxes (other than a connection arising principally by
reason of the Credit Agreement or this Guaranty) (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings, and liabilities being
hereinafter referred to as "Taxes"). If any Guarantor shall be required by law
to deduct or withhold any Taxes from or in respect of any sum payable
4
<PAGE>
hereunder to the Agent or any Lender:
(i) the sum payable shall be increased as may be necessary
so that after making all required deductions (including
deductions applicable to additional sums payable under this
Section 2.8) the Agent or such Lender receives an amount equal
to the sum it would have received had no such deductions been
made;
(ii) such Guarantor shall make such deductions; and
(iii) such Guarantor shall pay the full amount deducted to
the relevant taxation authority or other governmental
authority in accordance with applicable law.
(b) Each Guarantor shall pay any present or future stamp or
documentary taxes or any other sales, excise, or property taxes,
charges, or similar levies which arise from any payment made hereunder
or from the execution, delivery, or registration of, or otherwise with
respect to, this Guaranty (other than on account of a Bid Loan, except
to the extent otherwise specified as being applicable to such Bid Loan)
(hereinafter referred to as "Other Taxes")
(c) Subject to subsection (e) below, each Guarantor, jointly
and severally, hereby indemnifies and holds harmless the Agent and each
Lender for the full amount of Taxes or Other Taxes (including any Taxes
or Other Taxes imposed by any jurisdiction on amounts payable under
this Section 2.6) paid by the Agent or such Lender and any liability
(including penalties, interest and expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted; provided, however, that the Agent and
each Lender agree to contest in good faith any Taxes or Other Taxes
that the Agent or such Lender, in its sole discretion, believes have
been incorrectly asserted. A certificate as to the amount demanded by
the Agent or any Lender, or the Agent on behalf of any Lender, absent
manifest error, shall be binding and conclusive.
(d) Within 30 days after the date of any payment of Taxes or
Other Taxes, each Guarantor shall furnish to the Agent the original or
a certified copy of a receipt evidencing payment thereof or other
evidence of payment reasonably satisfactory to the Agent.
(e) Each Lender shall, promptly upon the request of any
Guarantor to that effect, deliver to the Agent and such Guarantor such
accurate and complete forms or similar documentation as may be required
from time to time by any applicable law, treaty, rule or regulation in
order to establish (if appropriate) such Lender's tax status for
withholding purposes or may otherwise be appropriate to eliminate or
minimize any Taxes on payments under this Guaranty. The provisions of
Sections 3.05(f), (g), (h), and (i) of the Credit Agreement are hereby
incorporated by reference into this Guaranty as if fully stated herein,
except that each reference to the "Company" contained therein shall be
deemed to be a reference to the "Guarantors" for purposes of this
Guaranty.
(f) Without prejudice to the survival of any other agreement
of each Guarantor hereunder, the agreements and obligations of each
Guarantor contained in this Section 2.8 shall survive the payment in
full of the principal of and interest on the Loans.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
5
<PAGE>
SECTION 3.1 Representations and Warranties. Each Guarantor hereby makes
each of the representations and warranties made by Georgia-Pacific in the Credit
Agreement, to the extent that any such representation or warranty made by
Georgia-Pacific in the Credit Agreement shall be applicable to such Guarantor,
its Subsidiaries, or any of its or their properties.
ARTICLE 4
COVENANTS, ETC.
SECTION 4.1 Affirmative Covenants. Each Guarantor covenants and agrees
that, so long as any portion of the Obligations shall remain unpaid or any
Lender shall have any outstanding Commitment, such Guarantor will, unless the
Required Lenders shall otherwise consent in writing, duly keep, perform, and
observe for the benefit of the Agent and the Lenders each and every covenant set
forth in Article 8 of the Credit Agreement to the extent that any such covenant
shall be applicable to such Guarantor, any of its Subsidiaries, or any of its or
their properties (all of which covenants, together with related definitions and
ancillary provisions, are hereby incorporated herein by reference as if such
terms were set forth herein in full), without regard to any termination of the
Credit Agreement.
SECTION 4.2 Negative Covenants. Each Guarantor covenants and agrees
that, so long as any portion of the Obligations shall remain unpaid or any
Lender shall have any outstanding Commitment, such Guarantor will, unless the
Required Lenders shall otherwise consent in writing, duly keep, perform, and
observe for the benefit of the Agent and the Lenders each and every covenant set
forth in Article 9 of the Credit Agreement to the extent that any such covenant
shall be applicable to such Guarantor, any of its Subsidiaries, or any of its or
their properties (all of which covenants, together with related definitions and
ancillary provisions, are hereby incorporated herein by reference as if such
terms were set forth herein in full), without regard to any termination of the
Credit Agreement.
ARTICLE 5
MISCELLANEOUS PROVISIONS
SECTION 5.1 Loan Document. This Guaranty is a Loan Document executed
pursuant to the Credit Agreement and shall (unless otherwise expressly indicated
herein) be construed, administered and applied in accordance with the terms and
provisions thereof, including, without limitation, Article 12 of the Credit
Agreement.
SECTION 5.2 Binding on Successors, Transferees and Assigns; Assignment.
In addition to, and not in limitation of, Section 2.7, this Guaranty shall be
binding upon each Guarantor and its successors, transferees, and assigns and
shall inure to the benefit of and be enforceable by the Agent, each Lender, and
their respective successors, transferees, and assigns (to the full extent
provided pursuant to Section 2.7); provided, however, that no Guarantor may
assign any of its obligations hereunder.
SECTION 5.3 Amendment, etc. No amendment to or waiver of any provision
of this Guaranty, nor consent to any departure by any Guarantor herefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Guarantors, the Agent and consented to by the Required Lenders (or, as provided
in Section 12.02(e) of the Credit Agreement, all Lenders), and then such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given.
SECTION 5.4 Addresses for Notices to each Guarantor. All notices and
other communications hereunder to any Guarantor shall be in writing (including
by facsimile) and mailed by overnight delivery, transmitted by facsimile, or
delivered to it, addressed to it at the address set forth
6
<PAGE>
below its signature hereto or at such other address as shall be designated by
such Guarantor in a written notice to the Agent at the address specified in the
Credit Agreement complying as to delivery with the terms of this Section 5.4.
All such notices and other communications shall be effective, if transmitted by
facsimile when transmitted or, if mailed by overnight delivery or delivered,
upon delivery, addressed as aforesaid
SECTION 5.5 No Waiver; Remedies. In addition to, and not in limitation
of, Sections 2.3 and 2.5, no failure on the part of the Agent or any Lender to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
SECTION 5.6 Section Captions. Section captions used in this Guaranty
are for convenience of reference only, and shall not affect the construction of
this Guaranty.
SECTION 5.7 Setoff. In addition to, and not limitation of, any rights
of the Agent or any Lender under applicable law, the Agent and each Lender
shall, upon the occurrence and during the continuance of any Event of Default,
have the right to appropriate and apply to the payment of the obligations of
each Guarantor owing to it hereunder, whether or not then due, any and all
balances, credits, deposits, accounts or moneys of such Guarantor then or
thereafter maintained with the Agent or such Lender; provided, however, that any
such appropriation and application shall be subject to the provisions of Section
3.06 of the Credit Agreement. Each Lender agrees promptly to notify the relevant
Guarantor after any such setoff and application made by such party; provided,
however, that the failure to give such notice shall not affect the validity of
such setoff and application. The rights of the Agent and each Lender under this
Section 5.7 are in addition to any other right or remedy (including any other
right of set off) which the Agent or such Lender may have.
SECTION 5.8 Severability. Wherever possible each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
SECTION 5.9 Governing Law, etc. THIS GUARANTY SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. THIS GUARANTY AND
THE OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE AGREEMENT AND UNDERSTANDING AMONG
THE PARTIES TO THE LOAN DOCUMENTS WITH RESPECT TO THE SUBJECT MATTER THEREOF AND
SUPERSEDE ALL PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO, EXCEPT
FOR THE FEE LETTER AND ANY PRIOR ARRANGEMENT MADE WITH RESPECT TO THE PAYMENT BY
ANY LENDER OF (OR ANY INDEMNIFICATION FOR) ANY FEES, COSTS OR EXPENSES PAYABLE
TO OR INCURRED (OR TO BE INCURRED) BY OR ON BEHALF OF THE AGENT OR ANY LENDER.
SECTION 5.10 Waiver of Jury Trial. EACH GUARANTOR HEREBY KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY EAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS GUARANTY. EACH GUARANTOR ACKNOWLEDGES AND AGREES THAT IT
HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS ENTERING INTO THE CREDIT
AGREEMENT.
7
<PAGE>
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
NORTH AMERICAN TIMBER CORP.
By: /s/Danny W. Huff
Title: Vice President and Treasurer
Address:
c/o Georgia-Pacific Corporation
133 Peachtree Street, N.E.
Atlanta, Georgia 30348-5605
Attn: Treasurer's Department
Facsimile: 404-230-5598
UNISOURCE WORLDWIDE, INC.
By: /s/Danny W. Huff
Title: Vice President and Treasurer
Address:
c/o Georgia-Pacific Corporation
133 Peachtree Street, N.E.
Atlanta, Georgia 30348-5605
Attn: Treasurer's Department
Facsimile: 404-230-5598
8
<PAGE>
GREAT NORTHERN NEKOOSA CORPORATION
By: /s/Danny W. Huff
Title: Vice President and Treasurer
Address:
c/o Georgia-Pacific Corporation
133 Peachtree Street, N.E.
Atlanta, Georgia 30348-5605
Attn: Treasurer's Department
Facsimile: 404-230-5598
BRUNSWICK PULP & PAPER COMPANY
By: /s/Danny W. Huff
Title: Vice President and Treasurer
Address:
c/o Georgia-Pacific Corporation
133 Peachtree Street, N.E.
Atlanta, Georgia 30348-5605
Attn: Treasurer's Department
Facsimile: 404-230-5598
GEORGIA-PACIFIC WEST, INC.
By: /s/Danny W. Huff
Title: Vice President and Treasurer
Address:
c/o Georgia-Pacific Corporation
133 Peachtree Street, N.E.
Atlanta, Georgia 30348-5605
Attn: Treasurer's Department
Facsimile: 404-230-5598
9
<PAGE>
G-P GYPSUM CORPORATION
By: /s/Danny W. Huff
Title: Vice President and Treasurer
Address:
c/o Georgia-Pacific Corporation
133 Peachtree Street, N.E.
Atlanta, Georgia 30348-5605
Attn: Treasurer's Department
Facsimile: 404-230-5598
LEAF RIVER FOREST PRODUCTS, INC.
By: /s/Danny W. Huff
Title: Vice President and Treasurer
Address:
c/o Georgia-Pacific Corporation
133 Peachtree Street, N.E.
Atlanta, Georgia 30348-5605
Attn: Treasurer's Department
Facsimile: 404-230-5598
NEKOOSA PACKAGING CORPORATION
By: /s/Danny W. Huff
Title: Vice President and Treasurer
Address:
c/o Georgia-Pacific Corporation
133 Peachtree Street, N.E.
Atlanta, Georgia 30348-5605
Attn: Treasurer's Department
Facsimile: 404-230-5598
NEKOOSA PAPERS INC.
10
<PAGE>
By: /s/Danny W. Huff
Title: Vice President and Treasurer
Address:
c/o Georgia-Pacific Corporation
133 Peachtree Street, N.E.
Atlanta, Georgia 30348-5605
Attn: Treasurer's Department
Facsimile: 404-230-5598
11
EXHIBIT 10.21
GEORGIA-PACIFIC GROUP
2000 EMPLOYEE STOCK PURCHASE PLAN
<PAGE>
GEORGIA-PACIFIC GROUP
2000 EMPLOYEE STOCK PURCHASE PLAN
TABLE OF CONTENTS
Section Page
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ss. 1. Purpose 1
ss. 2. Definitions 1
2..1 Account 1
2.2 Authorization 1
2.3 Board 1
2.4 Code 1
2.5 Eligible Employee 1
2.6 Exercise Date 2
2.7 Fair Market Value 2
2.8 Georgia-Pacific 2
2.9 Offering Period 2
2.10 Option Price 2
2.11 Participant 2
2.12 Participating Employer 2
2.13 Plan 2
2.14 Plan Administrator 2
2.15 Purchase Period 3
2.16 Stock 3
2.17 Subsidiary 3
ss. 3 Offerings 3
ss. 4 Participation 4
ss. 5 Granting of Options 4
(a) General Rule 4
(b) Statutory Limitation 4
(c) Available Shares of Stock 5
ss. 6. Payroll Deductions 5
(a) Initial Authorization 5
(b) Subsequent Authorization 5
(c) Account Credits, General Assets and Taxes 6
(d) No Cash Payments 6
ss. 7. Exercise of Option 6
(a) General Rule 6
(c) Automatic Refund 6
ss. 8. Delivery 6
ss. 9. Voluntary Account Withdrawal 7
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<TABLE>
<CAPTION>
Section Page
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<S> <C> <C>
ss. 10. Termination of Employment 7
ss. 11. Retirement or Disability 7
ss. 12. Death 8
ss. 13. Temporary Layoff and Authorized Leave of 9
Absence
ss. 14. Hardship Withdrawals From 401(k) Plans 9
ss. 15. Administration 9
ss. 16. Transferability 9
ss. 17. Adjustment 10
ss. 18. Securities Registration 10
ss. 19. Amendment or Termination 11
ss. 20. Notices 11
ss. 21. Employment 11
ss. 22. Headings, References and Construction 11
ss. 23. Shareholder Approval 12
</TABLE>
ii
<PAGE>
GEORGIA-PACIFIC GROUP
2000 EMPLOYEE STOCK PURCHASE PLAN
ss. 1. PURPOSE
The primary purpose of this Plan is to encourage Stock ownership by
each Eligible Employee of Georgia-Pacific and each Subsidiary by permitting the
purchase of Stock on a discounted basis. Georgia-Pacific intends that this Plan
constitute an "employee stock purchase plan" within the meaning of ss. 423 of
the Code and, further, intends that any ambiguity in this Plan or any related
offering be resolved to effect such intent.
ss. 2. DEFINITIONS
2.1. Account shall mean the separate bookkeeping account which shall be
established and maintained by the Plan Administrator for each Participant for
each Purchase Period to record the payroll deductions made on his or her behalf
to purchase Stock under this Plan.
2.2. Authorization shall mean the participation election and payroll
deduction authorization form which an Eligible Employee shall be required to
properly complete in writing (or in any other form acceptable to the Plan
Administrator) and timely file with the Plan Administrator before the end of an
Offering Period in order to participate in this Plan for the related Purchase
Period and which shall require an Eligible Employee to provide such information
and to take such action as the Plan Administrator in his or her discretion deems
necessary or helpful to the orderly administration of this Plan.
2.3. Board shall mean the Board of Directors of Georgia-Pacific.
2.4. Code shall mean the Internal Revenue Code of 1986, as amended.
2.5. Eligible Employee shall mean each employee of Georgia-Pacific or a
Subsidiary except:
(a) an employee who customarily is employed (within the
meaning of Code ss. 423(b)(4)(B)) 20 hours or less per week by
Georgia-Pacific or such Subsidiary,
(b) an employee who customarily is employed (within the
meaning of Code ss. 423(b)(4)(C)) for not more than 5 months in any
calendar year by Georgia-Pacific or such Subsidiary, and
(c) an employee who would own (immediately after the grant of
an option under this Plan) stock possessing 5% or more of the total
combined voting
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power or value of all classes of stock of Georgia-Pacific based on the
rules set forth in ss. 423(b)(3) and ss. 424 of the Code.
2.6. Exercise Date shall mean for each Purchase Period the last day of
such Purchase Period.
2.7. Fair Market Value shall mean, as of any date, the mean between the
high and low sales prices of a share of Stock on that date as reported in the
record of Composite Transactions for New York Stock Exchange listed securities
and printed in The Wall Street Journal or in any successor to The Wall Street
Journal or, if there is no such successor, any similar publication selected by
the Plan Administrator. If the date of determination is not a trading date on
the New York Stock Exchange, Fair Market Value shall be determined using the
high and low sales prices of a share of Stock on the next preceding trading
date. The Fair Market Value shall be rounded to the nearest whole cent (with 0.5
cent being rounded to the next higher whole cent).
2.8. Georgia-Pacific shall mean Georgia-Pacific Corporation, a
corporation incorporated under the laws of the State of Georgia, and any
successor to Georgia-Pacific.
2.9. Offering Period shall mean, with respect to the initial Offering
Period, the period beginning on May 8, 2000 and ending on June 5, 2000 and, with
respect to each subsequent Offering Period, the period beginning on the date
determined by the Plan Administrator which precedes the related Purchase Period
and which shall continue for no more than 31 days.
2.10. Option Price shall mean for each Purchase Period the lesser of
(i) 90% of the Fair Market Value for a share of Stock on the first day of such
Purchase Period or (ii) 90% of the Fair Market Value for a share of Stock on the
last day of such Purchase Period.
2.11. Participant shall mean for each Purchase Period an Eligible
Employee who has satisfied the requirements set forth in ss. 4 of this Plan for
such Purchase Period.
2.12. Participating Employer shall for each Participant, as of any
date, mean Georgia-Pacific or a Subsidiary, whichever employs such Participant
as of such date.
2.13. Plan shall mean this Georgia-Pacific Group 2000 Employee Stock
Purchase Plan, as amended from time to time.
2.14. Plan Administrator shall mean the Senior Vice President - Human
Resources or his or her delegate.
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<PAGE>
2.15. Purchase Period shall mean, with respect to the initial Purchase Period,
the 12 month period beginning on July 1, 2000 and, with respect to each
subsequent Purchase Period, the 12 month period beginning on the date determined
by the Plan Administrator, which date shall be the first day of the second
calendar month which immediately follows the end of the related Offering Period.
2.16. Stock shall mean Georgia-Pacific Corporation - Georgia-Pacific
Group Common Stock.
2.17. Subsidiary shall mean for each Purchase Period
(a) each domestic corporation (other than North American
Timber Corp. and Georgia Temp, Inc.) which as of the first day of an
Offering Period is in an unbroken chain of corporations beginning with
Georgia-Pacific in which each domestic corporation in such chain
(except for the last corporation in such chain) owns stock possessing
50% or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain; and
(b) each foreign corporation in which Georgia-Pacific owns
stock possessing 50% or more of the total combined voting power of all
classes of stock and which is listed prior to each Offering Period by
the Plan Administrator on Appendix A to this Plan.
ss. 3. OFFERINGS
Options to purchase shares of Stock shall be offered to Participants in
accordance with this Plan during three Offering Periods; provided, however,
there shall be no more than one Offering Period in effect at any time and no
more than one Purchase Period in effect at any time. There shall be a total of
8,550,000 shares of Stock available under this Plan, 2,850,000 of which shall be
available with respect to the initial Offering Period and no less than 2,850,000
of which shall be available with respect to each of the remaining two Offering
Periods. Such shares of Stock shall be available for purchase from
Georgia-Pacific upon the exercise of such options, and any shares of Stock which
are subject to options granted as of the first day of a Purchase Period but
which are not purchased on the related Exercise Date shall again become
available under this Plan.
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<PAGE>
ss. 4. PARTICIPATION
Each person who is an Eligible Employee on the first day of an Offering
Period shall satisfy the requirements to be a Participant in this Plan for the
related Purchase Period if
(a) he or she properly completes and files an Authorization
with the Plan Administrator on or before the last day of such Offering
Period to purchase shares of Stock, and
(b) his or her employment as an Eligible Employee continues
throughout the period which begins on the first day of such Offering
Period and ends on the first day of the related Purchase Period (for
this purpose, employment as an Eligible Employee shall not be treated
as interrupted by a transfer directly between Georgia-Pacific and any
Subsidiary or between one Subsidiary and another Subsidiary).
A Participant's status as such shall terminate for a Purchase Period (for which
he or she has an effective Authorization) at such time as his or her Account has
been withdrawn under ss. 9, ss. 10, ss. 11, ss. 12 or ss. 13 or the purchases
and distributions contemplated under ss. 7 with respect to his or her Account
have been completed, whichever comes first.
ss. 5. GRANTING OF OPTIONS
(a) General Rule. Subject to subsections (b) and (c) below,
each person who is a Participant for a Purchase Period automatically
shall be granted an option on the first day of such Purchase Period to
purchase at the Option Price a maximum number of whole shares of Stock
determined by dividing $25,000 by the Fair Market Value of a share of
Stock on the first day of such Purchase Period.
(b) Statutory Limitation. No option granted under this Plan to
any Eligible Employee shall permit his or her rights to purchase shares
of Stock under this Plan or under any other employee stock purchase
plan (within the meaning of ss. 423 of the Code) or any other shares of
Stock under any other employee stock purchase plans (within the meaning
of ss. 423 of the Code) of Georgia-Pacific and any of its subsidiaries
(within the meaning of ss. 424(f) of the Code) to accrue (within the
meaning of ss. 423(b)(8) of the Code) at a rate which exceeds $25,000
of the Fair Market Value of such Stock for any calendar year. Such Fair
Market Value shall be determined as of the first day of the Purchase
Period for which the option is granted.
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<PAGE>
(c) Available Shares of Stock. If the number of shares of
Stock available for purchase for any Purchase Period is insufficient to
cover the number of shares which Participants have elected to purchase
through effective Authorizations, then each Participant's option to
purchase shares of Stock for such Purchase Period shall be reduced to
the number of shares of Stock which the Plan Administrator shall
determine by multiplying the number of shares of Stock for which such
Participant would have been granted an option if sufficient shares were
available by a fraction, the numerator of which shall be the number of
shares of Stock available for options for such Purchase Period and the
denominator of which shall be the total number of shares of Stock for
which options would have been granted to all Participants if sufficient
shares were available.
ss. 6. PAYROLL DEDUCTIONS
(a) Initial Authorization. Each Participant's Authorization
shall specify the specific dollar amount which he or she authorizes his
or her Participating Employer to deduct from his or her compensation
each pay period (determined in accordance with such Participating
Employer's standard payroll policies and practices) during the Purchase
Period for which such Authorization is in effect, provided
(1) the minimum amount deducted from a Participant's
compensation during each pay period in a Purchase
Period shall not be less than $600 divided by the
number of pay periods in the Purchase Period; and
(2) the maximum amount deducted from a Participant's
compensation during each pay period shall not be more
than the lesser of (i) $22,500 (90% of the $25,000
maximum) divided by the number of pay periods in the
Purchase Period, (ii) such lower amount which is set
by the Plan Administrator before the beginning of a
Purchase Period, or (iii) such Participant's net pay
after all other withholdings.
(b) Subsequent Authorization. A Participant shall have the
right to make one amendment to an Authorization after the end of an
Offering Period to stop the payroll deductions which he or she
previously had authorized for the related Purchase Period, and such
amendment shall be effective with the next possible payroll period
(determined in accordance with the Participating Employer's payroll
practices and policies regarding cut-off dates for payroll changes)
after the Plan Administrator actually receives such amended
Authorization.
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<PAGE>
(c) Account Credits, General Assets and Taxes. All payroll
deductions made for a Participant shall be credited to his or her
Account as of the pay day as of which the deduction is made. All
payroll deductions shall be held by Georgia-Pacific, by
Georgia-Pacific's agent or by one, or more than one, Subsidiary (as
determined by the Plan Administrator ) as part of the general assets of
Georgia-Pacific or any such Subsidiary, and each Participant's right to
the payroll deductions credited to his or her Account shall be those of
a general and unsecured creditor. Georgia-Pacific, Georgia-Pacific's
agent or such Subsidiary shall have the right to withhold on payroll
deductions to the extent such person deems necessary or appropriate to
satisfy applicable tax laws.
(d) No Cash Payments. Except as provided for in ss. 11 and ss.
12, a Participant (or beneficiary) may not make any contribution to his
or her Account except through payroll deductions made in accordance
with this ss. 6.
ss. 7. EXERCISE OF OPTION
(a) General Rule. Unless a Participant files an amended
Authorization under ss. 9 on or before the Exercise Date for a Purchase
Period, his or her option shall be exercised automatically on such
Exercise Date for the purchase of as many whole shares of Stock subject
to such option as the balance credited to his or her Account as of that
date will purchase at the Option Price for such shares of Stock,
provided that he or she is an Eligible Employee on such Exercise Date.
(b) Automatic Refund. If a Participant's Account has a
remaining balance after his or her option has been exercised as of an
Exercise Date under this ss. 7, such balance automatically shall be
refunded to the Participant in cash (without interest) as soon as
practicable following such Exercise Date.
ss. 8. DELIVERY
A stock certificate representing all shares of Stock purchased upon the
exercise of an option under this Plan shall be held for the Participant by a
broker-dealer designated by the Plan Administrator or, at the Participant's
direction and expense, delivered to the Participant (or any person who makes a
claim through a Participant), and shall be registered in his or her name;
provided, however, Georgia-Pacific shall not have any obligation to deliver a
certificate to a Participant which represents a fractional share of Stock. No
Participant (or any person who makes a claim through a Participant) shall have
any interest in any shares of Stock subject to an option until such option has
been exercised and the related shares of Stock actually have been delivered to
such person or have been transferred to an account for such person at a
broker-dealer designated by the Plan Administrator. The Plan Administrator shall
have the discretion
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<PAGE>
to satisfy Georgia-Pacific's obligations hereunder with newly issued shares or
shares previously issued and outstanding that have been repurchased by
Georgia-Pacific.
ss. 9. Voluntary Account Withdrawal
A Participant may elect to withdraw the entire balance credited to his
or her Account for a Purchase Period by completing and filing an amended
Authorization with the Plan Administrator before the Exercise Date for such
period. If a Participant makes such a withdrawal election, no further payroll
deductions shall be made on his or her behalf and such balance shall be paid to
him or her in cash (without interest) at the next possible payroll period
(determined in accordance with the Participating Employer's payroll practices
and policies regarding cut-off dates for payroll changes).
ss. 10. TERMINATION OF EMPLOYMENT
If a Participant's employment as an Eligible Employee terminates on or
before the Exercise Date for a Purchase Period for any reason whatsoever, his or
her Account shall (subject to ss. 11 and ss. 12) be distributed as if he or she
had elected to withdraw his or her Account in cash under ss. 9 immediately
before the date his or her employment had so terminated. However, if a
Participant is transferred directly between Georgia-Pacific and a Subsidiary or
between one Subsidiary and another Subsidiary while he or she has an
Authorization in effect, his or her employment shall not be treated as
terminated merely by reason of such transfer and any such Authorization shall
(subject to all the terms and conditions of this Plan) remain in effect after
such transfer for the remainder of the Purchase Period.
ss. 11. RETIREMENT OR DISABILITY
If a Participant retires or becomes disabled within three months before
the Exercise Date for a Purchase Period, he or she may elect prior to such
Exercise Date to (i) make a cash lump sum payment to his or her Account in an
amount equal to the unpaid balance under his or her Authorization as then in
effect for such Purchase Period, (ii) purchase at the end of the Purchase Period
the number of whole shares of Stock as the balance credited to the Participant's
Account as of that date will purchase at the Option Price for such shares of
Stock, or (iii) withdraw the entire balance credited to his or her Account for
such Purchase Period in accordance with ss. 9. In the event a Participant elects
to make a cash lump sum payment to his or her Account, his or her option shall
be exercised automatically on the Exercise Date for such Purchase Period for the
purchase of as many whole shares of Stock as the balance credited to his or her
Account as of that date will purchase at the Option Price for such shares of
Stock as if he or she is an Eligible Employee on such Exercise Date. In the
event a Participant fails to make a timely election under this ss. 11, his or
her Account shall be distributed as if he or she had elected to withdraw the
entire balance credited to his or her Account in cash under ss. 9 immediately
before the date he or she retired.
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<PAGE>
For purposes of this ss. 11, "retire" or "retirement" shall mean a
Participant's voluntary or involuntary termination with the Company and all of
its affiliates (within the meaning of Code ss. 1563(a), except that for such
affiliate determination, the phrase "at least 50%" shall be substituted for "at
least 80%" in Code ss. ss. 1563(a)(1) and (a)(2)(A)) at a time when he or she
has attained at least age 65 or attained at least age 55 and accrued 5 years of
service for vesting purposes under Georgia-Pacific's qualified benefit plans
covering him or her, provided that termination for "cause" as determined by
Georgia-Pacific shall not be considered retirement under this Plan.
For purposes of this ss. 11, a Participant's date of "disability" shall
be the last day of his or her short-term medical leave period under
Georgia-Pacific's policy providing paid medical leave for salaried employees who
are medically unable to work because of injury or illness (or the last day of a
period determined as if the Participant were a salaried employee entitled to
such short-term medical leave), and a Participant shall be deemed "disabled" at
such time only if the Participant would be "totally disabled" pursuant to the
standards set forth in the Georgia-Pacific Corporation Salaried Long-Term
Disability Plan whether or not he or she is covered under that plan.
ss. 12. DEATH
If a Participant's employment terminates due to his or her death before
the Exercise Date for a Purchase Period, his or her beneficiary may elect before
the Exercise Date to (i) make a cash lump sum payment to the Participant's
Account in an amount equal to the unpaid balance under the Participant's
Authorization as then in effect for such Purchase Period, (ii) purchase at the
end of the Purchase Period the number of whole shares of Stock as the balance
credited to the Participant's Account as of that date will purchase at the
Option Price for such shares of Stock, or (iii) withdraw the entire balance
credited to the Participant's Account for such Purchase Period in accordance
with ss. 9. In the event a Participant's beneficiary elects to make a cash lump
sum payment to the Participant's Account, the Participant's option shall be
exercised automatically on the Exercise Date for such Purchase Period for the
purchase of as many whole shares of Stock as the balance credited to his or her
Account as of that date will purchase at the Option Price for such shares of
Stock as if the Participant is an Eligible Employee on such Exercise Date. In
the event a beneficiary fails to make a timely election under this ss. 12, the
Participant's Account shall be distributed as if the Participant had elected to
withdraw his or her Account in cash under ss. 9 immediately before the date he
or she died.
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<PAGE>
ss. 13. TEMPORARY LAYOFF AND AUTHORIZED LEAVE OF ABSENCE
Any amounts being deducted from a Participant's compensation under his
or her Authorization for a Purchase Period shall be suspended during a period of
temporary layoff or authorized leave of absence without pay. If the Participant
returns to active service prior to the last payroll period in the Purchase
Period, his or her payroll deductions shall be commenced or resumed. The
Participant's option shall be exercised automatically on the Exercise Date for
such Purchase Period for the purchase of as many whole shares of Stock as the
balance credited to his or her Account as of that date will purchase at the
Option Price for such shares of Stock provided he or she is an Eligible Employee
on such Exercise Date.
For purposes of this Plan, a Participant on a temporary layoff or
authorized leave of absence shall be deemed to be terminated from his or her
employment with Georgia-Pacific and all of its affiliates if such layoff or
leave exceeds a period of 90 consecutive days (unless the Participant's right to
reemployment is guaranteed either by statute or by contract). At the end of such
90 day period, such Participant shall have his or her Account distributed as if
he or she had elected to withdraw his or her Account in cash under ss. 9
immediately before the date his or her employment had so terminated.
ss. 14. HARDSHIP WITHDRAWALS FROM 401(K) PLANS
If a Participant receives a hardship withdrawal pursuant to the
provisions of a qualified retirement plan subject to Code ss. 401(k), any
amounts being deducted from such Participant's compensation under his or her
Authorization shall be suspended for a period of twelve consecutive months
following such withdrawal. If such suspension is in effect on the last day of an
Offering Period, any Authorization filed by an Eligible Employee during such
Offering Period shall be null and void and of no effect.
ss. 15. ADMINISTRATION
The Plan Administrator shall be responsible for the administration of
this Plan and shall have the power to interpret this Plan and to take such other
action as the Plan Administrator deems necessary or equitable under the
circumstances. The Plan Administrator also shall have the power to delegate the
duty to perform such administrative functions as the Plan Administrator deems
appropriate under the circumstances. Any person to whom the duty to perform an
administrative function is delegated shall act on behalf of the Plan
Administrator for such function. Any action or inaction by or on behalf of the
Plan Administrator under this Plan shall be final and binding on each Eligible
Employee, each Participant and on each other person who makes a claim under this
Plan based on the rights, if any, of any such Eligible Employee or Participant
under this Plan.
ss. 16. TRANSFERABILITY
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<PAGE>
Neither the balance credited to a Participant's Account nor any rights
to the exercise of an option or to receive shares of Stock under this Plan may
be assigned, encumbered, alienated, transferred, pledged, or otherwise disposed
of in any way by a Participant during his or her lifetime or by any other person
during his or her lifetime, and any attempt to do so shall be without effect;
provided, however, that the Plan Administrator in its absolute discretion may
treat any such action as an election by a Participant to withdraw the balance
credited to his or her Account in accordance with ss. 9.
ss. 17. ADJUSTMENT
The number of shares of Stock covered by outstanding options granted
pursuant to this Plan and the related Option Price and the number of shares of
Stock available under this Plan automatically shall be adjusted by the Plan
Administrator in a manner to fully and fairly reflect any change in the
capitalization of Georgia-Pacific, including, but not limited to, such changes
as dividends paid in the form of Stock or Stock splits. Furthermore, the Plan
Administrator automatically shall adjust (in a manner which satisfies the
requirements of ss. 424(a) of the Code) the number of shares of Stock available
under this Plan and the number of shares of Stock covered by options granted
under this Plan and the related Option Prices in the event of any corporate
transaction described in ss. 424(a) of the Code. An adjustment made under this
ss. 17 by the Plan Administrator shall be conclusive and binding on all affected
persons.
ss. 18. SECURITIES REGISTRATION
If Georgia-Pacific shall deem it necessary to register under the
Securities Act of 1933, as amended, or any other applicable statutes, any shares
of Stock with respect to which an option shall have been exercised under this
Plan or to qualify any such shares of Stock for an exemption from any such
statutes, Georgia-Pacific shall take such action at its own expense before
delivery of any certificate representing such shares of Stock. If shares of
Stock are listed on any national stock exchange at the time an option to
purchase shares of Stock is exercised under this Plan, Georgia-Pacific whenever
required shall register shares of Stock for which such option is exercised under
the Securities Exchange Act of 1934, as amended, and shall make prompt
application for the listing on such national stock exchange of such shares, all
at the expense of Georgia-Pacific.
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<PAGE>
ss. 19. AMENDMENT OR TERMINATION
This Plan may be amended by the Plan Administrator from time to time to
the extent that the Plan Administrator deems necessary or appropriate in light
of, and consistent with, ss. 423 of the Code and the laws of the State of
Georgia, and any such amendment shall be subject to the approval of
Georgia-Pacific's shareholders to the extent such approval is required under ss.
423 of the Code or the laws of the State of Georgia. The Plan Administrator also
may terminate this Plan or any offering made under this Plan at any time;
provided, however, the Plan Administrator shall not have the right to modify,
cancel, or amend any option outstanding after the beginning of a Purchase Period
unless (1) each Participant consents in writing to such modification, amendment
or cancellation, (2) such modification only accelerates the Exercise Date for
the related Purchase Period, or (3) the Plan Administrator acting in good faith
deems that such action is required under applicable law.
ss. 20. NOTICES
All Authorizations and other communications from a Participant to the
Plan Administrator under, or in connection with, this Plan shall be deemed to
have been filed with the Plan Administrator when actually received in the form
specified by the Plan Administrator at the location, or by the person,
designated by the Plan Administrator for the receipt of such Authorizations and
communications.
ss. 21. EMPLOYMENT
No offer under this Plan shall constitute an offer of employment, and
no acceptance of an offer under this Plan shall constitute an employment
agreement. Any such offer or acceptance shall have no bearing whatsoever on the
employment relationship between any Eligible Employee and Georgia-Pacific or any
subsidiary of Georgia-Pacific, including a Subsidiary. Finally, no Eligible
Employee shall be induced to participate in this Plan by the expectation of
employment or continued employment.
ss. 22. HEADINGS, REFERENCES AND CONSTRUCTION
The headings to sections in this Plan have been included for
convenience of reference only. Except as otherwise expressly indicated, all
references to sections (ss.) in this Plan shall be to sections (ss.) of this
Plan. This Plan shall be interpreted and construed in accordance with the laws
of the State of Georgia.
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<PAGE>
ss. 23. SHAREHOLDER APPROVAL
The Plan is subject to the approval by the holders of the majority of
the outstanding shares of Stock within 12 months before or after the date of
adoption of the Plan by the Board. The Plan shall be null and void and of no
effect if the foregoing condition is not fulfilled.
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EXHIBIT 10.22
THE TIMBER COMPANY
2000 EMPLOYEE STOCK PURCHASE PLAN
<PAGE>
THE TIMBER COMPANY
2000 EMPLOYEE STOCK PURCHASE PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
ss. 1. Purpose............................................................................... 1
ss. 2. Definitions........................................................................... 1
2.1. Account......................................................................... 1
2.2. Authorization................................................................... 1
2.3. Board........................................................................... 1
2.4. Code............................................................................ 1
2.5. Company......................................................................... 1
2.6. Eligible Employee............................................................... 1
2.7. Exercise Date................................................................... 2
2.8. Fair Market Value............................................................... 2
2.9. Georgia-Pacific................................................................. 2
2.10. Offering Period................................................................ 2
2.11. Option Price................................................................... 2
2.13. Plan........................................................................... 2
2.14. Plan Administrator............................................................. 2
2.15. Purchase Period................................................................ 3
2.16. Stock.......................................................................... 3
ss. 3. Offerings............................................................................. 3
ss. 4. Participation......................................................................... 3
ss. 5. Granting of Options................................................................... 4
(a) General Rule................................................................... 4
(b) Statutory Limitation........................................................... 4
(C) Available Shares of Stock...................................................... 4
ss. 6. Payroll Deductions.................................................................... 4
(a) Initial Authorization.......................................................... 4
(b) Subsequent Authorization....................................................... 5
(c) Account Credits, General Assets and Taxes...................................... 5
(d) No Cash Payments............................................................... 5
ss. 7. Exercise of Option.................................................................... 5
(a) General Rule................................................................... 5
(b) Automatic Refund............................................................... 6
ss. 8. Delivery.............................................................................. 6
ss. 9. Voluntary Account Withdrawal.......................................................... 6
ss. 10. Termination of Employment............................................................. 6
ss. 11. Retirement or Disability.............................................................. 6
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Section Page
<S> <C>
ss. 12. Death.................................................................................. 7
ss. 13. Temporary Layoff and Authorized Leave of Absence....................................... 8
ss. 14. Hardship Withdrawals From 401(k) Plans................................................. 8
ss. 15. Administration......................................................................... 9
ss. 16. Transferability........................................................................ 9
ss. 17. Adjustment............................................................................. 9
ss. 18. Securities Registration................................................................ 9
ss. 19. Amendment or Termination...............................................................10
ss. 20. Notices................................................................................10
ss. 21. Employment.............................................................................10
ss. 22. Headings, References and Construction..................................................11
ss. 23. Shareholder Approval...................................................................11
</TABLE>
ii
<PAGE>
THE TIMBER COMPANY
2000 EMPLOYEE STOCK PURCHASE PLAN
ss. 1. Purpose
The primary purpose of this Plan is to encourage Stock ownership by
each Eligible Employee of the Company by permitting the purchase of Stock on a
discounted basis. The Company intends that this Plan constitute an "employee
stock purchase plan" within the meaning of ss. 423 of the Code and, further,
intends that any ambiguity in this Plan or any related offering be resolved to
effect such intent.
ss. 2. Definitions
2.1. Account shall mean the separate bookkeeping account which shall be
established and maintained by the Plan Administrator for each Participant for
each Purchase Period to record the payroll deductions made on his or her behalf
to purchase Stock under this Plan.
2.2. Authorization shall mean the participation election and payroll
deduction authorization form which an Eligible Employee shall be required to
properly complete in writing (or in any other form acceptable to the Plan
Administrator) and timely file with the Plan Administrator before the end of an
Offering Period in order to participate in this Plan for the related Purchase
Period and which shall require an Eligible Employee to provide such information
and to take such action as the Plan Administrator in his or her discretion deems
necessary or helpful to the orderly administration of this Plan.
2.3. Board shall mean the Board of Directors of Georgia-Pacific.
2.4. Code shall mean the Internal Revenue Code of 1986, as amended.
2.5. Company shall mean North American Timber Corp., a wholly owned
subsidiary of Georgia-Pacific and a corporation incorporated under the laws of
the State of Delaware, and any successor thereto.
2.6. Eligible Employee shall mean each employee of the Company except:
(a) an employee who customarily is employed (within the
meaning of Codess. 423(b)(4)(B)) 20 hours or less per week by the
Company,
(b) an employee who customarily is employed (within the
meaning of Codess. 423(b)(4)(C)) for not more than 5 months in any
calendar year by the Company, and
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<PAGE>
(c) an employee who would own (immediately after the grant of
an option under this Plan) stock possessing 5% or more of the total
combined voting power or value of all classes of stock of the Company
based on the rules set forth in ss. 423(b)(3) and ss. 424 of the Code.
2.7. Exercise Date shall mean for each Purchase Period the last day of
such Purchase Period.
2.8. Fair Market Value shall mean, as of any date, the mean between the
high and low sales prices of a share of Stock on that date as reported in the
record of Composite Transactions for New York Stock Exchange listed securities
and printed in The Wall Street Journal or in any successor to The Wall Street
Journal or, if there is no such successor, any similar publication selected by
the Plan Administrator. If the date of determination is not a trading date on
the New York Stock Exchange, Fair Market Value shall be determined using the
high and low sales prices of a share of Stock on the next preceding trading
date. The Fair Market Value shall be rounded to the nearest whole cent (with 0.5
cent being rounded to the next higher whole cent).
2.9. Georgia-Pacific shall mean Georgia-Pacific Corporation, a
corporation incorporated under the laws of the State of Georgia, and any
successor to Georgia-Pacific.
2.10. Offering Period shall mean, with respect to the initial Offering
Period, the period beginning on May 8, 2000 and ending on June 5, 2000 and, with
respect to each subsequent Offering Period, the period beginning on the date
determined by the Plan Administrator which precedes the related Purchase Period
and which shall continue for no more than 31 days.
2.11. Option Price shall mean for each Purchase Period the lesser of
(i) 90% of the Fair Market Value for a share of Stock on the first day of such
Purchase Period, or (ii) 90% of the Fair Market Value for a share of Stock on
the last day of such Purchase Period.
2.12. Participant shall mean for each Purchase Period an Eligible
Employee who has satisfied the requirements set forth in ss. 4 of this Plan for
such Purchase Period.
2.13. Plan shall mean The Timber Company 2000 Employee Stock Purchase
Plan, as amended from time to time.
2.14. Plan Administrator shall mean the Senior Vice President - Human
Resources of Georgia-Pacific or his or her delegate.
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<PAGE>
2.15. Purchase Period shall mean, with respect to the initial Purchase
Period, the 12 month period beginning on July 1, 2000 and, with respect to each
subsequent Purchase Period, the 12 month period beginning on the date determined
by the Plan Administrator, which date shall be the first day of the second
calendar month which immediately follows the end of the related Offering Period.
2.16. Stock shall mean Georgia-Pacific Corporation - Timber Group
Common Stock.
ss. 3. Offerings
Options to purchase shares of Stock shall be offered to Participants in
accordance with this Plan during three Offering Periods; provided, however,
there shall be no more than one Offering Period in effect at any time and no
more than one Purchase Period in effect at any time. There shall be a total of
1,500,000 shares of Stock available under this Plan, 500,000 of which shall be
available with respect to the initial Offering Period and no less than 500,000
of which shall be available with respect to each of the remaining two Offering
Periods. Such shares of Stock shall be available for purchase from
Georgia-Pacific upon the exercise of such options, and any shares of Stock which
are subject to options granted as of the first day of a Purchase Period but
which are not purchased on the related Exercise Date shall again become
available under this Plan.
ss. 4. Participation
Each person who is an Eligible Employee on the first day of an Offering
Period shall satisfy the requirements to be a Participant in this Plan for the
related Purchase Period if
(a) he or she properly completes and files an Authorization
with the Plan Administrator on or before the last day of such Offering
Period to purchase shares of Stock, and
(b) his or her employment as an Eligible Employee continues
throughout the period which begins on the first day of such Offering
Period and ends on the first day of the related Purchase Period.
A Participant's status as such shall terminate for a Purchase Period (for which
he or she has an effective Authorization) at such time as his or her Account has
been withdrawn under ss. 9, ss. 10, ss. 11, ss. 12 or ss. 13 or the purchases
and distributions contemplated under ss. 7 with respect to his or her Account
have been completed, whichever comes first.
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<PAGE>
ss. 5. Granting of Options
(a) General Rule. Subject to subsections (b) and (c) below,
each person who is a Participant for a Purchase Period automatically
shall be granted an option on the first day of such Purchase Period to
purchase at the Option Price a maximum number of whole shares of Stock
determined by dividing $25,000 by the Fair Market Value of a share of
Stock on the first day of such Purchase Period.
(b) Statutory Limitation. No option granted under this Plan to
any Eligible Employee shall permit his or her rights to purchase shares
of Stock under this Plan or under any other employee stock purchase
plan (within the meaning of ss. 423 of the Code) or any other shares of
Stock under any other employee stock purchase plans (within the meaning
of ss. 423 of the Code) of Georgia-Pacific and any of its subsidiaries
(within the meaning of ss. 424(f) of the Code) to accrue (within the
meaning of ss. 423(b)(8) of the Code) at a rate which exceeds $25,000
of the Fair Market Value of such Stock for any calendar year. Such Fair
Market Value shall be determined as of the first day of the Purchase
Period for which the option is granted.
(c) Available Shares of Stock. If the number of shares of
Stock available for purchase for any Purchase Period is insufficient to
cover the number of shares which Participants have elected to purchase
through effective Authorizations, then each Participant's option to
purchase shares of Stock for such Purchase Period shall be reduced to
the number of shares of Stock which the Plan Administrator shall
determine by multiplying the number of shares of Stock for which such
Participant would have been granted an option if sufficient shares were
available by a fraction, the numerator of which shall be the number of
shares of Stock available for options for such Purchase Period and the
denominator of which shall be the total number of shares of Stock for
which options would have been granted to all Participants if sufficient
shares were available.
ss. 6. Payroll Deductions
(a) Initial Authorization. Each Participant's Authorization
shall specify the specific dollar amount which he or she authorizes the
Company to deduct from his or her compensation each pay period
(determined in accordance with the Company's standard payroll policies
and practices) during the Purchase Period for which such Authorization
is in effect, provided
(1) the minimum amount deducted from a Participant's
compensation during each pay period in a Purchase Period shall
not be less than
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<PAGE>
$600 divided by the number of pay periods in the Purchase
Period; and
(2) the maximum amount deducted from a Participant's
compensation during each pay period shall not be more than the
lesser of (i) $22,500 (90% of the $25,000 maximum) divided by
the number of pay periods in the Purchase Period, (ii) such
lower amount which is set by the Plan Administrator before the
beginning of a Purchase Period, or (iii) such Participant's
net pay after all other withholdings.
(b) Subsequent Authorization. A Participant shall have the
right to make one amendment to an Authorization after the end of an
Offering Period to stop the payroll deductions which he or she
previously had authorized for the related Purchase Period, and such
amendment shall be effective with the next possible payroll period
(determined in accordance with the Company's payroll practices and
policies regarding cut-off dates for payroll changes) after the Plan
Administrator actually receives such amended Authorization.
(c) Account Credits, General Assets and Taxes. All payroll
deductions made for a Participant shall be credited to his or her
Account as of the pay day as of which the deduction is made. All
payroll deductions shall be held by the Company, by the Company's agent
(as determined by the Plan Administrator ) as part of the general
assets of the Company, and each Participant's right to the payroll
deductions credited to his or her Account shall be those of a general
and unsecured creditor. The Company or it's agent shall have the right
to withhold on payroll deductions to the extent such person deems
necessary or appropriate to satisfy applicable tax laws.
(d) No Cash Payments. Except as provided for in ss. 11 and ss.
12, a Participant (or beneficiary) may not make any contribution to his
or her Account except through payroll deductions made in accordance
with this ss. 6.
ss. 7. Exercise of Option
(a) General Rule. Unless a Participant files an amended
Authorization under ss. 9 on or before the Exercise Date for a Purchase
Period, his or her option shall be exercised automatically on such
Exercise Date for the purchase of as many whole shares of Stock subject
to such option as the balance credited to his or her Account as of that
date will purchase at the Option Price for such shares of Stock,
provided that he or she is an Eligible Employee on such Exercise Date.
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<PAGE>
(b) Automatic Refund. If a Participant's Account has a
remaining balance after his or her option has been exercised as of an
Exercise Date under this ss. 7, such balance automatically shall be
refunded to the Participant in cash (without interest) as soon as
practicable following such Exercise Date.
ss. 8. Delivery
A stock certificate representing all shares of Stock purchased upon the
exercise of an option under this Plan shall be held for the Participant by a
broker-dealer designated by the Plan Administrator or, at the Participant's
direction and expense, delivered to the Participant (or any person who makes a
claim through a Participant), and shall be registered in his or her name;
provided, however, Georgia-Pacific shall not have any obligation to deliver a
certificate to a Participant which represents a fractional share of Stock. No
Participant (or any person who makes a claim through a Participant) shall have
any interest in any shares of Stock subject to an option until such option has
been exercised and the related shares of Stock actually have been delivered to
such person or have been transferred to an account for such person at a
broker-dealer designated by the Plan Administrator. The Plan Administrator shall
have the discretion to satisfy Georgia-Pacific's obligations hereunder with
newly issued shares or shares previously issued and outstanding that have been
repurchased by Georgia-Pacific.
ss. 9. Voluntary Account Withdrawal
A Participant may elect to withdraw the entire balance credited to his
or her Account for a Purchase Period by completing and filing an amended
Authorization with the Plan Administrator before the Exercise Date for such
period. If a Participant makes such a withdrawal election, no further payroll
deductions shall be made on his or her behalf and such balance shall be paid to
him or her in cash (without interest) at the next possible payroll period
(determined in accordance with the Company's payroll practices and policies
regarding cut-off dates for payroll changes).
ss. 10. Termination of Employment
If a Participant's employment as an Eligible Employee terminates on or
before the Exercise Date for a Purchase Period for any reason whatsoever, his or
her Account shall (subject to ss. 11 and ss. 12) be distributed as if he or she
had elected to withdraw his or her Account in cash under ss. 9 immediately
before the date his or her employment had so terminated.
ss. 11. Retirement or Disability
If a Participant retires or becomes disabled within three months before
the Exercise Date for a Purchase Period, he or she may elect prior to such
Exercise Date
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<PAGE>
to (i) make a cash lump sum payment to his or her Account in an amount equal to
the unpaid balance under his or her Authorization as then in effect for such
Purchase Period, (ii) purchase at the end of the Purchase Period the number of
whole shares of Stock as the balance credited to the Participant's Account as of
that date will purchase at the Option Price for such shares of Stock, or (iii)
withdraw the entire balance credited to his or her Account for such Purchase
Period in accordance with ss. 9. In the event a Participant elects to make a
cash lump sum payment to his or her Account, his or her option shall be
exercised automatically on the Exercise Date for such Purchase Period for the
purchase of as many whole shares of Stock as the balance credited to his or her
Account as of that date will purchase at the Option Price for such shares of
Stock as if he or she is an Eligible Employee on such Exercise Date. In the
event a Participant fails to make a timely election under this ss. 11, his or
her Account shall be distributed as if he or she had elected to withdraw the
entire balance credited to his or her Account in cash under ss. 9 immediately
before the date he or she retired.
For purposes of this ss. 11, "retire" or "retirement" shall mean a
Participant's voluntary or involuntary termination with the Company and all of
its affiliates (within the meaning of Code ss. 1563(a), except that for such
affiliate determination, the phrase "at least 50%" shall be substituted for "at
least 80%" in Code ss. ss. 1563(a)(1) and (a)(2)(A)) at a time when he or she
has attained at least age 65 or attained at least age 55 and accrued 5 years of
service for vesting purposes under Georgia-Pacific's qualified benefit plans
covering him or her, provided that termination for "cause" as determined by the
Company shall not be considered retirement under this Plan.
For purposes of this ss. 11, a Participant's date of "disability" shall
be the last day of his or her short-term medical leave period under
Georgia-Pacific's policy providing paid medical leave for salaried employees who
are medically unable to work because of injury or illness (or the last day of a
period determined as if the Participant were a salaried employee entitled to
such short-term medical leave), and a Participant shall be deemed "disabled" at
such time only if the Participant would be "totally disabled" pursuant to the
standards set forth in the Georgia-Pacific Corporation Salaried Long-Term
Disability Plan whether or not he or she is covered under that plan.
ss. 12. Death
If a Participant's employment terminates due to his or her death before
the Exercise Date for a Purchase Period, his or her beneficiary may elect before
the Exercise Date to (i) make a cash lump sum payment to the Participant's
Account in an amount equal to the unpaid balance under the Participant's
Authorization as then in effect for such Purchase Period, (ii) purchase at the
end of the Purchase Period the number of whole shares of Stock as the balance
credited to the Participant's Account
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<PAGE>
as of that date will purchase at the Option Price for such shares of Stock, or
(iii) withdraw the entire balance credited to the Participant's Account for such
Purchase Period in accordance with ss. 9. In the event a Participant's
beneficiary elects to make a cash lump sum payment to the Participant's Account,
the Participant's option shall be exercised automatically on the Exercise Date
for such Purchase Period for the purchase of as many whole shares of Stock as
the balance credited to his or her Account as of that date will purchase at the
Option Price for such shares of Stock as if the Participant is an Eligible
Employee on such Exercise Date. In the event a beneficiary fails to make a
timely election under this ss. 12, the Participant's Account shall be
distributed as if the Participant had elected to withdraw his or her Account in
cash under ss. 9 immediately before the date he or she died.
ss. 13. Temporary Layoff and Authorized Leave of Absence
Any amounts being deducted from a Participant's compensation under his
or her Authorization for a Purchase Period shall be suspended during a period of
temporary layoff or authorized leave of absence without pay. If the Participant
returns to active service prior to the last payroll period in the Purchase
Period, his or her payroll deductions shall be commenced or resumed. The
Participant's option shall be exercised automatically on the Exercise Date for
such Purchase Period for the purchase of as many whole shares of Stock as the
balance credited to his or her Account as of that date will purchase at the
Option Price for such shares of Stock provided he or she is an Eligible Employee
on such Exercise Date.
For purposes of this Plan, a Participant on a temporary layoff or
authorized leave of absence shall be deemed to be terminated from his or her
employment with the Company if such layoff or leave exceeds a period of 90
consecutive days (unless the Participant's right to reemployment is guaranteed
either by statute or by contract). At the end of such 90 day period, such
Participant shall have his or her Account distributed as if he or she had
elected to withdraw his or her Account in cash under ss. 9 immediately before
the date his or her employment had so terminated.
ss. 14. Hardship Withdrawals From 401(k) Plans
If a Participant receives a hardship withdrawal pursuant to the
provisions of a qualified retirement plan subject to Code ss. 401(k), any
amounts being deducted from such Participant's compensation under his or her
Authorization shall be suspended for a period of twelve consecutive months
following such withdrawal. If such suspension is in effect on the last day of an
Offering Period, any Authorization filed by an Eligible Employee during such
Offering Period shall be null and void and of no effect.
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<PAGE>
ss. 15. Administration
The Plan Administrator shall be responsible for the administration of
this Plan and shall have the power to interpret this Plan and to take such other
action as the Plan Administrator deems necessary or equitable under the
circumstances. The Plan Administrator also shall have the power to delegate the
duty to perform such administrative functions as the Plan Administrator deems
appropriate under the circumstances. Any person to whom the duty to perform an
administrative function is delegated shall act on behalf of the Plan
Administrator for such function. Any action or inaction by or on behalf of the
Plan Administrator under this Plan shall be final and binding on each Eligible
Employee, each Participant and on each other person who makes a claim under this
Plan based on the rights, if any, of any such Eligible Employee or Participant
under this Plan.
ss. 16. Transferability
Neither the balance credited to a Participant's Account nor any rights
to the exercise of an option or to receive shares of Stock under this Plan may
be assigned, encumbered, alienated, transferred, pledged, or otherwise disposed
of in any way by a Participant during his or her lifetime or by any other person
during his or her lifetime, and any attempt to do so shall be without effect;
provided, however, that the Plan Administrator in its absolute discretion may
treat any such action as an election by a Participant to withdraw the balance
credited to his or her Account in accordance with ss. 9.
ss. 17. Adjustment
The number of shares of Stock covered by outstanding options granted
pursuant to this Plan and the related Option Price and the number of shares of
Stock available under this Plan automatically shall be adjusted by the Plan
Administrator in a manner to fully and fairly reflect any change in the
capitalization of Georgia-Pacific affecting the Stock, including, but not
limited to, such changes as dividends paid in the form of Stock or Stock splits.
Furthermore, the Plan Administrator automatically shall adjust (in a manner
which satisfies the requirements of ss. 424(a) of the Code) the number of shares
of Stock available under this Plan and the number of shares of Stock covered by
options granted under this Plan and the related Option Prices in the event of
any corporate transaction described in ss. 424(a) of the Code. An adjustment
made under this ss. 17 by the Plan Administrator shall be conclusive and binding
on all affected persons.
ss. 18. Securities Registration
If Georgia-Pacific shall deem it necessary to register under the
Securities Act of 1933, as amended, or any other applicable statutes, any shares
of Stock with respect
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<PAGE>
to which an option shall have been exercised under this Plan or to qualify any
such shares of Stock for an exemption from any such statutes, Georgia-Pacific
shall take such action at its own expense before delivery of any certificate
representing such shares of Stock. If shares of Stock are listed on any national
stock exchange at the time an option to purchase shares of Stock is exercised
under this Plan, Georgia-Pacific whenever required shall register shares of
Stock for which such option is exercised under the Securities Exchange Act of
1934, as amended, and shall make prompt application for the listing on such
national stock exchange of such shares, all at the expense of Georgia-Pacific.
ss. 19. Amendment or Termination
This Plan may be amended by the Plan Administrator from time to time to
the extent that the Plan Administrator deems necessary or appropriate in light
of, and consistent with, ss. 423 of the Code and the laws of the State of
Georgia, and any such amendment shall be subject to the approval of
Georgia-Pacific's shareholders to the extent such approval is required under ss.
423 of the Code or the laws of the State of Georgia. The Plan Administrator also
may terminate this Plan or any offering made under this Plan at any time;
provided, however, the Plan Administrator shall not have the right to modify,
cancel, or amend any option outstanding after the beginning of a Purchase Period
unless (1) each Participant consents in writing to such modification, amendment
or cancellation, (2) such modification only accelerates the Exercise Date for
the related Purchase Period, or (3) the Plan Administrator acting in good faith
deems that such action is required under applicable law.
ss. 20. Notices
All Authorizations and other communications from a Participant to the
Plan Administrator under, or in connection with, this Plan shall be deemed to
have been filed with the Plan Administrator when actually received in the form
specified by the Plan Administrator at the location, or by the person,
designated by the Plan Administrator for the receipt of such Authorizations and
communications.
ss. 21. Employment
No offer under this Plan shall constitute an offer of employment, and
no acceptance of an offer under this Plan shall constitute an employment
agreement. Any such offer or acceptance shall have no bearing whatsoever on the
employment relationship between any Eligible Employee and the Company,
Georgia-Pacific or any subsidiary of Georgia-Pacific. Finally, no Eligible
Employee shall be induced to participate in this Plan by the expectation of
employment or continued employment.
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<PAGE>
ss. 22. Headings, References and Construction
The headings to sections in this Plan have been included for
convenience of reference only. Except as otherwise expressly indicated, all
references to sections (ss.) in this Plan shall be to sections (ss.) of this
Plan. This Plan shall be interpreted and construed in accordance with the laws
of the State of Georgia.
ss. 23. Shareholder Approval
The Plan is subject to the approval by the holders of the majority of
the outstanding shares of Stock within 12 months before or after the date of
adoption of the Plan by the Board. The Plan shall be null and void and of no
effect if the foregoing condition is not fulfilled.
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EXHIBIT 10.23
GEORGIA-PACIFIC TISSUE, LLC
2000 EMPLOYEE STOCK PURCHASE PLAN
<PAGE>
GEORGIA-PACIFIC TISSUE
2000 EMPLOYEE STOCK PURCHASE PLAN
TABLE OF CONTENTS
Section Page
- ------- ----
ss. 1. Purpose............................................................ 1
ss. 2. Definitions........................................................ 1
2.1. Account................................................... 1
2.2. Authorization............................................. 1
2.3. Board..................................................... 1
2.4. Code...................................................... 1
2.5. Eligible Employee......................................... 1
2.6. Exercise Date............................................. 2
2.7. Fair Market Value......................................... 2
2.8. Georgia-Pacific........................................... 2
2.9. Offering Period........................................... 2
2.10. Option Price.............................................. 2
2.11. Participant............................................... 2
2.12. Participating Company..................................... 2
2.13. Plan...................................................... 2
2.14. Plan Administrator........................................ 2
2.15. Purchase Period........................................... 3
2.16. Stock..................................................... 3
ss. 3. Offerings.......................................................... 3
ss. 4. Participation...................................................... 3
ss. 5. Granting of Options................................................ 4
(a) General Rule.............................................. 4
(b) Statutory Limitation...................................... 4
(c) Available Shares of Stock................................. 4
ss. 6. Payroll Deductions................................................. 4
(a) Initial Authorization..................................... 4
(b) Subsequent Authorization.................................. 5
(c) Account Credits, General Assets and Taxes................. 5
(d) No Cash Payments.......................................... 5
ss. 7. Exercise of Option................................................. 6
(a) General Rule.............................................. 6
(c) Automatic Refund.......................................... 6
ss. 8. Delivery........................................................... 6
ss. 9. Voluntary Account Withdrawal....................................... 6
ss. 10. Termination of Employment.......................................... 7
ss. 11. Retirement or Disability........................................... 7
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ss. 12. Death........................................................ 8
ss. 13. Temporary Layoff and Authorized Leave of Absence............. 8
ss. 14. Hardship Withdrawals From 401(k) Plans....................... 9
ss. 15. Administration............................................... 9
ss. 16. Transferability.............................................. 9
ss. 17. Adjustment................................................... 9
ss. 18. Securities Registration...................................... 10
ss. 19. Amendment or Termination..................................... 10
ss. 20. Notices...................................................... 11
ss. 21. Employment................................................... 11
ss. 22. Headings, References and Construction........................ 11
ss. 23. Shareholder Approval......................................... 11
ii
<PAGE>
GEORGIA-PACIFIC TISSUE
2000 EMPLOYEE STOCK PURCHASE PLAN
ss. 1. PURPOSE
-------
The primary purpose of this Plan is to encourage Stock ownership by each
Eligible Employee of a Participating Company by permitting the purchase of Stock
on a discounted basis. The Plan is not intended to constitute an "employee stock
purchase plan" within the meaning of ss. 423 of the Code.
ss. 2. DEFINITIONS
-----------
2.1. Account shall mean the separate bookkeeping account which shall be
established and maintained by the Plan Administrator for each Participant for
each Purchase Period to record the payroll deductions made on his or her behalf
to purchase Stock under this Plan.
2.2. Authorization shall mean the participation election and payroll
deduction authorization form which an Eligible Employee shall be required to
properly complete in writing (or in any other form acceptable to the Plan
Administrator) and timely file with the Plan Administrator before the end of an
Offering Period in order to participate in this Plan for the related Purchase
Period and which shall require an Eligible Employee to provide such information
and to take such action as the Plan Administrator in his or her discretion deems
necessary or helpful to the orderly administration of this Plan.
2.3. Board shall mean the Board of Directors of Georgia-Pacific.
2.4. Code shall mean the Internal Revenue Code of 1986, as amended.
2.5. Eligible Employee shall mean each employee of a Participating
Company except:
(a) an employee who customarily is employed (within the meaning of
Code ss. 423(b)(4)(B)) 20 hours or less per week by the Participating
Company,
(b) an employee who customarily is employed (within the meaning of
Code ss. 423(b)(4)(C)) for not more than 5 months in any calendar year by
the Participating Company,
(c) an employee who would own (immediately after the grant of an
option under this Plan) stock possessing 5% or more of the total combined
voting power or value of all classes of stock of Georgia-Pacific based on
the rules set forth in ss. 423(b)(3) and ss. 424 of the Code; and
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(d) an employee who is an officer of a Participating Company.
2.6. Exercise Date shall mean for each Purchase Period the last day of
such Purchase Period.
2.7. Fair Market Value shall mean, as of any date, the mean between the
high and low sales prices of a share of Stock on that date as reported in the
record of Composite Transactions for New York Stock Exchange listed securities
and printed in The Wall Street Journal or in any successor to The Wall Street
Journal or, if there is no such successor, any similar publication selected by
the Plan Administrator. If the date of determination is not a trading date on
the New York Stock Exchange, Fair Market Value shall be determined using the
high and low sales prices of a share of Stock on the next preceding trading
date. The Fair Market Value shall be rounded to the nearest whole cent (with 0.5
cent being rounded to the next higher whole cent).
2.8. Georgia-Pacific shall mean Georgia-Pacific Corporation, a
corporation incorporated under the laws of the State of Georgia, and any
successor to Georgia-Pacific.
2.9. Offering Period shall mean, with respect to the initial Offering
Period, the period beginning on May 8, 2000 and ending on June 5, 2000 and, with
respect to each subsequent Offering Period, the period beginning on the date
determined by the Plan Administrator which precedes the related Purchase Period
and which shall continue for no more than 31 days.
2.10. Option Price shall mean for each Purchase Period the lesser of (i)
90% of the Fair Market Value for a share of Stock on the first day of such
Purchase Period, or (ii) 90% of the Fair Market Value for a share of Stock on
the last day of such Purchase Period.
2.11. Participant shall mean for each Purchase Period an Eligible
Employee who has satisfied the requirements set forth in ss. 4 of this Plan for
such Purchase Period.
2.12. Participating Company shall for each Participant, as of any date,
mean Georgia-Pacific Tissue, LLC or Wisconsin Tissue Management, LLC, whichever
employs such Participant as of such date.
2.13. Plan shall mean this Georgia-Pacific Tissue 2000 Employee Stock
Purchase Plan, as amended from time to time.
2.14. Plan Administrator shall mean the Senior Vice President - Human
Resources of Georgia-Pacific or his or her delegate.
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<PAGE>
2.15. Purchase Period shall mean, with respect to the initial Purchase
Period, the 12 month period beginning on July 1, 2000 and, with respect to each
subsequent Purchase Period, the 12 month period beginning on the date determined
by the Plan Administrator, which date shall be the first day of the second
calendar month which immediately follows the end of the related Offering Period.
2.16. Stock shall mean Georgia-Pacific Corporation - Georgia-Pacific
Group Common Stock.
ss. 3. OFFERINGS
---------
Options to purchase shares of Stock shall be offered to Participants in
accordance with this Plan during three Offering Periods; provided, however,
there shall be no more than one Offering Period in effect at any time and no
more than one Purchase Period in effect at any time. There shall be a total of
450,000 shares of Stock available under this Plan, 150,000 of which shall be
available with respect to the initial Offering Period and no less than 150,000
of which shall be available with respect to each of the remaining two Offering
Periods. Such shares of Stock shall be available for purchase from
Georgia-Pacific upon the exercise of such options, and any shares of Stock which
are subject to options granted as of the first day of a Purchase Period but
which are not purchased on the related Exercise Date shall again become
available under this Plan.
ss. 4. PARTICIPATION
-------------
Each person who is an Eligible Employee on the first day of an Offering
Period shall satisfy the requirements to be a Participant in this Plan for the
related Purchase Period if
(a) he or she properly completes and files an Authorization with the
Plan Administrator on or before the last day of such Offering Period to
purchase shares of Stock, and
(b) his or her employment as an Eligible Employee continues
throughout the period which begins on the first day of such Offering
Period and ends on the first day of the related Purchase Period (for this
purpose, employment as an Eligible Employee shall not be treated as
interrupted by a transfer directly between one Participating Company and
another Participating Company).
A Participant's status as such shall terminate for a Purchase Period (for which
he or she has an effective Authorization) at such time as his or her Account has
been withdrawn under ss. 9, ss. 10, ss. 11, ss. 12 or ss. 13 or the purchases
and distributions
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<PAGE>
contemplated under ss. 7 with respect to his or her Account have been completed,
whichever comes first.
ss. 5. GRANTING OF OPTIONS
-------------------
(a) General Rule. Subject to subsections (b) and (c) below, each
person who is a Participant for a Purchase Period automatically shall be
granted an option on the first day of such Purchase Period to purchase at
the Option Price a maximum number of whole shares of Stock determined by
dividing $25,000 by the Fair Market Value of a share of Stock on the
first day of such Purchase Period.
(b) Statutory Limitation. No option granted under this Plan to any
Eligible Employee shall permit his or her rights to purchase shares of
Stock under this Plan or under any other employee stock purchase plan
(within the meaning of ss. 423 of the Code) or any other shares of Stock
under any other employee stock purchase plans (within the meaning of ss.
423 of the Code) of Georgia-Pacific and any of its subsidiaries (within
the meaning of ss. 424(f) of the Code) to accrue (within the meaning of
ss. 423(b)(8) of the Code) at a rate which exceeds $25,000 of the Fair
Market Value of such Stock for any calendar year. Such Fair Market Value
shall be determined as of the first day of the Purchase Period for which
the option is granted.
(c) Available Shares of Stock. If the number of shares of Stock
available for purchase for any Purchase Period is insufficient to cover
the number of shares which Participants have elected to purchase through
effective Authorizations, then each Participant's option to purchase
shares of Stock for such Purchase Period shall be reduced to the number
of shares of Stock which the Plan Administrator shall determine by
multiplying the number of shares of Stock for which such Participant
would have been granted an option if sufficient shares were available by
a fraction, the numerator of which shall be the number of shares of Stock
available for options for such Purchase Period and the denominator of
which shall be the total number of shares of Stock for which options
would have been granted to all Participants if sufficient shares were
available.
ss. 6. PAYROLL DEDUCTIONS
------------------
(a) Initial Authorization. Each Participant's Authorization shall
specify the specific dollar amount which he or she authorizes the
Participating Company to deduct from his or her compensation each pay
period (determined in accordance with the Participating Company's
standard payroll policies and practices) during the Purchase Period for
which such Authorization is in effect, provided
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<PAGE>
(1) the minimum amount deducted from a Participant's compensation
during each pay period in a Purchase Period shall not be less
than $600 divided by the number of pay periods in the Purchase
Period; and
(2) the maximum amount deducted from a Participant's compensation
during each pay period shall not be more than the lesser of
(i) $22,500 (90% of the $25,000 maximum) divided by the number
of pay periods in the Purchase Period, (ii) such lower amount
which is set by the Plan Administrator before the beginning of
a Purchase Period, or (iii) such Participant's net pay after
all other withholdings.
(b) Subsequent Authorization. A Participant shall have the right to
make one amendment to an Authorization after the end of an Offering
Period to stop the payroll deductions which he or she previously had
authorized for the related Purchase Period, and such amendment shall be
effective with the next possible payroll period (determined in accordance
with the Participating Company's payroll practices and policies regarding
cut-off dates for payroll changes) after the Plan Administrator actually
receives such amended Authorization.
(c) Account Credits, General Assets and Taxes. All payroll
deductions made for a Participant shall be credited to his or her Account
as of the pay day as of which the deduction is made. All payroll
deductions shall be held by the Participating Company, by the
Participating Company's agent (as determined by the Plan Administrator )
as part of the general assets of the Participating Company, and each
Participant's right to the payroll deductions credited to his or her
Account shall be those of a general and unsecured creditor. The
Participating Company or it's agent shall have the right to withhold on
payroll deductions to the extent such person deems necessary or
appropriate to satisfy applicable tax laws.
(d) No Cash Payments. Except as provided for in ss. 11 and ss. 12, a
Participant (or beneficiary) may not make any contribution to his or her
Account except through payroll deductions made in accordance with this
ss. 6.
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<PAGE>
ss. 7. EXERCISE OF OPTION
------------------
(a) General Rule. Unless a Participant files an amended
Authorization under ss. 9 on or before the Exercise Date for a Purchase
Period, his or her option shall be exercised automatically on such
Exercise Date for the purchase of as many whole shares of Stock subject
to such option as the balance credited to his or her Account as of that
date will purchase at the Option Price for such shares of Stock, provided
that he or she is an Eligible Employee on such Exercise Date.
(b) Automatic Refund. If a Participant's Account has a remaining
balance after his or her option has been exercised as of an Exercise Date
under this ss. 7, such balance automatically shall be refunded to the
Participant in cash (without interest) as soon as practicable following
such Exercise Date.
ss. 8. DELIVERY
--------
A stock certificate representing all shares of Stock purchased upon the
exercise of an option under this Plan shall be held for the Participant by a
broker-dealer designated by the Plan Administrator or, at the Participant's
direction and expense, delivered to the Participant (or any person who makes a
claim through a Participant), and shall be registered in his or her name;
provided, however, Georgia-Pacific shall not have any obligation to deliver a
certificate to a Participant which represents a fractional share of Stock. No
Participant (or any person who makes a claim through a Participant) shall have
any interest in any shares of Stock subject to an option until such option has
been exercised and the related shares of Stock actually have been delivered to
such person or have been transferred to an account for such person at a
broker-dealer designated by the Plan Administrator. The Plan Administrator shall
have the discretion to satisfy Georgia-Pacific's obligations hereunder with
newly issued shares or shares previously issued and outstanding that have been
repurchased by Georgia-Pacific.
ss. 9. Voluntary Account Withdrawal
----------------------------
A Participant may elect to withdraw the entire balance credited to his or
her Account for a Purchase Period by completing and filing an amended
Authorization with the Plan Administrator before the Exercise Date for such
period. If a Participant makes such a withdrawal election, no further payroll
deductions shall be made on his or her behalf and such balance shall be paid to
him or her in cash (without interest) at the next possible payroll period
(determined in accordance with the Participating Company's payroll practices and
policies regarding cut-off dates for payroll changes).
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<PAGE>
ss. 10. TERMINATION OF EMPLOYMENT
-------------------------
If a Participant's employment as an Eligible Employee terminates on or
before the Exercise Date for a Purchase Period for any reason whatsoever, his or
her Account shall (subject to ss. 11 and ss. 12) be distributed as if he or she
had elected to withdraw his or her Account in cash under ss. 9 immediately
before the date his or her employment had so terminated. However, if a
Participant is transferred directly between one Participating Company and
another Participating Company while he or she has an Authorization in effect,
his or her employment shall not be treated as terminated merely by reason of
such transfer and any such Authorization shall (subject to all the terms and
conditions of this Plan) remain in effect after such transfer for the remainder
of the Purchase Period.
ss. 11. RETIREMENT OR DISABILITY
------------------------
If a Participant retires or becomes disabled within three months before
the Exercise Date for a Purchase Period, he or she may elect prior to such
Exercise Date to (i) make a cash lump sum payment to his or her Account in an
amount equal to the unpaid balance under his or her Authorization as then in
effect for such Purchase Period, (ii) purchase at the end of the Purchase Period
the number of whole shares of Stock as the balance credited to the Participant's
Account as of that date will purchase at the Option Price for such shares of
Stock, or (iii) withdraw the entire balance credited to his or her Account for
such Purchase Period in accordance with ss. 9. In the event a Participant elects
to make a cash lump sum payment to his or her Account, his or her option shall
be exercised automatically on the Exercise Date for such Purchase Period for the
purchase of as many whole shares of Stock as the balance credited to his or her
Account as of that date will purchase at the Option Price for such shares of
Stock as if he or she is an Eligible Employee on such Exercise Date. In the
event a Participant fails to make a timely election under this ss. 11, his or
her Account shall be distributed as if he or she had elected to withdraw the
entire balance credited to his or her Account in cash under ss. 9 immediately
before the date he or she retired.
For purposes of this ss. 11, "retire" or "retirement" shall mean a
Participant's voluntary or involuntary termination with the Participating
Company and all of its affiliates (within the meaning of Code ss. 1563(a),
except that for such affiliate determination, the phrase "at least 50%" shall be
substituted for "at least 80%" in Code ss. ss. 1563(a)(1) and (a)(2)(A)) at a
time when he or she has attained at least age 65 or attained at least age 55 and
accrued 5 years of service for vesting purposes under the Participating
Company's qualified benefit plans covering him or her, provided that termination
for "cause" as determined by the Participating Company shall not be considered
retirement under this Plan.
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For purposes of this ss. 11, a Participant's date of "disability" shall
be the last day of his or her short-term medical leave period under
Georgia-Pacific's policy providing paid medical leave for salaried employees who
are medically unable to work because of injury or illness (or the last day of a
period determined as if the Participant were a salaried employee entitled to
such short-term medical leave), and a Participant shall be deemed "disabled" at
such time only if the Participant would be "totally disabled" pursuant to the
standards set forth in the Georgia-Pacific Corporation Salaried Long-Term
Disability Plan whether or not he or she is covered under that plan.
ss. 12. DEATH
-----
If a Participant's employment terminates due to his or her death before
the Exercise Date for a Purchase Period, his or her beneficiary may elect before
the Exercise Date to (i) make a cash lump sum payment to the Participant's
Account in an amount equal to the unpaid balance under the Participant's
Authorization as then in effect for such Purchase Period, (ii) purchase at the
end of the Purchase Period the number of whole shares of Stock as the balance
credited to the Participant's Account as of that date will purchase at the
Option Price for such shares of Stock, or (iii) withdraw the entire balance
credited to the Participant's Account for such Purchase Period in accordance
with ss. 9. In the event a Participant's beneficiary elects to make a cash lump
sum payment to the Participant's Account, the Participant's option shall be
exercised automatically on the Exercise Date for such Purchase Period for the
purchase of as many whole shares of Stock as the balance credited to his or her
Account as of that date will purchase at the Option Price for such shares of
Stock as if the Participant is an Eligible Employee on such Exercise Date. In
the event a beneficiary fails to make a timely election under this ss. 12, the
Participant's Account shall be distributed as if the Participant had elected to
withdraw his or her Account in cash under ss. 9 immediately before the date he
or she died.
ss. 13. TEMPORARY LAYOFF AND AUTHORIZED LEAVE OF ABSENCE
------------------------------------------------
Any amounts being deducted from a Participant's compensation under his
or her Authorization for a Purchase Period shall be suspended during a period of
temporary layoff or authorized leave of absence without pay. If the Participant
returns to active service prior to the last payroll period in the Purchase
Period, his or her payroll deductions shall be commenced or resumed. The
Participant's option shall be exercised automatically on the Exercise Date for
such Purchase Period for the purchase of as many whole shares of Stock as the
balance credited to his or her Account as of that date will purchase at the
Option Price for such shares of Stock provided he or she is an Eligible Employee
on such Exercise Date.
For purposes of this Plan, a Participant on a temporary layoff or
authorized leave of absence shall be deemed to be terminated from his or her
employment with
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<PAGE>
the Participating Company if such layoff or leave exceeds a period of 90
consecutive days (unless the Participant's right to reemployment is guaranteed
either by statute or by contract). At the end of such 90 day period, such
Participant shall have his or her Account distributed as if he or she had
elected to withdraw his or her Account in cash under ss. 9 immediately before
the date his or her employment had so terminated.
ss. 14. HARDSHIP WITHDRAWALS FROM 401(K) PLANS
--------------------------------------
If a Participant receives a hardship withdrawal pursuant to the
provisions of a qualified retirement plan subject to Code ss. 401(k), any
amounts being deducted from such Participant's compensation under his or her
Authorization shall be suspended for a period of twelve consecutive months
following such withdrawal. If such suspension is in effect on the last day of an
Offering Period, any Authorization filed by an Eligible Employee during such
Offering Period shall be null and void and of no effect.
ss. 15. ADMINISTRATION
--------------
The Plan Administrator shall be responsible for the administration of
this Plan and shall have the power to interpret this Plan and to take such other
action as the Plan Administrator deems necessary or equitable under the
circumstances. The Plan Administrator also shall have the power to delegate the
duty to perform such administrative functions as the Plan Administrator deems
appropriate under the circumstances. Any person to whom the duty to perform an
administrative function is delegated shall act on behalf of the Plan
Administrator for such function. Any action or inaction by or on behalf of the
Plan Administrator under this Plan shall be final and binding on each Eligible
Employee, each Participant and on each other person who makes a claim under this
Plan based on the rights, if any, of any such Eligible Employee or Participant
under this Plan.
ss. 16. TRANSFERABILITY
---------------
Neither the balance credited to a Participant's Account nor any rights
to the exercise of an option or to receive shares of Stock under this Plan may
be assigned, encumbered, alienated, transferred, pledged, or otherwise disposed
of in any way by a Participant during his or her lifetime or by any other person
during his or her lifetime, and any attempt to do so shall be without effect;
provided, however, that the Plan Administrator in its absolute discretion may
treat any such action as an election by a Participant to withdraw the balance
credited to his or her Account in accordance with ss. 9.
ss. 17. ADJUSTMENT
----------
The number of shares of Stock covered by outstanding options granted
pursuant to this Plan and the related Option Price and the number of shares of
Stock available
-9-
<PAGE>
under this Plan automatically shall be adjusted by the Plan Administrator in a
manner to fully and fairly reflect any change in the capitalization of
Georgia-Pacific, including, but not limited to, such changes as dividends paid
in the form of Stock or Stock splits. Furthermore, the Plan Administrator
automatically shall adjust (in a manner which satisfies the requirements of ss.
424(a) of the Code) the number of shares of Stock available under this Plan and
the number of shares of Stock covered by options granted under this Plan and the
related Option Prices in the event of any corporate transaction described in ss.
424(a) of the Code. An adjustment made under this ss. 17 by the Plan
Administrator shall be conclusive and binding on all affected persons.
ss. 18. SECURITIES REGISTRATION
-----------------------
If Georgia-Pacific shall deem it necessary to register under the
Securities Act of 1933, as amended, or any other applicable statutes, any shares
of Stock with respect to which an option shall have been exercised under this
Plan or to qualify any such shares of Stock for an exemption from any such
statutes, Georgia-Pacific shall take such action at its own expense before
delivery of any certificate representing such shares of Stock. If shares of
Stock are listed on any national stock exchange at the time an option to
purchase shares of Stock is exercised under this Plan, Georgia-Pacific whenever
required shall register shares of Stock for which such option is exercised under
the Securities Exchange Act of 1934, as amended, and shall make prompt
application for the listing on such national stock exchange of such shares, all
at the expense of Georgia-Pacific.
ss. 19. AMENDMENT OR TERMINATION
------------------------
This Plan may be amended by the Plan Administrator from time to time to
the extent that the Plan Administrator deems necessary or appropriate. The Plan
Administrator also may terminate this Plan or any offering made under this Plan
at any time; provided, however, the Plan Administrator shall not have the right
to modify, cancel, or amend any option outstanding after the beginning of a
Purchase Period unless (1) each Participant consents in writing to such
modification, amendment or cancellation, (2) such modification only accelerates
the Exercise Date for the related Purchase Period, or (3) the Plan Administrator
acting in good faith deems that such action is required under applicable law.
-10-
<PAGE>
ss. 20. NOTICES
-------
All Authorizations and other communications from a Participant to the
Plan Administrator under, or in connection with, this Plan shall be deemed to
have been filed with the Plan Administrator when actually received in the form
specified by the Plan Administrator at the location, or by the person,
designated by the Plan Administrator for the receipt of such Authorizations and
communications.
ss. 21. EMPLOYMENT
----------
No offer under this Plan shall constitute an offer of employment, and
no acceptance of an offer under this Plan shall constitute an employment
agreement. Any such offer or acceptance shall have no bearing whatsoever on the
employment relationship between any Eligible Employee and the Participating
Company, Georgia-Pacific or any subsidiary of Georgia-Pacific. Finally, no
Eligible Employee shall be induced to participate in this Plan by the
expectation of employment or continued employment.
ss. 22. HEADINGS, REFERENCES AND CONSTRUCTION
-------------------------------------
The headings to sections in this Plan have been included for
convenience of reference only. Except as otherwise expressly indicated, all
references to sections (ss.) in this Plan shall be to sections (ss.) of this
Plan. This Plan shall be interpreted and construed in accordance with the laws
of the State of Georgia.
ss. 23. SHAREHOLDER APPROVAL
--------------------
The Plan is not subject to shareholder approval. However, the Plan
shall be null and void and of no effect if the holders of the majority of the
outstanding shares of Stock do not approve the Georgia-Pacific Group 2000
Employee Stock Purchase Plan and The Timber Company 2000 Employee Stock Purchase
Plan within 12 months before or after the date of the adoption of such plans by
the Board.
-11-
EXHIBIT 12
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
STATEMENTS OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
(In millions)
For the year ended
-----------------------------------
January 1, December 31,
----------- -------------------
2000 1998 1997
----- ----- -----
Fixed charges:
Total interest expense $ 501 $ 451 $ 477
One-third of rent expense 39 25 25
------ ------ ------
Total fixed charges 540 476 502
------ ------ ------
Add (deduct):
Income before income taxes,
extraordinary item and
accounting change 1,821 491 235
Interest capitalized 10 7 6
------ ------ ------
1,831 498 241
------ ------ ------
Earnings for fixed charges $2,371 $ 974 $ 743
====== ====== ======
Ratio of earnings to fixed charges 4.39x 2.05x 1.48x
====== ====== ======
EXHIBIT 13.1
HIGHLIGHTS
GEORGIA-PACIFIC CORPORATION -GEORGIA-PACIFIC GROUP
<TABLE>
<CAPTION>
Year ended
January 1, December 31,
2000 1998
(In millions, except shares, and per share amounts) ----------------------------------------------------
<S> <C> <C>
Net sales $ 17,796 $ 13,229
Income before extraordinary items 716 111
Basic income per share before extraordinary items 4.17 0.62
Cash provided by operations 1,439 1,686
Property, plant and equipment investments 721 632
Cash dividends paid 86 90
Total assets at year end 15,380 11,538
Total debt at year end 6,054* 4,568
Total debt to capital at year end, book basis 44.9% 44.5%
Total debt to capital at year end, market basis 40.9% 47.4%
- -------------------------------------------------------------------------------------------------------------------------
Cash dividends paid per share of common stock $ 0.50 $ 0.50
Market price per share of common stock at year end $ 50.75 $ 29.28
Shares of common stock outstanding at year end 172.2 173.0
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Debt excludes senior deferrable notes of $863 million.
GEORGIA-PACIFIC CORPORATION - GEORGIA-PACIFIC GROUP
LETTER TO SHAREHOLDERS
For Georgia-Pacific, 1999 was less the end of a century than it was a beginning.
While most of the world was celebrating the end of the 20th century, your
company was looking forward to years of much-improved business conditions.
Indeed, 1999 proved to be a good year in financial performance ($4.07 per share
earnings), and a great year in share appreciation as our shares grew in value by
73 percent. More important, however, is our view that 1999 launched a period of
improving prosperity. Why do we believe this, given the checkered history of the
last 10 years?
For one thing, the fundamentals of supply and demand in our commodity paper
businesses are better than they have been for a long time. Pulp and paper supply
will be increasingly tight for at least the next 24 months, and our building
products business has become a much more stable generator of earnings and cash.
The difficulties of the past decade have helped us develop our core beliefs
about our industry and our company. These insights will allow us to generate
more value going forward. We are convinced that we must:
- - Minimize capital spending on new plant and equipment
- - Drive our real dollar cost down every year
- - Invest in value-adding acquisitions - with caution and discipline
- - Generate excess cash in all markets
- - Distribute excess cash to our shareholders
- - Use compensation and accountability standards driven by EVA
We continue to believe that our industry generates more cash than it can
profitably reinvest. To that end, we paid out $343 million in the form of
dividends and share repurchases in 1999, following 1998's $526 million payout.
In order to distribute discretionary cash consistently, we must keep a very
tight rein on capital spending. Our maintenance expenditures and the growth
capital in gypsum and tissue
<PAGE>
totaled $721 million in 1999. The regulation-driven environmental component of
that spending totaled $147 million last year and is estimated to be $260 million
in 2000. Total capital requirements for 2000 will be approximately equal to
depreciation.
We completed two significant acquisitions in 1999. The purchase of Unisource
provides substantial cost reduction synergies, some of which already are evident
in our results; it also offers vertical integration in the paper merchant and
supplies businesses. The Wisconsin Tissue venture also provides cost savings,
margin improvement and a perfect geographic fit for Georgia-Pacific. Wisconsin
Tissue's secondary fiber-based strategy fits well with our virgin fiber-based
system. We are now a major player in both the away-from-home and the consumer
tissue markets. Since 1993, when we implemented new tissue marketing and
manufacturing strategies, our consumer brand case volume has grown at an 8
percent annual rate, well above the market growth rate of 2 to 3 percent. Our
commercial business has grown case volume at 5 percent annually over the same
period. Our growth and financial success in this business results from highly
efficient, integrated mills and a no-frills marketing strategy that has captured
a growing share of the value-brand shelf space. While we are building a new
tissue machine at Port Hudson, La., to replace a dismantled pulp dryer, we have
canceled a machine planned by Wisconsin Tissue with about the same anticipated
capacity, resulting in no net change in projected capacity going forward.
We continue to refine our new approach to running our pulp and paper mills -
running to demand and our Mill Improvement Process (MIP). These two concepts
have become part of our culture without much fanfare - but they are truly
revolutionary concepts for us, given our historic modus operandi of depending on
our low cash cost to force others to take downtime when prices fell. Running to
demand requires adhering to strict inventory targets which, when exceeded,
triggers mill downtime or - another nuance to this strategy - machine
"slowback." Slowing a paper machine defies the industry's conventional wisdom
that the last ton of production is the most profitable. When analyzing marginal
cost, we found just the opposite to be true. The marginal ton of linerboard
produced, for example, usually required higher-cost wood fiber (due to longer
hauls) and expensive purchased energy.
Traditionally, paper producers have lowered unit costs by building new machines
or rebuilding old ones, both of which require heroic amounts of "other people's
money." The MIP analyzes how to lower unit cost with little or no capital.
Through 1999, we have identified cost reductions and quality improvements worth
$320 million while adding 1,000 tons per day to our mill capacity. The MIP began
in response to our implementation of EVA as our success measure in 1994. We
needed to follow a formal process for mill improvement that would reduce costs
and improve efficiency with minimal capital, thereby improving EVA. In 1999, we
achieved $120 million in sustainable savings while identifying $154 million in
new ideas. Our rate of improvement is accelerating as the MIP becomes embedded
in the way we operate. A good example of this process in action is our Leaf
River, Miss., pulp mill. Since 1995, production costs per ton have fallen 11
percent. During the same period, reinvestment was only 30 percent of
depreciation - including 1998 when we spent no capital!
The improvement in our building products businesses is no less impressive. We
have adopted the same two themes of cost reduction and inventory control. An
added dimension of improvement is the return to growth and profitability of our
building products distribution business. In 1999, sales grew $500 million to
$4.9 billion and profits improved to $63 million, reestablishing Georgia-Pacific
as the premier distributor in the industry. Combining that sales engine with our
new position as the largest seller of Southern pine treated lumber has ensured
captive outlets for many of our products.
A good example of our cost reduction in building products is the Grenada, Miss.,
oriented strand board plant. Costs in 1999 dropped 14 percent, after a drop
almost as large in 1998. This reduction took capital, but the facility is now
poised to profit from a low-capital strategy.
These cost reductions follow on the heels of our large cuts in overhead in 1997
to 1999. This focused effort eliminated approximately $300 million annually of
sales, general and administrative expense.
Our gypsum business had unbelievably good markets in 1999, but the best news is
that the business took advantage of the market opportunity when it was
presented. Production was up over 1998 and
<PAGE>
costs were down. As market demand slowed late in the year, we reduced volume to
meet this decline. We started up our new synthetic gypsum plant in Wheatfield,
Ind., but have announced the closure of an old plant in Grand Rapids, Mich. This
slowdown and closure shows again our commitment to inventory control.
Georgia-Pacific was once again the safest forest products company in the United
States last year. Our OSHA incidence rate was 25 percent better than the company
in second place. We are constantly asked why safety is so important at
Georgia-Pacific. The answer is simple: Safety is the best indicator we know for
operating management skills. As safety improves, cost improves along with
productivity. We believe safety leadership is the best indicator of our
productivity and cost leadership.
Why am I so optimistic as we head across the millennial dateline? In the decade
ahead, I see improving supply/demand fundamentals in our pulp and paper
businesses. I see improving performance from our building products business
operations consistent with an increasingly productive, resilient and diversified
economy. I see continued consolidation in our industry, which should reward
efficient companies that use capital wisely. Finally, I see a new
results-oriented performance ethic at Georgia-Pacific that will ensure that we
outperform regardless of market conditions.
Our strategy remains consistent with our long-stated goal of generating free
cash flow, even in poor market conditions. And we are doing things differently,
as I have outlined above. For those of you who are already on board, we thank
you for your support. If you are not yet on board, I invite you to take a long
look at this document and then join us - because our train is leaving the
station!
GEORGIA-PACIFIC CORPORATION - GEORGIA-PACIFIC GROUP
OPERATING AND FINANCIAL STRATEGY
THE ULTIMATE MEASURE OF OUR SUCCESS IS THE CREATION OF WEALTH FOR OUR INVESTORS.
The Georgia-Pacific Group continues to believe that the key to creating
long-term shareholder wealth is maximizing discretionary cash flow and
reinvesting that cash flow in positive net present value opportunities. We
define discretionary cash flow as cash from operations before investment in
working capital and after payment of dividends. Absent attractive reinvestment
opportunities, the Georgia-Pacific Group returns this excess cash to
shareholders in the form of share repurchases. By managing our operations for
maximum cash flow, minimizing our cost of capital through consistent
capitalization policies and carefully deploying the cash from these sources, we
expect to generate significant discretionary cash flow in all market conditions.
Our goal: to build an enterprise capable of generating substantial discretionary
cash flow even under the most strenuous market conditions.
MAXIMIZING CASH FROM OPERATIONS. The Georgia-Pacific Group operates in several
cyclical commodity markets - markets that are complex and changing. To compete
effectively, we must recognize the critical success factors in each business and
understand the degree of influence we have over each of these factors. We use
this influence to aggressively manage each business to maximize cash flow.
The Georgia-Pacific Group measures business unit performance and bases incentive
compensation plans on the Economic Value Added (EVA) metric. In applying this
measure, business units are rewarded for their ability to improve returns on the
market value of capital employed. These plans encourage our employees and
management to continuously reduce costs, seek process improvements, manage
inventories and divest underperforming assets.
CONTINUOUS COST REDUCTION - A TICKET TO STAY IN THE GAME. In a commodity
business, cost reduction in and of itself is not a winning strategy - it's an
operating imperative! The Georgia-Pacific Group has created a culture that makes
continuous cost reduction, without capital investment, a way of life. Our
employee-driven Mill Improvement Process, for example, has generated more than
$320 million in sustainable cost savings and over 1,000 tons per day in
production improvement since
<PAGE>
the program began in 1994. In addition, our continuing focus on overhead
reduction has saved $300 million annually over 1996 levels.
MANAGING PRODUCTION - APPLYING KNOWLEDGE, DEMONSTRATING LEADERSHIP. Recognizing
inventory as an investment that must generate positive economic returns drives
the active management of our physical inventories. Industry inventories are an
important part of the near-term supply equation and critical indicators of the
pricing environment for many of our products. Keeping an eye on our inventories
and understanding end-market demand levels help us gain the insight needed to
make production decisions to help balance supply and demand.
A NEW OPERATING MODEL - EFFICIENT OPERATIONS AT LESS THAN FULL CAPACITY. Our
commitment to continuous cost reduction and inventory management has spawned a
new operating paradigm, the mill slowback. This operating policy is aimed
directly at balancing supply and demand, controlling our investment in inventory
and managing costs. The mill slowback explicitly recognizes the marginal cost of
production and marginal revenue at the facility level. The old operating adage
of "more tons is better" often generated costly investment in inventory and was
born of a reliance on average cost and average price. In the past, managers
didn't realize that the last ton produced sometimes cost more than the price it
could command in the market. The realization that a mill can recognize
efficiencies in wood cost, fiber utilization, chemical cost and maintenance
expense when operating below full capacity increases mill management flexibility
to respond to market conditions.
FOCUSED FIBER PROCUREMENT - ACCESS TO TIMBER AT MARKET PRICE. In an effort to
enhance shareholder value, in 1997 Georgia-Pacific Corporation separated the
operations of its timberlands from the manufacturing and distribution
businesses. We are convinced that this move has resulted in significant benefits
for Georgia-Pacific Group operations. A focused fiber procurement organization
aggressively manages and fills 100 percent of the fiber needs for the
Georgia-Pacific Group - more than 80 percent of which is purchased from
unrelated parties. Competing every day in the marketplace for this critical raw
material helps us develop insight into the raw material marketplace and results
in a competitive advantage for many of our mills. Eliminating the crutch of
owned timberlands was a major departure from industry norms. We've proven that
you don't have to own the standing timber to be competitive; you just need
access to timber at market prices.
The results are just beginning to be felt. The Georgia-Pacific Group is now
buying timber on the open market cheaper than it ever has relative to benchmark
prices. We expect our shareholders to continue to reap benefits not only through
reduced wood costs but through improved capital allocation.
DELIVERING ACQUISITION SYNERGIES. The Georgia-Pacific Group completed two
sizable transactions in 1999: the acquisition of Unisource Worldwide and the
formation of a joint venture with Chesapeake Corp. to own and operate its
Wisconsin Tissue business and our commercial tissue operations. Both
combinations provide substantial opportunities for hard synergy realizations.
In July 1999, the Georgia-Pacific Group completed the acquisition of Unisource
Worldwide. In the first six months of operation under Georgia-Pacific ownership,
Unisource generated $78 million in operating profits. We anticipate that more
than $150 million in synergies and cost savings will be obtained within the
first two years of operation.
In June 1999, Georgia-Pacific and Chesapeake agreed to combine their commercial
tissue operations in a joint venture. The Georgia-Pacific Group owns 95 percent
of the business and expects to realize approximately $50 million in synergies
from the combination. As a result, the Georgia-Pacific Group (including its
share of the joint venture) is the new number three producer in the North
American tissue market, with a unique 50/50 split between consumer and
commercial tissue products.
MINIMIZING THE COST OF CAPITAL - FINANCING AND CAPITAL STRUCTURE. We balance our
mix of debt and equity to benefit our shareholders by keeping our weighted
average cost of capital as low as possible, while retaining the flexibility
needed to finance attractive opportunities. The size and nature of our assets
and the cash-generating capability of our operations determine our capital
structure policy. By understanding and managing the operating risks that we can
influence, we
<PAGE>
maximize the cash flow from our operations. The Georgia-Pacific Group recognizes
that we have widely varying degrees of influence across a broad range of risk
factors. Significant risk factors that contribute to the volatility of our cash
flows include economic cycles, changes in industry capacity and additional
environmental regulations. At the same time, a number of factors reduce our risk
and increase the Corporation's borrowing capacity. These include the number,
size, diversity and liquidity of our capital assets.
THE BEDROCK CASH FLOW CASE. The methodology employed for determining our
appropriate capital structure is based on management's goal to generate
discretionary cash flow under the most challenging market conditions, while
maintaining our investment-grade bond ratings. We regularly review our "bedrock
cash flow case," a pro forma depiction of the Georgia-Pacific Group's cash flow
under the worst historical pricing environment in recent years for each of our
major businesses. In addition, we assume a high interest-rate environment for
our floating rate debt. Management believes this pro forma case is highly
unlikely and is therefore a conservative assumption given the diversity and
stability of our major businesses.
DERIVATION OF OUR TARGET DEBT LEVEL AND STRUCTURE. The cash-generating
capability of the Georgia-Pacific Group as depicted in the bedrock cash flow
case is used to establish a debt level that allows for service of the debt,
maintenance capital expenditures and uninterrupted dividend payments in cyclical
troughs. More importantly, it allows for significant cash distributions to our
shareholders even during periods of weak industry fundamentals.
The Corporation employs a high proportion of long-term, fixed-rate debt in its
capital structure, consistent with the long-term nature of the Corporation's
assets. This mitigates refinancing risk while insulating net cash flow from
rising interest rates, which also affect demand for some of our businesses.
In June 1999, the Board of Directors approved the financing structure for the
Unisource acquisition and the Wisconsin Tissue joint venture. The $1.9 billion
financing plan maintained the Corporation's credit rating and allowed the
Georgia-Pacific Group to continue its share repurchase program shortly after the
completion of the transactions.
As part of the financing package, the Board approved a $1.05 billion increase in
the Corporation's target debt level to $6.8 billion. All the increase was
allocated to the Georgia-Pacific Group. We believe this is appropriate given the
additional cash flows these acquisitions contribute.
The Board also approved the issue of 17,250,000 PEPS Units. Each PEPS Unit
consists of a 7.15 percent senior deferrable note and a forward purchase
contract paying 0.35 percent to buy Georgia-Pacific Group stock on August 16,
2002. Unlike mandatory convertible preferred stocks, the dividend on the PEPS
Unit is considered interest expense. Therefore, it lowers the Georgia-Pacific
Group's after-tax cost of financing. The tax-efficient nature of the dividend is
attractive, while the mandatory convertible nature of the unit receives
substantial equity credit from bond rating agencies. More importantly, this
structure allowed the Georgia-Pacific Group to honor its commitment to continue
share repurchases.
On January 1, 2000, the Georgia-Pacific Group's share of the Corporation's debt
was $6.054 billion. On a market value basis, the debt-to-capital ratio for the
Georgia-Pacific Group was 40.9 percent.
On January 1, 2000, the Corporation's total debt was $7.024 billion, above the
target debt level of $6.8 billion. The weighted average pretax cost of debt was
7.2 percent. About 66 percent of our debt was long term, with an average
maturity of approximately 13 years.
The Board continually reviews the Corporation's capital structure and could
change the target debt level in the future. Any future major acquisition would
likely be financed with equity or a combination of debt and equity.
COMMITMENT TO A SUSTAINABLE DIVIDEND. We believe a portion of our cash flows
should be paid to shareholders as regular, sustainable quarterly dividends. In
May 1999, the Board of Directors declared a two-for-one stock split and, as a
result, the Georgia-Pacific Group currently pays a quarterly
<PAGE>
$0.125 dividend. In the future, the dividend rate will depend on our cash flows,
long-term capital requirements and overall capital structure.
INVESTMENT - STEWARDS OF OUR SHAREHOLDERS' CAPITAL. Cash from our ongoing
operations and cash entrusted to us through the capital markets are the sources
for financing the operation of our facilities and the growth of our businesses.
Management of the Georgia-Pacific Group is keenly aware of the gap between
shareholder expectations and the industry's stock performance during the 1990s.
The attempt by the industry to increase equity values by reinvesting in
expansion projects has been largely unsuccessful. We believe that cash generated
in excess of positive net present value investment opportunities should be
distributed to shareholders in the form of dividends and share repurchases.
CAPITAL EXPENDITURES FOR PP&E AT OR BELOW DEPRECIATION. The Georgia-Pacific
Group attempts to minimize capital expenditures without compromising our ability
to operate effectively. We expect our capital expenditures on property, plant
and equipment to average at or below depreciation over time. With the addition
of Unisource and Wisconsin Tissue to our business mix, we anticipate
depreciation in 2000 to approximate $820 million. The Georgia-Pacific Group
expects capital spending on environmental projects will be significant in the
next few years as management meets spending obligations for the Cluster Rule and
other environmental rules.
DISCIPLINED INVESTMENT IN COST SAVINGS AND GROWTH PROJECTS. The Georgia-Pacific
Group evaluates most major cost savings and growth projects by the projected net
present value of the cash flows discounted at an appropriate risk-adjusted rate.
Several factors create risk, including the level of economic growth and demand
in U.S. and export markets, changes in industry capacity, changes in the cost of
wood fiber and other costs of production, and potential competition from
substitute and imported products.
In addition to the preinvestment evaluations of capital projects, we review
major investments during the course of the projects and/or after their
completion. These reviews compare the actual timing and amount of expenditures,
product prices, raw material costs and other critical success factors to the
assumptions made when the investments were proposed. These reviews (which are
presented periodically to the Corporation's Board of Directors) are key to our
continued learning and understanding of the risks inherent in future
investments. They are critical to our ability to employ shareholders' capital
where it is likely to create positive economic returns.
REVIEW OF COMPANY AND INDUSTRY ASSETS FOR RESTRUCTURING OPPORTUNITIES. The
Georgia-Pacific Group employs the same tools used in evaluating the
attractiveness of cost savings and growth investment when evaluating merger,
acquisition and restructuring opportunities. We use EVA metrics, discounted cash
flow analysis and, in some cases, Monte Carlo simulation to understand and
quantify risk and opportunity.
Georgia-Pacific Group management believes that our current asset base contains a
number of embedded options - options that can enhance the value of the
Georgia-Pacific Group. We are currently in the process of identifying, valuing
and understanding how the exercise of these options can enhance the value of the
Georgia-Pacific Group.
In a continuing effort to create shareholder value, we routinely evaluate the
performance, competitiveness, strategic fit and value to others of our existing
operations. Assets not considered strategic or not expected to deliver adequate
returns, or potentially more valuable to others, undergo evaluation for
divestment. In 1999, the Georgia-Pacific Group closed or sold a number of
operations, including box plants, a chemical facility and a hardboard plant. In
January 2000, we closed a gypsum wallboard plant and sold a hardboard plant.
In 1999, management initiated a proactive program to identify attractive
industry businesses and assets that provide significant synergistic
opportunities in combination with the Georgia-Pacific Group. Potential
businesses and assets will have the following characteristics:
<PAGE>
- - strategic fit with G-P Group goals and objectives
- - attractive valuation
- - significant hard, deliverable synergies
- - expansion of G-P Group options
The program's goal is to provide management with up-to-date, comprehensive
evaluations of acquisition and restructuring opportunities. When timing and
valuations are right, the Georgia-Pacific Group will be ready with thorough and
thoughtful evaluation of the opportunities and risks. We remain committed to
being an aggressive shopper and a patient, disciplined buyer.
EXCESS CASH RETURNED TO SHAREHOLDERS. As in 1999, there likely will be periods
when the Georgia-Pacific Group generates cash in excess of its opportunities for
investment. This excess cash will be returned to our shareholders through share
repurchases so they can make their own investment choices. We believe our
long-term shareholders will benefit as their proportionate ownership of the
Georgia-Pacific Group grows.
Management is authorized to repurchase shares of the Georgia-Pacific Group when
total corporate debt is below $6.8 billion and the Georgia-Pacific Group debt is
below $5.8 billion. During 1999, the Georgia-Pacific Group repurchased more than
6.2 million shares. These share repurchases represent a tax-efficient
distribution of more than $257 million to our shareholders and a 4 percent
reduction in shares outstanding this year.
MANAGEMENT'S DISCUSSION AND ANALYSIS
GEORGIA-PACIFIC GROUP
The Georgia-Pacific Group consists of all of Georgia-Pacific Corporation's (the
Corporation) manufacturing mills and plants, its building products distribution
business and its paper distribution business. These include 34 facilities in the
United States and one each in Canada and Mexico manufacturing communication
papers, market pulp, tissue and other products; 56 facilities in the United
States manufacturing containerboard and packaging materials; 331 facilities in
the United States, Canada and Mexico that distribute paper and supplies; 148
facilities in the United States and seven in Canada that manufacture lumber and
wood panels such as plywood, oriented strand board and industrial panels, gypsum
products, chemicals and other products; and a building products distribution
organization that operates a network of 64 sales centers, large distribution
centers and smaller local distribution centers throughout the United States and
in Canada. The accompanying financial statements present the historical results
of operations and financial condition of the operations that compose the
Georgia-Pacific Group. The results of operations of the Georgia-Pacific Group
have historically been, and are expected to continue to be, subject to highly
cyclical earnings patterns.
The Georgia-Pacific Group also includes a procurement function that is
responsible for purchasing timber and wood fiber for all of the Georgia-Pacific
Group's manufacturing facilities. Historically, a portion of the Group's timber
requirements have been supplied by the Georgia-Pacific Corporation's own
timberlands (approximately 19% in 1999), which now constitute The Timber
Company, and the remaining amounts have been supplied by unaffiliated third
parties.
Currently, the Georgia-Pacific Group and The Timber Company operate under a
policy governing sales of timber through the year 2000, which is more fully
described in Note 14 of the Notes to Combined Financial Statements.
1999 COMPARED WITH 1998
<PAGE>
The Georgia-Pacific Group reported net sales of $17.8 billion and net
income of $716 million, or $4.07 diluted earnings per share, for 1999, compared
with net sales of $13.2 billion and net income of $98 million, or $0.54 diluted
earnings per share, in 1998. Included in 1999 are $3.4 billion and $104 million
of net sales, respectively, from the recently acquired Unisource Worldwide, Inc.
(Unisource) and Wisconsin Tissue operations. The 1998 results included an
extraordinary, after-tax loss of $13 million, or $0.07 diluted loss per share,
for the early retirement of debt.
Interest expense increased $54 million to $426 million in 1999, compared with
$372 million in 1998, primarily as a result of higher debt levels and the
issuance of senior deferrable notes, more fully described in Note 7 of the Notes
to Combined Financial Statements, slightly offset by a decrease in average
interest rates.
The Georgia-Pacific Group reported pretax income of $1,164 million and an income
tax provision of $448 million for the year ended January 1, 2000, compared with
pretax income of $198 million and an income tax provision of $87 million for the
year ended December 31, 1998. The effective tax rate used to calculate the
provision for income taxes was 38.5% in 1999 and 43.9% in 1998. The reduction in
the 1999 effective tax rate resulted principally from higher pretax income and
an increased utilization of foreign sales corporation tax benefits, which more
than offset nondeductible goodwill amortization expense associated with business
acquisitions.
The remaining discussion refers to the "Selected Operating Segment Data" table
below.
SELECTED OPERATING SEGMENT DATA
Georgia-Pacific Corporation - Georgia-Pacific Group
<TABLE>
<CAPTION>
Year ended
------------------------------------------------------------
January 1, December 31,
(In millions) 2000 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales
Building products $ 6,164 $ 5,792 $ 5,545
Building products distribution 4,869 4,333 4,406
Containerboard and packaging 2,391 2,104 1,817
Pulp and paper 3,891 3,554 3,701
Paper distribution 3,336 - -
Other* (2,855) (2,554) (2,490)
- ------------------------------------------------------------------------------------------------------------------------------------
Total net sales $ 17,796 $ 13,229 $ 12,979
====================================================================================================================================
Operating profits
Building products $ 1,139 $ 603 $ 490
Building products distribution 63 1 (171)
Containerboard and packaging 344 106 (6)
Pulp and paper 266 133 201
Paper distribution 78 - -
Other (300) (273) (251)
- ------------------------------------------------------------------------------------------------------------------------------------
Total operating profits 1,590 570 263
Interest expense 426 372 381
Provision (benefit) for income taxes 448 87 (32)
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary items and accounting change 716 111 (86)
Extraordinary items, net of taxes - (13) -
Cumulative effect of accounting change, net of taxes - - (60)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 716 $ 98 $ (146)
====================================================================================================================================
</TABLE>
<PAGE>
*Includes the elimination of intersegment sales.
BUILDING PRODUCTS. The Georgia-Pacific Group's building products segment
reported net sales of $6.2 billion and operating profits of $1,139 million for
the year ended January 1, 2000, compared with net sales of $5.8 billion and
operating profits of $603 million in 1998. Return on sales was 18% in 1999 and
10% in 1998. The primary components of the increase in 1999 sales and operating
profits were 26% higher average oriented strand board prices; 22% higher average
gypsum prices; 16% higher average plywood prices; and higher average selling
prices for lumber and particleboard. These increases were offset slightly by
lower chemical prices and slightly lower volume for plywood and lumber. The
Georgia-Pacific Group expects softening building products markets and lower
levels of housing starts to reduce operating results for the building products
segment in 2000.
BUILDING PRODUCTS DISTRIBUTION. The building products distribution segment
reported net sales of $4.9 billion and operating profits of $63 million for
1999, compared with net sales of $4.3 billion and operating profits of $1
million in 1998. The 1998 results included one-time gains, principally on sales
of assets related to the restructuring plan, of approximately $20 million. The
increase in profitability in 1999 is due primarily to higher margins in
commodity and specialty products and lower operating costs. The Georgia-Pacific
Group expects a slight improvement in 2000 operating results for the building
products distribution segment related primarily to increased market share,
despite an expected softening of building products markets and lower levels of
housing starts.
CONTAINERBOARD AND PACKAGING. The Georgia-Pacific Group's containerboard and
packaging segment reported net sales of $2.4 billion and operating profits of
$344 million for the year ended January 1, 2000, compared with net sales of $2.1
billion and operating profits of $106 million in 1998. Return on sales increased
to 14% from 5% in 1998. Average selling prices increased steadily throughout
1999 and ended the year above 1998 levels. Average selling prices for
containerboard products increased 8% while average selling prices for packaging
increased 2%. Cost decreases for wood fiber and energy as well as higher sales
volume also contributed to the increased profit margins. The Georgia-Pacific
Group expects continued price improvement in the containerboard and packaging
segment into 2000.
PULP AND PAPER. The Georgia-Pacific Group's pulp and paper segment reported net
sales of $3.9 billion and operating profits of $266 million for the year ended
January 1, 2000, compared with net sales of $3.6 billion and operating profits
of $133 million in 1998. Return on sales increased to 7% compared with 4% for
the same period a year ago. Operating profits in 1998 included a one-time, $12
million charge primarily for the closure of a hardwood market pulp operation.
The increase in profitability in 1999 was due primarily to a 5% improvement in
average pulp selling prices, lower overall wood fiber costs and higher sales
volumes for the tissue business, despite a decrease in average selling prices
for most of the Georgia-Pacific Group's paper products. Average selling prices
in 1999 for communication papers and tissue were approximately 2% and 5%,
respectively, below average selling prices in 1998.
In 1999, net sales and operating profits from the segment's tissue business were
$1.1 billion and $134 million, respectively, and included net sales and
operating profits of $104 million and $15 million, respectively, from the
Wisconsin Tissue operations. The Wisconsin Tissue operations were combined with
the Georgia-Pacific Group's commercial tissue business beginning on October 3,
1999, when the Georgia-Pacific Tissue joint venture was formed. In 1998, net
sales and operating profits of the tissue business were $986 million and $145
million, respectively. Excluding the results of the Wisconsin Tissue operations
in 1999, operating profits from the segment's tissue business decreased by $26
million related primarily to lower selling prices, despite a 7% increase in
sales volume.
During 1999, the Georgia-Pacific Group incurred market-related downtime at its
pulp and paper mills, resulting in a reduction in pulp production of 311,000
tons and communication papers production of 17,000 tons. In 1998, the
Georgia-Pacific Group incurred market-related downtime at its pulp and paper
mills resulting in a reduction in pulp and communication papers production of
300,000 tons and 74,000 tons, respectively. In the third quarter of 1998, the
Georgia-Pacific Group indefinitely shut down the hardwood market pulp portion of
its operations at Port Hudson, Louisiana, resulting in
<PAGE>
closure of approximately 260,000 tons of annual production capacity.
Selling prices for most of the Georgia-Pacific Group's pulp and communication
papers products steadily increased during 1999 and ended the year at levels
higher than 1998. The Georgia-Pacific Group expects the improving selling price
trend to continue through 2000. Historically, selling prices for all of the
Georgia-Pacific Group's pulp and paper products have been highly volatile.
PAPER DISTRIBUTION. The Georgia-Pacific Group's paper distribution segment,
which represents the operating results of Unisource since its acquisition by the
Georgia-Pacific Group at the end of the second quarter of 1999, reported net
sales of $3.3 billion and operating profits of $78 million for the year ended
January 1, 2000. Unisource sells and distributes high-quality printing, writing
and copying papers to printers, publishers, business forms manufacturers and
direct mail firms, as well as to corporate and retail copy centers, in-plant
print facilities, government institutions and other paper-intensive businesses.
Unisource also sells and distributes a broad range of packaging and maintenance
supplies, equipment and services (principally to manufacturers, food processors
and retailers); maintenance supplies and equipment such as towels, tissues, can
liners and sanitation chemicals; packaging supplies and equipment such as carton
erectors, baggers and filers as well as films, shrink-wrap and cushioning
materials; shipping room supplies such as corrugated boxes, cushioning
materials, tapes and labeling; and food service supplies such as films and food
wraps, food containers and disposable apparel for food service workers.
Operating results for the paper distribution segment have historically been
seasonal, with the strongest operating results occurring in the third quarter.
OTHER. The operating loss for the "Other" nonreportable segment, which includes
some miscellaneous businesses, certain goodwill amortization, unallocated
corporate operating expenses and the elimination of profit on intersegment
sales, increased by $27 million to a loss of $300 million in 1999 from a loss of
$273 million in 1998. This increase was primarily a result of higher employee
benefit and incentive costs.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES. The Georgia-Pacific Group generated cash from operations
of $1,439 million during 1999. The Group's cash provided by operations in 1998
was $1,686 million. The decrease in 1999 cash provided by operations was
primarily a result of higher working capital levels, related principally to
inventories and to accounts receivable associated with the increase in revenues,
offset somewhat by higher operating results.
INVESTING ACTIVITIES. During 1999, capital expenditures for property, plant and
equipment, excluding acquisitions, were $721 million compared with $632 million
in 1998. Expenditures in 1999 included $265 million in the building products
segment, $16 million in the building products distribution segment, $92 million
in the containerboard and packaging segment, $262 million in the pulp and paper
segment, $45 million in the paper distribution segment, and $41 million of other
and general corporate. In 2000, the Georgia-Pacific Group expects to make
capital expenditures for property, plant and equipment, excluding the cost of
any acquisitions, that approximately equal depreciation expense for the year.
During 1999, the Georgia-Pacific Group invested $147 million for pollution
control and abatement. The Group's 2000 capital expenditure budget currently
includes approximately $260 million for environment-related projects. Certain
other capital projects that are being undertaken for the primary reason of
improving financial returns or safety will also include expenditures for
pollution control.
On April 15, 1998, the U.S. Environmental Protection Agency promulgated a set of
regulations known as the "Cluster Rule" that establishes new requirements for
air emissions and wastewater discharges from pulp and paper mills. The
Georgia-Pacific Group estimates that it will make capital expenditures up to
approximately $550 million through April 2006 in order to comply with the
Cluster Rule's requirements. Of that total, approximately $160 million was spent
through 1999 and about $350 million will be spent by the end of 2000. The
Cluster Rule requires that pulp and paper mills become
<PAGE>
elemental chlorine free (ECF) in the pulp bleaching process. Approximately $110
million of the amount required to be spent in 2000 will go toward ECF conversion
at mills located in Ashdown, Arkansas; Crossett, Arkansas; Bellingham,
Washington; and Palatka, Florida. The bulk of the remaining expenditures in 2000
will be for additional air emission controls at the Georgia-Pacific Group's
other pulp and paper facilities.
Cash paid for timber and wood fiber was $372 million in 1999 compared with $475
million in 1998.
At the end of the second quarter of 1999, the Georgia-Pacific Group, through its
wholly owned subsidiary Atlanta Acquisition Corp., completed a tender offer for
all the outstanding shares of common stock of Unisource, the largest independent
marketer and distributor of printing and imaging paper and supplies in North
America, and acquired 90.7% of the then outstanding shares of Unisource. On July
6, 1999, Atlanta Acquisition Corp. was merged with and into Unisource and, by
virtue of such merger, shares of Unisource that were not tendered to the
Georgia-Pacific Group (other than shares held by Unisource and the
Georgia-Pacific Group and its subsidiaries) were converted into the right to
receive $12.00 per Unisource share in cash, subject to dissenters' rights. The
Georgia-Pacific Group is paying for such untendered shares as they are delivered
to the exchange agent. Through January 1, 2000, the Georgia-Pacific Group paid
approximately $829 million for such shares. Unisource's results of operations
were consolidated with those of the Georgia-Pacific Group beginning July 4,
1999.
Effective October 3, 1999, the Georgia-Pacific Group and Chesapeake Corp.
(Chesapeake) completed a previously announced agreement to create
Georgia-Pacific Tissue, a joint venture in which the two companies have combined
their away-from-home tissue businesses. The Georgia-Pacific Group contributed
substantially all the assets of its commercial tissue business to the joint
venture. The Georgia-Pacific Group controls and manages the joint venture and
owns 95% of its equity. Chesapeake contributed the assets of its Wisconsin
Tissue business to the joint venture, for which it received a 5% equity interest
in the joint venture and an initial cash distribution of approximately $755
million. Wisconsin Tissue's results of operations were combined with the
Georgia-Pacific Group's commercial tissue business beginning on October 3, 1999,
when the Georgia-Pacific Tissue joint venture was formed.
During 1999, the Georgia-Pacific Group also completed the acquisition of a
packaging plant, four treated lumber facilities, a chemical business and lumber
transportation assets for a total consideration of approximately $74 million in
cash.
On June 30, 1998, the Georgia-Pacific Group completed its acquisition of CeCorr
Inc. (CeCorr), a leading independent producer of corrugated sheets in the United
States. On June 30, 1998, the Georgia-Pacific Group paid approximately $93
million in cash (net of $2 million of cash acquired) and issued approximately
3.2 million shares of Georgia-Pacific Group stock valued at approximately $28.94
per share for all the outstanding shares of CeCorr. In addition, the
Georgia-Pacific Group assumed approximately $92 million of CeCorr's debt, of
which $34 million was owed to the Georgia-Pacific Group ($58 million net debt
assumed). On July 2, 1998, a former owner of CeCorr exercised his right to
resell to the Georgia-Pacific Group approximately 2.2 million shares of
Georgia-Pacific Group stock issued in the transaction. CeCorr's results of
operations were consolidated with those of the Georgia-Pacific Group beginning
July 1, 1998.
During 1999 and 1998, the Georgia-Pacific Group received $31 million and $67
million, respectively, from the sale of assets, principally various production
and distribution facilities.
In December 1999, The Timber Company sold approximately 194,000 acres of its
redwood and Douglas fir timberlands in Northern California for a purchase price
of approximately $397 million. The Fort Bragg sawmill has a wood supply
agreement with The Timber Company through 2000 that was transferred as part of
the sale agreement.
FINANCING ACTIVITIES. The Corporation's total debt, excluding senior deferrable
notes, increased by $1,473 million to $7,024 million at January 1, 2000 from
$5,551 million at December 31, 1998. At January 1, 2000 and December 31, 1998,
$6,054 million and $4,568 million, respectively, of such total
<PAGE>
debt was allocated to the Georgia-Pacific Group and $970 million and $983
million, respectively, was allocated to The Timber Company. The debt of the
Georgia-Pacific Group bears interest at a rate equal to the weighted average
interest rate of the Corporation's total debt, calculated on a quarterly basis.
At January 1, 2000, the weighted average interest rate on the Corporation's
total debt, excluding senior deferrable notes, was 7.2% including outstanding
interest rate exchange agreements. The Georgia-Pacific Group's debt increases or
decreases by the amount of any cash provided by or used for its operating
activities, investing activities, dividend payments, share repurchases or
issuances and other nondebt-related financing activities. See Note 1 of the
Notes to Combined Financial Statements for further discussion of financial
activities.
In June 1999, the Corporation renegotiated its accounts receivable secured
borrowing program and increased the amount outstanding under the program from
$280 million to $750 million. The program expires in April 2000. In connection
with the acquisition of Unisource, the Corporation assumed former Unisource
programs to pledge up to $150 million of certain qualifying U.S. accounts
receivable and up to CN$70 million of certain eligible Canadian accounts
receivable. The U.S. program expires in April 2000 and the Canadian program
expires in May 2004. At January 1, 2000, approximately $948 million was
outstanding under the Corporation's and Unisource's programs in the aggregate.
The receivables outstanding under these programs and the corresponding debt are
included as "Receivables" and "Commercial paper and other short-term notes,"
respectively, on the Corporation's consolidated balance sheets. All programs are
accounted for as secured borrowings. As collections reduce previously pledged
interests, new receivables may be pledged.
Also, in connection with the acquisition of Unisource, the Corporation assumed
former Unisource industrial revenue bonds in the amount of $9 million and
capital leases in the amount of $12 million. Additionally, the Corporation
assumed other long-term debt in the amount of $447 million and bank overdrafts
in the amount of $120 million, and retained the previously described accounts
receivable secured borrowing programs in the amount of $197 million. These
amounts are included in the Corporation's total debt.
In November 1999, in connection with the formation of Georgia-Pacific Tissue,
the Corporation issued $500 million of 7.75% Debentures Due November 15, 2029.
During 1998, the Corporation issued $300 million of 7.25% Debentures Due June 1,
2028 and a $14 million floating rate note due September 30, 2003. In January
1998, the Corporation redeemed $200 million of 9-3/4% Sinking Fund Debentures
Due January 15, 2018. In February 1998, the Corporation redeemed $200 million of
9-1/2% Debentures Due February 15, 2018.
During 1999, the Corporation increased the amount of its unsecured revolving
credit facility from $1.5 billion to $2.0 billion. This unsecured revolving
credit facility is used for direct borrowings and as support for commercial
paper and other short-term borrowings. Under the agreement, $1 billion will
terminate in July 2000 and $1 billion will terminate in 2004. As of January 1,
2000, $1,145 million of committed credit was available in excess of all
short-term borrowings outstanding under or supported by the facility.
On July 7, 1999, the Corporation issued 17,250,000 of 7.5% Premium Equity
Participating Security Units (PEPS Units) for $862.5 million. Each PEPS Unit had
an issue price of $50 and consists of a contract to purchase shares of
Georgia-Pacific Group common stock on or prior to August 16, 2002 and a senior
deferrable note of the Georgia-Pacific Group due August 16, 2004. Each purchase
contract yields interest of 0.35% per year, paid quarterly, on the $50 stated
amount of the PEPS Unit. Each senior deferrable note yields interest 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%. The liability related to the
PEPS Units is classified as "Senior deferrable notes" on the Georgia-Pacific
Group's combined balance sheets and is not included in the debt amount for
purposes of determining the corporate and Georgia-Pacific Group debt targets.
The senior deferrable notes and related interest expense are allocated
specifically to the Georgia-Pacific Group.
<PAGE>
In October 1999, the Corporation entered into a financing arrangement to enhance
the return on a deposit made in connection with a 1995 sale-leaseback
transaction by issuing $379 million of 5.74% Debentures Due April 5, 2005 that
were legally defeased with deposits of an equal amount. Accordingly, the
debentures and related deposits are not reflected on the Georgia-Pacific Group's
combined balance sheets.
The Corporation's senior management establishes the parameters of the
Corporation's financial risk, which have been approved by the Board of Directors
(the Board). Hedging interest rate exposure through the use of swaps and options
and hedging foreign exchange exposure through the use of forward contracts are
specifically contemplated to manage risk in keeping with management policy.
Derivative instruments, such as swaps, forwards, options or futures, which are
based directly or indirectly upon interest rates, currencies, equities and
commodities, may be used by the Corporation to manage and reduce the risk
inherent in price, currency and interest rate fluctuations.
The Corporation does not utilize derivatives for speculative purposes.
Derivatives are transaction-specific so that a specific debt instrument,
contract or invoice determines the amount, maturity and other specifics of the
hedge. Counterparty risk is limited to institutions with long-term debt ratings
of A or better.
The following tables present principal (or notional) amounts and related
weighted average interest rates by year of expected maturity for the
Corporation's debt obligations as of January 1, 2000 and December 31, 1998. For
obligations with variable interest rates, the tables set forth payout amounts
based on current rates and do not attempt to project future interest rates.
<TABLE>
<CAPTION>
(In millions) 2000 2001 2002 2003
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debt
Commercial paper and other short-term notes - - - -
Average interest rates - - - -
Notes and debentures - - $ 300 $ 300
Average interest rates - - 10.0% 5.7%
Revenue bonds $ 24 $ 6 $ 73 -
Average interest rates 4.5% 5.5% 4.7% -
Capital leases $ 2 $ 3 $ 3 $ 2
Average interest rates 9.8% 9.9% 10.2% 10.4%
Other loans $ 13 - - $ 15
Average interest rates 8.0% - - 6.7%
Senior deferrable notes - - $ 863 -
Average interest rates - - 7.2% -
Notional principal amount of interest exchange
agreements $ 177 - $ 131 $ 300
Average interest rate paid (fixed) 7.7% - 6.0% 5.9%
Average interest rate received (variable) 5.9% - 6.0% 5.9%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
(In millions)
Fair value
January 1,
2004 Thereafter Total 2000
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debt
Commercial paper and other short-term notes - $ 2,067 $ 2,067 $ 2,067
Average interest rates - 6.5% 6.5% 6.5%
Notes and debentures - $ 3,389 $ 3,989 $ 3,952
Average interest rates - 8.4% 8.3% 8.3%
Revenue bonds $ 33 $ 517 $ 653 $ 564
Average interest rates 5.4% 5.7% 5.5% 5.5%
Capital Leases $ 2 $ 2 $ 14 $ 14
Average interest rates 10.5% 10.5% 10.1% 7.9%
Other loans - - $ 28 $ 27
Average interest rates - - 7.3% 6.9%
Senior deferrable notes - - $ 863 $ 866
Average interest rates - - 7.2% 7.4%
Notional principal amount of interest exchange
agreements - - $ 608 $ (1)
Average interest rate paid (fixed) - - 6.4% 6.4%
Average interest rate received (variable) - - 5.9% 5.9%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
The Corporation has the intent and ability to refinance commercial paper and
other short-term notes as they mature. Therefore, maturities of these
obligations are reflected as cash flows expected to be made after 2004.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
(In millions) 1999 2000 2001 2002
- -----------------------------------------------------------------------------------------------------------------
Debt
Commercial paper and other short-term notes - - - -
Average interest rates - - - -
Notes and debentures - - - $ 300
Average interest rates - - - 10.0%
Revenue bonds $ 21 $ 21 $ 1 $ 75
Average interest rates 4.2% 4.4% 6.5% 5.1%
Other loans $ 2 $ 13 - -
Average interest rates 7.7% 7.9% - -
Notional principal amount of interest exchange
agreements $ 56 $ 100 - -
Average interest rate paid (fixed) 8.8% 8.4% - -
Average interest rate received (variable) 5.0% 5.8% - -
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Fair value
December 31,
(In millions) 2003 Thereafter Total 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debt
Commercial paper and other short-term notes - $ 1,209 $ 1,209 $ 1,209
Average interest rates - 5.8% 5.8% 5.8%
Notes and debentures $ 300 $ 2,900 $ 3,500 $ 3,783
Average interest rates 5.5% 8.6% 8.4% 8.4%
Revenue bonds $ 1 $ 518 $ 637 $ 587
Average interest rates 6.5% 5.2% 5.2% 5.2%
Other loans $ 14 - $ 29 $ 29
Average interest rates 5.8% - 6.9% 6.9%
Notional principal amount of interest exchange
agreements $ 300 - $ 456 $ 14
Average interest rate paid (fixed) 5.9% - 6.8% 6.8%
Average interest rate received (variable) 5.7% - 5.7% 5.7%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
The Corporation has the intent and ability to refinance commercial paper and
other short-term notes as they mature. Therefore, maturities of these
obligations are reflected as cash flows expected to be made after 2003.
At January 1, 2000, the Corporation had interest rate exchange agreements that
effectively converted $608 million of floating rate obligations with a weighted
average interest rate of 5.9% to fixed rate obligations with an average
effective interest rate of approximately 6.4%. These agreements increased
interest expense by $7 million for the year ended January 1, 2000 and $11
million and $16 million for the years ended December 31, 1998 and 1997,
respectively. As of January 1, 2000, these agreements have a weighted average
maturity of approximately 2.6 years. As of January 1, 2000, the Corporation's
total floating rate debt exceeded related interest rate exchange agreements by
$1,957 million.
The Corporation also enters into foreign currency exchange agreements and
commodity futures and swaps, the amounts of which were not material to the
financial position of the Georgia-Pacific Group at January 1, 2000.
As of January 1, 2000, the Corporation had registered for sale up to $2.975
billion of debt and equity securities under a shelf registration statement filed
with the Securities and Exchange Commission. The Corporation registered $1.725
billion under such registration statement related to the PEPS Units ($862.5
million of which was received on July 7, 1999 in exchange for senior deferrable
notes, and $862.5 million of Georgia-Pacific Group common stock will be issued
upon exercise of the purchase contracts). The $862.5 million of cash (less
expenses) raised in the sale of the PEPS Units was used to pay for the
acquisition of Unisource. In addition, the Corporation registered $500 million
of 7.75% Debentures Due November 15, 2029 under this shelf registration
statement. Proceeds from the issuance of securities under this shelf
registration statement will be used for general corporate purposes, including
the repayment of short-term debt, acquisitions, investments in, or extension of
credit to, the Corporation's subsidiaries and the acquisition of real property.
The Board has adopted a policy that earnings and cash flows generated from the
businesses of the Georgia-Pacific Group or The Timber Company will be used only
for reinvestment in the business of the group generating such earnings and
related cash flows, for repayment of its debt, or for payment of dividends on,
or the repurchase of shares of, the class of common stock reflecting such
group's performance. Funds of one group will not be loaned to or otherwise
invested in the business of the other group.
In June 1999, the Board increased the corporate target debt level under which
the Corporation can purchase shares of Georgia-Pacific Group and The Timber
Company common stock on the open market from $5.75 billion to $6.8 billion. In
addition, the Board increased the Georgia-Pacific Group's target debt level from
$4.75 billion to $5.8 billion. The Timber Company's target debt level remains at
$1.0 billion. Depending on operating and financial considerations, debt levels
of the Corporation and of the Georgia-Pacific Group may from time to time be
above or below these thresholds.
During 1999, the Georgia-Pacific Group purchased on the open market
approximately 6.2 million shares of Georgia-Pacific Group stock at an aggregate
price of $257 million ($41.45 average per share), all of which were held as
treasury stock at January 1, 2000. During 1998, the Georgia-Pacific Group
purchased approximately 15.4 million shares of Georgia-Pacific Group stock
(including 2.2 million shares related to the CeCorr acquisition) at an aggregate
price of $427 million ($27.73 average per share). Of these purchased shares,
approximately 13.5 million shares were held as treasury stock and approximately
1.9 million shares were retired. Cash paid in 1998 related to stock repurchases
totaled $436 million, which included $9 million for shares purchased but not
settled in 1997.
Subsequent to year-end 1999 through February 4, 2000, there was no
Georgia-Pacific Group stock purchased by the Georgia-Pacific Group. The
Georgia-Pacific Group expects to repurchase stock throughout 2000 as long as
debt levels are below the established thresholds.
<PAGE>
During 1999 and 1998, the Georgia-Pacific Group paid dividends totaling $86
million and $90 million, respectively.
In 2000, the Georgia-Pacific Group expects its cash flow from operations,
together with proceeds from any sales of assets and available financing sources,
to be sufficient to fund planned capital investments, pay dividends and make
scheduled debt repayments.
OTHER. The Georgia-Pacific Group employs approximately 59,400 people,
approximately 27,000 of whom are members of unions. The Georgia-Pacific Group
considers its relationship with its employees to be good. Forty-nine union
contracts are subject to negotiation and renewal in 2000, including four at
large paper facilities.
In July 1999, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 137, providing for a one-year delay
of the effective date of SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities." SFAS No. 133 establishes accounting and reporting
standards for derivative instruments and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities on its
balance sheet and measure those instruments at fair value. The Georgia-Pacific
Group will be required to adopt SFAS No. 133 in 2001. Management is evaluating
the effect of this statement on the Corporation's derivative instruments, which
are primarily interest rate swaps, foreign currency forward contracts, commodity
futures and long-term purchase commitments. The impact of such adjustments to
fair value is not expected to be material to the Georgia-Pacific Group's
financial position.
The Georgia-Pacific Group has resolved the effects of the Year 2000 problem on
its key information systems, the operating systems used in its manufacturing
operations and its facilities systems. The Year 2000 problem, which is common to
most businesses, concerns the inability of such systems to properly recognize
and process dates and date-sensitive information on and beyond January 1, 2000.
The Georgia-Pacific Group developed a Year 2000 plan, under which all key
systems were tested and noncompliant software or technology was modified or
replaced. The Georgia-Pacific Group incurred only minor problems in its key
systems related to Year 2000 that were immediately corrected at no incremental
cost and with no effect on operations.
The Georgia-Pacific Group incurred approximately $30 million of incremental
costs to resolve the Year 2000 problem (including approximately $4 million of
capital costs). In addition, the Georgia-Pacific Group incurred internal costs
totaling approximately $17 million related to the Year 2000 problem. These
incremental and internal costs were expensed as incurred, except for new systems
purchased that were capitalized in accordance with corporate policy. The
Georgia-Pacific Group will continue to monitor and test for the effect of Year
2000 on its systems during the first few months of 2000 and expects to incur
related incremental and internal costs totaling approximately $1 million during
the first half of 2000.
For a discussion of commitments and contingencies, see Note 13 of the Notes to
Combined Financial Statements.
1998 COMPARED WITH 1997
The Georgia-Pacific Group reported net sales of $13.2 billion and net income of
$98 million, or $0.54 diluted earnings per share, for 1998, compared with net
sales of $13.0 billion and a net loss of $146 million, or $0.80 diluted loss per
share, in 1997. The 1998 results included an extraordinary, after-tax loss of
$13 million, or $0.07 diluted earnings per share, for the early retirement of
debt. The 1997 results included a pretax gain of $14 million ($9 million after
taxes) from the sale of the Georgia-Pacific Group's Martell, California, assets
that included a sawmill and a particleboard plant, and a $60 million, or $0.33
diluted loss per share, one-time, after-tax charge for an accounting change.
Interest expense was $372 million in 1998, compared with $381 million in 1997.
The reduction was the result of lower average debt levels and lower average
interest rates.
<PAGE>
The Georgia-Pacific Group reported pretax income of $198 million and an income
tax provision of $87 million for the year ended December 31, 1998, compared with
a pretax loss of $118 million and an income tax benefit of $32 million for the
year ended December 31, 1997. The effective tax rate used to calculate the
provision or benefit for income taxes for both years was higher than the
statutory rates used to calculate federal and state income taxes primarily
because of nondeductible goodwill amortization expense associated with business
acquisitions.
In 1997, the Group adopted FASB Emerging Issues Task Force Issue No. 97-13 (EITF
97-13), "Accounting for Costs Incurred in Connection with a Consulting Contract
or an Internal Project That Combines Business Process Reengineering and
Information Technology Transformation," which resulted in a one-time, after-tax
charge of $60 million.
BUILDING PRODUCTS. The Georgia-Pacific Group's building products segment
reported net sales of $5.8 billion and operating profits of $603 million for the
year ended December 31, 1998, compared with net sales of $5.5 billion and
operating profits of $490 million in 1997. Return on sales was 10% in 1998 and
9% in 1997. The 1997 results included unusual one-time charges of $32 million
primarily related to asset write-downs, including closure of certain building
products facilities, as well as information systems write-offs.
The primary components of the increase in 1998 sales and operating profits were
45% higher oriented strand board prices and 6% higher gypsum prices. Demand and
volume were also higher in 1998 for both of these products than in the prior
year. These increases were offset slightly by 12% lower lumber prices and 9%
higher log costs.
BUILDING PRODUCTS DISTRIBUTION. The Georgia-Pacific Group's building products
distribution segment reported operating profits of $1 million in 1998 (including
gains on asset sales of $20 million) compared with a loss of $171 million in
1997 (including gains on asset sales of $26 million). The 1997 results included
restructuring charges of $80 million. The improvement in the building products
distribution segment's operating results reflected the implementation of the
division's restructuring plan, which began in the 1997 fourth quarter. This plan
included disposition of its millwork fabrication facilities nationwide and of a
number of distribution centers located in the Western United States. The
millwork fabrication facilities were divested and the targeted distribution
centers were sold or closed.
CONTAINERBOARD AND PACKAGING. The Georgia-Pacific Group's containerboard and
packaging segment reported net sales of $2.1 billion and operating profits of
$106 million for the year ended December 31, 1998, compared with net sales of
$1.8 billion and an operating loss of $6 million in 1997. Return on sales
increased to 5% in 1998 compared with (0.3)% for 1997, principally due to a 19%
increase in average prices for containerboard and an average 6% price increase
for packaging products. During 1998, the Georgia-Pacific Group took
approximately 270,000 tons of downtime at its containerboard mills to avoid
building inventories.
PULP AND PAPER. The Georgia-Pacific Group's pulp and paper segment reported net
sales of $3.6 billion and operating profits of $133 million for the year ended
December 31, 1998, compared with net sales of $3.7 billion and operating profits
of $201 million in 1997. Return on sales decreased to 4% in 1998 compared with
5% for 1997, principally due to a slight decrease in average prices for almost
all of the Georgia-Pacific Group's pulp and paper products. Operating profits in
1998 included a one-time, $12 million charge primarily for the closure of a
hardwood market pulp operation. Average pulp prices were approximately 9% below
1997 levels. Tissue prices decreased approximately 3% due to lower fiber costs
and new capacity. Average prices of communication papers for 1998 were
approximately 2% below 1997 levels.
During the second half of 1998, the Georgia-Pacific Group took significant
market-related downtime due to continued weakness in demand and pricing for pulp
and paper, primarily stemming from market conditions in Asia. In the 1998 third
quarter, the Georgia-Pacific Group indefinitely shut down the hardwood market
pulp portion of its operations at Port Hudson, Louisiana, resulting in closure
of
<PAGE>
approximately 260,000 tons of annual production capacity. Additionally, the
Georgia-Pacific Group took approximately 300,000 tons of downtime in 1998 at its
pulp mills to avoid building inventories.
OTHER. The operating loss for the "Other" nonreportable segment increased by $22
million to a loss of $273 million in 1998 from a loss of $251 million in 1997.
This increase was primarily a result of higher litigation and environmental
remediation costs.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. The statements under "Management's
Discussion and Analysis" and other statements contained herein that are not
historical facts are forward-looking statements (as such term is defined under
the Private Securities Litigation Reform Act of 1995) based on current
expectations. The accuracy of such statements is subject to a number of risks,
uncertainties and assumptions. In addition to the risks, uncertainties and
assumptions discussed elsewhere herein, factors that could cause or contribute
to actual results differing materially from such forward-looking statements
include the following: the Georgia-Pacific Group's production capacity
continuing to exceed demand for its pulp and paper products, necessitating
market-related downtime; changes in the productive capacity and production
levels of other building products and pulp and paper producers; the effect on
the Georgia-Pacific Group of changes in environmental and pollution control laws
and regulations; the general level of economic activity in U.S. and export
markets; variations in the level of housing starts; fluctuations in interest
rates and currency exchange rates; the availability and cost of wood fiber; and
other risks, uncertainties and assumptions discussed in the Corporation's
filings with the Securities and Exchange Commission, including the Corporation's
Form 8-K dated October 17, 1996.
REPORT ON MANAGEMENT'S RESPONSIBILITIES.
Management of Georgia-Pacific Corporation is responsible for the preparation,
integrity and fair presentation of the consolidated financial statements and the
estimates and judgments upon which certain amounts in the financial statements
are based. Management is also responsible for preparing the other financial
information included in this annual report. In our opinion, the accompanying
financial statements have been prepared in conformity with generally accepted
accounting principles, and the other financial information in this annual report
is consistent with the financial statements.
Management is also responsible for establishing and maintaining a system of
internal control over financial reporting, which encompasses policies,
procedures and controls directly related to, and designed to provide reasonable
assurance as to, the reliability of the published financial statements. An
independent assessment of the system is performed by the Corporation's internal
audit staff in order to confirm that the system is adequate and operating
effectively. The Corporation's independent public accountants also consider
certain elements of the internal control system in order to determine their
auditing procedures for the purpose of expressing an opinion on the financial
statements. Management has considered any significant recommendations regarding
the internal control system that have been brought to its attention by the
internal audit staff or independent public accountants and has taken steps it
deems appropriate to maintain a cost-effective internal control system. The
Audit Committee of the Board of Directors, consisting of independent directors,
provides oversight to the financial reporting process. The Corporation's
internal auditors and independent public accountants meet regularly with the
Audit Committee to discuss financial reporting and internal control issues and
have full and free access to the Audit Committee.
There are inherent limitations in the effectiveness of any system of internal
control, including the possibility of human error and the circumvention or
overriding of controls. Accordingly, even an effective internal control system
can provide only reasonable assurance with respect to financial statement
preparation. Furthermore, the effectiveness of an internal control system can
vary over time due to changes in conditions.
Management believes that as of January 1, 2000, the internal control system over
financial reporting is adequate and effective in all material respects.
<PAGE>
/s/ James E. Terrell
- ---------------------
James E. Terrell
Vice President and Controller
/s/ Danny W. Huff
- ---------------------
Danny W. Huff
Executive Vice President - Finance
and Chief Financial Officer
/s/ A. D. Correll
- ------------------
A. D. Correll
Chairman, Chief Executive Officer and President
February 4, 2000
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Georgia-Pacific Corporation: We have audited the accompanying combined
balance sheets of Georgia-Pacific Corporation - Georgia-Pacific Group (as
described in Note 1) as of January 1, 2000 and December 31, 1998 and the related
combined statements of income, shareholders' equity, comprehensive income, and
cash flows for each of the three years in the period ended January 1, 2000.
These financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Georgia-Pacific
Corporation - Georgia-Pacific Group as of January 1, 2000 and December 31, 1998
and the results of their operations and their cash flows for each of the three
years in the period ended January 1, 2000 in conformity with generally accepted
accounting principles.
As explained in Note 1 of the Notes to Combined Financial Statements, effective
December 31, 1997, Georgia-Pacific Group changed its method of accounting for
business process reengineering costs incurred as part of a project to acquire,
develop, or implement internal-use software.
/s/ Arthur Andersen LLP
- ------------------------
Arthur Andersen LLP
Atlanta, Georgia
February 4, 2000
<PAGE>
COMBINED STATEMENTS OF INCOME
Georgia-Pacific Corporation -- Georgia-Pacific Group
<TABLE>
<CAPTION>
Year ended
------------------------------------------------------------
January 1, December 31,
(In millions, except per share amounts) 2000 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 17,796 $ 13,229 $ 12,979
- ------------------------------------------------------------------------------------------------------------------------------------
Costs and expenses
Cost of sales, excluding depreciation, amortization and
cost of timber harvested shown below
The Timber Company 95 89 75
Third parties 13,281 10,129 10,083
- ------------------------------------------------------------------------------------------------------------------------------------
Total cost of sales 13,376 10,218 10,158
- ------------------------------------------------------------------------------------------------------------------------------------
Selling and distribution 817 556 607
Depreciation, amortization and cost of timber harvested
The Timber Company 232 320 350
Third parties 971 953 969
- ------------------------------------------------------------------------------------------------------------------------------------
Total depreciation, amortization and cost of timber harvested 1,203 1,273 1,319
- ------------------------------------------------------------------------------------------------------------------------------------
General and administrative 810 612 646
Interest 426 372 381
Other income - - (14)
- ------------------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 16,632 13,031 13,097
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes, extraordinary items and
accounting change 1,164 198 (118)
Provision (benefit)for income taxes 448 87 (32)
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary items and accounting
change 716 111 (86)
Extraordinary items-loss from early retirement of debt, net of
taxes - (13) -
Cumulative effect of accounting change, net of taxes - - (60)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 716 $ 98 $ (146)
====================================================================================================================================
Basic per share:
Income (loss) before extraordinary items and accounting change $ 4.17 $ 0.62 $ (0.47)
Extraordinary items, net of taxes - (0.07) -
Cumulative effect of accounting change, net of taxes - - (0.33)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 4.17 $ 0.55 $ (0.80)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year ended
---------------------------------------------------------------
January 1, December 31,
(In millions, except per share amounts) 2000 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Diluted per share:
Income (loss) before extraordinary items and accounting change $ 4.07 $ 0.61 $ (0.47)
Extraordinary items, net of taxes - (0.07) -
Cumulative effect of accounting change, net of taxes - - (0.33)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 4.07 $ 0.54 $ (0.80)
- ------------------------------------------------------------------------------------------------------------------------------------
Average number of shares outstanding:
Basic 171.8 179.8 182.9
Diluted 175.9 181.1 182.9
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
COMBINED STATEMENTS OF CASH FLOWS
Georgia-Pacific Corporation -- Georgia-Pacific Group
<TABLE>
<CAPTION>
Year ended
------------------------------------------------------------
January 1, December 31,
(In millions) 2000 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss) $ 716 $ 98 $ (146)
Adjustments to reconcile net income (loss) to cash
provided by operations:
Depreciation 746 744 785
Cost of timber harvested-third parties 156 147 125
Cost of timber harvested-The Timber Company 232 320 350
Deferred income taxes (59) 34 34
Amortization of goodwill 69 62 59
Stock compensation programs 8 (3) -
Cumulative effect of accounting change, net of taxes - - 60
Loss (gain) on disposal of assets, net 3 1 (5)
(Increase) decrease in receivables (258) 145 (63)
(Increase) decrease in inventories (244) 92 101
Increase (decrease) in accounts payable 4 (48) (26)
Change in other working capital 41 51 6
Change in other assets and other long-term liabilities 25 43 (26)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash provided by operations 1,439 1,686 1,254
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Property, plant and equipment investments (721) (632) (715)
Timber contract purchases from third parties (150) (142) (131)
Timber purchases from The Timber Company (222) (333) (350)
Acquisitions (1,658) (112) -
Proceeds from sales of assets 31 67 107
Other 29 21 (23)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash used for investing activities (2,691) (1,131) (1,112)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Share repurchases (257) (436) (13)
Net additions to (repayments of) debt 661 (41) (70)
Issuance of senior deferrable notes 863 - -
Cash dividends paid (86) (90) (92)
<PAGE>
Proceeds from stock option plan exercises 107 9 31
Other (16) - -
- ------------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used for) financing activities 1,272 (558) (144)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash 20 (3) (2)
Balance at beginning of year 5 8 10
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at end of year $ 25 $ 5 $ 8
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
COMBINED BALANCE SHEETS
Georgia-Pacific Corporation -- Georgia-Pacific Group
<TABLE>
<CAPTION>
January 1, December 31,
(In millions) 2000 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets
Cash $ 25 $ 5
- ------------------------------------------------------------------------------------------------------------------------------------
Receivables, less allowances of $25 and $25, respectively 2,296 1,231
- ------------------------------------------------------------------------------------------------------------------------------------
Inventories
Raw materials 453 417
Finished goods 1,367 760
Supplies 341 310
LIFO reserve (154) (209)
- ------------------------------------------------------------------------------------------------------------------------------------
Total inventories 2,007 1,278
- ------------------------------------------------------------------------------------------------------------------------------------
Deferred income tax assets 139 61
- ------------------------------------------------------------------------------------------------------------------------------------
Other current assets 69 65
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets 4,536 2,640
- ------------------------------------------------------------------------------------------------------------------------------------
Timber contracts 66 78
- ------------------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment
Land and improvements 476 403
Buildings 1,629 1,331
Machinery and equipment 13,307 12,338
Construction in progress 404 315
- ------------------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment, at cost 15,816 14,387
Accumulated depreciation (8,756) (8,162)
- ------------------------------------------------------------------------------------------------------------------------------------
Total property, plant and equipment, net 7,060 6,225
- ------------------------------------------------------------------------------------------------------------------------------------
Goodwill, net 2,697 1,677
- ------------------------------------------------------------------------------------------------------------------------------------
Other assets 1,021 918
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 15,380 $ 11,538
====================================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
January 1, December 31,
(In millions) 2000 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Liabilities and shareholders' equity
Current liabilities
Short-term debt $ 2,071 $ 1,173
Accounts payable 886 553
Accrued compensation 327 243
Other current liabilities 537 412
- ------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 3,821 2,381
- ------------------------------------------------------------------------------------------------------------------------------------
Long-term debt, excluding current portion 3,983 3,395
- ------------------------------------------------------------------------------------------------------------------------------------
Senior deferrable notes 863 -
- ------------------------------------------------------------------------------------------------------------------------------------
Other long-term liabilities 1,803 1,566
- ------------------------------------------------------------------------------------------------------------------------------------
Deferred income tax liabilities 1,160 987
- ------------------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies
Shareholders' equity 3,750 3,209
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 15,380 $ 11,538
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY
Georgia-Pacific Corporation -- Georgia-Pacific Group
<TABLE>
<CAPTION>
Year ended
---------------------------------------------------------------
January 1, December 31,
(In millions) 2000 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shareholders' equity balance, beginning of year $ 3,209 $ 3,519 $ 3,682
Net income (loss) 716 98 (146)
Cash dividends paid (86) (90) (92)
Common stock repurchases (257) (427) (22)
Other comprehensive income (loss), net of taxes 11 (10) (5)
Other common stock activity 157 119 102
- ------------------------------------------------------------------------------------------------------------------------------------
Shareholders' equity balance, end of year $ 3,750 $ 3,209 $ 3,519
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
COMBINED STATEMENTS OF COMPREHENSIVE INCOME
Georgia-Pacific Corporation -- Georgia-Pacific Group
<TABLE>
<CAPTION>
Year ended
----------------------------------------------------------
January 1, December 31,
(In millions) 2000 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Net income (loss) $ 716 $ 98 $ (146)
Other comprehensive income (loss), before taxes:
Foreign currency translation adjustments 11 (14) (11)
Minimum pension liability adjustment 7 (3) 3
Income tax (expense) benefit related to other items of
comprehensive income (7) 7 3
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income (loss) $ 727 $ 88 $ (151)
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
GEORGIA-PACIFIC CORPORATION--GEORGIA-PACIFIC GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION. The Corporation, a Georgia corporation, is broadly
engaged in six business operations: the manufacture of building products
(including plywood, oriented strand board, various industrial wood products, and
softwood and hardwood lumber as well as certain nonwood products including
gypsum board, chemicals and other products); the distribution of building
products manufactured by the Corporation or purchased from others; the
manufacture of containerboard and packaging (including linerboard, medium, kraft
and corrugated packaging); the manufacture of pulp and paper (including
communication papers, market pulp, bleached board and tissue); the distribution
of paper products and supplies manufactured by the Corporation or purchased from
others; and the growing of timber on the approximately 4.7 million acres of
timberlands that the Corporation owns or leases. In 1999, these timberlands
supplied approximately 19% of the overall timber requirements of the
Corporation's manufacturing facilities.
On December 16, 1997, shareholders of the Corporation approved the creation
of two classes of common stock intended to reflect separately the performance of
the Corporation's manufacturing and timber businesses (the Letter Stock
Recapitalization). The Corporation's Articles of Incorporation were amended and
restated to (i) create a new class of stock designated as Georgia-Pacific
Corporation -Timber Group common stock, $0.80 par value per share (The Timber
Company stock), consisting of 250 million authorized shares; (ii) redesignate
each authorized share of the Corporation's common stock, $0.80 par value per
share (the Existing Common Stock) as, and convert each share into, one share of
Georgia-Pacific Corporation - Georgia-Pacific Group common stock (now two shares
of Georgia-Pacific Group common stock after giving effect to the May 14, 1999
two-for-one stock split), $0.80 par value per share (Georgia-Pacific Group
stock); (iii) increase the number of shares of Georgia-Pacific Group stock
authorized for issuance from 150 million shares to 400 million shares; and (iv)
authorize the distribution of one share of The Timber Company stock for each
outstanding share of Georgia-Pacific Group stock.
The Corporation's manufacturing and timber businesses are referred to
hereinafter as the "Georgia-Pacific Group" and "The Timber Company,"
respectively, or collectively as the "groups."
The Georgia-Pacific Group is a manufacturer and distributor of building products
as well as a producer and distributor of pulp and paper products. The
Georgia-Pacific Group includes a procurement function that is responsible for
purchasing timber and wood fiber for all the Georgia-Pacific Group's
manufacturing facilities. The Timber Company is engaged primarily in the growing
and selling of timber.
The Corporation has presented financial statements of the groups at
substantially the same level of detail as those of the Corporation to allow
investors to properly evaluate the financial condition and results of operations
of each business. It is the Corporation's expectation that investors will use
the groups' combined financial information in conjunction with the Corporation's
consolidated financial
<PAGE>
information to assist them in making informed financial decisions relative to
the acquisition or disposition of shares of each class of stock.
The financial statements of the groups comprise all of the accounts included in
the corresponding consolidated financial statements of the Corporation. The
separate financial statements of the Georgia-Pacific Group and The Timber
Company have been prepared on a basis that management believes to be reasonable
and appropriate and include (i) the historical balance sheets, results of
operations and cash flows for each of the groups, with all significant
intragroup transactions and balances eliminated; (ii) in the case of The Timber
Company's financial statements, assets and liabilities of the Corporation and
related transactions identified with The Timber Company, including allocated
portions of the Corporation's debt and general and administrative expense (G&A);
and (iii) in the case of the Georgia-Pacific Group's financial statements, all
other assets and liabilities and related transactions of the Corporation,
including allocated portions of the Corporation's debt and G&A. Intergroup
timber sales between the Georgia-Pacific Group and The Timber Company have not
been eliminated in either group's financial statements.
Notwithstanding the allocation of assets and liabilities (including contingent
liabilities) and shareholders' equity between the Georgia-Pacific Group and The
Timber Company for the purpose of preparing the respective financial statements
of each group, holders of Georgia-Pacific Group stock and The Timber Company
Sstock are shareholders of the Corporation and will continue to be subject to
all the risks associated with an investment in the Corporation and all of its
businesses, assets and liabilities. The allocation of assets and liabilities and
change in the equity structure of the Corporation resulting from the Letter
Stock Recapitalization did not result in a transfer or spin-off of any assets or
liabilities of the Corporation, or otherwise affect ownership of any assets or
responsibility for the liabilities of the Corporation or any of its
subsidiaries. As a result, the Letter Stock Recapitalization does not affect the
rights of holders of the Corporation's or any of its subsidiaries' debt.
Holders of Georgia-Pacific Group stock and The Timber Company stock have only
the rights customarily held by common shareholders of the Corporation and do not
have any rights related to their corresponding group except as set forth in
provisions relating to dividend and liquidation rights and requirements for a
mandatory dividend, redemption or conversion upon the disposition of assets of
their corresponding group, or have any right to vote on matters as a separate
voting group other than in limited circumstances as provided under Georgia law
or by stock exchange rules. The relative voting power of Georgia-Pacific Group
stock and The Timber Company stock will fluctuate from time to time, with each
share of Georgia-Pacific Group stock having one vote and each share of The
Timber Company stock having a number of votes based upon the ratio, over a
specified period prior to any shareholder vote, of the time-weighted average
market values of one share of The Timber Company stock and of one share of
Georgia-Pacific Group stock. This formula is intended to give each class of
common stock a number of votes proportionate to its aggregate market
capitalization at the time of any vote. Accordingly, changes in the market value
of Georgia-Pacific Group stock and The Timber Company stock will affect their
relative voting rights. As of January 1, 2000, the holders of Georgia-Pacific
Group stock had a substantial majority of the voting power of the Corporation.
Financial effects arising from either group that affect the Corporation's
results of operations or financial condition could, if significant, affect the
results of operations or financial condition of the other group and the market
price of the common stock relating to the other group. Any net losses of the
Georgia-Pacific Group or The Timber Company and dividends or distributions on,
or repurchases of, Georgia-Pacific Group stock or The Timber Company stock will
reduce the assets of the Corporation legally available for payment of dividends
on both Georgia-Pacific Group stock and The Timber Company stock.
The Board may, in its sole discretion, determine to convert shares of the class
of common stock related to one group into the class of common stock related to
the other group at any time at a 15% premium, or at a 10% premium in the case of
certain dispositions of all or substantially all of the properties or assets of
the group whose stock is being converted. Any conversion at any premium would
dilute the interests in the Corporation of the holders of the class of common
stock being issued in the conversion. In addition, any such conversion of a
class of common stock into another class of common stock would
<PAGE>
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.
The management and accounting policies applicable to the preparation of the
financial statements of the Georgia-Pacific Group and The Timber Company may be
modified or rescinded, or additional policies may be adopted, at the sole
discretion of the Board at any time without approval of the shareholders.
The Georgia-Pacific Group's combined financial statements reflect the
application of the management and allocation policies adopted by the Board to
various corporate activities, as described below. The Georgia-Pacific Group's
combined financial statements should be read in conjunction with the
Corporation's consolidated financial statements and The Timber Company's
combined financial statements.
FINANCIAL ACTIVITIES. At June 30, 1997, $1.0 billion of the Corporation's total
debt was allocated to The Timber Company for financial statement purposes, and
the balance of the Corporation's total debt was allocated to the Georgia-Pacific
Group. The Corporation's debt was allocated between the groups based upon a
number of factors including expected future cash flows, volatility of earnings,
and the ability to pay debt service and dividends. In addition, the Corporation
considered certain measures of creditworthiness, such as coverage ratios and
various tests of liquidity, as a means of ensuring that each group could
continue to pay debt service during a business downcycle. Management believes
that such allocation is equitable and reasonable.
At January 1, 2000, $970 million of the Corporation's debt was allocated to The
Timber Company and $6,054 million was allocated to the Georgia-Pacific Group.
The senior deferrable notes and related interest expense are allocated
specifically to the Georgia-Pacific Group (see Note 7 of the Notes to Combined
Financial Statements). The Corporation has not allocated any other debt
securities or instruments to either group. The debt of each group bears interest
at a rate equal to the weighted average interest rate of all the Corporation's
debt calculated on a quarterly basis. This weighted average interest rate
excludes the interest on the senior deferrable notes. Management believes that
this method of allocation of the cost of debt is equitable and provides a
reasonable estimate of the cost attributable to the groups.
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, investing activities,
dividend payments, share repurchases and other financing activities. Interest is
charged to each group in proportion to the respective amount of each group's
debt. Changes in the cost of the Corporation's debt are reflected in adjustments
to the weighted average interest cost of such debt. Dividend costs with respect
to any preferred stock issued by the Corporation are charged in a similar
manner.
ALLOCATION OF SHARED SERVICES. A portion of the Corporation's shared G&A (such
as executive management, human resources, legal, accounting and auditing, tax,
treasury, strategic planning and information systems support) has been allocated
to the Georgia-Pacific Group based upon identification of such services
specifically used by the Georgia-Pacific Group. Where determinations based on
specific usage alone have been impracticable, other methods and criteria were
used that management believes are equitable and provide a reasonable estimate of
the cost attributable to the Georgia-Pacific Group. These methods consisted of
allocating costs based on (i) number of employees of each group, (ii) percentage
of office space of each group and (iii) estimated percentage of staff time
allocable to each group. The total of these allocations was $248 million, $278
million and $339 million in 1999, 1998 and 1997, respectively. It is not
practicable to provide a detailed estimate of the expenses that would be
recognized if the Georgia-Pacific Group were a separate legal entity.
ALLOCATION OF EMPLOYEE BENEFITS. A portion of the Corporation's employee benefit
costs, including pension and postretirement health care and life insurance
benefits, has been allocated to the Georgia-Pacific Group. The Georgia-Pacific
Group's pension cost related to its participation in the Corporation's
noncontributory defined benefit pension plan, and other employee benefit costs
related to its participation in the Corporation's postretirement health care and
life insurance benefit plans, are
<PAGE>
actuarially determined based on the number of its employees and an allocable
share of the plan assets and are calculated in accordance with SFAS No. 87,
"Employers' Accounting for Pensions," and SFAS No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions," respectively. Management
believes such method of allocation is equitable and provides a reasonable
estimate of the costs attributable to the Georgia-Pacific Group.
Since plan assets are not segregated into separate accounts or restricted to
providing benefits to employees of the Georgia-Pacific Group, assets of the
Corporation's employee benefit plans may be used to provide benefits to
employees of both the Georgia-Pacific Group and The Timber Company. Plan assets
have been allocated to the Georgia-Pacific Group based on the percentage of its
projected benefit obligation to the plans' total projected benefit obligations.
The discussion of the Georgia-Pacific Group's retirement plans (see Note 10 of
the Notes to Combined Financial Statements) should be read in conjunction with
the Corporation's consolidated financial statements and notes thereto.
ALLOCATION OF FEDERAL AND STATE INCOME TAXES. The federal income taxes of the
Corporation and the subsidiaries that own assets allocated between the groups
are determined on a consolidated basis. Consolidated federal income tax
provisions and related tax payments or refunds are allocated between the groups
based principally on the taxable income and tax credits directly attributable to
each group. Such allocations reflect each group's contribution (positive or
negative) to the Corporation's consolidated federal taxable income and the
consolidated federal tax liability and tax credit position. Tax benefits that
cannot be used by the group generating those benefits, but can be used on a
consolidated basis, are credited to the group that generated such benefits. Had
the groups filed separate tax returns, the provision for income taxes and net
income for each group would not have significantly differed from the amounts
reported on the groups' statements of income for the years ended January 1, 2000
and December 31, 1998 and 1997. However, the amounts of current and deferred
taxes and taxes payable or refundable allocated to each group on the historical
financial statements may differ from those that would have been allocated had
the groups filed separate income tax returns.
Depending on the tax laws of the respective jurisdictions, state and local
income taxes are calculated on either a consolidated or combined basis or on a
separate corporation basis. State income tax provisions and related tax payments
or refunds determined on a consolidated or combined basis are allocated between
the groups based on their respective contributions to such consolidated or
combined state taxable incomes. State and local income tax provisions and
related tax payments that are determined on a separate corporation basis are
allocated 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.
The discussion of the Georgia-Pacific Group's income taxes (see Note 9 of the
Notes to Combined Financial Statements) should be read in conjunction with the
Corporation's consolidated financial statements and notes thereto.
DIVIDENDS. For purposes of the historical financial statements of the
Georgia-Pacific Group and The Timber Company for periods prior to 1998, all
dividends declared and paid by the Corporation were evenly allocated between the
groups. Management believes that such method of allocation is equitable and
provides a reasonable estimate of the dividends that would have been declared
and paid in respect of each class of common stock. The amount of earnings
available for payment of dividends on Georgia-Pacific Group stock and on The
Timber Company stock (i.e., the available dividend amounts) on any date is the
amount in excess of the minimum amount necessary for the particular group to be
able to pay its debts as they become due in the usual course of business. Future
dividends will not bear a direct relationship to earnings and retained earnings
as expressed on each group's combined financial statements in accordance with
generally accepted accounting principles. Accordingly, a mathematical
calculation of the available dividend amount for either group cannot be made.
STOCK SPLIT. On May 4, 1999, the Board declared a two-for-one split of the
Georgia-Pacific Group's stock in the form of a special dividend to shareholders
of record on May 14, 1999. The special dividend
<PAGE>
was paid as one share of Georgia-Pacific Group stock for each such share
outstanding on June 3, 1999. A total of 95,126,911 additional shares were issued
in conjunction with the stock split. The Georgia-Pacific Group's par value of
$0.80 remained unchanged. All historical share and per share amounts have been
restated to reflect retroactively the stock split.
REVENUE RECOGNITION. The Georgia-Pacific Group recognizes revenue when title to
the goods sold passes to the buyer, which is generally at the time of shipment.
INCOME PER SHARE. Basic earnings per share are computed based on net income and
the weighted average number of common shares outstanding. Diluted earnings per
share reflect the assumed issuance of common shares under long-term incentive,
stock option and stock purchase plans, and pursuant to the terms of the PEPS
Units. The computation of diluted earnings per share does not assume conversion
or exercise of securities that would have an antidilutive effect on earnings per
share. Income per share for each group is reflected on a pro forma basis for
1997 as if the Letter Stock Recapitalization had occurred on January 1, 1997.
Amounts are computed for each class of common stock based on the separate
earnings attributed to each of the respective businesses.
Georgia-Pacific Corporation--Georgia-Pacific Group
<TABLE>
<CAPTION>
January 1, December 31,
(In millions, except shares and per share amounts) 2000 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Basic and diluted income (loss) available to shareholders (numerator):
Income (loss) before extraordinary items and accounting
change $ 716 $ 111 $ (86)
Extraordinary items, net of taxes - (13) -
Accounting change, net of taxes - - (60)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 716 $ 98 $ (146)
====================================================================================================================================
Shares (denominator):
Average shares outstanding 171,807,884 179,765,172 182,860,880
Dilutive securities:
Options 3,677,295* 1,249,430** -***
Employee stock purchase plans 438,630 71,620 -***
- ------------------------------------------------------------------------------------------------------------------------------------
Total assuming conversion 175,923,809 181,086,222 182,860,880
====================================================================================================================================
Per share amounts:
Basic
Income (loss) before extraordinary items and accounting
change $ 4.17 $ 0.62 $ (0.47)
Extraordinary items, net of taxes - (0.07) -
Accounting change, net of taxes - - (0.33)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 4.17 $ 0.55 $ (0.80)
- ------------------------------------------------------------------------------------------------------------------------------------
Diluted
Income (loss) before extraordinary items and accounting
change $ 4.07 $ 0.61 $ (0.47)
Extraordinary items, net of taxes - (0.07) -
Accounting change, net of taxes - - (0.33)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 4.07 $ 0.54 $ (0.80)
====================================================================================================================================
</TABLE>
<PAGE>
* Options to purchase 176,490 shares of Georgia-Pacific Group stock at prices
ranging from $43.58 to $91.58 per share were outstanding during 1999, as were
PEPS Units to purchase Georgia-Pacific Group stock. However, these were not
included in the computation of diluted earnings per share because the options'
exercise price and the PEPS Unit purchase contract price were greater than the
average market price of the common shares.
** Options to purchase 23,856 shares of Georgia-Pacific Group stock at $30.25
per share were outstanding during 1998 but were not included in the computation
of diluted earnings per share because the options' exercise price was greater
than the average market price of the common shares.
*** Options to purchase 10,710,954 shares of Georgia-Pacific Group stock at
prices ranging from $21.00 to $28.65 per share were outstanding during 1997, as
were shares subscribed under the 1997 Employee Stock Purchase Plan. However, due
to operating losses, these shares are antidilutive and are not included in the
calculation of diluted earnings per share.
INVENTORY VALUATION. Inventories are valued at the lower of year-to-date average
cost or market and include the costs of materials, labor and manufacturing
overhead. The last-in, first-out (LIFO) dollar value pool method was used to
determine the cost of approximately 65% and 59% of inventories at January 1,
2000 and December 31, 1998, respectively.
TIMBER CONTRACTS. The Georgia-Pacific Group capitalizes purchases of standing
timber related to its timber procurement function, and does not purchase
timberland. The cost of timber harvested is calculated by individual tract and
is based on the volume of timber harvested and the capitalized cost.
PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment are recorded at
cost. Lease obligations for which the Georgia-Pacific Group assumes or retains
substantially all the property rights and risks of ownership are capitalized.
Replacements of major units of property are capitalized, and the replaced
properties are retired. Replacements of minor components of property, and repair
and maintenance costs, are charged to expense as incurred.
Depreciation is computed using the straight-line method over the estimated
useful lives of the related assets. Useful lives are 25 years for land
improvements, 20 to 45 years for buildings, and 3 to 20 years for machinery and
equipment. Upon retirement or disposition of assets, cost and accumulated
depreciation are removed from the related accounts and any gain or loss is
included in income.
The Georgia-Pacific Group capitalizes incremental costs that are directly
associated with the development of software for internal use. Amounts are
amortized over five years beginning when the assets are placed in service.
Capitalized costs were $66 million at January 1, 2000 and $31 million at
December 31, 1998. Amounts are included as property, plant and equipment on the
accompanying balance sheets.
In 1997, the Georgia-Pacific Group adopted EITF 97-13, "Accounting for Costs
Incurred in Connection with a Consulting Contract or an Internal Project That
Combines Business Process Reengineering and Information Tecnology
Transformation," which resulted in a one-time, after-tax charge of $60 million.
The Georgia-Pacific Group capitalizes interest on projects when construction
takes considerable time and entails major expenditures. Such interest is charged
to the property, plant and equipment accounts and amortized over the approximate
life of the related assets. Interest capitalized, expensed and paid was as
follows:
<TABLE>
<CAPTION>
Year ended
------------------------------------------------------------
January 1, December 31,
(In millions) 2000 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total interest costs $ 432 $ 381 $ 392
Interest capitalized (6) (9) (11)
- ----------------------------------------------------------------------------------------------------------------------------------
Interest expense $ 426 $ 372 $ 381
<PAGE>
==================================================================================================================================
Interest paid by the Corporation $ 473 $ 468 $ 475
==================================================================================================================================
Portion of interest paid charged to the Georgia-Pacific Group $ 416 $ 397 $ 391
==================================================================================================================================
</TABLE>
LANDFILLS AND LAGOONS. The Georgia-Pacific Group accrues for landfill closure
costs over the periods that benefit from the use of the landfill and accrues for
lagoon clean-out costs over the useful period between clean-outs.
GOODWILL. The Georgia-Pacific Group amortizes costs in excess of fair value of
net assets of businesses acquired using the straight-line method over a period
not to exceed 40 years. The Georgia-Pacific Group reviews the recorded value of
its goodwill annually, or sooner if events or changes in circumstances indicate
that the carrying amount may exceed fair value. Recoverability is then
determined by comparing the undiscounted net cash flows of the assets to which
the goodwill applies to the net book value, including goodwill, of those assets.
Amortization expense was $69 million, $62 million and $59 million in 1999, 1998
and 1997, respectively. Accumulated amortization at January 1, 2000 and December
31, 1998 was $615 million and $546 million, respectively.
ENVIRONMENTAL MATTERS. The Georgia-Pacific Group recognizes a liability for
environmental remediation costs when it believes it is probable a liability has
been incurred and the amount can be reasonably estimated. The liabilities are
developed based on currently available information and reflect the participation
of other potentially responsible parties, depending on the parties' financial
condition and probable contribution. The accruals are recorded at undiscounted
amounts and are reflected as other liabilities on the accompanying balance
sheets.
Environmental costs are generally capitalized when the costs improve the
condition of the property or the costs prevent or mitigate future contamination.
All other costs are expensed.
USE OF ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions. These estimates and assumptions affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements as well as reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.
ACCOUNTING STANDARDS CHANGE. In July 1999, the FASB issued SFAS No. 137,
providing for a one-year delay of the effective date of SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes accounting and reporting standards for derivative instruments and
for hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities on its balance sheet and measure those instruments
at fair value. The accounting for changes in the fair value of a derivative
depends on the intended use of the derivative and the resulting designation. The
Georgia-Pacific Group will be required to adopt SFAS No. 133 in 2001. Management
is evaluating the effect of this statement on the Corporation's derivative
instruments, which are primarily interest rate swaps, foreign currency forward
contracts, commodity futures and long-term purchase commitments. The impact of
such adjustments to fair value is not expected to be material to the
Georgia-Pacific Group's financial position.
CHANGE IN FISCAL YEAR. On or about April 22, 1999, the Georgia-Pacific Group
determined to change its fiscal year from December 31 to end on the Saturday
closest to December 31. Additionally, the Georgia-Pacific Group reports its
quarterly periods on a 13-week basis ending on a Saturday. The impact of one
additional day on the year ended January 1, 2000 was not material. There will be
no transition period on which to report.
<PAGE>
RECLASSIFICATIONS. Certain 1998 and 1997 amounts have been reclassified to
conform with the 1999 presentation. Beginning in 1999 and in connection with the
acquisition of Unisource (see Note 4 of the Notes to Combined Financial
Statements), certain selling and distribution expenses, which had previously
been included in "Net sales," "Cost of sales" and "General and administrative"
expenses, are now presented separately on the combined statements of income. In
addition, amortization of goodwill, which had previously been included in "Cost
of sales," is now presented in "Depreciation, amortization and cost of timber
harvested" on the combined statements of income.
NOTE 2. FACTORS AFFECTING THE GEORGIA-PACIFIC GROUP'S BUSINESS
CYCLICALITY AND VOLATILITY OF EARNINGS. The pulp and paper industry and, to a
lesser extent, the building products industry are subject to highly cyclical
earnings patterns, which in recent years have become more volatile. This
cyclicality is attributed in large measure to capital spending patterns in these
industries. Historically, the Georgia-Pacific Group and its competitors have
tended to invest large amounts of capital in building new manufacturing plants
and in maintaining and rebuilding existing manufacturing facilities. These
capital investments typically have been made at or shortly after earnings peaks.
Given the long periods of time required to build new facilities and install new
manufacturing equipment (generally 18-36 months), new manufacturing capacity in
both the pulp and paper and the building products industries has frequently come
on-line at times when prices for these products are falling, thus exacerbating
supply and demand imbalances and causing the prices of many of the
Georgia-Pacific Group's products to fall sharply. Furthermore, the
Georgia-Pacific Group's position as one of the leading worldwide manufacturers
of several key products that are essentially commodities has further exacerbated
the volatility of the Georgia-Pacific Group's earnings. This increased
volatility results from the fact that relatively minor movements in the price of
finished products cause major fluctuations in the Georgia-Pacific Group's
operating income due to the significant percentage of worldwide volume produced
by it. There can be no assurance that the cyclicality that has characterized the
pulp and paper and the building products industries in the past will not
continue or increase in future years.
RAW MATERIALS. The Georgia-Pacific Group relies on supplies of timber and wood
fiber to manufacture its wood products and pulp, the latter of which it
processes further in the production of a variety of paper products and tissue.
Under the operating policy governing sales of timber by The Timber Company to
the Georgia-Pacific Group, The Timber Company supplied 19% of the
Georgia-Pacific Group's timber needs in 1999 and will continue to supply a
portion of such needs at least through 2000. For a discussion of this operating
policy, see Note 14 of the Notes to Combined Financial Statements. The
Georgia-Pacific Group purchases the remainder of its timber and wood fiber from
a large number of other suppliers.
Because the Georgia-Pacific Group is highly dependent on supplies of timber and
wood fiber, risk factors associated with suppliers' operations and the forest
industry in general, including harvesting limitations, competition and
environmental regulation, could affect the Georgia-Pacific Group's results of
operations.
COMPETITION. The Georgia-Pacific Group experiences competition in virtually all
of its product lines from both large and small producers. Because most of its
products are essentially commodities, it competes principally on the basis of
price. Competition is intense, particularly in periods of excess supply.
Increased competitive pressures could have a material adverse effect on the net
sales, operating income and cash flows of the Georgia-Pacific Group.
ENVIRONMENTAL REGULATION. The Georgia-Pacific Group's key businesses also are
subject to extensive environmental regulation that has resulted and in the next
few years will result in major capital expenditures and modifications to
production processes to ensure compliance. Among these requirements are the
Clean Air Act, the Clean Water Act and the "Cluster Rule." On April 15, 1998,
the U.S. Environmental Protection Agency promulgated a set of regulations known
as the Cluster Rule that establishes new requirements for air emissions and
wastewater discharges from pulp and paper mills. The Georgia-Pacific Group
estimates that it will make capital expenditures up to approximately $550
<PAGE>
million through April 2006, in order to comply with the Cluster Rule's
requirements. Of that total, approximately $160 million was spent through 1999
and about $350 million will be spent by the end of 2000. The Georgia-Pacific
Group is also subject to other federal and state laws, including the Resource
Conservation and Recovery Act and the Comprehensive Environmental Response,
Compensation and Liability Act. There can be no assurance that such laws or
future legislation or administrative or judicial action with respect to
protection of the environment will not have a material adverse effect on net
sales, operating income or cash flows of the Georgia-Pacific Group.
NOTE 3. OPERATING SEGMENT INFORMATION
The Georgia-Pacific Group has five reportable operating segments: building
products, building products distribution, containerboard and packaging, pulp and
paper, and paper distribution.
Manufactured products in the building products segment consist primarily of wood
panels (plywood, oriented strand board, hardboard and particleboard), lumber,
gypsum products and chemicals. The building products distribution segment sells
a wide range of building products manufactured by the Georgia-Pacific Group or
purchased from others. These segments of the business are primarily affected by
the level of housing starts; the level of repairs, remodeling and additions;
industrial markets; commercial building activity; the availability and cost of
financing; and changes in industry capacity.
The containerboard and packaging segment produces linerboard, medium, kraft and
corrugated packaging. The pulp and paper segment produces communication papers,
market pulp, bleached board and tissue. The paper distribution segment sells and
distributes high-quality printing, writing and copying papers, and a broad range
of packaging and maintenance supplies, equipment and services. Markets for these
segments are affected primarily by changes in industry capacity, the level of
economic growth in U.S. and export markets, and fluctuations in currency
exchange rates.
The accounting policies of the segments are primarily the same as those
described in the summary of significant accounting policies. The Georgia-Pacific
Group evaluates performance based on profit or loss from operations before
interest and income taxes (i.e., operating profit or loss).
The Georgia-Pacific Group accounts for intersegment sales and transfers as if
the sales or transfers were to third parties, that is, at current market
prices.The Georgia-Pacific Group's reportable segments are strategic business
units that offer different products and services. They are managed separately
because each business has different customers and requires different production
processes.
The "Other" nonreportable segment includes some miscellaneous businesses,
certain goodwill amortization, unallocated corporate operating expenses, and the
elimination of intersegment sales and related profits.The Georgia-Pacific Group
has a large and diverse customer base, which includes some customers located in
foreign countries. No single unaffiliated customer accounted for more than 10%
of total sales in any year during the three years ended January 1, 2000. Sales
to foreign markets in 1999, 1998 and 1997 were 7%, 7% and 8%, respectively.
These sales were primarily to customers in Canada, Europe, Asia and Latin
America. Information on operations in U.S. and foreign markets is as follows:
REVENUES*
<TABLE>
<CAPTION>
Year ended
---------------------------------------------------------------
January 1, December 31,
(In millions) 2000 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $ 16,518 $ 12,298 $ 11,911
Foreign countries 1,278 931 1,068
====================================================================================================================================
</TABLE>
*Revenues are attributed to countries based on location of customer.
<PAGE>
Because a substantial portion of the Georgia-Pacific Group's foreign revenues
are derived from the sale of U.S.-produced products abroad, assets located
outside the United States are not material.
<TABLE>
<CAPTION>
Building products Containerboard
(In millions) Building products distribution and packaging
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1999
Net sales to unaffiliated customers $ 3,869 $ 4,858 $ 2,327
Intersegment sales 2,295 11 64
- ------------------------------------------------------------------------------------------------------------------------------------
Total net sales $ 6,164 $ 4,869 $ 2,391
Operating profit (loss) 1,139 63 344
Depreciation, amortization and cost of timber
harvested 559 36 157
Property, plant and equipment investments 265 16 92
Timber purchases 372 - -
Acquisitions 51 - 23
Assets 2,597 1,006 1,955
====================================================================================================================================
1998
Net sales to unaffiliated customers $ 3,337 $ 4,325 $ 2,044
Intersegment sales 2,455 8 60
- ------------------------------------------------------------------------------------------------------------------------------------
Total net sales $ 5,792 $ 4,333 $ 2,104
Operating profit (loss) 603 1 106
Depreciation, amortization and cost of timber
harvested 641 45 148
Property, plant and equipment investments 186 12 84
Timber purchases 475 - -
Acquisitions 19 - 93
Assets 2,517 990 1,871
====================================================================================================================================
1997
Net sales to unaffiliated customers $ 3,139 $ 4,398 $ 1,765
Intersegment sales 2,406 8 52
- ------------------------------------------------------------------------------------------------------------------------------------
Total net sales $ 5,545 $ 4,406 $ 1,817
Operating profit (loss) 490 (171) (6)
Depreciation, amortization and cost of timber
harvested 662 48 134
Property, plant and equipment investments 169 44 132
Timber purchases 481 - -
Acquisitions - - -
Assets 2,452 1,179 1,735
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Paper
(In millions) Pulp and paper distribution All other Combined
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999
Net sales to unaffiliated customers $ 3,407 $ 3,331 $ 4 $ 17,796
Intersegment sales 484 5 (2,859)* -
- ------------------------------------------------------------------------------------------------------------------------------------
Total net sales $ 3,891 $ 3,336 $ (2,855) $ 17,796
Operating profit (loss) 266 78 (300)** 1,590
<PAGE>
Depreciation, amortization and cost of timber
harvested 351 26 74 1,203
Property, plant and equipment investments 262 45 41 721
Timber purchases - - - 372
Acquisitions 755 829 - 1,658
Assets 4,722 2,369 2,731 15,380
====================================================================================================================================
1998
Net sales to unaffiliated customers $ 3,521 $ - $ 2 $ 13,229
Intersegment sales 33 - (2,556)* -
- ------------------------------------------------------------------------------------------------------------------------------------
Total net sales $ 3,554 $ - $ (2,554) $ 13,229
Operating profit (loss) 133 - (273)** 570
Depreciation, amortization and cost of timber
harvested 354 - 85 1,273
Property, plant and equipment investments 305 - 45 632
Timber purchases - - - 475
Acquisitions - - - 112
Assets 3,808 - 2,352 11,538
====================================================================================================================================
1997
Net sales to unaffiliated customers $ 3,675 $ - $ 2 $ 12,979
Intersegment sales 26 - (2,492)* -
- ------------------------------------------------------------------------------------------------------------------------------------
Total net sales $ 3,701 $ - $ (2,490) $ 12,979
Operating profit (loss) 201 - (251)** 263
Depreciation, amortization and cost of timber
harvested 386 - 89 1,319
Property, plant and equipment investments 306 - 64 715
Timber purchases - - - 481
Acquisitions - - - -
Assets 3,951 - 2,462 11,779
====================================================================================================================================
</TABLE>
* Elimination of intersegment sales
** Includes some miscellaneous businesses, certain goodwill amortization,
unallocated corporate operating expenses and the elimination of profit on
intersegment sales.
RECONCILIATION OF SEGMENT OPERATING PROFITS TO COMBINED NET INCOME
Georgia-Pacific Corporation -- Georgia-Pacific Group
<TABLE>
<CAPTION>
Year ended
---------------------------------------------------------------
January 1, December 31,
(In millions) 2000 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total operating profits $ 1,590 $ 570 $ 263
Interest expense 426 372 381
Provision (benefit) for income taxes 448 87 (32)
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
Income (loss) before extraordinary items and accounting change 716 111 (86)
Extraordinary items, net of taxes - (13) -
Accounting change, net of taxes - - (60)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 716 $ 98 $ (146)
====================================================================================================================================
</TABLE>
NOTE 4. ACQUISITIONS, DIVESTITURES AND UNUSUAL ITEMS
ACQUISITIONS AND DIVESTITURES. The following acquisitions and divestitures were
completed during 1999, 1998 and 1997.
At the end of the second quarter of 1999, the Georgia-Pacific Group, through its
wholly owned subsidiary Atlanta Acquisition Corp., completed a tender offer for
all the outstanding shares of common stock of Unisource, the largest independent
marketer and distributor of printing and imaging paper and supplies in North
America, and acquired 90.7% of the then outstanding shares of Unisource. On July
6, 1999, Atlanta Acquisition Corp. was merged with and into Unisource and, by
virtue of such merger, shares of Unisource that were not tendered to the
Georgia-Pacific Group (other than shares held by Unisource and the
Georgia-Pacific Group and its subsidiaries) were converted into the right to
receive $12.00 per Unisource share in cash, subject to dissenters' rights. The
Georgia-Pacific Group is paying for such untendered shares as they are delivered
to the exchange agent for cancellation. Through January 1, 2000, the
Georgia-Pacific Group paid approximately $829 million for such shares. In
addition, the Georgia-Pacific Group assumed $785 million of Unisource debt in
the acquisition.
Unisource's results of operations were consolidated with those of the
Georgia-Pacific Group beginning July 4, 1999. The Georgia-Pacific Group has
accounted for this transaction using the purchase method to record a new cost
basis for assets acquired and liabilities assumed. The allocation of the
purchase price and acquisition costs to the assets acquired and liabilities
assumed is preliminary as of January 1, 2000, and is subject to change pending
finalization of studies of fair value and the finalization of management's plans
to consolidate or close additional distribution centers. The difference between
the purchase price and the fair market value of the assets acquired and
liabilities assumed was recorded as goodwill and is being amortized over 40
years. The preliminary allocation of the purchase price of the acquisition is
summarized as follows:
(In millions)
============================================================================
Current assets $ 1,228
Property, plant and equipment 230
Other noncurrent assets 27
Goodwill 762
Liabilities (1,418)
- ----------------------------------------------------------------------------
Net cash paid for Unisource $ 829
============================================================================
The following unaudited pro forma financial data has been prepared assuming that
the acquisition of Unisource and related financings were consummated on January
1, 1998. This pro forma financial data is presented for informational purposes
and is not necessarily indicative of the operating results that would have
occurred had the acquisition been consummated on January 1, 1998, nor does it
include adjustments for expected synergies or cost savings. Accordingly, this
pro forma data is not necessarily indicative of future operations.
<PAGE>
<TABLE>
<CAPTION>
(In millions, except per share amounts) Year ended
------------------------------------------------------------
January 1, December 31,
2000 1998
====================================================================================================================================
<S> <C> <C>
Net sales $ 20,812 $ 20,246
Income (loss) before extraordinary items 709 (145)
Net income (loss) 709 (158)
Basic income (loss) before extraordinary items per share 4.12 (0.81)
Diluted income (loss) before extraordinary items per share 4.03 (0.81)
Basic earnings (loss) per share 4.12 (0.88)
Diluted earnings (loss) per share 4.03 (0.88)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The 1998 pro forma financial data includes non-recurring restructuring and asset
write-down charges of $225 million ($178 million after taxes) taken by
Unisource.
The Georgia-Pacific Group has nearly finalized and is in various phases of
implementing plans to restructure existing Unisource activities, including the
consolidation or closure of certain distribution centers, closure of the
Unisource headquarters facility, termination of redundant headcount and the
relocation of certain administrative functions. In connection with the
acquisition of Unisource, the Georgia-Pacific Group recorded liabilities
totaling approximately $71 million for employee termination (relating to
approximately 1,680 hourly and salaried employees) and relocation costs, and $20
million for closing costs of 48 facilities. As a result of this program,
approximately 580 employees were terminated and 31 facilities were closed or
consolidated in 1999. Finalization of management's plans to consolidate or close
additional distribution centers and changes in implementation plans could result
in additional liabilities recorded as part of the purchase price or charges to
earnings. The following table provides a rollforward of the $91 million reserve
for restructuring from the date of acquisition through January 1, 2000:
<TABLE>
<CAPTION>
Balance Balance
July 4, January 1,
(In millions) 1999 Additions Usage 2000
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Employee separation $ 71 $ - $ (28) $ 43
Facility closing costs and asset
impairments 20 - (6) 14
- ------------------------------------------------------------------------------------------------------------------------------
Total $ 91 $ - $ (34) $ 57
==============================================================================================================================
</TABLE>
In addition, during 1999, the Georgia-Pacific Group completed the acquisition of
a packaging plant, four treated lumber facilities, a chemical business and
lumber transportation assets for a total consideration of approximately $74
million in cash. The results of operations of the packaging plant and treated
lumber facilities were consolidated with those of the Georgia-Pacific Group
beginning in the second quarter of 1999. The operating results of the chemical
business and lumber transportation assets were consolidated with those of the
Georgia-Pacific Group beginning in the third and fourth quarters, respectively,
of 1999. The Georgia-Pacific Group has accounted for these business combinations
using the purchase method to record a new cost basis for assets acquired and
liabilities assumed.
<PAGE>
Effective October 3, 1999, the Georgia-Pacific Group and Chesapeake completed a
previously announced agreement to create Georgia-Pacific Tissue, a joint venture
in which the two companies have combined their away-from-home tissue businesses.
The Georgia-Pacific Group contributed substantially all the assets of its
commercial tissue business to the joint venture. The Georgia-Pacific Group
controls and manages the joint venture and owns 95% of its equity. Chesapeake
contributed the assets of its Wisconsin Tissue business to the joint venture,
for which it received a 5% equity interest in the joint venture and an initial
cash distribution of approximately $755 million.
The results of the Wisconsin Tissue operations were combined with the
Georgia-Pacific Group's commercial tissue business beginning on October 3, 1999,
when the Georgia-Pacific Tissue joint venture was formed. The Georgia-Pacific
Group has accounted for this transaction using the purchase method to record a
new cost basis for assets acquired and liabilities assumed. The allocation of
the purchase price and acquisition costs to the assets acquired and liabilities
assumed is preliminary as of January 1, 2000, and is subject to change pending
the finalization of management's plans for manufacturing and distribution
activities. The difference between the purchase price and the fair market value
of the assets acquired and liabilities assumed was recorded as goodwill and is
being amortized over 40 years. The preliminary allocation of the purchase price
of the acquisition is summarized as follows:
(In millions)
======================================================================
Current assets $ 97
Property, plant and equipment 632
Goodwill 290
Liabilities (264)
- -----------------------------------------------------------------------
Net cash paid for Wisconsin Tissue $ 755
=======================================================================
The Georgia-Pacific Group has completed an organizational restructuring of the
sales, marketing, administrative and manufacturing support activities for its
away-from-home tissue business, which resulted in the elimination of
approximately 300 salaried and hourly positions. The Georgia-Pacific Group
recorded liabilities totaling approximately $7 million for termination and
relocation costs of Wisconsin Tissue employees. This $7 million liability was
included as part of the Wisconsin Tissue assets purchase price. In addition, the
Georgia-Pacific Group recorded liabilities totaling approximately $2 million for
the termination and relocation of employees of the Georgia-Pacific Group. This
$2 million liability was charged to earnings in 1999. As a result of these
programs, approximately 100 employees were terminated and approximately $2
million of the termination and relocation reserves was used in 1999. The
Georgia-Pacific Group has not yet finalized its plans for manufacturing and
distribution activities. Finalization of these plans may result in additional
liabilities recorded as part of the purchase price or charges to earnings.
In June 1999, the Corporation sold 440,000 acres of its timberlands in Maine. In
conjunction with this sale, the Corporation received notes from the purchaser in
the amount of $51 million. In November 1999, the Corporation monetized these
notes through the issuance of notes payable in a private placement. The proceeds
of this transaction were credited to The Timber Company through the intergroup
account. The Corporation will use proceeds from the notes received from the
purchaser to fund payments required for the notes payable. The notes receivable
are classified as "Other assets" and the notes payable are classified as "Other
long-term liabilities" on the accompanying balance sheets at January 1, 2000.
On June 30, 1998, the Georgia-Pacific Group completed its acquisition of CeCorr,
a leading independent producer of corrugated sheets in the United States. On
June 30, 1998, the Georgia-Pacific
<PAGE>
Group paid approximately $93 million in cash (net of $2 million of cash
acquired) and issued approximately 3.2 million shares of Georgia-Pacific Group
stock valued at approximately $28.94 per share for all the outstanding shares of
CeCorr. In addition, the Georgia-Pacific Group assumed approximately $92 million
of CeCorr's debt, of which $34 million was owed to the Georgia-Pacific Group
($58 million net debt assumed). On July 2, 1998, a former owner of CeCorr
exercised his right to resell to the Georgia-Pacific Group approximately 2.2
million shares of Georgia-Pacific Group stock issued in the transaction.
CeCorr's results of operations were consolidated with those of the
Georgia-Pacific Group beginning July 1, 1998. The Georgia-Pacific Group
accounted for the CeCorr acquisition using the purchase method to record a new
cost basis for assets acquired and liabilities assumed.
In March 1997, the Corporation sold its Martell, California, operations for $308
million. Assets included in this transaction were 127,000 acres of timberlands
allocated to The Timber Company, and a sawmill and a particleboard plant
allocated to the Georgia-Pacific Group. In conjunction with the sale of its
Martell operations, the Corporation received notes from the purchaser in the
amount of $270 million related to the timberlands. In April 1997, the
Corporation monetized the notes through the issuance of notes payable in a
private placement. The proceeds of this transaction were credited to The Timber
Company through the intergroup account. The notes receivable are classified as
"Other assets" and the notes payable are classified as "Other long-term
liabilities" on the accompanying balance sheets. The Georgia-Pacific Group
recognized a pretax gain of approximately $14 million ($9 million after taxes)
on the portion of the sale allocated to the sawmill and the particleboard plant.
The amount is reflected in "Other income" on the accompanying statements of
income.
BUILDING PRODUCTS DISTRIBUTION SEGMENT RESTRUCTURING. In December 1997, the
Georgia-Pacific Group began a restructuring plan that included disposing of its
millwork fabrication facilities nationwide as well as several building products
distribution centers located in the Western United States. A reserve of $70
million was recorded in the 1997 fourth quarter for anticipated liabilities and
write-down of assets associated with the plan. The execution of the plan
included termination of approximately 1,770 employees in 1998. The employees
included hourly and salaried personnel employed in the identified millwork
fabrication facilities and distribution centers, and associated sales and
administrative personnel. The Georgia-Pacific Group also accrued related
pension, outplacement and retention expenses for these employees. The total
amount of the 1997 charge related to employee severance was $15 million and is
reflected in "Cost of sales" and "General and administrative" expenses on the
accompanying statements of income. No termination benefits were paid in 1997
related to this plan.
The following table provides a rollforward of the remaining reserves for
business restructurings from December 31, 1998 to January 1, 2000:
<TABLE>
<CAPTION>
Balance Balance
December 31, January 1,
(In millions) 1998 Additions Usage 2000
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Employee separation $ - $ - $ - $ -
Facility closing costs and asset
impairments 2 - (2) -
- -----------------------------------------------------------------------------------------------------------------------------
Total $ 2 $ - $ (2) $ -
=============================================================================================================================
</TABLE>
Prior to 1996, the Georgia-Pacific Group implemented a program to change and
improve certain processes in the building products distribution segment. The
Georgia-Pacific Group expensed $10 million of termination benefits in 1997
related to this program. As a result of this program, approximately 720
employees were terminated in 1997.
<PAGE>
NOTE 5. RECEIVABLES
The Georgia-Pacific Group has a large, diversified customer base, which includes
some customers located in foreign countries. The Georgia-Pacific Group closely
monitors extensions of credit and has not experienced significant losses related
to its receivables. In addition, a portion of the receivables from foreign sales
is covered by confirmed letters of credit to help ensure collectibility.
Supplemental information on the accounts receivable balances at January 1, 2000
and December 31, 1998 is as follows:
<TABLE>
<CAPTION>
January 1, December 31,
(In millions) 2000 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Receivables
Trade $ 2,183 $ 1,169
Other 138 87
- ------------------------------------------------------------------------------------------------------------------------------------
2,321 1,256
Less allowances 25 25
- ------------------------------------------------------------------------------------------------------------------------------------
Receivables, net $ 2,296 $ 1,231
====================================================================================================================================
</TABLE>
In June 1999, the Corporation renegotiated its accounts receivable secured
borrowing program and increased the amount outstanding under the program from
$280 million to $750 million. The program expires in April 2000. In connection
with the acquisition of Unisource, the Corporation assumed former Unisource
programs to pledge up to $150 million of certain qualifying U.S. accounts
receivable and up to CN$70 million of certain eligible Canadian accounts
receivable. The U.S. program expires in April 2000 and the Canadian program
expires in May 2004. At January 1, 2000, approximately $948 million was
outstanding under the Corporation's and Unisource's programs in the aggregate.
All programs are accounted for as secured borrowings.
The $948 million and $280 million of receivables outstanding under these
programs at January 1, 2000 and December 31, 1998, respectively, and the
corresponding debt are included as both "Receivables" and "Commercial paper and
other short-term notes" on the Corporation's balance sheets. A portion of the
cost of the accounts receivable secured borrowing programs is based on the
creditors' level of investment and borrowing costs. The Corporation pays fees
based on its senior debt ratings. The total cost of the programs, which was $36
million in 1999, $17 million in 1998 and $19 million in 1997, is included in
interest expense on the Corporation's statements of income.
Under the accounts receivable secured borrowing programs, the maximum amount of
the creditors' investment is subject to change based on the level of eligible
receivables and restrictions on concentrations of receivables.
NOTE 6. INDEBTEDNESS
The Corporation's indebtedness includes the following:
<TABLE>
<CAPTION>
January 1, December 31,
(In millions) 2000 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Debentures, 8.6% average rate, payable through 2029 $ 3,589 $ 3,100
Notes, 6.1% average rate, payable through 2006 400 400
Revenue bonds, 5.5% average rate, payable through 2029 653 637
Other loans, 7.3% average rate, payable through 2005 28 29
Capital leases, 10.1% average rate, payable through 2010 14 -
Less: unamortized discount (24) (19)
- -----------------------------------------------------------------------------------------------------------------------------------
4,660 4,147
Less: long-term portion of debt 4,621 4,125
- -----------------------------------------------------------------------------------------------------------------------------------
Current portion of long-term debt 39 22
Commercial paper and other short-term notes, 6.5% average rate 2,067 1,209
Bank overdrafts, net 297 195
- -----------------------------------------------------------------------------------------------------------------------------------
Total short-term debt 2,403 1,426
- -----------------------------------------------------------------------------------------------------------------------------------
Total debt $ 7,024 $ 5,551
===================================================================================================================================
Georgia-Pacific Group's portion of Corporation debt:
Short-term debt $ 2,071 $ 1,173
Long-term debt, excluding current portion 3,983 3,395
- -----------------------------------------------------------------------------------------------------------------------------------
Georgia-Pacific Group's total debt $ 6,054 $ 4,568
===================================================================================================================================
The Timber Company's portion of Corporation debt:
Short-term debt $ 332 $ 253
Long-term debt, excluding current portion 638 730
- -----------------------------------------------------------------------------------------------------------------------------------
The Timber Company's total debt $ 970 $ 983
===================================================================================================================================
Weighted average interest rate on Corporation debt at year end 7.2% 7.2%
===================================================================================================================================
</TABLE>
For additional information regarding financial instruments, see Notes 7 and 8.
The scheduled maturities of the Corporation's long-term debt for the next
five years are as follows: $39 million in 2000, $9 million in 2001, $376 million
in 2002, $317 million in 2003 and $35 million in 2004.
NOTES, DEBENTURES AND OTHER LOANS. During 1999, in connection with the formation
of Georgia-Pacific Tissue, the Corporation issued $500 million of 7.75%
Debentures Due November 15, 2029.
During 1998, the Corporation issued $300 million of 7.25% Debentures Due June 1,
2028 and a $14 million floating rate note due September 30, 2003. In January
1998, the Corporation redeemed $200 million of 9-3/4% Sinking Fund Debentures
Due January 15, 2018. In February 1998, the Corporation redeemed $200 million of
9-1/2% Debentures Due February 15, 2018. The Corporation recorded an after-tax
extraordinary loss of approximately $14 million related to these redemptions, of
which $12
<PAGE>
million was allocated to the Georgia-Pacific Group based on the ratio of the
Georgia-Pacific Group's debt to the Corporation's total debt.
REVOLVING CREDIT FACILITY. During 1999, the Corporation increased the amount of
its unsecured revolving credit facility from $1.5 billion to $2.0 billion. This
unsecured revolving credit facility is used for direct borrowings and as support
for commercial paper and other short-term borrowings. Under the agreement with
Bank of America National Trust and Savings Association and 14 other domestic and
international banks, $1 billion will terminate in July 2000 and $1 billion will
terminate in 2004. As of January 1, 2000, $1,145 million of committed credit was
available in excess of all short-term borrowings outstanding under or supported
by the facility.
Borrowings under the agreement bear interest, at the election of the
Corporation, at either (i) the higher of the Federal Funds Rate plus 1/2% or the
stipulated bank lending rate or (ii) LIBOR plus 0.2625% or (iii) fixed or
floating rates set by competitive bids. Fees associated with this revolving
credit facility include a facility fee of 0.125% and 0.150% per annum on the
aggregate commitments of the lenders under Tranche A and Tranche B,
respectively, and a utilization fee of 0.125%. Fees and margins may be adjusted
upward or downward according to a pricing grid based on the Corporation's
long-term debt ratings. At January 1, 2000, $855 million was borrowed under the
credit agreement at a weighted average interest rate of 6.5%. Amounts
outstanding under the revolving credit facility are included in "Commercial
paper and other short-term notes" on the Corporation's balance sheets.
The revolving credit agreement contains certain restrictive covenants. The
covenants include a maximum leverage ratio (funded indebtedness, including
senior deferrable notes, to earnings before interest, taxes, depreciation and
amortization [EBITDA]) of 4.5 to 1.0, which is to be maintained by the
Corporation throughout the term of the credit agreement. As of January 1, 2000,
the Corporation's leverage ratio was 2.7 to 1.0.
COMMERCIAL PAPER AND OTHER SHORT TERM NOTES. These borrowings are classified by
the Corporation as current liabilities, although all or a portion of them may be
refinanced on a long-term basis in 2000.
REVENUE BONDS. At January 1, 2000, the Corporation had outstanding borrowings of
approximately $653 million under certain industrial revenue bonds. During 1999,
approximately $75 million of floating rate bonds were replaced, of which $73
million were refunded by fixed rate instruments and $2 million were replaced by
floating rate instruments.
OTHER. At January 1, 2000, the amount of long-term debt secured by property,
plant and equipment and by timber and timberlands was not material.
Prior to 1996, the Corporation sold certain assets of the Georgia-Pacific Group
for $354 million and has agreed to lease the assets back from the purchaser over
a period of 30 years. Under the agreement with the purchaser, the Corporation
agreed to maintain a deposit (initially in the amount of $322 million) that,
together with interest earned thereon, was expected to be sufficient to fund the
Corporation's lease obligation, including the repurchase of assets at the end of
the term. This transaction was accounted for as a financing arrangement. At the
inception of the agreement, the Georgia-Pacific Group recorded on its balance
sheet an asset for the deposit from the sale of $305 million and a liability for
the lease obligation of $302 million.
At January 1, 2000, the deposit and lease obligation balances were both $357
million. Of these amounts, approximately $16 million was recorded as a current
asset and approximately $19 million was recorded as a current liability. The
long-term portions of these amounts are recorded in "Other assets" and "Other
long-term liabilities" on the accompanying balance sheets.
In October 1999, the Corporation entered into a financing arrangement to enhance
the return on this deposit by issuing $379 million of 5.74% Debentures Due April
5, 2005 that were legally defeased with deposits of an equal amount.
Accordingly, the debentures and related deposits are not reflected on the
accompanying balance sheets.
<PAGE>
In connection with the acquisition of Unisource, the Corporation assumed former
Unisource industrial revenue bonds in the amount of $9 million and capital
leases in the amount of $12 million. Additionally, the Corporation assumed other
long-term debt in the amount of $447 million and bank overdrafts in the amount
of $120 million, and retained accounts receivable secured borrowing programs in
the amount of $197 million. These amounts are included in the Corporation's
total debt.
During 1999, the Board increased the corporate target debt level under which the
Corporation can purchase shares of Georgia-Pacific Group and The Timber Company
common stock on the open market from $5.75 billion to $6.8 billion. In addition,
the Board increased the Georgia-Pacific Group's target debt level from $4.75
billion to $5.8 billion. The Timber Company's target debt level remains at $1.0
billion.
Also during 1999, the Corporation registered for sale up to $2.975 billion of
debt and equity securities under a shelf registration statement filed with the
Securities and Exchange Commission. The Corporation registered $1.725 billion
under such registration statement related to the PEPS Units ($862.5 million of
which was received on July 7, 1999 in exchange for senior deferrable notes, and
$862.5 million of Georgia-Pacific Group stock will be issued upon exercise of
the purchase contracts) (see Note 7 of the Notes to Combined Financial
Statements). The $862.5 million of cash (less expenses) raised in this sale of
the PEPS Units was used to pay for the acquisition of Unisource. In addition,
the Corporation registered the $500 million of 7.75% Debentures Due November 15,
2029 under this registration statement.
NOTE 7. SENIOR DEFERRABLE NOTES
On July 7, 1999, the Corporation issued 17,250,000 of 7.5% PEPS Units for $862.5
million. Each PEPS Unit had an issue price of $50 and consists of a contract to
purchase shares of Georgia-Pacific Group stock on or prior to August 16, 2002
and a senior deferrable note of the Georgia-Pacific Group due August 16, 2004.
Each purchase contract yields interest of 0.35% per year, paid quarterly, on the
$50 stated amount of the PEPS Unit. Each senior deferrable note yields interest
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%. The liability
related to the PEPS Units is classified as "Senior deferrable notes" on the
accompanying balance sheets and is not included in the debt amount for purposes
of determining the corporate and Georgia-Pacific Group debt targets. The senior
deferrable notes and related interest expense are allocated specifically to the
Georgia-Pacific Group.
NOTE 8. FINANCIAL INSTRUMENTS
The carrying amount and estimated fair value of the Corporation's financial
instruments are as follows:
<TABLE>
<CAPTION>
January 1, 2000 December 31, 1998
----------------------------------------------------------------------------
Carrying Fair Carrying Fair
(In millions) Amount Value Amount Value
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Liabilities:
Commercial paper and other short-term notes
(Note 6) $ 2,067 $ 2,067 $ 1,209 $ 1,209
Notes and debentures (Note 6) 3,989 3,952 3,500 3,783
Revenue bonds (Note 6) 653 564 637 587
Other loans (Note 6) 28 27 29 29
Senior deferrable notes (Note 7) 863 866 - -
Interest rate exchange agreements * (1) * 14
Notes receivable 350 350 - -
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The Corporation's balance sheets at January 1, 2000 and December 31, 1998
included accrued interest of $1 million and $1 million, respectively, related to
these agreements.
COMMERCIAL PAPER AND OTHER SHORT-TERM NOTES. The carrying amounts approximate
fair value because of the short maturity of these instruments.
NOTES AND DEBENTURES. The fair value of notes and debentures was estimated
primarily by obtaining quotes from brokers for these and similar issues. For
notes and debentures for which there are no quoted market prices, the fair value
was estimated by calculating the present value of anticipated cash flows. The
discount rate used was an estimated borrowing rate for similar debt instruments
with like maturities.
REVENUE BONDS, SENIOR DEFERRABLE NOTES, OTHER LOANS AND NOTES RECEIVABLE. The
fair value of revenue bonds, senior deferrable notes, other loans and notes
receivable that have not been monetized was estimated by calculating the present
value of anticipated cash flows. The discount rate used was an estimated
borrowing rate for similar debt instruments with like maturities.
INTEREST RATE AND FOREIGN CURRENCY EXCHANGE AGREEMENTS. The Corporation has used
interest rate swap and foreign currency exchange agreements in the normal course
of business to manage and reduce the risk inherent in interest rate and foreign
currency fluctuations.
The Corporation uses interest rate swap arrangements to manage its exposure to
interest rate changes. Such arrangements are considered hedges of specific
borrowings, and differences paid and received under the swap arrangements are
recognized as adjustments to interest expense. Under these agreements, the
Corporation makes payments to counterparties at fixed interest rates and in turn
receives payments at variable rates. The Corporation entered into interest rate
exchange agreements in prior years to protect against the increased cost
associated with a rise in interest rates. At January 1, 2000, the Corporation
had outstanding interest rate exchange agreements that effectively converted
$608 million of floating rate obligations with a weighted average interest rate
of 5.9% to fixed rate obligations with an average effective interest rate of
approximately 6.4%. These agreements increased interest expense by $7 million,
$11 million and $16 million for the years ending January 1, 2000 and December
31, 1998 and 1997, respectively. As of January 1, 2000, these agreements had a
weighted average maturity of approximately 2.6 years. As of January 1, 2000, the
Corporation's total floating rate debt, including the accounts receivable
secured borrowing programs, exceeded related interest rate exchange agreements
by $1,957 million.
The estimated fair value of the Corporation's (asset) liability under interest
rate exchange agreements at January 1, 2000 and December 31, 1998 was $(1)
million and $14 million, respectively, and represents the estimated amount the
Corporation could have paid (received) to terminate the agreements. The fair
value at January 1, 2000 and December 31, 1998 was estimated by calculating the
present value of anticipated cash flows. The discount rate used was an estimated
borrowing rate for similar debt instruments with like maturities.
The Corporation also enters into foreign currency exchange agreements and
commodity futures and swaps, the amounts of which were not material to the
consolidated financial position of the Corporation at January 1, 2000 and
December 31, 1998.
The Corporation may be exposed to losses in the event of nonperformance of
counterparties but does not anticipate such nonperformance.
<PAGE>
NOTE 9. INCOME TAXES
The provision for income taxes includes the Georgia-Pacific Group's allocated
portion of income taxes currently payable and those deferred because of
temporary differences between the financial statement and tax bases of assets
and liabilities. The Georgia-Pacific Group's provision (benefit) for income
taxes consists of the following:
<TABLE>
<CAPTION>
Year ended
---------------------------------------------------------------
January 1, December 31,
(In millions) 2000 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal income taxes:
Current $ 431 $ 44 $ (50)
Deferred (50) 33 24
State income taxes:
Current 76 9 (16)
Deferred (9) 1 10
- ------------------------------------------------------------------------------------------------------------------------------------
Provision (benefit) for income taxes $ 448 $ 87 $ (32)
====================================================================================================================================
Year ended
---------------------------------------------------------------
January 1, December 31,
(In millions) 2000 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Income taxes paid by the Corporation, net of refunds $ 620 $ 21 $ 51
====================================================================================================================================
Portion of income tax paid (refunded) allocated to the
Georgia-Pacific Group 495 (90) (21)
====================================================================================================================================
</TABLE>
Income taxes paid by the Corporation during 1999 are net of approximately $8
million in state income tax refunds and $8 million in federal income tax
refunds. Income taxes paid by the Corporation during 1998 were net of refunds of
approximately $81 million, primarily related to a 1997 federal tax overpayment.
The federal statutory income tax rate was 35%. The Georgia-Pacific Group's
provision (benefit) for income taxes is reconciled to the federal statutory rate
as follows:
<TABLE>
<CAPTION>
Year ended
---------------------------------------------------------------
January 1, December 31,
(In millions) 2000 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Provision (benefit) for income taxes computed at the federal
statutory tax rate $ 407 $ 69 $ (42)
State income taxes, net of federal benefit 46 4 (5)
Goodwill amortization 25 24 23
Foreign sales corporation (25) (6) (8)
Other (5) (4) -
- ------------------------------------------------------------------------------------------------------------------------------------
Provision (benefit) for income taxes $ 448 $ 87 $ (32)
====================================================================================================================================
</TABLE>
The components of the Georgia-Pacific Group's net deferred income tax
liabilities are as follows:
<TABLE>
<CAPTION>
January 1, December 31,
(In millions) 2000 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred income tax assets:
Compensation-related accruals $ 342 $ 275
Other accruals and reserves 120 59
Other - -
- ------------------------------------------------------------------------------------------------------------------------------------
462 334
Valuation allowance - -
- ------------------------------------------------------------------------------------------------------------------------------------
462 334
- ------------------------------------------------------------------------------------------------------------------------------------
Deferred income tax liabilities:
Property, plant and equipment (1,408) (1,172)
Other (75) (88)
- ------------------------------------------------------------------------------------------------------------------------------------
(1,483) (1,260)
- ------------------------------------------------------------------------------------------------------------------------------------
Deferred income tax liabilities, net $ (1,021) $ (926)
====================================================================================================================================
Included in the balance sheets:
Deferred income tax assets* $ 139 $ 61
Deferred income tax liabilities** (1,160) (987)
- ------------------------------------------------------------------------------------------------------------------------------------
Deferred income tax liabilities, net $ (1,021) $ (926)
====================================================================================================================================
</TABLE>
* Net of current liabilities of $9 million at both January 1, 2000 and December
31, 1998.
** Net of long-term assets of $316 million and $235 million at January 1, 2000
and December 31, 1998, respectively.
NOTE 10. RETIREMENT PLANS
DEFINED BENEFIT PENSION PLANS. Most of the Georgia-Pacific Group's employees
participate in noncontributory defined benefit pension plans. These include
plans that are administered solely by the
<PAGE>
Corporation and union-administered multiemployer plans. The Corporation's
funding policy for solely administered plans is based on actuarial calculations
and the applicable requirements of federal law. Contributions to multiemployer
plans are generally based on negotiated labor contracts.
Benefits under the majority of plans for hourly employees (including
multiemployer plans) are primarily related to years of service. The Corporation
has separate plans for salaried employees and officers under which benefits are
primarily related to compensation and years of service. The officers' plan and
certain Unisource salaried employee plans are not funded and are nonqualified
for federal income tax purposes.
For the Georgia-Pacific Group, plan assets consist principally of common stocks,
bonds, mortgage securities, interests in limited partnerships, cash equivalents
and real estate. At January 1, 2000 and December 31, 1998, $114 million and $101
million, respectively, of noncurrent prepaid pension cost was included in "Other
assets" on the accompanying balance sheets. Accrued pension liability of $136
million and $78 million at January 1, 2000 and December 31, 1998, respectively,
was included in "Other long-term liabilities" on the accompanying balance
sheets.
Pursuant to the provisions of SFAS No. 87, intangible assets of $3 million and
$5 million were recorded as of January 1, 2000 and December 31, 1998,
respectively, in order to recognize the required minimum liability.
In connection with the acquisition of Unisource and the formation of
Georgia-Pacific Tissue, projected benefit obligations of $264 million and plan
assets of $216 million related to solely administered plans are reflected as a
"Transfer in" on the following table. The following table sets forth the change
in projected benefit obligation and the change in plan assets for the solely
administered plans allocated as described in Note 1 of the Notes to Combined
Financial Statements under "Allocation of Employee Benefits":
<TABLE>
<CAPTION>
January 1, December 31,
(In millions) 2000 1998
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Change in projected benefit obligation
Projected benefit obligation at beginning of year $ 1,783 $ 1,614
Service cost 96 82
Interest cost 125 113
Transfer in 264 -
Plan amendments 13 12
Actuarial gains (losses) (170) 72
Foreign currency exchange rate changes 2 (2)
Benefits paid (115) (108)
- ---------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation at end of year $ 1,998 $ 1,783
=================================================================================================================================
Change in plan assets
Fair value of assets at beginning of year $ 2,061 $ 1,919
Actual return on plan assets 417 229
Transfer in 216 -
Employer contributions 7 23
Foreign currency exchange rate changes 2 (2)
Benefits paid (115) (108)
- ---------------------------------------------------------------------------------------------------------------------------------
Fair value of assets at end of year $ 2,588 $ 2,061
=================================================================================================================================
</TABLE>
<PAGE>
The funded status and the amounts recognized on the accompanying balance
sheets for the solely administered plans are set forth in the following table:
<TABLE>
<CAPTION>
January 1, December 31,
(In millions) 2000 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Funded status $ 591 $ 280
Unrecognized actuarial gains (683) (313)
Unrecognized prior service cost 73 68
Unrecognized net (asset) obligation - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net (accrued) prepaid benefit cost $ (19) $ 35
====================================================================================================================================
Amounts recognized on the balance sheets consist of:
Prepaid pension cost $ 114 $ 101
Accrued pension liability (136) (78)
Intangible asset 3 5
Deferred tax liability (3) -
Accumulated other comprehensive income 3 7
- ------------------------------------------------------------------------------------------------------------------------------------
Net amount recognized $ (19) $ 35
====================================================================================================================================
</TABLE>
The Georgia-Pacific Group's share of the net periodic pension cost for solely
administered and union-administered pension plans included the following:
<TABLE>
<CAPTION>
Year ended
-----------------------------------------------------------
January 1, December 31,
(In millions) 2000 1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost of benefits earned $ 96 $ 82 $ 83
Interest cost on projected benefit obligation 125 113 107
Expected return on plan assets (206) (182) (163)
Amortization of gains (11) (13) (7)
Amortization of prior service cost 9 8 6
Amortization of net transition obligation - - (9)
Contributions to multiemployer pension plans 4 4 4
- --------------------------------------------------------------------------------------------------------------------------------
Net periodic pension cost $ 17 $ 12 $ 21
=================================================================================================================================
</TABLE>
The following assumptions were used:
<TABLE>
<CAPTION>
Year ended
---------------------------------------------------------------
January 1, December 31,
2000 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Discount rate used to determine the projected benefit obligation 7.5% 6.5% 7.0%
Rate of increase in future compensation levels used to determine
the projected benefit obligation 5.7% 5.6% 5.5%
Expected long-term rate of return on plan assets used to
determine net periodic pension cost 9.5% 9.5% 9.5%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
DEFINED CONTRIBUTION PLANS. The Corporation sponsors several defined
contribution plans to provide eligible employees with additional income upon
retirement. The Corporation's contributions to the plans are based on employee
contributions and compensation. The allocated portion of the Corporation's
contributions related to the Georgia-Pacific Group totaled $61 million in 1999,
$51 million in 1998 and $47 million in 1997.
HEALTH CARE AND LIFE INSURANCE BENEFITS. The Corporation provides certain health
care and life insurance benefits to eligible retired employees. Salaried
participants generally become eligible for retiree health care benefits after
reaching age 55 with 10 years of service or after reaching age 65. Benefits,
eligibility and cost-sharing provisions for hourly employees vary by location
and/or bargaining unit. Generally, the medical plans pay a stated percentage of
most medical expenses, reduced for any deductible and payments made by
government programs and other group coverage. The plans are funded through a
trust established for the payment of active and retiree benefits. The
Corporation contributes to the trust in the amounts necessary to fund current
obligations of the plans.
In 1991, the Corporation began transferring its share of the cost of post-age 65
health care benefits to future salaried retirees. It is currently anticipated
that the Corporation will continue to reduce the percentage of the cost of
post-age 65 benefits that it will pay on behalf of salaried employees who retire
in each of the years 1995 through 1999 and that the Corporation will continue to
share the pre-age 65 cost with future salaried retirees but will no longer pay
any of the post-age 65 cost for salaried employees who retire after 1999.
In connection with the acquisition of Unisource and the formation of
Georgia-Pacific Tissue, projected benefit obligations of $15 million are
reflected as a "Transfer in" on the change in projected benefit obligation table
below.
The following tables set forth the change in projected benefit obligation and
the amounts recognized on the accompanying balance sheets:
<TABLE>
<CAPTION>
January 1, December 31,
(In millions) 2000 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Change in projected benefit obligation
Projected benefit obligation at beginning of year $ 431 $ 413
Service cost 8 7
Interest cost 26 26
Transfer in 15 -
Actuarial gains (losses) (16) 6
Benefits paid (28) (21)
- ------------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation at end of year $ 436 $ 431
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
January 1, December 31,
<S> <C> <C>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
2000 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Funded status $ (436) $ (431)
Unrecognized actuarial gains (82) (67)
Unrecognized prior service cost 11 11
Unrecognized net (asset) obligation - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net accrued benefit cost $ (507) $ (487)
====================================================================================================================================
Amounts recognized on the balance sheets consist primarily of:
Prepaid benefit cost $ - $ -
Accrued benefit liability (507) (487)
- ------------------------------------------------------------------------------------------------------------------------------------
Net amount recognized $ (507) $ (487)
====================================================================================================================================
</TABLE>
Net periodic postretirement benefit cost included the following components:
<TABLE>
<CAPTION>
Year ended
---------------------------------------------------------------
January 1, December 31,
(In millions) 2000 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost of benefits earned $ 8 $ 7 $ 7
Interest cost on accumulated postretirement benefit obligation 26 26 26
Amortization prior service cost 1 1 1
Amortization of gains (2) (2) (3)
- ------------------------------------------------------------------------------------------------------------------------------------
Net periodic postretirement benefit cost $ 33 $ 32 $ 31
====================================================================================================================================
</TABLE>
For measuring the expected postretirement benefit obligation, a 7%, 8% and 9%
annual rate of increase in the per capita claims cost was assumed for 1999, 1998
and 1997, respectively. The rate was assumed to decrease 1% per year to 5.5% in
2001 and remain at that level thereafter. The weighted average discount rate
used in determining the accumulated postretirement benefit obligation was 7.0%
at January 1, 2000, 6.0% at December 31, 1998 and 6.5% at December 31, 1997.
If the annual health care cost trend rate were increased by 1%, the accumulated
postretirement benefit obligation would have increased by 10% as of January 1,
2000, 10% as of December 31, 1998 and 9% as of December 31, 1997. The effect of
this change on the aggregate of service and interest costs would be an increase
of 12% for 1999, 11% for 1998 and 14% for 1997.
If the annual health care cost trend rate were decreased by 1%, the accumulated
postretirement benefit obligation would have decreased by 9% as of January 1,
2000, 9% as of December 31, 1998 and 9% as of December 31, 1997. The effect of
this change on the aggregate of service and interest costs would be a decrease
of 11% for 1999, 10% for 1998 and 13% for 1997.
NOTE 11. COMMON AND PREFERRED STOCK
<PAGE>
The Corporation's authorized capital stock consists of (i) 10 million shares of
Preferred Stock and 25 million shares of Junior Preferred Stock, of which no
shares were issued at January 1, 2000, and (ii) 400 million shares of
Georgia-Pacific Group stock and 250 million shares of The Timber Company stock.
The Georgia-Pacific Group stock has a par value of $0.80 per share, and
191,983,000 and 186,564,000 shares were issued as of January 1, 2000 and
December 31, 1998, respectively. The Timber Company stock has a par value of
$0.80 per share, and 93,904,000 and 92,785,000 shares were issued as of January
1, 2000 and December 31, 1998, respectively.
At January 1, 2000, the following authorized shares of common stock were
reserved for issue:
Georgia-Pacific Group
- --------------------------------------------------------------------------------
-----------
1999 Unisource conversions 628,290
1999 Wisconsin Tissue conversions 92,960
1997 Long-Term Incentive Plan 8,090,826
1995 Outside Directors Stock Plan 332,193
1995 Shareholder Value Incentive Plan 5,138,103
- --------------------------------------------------------------------------------
-----------
Common stock reserved 14,282,372
================================================================================
===========
The Timber Company
- --------------------------------------------------------------------------------
-----------
1997 Long-Term Incentive Plan 2,293,400
1995 Outside Directors Stock Plan 166,097
1995 Shareholder Value Incentive Plan 3,959,600
- --------------------------------------------------------------------------------
-----------
Common stock reserved 6,419,097
================================================================================
===========
1997 LONG-TERM INCENTIVE PLANS. The Corporation reserved 9,000,000 shares of
Georgia-Pacific Group stock for issuance under the Georgia-Pacific Group 1997
Long-Term Incentive Plan (the Georgia-Pacific Group Plan). Options covering
2,938,500; 34,000; 27,600; and 2,839,260 shares were granted under the
Georgia-Pacific Group Plan on January 29, March 2 and July 29, 1998 and January
28, 1999, respectively. These grants have a 10-year term and vest ratably over a
three-year period.
The Corporation initially reserved 2,300,000 shares of The Timber Company stock
for issuance under The Timber Company 1997 Long-Term Incentive Plan (The Timber
Company Plan). Options covering 1,010,600 and 950 shares were granted under The
Timber Company Plan on December 17, 1997 and January 28, 1999, respectively.
These grants have a 10-year term and vest ratably over a four-year period and
three-year period, respectively.
The Georgia-Pacific Group Plan authorizes grants of stock options, restricted
stock and performance awards with respect to Georgia-Pacific Group stock. The
Timber Company Plan authorizes grants of stock options, restricted stock and
performance awards with respect to The Timber Company stock. The Corporation
does not currently intend to grant awards under the Georgia-Pacific Group Plan
to employees of The Timber Company. However, certain officers and employees of
the Corporation with responsibilities involving both the Georgia-Pacific Group
and The Timber Company may be granted options, restricted stock or performance
awards under both the Georgia-Pacific Group Plan and The Timber Company Plan in
a manner that reflects their responsibilities.
<PAGE>
1990 LONG TERM-INCENTIVE PLAN. The Corporation reserved 8,000,000 and 4,000,000
shares of Georgia-Pacific Group stock and The Timber Company stock,
respectively, for issuance under the 1990 Long-Term Incentive Plan (the 1990
Incentive Plan), which expired March 9, 1995. Shares were awarded to employees
at no cost, based on increases in average market value of the Existing Common
Stock. At the time shares were awarded, the market value of the stock was added
to common stock and additional paid-in capital and was deducted from
shareholders' equity (long-term incentive plan deferred compensation) on the
Corporation's consolidated financial statements. Shares were restricted until
they vested under the terms of the 1990 Incentive Plan. The long-term incentive
plan deferred compensation was amortized over the vesting (restriction) period,
generally five years, with adjustments made monthly for market price
fluctuations. At the time awarded shares became vested, the Corporation paid on
behalf of each participant a cash bonus in the amount of the estimated income
tax liability to be incurred by the participant as a result of the award and
cash bonus. Under the 1990 Incentive Plan, the Corporation issued 2,037,480
shares of Georgia-Pacific Group stock and 1,018,740 shares of The Timber Company
stock. All such shares were vested as of October 1999.
Compensation expense allocated to the Georgia-Pacific Group was $2 million in
1999, $7 million in 1998 and $15 million in 1997 related to the 1990 Incentive
Plan.
As a result of the Letter Stock Recapitalization, each share of restricted
Existing Common Stock held in the 1990 Incentive Plan was redesignated as
Georgia-Pacific Group stock, and an equal number of restricted shares of The
Timber Company stock were distributed. The tax gross-up provided in the 1990
Incentive Plan was calculated based on the aggregate market value of the two
classes of shares distributed to an individual at such time.
EMPLOYEE STOCK PURCHASE PLANS. The Corporation reserved 1,582,800 shares of
Georgia-Pacific Group stock and 791,400 shares of The Timber Company stock for
issuance under the 1997 Employee Stock Purchase Plan (the 1997 Purchase Plan),
which offered employees the right to subscribe for shares of the Georgia-Pacific
Group and The Timber Company at a subscription price of $27.785 and $22.52 per
share, respectively, representing 85% of the mean of the high and low prices of
the Corporation's Existing Common Stock on September 2, 1997. The subscription
period expired on November 14, 1997. A subscriber purchased and paid for shares
no later than November 30, 1999, but prior to the time of the subscriber's last
contribution he/she could obtain a refund of his/her payments plus interest at a
rate of 6% per annum in lieu of stock.
In conjunction with the Letter Stock Recapitalization, the terms of the
subscription agreements were adjusted to allow subscribers, pursuant to the
terms of the 1997 Purchase Plan, to purchase at the same subscription price a
package consisting of one share of Georgia-Pacific Group stock and one share of
The Timber Company stock in lieu of each share of Existing Common Stock for
which he/she had originally subscribed.
Under the 1997 Purchase Plan, the Corporation issued 1,397,000 and 698,500
shares of Georgia-Pacific Group stock and The Timber Company stock,
respectively, in 1999.
1995 OUTSIDE DIRECTORS STOCK PLAN. The Corporation reserved 400,000 shares of
Georgia-Pacific Group stock and 200,000 shares of The Timber Company stock for
issuance under the 1995 Outside Directors Stock Plan (the Directors Plan), which
provides for the issuance of shares of common stock to nonemployee directors of
the Corporation on a restricted basis. Each nonemployee director was issued 692
and 784 restricted shares of Georgia-Pacific Group stock in 1999 and 1998,
respectively, and 346 and 392 restricted shares of The Timber Company stock in
1999 and 1998, respectively.
As a result of the Letter Stock Recapitalization, each share of restricted stock
held in the Directors Plan was redesignated as Georgia-Pacific Group stock, and
an equal number of shares of The Timber Company stock (subject to the same
restrictions as the original restricted shares) were distributed. Each
director's annual grant consists of a number of shares of Georgia-Pacific Group
stock and of The Timber Company stock determined so that (i) a substantially
equal number of shares of Georgia-Pacific Group stock and The Timber Company
stock will be granted in each year and (ii) the total market value of the shares
granted in each year (based on the mean of the high and low prices of each stock
<PAGE>
on the date of grant) is $40,000 (subject to immaterial rounding differentials).
The restrictions on the shares lapse at the time of death, retirement from the
Board or disability.
Effective May 6, 1997, accrual of additional retirement benefits under the
Corporation's retirement program for directors ceased, and the accrued benefits
of each of the current nonemployee directors (the present value of which totaled
$1,303,889 as of May 6, 1997) were converted into a grant of an equivalent
number of shares of restricted stock under the Directors Plan. The total number
of shares issued related to this conversion was 15,702.
EMPLOYEE STOCK OPTION PLANS. The 1995 Shareholder Value Incentive Plan (the
SVIP) provides for the granting of stock options having a term of either 5-1/2
or 10 years to officers and key employees. Under the amended and restated SVIP,
no further grants may be made under that plan. Options having a term of 10 years
become exercisable in 9-1/2 years unless certain performance targets tied to the
Corporation's common stock performance are met, in which case the holder could
exercise such options after 3, 4 or 5 years from the grant date. Options having
a term of 5-1/2 years may be exercised only if such performance targets are met
in the third, fourth or fifth year after such grant date. At the time options
are exercised, the exercise price is payable in cash or by surrender of shares
of common stock already owned by the optionee.
The 1994 Employee Stock Option Plan (the 1994 Option Plan) provided for the
granting of stock options to certain nonofficer key employees. Under the 1994
Option Plan, the Corporation issued 253,000 and 230,900 shares of
Georgia-Pacific Group stock in 1999 and 1998, respectively, and 146,350 and
75,550 shares of The Timber Company stock in 1999 and 1998, respectively. All
remaining options were exercised in February 1999.
Following the Letter Stock Recapitalization, each outstanding stock option under
the SVIP and the 1994 Option Plan was converted into separately exercisable
options to acquire a number of shares of Georgia-Pacific Group stock and The
Timber Company stock, each of which equaled the number of shares of Existing
Common Stock specified in the original option. The exercise prices for the
resulting Georgia-Pacific Group stock options and The Timber Company stock
options were calculated by multiplying the exercise price under the original
option from which they were converted by a fraction, the numerator of which was
the average of the high and low price of Georgia-Pacific Group stock or The
Timber Company stock, as the case may be, on December 17, 1997 and the
denominator of which was the sum of such Georgia-Pacific Group and The Timber
Company stock prices. This was intended to ensure that the aggregate intrinsic
value of the options was preserved and the ratio of the exercise price per
option to the market value per share was not reduced. In addition, the vesting
provisions and option periods of the original grants remained the same following
such conversion.
UNISOURCE CONVERSIONS. In connection with the acquisition of Unisource as
described in Note 4 of the Notes to Combined Financial Statements, the
Corporation converted certain stock options awarded under a former Unisource
stock option plan (Unisource stock options) into Georgia-Pacific Group stock
options. The conversion was intended to ensure that the aggregate intrinsic
value of the Unisource stock options was preserved and the ratio of the exercise
price per Unisource stock option to the market value per share of
Georgia-Pacific Group stock was not reduced. Unisource stock options to purchase
2,633,459 shares had original grant dates ranging from November 10, 1994 through
May 19, 1999 with a 10-year term, and vest ratably over three-year and five-year
periods. These Unisource stock options were converted into options to purchase
629,648 shares of Georgia-Pacific Group stock at prices ranging from $31.88 to
$91.58 per share. The vesting provisions and option periods of the original
grants remained the same following such conversion. The value of these options
at the acquisition date was $9.4 million and was included as part of the
purchase price paid for Unisource. No options to purchase The Timber Company
stock were issued as part of the conversion.
The Corporation also issued 40,152 restricted shares of Georgia-Pacific Group
stock under the 1997 Long-Term Incentive Plan to two former Unisource officers
who became officers of the Corporation. Each officer was issued 20,076
restricted shares of Georgia-Pacific Group stock. At the time restricted shares
were awarded, the average of the high and low market value of the stock was
added to common stock and additional paid-in capital and was deducted from
shareholders' equity (long-term incentive
<PAGE>
plan deferred compensation) on the Corporation's consolidated financial
statements. The long-term incentive plan deferred compensation of $2 million is
being amortized over the vesting (restriction) period, which is three years.
WISCONSIN TISSUE CONVERSIONS. In connection with the formation of
Georgia-Pacific Tissue, as described in Note 4 of the Notes to Combined
Financial Statements, the Corporation converted certain outstanding stock
options awarded under a Chesapeake stock option plan (Chesapeake stock options)
into Georgia-Pacific Group stock options. The conversion was intended to ensure
that the aggregate intrinsic value of the Chesapeake stock options was preserved
and the ratio of the exercise price per Chesapeake stock option to the market
value per share of Georgia-Pacific Group stock was not reduced. Chesapeake stock
options to purchase 172,250 shares had original grant dates ranging from August
11, 1997 through April 16, 1999, with a vesting period of three years and a
10-year term.
These Chesapeake stock options were converted into options to purchase 92,960
shares of Georgia-Pacific Group stock at prices ranging from $36.20 to $50.36
per share. The vesting provisions and option periods of the original grants
remained the same following such conversion. The stock options' total value of
$1.3 million was included in the asset purchase price on the date the
Corporation formed Georgia-Pacific Tissue. No options to purchase The Timber
Company stock were issued as part of the conversion.
Additional information relating to the Corporation's existing employee stock
option plans is as follows:
<TABLE>
<CAPTION>
Year ended January 1,
2000 2000
- ------------------------------------------------------------------------------------------------------------------------
----------
Georgia-Pacific Group The Timber Company
- ------------------------------------------------------------------------------------------------------------------------
----------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
- ------------------------------------------------------------------------------------------------------------------------
----------
<S> <C> <C> <C> <C>
Options outstanding at January 1, 1999 11,704,600 $ 27.03 5,544,850 $ 22.26
Options granted/ converted 3,561,868 36.10 950 22.56
Options exercised/ surrendered (3,974,803) 26.89 (417,150) 17.66
Options canceled (461,974) 28.25 (164,100) 19.69
- ------------------------------------------------------------------------------------------------------------------------
----------
Options outstanding at January 1, 2000 10,829,691* $ 30.01 4,964,550* $ 22.33
Options available for grant at January 1, 2000 3,160,640 1,288,450
- ------------------------------------------------------------------------------------------------------------------------
----------
Total reserved shares 13,990,331 6,253,000
========================================================================================================================
==========
Options exercisable at January 1, 2000 2,936,311 $ 30.17 2,972,400 $ 22.32
Option prices per share:
Granted/converted $32 - $92 $23
Exercised/surrendered $26 - $37 $21 - $23
Canceled $26 - $32 $21 - $23
*Options outstanding by exercise price:
$20.95 - $25.13 4,964,550 $ 22.33
Average remaining life 7.0 years
$25.84 - $31.88 7,451,500 $ 27.15
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Average remaining life 7.3 years
$32.17 - $44.07 3,018,453 $ 32.68
Average remaining life 8.1 years
$45.77 - $61.63 56,631 $ 52.80
Average remaining life 7.0 years
$63.73 - $91.58 303,107 $ 69.46
Average remaining life 6.9 years
==================================================================================
================
</TABLE>
<TABLE>
<CAPTION>
Year ended December 31,
1998** 1998
- --------------------------------------------------------------------------------------------------------------------------
----------------
Georgia-Pacific Group The Timber Company
- --------------------------------------------------------------------------------------------------------------------------
----------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
- --------------------------------------------------------------------------------------------------------------------------
----------------
<S> <C> <C> <C> <C> <C>
Options outstanding at January 1, 1998 10,038,200 $ 26.66 6,029,600 $ 22.20
Options granted 3,000,100 28.23 - -
Options exercised/ surrendered (637,200) 27.22 (180,400) 21.52
Options canceled (696,500) 26.71 (304,350) 21.54
- --------------------------------------------------------------------------------------------------------------------------
----------------
Options outstanding at December 31, 1998 11,704,600 $ 27.03 5,544,850 $ 22.26
Options available for grant at December 31, 1998 5,999,900 1,289,400
- --------------------------------------------------------------------------------------------------------------------------
----------------
Total reserved shares 17,704,500 6,834,250
==========================================================================================================================
================
Options exercisable at December 31, 1998 2,220,633 $ 28.43 1,448,975 $ 23.28
Average remaining life of options outstanding 7.1 years 6.3 years
Option prices per share:
Granted $28 - $30 $-
Exercised/surrendered $21 - $29 $17 - $23
Canceled $21 - $29 $17 - $25
Outstanding $26 - $31 $21 - $25
===========================================================================================================================
================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year ended December 31,
1997** 1997
- -------------------------------------------------------------------------------------------------------------------------------
----------------
Georgia-Pacific Group The Timber Company
- -------------------------------------------------------------------------------------------------------------------------------
----------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
- -------------------------------------------------------------------------------------------------------------------------------
----------------
<S> <C> <C> <C> <C>
Options outstanding at December 17, 1997 10,042,400 $ 19.47 5,021,200 $ 15.78
Options granted - - 1,010,600 25.13
Options exercised/ surrendered (600) 21.00 (300) 17.01
Options canceled (3,600) 26.93 (1,900) 21.83
- -------------------------------------------------------------------------------------------------------------------------------
----------------
Options outstanding at December 31, 1997 10,038,200 $ 26.66 6,029,600 $ 22.20
Options available for grant at December 31, 1997 9,000,000 1,289,400
- -------------------------------------------------------------------------------------------------------------------------------
----------------
Total reserved shares 19,038,200 7,319,000
===============================================================================================================================
================
Options exercisable at December 31, 1997 789,332 $ 26.41 391,100 $ 21.39
Average remaining life of options outstanding 5.7 years 6.3 years
Option prices per share
(December 17 through December 31, 1997):
Granted $- $25
Exercised/surrendered $21 $17
Canceled $ 26 - $29 $21 - $23
Outstanding $ 21 - $29 $17 - $25
=================================================================================================================================
================
</TABLE>
** All shares and prices reflect the two-for-one stock split of the
Georgia-Pacific Group's stock on May 14, 1999.
Period ended
December 16,
1997***
- ------------------------------------------------------------------------------
--------------
Georgia-Pacific Corporation
- ------------------------------------------------------------------------------
--------------
Weighted
Average
Exercise
Shares Price
- ------------------------------------------------------------------------------
--------------
Options outstanding at January 1, 1997 4,092,300 $ 57.48
Options granted 1,746,700 52.84
Options exercised/ surrendered (514,950) 69.94
Options canceled (302,850) 55.04
- ------------------------------------------------------------------------------
--------------
Options outstanding at December 16, 1997 5,021,200 $ 54.73
Options available for grant at December 16, 1997 2,966,100
- ------------------------------------------------------------------------------
--------------
<PAGE>
Total reserved shares 7,987,300
==============================================================================
==============
Options exercisable at December 16, 1997 396,766 $ 70.69
Average remaining life of options outstanding 5.7 years
Option prices per share:
Granted $53
Exercised/surrendered $59 - $75
Canceled $52 - $75
=============================================================================
==============
*** All shares and prices reflect the Corporation's Existing Common Stock
through December 16, 1997.
SHAREHOLDER RIGHTS PLAN. On December 16, 1997, shareholders approved an amended
and restated Shareholder Rights Plan (the Rights Agreement) pursuant to which
preferred stock purchase rights (the Rights) are issued on each outstanding
share of Georgia-Pacific Group stock (a Georgia-Pacific Group Right), which will
entitle the holders thereof to purchase shares of Series B Junior Preferred
Stock under the conditions specified in the Rights Agreement, and on each
outstanding share of The Timber Company stock (a Timber Company Right), which
will entitle the holders thereof to purchase shares of Series C Junior Preferred
Stock under the conditions specified in the Rights Agreement.
The Rights will expire on December 31, 2007, unless earlier redeemed by the
Corporation or extended. The Rights would be exercisable only if a person or
group acquires 15% or more of the total voting rights of all then outstanding
shares of common stock of the Corporation or commences a tender offer that would
result in such person or group beneficially owning 15% or more of the total
voting rights of all then outstanding shares of common stock of the Corporation.
In such event, each Right would entitle the holder to purchase from the
Corporation (i) in the case of a Georgia-Pacific Group Right, one one-hundredth
of a share of Series B Junior Preferred Stock (a Series B Unit) at a purchase
price of $175 (the Series B Unit Purchase Price), subject to adjustment, and
(ii) in the case of a Timber Company Right, one one-hundredth of a share of
Series C Junior Preferred Stock (a Series C Unit) at a purchase price of $100
(the Series C Unit Purchase Price), subject to adjustment.
Thereafter, in the event one of several specified events (generally involving
transactions by an acquirer in the Corporation's common stock or a business
combination involving the Corporation) occurs, each Georgia-Pacific Group Right
and each Timber Company Right will entitle its holder to purchase, for the
Series B Unit Purchase Price and the Series C Unit Purchase Price, respectively,
a number of shares of common stock of such entity or purchaser with a market
value equal to twice the applicable purchase price. Because of the nature of the
dividend, liquidation and voting rights of each class of Junior Preferred Stock
related to the Rights, the economic value of one Series B Unit and one Series C
Unit should approximate the economic value of one share of Georgia-Pacific Group
stock and one share of The Timber Company stock, respectively.
CAPITAL STOCK. During 1999, the Corporation purchased on the open market
approximately 6.2 million shares of Georgia-Pacific Group stock at an aggregate
price of $257 million ($41.45 average per share), all of which were held as
treasury stock at January 1, 2000. During 1998, the Corporation purchased
approximately 15.4 million shares of Georgia-Pacific Group stock (including 2.2
million shares related to the CeCorr acquisition) at an aggregate price of $427
million ($27.73 average per share). Of these purchased shares, approximately
13.5 million shares were held as treasury stock and approximately 1.9 million
shares were retired. Cash paid in 1998 related to stock repurchases totaled $436
million, which included $9 million for shares purchased but not settled in 1997.
Subsequent to year-end 1999 through February 4, 2000, there was no
Georgia-Pacific Group stock purchased by the Georgia-Pacific Group.
<PAGE>
The resolution of the Board authorizing such repurchases allows purchases of
Georgia-Pacific Group stock so long as the Georgia-Pacific Group's total debt
remains below $5.8 billion and the Corporation's total debt remains below $6.8
billion.
OTHER. The Georgia-Pacific Group has elected to continue to account for its
stock-based compensation plans under APB Opinion No. 25 and disclose pro forma
effects of the plans on net income and earnings per share as provided by SFAS
No. 123. Accordingly, no compensation cost has been recognized for the Unisource
stock options, Chesapeake stock options, the SVIP, the Georgia-Pacific Group
Plan, The Timber Company Plan or the 1997 Purchase Plan. Had compensation cost
for these plans been determined based on the fair value at the grant dates in
1999, 1998 or 1997 under the plan consistent with the method of SFAS No. 123,
the pro forma net income and earnings per share would have been as follows:
<TABLE>
<CAPTION>
Year ended
---------------------------------------------------------------------
------------
January 1, December 31,
(In millions, except per share
amounts) 2000 1998 1997
- -------------------------------------------------------------------------------------------------------------------
---------------
Income
Income Income Net (loss)
Net per Net per income per
income share* income share* (loss) share*
- -------------------------------------------------------------------------------------------------------------------
---------------
Georgia-Pacific Corporation
<S> <C> <C> <C> <C> <C> <C>
As reported $ 1,116 $ 274 $ 69
Pro forma 1,084 252 62
Georgia-Pacific Group
As reported 716 $ 4.17 98 $ 0.55 (146) $ (0.80
Pro forma 685 3.99 77 0.43 (153) (0.84)
The Timber Company
As reported 400 4.75 176 1.95 215 2.35
Pro forma 399 4.74 175 1.94 215 2.35
- -------------------------------------------------------------------------------------------------------------------
---------------
</TABLE>
* Represents basic earnings per share. Pro forma diluted income (loss) per share
was $3.89 and $4.72 in 1999, $0.42 and $1.93 in 1998, and $(0.84) and $2.33 in
1997 for the Georgia-Pacific Group and The Timber Company, respectively.
The fair-value-based method of accounting for stock-based compensation plans
under SFAS No. 123 recognizes the value of options granted as compensation cost
over the option's vesting period and has not been applied to options granted
prior to January 1, 1995. Accordingly, the resulting pro forma compensation cost
is not representative of what compensation cost will be in future years.
Following are the weighted average assumptions used in connection with the
Black-Scholes option pricing model to estimate the fair value of options granted
in 1999, 1998 and 1997:
<PAGE>
<TABLE>
<CAPTION>
Year ended
---------------------------------------------------------------------
----------------
January 1, December 31,
2000 1998 1997
Options Options Options ESPP*
- ------------------------------------------------------------------------------------------------
--------------
<S> <C> <C> <C> <C>
Georgia-Pacific Group
Risk-free interest rate 4.9% 5.8% 6.6% 5.8%
Expected dividend yield 1.0% 1.8% 2.7% 2.3%
Expected life 7 years 10 years 10 years 2 years
Expected volatility 0.46 0.39 0.30 0.37
Option forfeiture rate 3% 3% 3% 28%
- ------------------------------------------------------------------------------------------------
--------------
The Timber Company
Risk-free interest rate 4.9% 5.9% 6.4% 5.8%
Expected dividend yield 4.4% 3.9% 3.2% 2.3%
Expected life 9 years 10 years 10 years 2 years
Expected volatility 0.32 0.37 0.27 0.29
Option forfeiture rate 3% 3% 3% 28%
- ------------------------------------------------------------------------------------------------
--------------
</TABLE>
* 1997 Purchase Plan.
The weighted average grant date fair value per share, including modifications,
of Georgia-Pacific Group options and The Timber Company options granted during
the year using the Black-Scholes option pricing model was $29.38 and $5.80,
$13.44 and $8.55, and $11.87 and $7.54 for 1999, 1998 and 1997, respectively.
The weighted average grant date fair value per share of shares subscribed under
the 1997 Purchase Plan was $8.85 for the Georgia-Pacific Group and $6.52 for The
Timber Company. The total pro forma compensation cost calculated under SFAS No.
123 was allocated between the Georgia-Pacific Group and The Timber Company based
on the number of employees in each group for periods prior to December 17, 1997.
Management believes that this method of allocation is equitable and provides a
reasonable estimate of the costs attributable to each group.
STOCK SPLIT. On May 4, 1999, the Board declared a two-for-one split of the
Georgia-Pacific Group's stock in the form of a special dividend to shareholders
of record on May 14, 1999. The special dividend was paid as one share of
Georgia-Pacific Group stock for each such share outstanding on June 3, 1999. A
total of 95,126,911 additional shares were issued in conjunction with the stock
split. The Georgia-Pacific Group's par value of $0.80 remained unchanged. All
historical share and per share amounts have been restated to reflect
retroactively the stock split.
NOTE 12. OTHER COMPREHENSIVE INCOME
Georgia-Pacific Group's accumulated other comprehensive income includes the
following:
Minimum Accumulated
Foreign pension other
currency liability comprehensive
(In millions) items adjustment income
- -------------------------------------------------------------------------------
-----------------
December 31, 1997 $ (28) $ (5) $ (33)
Activity, net of taxes (8) (2) (10)
- -------------------------------------------------------------------------------
-----------------
December 31, 1998 (36) (7) (43)
Activity, net of taxes 7 4 11
- -------------------------------------------------------------------------------
-----------------
January 1, 2000 $ (29) $ (3) $ (32)
===============================================================================
<PAGE>
NOTE 13. COMMITMENTS AND CONTINGENCIES
Total rental expense was approximately $111.9 million, $71.8 million and $70.4
million in 1999, 1998 and 1997, respectively.
At January 1, 2000, total commitments of the Georgia-Pacific Group under
long-term, noncancelable contracts, including operating leases, were as follows:
(In millions)
======================================================
2000 $ 76
2001 73
2002 67
2003 61
2004 54
After 2004 184
- -------------------------------------------------------
$ 515
=======================================================
The following sets forth legal proceedings and claims arising out of the
operations of the Georgia-Pacific Group to which the Corporation is a party. The
holders of Georgia-Pacific Group stock are shareholders of the Corporation and
are subject to all of the risks associated with an investment in the
Corporation, including any legal proceedings and claims involving The Timber
Company.
The Georgia-Pacific Group is subject to various legal proceedings and claims
that arise in the ordinary course of its business. As is the case with other
companies in similar industries, the Georgia-Pacific Group faces exposure from
actual or potential claims and legal proceedings involving environmental
matters. Liability insurance in effect during the last several years provides
very limited coverage for environmental matters.
The Corporation is involved in environmental remediation activities at
approximately 173 sites, both owned by the Corporation and owned by others,
where it has been notified that it is or may be a potentially responsible party
under the Comprehensive Environmental Response, Compensation and Liability Act
or similar state "superfund" laws. Of the known sites in which it is involved,
the Corporation estimates that approximately 46% are being investigated,
approximately 30% are being remediated and approximately 24% are being monitored
(an activity that occurs after either site investigation or remediation has been
completed). The ultimate costs to the Corporation for the investigation,
remediation and monitoring of many of these sites cannot be predicted with
certainty, due to the often unknown magnitude of the pollution or the necessary
cleanup, the varying costs of alternative cleanup methods, the amount of time
necessary to accomplish such cleanups, the evolving nature of cleanup
technologies and governmental regulations, and the inability to determine the
Corporation's share of multiparty cleanups or the extent to which contribution
will be available from other parties. The Corporation has established reserves
for environmental remediation costs for these sites in amounts that it believes
are probable and reasonably estimable. Based on analysis of currently available
information and previous experience with respect to the cleanup of hazardous
substances, the Corporation believes it is reasonably possible that costs
associated with these sites may exceed current reserves by amounts that may
prove insignificant or that could range, in the aggregate, up to approximately
$56 million. This estimate of the range of reasonably possible additional costs
is less certain than the estimates upon which reserves are based, and in order
to establish the upper limit of such range, assumptions least favorable to the
Corporation among the range of reasonably possible outcomes were used. In
estimating both its current reserve for environmental remediation and the
possible range of additional costs, the Corporation has not assumed it will bear
the entire cost of remediation of every site to the exclusion of other known
potentially responsible parties who may be
<PAGE>
jointly and severally liable. The ability of other potentially responsible
parties to participate has been taken into account, based generally on the
parties' financial condition and probable contribution on a per site basis.
The Corporation and many other companies are defendants in suits brought in
various courts around the nation by plaintiffs who allege that they have
suffered personal injury as a result of exposure to asbestos-containing
products. These suits allege a variety of lung and other diseases based on
alleged exposure to products previously manufactured by the Corporation. In many
cases, the plaintiffs are unable to demonstrate that they have suffered any
compensable loss as a result of such exposure, or that any injuries they have
incurred in fact resulted from exposure to the Corporation's products.
The Corporation generally settles asbestos cases for amounts it considers
reasonable given the facts and circumstances of each case. The amounts it has
paid to date to defend and settle these cases have been substantially covered by
product liability insurance. The Corporation is currently defending claims of
approximately 44,800 such plaintiffs as of January 31, 2000 and anticipates that
additional suits will be filed against it over the next several years. The
Corporation has insurance available in amounts that it believes are adequate to
cover substantially all of the reasonably foreseeable damages and settlement
amounts arising out of claims and suits currently pending. The Corporation has
further insurance coverage available for the disposition of suits that may be
filed against it in the future, but there can be no assurance that the amounts
of such insurance will be adequate to cover all future claims. The Corporation
has established reserves for liabilities and legal defense costs it believes are
probable and reasonably estimable with respect to pending suits and claims, and
has also established a receivable for expected insurance recoveries.
On May 6, 1998, a lawsuit was filed in state court in Columbus, Ohio, against
the Corporation and Georgia-Pacific Resins, Inc. (GPR), a wholly owned
subsidiary of the Corporation. The lawsuit was filed by eight plaintiffs who
seek to represent a class of individuals who at any time from 1985 to the
present lived, worked, resided, owned, frequented or otherwise occupied property
located within a three-mile radius of the GPR's resins manufacturing operations
in Columbus, Ohio. The lawsuit alleges that the individual plaintiffs and
putative class members have suffered personal injuries and/or property damage
because of (i) alleged "continuing and long-term releases and threats of
releases of noxious fumes, odors and harmful chemicals, including hazardous
substances" from GPR's operations and/or (ii) a September 10, 1997 explosion at
the Columbus facility and alleged release of hazardous material resulting from
that explosion. Virtually all activity in this case has been stayed pending a
decision on a motion by plaintiffs for reconsideration of a case management
order issued by the court. The Corporation has denied the material allegations
of this lawsuit. While it is premature to evaluate the claims asserted in this
lawsuit, the Corporation believes it has meritorious defenses. Prior to the
filing of the lawsuit, the Corporation had received a number of
explosion-related claims from nearby residents and businesses. These claims were
for property damage, personal injury and business interruption and were being
reviewed and resolved on a case-by-case basis. On January 12, 2000, five
plaintiffs, including one of the class representatives in the state class
action, filed a lawsuit against the Corporation and GPR pursuant to the citizen
suit provisions of the federal Clean Air Act and the Community Right-to-Know
law. This suit alleges violations of these federal laws and certain state laws
regarding the form and substance of the defendants reporting of emissions and
alleged violations of permitting requirements under certain regulations issued
under the Clean Air Act. This suit seeks civil penalties of $25,000 per day, per
violation, an injunction to force the defendants to comply with these laws and
regulations and other relief. The defendants have denied the material
allegations of the complaint and have sought a ruling from a federal appeals
court to the effect that the regulations under which the alleged violations of
the Clean Air Act are premised are not applicable to the defendants. While it is
premature to completely evaluate these claims, the Corporation believes it has
meritorious defenses.
In May 1997, the Corporation and nine other companies were named as defendants
in a lawsuit brought by the Attorney General of the State of Florida alleging
that the defendants engaged in a conspiracy to fix the prices of sanitary
commercial paper products, such as towels and napkins, in violation of various
federal and state laws. Shortly after the filing of this suit, approximately 55
similar suits were filed by private plaintiffs in federal courts in California,
Florida, Georgia and Wisconsin, and in the state courts
<PAGE>
of California, Wisconsin, Minnesota and Tennessee. On July 28, 1999, the
Corporation and the Attorney General of the State of Florida entered into a
Settlement Agreement pursuant to which the State will dismiss its claims against
the Corporation. The Settlement Agreement states that the Attorney General is
dismissing its claims in the public interest and consistent with its
responsibilities. The Agreement also provides that the Corporation continues to
deny that there is any evidence that it engaged in the alleged price-fixing
conspiracy. In addition, the Corporation agreed to donate an immaterial amount
of real property to the State of Florida, Board of Trustees of the Internal
Improvement Trust. In addition, as part of the formation of the joint venture
with Chesapeake described in Note 4 of the Notes to Combined Financial
Statements, the Corporation and Wisconsin Tissue assigned, and Georgia-Pacific
Tissue agreed to assume, the liabilities of both companies in connection with
these antitrust cases. The Corporation and Wisconsin Tissue have denied that
they have engaged in any of the illegal conduct alleged in these cases and
intend to defend themselves vigorously.
Although the ultimate outcome of these environmental matters and legal
proceedings cannot be determined with certainty, based on presently available
information, management believes that adequate reserves have been established
for probable losses with respect thereto. Management further believes that the
ultimate outcome of such environmental matters and legal proceedings could be
material to operating results in any given quarter or year but will not have a
material adverse effect on the long-term results of operations, liquidity or
consolidated financial position of the Corporation.
NOTE 14. RELATED PARTY TRANSACTIONS
For all periods in which the separate accompanying combined statements of income
of the groups are presented, timber has been transferred from the Corporation's
timberlands at prices intended to reflect fair market prices based on prices
paid by independent purchasers and sellers for similar kinds of timber.
During the second quarter of 1998, the Georgia-Pacific Group and The Timber
Company revised the operating policy, which they had entered into in 1997, with
respect to sales of timber by The Timber Company to the Georgia-Pacific Group.
These revisions arose from sharp changes in the prices of timber from the first
quarter to the second quarter of 1998, a significant decrease in the volume of
timber purchased by the Georgia-Pacific Group in the second quarter, and other
issues in the policy. At the time these revisions were negotiated, The Timber
Company sold a timber deed to the Georgia-Pacific Group in the amount of
approximately $23 million, and the Georgia-Pacific Group made a one-time $3
million payment to The Timber Company for 1998 second quarter adjustments due
under the revised policy. The Timber Company recognized revenues and earnings
from this timber deed, and other contracts to sell timber to the Georgia-Pacific
Group, as the timber was cut.
Under the revised policy, beginning July 1, 1998, the prices for Southern timber
sold by The Timber Company are adjusted monthly, rather than quarterly, and
represent the average of prices paid by the Georgia-Pacific Group for timber
purchased from third parties in a particular forest over the most recent
three-month period. In most of The Timber Company's Southern forests, it must
offer 80% of its projected annual harvest from those forests to the
Georgia-Pacific Group, and the Georgia-Pacific Group must purchase not less than
60% nor more than 80% of that projected annual harvest. In addition, premiums
charged by The Timber Company for the right to harvest a significant percentage
of wood from its Southern forests have been reduced.
In two key Southern forests, the price paid by the Georgia-Pacific Group for
timber purchased from The Timber Company will be based on the average prices
paid over the most recent three months by the Georgia-Pacific Group for timber
purchased from third parties, and prices received by The Timber Company for
timber sold to third parties, in each forest. In those same forests, the
Georgia-Pacific Group has agreed to purchase, each quarter, 20% of the annual
volume of timber it has committed to purchase from The Timber Company during
that year. The revised policy reduces the volume of timber that the
Georgia-Pacific Group can purchase in these same two forests from 80% to 70% of
The Timber Company's annual harvest in those forests, and also reduces the
Georgia-Pacific Group's minimum annual purchase obligation in those forests from
60% to 50% of the annual harvest in 1999 and 2000.
<PAGE>
These changes are intended to cause prices paid by the Georgia-Pacific Group for
timber sold by The Timber Company to more quickly reflect market prices in
particular forests, to allow the Georgia-Pacific Group more flexibility in
purchasing wood from third parties, and to allow The Timber Company greater
flexibility in the timing of sales of its annual harvest on the open market. The
revised policy also contains additional provisions that resolve issues related
to certain operating practices of The Timber Company and the Georgia-Pacific
Group. This policy will remain in effect through 2000.
The Georgia-Pacific Group and The Timber Company are negotiating the terms of a
new long-term agreement to govern the purchases and sales of timber beginning in
2001. If such negotiations are unsuccessful, neither the Georgia-Pacific Group
nor The Timber Company will have any obligation to buy timber from or sell
timber to the other.
As of January 1, 2000 and December 31, 1998, the Georgia-Pacific Group had
approximately $4 million and $12 million, respectively, in timber purchases on
its balance sheets related to the uncut portion of timber on timber contracts
purchased from The Timber Company. This amount is included in "Timber contracts"
on the accompanying balance sheets.
The Corporation is a 50% partner in a joint venture (GA-MET) with Metropolitan
Life Insurance Company (Metropolitan). GA-MET owns and operates the
Corporation's main office building in Atlanta, Georgia. The Corporation accounts
for its investment in GA-MET under the equity method.
At January 1, 2000, GA-MET had an outstanding mortgage loan payable to
Metropolitan in the amount of $144 million. The note bears interest at 9-1/2%,
requires monthly payments of principal and interest through 2011, and is secured
by the land and building owned by the joint venture. In the event of
foreclosure, each partner has severally guaranteed payment of one-half of any
shortfall of collateral value to the outstanding secured indebtedness. Based on
the present market conditions and building occupancy, the likelihood of any
obligation to the Georgia-Pacific Group or The Timber Company with respect to
this guarantee is considered remote.
NOTE 15. UNAUDITED SELECTED QUARTERLY FINANCIAL DATA
Georgia-Pacific Corporation--Georgia-Pacific Group
<TABLE>
<CAPTION>
First Quarter Second Quarter
------------------------------------------------------------------------
(In millions, except per share amounts) 1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 3,354 $ 3,195 $ 3,808 $ 3,277
Gross profit (net sales minus cost of sales) 849 725 1,041 733
Income before extraordinary items 99 16 212 30
Net income 99 4 212 29
Dividends declared per share 0.125 0.125 0.125 0.125
Basic per share:
Income before extraordinary items 0.57 0.09 1.23 0.17
Net income 0.57 0.02 1.23 0.16
Diluted per share:
Income before extraordinary items 0.56 0.09 1.20 0.17
Net income 0.56 0.02 1.20 0.16
=====================================================================================================================
Price range of common stock:
High $ 41.00 $ 35.00 $ 54.13 $ 40.50
Low 29.34 26.00 38.75 27.34
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Third Quarter Fourth Quarter
-----------------------------------------------------------------------
(In millions, except per share amounts) 1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 5,483 $ 3,368 $ 5,151 $ 3,389
Gross profit (net sales minus cost of sales) 1,275 789 1,255 764
Income before extraordinary items 230 39 175 26
Net income 230 39 175 26
Dividends declared per share 0.125 0.125 0.125 0.125
Basic per share:
Income before extraordinary items 1.34 0.22 1.02 0.15
Net income 1.34 0.22 1.02 0.15
Diluted per share:
Income before extraordinary items 1.31 0.22 1.00 0.15
Net income 1.31 0.22 1.00 0.15
=======================================================================================================================
Price range of common stock:
High $ 52.88 $ 30.25 $ 50.88 $ 30.00
Low 37.50 18.69 35.75 22.00
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
The first and second quarters of 1998 included an after-tax extraordinary loss
of $12 million ($0.07 per share) and $1 million ($0.01 per share), respectively,
on early extinguishment of debt.
SELECTED FINANCIAL DATA - OPERATIONS
Georgia-Pacific Corporation -- Georgia-Pacific Group
<TABLE>
<CAPTION>
Year ended
-----------------------------------------------------------------
(Dollar amounts, except per share, January 1, December 31,
and shares are in millions) 2000 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net sales $ 17,796 $ 13,229 $ 12,979 $ 12,910
- --------------------------------------------------------------------------------------------------------------------
Costs and expenses
Cost of sales
The Timber Company 95 89 75 109
Third parties 13,281 10,129 10,083 9,675
- --------------------------------------------------------------------------------------------------------------------
Total cost of sales 13,376 10,218 10,158 9,784
Selling and distribution 817 556 607 642
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Depreciation, amortization and cost of timber
harvested
The Timber Company 232 320 350 315
Third parties 971 953 969 939
- --------------------------------------------------------------------------------------------------------------------
Total depreciation, amortization and cost of
timber harvested 1,203 1,273 1,319 1,254
General and administrative 810 612 646 788
Interest 426 372 381 354
Other income - - (14) -
- --------------------------------------------------------------------------------------------------------------------
Total costs and expenses 16,632 13,031 13,097 12,822
- --------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes,
extraordinary items and accounting change 1,164 198 (118) 88
Provision (benefit) for income taxes 448 87 (32) 54
- --------------------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary items and
accounting change 716 111 (86) 34
Extraordinary items and accounting change,
net of taxes - (13) (60) (5)
- --------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 716 $ 98 $ (146) $ 29
====================================================================================================================
Cash provided by operations $ 1,439 $ 1,686 $ 1,254 $ 1,376
====================================================================================================================
Other statistical data
Basic per share:
Income (loss) before extraordinary items and
accounting change $ 4.17 $ 0.62 $ (0.47)
Extraordinary items and accounting change,
net of taxes - (0.07) (0.33)
- --------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 4.17 $ 0.55 $ (0.80)
- --------------------------------------------------------------------------------------------------------------------
Diluted per share:
Income (loss) before extraordinary items and
accounting change $ 4.07 $ 0.61 $ (0.47)
Extraordinary items and accounting change,
net of taxes - (0.07) (0.33)
- --------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 4.07 $ 0.54 $ (0.80)
====================================================================================================================
Average number of shares outstanding, basic 171.8 179.8 182.9
Average number of shares outstanding, diluted 175.9 181.1 182.9
Earnings to fixed charges 3.5 1.5 0.7 1.3
Cash flow to interest 4.3 5.4 4.2 4.5
Effective income tax rate 38.5% 43.9% 27.1% 61.4%
====================================================================================================================
</TABLE>
<PAGE>
Year ended
(In millions, except shares, December 31
and per share amounts) 1995
- --------------------------------------------------------------------------
Operations
Net sales $ 14,204
- --------------------------------------------------------------------------
Costs and expenses
Cost of sales
The Timber Company 145
Third parties 9,681
- --------------------------------------------------------------------------
Total cost of sales 9,826
Selling and distribution 575
Depreciation and cost of timber harvested
The Timber Company 230
Third parties 929
- --------------------------------------------------------------------------
Total depreciation and cost of timber harvested 1,159
General and administrative 786
Interest 321
Other income -
- --------------------------------------------------------------------------
Total costs and expenses 12,667
- --------------------------------------------------------------------------
Income (loss) before income taxes, extraordinary
items and accounting change 1,537
Provision (benefit) for income taxes 616
- --------------------------------------------------------------------------
Income (loss) before extraordinary items and
accounting change 921
Extraordinary items and accounting change, net
of taxes -
- --------------------------------------------------------------------------
Net income $ 921
==========================================================================
Cash provided by operations $ 1,918*
==========================================================================
Other statistical data
Basic per share:
Income before extraordinary items and
accounting change
Extraordinary items and accounting change, net
of taxes
- --------------------------------------------------------------------------
Net income
- --------------------------------------------------------------------------
Diluted per share:
Income before extraordinary items and
accounting change
Extraordinary items and accounting change, net
of taxes
- --------------------------------------------------------------------------
Net income
==========================================================================
Average number of shares outstanding, basic
Average number of shares outstanding, diluted
Earnings to fixed charges 5.6
<PAGE>
Cash flow to interest 6.2
Effective income tax rate 40.1%
==========================================================================
* Excludes the accounts receivable secured borrowing program.
EARNINGS TO FIXED CHARGES
Income (loss) before income taxes, extraordinary items and accounting change
plus total interest cost (interest expense plus capitalized interest) and
one-third of rent expense, divided by total interest cost plus one-third of rent
expense.
CASH FLOW TO INTEREST
Cash provided by operations plus interest expense divided by total interest cost
(interest expense plus capitalized interest).
EFFECTIVE INCOME TAX RATE
Provision (benefit) for income taxes divided by income (loss) before income
taxes, extraordinary items and accounting change.
SELECTED FINANCIAL DATA - FINANCIAL POSITION, END OF YEAR
Georgia-Pacific Corporation -- Georgia-Pacific Group
<TABLE>
<CAPTION>
Year ended
------------------------------------------------------------------
(Dollar amounts, except per share, January 1, December 31,
and shares are in millions) 2000 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial position, end of year
Current assets $ 4,536 $ 2,640 $ 2,911 $ 2,611
Timber contracts 66 78 71 58
Property, plant and equipment, net 7,060 6,225 6,277 6,535
Goodwill, net 2,697 1,677 1,599 1,658
Other assets 1,021 918 921 630
- ---------------------------------------------------------------------------------------------------------------------
Total assets $ 15,380 $ 11,538 $ 11,779 $ 11,492
- ---------------------------------------------------------------------------------------------------------------------
Current liabilities $ 3,821 $ 2,381 $ 2,698 $ 2,200
Long-term debt 3,983 3,395 3,057 3,340
Senior deferrable notes 863 - - -
Other long-term liabilities 1,803 1,566 1,546 1,282
Deferred income taxes 1,160 987 959 987
- ---------------------------------------------------------------------------------------------------------------------
Total liabilities $ 11,630 $ 8,329 $ 8,260 $ 7,809
- ---------------------------------------------------------------------------------------------------------------------
Shareholders' equity $ 3,750 $ 3,209 $ 3,519 $ 3,683
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Other statistical data
Property, plant and equipment investments $ 721 $ 632 $ 715 $ 1,055
Timber contract purchases from third parties 150 142 131 94
Timber purchases from The Timber Company 222 333 350 315
Cash paid for acquisitions 1,658 112 - 363
Per share*
Market price:
High $ 54.13 $ 40.50 $ 32.00
Low $ 29.34 $ 18.69 $ 29.50
Year-end $ 50.75 $ 29.28 $ 30.38
Book value $ 21.78 $ 18.55 $ 19.10
Shares of common stock outstanding
at year end 172.2 173.0 184.5
Dividends declared per share $ 0.50 $ 0.50
Total debt to capital, book basis 44.9% 44.5% 43.1% 44.2%
Total debt to capital, market basis 40.9% 47.4% 44.7%
Current ratio 1.2 1.1 1.1 1.2
=====================================================================================================================
<CAPTION>
Year ended
(In millions, except shares, December 31,
and per share amounts) 1995
- ----------------------------------------------------------------------
<S> <C>
Financial position, end of year
Current assets $ 2,589
Timber contracts 81
Property, plant and equipment, net 5,986
Goodwill, net 1,714
Other assets 617
- ----------------------------------------------------------------------
Total assets $ 10,987
- ----------------------------------------------------------------------
Current liabilities $ 1,616
Long-term debt 3,479
Other long-term liabilities 1,199
Deferred income taxes 967
- ----------------------------------------------------------------------
Total liabilities $ 7,261
- ----------------------------------------------------------------------
Shareholders' equity $ 3,726
- ----------------------------------------------------------------------
Other statistical data
Property, plant and equipment investments $ 1,253
Timber contract purchases from third parties 182
Timber purchases from The Timber Company 230
Cash paid for acquisitions -
Per share*
Market price:
High
Low
Year-end
Book value
Shares of common stock outstanding at year end
Dividends declared per share
Total debt to capital, book basis 42.3%
Total debt to capital, market basis
Current ratio 1.6
======================================================================
</TABLE>
<PAGE>
* 1997 amounts are for the period from December 17, 1997 through December 31,
1997.
BOOK VALUE PER COMMON SHARE
Shareholders' equity divided by shares of common stock outstanding as of the end
of the year.
TOTAL DEBT TO CAPITAL, BOOK BASIS
Total debt divided by the sum of total debt, senior deferrable notes, deferred
income taxes, net, other long-term liabilities and shareholders' equity as of
the end of the year. Total debt includes bank overdrafts, commercial paper and
short-term notes, current portion of long-term debt, (all of which are included
in "Current liabilities"), other long-term debt and accounts receivable pledged.
TOTAL DEBT TO CAPITAL, MARKET BASIS
Total debt divided by the sum of total debt and the market value of
shareholders' equity as of the end of the year. Total debt includes bank
overdrafts, commercial paper and short-term notes, current portion of long-term
debt, long-term debt and accounts receivable pledged. The market value of
shareholders' equity is the market price of common stock multiplied by the
number of common stock shares outstanding.
CURRENT RATIO
Current assets divided by current liabilities as of the end of the year.
INVESTOR INFORMATION
Georgia-Pacific Corporation and Subsidiaries
CORPORATE HEADQUARTERS
Georgia-Pacific Corporation
Georgia-Pacific Center
133 Peachtree Street, N.E.
Atlanta, Georgia 30303
(404) 652-4000
STOCK EXCHANGES AND SYMBOLS
Georgia-Pacific Group common stock is listed on the New York Stock Exchange
(NYSE). The NYSE symbol for Georgia-Pacific Group common stock is "GP."
Georgia-Pacific Group options are traded on the Philadelphia Stock Exchange.
The Georgia-Pacific Corporation Premium Equity Participating Security Units
(PEPS Units) are listed on the NYSE. The NYSE symbol for Georgia-Pacific PEPS
Units is "GPW."
TRANSFER AGENT AND REGISTRAR
First Chicago Trust Company
A Division of Equiserve
Post Office Box 2500
Jersey City, New Jersey 07303-2500
(800) 519-3111
ENVIRONMENTAL AND SAFETY REPORT
Requests for Georgia-Pacific Corporation's most recent Environmental and Safety
Report should be addressed to: Corporate Communications, Georgia-Pacific
Corporation, Post Office Box 105605, Atlanta, Georgia 30348. The report can also
be viewed on-line at www.gp.com.
SHAREHOLDER INFORMATION
For shareholder information, contact the Transfer Agent and Registrar, First
Chicago Trust Company, a division of Equiserve, at Post Office Box 2500, Jersey
City, New Jersey 07303-2500, or telephone (800) 519-3111.
Registered Georgia-Pacific Group shareholders are eligible to participate in the
Georgia-Pacific Group Dividend Reinvestment Plan. For information on the Plan,
contact the Plan's agent, First Chicago Trust Company, a Division of EquiServe,
Dividend Reinvestment Plan, Post Office Box 2598, Jersey City, New Jersey
07303-2598, or by telephone at (800) 414-6280. Website: www. fctc.com.
Number of Georgia-Pacific Group shareholders of record at January 1, 2000:
34,427.
FINANCIAL INFORMATION
A copy of the Georgia-Pacific Corporation 1999 Annual Report to the Securities
and Exchange Commission on Form 10-K and the Georgia-Pacific Corporation 1999
Consolidated Financial Statements will be supplied without charge. Annual
statistical updates are also available. For current quarterly financial updates
telephone (800) 340-2384. Copies of corporate news releases are available
through fax-on-demand by telephoning (800) 758-5804, extension 357498.
<PAGE>
All other requests for financial information should be directed to: Investor
Relations, Georgia-Pacific Corporation, P.O. Box 105605, Atlanta, Georgia 30348,
or telephone (404) 652-5555. Information concerning the Georgia-Pacific Group
can also be found at our website www.gp.com.
EXHIBIT 13.2
HIGHLIGHTS
Georgia-Pacific Corporation -The Timber Company
<TABLE>
<CAPTION>
Year Ended
----------------------------------------
January 1, December 31,
(In millions, except shares and per share amounts) 2000 1998
- --------------------------------------------------------------------------------------------------
---------
<S> <C> <C>
Net sales $ 526 $ 534
Income before extraordinary items 400 178
Basic income per share before extraordinary items 4.75 1.97
Cash provided by operations 159 201
Timber and timberland investments 78 59
Cash dividends paid 84 91
Total assets at year end 1,521 1,174
Total debt at year end 970 983
Total debt to capital at year end, book basis 65.6% 85.6%
Total debt to capital at year end, market basis 32.2% 32.2%
- --------------------------------------------------------------------------------------------------
---------
Cash dividends paid per share of common stock $ 1.00 $ 1.00
Market price per share of common stock at year end $ 24.63 $ 23.81
Shares of common stock outstanding at year end 82.9 87.1
- --------------------------------------------------------------------------------------------------
---------
</TABLE>
GEORGIA-PACIFIC CORPORATION-THE TIMBER COMPANY
LETTER TO SHAREHOLDERS
The Timber Company had an excellent year in 1999 as we continued to realize the
benefits of focusing on a single business - growing and selling timber. During
the year, we generated $203 million in free cash flow not including proceeds
from the California land sale. We returned $215 million to shareholders by
paying an annual dividend of $1 per share and by repurchasing about 6 percent of
our outstanding stock.
While the Georgia-Pacific Group remained our largest customer in 1999, we
significantly increased our customer base, selling more than 38 percent of our
harvest volume to outside customers. Our performance benefited from continued
strong demand for our products, as well as our emphasis on selling our timber at
the highest possible price, at the right time, to the right customer.
Nevertheless, extremely dry conditions throughout the South made low-lying areas
harvestable, and this increase in supply helped keep prices below 1998 levels.
The Timber Company took key steps in 1999 that position us well for the future.
Most importantly, we strategically repositioned our timberland portfolio. During
the year, we sold approximately 830,000 acres in Maine and New Brunswick,
Canada, and approximately 194,000 acres in Northern California. While these
lands had been well managed and provided steady cash flows, we found they had
more strategic value for other landowners. These lands represented nearly 20
percent of our land base but only contributed a little more than 10 percent of
our historic EBITDA. The cash proceeds from these sales represent more than 20
percent of our January 1, 2000 market capitalization.
We now manage approximately 4.7 million acres of timberlands in key markets
across the country. These holdings are primarily concentrated in 11 Southern
states, but also include productive timberlands in the Pacific Northwest, the
upper Midwest and the Appalachians. This portfolio provides a strong platform
for both our ongoing operations and our future growth. We estimate our
<PAGE>
merchantable inventory now stands at approximately 185 million tons. Our current
timber portfolio allows us to increase our harvest at an average annual rate of
about 2.5 percent over the next 15 years while maintaining our standing
inventory levels. Focusing our business on certain strategic markets enables us
to make the best decisions about how and when to bring our timber to market, in
order to realize the most value for our shareholders.
Throughout our two full years of operation, The Timber Company has done
everything we expected...and more. We have provided strong, stable cash flows
and a good dividend. We have strategically focused our timber holdings, and we
have continued to increase forest productivity while following the principles of
sustainable forestry.
In the coming year, we will continue to look for ways to fully realize the value
of our forests and your investment. We pledge to continue our effort to ensure
that the strength of our operating results and potential are fully realized and
that this value accrues to our shareholders. We appreciate your support and are
committed to the success of your investment in our company.
A.D. "Pete" Correll
Chairman, Chief Executive Officer and President
Georgia-Pacific Corporation
February 4, 2000
Donald L. Glass
President and Chief Executive Officer
The Timber Company
February 4, 2000
GEORGIA-PACIFIC CORPORATION -THE TIMBER COMPANY
OPERATING & FINANCIAL STRATEGY
The Timber Company believes maximizing long-term free cash flow is the key to
wealth creation for our shareholders. We believe timber is a unique asset class
that generates substantial cash flow, providing investors with handsome
historical returns while limiting downside risk. Over the past two years we've
created an enterprise focused on ensuring that every acre and every tree
delivers its full potential.
TIMBER IS A UNIQUE ASSET
Investing in timberland is truly a unique proposition. Timber grows in volume
and is renewable - unlike oil, gas, minerals and other natural resources. While
investments in industrial assets depreciate and require maintenance
reinvestment, timber appreciates without significant reinvestment. Within the
forest products industry, timber stands out as the only product to enjoy real
price appreciation over the past decade. This unique combination of traits
historically has enabled timber investments to outperform the broad equity
markets, with lower risk.
TIMBER MARKETS ARE LOCAL MARKETS
Because about half of a log's weight is water, timber can only be shipped
economically over a short distance - normally about 150 miles. So local supply
and demand conditions dominate short-term pricing dynamics.
Because timber takes years to grow, harvestable inventory is essentially fixed
at any particular time. However, accessible inventory fluctuates. Best
management practices restrict the ability to harvest during periods of wet
weather. This can quickly impact the local supply of logs for sale. Periods of
drought usually expand accessible inventory, as low-lying areas become
harvestable and prices retreat. When prices are depressed, there is little
motivation to exercise the option to sell timber. In other words, the short-term
timber supply is price-elastic.
Local, professional management is essential if owners are to realize the full
value of their timberland investment. Timber assets demand management by
professional foresters who thoroughly understand
<PAGE>
the science of silviculture and the short- and long-term supply/demand dynamics
of their local marketplace.
STRATEGY - FOCUS ON ONE BUSINESS
At The Timber Company, we focus on one business: the management and marketing of
timber and timberlands. We seek a portfolio of attractive timber assets that
provides investors with superior return potential for relatively low risk. With
holdings in numerous timber basins, we provide investors with risk-reducing
geographic and product diversity difficult to obtain through a direct timberland
investment. Qualities we seek in timberlands include:
- - High-quality land suited for highly productive timber management
- - Significant high-quality merchantable and premerchantable inventory
- - A concentration of healthy and diverse converting facilities within economic
reach
SHORTEN THE DISTANCE FROM THE FOREST TO THE SHAREHOLDER. The Timber Company
operates 13 profit centers that each manage between 200,000 and 600,000 acres of
productive forestland. Our 280 foresters combine their local market knowledge
with forestry expertise in the management of our lands. We structure the
compensation of these managers and other key employees to align the management
of our timber assets with our shareholders' financial interest.
DEPLOY TECHNOLOGY TO ENHANCE PRODUCTIVITY. The Timber Company is increasing
forest growth rates to allow higher, sustainable harvest volumes over time. We
expect growth rates on our timberlands to increase through the use of
genetically improved seedlings, intensive fertilization, vegetation control,
thinning and selective harvesting practices. We expect to increase seedling
survival rates, improve drought and pest resistance, and achieve higher growth
rates. Our forest technology group employs proprietary forest growth and
economic modeling technology on a site-by-site basis to prescribe optimal
investments and harvest timing.
OPERATING POLICIES
Management of The Timber Company is focused on creating superior shareholder
returns. Key to realizing this goal is our knowledge of local markets. Our
management recognizes the value of the timber harvest option and the flexibility
it creates to maximize returns. We also have several options in bringing timber
to market, including long-term contracts, various types of auctions and
delivered wood sales. This flexibility allows us to match each tree with its
best buyer.
While maximizing revenues, The Timber Company does not lose sight of cost
control. During our two-year history, the absolute level of our fixed costs has
not changed.
About 5 percent of revenues has come from nontimber income sources, primarily
high-margin lease rights on our lands. In the past, income from hunting leases,
the sale of minerals and mineral rights, and the sale of easements was used to
offset property taxes. We are currently managing this growing income stream with
an eye toward offsetting our G&A expense.
We have developed a program to identify small parcels of land that are either
marginally productive or more valuable to others. The majority of the proceeds
from these tactical land sales are tax-efficiently redeployed to acquire more
productive timberlands. In this way, we constantly upgrade the quality of our
timber portfolio.
FINANCIAL POLICIES
SEPARATION OF CASH FLOWS. The letter stock transaction, which created The Timber
Company (and our tracking stock that trades separately from the Georgia-Pacific
Group), underscores our commitment to providing shareholders of The Timber
Company with an appropriate rate of return. The Timber Company's cash flows must
be reinvested solely in The Timber Company, or returned to its shareholders in
the form of dividends and/or share repurchases, regardless of the cash needs of
the Georgia-Pacific Group.
<PAGE>
CAPITAL STRUCTURE. We strive to balance our mix of debt and equity to best
benefit our shareholders by keeping our weighted average cost of capital low,
while retaining the flexibility needed to pay dividends and finance attractive
growth opportunities. Risk factors that contribute to the volatility of The
Timber Company and influence the capital structure decision include economic
cycles, changes in industry capacity and additional environmental regulations.
On the other hand, the size, diversity and liquidity of The Timber Company's
timberlands, and the Corporation's capital assets, reduce risk and increase
borrowing capacity. We consider our debt level to be both manageable and prudent
given our capability to generate cash flow.
The Timber Company's target debt level is currently $1.0 billion. On January 1,
2000, our debt was $970 million. The Timber Company held a $397 million
face-value note received as payment for 194,000 acres of California timberland.
We intend to monetize this note in 2000. On a market value basis, the
debt-to-capital ratio was 32.2 percent.
On January 1, 2000, Georgia-Pacific Corporation's total debt was $7.024 billion,
slightly above the target of $6.8 billion. The weighted average pretax cost of
debt was 7.2 percent. Considering the Corporation's ability to generate strong
cash flows even in cycle troughs, we believe the current debt structure is
appropriate and manageable.
INVESTMENT - TREES, TRUCKS AND NOT MUCH ELSE. Investment consists almost
exclusively of the acquisition of timberlands and investments in reforestation
and silviculture to improve growth and yield. Of the $80 million invested in
1999, $36 million was used to acquire timber and timberlands, and $42 million
was invested in reforestation and silvicultural treatments. The remaining $2
million was invested primarily in information systems and pickup trucks. We
expect average annual capital spending in the $50 million range, exclusive of
timberland acquisitions.
DIVESTITURES - STRATEGIC LAND SALES. In 1998, we began a comprehensive review of
assets to ascertain their strategic fit with our overall business portfolio and
our overall financial return criteria. We established two programs to monetize
lands that do not fit these objectives. The tactical land sales program has been
discussed on page 8.
The strategic land sales program began in 1998 with the sale of 61,000 acres in
West Virginia. In 1999, we concluded the program with the sale of our Maine,
California and New Brunswick properties. The combined $489 million sales price
valued the properties at 13.5 times 1998 EBITDA. These transactions were
tax-efficiently structured, deferring taxes on the gains for several years. A
portion of the proceeds was used to execute open market share repurchases in
1999, with the balance expected to be used to repurchase stock in 2000.
ACQUISITIONS - AGGRESSIVE SHOPPER / DISCIPLINED BUYER. From time to time,
sizable timberland acreage becomes available for purchase. We evaluate such
potential acquisitions for both strategic fit and estimated returns. Strategic
fit involves an evaluation of the property including, but not limited to, the
number, size and long-term viability of customers within economic shipping
distance of the forest; the quality of the land; and the quality of the standing
inventory. Traditional valuation techniques are used to triangulate values for
these timberlands with an emphasis on discounted cash flow. Strategic
acquisitions must provide returns to our investors that exceed the cost of
capital.
In 1999, we performed analyses on more than 1 million acres of strategic
timberland acquisitions. However, no major acquisitions could be consummated at
a price that would allow us to meet our financial return requirements.
DIVIDENDS AND SHARE REPURCHASES - EXCESS CASH RETURNED TO SHAREHOLDERS. We
believe a portion of our cash flows should be paid to shareholders as
sustainable quarterly dividends. Currently, we pay a $0.25 quarterly dividend.
Our dividend policy is dictated by our cash flow generation, long-term capital
requirements, capital structure and investor preferences.
<PAGE>
As in 1999, there are periods when The Timber Company generates cash in excess
of our requirements for dividends and our opportunities for reinvestment at
attractive rates of return. In such cases, we distribute that excess cash to our
shareholders so they can make their own investment choices. The only
requirements we must meet in order to execute repurchases are that total
corporate debt be below $6.8 billion and total debt of The Timber Company be
below $1.0 billion. This year we repurchased more than 5.3 million shares, a
distribution of $131 million in cash to our shareholders and a reduction of
about 6 percent of shares in 1999. Since share repurchases were initiated in
June of 1998, The Timber Company has repurchased nearly 12 percent of
outstanding shares. It is our intention to continue this program as long as cash
flows exceed available attractive investment opportunities.
MANAGEMENT'S DISCUSSION AND ANALYSIS
THE TIMBER COMPANY
The Timber Company's assets consist of approximately 4.7 million acres of
timberlands owned or leased by Georgia-Pacific Corporation (the Corporation),
together with related facilities and equipment. The accompanying financial
statements present the historical results of operations and financial condition
of the timberlands and operations that compose The Timber Company.
Historically, The Timber Company grew and sold timber, substantially all of
which was sold to manufacturing facilities that now constitute the
Georgia-Pacific Group. Currently, The Timber Company and the Georgia-Pacific
Group operate under a policy governing sales of timber through the year 2000,
which is more fully described in Note 12 of the Notes to Combined Financial
Statements. In 2000, the Georgia-Pacific Group is expected to purchase
approximately 60% of The Timber Company's harvest volumes. This will allow The
Timber Company to continue to provide a comparable amount of timber available
for sale on the open market as in 1999.
The Timber Company's harvest volumes in 1999 were comparable to 1998. As a
result of the land sales in the Northeast, hardwood pulpwood harvest volumes
were slightly lower in 1999. Total harvest volumes for 2000 are expected to be
between 12 million and 13 million tons. The decrease is a result of strategic
timberland sales in 1999 and regular harvest planning for 2000. Sawtimber demand
is expected to remain strong in the South and West. In addition, pulpwood demand
is expected to improve as the demand for pulp and paper products increases.
Selected sales data for The Timber Company are shown in the following table:
SELECTED SALES DATA
Georgia-Pacific Corporation-The Timber Company
Year ended
-------------------------------------------------
-------
January 1, December 31,
2000 1998 1997
- --------------------------------------------------------------------------------
--------
Volume (in thousand tons)
Southern softwood sawtimber 6,449 6,007 5,986
Western softwood sawtimber 1,343 1,608 1,539
Softwood pulpwood 4,323 4,289 5,118
Hardwood sawtimber 547 436 397
Hardwood pulpwood 2,231 2,256 2,572
- --------------------------------------------------------------------------------
--------
Total volume 14,893 14,596 15,612
================================================================================
=========
<PAGE>
Selling prices (per ton)
Southern softwood sawtimber $ 47 $ 50 $ 47
Western softwood sawtimber 83 70 77
Softwood pulpwood 12 14 15
Hardwood sawtimber 35 36 50
Hardwood pulpwood 7 10 11
Weighted average price $ 34 $ 35 $ 34
================================================================================
=========
The Timber Company also is engaged in certain businesses related to the
ownership and management of timberlands, including managing the sale of hunting
leases, the sale of minerals and mineral rights, and the sale of easements. In
prior years, The Timber Company was engaged in certain businesses related to
real estate development, but is no longer engaged in these activities. Revenues
from these related activities are presented in the table below.
Georgia-Pacific Corporation-The Timber Company
Year ended
-------------------------------------------------
January 1, December 31,
(In millions) 2000 1998 1997
- --------------------------------------------------------------------------------
Other net sales
Hunting leases $ 12 $ 12 $ 11
Minerals 5 4 6
Easements 6 - -
Real estate development - 3 8
Other 2 1 1
- --------------------------------------------------------------------------------
--------
Total $ 25 $ 20 $ 26
================================================================================
=========
1999 COMPARED WITH 1998
The Timber Company reported net sales of $526 million and net income of $400
million, or $4.73 diluted earnings per share, in 1999, compared with net sales
of $534 million and net income of $176 million, or $1.94 diluted earnings per
share, in 1998. The 1999 results included a $355 million pretax gain ($215
million after taxes, or $2.54 diluted earnings per share) from the sale of
1,024,000 acres of timberlands located in California, Maine and New Brunswick,
Canada. The 1998 results included a $24 million pretax gain ($14 million after
taxes, or $0.16 diluted earnings per share) from the sale of certain timberlands
in West Virginia and an extraordinary, after-tax loss of $2 million, or $0.02
diluted loss per share, for the early retirement of debt.
Timber sales decreased $13 million to $501 million in 1999 compared to $514
million in 1998, primarily as a result of a 21% decline in pulpwood prices.
Total harvest volumes remained relatively flat, with a 2% overall increase.
Timber sales to third parties grew 66% over 1998 as The Timber Company increased
its total sales revenue to third parties from 20% in 1998 to 35% in 1999.
Southern softwood sawtimber prices decreased 6% from record levels in 1998 due
in part to the dry ground conditions in the South. This decline in price was
offset by a 7% increase in harvest volumes due in part to strong demand in the
building products business. However, Western sawtimber volumes decreased 16%
compared to 1998 due in part to weather conditions which restricted harvesting
in the
<PAGE>
Northwest during the first nine months of 1999. Softwood pulpwood prices were
down 14% compared to 1998 due to a combination of dry weather and pulp mill
curtailments and/or shutdowns in the first half of 1999. Hardwood pulpwood
prices also continued to drop, as anticipated. Hardwood sawtimber harvest
volumes increased 25% over 1998, while pricing remained relatively flat. Western
sawtimber prices increased 19% year over year, primarily due to recovering
Western markets. Also contributing was the increased demand in the building
products business that was experienced during 1999. Prices for most products are
anticipated to hold at or near current levels in 2000.
Excluding the pretax gain on the sale of timberlands in California, Maine and
New Brunswick of $355 million in 1999, and the pretax gain on the sale of
certain timberlands in West Virginia of $24 million in 1998, earnings before
interest and taxes increased $31 million to $371 million in 1999 compared with
$340 million in 1998. The 9% increase resulted primarily from a $34 million
increase in gains on miscellaneous land sales as compared to 1998. Overall, 2%
higher total harvest volumes partially offset the year over year 3% decline in
average sales price. Cost of sales, excluding depreciation and cost of timber
harvested and gains on asset sales, decreased by $10 million to $121 million in
1999, compared to $131 million in 1998. Much of the decline in cost of sales was
attributable to lower silvicultural expenses and lower cut and haul expenses.
General and administrative expense (G&A) was $43 million in 1999 compared with
$36 million in 1998. The increase is due to higher incentive compensation
accruals, higher legal fees and $2 million of one-time, nonrecurring charges in
the third quarter of 1999, primarily related to charitable contributions. G&A
expense is expected to decline in 2000 by approximately 10%, consistent with the
reduced size of The Timber Company's timberland holdings.
Interest expense decreased by $2 million to $69 million in 1999 compared to $71
million in 1998 due primarily to a decrease in the weighted average interest
rate.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES. The Timber Company generated cash from operations of $159
million during 1999. The Timber Company's cash provided by operations in 1998
was $201 million. The decrease is due in part to the cash received from the sale
of a timber deed sold to the Georgia-Pacific Group in the second quarter of 1998
for approximately $23 million and to taxes paid of approximately $14 million on
the gain from the 1999 sale of timberlands in New Brunswick, Canada.
INVESTING ACTIVITIES. Expenditures in 1999 were $80 million, which included $42
million for silvicultural investments, $36 million for timberland purchases and
$2 million for equipment purchases. Expenditures in 1998 totaled $65 million.
Expenditures for both 1999 and 1998 excluded tax-free exchange transactions. The
Timber Company expects to invest approximately $50 million in 2000, without
considering the cost of any acquisitions, primarily for silvicultural
investments.
Excluding tax-free exchange transactions, The Timber Company received $124
million in proceeds from the sale of assets in 1999, including $92 million from
the sale of approximately 390,000 acres of timberlands in New Brunswick, Canada,
and approximately 440,000 acres of timberlands in Maine.
In December 1999, The Timber Company sold approximately 194,000 acres of its
redwood and Douglas fir timberlands in Northern California for a purchase price
of approximately $397 million. In conjunction with the sale, the Corporation
received notes from the purchaser for the purchase price. These notes are fully
secured by a standby letter of credit with an unaffiliated third-party financial
institution. The Corporation expects to monetize these notes through the
issuance of notes payable in the first half of 2000. The Timber Company expects
to use the proceeds of the monetization of the notes to fund its share
repurchase program if attractive timberland investment opportunities are not
available. The estimated annual operating profits and capital expenditures for
1999 related to these timberlands were $30 million and $1 million, respectively.
The Timber Company expects to continue to optimize its timber portfolio in 2000,
selling selected properties that are nonstrategic or have a greater value as
conservation, commercial or recreational
<PAGE>
sites. There are currently more than 100,000 acres of scattered parcels that
have been identified for such sales. Excluding tax-free exchange transactions,
The Timber Company received $64 million in proceeds from the sale of assets in
1998, principally real estate development properties located in South Carolina
and Florida and certain timberlands in West Virginia.
FINANCING ACTIVITIES. The Corporation's total debt, excluding senior deferrable
notes, increased by $1,473 million to $7,024 million at January 1, 2000 from
$5,551 million at December 31, 1998. At January 1, 2000 and December 31, 1998,
$970 million and $983 million, respectively, of such total debt was allocated to
The Timber Company and $6,054 million and $4,568 million, respectively, was
allocated to the Georgia-Pacific Group. The debt of The Timber Company bears
interest at a rate equal to the weighted average interest rate of the
Corporation's total debt, calculated on a quarterly basis. At January 1, 2000,
the weighted average interest rate on the Corporation's total debt, excluding
senior deferrable notes, was 7.2% including outstanding interest rate exchange
agreements. The Timber Company's debt increases or decreases by the amount of
any cash provided by or used for its operating activities, investing activities,
dividend payments, share repurchases or issuances and other nondebt-related
financing activities. See Note 1 of the Notes to Combined Financial Statements
for further discussion of financial activities.
In conjunction with the sale of 440,000 acres of The Timber Company's Maine
timberlands in June 1999, the Corporation received notes from the purchaser in
the amount of $51 million. In November 1999, the Corporation monetized these
notes through the issuance of notes payable in a private placement. These
proceeds were used to reduce The Timber Company's debt. The Corporation will use
proceeds from the notes receivable to fund payments required for the notes
payable.
In conjunction with the sale of 194,000 acres of The Timber Company's California
timberlands in December 1999, The Timber Company received notes from the
purchaser with an estimated fair value of $350 million. The Corporation plans to
monetize these notes through the issuance of notes payable in the first half of
2000. The Timber Company expects to use proceeds from the monetization of the
notes to fund its share repurchase program if attractive timberland investment
opportunities are not available. The Corporation will use proceeds from the
notes receivable to fund payments required for the notes payable.
In June 1999, the Corporation renegotiated its accounts receivable secured
borrowing program and increased the amount outstanding under the program from
$280 million to $750 million. The program expires in April 2000. In connection
with the acquisition of Unisource Worldwide, Inc. (Unisource), the Corporation
assumed former Unisource programs to pledge up to $150 million of certain
qualifying U.S. accounts receivable and up to CN$70 million of certain eligible
Canadian accounts receivable. The U.S. program expires in April 2000 and the
Canadian program expires in May 2004. At January 1, 2000, approximately $948
million was outstanding under the Corporation's and Unisource's programs in the
aggregate. The receivables outstanding under these programs and the
corresponding debt are included as "Receivables" and "Commercial paper and other
short-term notes," respectively, on the Corporation's consolidated balance
sheets. All programs are accounted for as secured borrowings. As collections
reduce previously pledged interests, new receivables may be pledged.
Also in connection with the acquisition of Unisource, the Corporation assumed
former Unisource industrial revenue bonds in the amount of $9 million and
capital leases in the amount of $12 million. Additionally, the Corporation
assumed other long-term debt in the amount of $447 million and bank overdrafts
in the amount of $120 million, and retained the previously described accounts
receivable secured borrowing programs in the amount of $197 million. These
amounts are included in the Corporation's total debt.
In November 1999, in connection with the formation of Georgia-Pacific Tissue,
the Corporation issued $500 million of 7.75% Debentures Due November 15, 2029.
During 1998, the Corporation issued $300 million of 7.25% Debentures Due June 1,
2028 and a $14 million floating rate note due September 30, 2003. In January
1998, the Corporation redeemed $200
<PAGE>
million of 9-3/4% Sinking Fund Debentures Due January 15, 2018. In February
1998, the Corporation redeemed $200 million of 9-1/2% Debentures Due February
15, 2018.
During 1999, the Corporation increased the amount of its unsecured revolving
credit facility from $1.5 billion to $2.0 billion. This unsecured revolving
credit facility is used for direct borrowings and as support for commercial
paper and other short-term borrowings. Under the agreement, $1 billion will
terminate in July 2000 and $1 billion will terminate in 2004. As of January 1,
2000, $1,145 million of committed credit was available in excess of all
short-term borrowings outstanding under or supported by the facility.
On July 7, 1999, the Corporation issued 17,250,000 of 7.5% Premium Equity
Participating Security Units (PEPS Units) for $862.5 million. Each PEPS Unit had
an issue price of $50 and consists of a contract to purchase shares of
Georgia-Pacific Group common stock on or prior to August 16, 2002 and a senior
deferrable note of the Georgia-Pacific Group due August 16, 2004. Each purchase
contract yields interest of 0.35% per year, paid quarterly, on the $50 stated
amount of the PEPS Unit. Each senior deferrable note yields interest 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%. The liability related to the
PEPS Units is classified as "Senior deferrable notes" on the Corporation's
consolidated balance sheets and is not included in the debt amount for purposes
of determining the corporate and Georgia-Pacific Group debt targets. The senior
deferrable notes and related interest expense are allocated specifically to the
Georgia-Pacific Group.
In October 1999, the Corporation entered into a financing arrangement to enhance
the return on a deposit made in connection with a 1995 sale-leaseback
transaction by issuing $379 million of 5.74% Debentures Due April 5, 2005 that
were legally defeased with deposits of an equal amount. Accordingly, the
debentures and related deposits are not reflected on the Corporation's
consolidated balance sheets.
The Corporation's senior management establishes the parameters of the
Corporation's financial risk, which have been approved by the Board of Directors
(the Board). Hedging interest rate exposure through the use of swaps and options
and hedging foreign exchange exposure through the use of forward contracts are
specifically contemplated to manage risk in keeping with management policy.
Derivative instruments, such as swaps, forwards, options or futures, which are
based directly or indirectly upon interest rates, currencies, equities and
commodities, may be used by the Corporation to manage and reduce the risk
inherent in price, currency and interest rate fluctuations.
The Corporation does not utilize derivatives for speculative purposes.
Derivatives are transaction-specific so that a specific debt instrument,
contract or invoice determines the amount, maturity and other specifics of the
hedge. Counterparty risk is limited to institutions with long-term debt ratings
of A or better.
The following tables present principal (or notional) amounts and related
weighted average interest rates by year of expected maturity for the
Corporation's debt obligations as of January 1, 2000 and December 31, 1998. For
obligations with variable interest rates, the tables set forth payout amounts
based on current rates and do not attempt to project future interest rates.
<TABLE>
<CAPTION>
(In millions) 2000 2001 2002 2003
- -----------------------------------------------------------------------------------------------------
----------------
<S> <C> <C> <C> <C>
Debt
Commercial paper and other short-term notes -- -- -- --
Average interest rates -- -- -- --
Notes and debentures -- -- $ 300 $ 300
Average interest rates -- -- 10.0% 5.7%
Revenue bonds $ 24 $ 6 $ 73 --
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Average interest rates 4.5% 5.5% 4.7% --
Capital leases $ 2 $ 3 $ 3 $ 2
Average interest rates 9.8% 9.9% 10.2% 10.4%
Other loans $ 13 -- -- $ 15
Average interest rates 8.0% -- -- 6.7%
Senior deferrable notes -- -- $ 863 --
Average interest rates -- -- 7.2% --
Notional principal amount of interest rate
exchange agreements $ 177 -- $ 131 $ 300
Average interest rate paid (fixed) 7.7% -- 6.0% 5.9%
Average interest rate received (variable) 5.9% -- 6.0% 5.9%
- -----------------------------------------------------------------------------------------------------
----------------
<CAPTION>
Fair value
January 1,
(In millions) 2004 Thereafter Total 2000
- -----------------------------------------------------------------------------------------------------
----------------
<S> <C> <C> <C> <C>
Debt
Commercial paper and other short-term notes -- $ 2,067 $ 2,067 $ 2,067
Average interest rates -- 6.5% 6.5% 6.5%
Notes and debentures -- $ 3,389 $ 3,989 $ 3,952
Average interest rates -- 8.4% 8.3% 8.3%
Revenue bonds $ 33 $ 517 $ 653 $ 564
Average interest rates 5.4% 5.7% 5.5% 5.5%
Capital Leases $ 2 $ 2 $ 14 $ 14
Average interest rates 10.5% 10.5% 10.1% 7.9%
Other loans -- -- $ 28 $ 27
Average interest rates -- -- 7.3% 6.9%
Senior deferrable notes -- -- $ 863 $ 866
Average interest rates -- -- 7.2% 7.4%
Notional principal amount of interest rate
exchange agreements -- -- $ 608 $ (1)
Average interest rate paid (fixed) -- -- 6.4% 6.4%
Average interest rate received (variable) -- -- 5.9% 5.9%
- -----------------------------------------------------------------------------------------------------
----------------
</TABLE>
The Corporation has the intent and ability to refinance commercial paper and
other short-term notes as they mature. Therefore, maturities of these
obligations are reflected as cash flows expected to be made after 2004.
<TABLE>
<CAPTION>
(In millions) 1999 2000 2001 2002
- -----------------------------------------------------------------------------------------------------
----------------
<S> <C> <C> <C> <C>
Debt
Commercial paper and other short-term notes -- -- -- --
Average interest rates -- -- -- --
Notes and debentures -- -- -- $ 300
Average interest rates -- -- -- 10.0%
Revenue bonds $ 21 $ 21 $ 1 $ 75
Average interest rates 4.2% 4.4% 6.5% 5.1%
Other loans $ 2 $ 13 -- --
Average interest rates 7.7% 7.9% -- --
Notional principal amount of interest rate
exchange agreements $ 56 $ 100 -- --
Average interest rate paid (fixed) 8.8% 8.4% -- --
Average interest rate received (variable) 5.0% 5.8% -- --
- -----------------------------------------------------------------------------------------------------
----------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Fair value
December 31,
(In millions) 2003 Thereafter Total 1998
- -----------------------------------------------------------------------------------------------------
----------------
<S> <C> <C> <C> <C>
Debt
Commercial paper and other short-term notes -- $ 1,209 $ 1,209 $ 1,209
Average interest rates -- 5.8% 5.8% 5.8%
Notes and debentures $ 300 $ 2,900 $ 3,500 $ 3,783
Average interest rates 5.5% 8.6% 8.4% 8.4%
Revenue bonds $ 1 $ 518 $ 637 $ 587
Average interest rates 6.5% 5.2% 5.2% 5.2%
Other loans $ 14 -- $ 29 $ 29
Average interest rates 5.8% -- 6.9% 6.9%
Notional principal amount of interest rate
Exchange agreements $ 300 -- $ 456 $ 14
Average interest rate paid (fixed) 5.9% -- 6.8% 6.8%
Average interest rate received (variable) 5.7% -- 5.7% 5.7%
- -----------------------------------------------------------------------------------------------------
----------------
</TABLE>
The Corporation has the intent and ability to refinance commercial paper and
other short-term notes as they mature. Therefore, maturities of these
obligations are reflected as cash flows expected to be made after 2003.
At January 1, 2000, the Corporation had interest rate exchange agreements that
effectively converted $608 million of floating rate obligations with a weighted
average interest rate of 5.9% to fixed rate obligations with an average
effective interest rate of approximately 6.4%. These agreements increased
interest expense by $7 million for the year ended January 1, 2000, and $11
million and $16 million for the years ended December 31, 1998 and 1997,
respectively. As of January 1, 2000, these agreements have a weighted average
maturity of approximately 2.6 years. As of January 1, 2000, the Corporation's
total floating rate debt exceeded related interest rate exchange agreements by
$1,957 million.
The Corporation also enters into foreign currency exchange agreements and
commodity futures and swaps, the amounts of which were not material to the
financial position of The Timber Company at January 1, 2000.
As of January 1, 2000, the Corporation had registered for sale up to $2.975
billion of debt and equity securities under a shelf registration statement filed
with the Securities and Exchange Commission. The Corporation registered $1.725
billion under such registration statement related to the PEPS Units ($862.5
million of which was received on July 7, 1999 in exchange for senior deferrable
notes, and $862.5 million of Georgia-Pacific Group common stock will be issued
upon exercise of the purchase contracts). The $862.5 million of cash (less
expenses) raised in the sale of the PEPS Units was used to pay for the
acquisition of Unisource. In addition, the Corporation registered $500 million
of 7.75% Debentures Due November 15, 2029 under this shelf registration
statement. Proceeds from the issuance of securities under this shelf
registration statement will be used for general corporate purposes, including
the repayment of short-term debt, acquisitions, investments in, or extension of
credit to, the Corporation's subsidiaries and the acquisition of real property.
The Board has adopted a policy that earnings and cash flows generated from the
businesses of the Georgia-Pacific Group or The Timber Company will be used only
for reinvestment in the business of the group generating such earnings and
related cash flows, for repayment of its debt, or for payment of dividends on,
or the repurchase of shares of, the class of common stock reflecting such
group's performance. Funds of one group will not be loaned to or otherwise
invested in the business of the other group.
<PAGE>
The Timber Company expects to buy and sell timberlands as part of a continuing
effort to improve its competitive position. Proceeds from sales of timberlands
will be used by it either to fund the purchase of other timberlands that, due to
location or species mix, are more desirable, or to reduce debt or return cash to
holders of The Timber Company stock, in the form of either dividends or stock
repurchases. The cost of timberland purchases or the proceeds from timberland
sales could be material to the results of operations and financial condition
reported for The Timber Company in a particular quarter or year.
In June 1999, the Board increased the corporate target debt level under which
the Corporation can purchase shares of Georgia-Pacific Group and The Timber
Company common stock on the open market from $5.75 billion to $6.8 billion. In
addition, the Board increased the Georgia-Pacific Group's target debt level from
$4.75 billion to $5.8 billion. The Timber Company's target debt level remains at
$1.0 billion. Depending on operating and financial considerations, debt levels
of the Corporation and of The Timber Company may from time to time be above or
below these thresholds.
During 1999, The Timber Company purchased on the open market approximately 5.3
million shares of The Timber Company stock at an aggregate price of $131 million
($24.72 average per share). Of these purchased shares, approximately 5,343,000
shares were held as treasury stock and 6,000 shares were purchased during 1999
and settled after January 1, 2000. During 1998, The Timber Company purchased on
the open market approximately 5.7 million shares of The Timber Company stock at
an aggregate price of $121 million ($21.23 average per share), all of which were
held as treasury stock at December 31, 1998.
Subsequent to year-end 1999 through February 4, 2000, The Timber Company
purchased on the open market 418,700 shares of The Timber Company stock at an
aggregate price of $9.5 million ($22.66 average per share). The Timber Company
expects to repurchase shares of its stock throughout 2000 as long as debt levels
are below the established thresholds.
During 1999 and 1998, The Timber Company paid dividends totaling $84 million and
$91 million, respectively.
In 2000, The Timber Company expects its cash flow from operations, together with
proceeds from any sales of assets and available financing sources, to be
sufficient to fund planned capital investments, pay dividends and make scheduled
debt repayments.
OTHER. The Timber Company employs approximately 400 people of which there are
not a significant number of union employees.
In July 1999, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 137, providing for a one-year delay
of the effective date of SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities." SFAS No. 133 establishes accounting and reporting
standards for derivative instruments and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities on the
balance sheets and measure those instruments at fair value. The Timber Company
will be required to adopt SFAS No. 133 in 2001. Management is evaluating the
effect of this statement on the Corporation's derivative instruments, which are
primarily interest rate swaps, foreign currency forward contracts, commodity
futures and long-term purchase commitments. The impact of such adjustments to
fair value is not expected to be material to The Timber Company's financial
position.
The Timber Company has resolved the effects of the Year 2000 problem on its key
information systems. The Year 2000 problem, which is common to most businesses,
concerns the inability of such systems to properly recognize and process dates
and date-sensitive information on and beyond January 1, 2000. The Timber Company
developed a Year 2000 plan, under which all of its key information systems were
tested and noncompliant software or technology was modified or replaced. The
work needed to resolve the Year 2000 problem with regard to its operations was
performed as part of normal systems maintenance and replacement practices. The
Timber Company did not accelerate its internal maintenance schedule or incur any
incremental cost for such work. The Timber Company did not incur
<PAGE>
any significant cost or problems in its key information systems related to Year
2000. The Timber Company will continue to monitor the effect of Year 2000 on its
systems during the first few months of 2000.
For a discussion of commitments and contingencies, see Note 11 of the Notes to
Combined Financial Statements.
1998 COMPARED WITH 1997.
The Timber Company reported net sales of $534 million and net income of $176
million, or $1.94 diluted earnings per share, in 1998, compared with net sales
of $551 million and net income of $215 million, or $2.33 diluted earnings per
share, in 1997. The 1998 results included a $24 million pretax gain ($14 million
after taxes, or $0.16 diluted earnings per share) from the sale of certain West
Virginia timberlands and an extraordinary, after-tax loss of $2 million, or
$0.02 diluted loss per share, for the early retirement of debt. The 1997 results
included a $114 million pretax gain ($71 million after taxes, or $0.78 diluted
earnings per share) from the sale of 127,000 acres of timberlands located near
Martell, California. There were no sales from the Martell timberlands in 1997,
and the operating profits from those timberlands were not significant for any of
the years presented on the financial statements.
Timber sales decreased $11 million to $514 million in 1998 compared to $525
million in 1997. This decline was due in large part to the fact that one million
fewer tons (7%) were harvested in 1998 compared to 1997. This overall decline in
volume was offset somewhat by an increase in Southern sawtimber prices of 6%.
After reaching record levels in the first half of 1998 due to extremely wet
weather, prices for Southern sawtimber were closer to 1997 prices by year-end
1998. Southern sawtimber harvest levels were relatively unchanged in 1998 as
compared with 1997. Softwood pulpwood harvest volumes declined 16% in 1998 in
part due to a different harvest plan for softwood pulpwood in 1998 versus 1997
and in part due to downtime taken by pulp and paper mills. While causing a
decline in total sales revenue, this also resulted in a higher-margin product
mix for 1998. In addition to lower volumes, softwood pulpwood prices were 7%
lower in 1998 than in 1997 partially due to downtime declared by pulp and paper
mills. Western softwood sawtimber prices decreased 9% compared to 1997 due to
weak demand associated with the Asian economic problems. Hardwood sawtimber
prices decreased in large part due to the mix of hardwood sawtimber harvested
(i.e., a higher proportion of less-expensive, lower-grade sawtimber being
harvested).
Sales from real estate development activities decreased $5 million to $3 million
in 1998, compared to $8 million in 1997, due to the sale of the real estate
development properties located in South Carolina and Florida in the first
quarter of 1998. The Timber Company is no longer engaged in real estate
development activities.
Excluding the pretax gain on the sale of certain timberlands in West Virginia of
$24 million in 1998, and the pretax gain on the sale of timberlands near
Martell, California, of $114 million in 1997, earnings before interest and taxes
increased $17 million to $340 million in 1998, compared with $323 million in
1997. This increase was the result of a higher-margin product mix coupled with
efforts to reduce costs by optimizing productivity and operating with a
workforce focused on cost control. Cost of sales, excluding depreciation and
cost of timber harvested and gains on asset sales, decreased by $21 million to
$131 million in 1998, compared to $152 million in 1997. Much of the decline in
cost of sales was attributable to lower silvicultural expenses and lower cut and
haul expenses.
G&A was $36 million in 1998, compared with $43 million in 1997. Excluding a
one-time charge of $3 million related to information systems write-offs in 1997,
G&A decreased $4 million as a result of the implementation of strategies that
focus continually on controlling costs.
Interest expense declined 15% to $71 million in 1998, compared with $84 million
in 1997. The primary reason for this decline was a lower level of debt, which
resulted from applying the $270 million proceeds from the sale of the
timberlands near Martell, California. Also contributing to the decline were
lower average interest rates.
<PAGE>
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. The statements under "Management's
Discussion and Analysis" and other statements contained herein that are not
historical facts, including statements regarding pricing trends and expected
harvest rotations, are forward-looking statements (as such term is defined under
the Private Securities Litigation Reform Act of 1995) based on current
expectations. The accuracy of such statements is subject to a number of risks,
uncertainties and assumptions. In addition to the risks, uncertainties and
assumptions discussed elsewhere herein, factors that could cause or contribute
to actual results differing materially from such forward-looking statements
include the following: the effect on The Timber Company of governmental,
legislative and environmental restrictions; catastrophic losses from fires,
floods, windstorms, earthquakes, volcanic eruptions, insect infestations or
diseases; material variations in regional market demand for timber products;
fluctuations in interest rates; and other risks, uncertainties and assumptions
discussed in the Corporation's filings with the Securities and Exchange
Commission, including the Corporation's Form 8-K dated October 17, 1996.
REPORT ON MANAGEMENT'S RESPONSIBILITIES
Management of Georgia-Pacific Corporation is responsible for the preparation,
integrity and fair presentation of the consolidated financial statements and the
estimates and judgments upon which certain amounts in the financial statements
are based. Management is also responsible for preparing the other financial
information included in this annual report. In our opinion, the accompanying
financial statements have been prepared in conformity with generally accepted
accounting principles, and the other financial information in this annual report
is consistent with the financial statements.
Management is also responsible for establishing and maintaining a system of
internal control over financial reporting, which encompasses policies,
procedures and controls directly related to, and designed to provide reasonable
assurance as to, the reliability of the published financial statements. An
independent assessment of the system is performed by the Corporation's internal
audit staff in order to confirm that the system is adequate and operating
effectively. The Corporation's independent public accountants also consider
certain elements of the internal control system in order to determine their
auditing procedures for the purpose of expressing an opinion on the financial
statements. Management has considered any significant recommendations regarding
the internal control system that have been brought to its attention by the
internal audit staff or independent public accountants and has taken steps it
deems appropriate to maintain a cost-effective internal control system. The
Audit Committee of the Board of Directors, consisting of independent directors,
provides oversight to the financial reporting process. The Corporation's
internal auditors and independent public accountants meet regularly with the
Audit Committee to discuss financial reporting and internal control issues and
have full and free access to the Audit Committee.
There are inherent limitations in the effectiveness of any system of internal
control, including the possibility of human error and the circumvention or
overriding of controls. Accordingly, even an effective internal control system
can provide only reasonable assurance with respect to financial statement
preparation. Furthermore, the effectiveness of an internal control system can
vary over time due to changes in conditions.
Management believes that as of January 1, 2000, the internal control system over
financial reporting is adequate and effective in all material respects.
/s/ James E. Terrell
- ---------------------
James E. Terrell
Vice President and Controller
/s/ Danny W. Huff
<PAGE>
- ---------------------
Danny W. Huff
Executive Vice President - Finance
and Chief Financial Officer
/s/ A. D. Correll
- ------------------
A. D. Correll
Chairman, Chief Executive Officer and President
February 4, 2000
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Georgia-Pacific Corporation:
We have audited the accompanying combined balance sheets of Georgia-Pacific
Corporation - The Timber Company (as described in Note 1) as of January 1, 2000
and December 31, 1998 and the related combined statements of income,
shareholders' equity, and cash flows for each of the three years in the period
ended January 1, 2000. These financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Georgia-Pacific
Corporation -The Timber Company as of January 1, 2000 and December 31, 1998 and
the results of their operations and their cash flows for each of the three years
in the period ended January 1, 2000 in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
- ------------------------
Arthur Andersen LLP
Atlanta, Georgia
February 4, 2000
<PAGE>
COMBINED STATEMENTS OF INCOME
Georgia-Pacific Corporation - The Timber Company
<TABLE>
<CAPTION>
Year ended
------------------------------------------------
January 1, December 31,
(In millions, except per share amounts) 2000 1998 1997
- ---------------------------------------------------------------------------------------------------------------------
---------------
<S> <C> <C> <C>
Net sales
Timber--Georgia-Pacific Group $ 327 $ 409 $ 425
Timber--third parties
Delivered 43 53 87
Stumpage 131 52 13
Other 25 20 26
- ---------------------------------------------------------------------------------------------------------------------
---------------
Total net sales 526 534 551
- ---------------------------------------------------------------------------------------------------------------------
---------------
Costs and expenses
Cost of sales, excluding depreciation and cost of timber
harvested shown below 70 114 137
Depreciation and cost of timber harvested 42 44 48
General and administrative 43 36 43
Interest 69 71 84
Other income (355) (24) (114)
- ---------------------------------------------------------------------------------------------------------------------
---------------
Total costs and expenses (131) 241 198
- ---------------------------------------------------------------------------------------------------------------------
---------------
Income before income taxes and extraordinary items 657 293 353
Provision for income taxes 257 115 138
- ---------------------------------------------------------------------------------------------------------------------
---------------
Income before extraordinary items 400 178 215
Extraordinary items-loss from early retirement of debt, net of
taxes - (2) -
- ---------------------------------------------------------------------------------------------------------------------
---------------
Net income $ 400 $ 176 $ 215
=====================================================================================================================
===============
Basic per share:
Income before extraordinary items $ 4.75 $ 1.97 $ 2.35
Extraordinary items, net of taxes - (0.02) -
- ---------------------------------------------------------------------------------------------------------------------
---------------
Net income $ 4.75 $ 1.95 $ 2.35
- ---------------------------------------------------------------------------------------------------------------------
---------------
Diluted per share:
Income before extraordinary items $ 4.75 $ 1.96 $ 2.33
Extraordinary items, net of taxes - (0.02) -
- ---------------------------------------------------------------------------------------------------------------------
---------------
Net income $ 4.73 $ 1.94 $ 2.33
=====================================================================================================================
===============
Average number of shares outstanding:
Basic 84.1 90.3 91.4
Diluted 84.6 90.8 92.1
=====================================================================================================================
===============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
<PAGE>
COMBINED STATEMENTS OF CASH FLOWS
Georgia-Pacific Corporation-The Timber Company
<TABLE>
<CAPTION>
Year ended
------------------------------------------------
January 1, December 31,
(In millions) 2000 1998 1997
- ---------------------------------------------------------------------------------------------------------------------
---------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 400 $ 176 $ 215
Adjustments to reconcile net income to cash provided by
operations:
Depreciation 6 5 4
Cost of timber harvested 36 39 44
Other Income (355) (24) (114)
Deferred income taxes 132 4 66
Gain on sales of assets, net (51) (17) (15)
Other (9) 18 12
- ---------------------------------------------------------------------------------------------------------------------
---------------
Cash provided by operations 159 201 212
- ---------------------------------------------------------------------------------------------------------------------
---------------
Cash flows from investing activities
Property, plant and equipment investments (2) (6) (2)
Timber and timberland investments (78) (59) (44)
Proceeds from sales of assets 124 64 271
- ---------------------------------------------------------------------------------------------------------------------
---------------
Cash provided by (used for) investing activities 44 (1) 225
- ---------------------------------------------------------------------------------------------------------------------
---------------
Cash flows from financing activities
Share repurchases (131) (121) -
Proceeds from employee stock purchase plan 16 - -
Proceeds from stock option plan exercises 9 - -
Additions to (repayments of) debt (13) 12 (345)
Cash dividends paid (84) (91) (92)
- ---------------------------------------------------------------------------------------------------------------------
---------------
Cash used for financing activities (203) (200) (437)
- ---------------------------------------------------------------------------------------------------------------------
---------------
Increase (decrease) in cash - - -
Balance at beginning of year - - -
- ---------------------------------------------------------------------------------------------------------------------
---------------
Balance at end of year $ - $ - $ -
=====================================================================================================================
===============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
<PAGE>
COMBINED BALANCE SHEETS
Georgia-Pacific Corporation-The Timber Company
<TABLE>
<CAPTION>
January 1, December 31,
(In millions) 2000 1998
- ---------------------------------------------------------------------------------------------------
---------------
<S> <C> <C>
Assets
Timber and timberlands
Timberlands $ 318 $ 303
Fee timber 523 580
Reforestation 259 227
Other 27 34
- ---------------------------------------------------------------------------------------------------
---------------
Total timber and timberlands 1,127 1,144
- ---------------------------------------------------------------------------------------------------
---------------
Property, plant and equipment
Land and improvements 22 25
Buildings 5 5
Machinery and equipment 36 36
- ---------------------------------------------------------------------------------------------------
---------------
Property, plant and equipment, at cost 63 66
Accumulated depreciation (44) (42)
- ---------------------------------------------------------------------------------------------------
---------------
Total property, plant and equipment, net 19 24
Note receivable 350 -
Other assets 25 6
- ---------------------------------------------------------------------------------------------------
---------------
Total assets $ 1,521 $ 1,174
=================================================================================================
===============
<CAPTION>
January 1, December 31,
2000 1998
- ---------------------------------------------------------------------------------------------------
---------------
<S> <C> <C>
Liabilities and shareholders' equity
Debt $ 970 $ 983
Other liabilities 50 32
Deferred income tax liabilities 376 244
- ---------------------------------------------------------------------------------------------------
---------------
Total liabilities 1,396 1,259
- ---------------------------------------------------------------------------------------------------
---------------
Commitments and contingencies
Shareholders' equity 125 (85)
- ---------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 1,521 $ 1,174
===================================================================================================
===============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
<PAGE>
COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY
Georgia-Pacific Corporation-The Timber Company
<TABLE>
<CAPTION>
Year ended
---------------------------------------------
January 1, December 31,
(In millions) 2000 1998 1997
- ------------------------------------------------------------------------------------------------------------------
---------------
<S> <C> <C> <C>
Shareholders' equity balance, beginning of year $ (85) $ (49) $ (172)
Net income 400 176 215
Common stock repurchases (131) (121) -
Cash dividends paid (84) (91) (92)
Stock option plans and directors plan 9 - -
Employee stock purchase plan 16 - -
- ------------------------------------------------------------------------------------------------------------------
---------------
Shareholders' equity balance, end of year $ 125 $ (85) $ (49)
=================================================================================================================
===============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
GEORGIA-PACIFIC CORPORATION-THE TIMBER COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION. The Corporation, a Georgia corporation, is broadly
engaged in six business operations: the manufacture of building products
(including plywood, oriented strand board, various industrial wood products, and
softwood and hardwood lumber as well as certain nonwood products including
gypsum board, chemicals and other products); the distribution of building
products manufactured by the Corporation or purchased from others; the
manufacture of containerboard and packaging (including linerboard, medium, kraft
and corrugated packaging); the manufacture of pulp and paper (including
communication papers, market pulp, bleached board and tissue); the distribution
of paper products and supplies manufactured by the Corporation or purchased from
others; and the growing of timber on the approximately 4.7 million acres of
timberlands that the Corporation owns or leases. In 1999, these timberlands
supplied approximately 19% of the overall timber requirements of the
Corporation's manufacturing facilities.
On December 16, 1997, shareholders of the Corporation approved the creation of
two classes of common stock intended to reflect separately the performance of
the Corporation's manufacturing and timber businesses (the Letter Stock
Recapitalization). The Corporation's Articles of Incorporation were amended and
restated to (i) create a new class of stock designated as Georgia-Pacific
Corporation - Timber Group common stock, $0.80 par value per share (The Timber
Company stock), consisting of 250 million authorized shares; (ii) redesignate
each authorized share of the Corporation's common stock, $0.80 par value per
share (the Existing Common Stock) as, and convert each share into, one share of
Georgia-Pacific Corporation - Georgia-Pacific Group common stock (now two shares
of Georgia-Pacific Group common stock after giving effect to the May 14, 1999
two-for-one stock split), $0.80 par value per share (Georgia-Pacific Group
stock); (iii) increase the number of shares of Georgia-Pacific Group stock
authorized for issuance from 150 million shares to 400 million shares; and (iv)
authorize the distribution of one share of The Timber Company stock for each
outstanding share of Georgia-Pacific Group stock.
The Corporation's manufacturing and timber businesses are referred to
hereinafter as the "Georgia-Pacific Group" and "The Timber Company,"
respectively, or collectively as the "groups."
<PAGE>
The Georgia-Pacific Group is a manufacturer and distributor of building products
as well as a producer and distributor of pulp and paper products. The
Georgia-Pacific Group includes a procurement function that is responsible for
purchasing timber and wood fiber for all of the Georgia-Pacific Group's
manufacturing facilities. The Timber Company is engaged primarily in the growing
and selling of timber.
The Corporation has presented financial statements of the groups at
substantially the same level of detail as those of the Corporation to allow
investors to properly evaluate the financial condition and results of operations
of each business. It is the Corporation's expectation that investors will use
the groups' combined financial information in conjunction with the Corporation's
consolidated financial information to assist them in making informed financial
decisions relative to the acquisition or disposition of shares of each class of
stock.
The financial statements of the groups comprise all of the accounts included in
the corresponding consolidated financial statements of the Corporation. The
separate financial statements of the Georgia-Pacific Group and The Timber
Company have been prepared on a basis that management believes to be reasonable
and appropriate and include (i) the historical balance sheets, results of
operations and cash flows for each of the groups, with all significant
intragroup transactions and balances eliminated; (ii) in the case of The Timber
Company's financial statements, assets and liabilities of the Corporation and
related transactions identified with The Timber Company, including allocated
portions of the Corporation's debt and G&A; and (iii) in the case of the
Georgia-Pacific Group's financial statements, all other assets and liabilities
and related transactions of the Corporation, including allocated portions of the
Corporation's debt and G&A. Intergroup timber sales between the Georgia-Pacific
Group and The Timber Company have not been eliminated on either group's
financial statements.
Notwithstanding the allocation of assets and liabilities (including contingent
liabilities) and shareholders' equity between the Georgia-Pacific Group and The
Timber Company for the purpose of preparing the respective financial statements
of each group, holders of Georgia-Pacific Group stock and The Timber Company
stock are shareholders of the Corporation and will continue to be subject to all
the risks associated with an investment in the Corporation and all of its
businesses, assets and liabilities. The allocation of assets and liabilities and
change in the equity structure of the Corporation resulting from the Letter
Stock Recapitalization did not result in a transfer or spin-off of any assets or
liabilities of the Corporation, or otherwise affect ownership of any assets or
responsibility for the liabilities of the Corporation or any of its
subsidiaries. As a result, the Letter Stock Recapitalization does not affect the
rights of holders of the Corporation's or any of its subsidiaries' debt.
Holders of Georgia-Pacific Group stock and The Timber Company stock have only
the rights customarily held by common shareholders of the Corporation and do not
have any rights related to their corresponding group except as set forth in
provisions relating to dividend and liquidation rights and requirements for a
mandatory dividend, redemption or conversion upon the disposition of assets of
their corresponding group, or have any right to vote on matters as a separate
voting group other than in limited circumstances as provided under Georgia law
or by stock exchange rules. The relative voting power of Georgia-Pacific Group
stock and The Timber Company stock will fluctuate from time to time, with each
share of Georgia-Pacific Group stock having one vote and each share of The
Timber Company stock having a number of votes based upon the ratio, over a
specified period prior to any shareholder vote, of the time-weighted average
market values of one share of The Timber Company stock and of one share of
Georgia-Pacific Group stock. This formula is intended to give each class of
common stock a number of votes proportionate to its aggregate market
capitalization at the time of any vote. Accordingly, changes in the market value
of Georgia-Pacific Group stock and The Timber Company stock will affect their
relative voting rights. As of January 1, 2000, the holders of Georgia-Pacific
Group stock had a substantial majority of the voting power of the Corporation.
Financial effects arising from either group that affect the Corporation's
results of operations or financial condition could, if significant, affect the
results of operations or financial condition of the other group and the market
price of the common stock relating to the other group. Any net losses of the
Georgia-Pacific Group or The Timber Company and dividends or distributions on,
or repurchases of, Georgia-Pacific Group stock or The Timber Company stock will
reduce the assets of the Corporation
<PAGE>
legally available for payment of dividends on both Georgia-Pacific Group stock
and The Timber Company stock.
The Board may, in its sole discretion, determine to convert shares of the class
of common stock related to one group into the class of common stock related to
the other group at any time at a 15% premium, or at a 10% premium in the case of
certain dispositions of all or substantially all of the properties or assets of
the group whose stock is being converted. Any conversion at any premium would
dilute the interests in the Corporation of the holders of the class of common
stock being issued in the conversion. In addition, any such conversion of a
class of common stock into another class of common stock would 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.
The management and accounting policies applicable to the preparation of the
financial statements of the Georgia-Pacific Group and The Timber Company may be
modified or rescinded, or additional policies may be adopted, at the sole
discretion of the Board at any time without approval of the shareholders.
The Timber Company's combined financial statements reflect the application of
the management and allocation policies adopted by the Board to various corporate
activities, as described below. The Timber Company's combined financial
statements should be read in conjunction with the Corporation's consolidated
financial statements and the Georgia-Pacific Group's combined financial
statements.
FINANCIAL ACTIVITIES. At June 30, 1997, $1.0 billion of the Corporation's total
debt was allocated to The Timber Company for financial statement purposes, and
the balance of the Corporation's total debt was allocated to the Georgia-Pacific
Group. The Corporation's debt was allocated between the groups based upon a
number of factors including expected future cash flows, volatility of earnings,
and the ability to pay debt service and dividends. In addition, the Corporation
considered certain measures of creditworthiness, such as coverage ratios and
various tests of liquidity, as a means of ensuring that each group could
continue to pay debt service during a business downcycle. Management believes
that such allocation is equitable and reasonable.
At January 1, 2000, $970 million of the Corporation's debt was allocated to The
Timber Company and $6,054 million was allocated to the Georgia-Pacific Group.
The senior deferrable notes and related interest expense are allocated
specifically to the Georgia-Pacific Group (see Note 5 of the Notes to Combined
Financial Statements). The Corporation has not allocated any other debt
securities or instruments to either group. The debt of each group bears interest
at a rate equal to the weighted average interest rate of all the Corporation's
debt calculated on a quarterly basis. This weighted average interest rate
excludes the interest on the senior deferrable notes. Management believes that
this method of allocation of the cost of debt is equitable and provides a
reasonable estimate of the cost attributable to the groups.
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, investing activities,
dividend payments, share repurchases and other financing activities. Interest is
charged to each group in proportion to the respective amount of each group's
debt. Changes in the cost of the Corporation's debt are reflected in adjustments
to the weighted average interest cost of such debt. Dividend costs with respect
to any preferred stock issued by the Corporation are charged in a similar
manner.
ALLOCATION OF SHARED SERVICES. A portion of the Corporation's shared G&A (such
as executive management, human resources, legal, accounting and auditing, tax,
treasury, strategic planning and information systems support) has been allocated
to The Timber Company based upon identification of such services specifically
used by The Timber Company. Where determinations based on specific usage alone
have been impracticable, other methods and criteria were used that management
believes are equitable and provide a reasonable estimate of the cost
attributable to The Timber Company. These methods consisted of allocating costs
based on (i) number of employees of each group, (ii) percentage of office space
of each group and (iii) estimated percentage of staff time allocable to each
group. The total of these allocations was $3 million, $4 million and $7 million
in 1999, 1998 and 1997, respectively.
<PAGE>
It is not practicable to provide a detailed estimate of the expenses that would
be recognized if The Timber Company were a separate legal entity.
ALLOCATION OF EMPLOYEE BENEFITS. A portion of the Corporation's employee benefit
costs, including pension and postretirement health care and life insurance
benefits, has been allocated to The Timber Company. The Timber Company's pension
cost related to its participation in the Corporation's noncontributory defined
benefit pension plan, and other employee benefit costs related to its
participation in the Corporation's postretirement health care and life insurance
benefit plans, are actuarially determined based on the number of its employees
and an allocable share of the plan assets and are calculated in accordance with
SFAS No. 87, "Employers' Accounting for Pensions," and SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," respectively.
Management believes such method of allocation is equitable and provides a
reasonable estimate of the costs attributable to The Timber Company.
Since plan assets are not segregated into separate accounts or restricted to
providing benefits to employees of The Timber Company, assets of the
Corporation's employee benefit plans may be used to provide benefits to
employees of both the Georgia-Pacific Group and The Timber Company. Plan assets
have been allocated to The Timber Company based on the percentage of its
projected benefit obligation to the plans' total projected benefit obligations.
The discussion of The Timber Company's retirement plans (see Note 8 of the Notes
to Combined Financial Statements) should be read in conjunction with the
Corporation's consolidated financial statements and notes thereto.
ALLOCATION OF FEDERAL AND STATE INCOME TAXES. The federal income taxes of the
Corporation and the subsidiaries that own assets allocated between the groups
are determined on a consolidated basis. Consolidated federal income tax
provisions and related tax payments or refunds are allocated between the groups
based principally on the taxable income and tax credits directly attributable to
each group. Such allocations reflect each group's contribution (positive or
negative) to the Corporation's consolidated federal taxable income and the
consolidated federal tax liability and tax credit position. Tax benefits that
cannot be used by the group generating those benefits, but can be used on a
consolidated basis, are credited to the group that generated such benefits. Had
the groups filed separate tax returns, the provision for income taxes and net
income for each group would not have significantly differed from the amounts
reported on the groups' statements of income for the years ended January 1, 2000
and December 31, 1998 and 1997. However, the amounts of current and deferred
taxes and taxes payable or refundable allocated to each group on the historical
financial statements may differ from those that would have been allocated had
the groups filed separate income tax returns.
Depending on the tax laws of the respective jurisdictions, state and local
income taxes are calculated on either a consolidated or combined basis or on a
separate corporation basis. State income tax provisions and related tax payments
or refunds determined on a consolidated or combined basis are allocated between
the groups based on their respective contributions to such consolidated or
combined state taxable incomes. State and local income tax provisions and
related tax payments that are determined on a separate corporation basis are
allocated 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.
The discussion of The Timber Company's income taxes (see Note 7 of the Notes to
Combined Financial Statements) should be read in conjunction with the
Corporation's consolidated financial statements and the notes thereto.
DIVIDENDS. For purposes of the historical financial statements of The Timber
Company and the Georgia-Pacific Group, for periods prior to 1998, all dividends
declared and paid by the Corporation were evenly allocated between the groups.
Management believes that such method of allocation is equitable and provides a
reasonable estimate of the dividends that would have been declared and paid in
respect of each class of common stock. The amount of earnings available for the
payment of dividends on Georgia-Pacific Group stock and on The Timber Company
stock (i.e., the available
<PAGE>
dividend amounts) on any date is the amount in excess of the minimum amount
necessary for the particular group to be able to pay its debts as they become
due in the usual course of business. Future dividends will not bear a direct
relationship to earnings and retained earnings as expressed on each group's
combined financial statements in accordance with generally accepted accounting
principles. Accordingly, a mathematical calculation of the available dividend
amount for either group cannot be made.
REVENUE RECOGNITION. Timber sales are recognized when legal ownership or the
risk of loss passes to the purchaser and the quantity sold is determinable. This
occurs when a purchaser acquires stumpage or standing timber, or when a
purchaser receives logs on a delivered sale agreement. There are two types of
stumpage agreements. A timber deed agreement is one in which the purchaser takes
title to all timber on a tract of land. When title passes, revenue is recognized
for the full value of all timber on the tract, except in the case when The
Timber Company sells a deed to the Georgia-Pacific Group. Such sales are treated
as if they were a cutting contract (see Note 12 of the Notes to Combined
Financial Statements). A cutting contract agreement is one in which the
purchaser acquires the right to harvest all stumpage on a tract at an agreed-to
price per unit for all products on the tract. The sale, and any related
advances, is recognized as the purchaser harvests the timber on the tract. For
delivered sales, the risk of loss passes when the timber is delivered to the
customer. Revenues are determined by multiplying actual harvest volumes by
contractually agreed-upon prices negotiated with the purchasers, including the
Georgia-Pacific Group. Other sales are recognized when earned.
INCOME PER SHARE. Basic earnings per share are computed based on net income and
the weighted average number of common shares outstanding. Diluted earnings per
share reflect the assumed issuance of common shares under long-term incentive,
stock option and stock purchase plans. The computation of diluted earnings per
share does not assume conversion or exercise of securities that would have an
antidilutive effect on earnings per share. Income per share for each group is
reflected on a pro forma basis for 1997 as if the Letter Stock Recapitalization
had occurred on January 1, 1997. Amounts are computed for each class of common
stock based on the separate earnings attributed to each of the respective
businesses.
Georgia-Pacific Corporation-The Timber Company
<TABLE>
<CAPTION>
Year ended
----------------------------------------------------------
January 1, December 31,
(In millions, except shares and per share amounts) 2000 1998 1997
- ----------------------------------------------------------------------------------------------------------
--------------
<S> <C> <C> <C>
Basic and diluted income (loss) available to
shareholders
(numerator):
Income before extraordinary items $ 400 $ 178 $ 215
Extraordinary items, net of taxes - (2) -
- ---------------------------------------------------------------------------------------------------------
--------------
Net income $ 400 $ 176 $ 215
=========================================================================================================
==============
Shares (denominator):
Average shares outstanding 84,138,673 90,313,022 91,444,588
Dilutive securities:
Options 426,423* 492,549** 677,784***
Employee stock purchase plans 40,508 7,575 4,047
- ---------------------------------------------------------------------------------------------------------
--------------
Total assuming conversion 84,605,604 90,813,146 92,126,419
=========================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
==============
<S> <C> <C> <C>
Per share amounts:
Basic
Income before extraordinary items $ 4.75 $ 1.97 $ 2.35
Extraordinary items, net of taxes - (0.02) -
- ---------------------------------------------------------------------------------------------------------
--------------
Net income $ 4.75 $ 1.95 $ 2.35
- ---------------------------------------------------------------------------------------------------------
--------------
Diluted
Income before extraordinary items $ 4.75 $ 1.96 $ 2.33
Extraordinary items, net of taxes - (0.02) -
- ---------------------------------------------------------------------------------------------------------
--------------
Net income $ 4.75 $ 1.94 $ 2.33
=========================================================================================================
==============
</TABLE>
* Options to purchase 1,004,000 shares of The Timber Company stock at $25.13 per
share were outstanding during 1999 but were not included in the computation of
diluted earnings per share because the options' exercise price was greater than
the average market price of the common shares.
** Options to purchase 1,951,130 shares of The Timber Company stock at prices
ranging from $23.21 to $25.13 per share were outstanding during 1998 but were
not included in the computation of diluted earnings per share because the
options' exercise price was greater than the average market price of the common
shares.
*** Options to purchase 1,010,600 shares of The Timber Company stock at $25.13
per share were issued on December 17, 1997 but were not included in the
computation of diluted earnings per share because the options' exercise price
was greater than the average market price of the common shares.
TIMBER AND TIMBERLANDS. The Timber Company capitalizes timber and timberland
purchases and reforestation costs. The cost of timber harvested is based on the
volume of timber harvested, the capitalized cost and the total timber volume
estimated to be available over the growth cycle. Timber carrying costs are
expensed as incurred.
Gains or losses on sales of timberlands are reflected as a reduction of "Cost of
sales" on the accompanying statements of income, with the exception of major
divestitures, which are reflected as "Other income."
The Timber Company enters into tax-free exchange transactions to acquire and
sell assets, principally timberlands. During 1999, 1998 and 1997, The Timber
Company acquired assets totaling $34 million, $5 million and $7 million,
respectively, under tax-free exchange transactions. Also during 1999, 1998 and
1997, The Timber Company disposed of assets for consideration of $32 million,
zero and $10 million, respectively, under tax-free exchange transactions. These
transactions are treated as noncash exchanges for purposes of preparing the
accompanying statements of cash flows.
PROPERTY, PLANT AND EQUIPMENT. Forestry-related property, plant and equipment
are recorded at cost. Lease obligations for which The Timber Company assumes or
retains substantially all the property rights and risks of ownership are
capitalized. Replacements of major units of property are capitalized, and the
replaced properties are retired. Replacements of minor components of property,
and repair and maintenance costs, are charged to expense as incurred.
Depreciation is computed using the straight-line method over the estimated
useful lives of the related assets. Useful lives are 25 years for land
improvements, 20 to 45 years for buildings, and 3 to 20 years for machinery and
equipment. Upon retirement or disposition of assets, cost and accumulated
depreciation are removed from the related accounts and any gain or loss is
included in income.
<PAGE>
INVESTMENT IN REAL ESTATE HELD FOR DEVELOPMENT AND SALE. The Timber Company
divested its real estate development properties located in South Carolina and
Florida in the first quarter of 1998. As a result, The Timber Company is no
longer engaged in real estate development activities. Real estate held for
development and sale was stated at the lower of cost or net realizable value,
and included direct costs of land and land development and indirect costs,
including amenities, less amounts charged to cost of sales. These costs were
allocated to individual lots or acreage sold based on relative sales value.
Direct costs were allocated on a specific neighborhood basis, while indirect
costs were allocated over the projects. The Timber Company recognized sales of
retail homesites developed when all conditions, as set forth in SFAS No. 66,
"Accounting for Sales of Real Estate," had occurred.
USE OF ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions. These estimates and assumptions affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements as well as reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.
ACCOUNTING STANDARDS CHANGE. In July 1999, the FASB issued SFAS No. 137,
providing for a one-year delay of the effective date of SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes accounting and reporting standards for derivative instruments and
for hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities on its balance sheet and measure those instruments
at fair value. The accounting for changes in the fair value of a derivative
depends on the intended use of the derivative and the resulting designation. The
Timber Company will be required to adopt SFAS No. 133 in 2001. Management is
evaluating the effect of this statement on the Corporation's derivative
instruments, which are primarily interest rate swaps, foreign currency forward
contracts, commodity futures and long-term purchase commitments. The impact of
such adjustments to fair value is not expected to be material to The Timber
Company's financial position.
CHANGE IN FISCAL YEAR. On or about April 22, 1999, The Timber Company determined
to change its fiscal year from December 31 to end on the Saturday closest to
December 31. Additionally, The Timber Company reports its quarterly periods on a
13-week basis ending on a Saturday. The impact of one additional day on the year
ended January 1, 2000 was not material. There will be no transition period on
which to report.
RECLASSIFICATIONS. Certain 1998 and 1997 amounts have been reclassified to
conform with the 1999 presentation.
NOTE 2. FACTORS AFFECTING THE TIMBER COMPANY'S BUSINESS
FACTORS AFFECTING SUPPLY AND DEMAND. The results of operations of The Timber
Company are and will continue to be affected by cyclical supply and demand
factors related to the forest products industry. The supply of timber is
significantly affected by land use management policies of the U.S. government,
which in recent years have limited, and are likely to continue to limit, the
amount of timber offered for sale by certain U.S. government agencies. Such
government agencies historically have been major suppliers of timber to the U.S.
forest products industry, but timber sales by such government agencies currently
are at historically low levels. Any reversal of government land use management
policies that substantially increases sales of timber by U.S. government
agencies could significantly reduce prices for logs, lumber and other forest
products. The demand for logs and manufactured wood products also has been, and
in the future can be expected to be, subject to cyclical fluctuations. Such
demand is primarily affected by the level of housing starts, repair and
remodeling activity, industrial wood product use, competition from nonwood
products, and the demand for pulp and paper products. These factors are subject
to fluctuations due to changes in economic conditions, interest rates,
population growth, weather conditions, competitive pressures and other factors.
Any decrease in the level of industry demand for logs and wood products
generally can be expected to result in lower net sales, operating income and
cash flow of The Timber Company.
<PAGE>
HARVESTING LIMITATIONS. Net sales, operating income and cash flow of The Timber
Company are dependent, to a significant extent, on the continued ability of
purchasers of standing timber and, to a lesser extent, of The Timber Company to
harvest timber at adequate levels. Weather conditions, timber growth cycles,
access limitations and regulatory requirements associated with the protection of
wildlife and water resources may restrict harvesting of The Timber Company's
timberlands. From time to time, proposals have been made in state legislatures
that would regulate the level of timber harvesting. Timber harvests also may be
affected by various natural factors, including damage by fire, insect
infestation, disease, prolonged drought, severe weather conditions and other
causes. The effects of such natural disasters may be particularly damaging to
young timber. Although damage from such natural causes usually is localized and
affects only a limited percentage of the timber, there can be no assurance that
any damage affecting The Timber Company's timberlands will in fact be so
limited. Consistent with industry practice, The Timber Company does not maintain
insurance coverage with respect to damage to its timberlands. Any of the above
factors that materially limits the ability of purchasers or The Timber Company
to harvest timber could have a significant adverse impact on the net sales,
operating income and cash flow of The Timber Company.
COMMITTED PRODUCT PURCHASES BY THE GEORGIA-PACIFIC GROUP; POSSIBLE INABILITY TO
DEVELOP NEW MARKETS. During 1999, The Timber Company derived approximately 62%
of its net sales from sales of timber directly to the Georgia-Pacific Group. For
a description of the terms of sales of timber by The Timber Company to the
Georgia-Pacific Group, see Note 12 of the Notes to Combined Financial
Statements. While management of The Timber Company believes that there is
significant demand for The Timber Company's timber products from users other
than the Georgia-Pacific Group, no assurance can be given that such demand will
be equivalent to The Timber Company's planned annual harvests. Any excess supply
of timber that results from the inability of The Timber Company to sell its
products to users other than the Georgia-Pacific Group could result in lower
prices for The Timber Company's products, which could have a material adverse
effect on the net sales, operating income and cash flow of The Timber Company.
ENVIRONMENTAL REGULATION. The Timber Company is subject to extensive and
changing federal, state and local environmental laws and regulations, the
provisions and enforcement of which are expected to become more stringent in the
future. The Timber Company's operations generate air emissions, discharge
wastewater and stormwater, and generate and dispose of both hazardous and
nonhazardous wastes. The Timber Company is subject to regulation under the
Endangered Species Act (the ESA), the Clean Water Act, the Clean Air Act, the
Resource Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, and the Federal Insecticide,
Fungicide and Rodenticide Act, as well as similar state laws and regulations.
Violations of various statutory and regulatory programs that apply to The Timber
Company's operations can result in civil penalties, remediation expenses,
natural resource damages, potential injunctions, cease and desist orders, and
criminal penalties. Some environmental statutes impose strict liability,
rendering a person liable for environmental damage without regard to negligence
or fault on the part of such person. There can be no assurance that such laws or
future legislation or administrative or judicial action with respect to
protection of the environment will not adversely affect The Timber Company.
The ESA and counterpart state legislation protect species threatened with
possible extinction. A number of species indigenous to The Timber Company's
timberlands have been and in the future may be protected under these laws,
including the northern spotted owl, marbled murrelet, gray wolf, grizzly bear,
bald eagle, red-cockaded woodpecker, coho salmon and various other species.
Protection of endangered and threatened species may include restrictions on
timber harvesting, road building and other silvicultural activities on private,
federal and state land containing the affected species.
The U.S. Environmental Protection Agency has proposed regulations under its
Total Maximum Daily Load (TMDL) and National Pollutant Discharge Elimination
System (NPDES) programs under the Clean Water Act that could redefine certain
silvicultural activities as point sources of pollution. These proposals, if
enacted as currently written, have the potential to negatively impact forest
management activities in certain areas.
<PAGE>
POTENTIAL ACQUISITION RISKS. The Timber Company intends to pursue acquisitions
as part of its strategy in order to increase cash flow and returns to its
shareholders. There can be no guarantee, however, that The Timber Company will
be able to identify any timberlands for acquisition on terms that are
economically feasible. Additionally, any acquisition strategy involves numerous
risks, including difficulties inherent in the integration of systems, operations
and personnel; diversion of management attention away from other business
concerns; and the need to potentially secure additional financing to consummate
such acquisitions.
NOTE 3. DIVESTITURES
During the second quarter of 1999, The Timber Company sold approximately 390,000
acres of timberlands in New Brunswick, Canada, and approximately 440,000 acres
of timberlands in Maine for approximately $92 million and recognized a pretax
gain of $84 million ($50 million after taxes). The amount is reflected in "Other
income" on the accompanying statements of income. In conjunction with the sale
of its Maine timberlands, the Corporation received notes from the purchaser in
the amount of $51 million. In November 1999, the Corporation monetized these
notes through the issuance of notes payable in a private placement. These
proceeds were used to reduce The Timber Company's debt. The Corporation will use
proceeds from the notes received from the purchaser to fund payments required
for the notes payable. The notes receivable are classified as "Other assets" and
the notes payable are classified as "Other long-term liabilities" on the
Corporation's January 1, 2000 balance sheets.
In December 1999, The Timber Company sold approximately 194,000 acres of redwood
and Douglas fir timberlands in Northern California for a purchase price of
approximately $397 million and recognized a pretax gain of $271 million ($165
million after taxes). The amount is reflected in "Other income" on the
accompanying statements of income. In conjunction with the sale of its
California timberlands, The Timber Company received notes from the purchaser
with an estimated fair value of $350 million. These notes are fully secured by a
standby letter of credit with an unaffiliated third-party financial institution.
The Corporation plans to monetize these notes through the issuance of notes
payable in the first half of 2000. These notes are included in "Note receivable"
on the accompanying balance sheets at January 1, 2000.
In March 1998, The Timber Company sold its real estate development properties
located in South Carolina and Florida for $18 million in cash, resulting in a
pretax gain of approximately $1 million.
In December 1998, The Timber Company completed the sale of approximately 61,000
acres of timberlands located in West Virginia. This sale resulted in a pretax
gain of $24 million ($14 million after taxes). The amount is reflected in "Other
income" on the accompanying statements of income.
In March 1997, The Timber Company sold 127,000 acres of timberlands located near
Martell, California, for $270 million. In conjunction with the sale of its
Martell timberlands, the Corporation received notes from the purchaser in the
amount of $270 million related to the timberlands. In April 1997, the
Corporation monetized the notes through the issuance of notes payable in a
private placement. The proceeds of this transaction were credited to The Timber
Company through the intergroup account. The notes receivable are classified as
"Other assets" and the notes payable are classified as "Other long-term
liabilities" on the Corporation's balance sheets. The Timber Company recognized
a pretax gain of $114 million on the sale of the timberlands ($71 million after
taxes), which is included in "Other income" on the accompanying statements of
income.
NOTE 4. INDEBTEDNESS
The Corporation's indebtedness includes the following:
<PAGE>
<TABLE>
<CAPTION>
January 1, December 31
(In millions) 2000 1998
- ----------------------------------------------------------------------------------------------------------
--------------
<S> <C> <C>
Debentures, 8.6% average rate, payable through 2029 $ 3,589 $ 3,100
Notes, 6.1% average rate, payable through 2006 400 400
Revenue bonds, 5.5% average rate, payable through 2029 653 637
Other loans, 7.3% average rate, payable through 2005 28 29
Capital leases, 10.1% average rage, payable through 2010 14 -
Less: unamortized discount (24) (19)
- ----------------------------------------------------------------------------------------------------------
--------------
4,660 4,147
Less: long-term portion of debt 4,621 4,125
- ----------------------------------------------------------------------------------------------------------
--------------
Current portion of long-term debt 39 22
Commercial paper and other short-term notes, 6.5% average rate 2,067 1,209
Bank overdrafts, net 297 195
- ----------------------------------------------------------------------------------------------------------
--------------
Total short-term debt 2,403 1,426
- ----------------------------------------------------------------------------------------------------------
--------------
Total debt $ 7,024 $ 5,551
==========================================================================================================
==============
The Timber Company's portion of Corporation debt:
Short-term debt $ 332 $ 253
Long-term debt, excluding current portion 638 730
- ----------------------------------------------------------------------------------------------------------
--------------
The Timber Company's total debt $ 970 $ 983
==========================================================================================================
==============
Georgia-Pacific Group's portion of Corporation debt:
Short-term debt $ 2,071 $ 1,173
Long-term debt, excluding current portion 3,983 3,395
- ----------------------------------------------------------------------------------------------------------
--------------
Georgia-Pacific Group's total debt $ 6,054 $ 4,568
==========================================================================================================
==============
Weighted average interest rate on Corporation debt at year end 7.2% 7.2%
==========================================================================================================
==============
</TABLE>
For additional information regarding financial instruments, see Note 5 and 6.
The scheduled maturities of the Corporation's long-term debt for the next
five years are as follows: $39 million in 2000, $9 million in 2001, $376 million
in 2002, $317 million in 2003 and $35 million in 2004.
NOTES, DEBENTURES AND OTHER LOANS. During 1999, in connection with the formation
of Georgia-Pacific Tissue, the Corporation issued $500 million of 7.75%
Debentures Due November 15, 2029.
During 1998, the Corporation issued $300 million of 7.25% Debentures Due June 1,
2028 and a $14 million floating rate note due September 30, 2003. In January
1998, the Corporation redeemed $200 million of 9-3/4% Sinking Fund Debentures
Due January 15, 2018. In February 1998, the Corporation redeemed $200 million of
9-1/2% Debentures Due February 15, 2018. The Corporation recorded an
<PAGE>
after-tax extraordinary loss of approximately $14 million related to these
redemptions, of which $2 million was allocated to The Timber Company based on
the ratio of The Timber Company's debt to the Corporation's total debt.
REVOLVING CREDIT FACILITY. During 1999, the Corporation increased the amount of
its unsecured revolving credit facility from $1.5 billion to $2.0 billion. This
unsecured revolving credit facility is used for direct borrowings and as support
for commercial paper and other short-term borrowings. Under the agreement with
Bank of America National Trust and Savings Association and 14 other domestic and
international banks, $1 billion will terminate in July 2000 and $1 billion will
terminate in 2004. As of January 1, 2000, $1,145 million of committed credit was
available in excess of all short-term borrowings outstanding under or supported
by the facility.
Borrowings under the agreement bear interest, at the election of the
Corporation, at either (i) the higher of the Federal Funds Rate plus 1/2% or the
stipulated bank lending rate or (ii) LIBOR plus 0.2625% or (iii) fixed or
floating rates set by competitive bids. Fees associated with this revolving
credit facility include a facility fee of 0.125% and 0.150% per annum on the
aggregate commitments of the lenders under Tranche A and Tranche B,
respectively, and a utilization fee of 0.125%. Fees and margins may be adjusted
upward or downward according to a pricing grid based on the Corporation's
long-term debt ratings. At January 1, 2000, $855 million was borrowed under the
credit agreement at a weighted average interest rate of 6.5%. Amounts
outstanding under the revolving credit facility are included in "Commercial
paper and other short-term notes" on the Corporation's balance sheets.
The revolving credit agreement contains certain restrictive covenants. The
covenants include a maximum leverage ratio (funded indebtedness, including
senior deferrable notes, to earnings before interest, taxes, depreciation and
amortization [EBITDA]) of 4.5 to 1.0, which is to be maintained by the
Corporation throughout the term of the credit agreement. As of January 1, 2000,
the Corporation's leverage ratio was 2.7 to 1.0.
COMMERCIAL PAPER AND OTHER SHORT-TERM NOTES. These borrowings are classified by
the Corporation as current liabilities, although all or a portion of them may be
refinanced on a long-term basis in 2000.
REVENUE BONDS. At January 1, 2000, the Corporation had outstanding borrowings of
approximately $653 million under certain industrial revenue bonds. During 1999,
approximately $75 million of floating rate bonds were replaced, of which $73
million were refunded by fixed rate instruments and $2 million were replaced by
floating rate instruments.
ACCOUNTS RECEIVABLE SECURED BORROWING PROGRAMS. In June 1999, the Corporation
renegotiated its accounts receivable secured borrowing program and increased the
amount outstanding under the program from $280 million to $750 million. The
program expires in April 2000. In connection with the acquisition of Unisource,
the Corporation assumed former Unisource programs to pledge up to $150 million
of certain qualifying U.S. accounts receivable and up to CN$70 million of
certain eligible Canadian accounts receivable. The U.S. program expires in April
2000 and the Canadian program expires in May 2004. At January 1, 2000,
approximately $948 million was outstanding under the Corporation's and
Unisource's programs in the aggregate. All programs are accounted for as secured
borrowings.
The $948 million and $280 million of receivables outstanding under these
programs at January 1, 2000 and December 31, 1998, respectively, and the
corresponding debt are included as both "Receivables" and "Commercial paper and
other short-term notes" on the Corporation's balance sheets. A portion of the
cost of the accounts receivable secured borrowing programs is based on the
creditors' level of investment and borrowing costs. The Corporation pays fees
based on its senior debt ratings. The total cost of the programs, which was $36
million in 1999, $17 million in 1998 and $19 million in 1997, is included in
interest expense on the Corporation's statements of income.
<PAGE>
Under the accounts receivable secured borrowing programs, the maximum amount of
the creditors' investment is subject to change based on the level of eligible
receivables and restrictions on concentrations of receivables.
OTHER. At January 1, 2000, the amount of long-term debt secured by property,
plant and equipment and by timber and timberlands was not material.
Prior to 1996, the Corporation sold certain assets of the Georgia-Pacific Group
for $354 million and has agreed to lease the assets back from the purchaser over
a period of 30 years. Under the agreement with the purchaser, the Corporation
agreed to maintain a deposit (initially in the amount of $322 million) that,
together with interest earned thereon, was expected to be sufficient to fund the
Corporation's lease obligation, including the repurchase of assets at the end of
the term. This transaction was accounted for as a financing arrangement. At the
inception of the agreement, the Georgia-Pacific Group recorded on its balance
sheet an asset for the deposit from the sale of $305 million and a liability for
the lease obligation of $302 million.
At January 1, 2000, the deposit and lease obligation balances were both $357
million. Of these amounts, approximately $16 million was recorded as a current
asset and $19 million was recorded as a current liability. The long-term
portions of these amounts are recorded in "Other assets" and "Other long-term
liabilities" on the Corporation's balance sheets.
In October 1999, the Corporation entered into a financing arrangement to enhance
the return on this deposit by issuing $379 million of 5.74% Debentures Due April
5, 2005 that were legally defeased with deposits of an equal amount.
Accordingly, the debentures and related deposits are not reflected on the
Corporation's balance sheets.
In connection with the acquisition of Unisource, the Corporation assumed former
Unisource industrial revenue bonds in the amount of $9 million and capital
leases in the amount of $12 million. Additionally, the Corporation assumed other
long-term debt in the amount of $447 million and bank overdrafts in the amount
of $120 million, and retained accounts receivable secured borrowing programs in
the amount of $197 million. These amounts are included in the Corporation's
total debt.
During 1999, the Board increased the corporate target debt level under which the
Corporation can purchase shares of Georgia-Pacific Group and The Timber Company
common stock on the open market from $5.75 billion to $6.8 billion. In addition,
the Board increased the Georgia-Pacific Group's target debt level from $4.75
billion to $5.8 billion. The Timber Company's target debt level remains at $1.0
billion.
Also during 1999, the Corporation registered for sale up to $2.975 billion of
debt and equity securities under a shelf registration statement filed with the
Securities and Exchange Commission. The Corporation registered $1.725 billion
under such registration statement related to the PEPS Units ($862.5 million of
which was received on July 7, 1999 in exchange for senior deferrable notes, and
$862.5 million of Georgia-Pacific Group stock will be issued upon exercise of
the purchase contracts) (see Note 5 of the Notes to Combined Financial
Statements). The $862.5 million of cash (less expenses) raised in this sale of
the PEPS Units was used to pay for the acquisition of Unisource. In addition,
the Corporation registered the $500 million of 7.75% Debentures Due November 15,
2029 under this registration statement.
INTEREST PAID. The Corporation paid interest of $473 million, $468 million and
$475 million in 1999, 1998 and 1997, respectively, of which $57 million, $71
million and $84 million, respectively, was charged to The Timber Company.
NOTE 5. SENIOR DEFERRABLE NOTES.
On July 7, 1999, the Corporation issued 17,250,000 of 7.5% PEPS Units for $862.5
million. Each PEPS Unit had an issue price of $50 and consists of a contract to
purchase shares of Georgia-Pacific Group
<PAGE>
stock on or prior to August 16, 2002 and a senior deferrable note of the
Georgia-Pacific Group due August 16, 2004. Each purchase contract yields
interest of 0.35% per year, paid quarterly, on the $50 stated amount of the PEPS
Unit. Each senior deferrable note yields interest 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%. The liability related to the PEPS Units is
classified as "Senior deferrable notes" on the Corporation's balance sheets and
is not included in the debt amount for purposes of determining the corporate and
Georgia-Pacific Group debt targets. The senior deferrable notes and related
interest expense are allocated specifically to the Georgia-Pacific Group.
NOTE 6. FINANCIAL INSTRUMENTS
The carrying amount and estimated fair value of the Corporation's financial
instruments are as follows:
<TABLE>
<CAPTION>
January 1, 2000 December 31, 1998
------------------------------------------------------
------ --------
Carrying Fair Carrying Fair
(In millions) Amount Value Amount Value
- ------------------------------------------------------------------------------------------------------
--------------
<S> <C> <C> <C> <C>
Liabilities:
Commercial paper and other short-term notes
(Note 4) $ 2,067 $ 2,067 $ 1,209 $ 1,209
Notes and debentures (Note 4) 3,989 3,952 3,500 3,783
Revenue bonds (Note 4) 653 564 637 587
Other loans (Note 4) 28 27 29 29
Senior deferrable notes (Note 5) 863 866 - -
Interest rate exchange agreements * (1) * 14
Notes receivable (Note 3) 350 350 - -
- ------------------------------------------------------------------------------------------------------
--------------
</TABLE>
* The Corporation's balance sheets at January 1, 2000 and December 31, 1998
included accrued interest of $1 million and $1 million, respectively,
related to these agreements.
COMMERCIAL PAPER AND OTHER SHORT-TERM NOTES. The carrying amounts approximate
fair value because of the short maturity of these instruments.
NOTES AND DEBENTURES. The fair value of notes and debentures was estimated
primarily by obtaining quotes from brokers for these and similar issues. For
notes and debentures for which there are no quoted market prices, the fair value
was estimated by calculating the present value of anticipated cash flows. The
discount rate used was an estimated borrowing rate for similar debt instruments
with like maturities.
REVENUE BONDS, SENIOR DEFERRABLE NOTES, OTHER LOANS AND NOTES RECEIVABLE. The
fair value of revenue bonds, senior deferrable notes, other loans and notes
receivable that have not been monetized was estimated by calculating the present
value of anticipated cash flows. The discount rate used was an estimated
borrowing rate for similar debt instruments with like maturities.
INTEREST RATE AND FOREIGN CURRENCY EXCHANGE AGREEMENTS. The Corporation has used
interest rate swap and foreign currency exchange agreements in the normal course
of business to manage and reduce the risk inherent in interest rate and foreign
currency fluctuations.
The Corporation uses interest rate swap arrangements to manage its exposure to
interest rate changes. Such arrangements are considered hedges of specific
borrowings, and differences paid and received
<PAGE>
under the swap arrangements are recognized as adjustments to interest expense.
Under these agreements, the Corporation makes payments to counterparties at
fixed interest rates and in turn receives payments at variable rates. The
Corporation entered into interest rate exchange agreements in prior years to
protect against the increased cost associated with a rise in interest rates. At
January 1, 2000, the Corporation had outstanding interest rate exchange
agreements that effectively converted $608 million of floating rate obligations
with a weighted average interest rate of 5.9% to fixed rate obligations with an
average effective interest rate of approximately 6.4%. These agreements
increased interest expense by $7 million, $11 million and $16 million for the
years ending January 1, 2000 and December 31, 1998 and 1997, respectively. As of
January 1, 2000, these agreements had a weighted average maturity of
approximately 2.6 years. As of January 1, 2000, the Corporation's total floating
rate debt, including the accounts receivable secured borrowing programs,
exceeded related interest rate exchange agreements by $1,957 million.
The estimated fair value of the Corporation's (asset) liability under interest
rate exchange agreements at January 1, 2000 and December 31, 1998 was $(1)
million and $14 million, respectively, and represents the estimated amount the
Corporation could have paid (received) to terminate the agreements. The fair
value at January 1, 2000 and December 31, 1998 was estimated by calculating the
present value of anticipated cash flows. The discount rate used was an estimated
borrowing rate for similar debt instruments with like maturities.
The Corporation also enters into foreign currency exchange agreements and
commodity futures and swaps, the amounts of which were not material to the
consolidated financial position of the Corporation at January 1, 2000 and
December 31, 1998.
The Corporation may be exposed to losses in the event of nonperformance of
counterparties but does not anticipate such nonperformance.
NOTE 7. INCOME TAXES
The provision for income taxes includes The Timber Company's allocated portion
of income taxes currently payable and those deferred because of temporary
differences between the financial statement and tax bases of assets and
liabilities. The Timber Company's provision for income taxes consists of the
following:
Georgia-Pacific Corporation-The Timber Company
Year ended
---------------------------------------
January 1, December 31,
(In millions) 2000 1998 1997
- ------------------------------------------------------------------------
---------------
Federal income taxes:
Current $ 105 $ 95 $ 61
Deferred 112 4 56
State income taxes:
Current 20 16 11
Deferred 20 - 10
- ------------------------------------------------------------------------
---------------
Provision for income taxes $ 257 $ 115 $ 138
========================================================================
===============
<PAGE>
<TABLE>
<CAPTION>
Year ended
----------------------------------------------------
-------
January 1, December 31,
(In millions) 2000 1998 1997
===================================================================================================
===============
<S> <C> <C> <C>
Income taxes paid by the corporation, net of refunds $ 620 $ 21 $ 51
===================================================================================================
===============
Portion of income taxes paid allocated to The Timber
Company $ 125 $ 111 $ 72
===================================================================================================
===============
</TABLE>
Income taxes paid by the Corporation during 1999 are net of approximately $8
million in state income tax refunds and $8 million in federal income tax
refunds. Income taxes paid by the Corporation during 1998 were net of refunds of
approximately $81 million, primarily related to a 1997 federal tax overpayment.
The federal statutory income tax rate was 35%. The Timber Company's provision
for income taxes is reconciled to the federal statutory rate as follows:
Georgia-Pacific Corporation-The Timber Company
<TABLE>
<CAPTION>
Year ended
------------------------------------------
January 1, December 31,
(In millions) 2000 1998 1997
- --------------------------------------------------------------------------------------------------
---------------
<S> <C> <C> <C>
Provision for income taxes computed at the federal
statutory tax
rate $ 230 $ 103 $ 124
State income taxes, net of federal benefit 27 12 14
- --------------------------------------------------------------------------------------------------
---------------
Provision for income taxes $ 257 $ 115 $ 138
==================================================================================================
===============
</TABLE>
The components of The Timber Company's net deferred income tax liabilities are
as follows:
Georgia-Pacific Corporation-The Timber Company
January 1, December 31,
(In millions) 2000 1998
- -----------------------------------------------------------------------------
---------------
Deferred income tax assets:
Other accruals and reserves $ 1 $ 1
- -----------------------------------------------------------------------------
---------------
1 1
Valuation allowance - -
- -----------------------------------------------------------------------------
---------------
1 1
- -----------------------------------------------------------------------------
---------------
Deferred income tax liabilities:
Machinery and equipment (5) (9)
Timber and timberlands (372) (236)
<PAGE>
Other - -
- -----------------------------------------------------------------------------
---------------
(377) (245)
- -----------------------------------------------------------------------------
Deferred income tax liabilities, net $ (376) $ (244)
=============================================================================
===============
NOTE 8. RETIREMENT PLANS
DEFINED BENEFIT PENSION PLANS Most of The Timber Company's employees participate
in noncontributory defined benefit pension plans. These include plans that are
administered solely by the Corporation. The Corporation's funding policy for
solely administered plans is based on actuarial calculations and the applicable
requirements of federal law.
Benefits under the majority of plans for hourly employees are primarily related
to years of service. The Corporation has separate plans for salaried employees
and officers under which benefits are primarily related to compensation and
years of service. The officers' plan is not funded and is nonqualified for
federal income tax purposes.
Plan assets consist principally of common stocks, bonds, mortgage securities,
interests in limited partnerships, cash equivalents and real estate.
The following table sets forth the change in projected benefit obligation and
the change in plan assets for the solely administered plans allocated as
described in Note 1 of the Notes to Combined Financial Statements under
"Allocation of Employee Benefits":
January 1, December 31,
(In millions) 2000 1998
- --------------------------------------------------------------------------------
--------------
Change in projected benefit obligation
Projected benefit obligation at beginning of year $ 16 $ 15
Service cost 1 1
Interest cost 1 1
Actuarial gains (losses) (1) -
Benefits paid (1) (1)
- --------------------------------------------------------------------------------
--------------
Projected benefit obligation at end of year $ 16 $ 16
================================================================================
==============
Change in plan assets
Fair value of assets at beginning of year $ 21 $ 20
Actual return on plan assets 5 2
Employer contributions - -
Benefits paid (1) (1)
- --------------------------------------------------------------------------------
--------------
Fair value of assets at end of year $ 25 $ 21
================================================================================
==============
The funded status and the amounts recognized on the accompanying balance
sheets for the solely administered plans are set forth in the following table:
<PAGE>
January 1, December 31,
(In millions) 2000 1998
- --------------------------------------------------------------------------------
--------------
Funded status $ 8 $ 6
Unrecognized actuarial gain (8) (6)
Unrecognized prior service cost - -
Unrecognized net (asset) obligation - -
- --------------------------------------------------------------------------------
--------------
Net (accrued) prepaid benefit cost $ - $ -
===============================================================================
==============
Amounts recognized on the balance sheets consist of:
Prepaid pension cost $ - $ -
Accrued pension liability - -
- --------------------------------------------------------------------------------
--------------
Net amount recognized $ - $ -
===============================================================================
==============
The Timber Company's share of the net periodic pension cost for solely
administered pension plans included the following:
Year ended
----------------------------------
January 1, December 31,
(In millions) 2000 1998 1997
- --------------------------------------------------------------------------------
--------------
Service cost of benefits earned $ 1 $ 1 $ 1
Interest cost on projected benefit obligation 1 1 1
Expected return on plan assets (2) (2) (2)
- --------------------------------------------------------------------------------
--------------
Net periodic pension cost $ - $ - $ -
===============================================================================
==============
The following assumptions were used:
<TABLE>
<CAPTION>
Year ended
------------------------------------------------
------
January 1, December 31,
2000 1998 1997
- ---------------------------------------------------------------------------------------------------------
------------------
<S> <C> <C> <C>
Discount rate used to determine the projected benefit
obligation 7.5% 6.5% 7.0%
Rate of increase in future compensation levels used to
determine
the projected benefit obligation 5.7% 5.6% 5.5%
Expected long-term rate of return on plan assets used to
determine net periodic pension cost 9.5% 9.5% 9.5%
- ---------------------------------------------------------------------------------------------------------
------------------
</TABLE>
DEFINED CONTRIBUTION PLANS. The Corporation sponsors several defined
contribution plans to provide eligible employees with additional income upon
retirement. The Corporation's contributions to
<PAGE>
the plans are based on employee contributions and compensation. The allocated
portion of the Corporation's contributions related to The Timber Company totaled
$1 million each in 1999, 1998 and 1997.
HEALTH CARE AND LIFE INSURANCE BENEFITS. The Corporation provides certain health
care and life insurance benefits to eligible retired employees. Salaried
participants generally become eligible for retiree health care benefits after
reaching age 55 with 10 years of service or after reaching age 65. Benefits,
eligibility and cost-sharing provisions for hourly employees vary by location
and/or bargaining unit. Generally, the medical plans pay a stated percentage of
most medical expenses, reduced for any deductible and payments made by
government programs and other group coverage. The plans are funded through a
trust established for the payment of active and retiree benefits. The
Corporation contributes to the trust in the amounts necessary to fund current
obligations of the plans.
In 1991, the Corporation began transferring its share of the cost of post-age 65
health care benefits to future salaried retirees. It is currently anticipated
that the Corporation will continue to reduce the percentage of the cost of
post-age 65 benefits that it will pay on behalf of salaried employees who retire
in each of the years 1995 through 1999 and that the Corporation will continue to
share the pre-age 65 cost with future salaried retirees but will no longer pay
any of the post-age 65 cost for salaried employees who retire after 1999.
The following tables set forth the change in projected benefit obligation and
the amounts recognized on the accompanying balance sheets:
<TABLE>
<CAPTION>
January 1, December 31,
(In millions) 2000 1998
- --------------------------------------------------------------------------------------------
-----------------
<S> <C> <C>
Change in projected benefit obligation
Projected benefit obligation at beginning of year $ 1 $ 1
Actuarial gains (losses) - -
- --------------------------------------------------------------------------------------------
-----------------
Projected benefit obligation at end of year $ 1 $ 1
============================================================================================
=================
January 1, December 31,
(In millions) 2000 1998
- --------------------------------------------------------------------------------------------
-----------------
Funded status $ (1) $ (1)
Unrecognized actuarial (gain) losses - -
Unrecognized prior service cost - -
Unrecognized net (asset) obligation - -
- --------------------------------------------------------------------------------------------
-----------------
Net accrued benefit cost $ (1) $ (1)
============================================================================================
=================
Amounts recognized on the balance sheets consist of:
Prepaid benefit cost $ - $ -
Accrued benefit liability (1) (1)
- --------------------------------------------------------------------------------------------
-----------------
Net amount recognized $ (1) $ (1)
============================================================================================
=================
</TABLE>
The Timber Company's net periodic postretirement benefit cost consists of
service cost of benefits earned, interest cost on accumulated postretirement
benefit obligation and amortization of gains and
<PAGE>
losses. Total net periodic postretirement benefit costs were $74,123 at January
1, 2000, $91,849 at December 31, 1998 and $95,031 at December 31, 1997.
For measuring the expected postretirement benefit obligation, a 7%, 8% and 9%
annual rate of increase in the per capita claims cost was assumed for 1999, 1998
and 1997, respectively. The rate was assumed to decrease 1% per year to 5.5% in
2001 and remain at that level thereafter. The weighted average discount rate
used in determining the accumulated postretirement benefit obligation was 7.0%
at January 1, 2000, 6.0% at December 31, 1998 and 6.5% at December 31, 1997.
If the annual health care cost trend rate were increased by 1%, the accumulated
postretirement benefit obligation would have increased by 13% as of January 1,
2000 and 10% as of both December 31, 1998 and 1997. The effect of this change on
the aggregate of service and interest costs would be an increase of 13% for
1999, 10% for 1998 and 13% for 1997.
If the annual health care cost trend rate were decreased by 1%, the accumulated
postretirement benefit obligation would have decreased by 11% as of January 1,
2000 and 9% as of both December 31, 1998 and 1997. The effect of this change on
the aggregate of service and interest costs would be a decrease of 12% for 1999,
9% for 1998 and 12% for 1997.
NOTE 9. COMMON AND PREFERRED STOCK
The Corporation's authorized capital stock consists of (i) 10 million shares of
Preferred Stock and 25 million shares of Junior Preferred Stock, of which no
shares were issued at January 1, 2000, and (ii) 400 million shares of
Georgia-Pacific Group stock and 250 million shares of The Timber Company stock.
The Georgia-Pacific Group stock has a par value of $0.80 per share, and
191,983,000 and 186,564,000 shares were issued as of January 1, 2000 and
December 31, 1998, respectively. The Timber Company stock has a par value of
$0.80 per share, and 93,904,000 and 92,785,000 shares were issued as of January
1, 2000 and December 31, 1998, respectively.
At January 1, 2000, the following authorized shares of common stock were
reserved for issue:
Georgia-Pacific Group
- -----------------------------------------------------------------------------
-----------------
1999 Unisource conversions 628,290
1999 Wisconsin Tissue conversions 92,960
1997 Long-Term Incentive Plan 8,090,826
1995 Outside Directors Stock Plan 332,193
1995 Shareholder Value Incentive Plan 5,138,103
- -----------------------------------------------------------------------------
-----------------
Common stock reserved 14,282,372
============================================================================
=================
The Timber Company
- -----------------------------------------------------------------------------
-----------------
1997 Long-Term Incentive Plan 2,293,400
1995 Outside Directors Stock Plan 166,097
1995 Shareholder Value Incentive Plan 3,959,600
- -----------------------------------------------------------------------------
-----------------
Common stock reserved 6,419,097
============================================================================
=================
<PAGE>
1997 LONG-TERM INCENTIVE PLANS. The Corporation reserved 2,300,000 shares of The
Timber Company stock for issuance under The Timber Company 1997 Long-Term
Incentive Plan (The Timber Company Plan). Options covering 1,010,600 and 950
shares were granted under The Timber Company Plan on December 17, 1997 and
January 28, 1999, respectively. These grants have a 10-year term and vest
ratably over a four-year period and three-year period, respectively.
The Corporation reserved 9,000,000 shares of Georgia-Pacific Group stock for
issuance under the Georgia-Pacific Group 1997 Long-Term Incentive Plan (the
Georgia-Pacific Group Plan). Options covering 2,938,500; 34,000; 27,600; and
2,839,260 shares were granted under the Georgia-Pacific Group Plan on January
29, March 2 and July 29, 1998 and January 28, 1999, respectively. These grants
have a 10-year term and vest ratably over a three-year period.
The Georgia-Pacific Group Plan authorizes grants of stock options, restricted
stock and performance awards with respect to Georgia-Pacific Group stock. The
Timber Company Plan authorizes grants of stock options, restricted stock and
performance awards with respect to The Timber Company stock. The Corporation
does not currently intend to grant awards under the Georgia-Pacific Group Plan
to employees of The Timber Company. However, certain officers and employees of
the Corporation with responsibilities involving both the Georgia-Pacific Group
and The Timber Company may be granted options, restricted stock or performance
awards under both the Georgia-Pacific Group Plan and The Timber Company Plan in
a manner that reflects their responsibilities.
1990 LONG-TERM INCENTIVE PLAN. The Corporation reserved 8,000,000 and 4,000,000
shares of Georgia-Pacific Group stock and The Timber Company stock,
respectively, for issuance under the 1990 Long-Term Incentive Plan (the 1990
Incentive Plan), which expired March 9, 1995. Shares were awarded to employees
at no cost, based on increases in average market value of the Existing Common
Stock. At the time shares were awarded, the market value of the stock was added
to common stock and additional paid-in capital and was deducted from
shareholders' equity (long-term incentive plan deferred compensation) on the
Corporation's consolidated financial statements. Shares were restricted until
they vested under the terms of the 1990 Incentive Plan. The long-term incentive
plan deferred compensation was amortized over the vesting (restriction) period,
generally five years, with adjustments made monthly for market price
fluctuations. At the time awarded shares became vested, the Corporation paid on
behalf of each participant a cash bonus in the amount of the estimated income
tax liability to be incurred by the participant as a result of the award and
cash bonus. Under the 1990 Incentive Plan, the Corporation issued 2,037,480
shares of Georgia-Pacific Group stock and 1,018,740 shares of The Timber Company
stock. All such shares were vested as of October 1999.
Compensation expense allocated to The Timber Company was zero in 1999, $0.1
million in 1998 and $0.4 million in 1997 related to the 1990 Incentive Plan.
As a result of the Letter Stock Recapitalization, each share of restricted
Existing Common Stock held in the 1990 Incentive Plan was redesignated as
Georgia-Pacific Group stock, and an equal number of restricted shares of The
Timber Company stock were distributed. The tax gross-up provided in the 1990
Incentive Plan was calculated based on the aggregate market value of the two
classes of shares distributed to an individual at such time.
EMPLOYEE STOCK PURCHASE PLAN. The Corporation reserved 1,582,800 shares of
Georgia-Pacific Group stock and 791,400 shares of The Timber Company stock for
issuance under the 1997 Employee Stock Purchase Plan (the 1997 Purchase Plan),
which offered employees the right to subscribe for shares of the Georgia-Pacific
Group and The Timber Company at a subscription price of $27.785 and $22.52 per
share, respectively, representing 85% of the mean of the high and low prices of
the Corporation's Existing Common Stock on September 2, 1997. The subscription
period expired on November 14, 1997. A subscriber purchased and paid for shares
no later than November 30, 1999, but prior to the time of the subscriber's last
contribution he/she could obtain a refund of his/her payments plus interest at a
rate of 6% per annum in lieu of stock.
In conjunction with the Letter Stock Recapitalization, the terms of the
subscription agreements were adjusted to allow subscribers, pursuant to the
terms of the 1997 Purchase Plan, to purchase at the same
<PAGE>
subscription price a package consisting of one share of Georgia-Pacific Group
stock and one share of The Timber Company stock in lieu of each share of
Existing Common Stock for which he/she had originally subscribed.
Under the 1997 Purchase Plan, the Corporation issued 1,397,000 and 698,500
shares of Georgia-Pacific Group stock and The Timber Company stock,
respectively, in 1999.
1995 OUTSIDE DIRECTORS STOCK PLAN. The Corporation reserved 400,000 shares of
Georgia-Pacific Group stock and 200,000 shares of The Timber Company stock for
issuance under the 1995 Outside Directors Stock Plan (the Directors Plan), which
provides for the issuance of shares of common stock to nonemployee directors of
the Corporation on a restricted basis. Each nonemployee director was issued 692
and 784 restricted shares of Georgia-Pacific Group stock in 1999 and 1998,
respectively, and 346 and 392 restricted shares of The Timber Company stock in
1999 and 1998, respectively.
As a result of the Letter Stock Recapitalization, each share of restricted stock
held in the Directors Plan was redesignated as Georgia-Pacific Group stock, and
an equal number of shares of The Timber Company stock (subject to the same
restrictions as the original restricted shares) were distributed. Each
director's annual grant consists of a number of shares of Georgia-Pacific Group
stock and of The Timber Company stock determined so that (i) a substantially
equal number of shares of Georgia-Pacific Group stock and The Timber Company
stock will be granted in each year and (ii) the total market value of the shares
granted in each year (based on the mean of the high and low prices of each stock
on the date of grant) is $40,000 (subject to immaterial rounding differentials).
The restrictions on the shares lapse at the time of death, retirement from the
Board or disability.
Effective May 6, 1997, accrual of additional retirement benefits under the
Corporation's retirement program for directors ceased, and the accrued benefits
of each of the current nonemployee directors (the present value of which totaled
$1,303,889 as of May 6, 1997) were converted into a grant of an equivalent
number of shares of restricted stock under the Directors Plan. The total number
of shares issued related to this conversion was 15,702.
EMPLOYEE STOCK OPTION PLANS. The 1995 Shareholder Value Incentive Plan (the
SVIP) provides for the granting of stock options having a term of either 5-1/2
or 10 years to officers and key employees. Under the amended and restated SVIP,
no further grants may be made under that plan. Options having a term of 10 years
become exercisable in 9-1/2 years unless certain performance targets tied to the
Corporation's common stock performance are met, in which case the holder could
exercise such options after 3, 4 or 5 years from the grant date. Options having
a term of 5-1/2 years may be exercised only if such performance targets are met
in the third, fourth or fifth year after such grant date. At the time options
are exercised, the exercise price is payable in cash or by surrender of shares
of common stock already owned by the optionee.
The 1994 Employee Stock Option Plan (the 1994 Option Plan) provided for the
granting of stock options to certain nonofficer key employees. Under the 1994
Option Plan, the Corporation issued 253,000 and 230,900 shares of
Georgia-Pacific Group stock in 1999 and 1998, respectively, and 146,350 and
75,550 shares of The Timber Company stock in 1999 and 1998, respectively. All
remaining options were exercised in February 1999.
Following the Letter Stock Recapitalization, each outstanding stock option under
the SVIP and the 1994 Option Plan was converted into separately exercisable
options to acquire a number of shares of Georgia-Pacific Group stock and The
Timber Company stock, each of which equaled the number of shares of Existing
Common Stock specified in the original option. The exercise prices for the
resulting Georgia-Pacific Group stock options and The Timber Company stock
options were calculated by multiplying the exercise price under the original
option from which they were converted by a fraction, the numerator of which was
the average of the high and low price of Georgia-Pacific Group stock or The
Timber Company stock, as the case may be, on December 17, 1997 and the
denominator of which was the sum of such Georgia-Pacific Group and The Timber
Company stock prices. This was intended to ensure that the aggregate intrinsic
value of the options was preserved and the ratio of the exercise price
<PAGE>
per option to the market value per share was not reduced. In addition, the
vesting provisions and option periods of the original grants remained the same
following such conversion.
UNISOURCE CONVERSIONS. In connection with the acquisition of Unisource, the
Corporation converted certain stock options awarded under a former Unisource
stock option plan (Unisource stock options) into Georgia-Pacific Group stock
options. The conversion was intended to ensure that the aggregate intrinsic
value of the Unisource stock options was preserved and the ratio of the exercise
price per Unisource stock option to the market value per share of
Georgia-Pacific Group stock was not reduced. Unisource stock options to purchase
2,633,459 shares had original grant dates ranging from November 10, 1994 through
May 19, 1999 with a 10-year term, and vest ratably over three-year and five-year
periods. These Unisource stock options were converted into options to purchase
629,648 shares of Georgia-Pacific Group stock at prices ranging from $31.88 to
$91.58 per share. The vesting provisions and option periods of the original
grants remained the same following such conversion. The value of these options
at the acquisition date was $9.4 million and was included as part of the
purchase price paid for Unisource. No options to purchase The Timber Company
stock were issued as part of the conversion.
The Corporation also issued 40,152 restricted shares of Georgia-Pacific Group
stock under the 1997 Long-Term Incentive Plan to two former Unisource officers
who became officers of the Corporation. Each officer was issued 20,076
restricted shares of Georgia-Pacific Group stock. At the time restricted shares
were awarded, the average of the high and low market value of the stock was
added to common stock and additional paid-in capital and was deducted from
shareholders' equity (long-term incentive plan deferred compensation) on the
Corporation's consolidated financial statements. The long-term incentive plan
deferred compensation of $2 million is being amortized over the vesting
(restriction) period, which is three years.
WISCONSIN TISSUE CONVERSIONS. In connection with the formation of
Georgia-Pacific Tissue, the Corporation converted certain outstanding stock
options awarded under a Chesapeake stock option plan (Chesapeake stock options)
into Georgia-Pacific Group stock options. The conversion was intended to ensure
that the aggregate intrinsic value of the Chesapeake stock options was preserved
and the ratio of the exercise price per Chesapeake stock option to the market
value per share of Georgia-Pacific Group stock was not reduced. Chesapeake stock
options to purchase 172,250 shares had original grant dates ranging from August
11, 1997 through April 16, 1999, with a vesting period of three years and a
10-year term.
These Chesapeake stock options were converted into options to purchase 92,960
shares of Georgia-Pacific Group stock at prices ranging from $36.20 to $50.36
per share. The vesting provisions and option periods of the original grants
remained the same following such conversion. The stock options' total value of
$1.3 million was included in the asset purchase price on the date the
Corporation formed Georgia-Pacific Tissue. No options to purchase The Timber
Company stock were issued as part of the conversion.
Additional information relating to the Corporation's existing employee stock
options is as follows:
<TABLE>
<CAPTION>
Year ended January 1,
2000 2000
- -----------------------------------------------------------------------------------------------------------------------------
----------------
Georgia-Pacific Group The Timber Company
- -----------------------------------------------------------------------------------------------------------------------------
----------------
Weighted Weighted
average average
exercise exercise
Shares price Shares price
- -----------------------------------------------------------------------------------------------------------------------------
----------------
<S> <C> <C> <C> <C> <C>
Options outstanding at January 1, 1999 11,704,600 $ 27.03 5,544,850 $ 22.26
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Options granted/converted 3,561,868 36.10 950 22.56
Options exercised/surrendered (3,974,803) 26.89 (417,150) 17.66
Options canceled (461,974) 28.25 (164,100) 19.69
- -----------------------------------------------------------------------------------------------------------------------------
----------------
Options outstanding at January 1, 2000 10,829,691* $ 30.01 4,964,550* $ 22.33
Options available for grant at January 1, 2000 3,160,640 1,288,450
- -----------------------------------------------------------------------------------------------------------------------------
----------------
Total reserved shares 13,990,331 6,253,000
=============================================================================================================================
================
Options exercisable at January 1, 2000 2,936,311 $ 30.17 2,972,400 $ 22.32
Option prices per share:
Granted/converted $32 - $92 $23
Exercised/surrendered $26 - $37 $21 - $23
Canceled $26 - $32 $21 - $23
*Options outstanding by exercise price:
$20.95 - $25.13 4,964,550 $ 22.33
Average remaining life 7.0 years
$25.84 - $31.88 7,451,500 $ 27.15
Average remaining life 7.3 years
$32.17 - $44.07 3,018,453 $ 32.68
Average remaining life 8.1 years
$45.77 - $61.63 56,631 $ 52.80
Average remaining life 7.0 years
$63.73 - $91.58 303,107 $ 69.46
Average remaining life 6.9 years
=============================================================================================================================
================
<CAPTION>
Year ended December 31,
1998 1998
- -----------------------------------------------------------------------------------------------------------------------------
----------------
Georgia-Pacific Group The Timber Company
- -----------------------------------------------------------------------------------------------------------------------------
----------------
Weighted Weighted
average average
exercise exercise
Shares price Shares price
- -----------------------------------------------------------------------------------------------------------------------------
----------------
<S> <C> <C> <C> <C> <C>
Options outstanding at January 1, 1998 10,038,200 $ 26.66 6,029,600 $ 22.20
Options granted 3,000,100 28.23 - -
Options exercised/surrendered (637,200) 27.22 (180,400) 21.52
Options canceled (696,500) 26.71 (304,350) 21.54
- -----------------------------------------------------------------------------------------------------------------------------
----------------
Options outstanding at December 31, 1998 11,704,600 $ 27.03 5,544,850 $ 22.26
Options available for grant at December 31, 1998 5,999,900 1,289,400
- -----------------------------------------------------------------------------------------------------------------------------
----------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Total reserved shares 17,704,500 6,834,250
=============================================================================================================================
================
Options exercisable at December 31, 1998 2,220,633 $ 28.43 1,448,975 $ 23.28
Average remaining life of options outstanding 7.1 years 6.3 years
Option prices per share:
Granted $28 - $30 $-
Exercised/surrendered $21 - $29 $17 - $23
Canceled $21 - $29 $17 - $25
Outstanding $26 - $31 $21 - $25
=============================================================================================================================
================
<CAPTION>
Year ended December 31
1997* 1997
- -----------------------------------------------------------------------------------------------------------------------------
----------------
Georgia-Pacific Group The Timber Company
- -----------------------------------------------------------------------------------------------------------------------------
----------------
Weighted Weighted
average average
exercise exercise
Shares price Shares price
- -----------------------------------------------------------------------------------------------------------------------------
----------------
<S> <C> <C> <C> <C>
Options outstanding at December 17, 1997 10,042,400 $ 19.47 5,021,200 $ 15.78
Options granted - - 1,010,600 25.13
Options exercised/surrendered (600) 21.00 (300) 17.01
Options canceled (3,600) 26.93 (1,900) 21.83
- -----------------------------------------------------------------------------------------------------------------------------
----------------
Options outstanding at December 31, 1997 10,038,200 $ 26.66 6,029,600 $ 22.20
Options available for grant at December 31, 1997 9,000,000 1,289,400
- -----------------------------------------------------------------------------------------------------------------------------
----------------
Total reserved shares 19,038,200 7,319,000
=======================================================================================
================
Options exercisable at December 31, 1997 789,332 $ 26.41 391,100 $ 21.39
Average remaining life of options outstanding 5.7 years 6.3 years
Option prices per share
(December 17 through December 31, 1997):
Granted $- $25
Exercised/surrendered $21 $17
Canceled $26 - $29 $21 - $23
Outstanding $21 - $29 $17 - $25
=======================================================================================
================
</TABLE>
* All shares and prices reflect the two-for-one stock split of the
Georgia-Pacific Group's stock on May 14, 1999.
Period ended
December 16,
1997**
- ----------------------------------------------------------------------------
----------------
Georgia-Pacific Corporation
<PAGE>
- ----------------------------------------------------------------------------
----------------
Weighted
average
exercise
Shares price
- ----------------------------------------------------------------------------
----------------
Options outstanding at January 1, 1997 4,092,300 $ 57.48
Options granted at January 1, 1997 1,746,700 52.84
Options exercised/surrendered (514,950) 69.94
Options canceled (302,850) 55.04
- ----------------------------------------------------------------------------
----------------
Options outstanding at December 16, 1997 5,021,200 $ 54.73
Options available for grant at December 16, 1997 2,966,100
- ----------------------------------------------------------------------------
----------------
Total reserved shares 7,987,300
============================================================================
================
Options exercisable at December 16, 1997 396,766 $ 70.69
Average remaining life of options outstanding 5.7 years
Option prices per share:
Granted $53
Exercised/surrendered $59 - $75
Canceled $52 - $75
=============================================================================
================
** All shares and prices reflect the Corporation's Existing Common Stock through
December 16, 1997.
SHAREHOLDER RIGHTS PLAN. On December 16, 1997, shareholders approved an amended
and restated Shareholder Rights Plan (the Rights Agreement) pursuant to which
preferred stock purchase rights (the Rights) are issued on each outstanding
share of Georgia-Pacific Group stock (a Georgia-Pacific Group Right), which will
entitle the holders thereof to purchase shares of Series B Junior Preferred
Stock under the conditions specified in the Rights Agreement, and on each
outstanding share of The Timber Company stock (a Timber Company Right), which
will entitle the holders thereof to purchase shares of Series C Junior Preferred
Stock under the conditions specified in the Rights Agreement.
The Rights will expire on December 31, 2007, unless earlier redeemed by the
Corporation or extended. The Rights would be exercisable only if a person or
group acquires 15% or more of the total voting rights of all then outstanding
shares of common stock of the Corporation, or commences a tender offer that
would result in such person or group beneficially owning 15% or more of the
total voting rights of all then outstanding shares of common stock of the
Corporation. In such event, each Right would entitle the holder to purchase from
the Corporation (i) in the case of a Georgia-Pacific Group Right, one
one-hundredth of a share of Series B Junior Preferred Stock (a Series B Unit) at
a purchase price of $175 (the Series B Unit Purchase Price), subject to
adjustment, and (ii) in the case of a Timber Company Right, one one-hundredth of
a share of Series C Junior Preferred Stock (a Series C Unit) at a purchase price
of $100 (the Series C Unit Purchase Price), subject to adjustment.
Thereafter, in the event one of several specified events (generally involving
transactions by an acquirer in the Corporation's common stock or a business
combination involving the Corporation) occurs, each Georgia-Pacific Group Right
and each Timber Company Right will entitle its holder to purchase, for the
Series B Unit Purchase Price and the Series C Unit Purchase Price, respectively,
a number of shares of common stock of such entity or purchaser with a market
value equal to twice the applicable purchase
<PAGE>
price. Because of the nature of the dividend, liquidation and voting rights of
each class of Junior Preferred Stock related to the Rights, the economic value
of one Series B Unit and one Series C Unit should approximate the economic value
of one share of Georgia-Pacific Group stock and one share of The Timber Company
stock, respectively.
CAPITAL STOCK. During 1999, the Corporation purchased on the open market
approximately 5.3 million shares of The Timber Company stock at an aggregate
price of $131 million ($24.72 average per share). Of these purchased shares,
approximately 5,343,000 shares of The Timber Company stock were held as treasury
stock and 6,000 shares were purchased during 1999 and settled after January 1,
2000. During 1998, the Corporation purchased on the open market 5.7 million
shares of The Timber Company stock at an aggregate price of $121 million ($21.23
average per share), all of which were held as treasury stock at December 31,
1998.
Subsequent to year-end 1999 through February 4, 2000, The Timber Company
purchased on the open market 418,700 shares of The Timber Company stock at an
aggregate price of $9.5 million ($22.66 average per share).
The resolution of the Board authorizing such repurchases allows purchases of The
Timber Company stock so long as The Timber Company's debt remains below $1.0
billion and the Corporation's debt remains below $6.8 billion.
OTHER. The Timber Company has elected to continue to account for its stock-based
compensation plans under APB Opinion No. 25 and disclose pro forma effects of
the plans on net income and earnings per share as provided by SFAS No. 123.
Accordingly, no compensation cost has been recognized for the Unisource stock
options, Chesapeake stock options, the SVIP, the Georgia-Pacific Group Plan, The
Timber Company Plan or the 1997 Purchase Plan. Had compensation cost for these
plans been determined based on the fair value at the grant dates in 1999, 1998
or 1997 under the plan consistent with the method of SFAS No. 123, the pro forma
net income and earnings per share would have been as follows:
<TABLE>
<CAPTION>
Year ended
---------------------------------------------------------------------------------
--------
January 1, December 31,
(In millions, except per share amounts) 2000 1998 1997
- -------------------------------------------------------------------------------------------------------------------------
----------------
Income
Income Income Net (loss)
Net per Net per income per
income share* income share* (loss) share*
- -------------------------------------------------------------------------------------------------------------------------
----------------
<S> <C> <C> <C> <C> <C> <C>
Georgia-Pacific Corporation
As reported $ 1,116 $ 274 $ 69
Pro forma 1,084 252 62
Georgia-Pacific Group
As reported 716 $ 4.17 98 $ 0.55 (146) $ (0.80)
Pro forma 685 3.99 77 0.43 (153) (0.84)
The Timber Company
As reported 400 4.75 176 1.95 215 2.35
Pro forma 399 4.74 175 1.94 215 2.35
- -------------------------------------------------------------------------------------------------------------------------
----------------
</TABLE>
<PAGE>
* Represents basic earnings per share. Pro forma diluted income (loss) per share
was $3.89 and $4.72 in 1999, $0.42 and $1.93 in 1998, and $(0.84) and $2.33 in
1997 for the Georgia-Pacific Group and The Timber Company, respectively.
The fair-value-based method of accounting for stock-based compensation plans
under SFAS No. 123 recognizes the value of options granted as compensation cost
over the option's vesting period and has not been applied to options granted
prior to January 1, 1995. Accordingly, the resulting pro forma compensation cost
is not representative of what compensation cost will be in future years.
Following are the weighted average assumptions used in connection with the
Black-Scholes option pricing model to estimate the fair value of options granted
in 1999, 1998 and 1997:
<TABLE>
<CAPTION>
Year ended
------------------------------------------------------------------------
-------
January 1, December 31,
2000 1998 1997
Options Options Options ESPP*
- ---------------------------------------------------------------------------------------------------
-------------
<S> <C> <C> <C> <C>
Georgia-Pacific Group
Risk-free interest rate 4.9% 5.8% 6.6% 5.8%
Expected dividend yield 1.0% 1.8% 2.7% 2.3%
Expected life 7 years 10 years 10 years 2 years
Expected volatility 0.46 0.39 0.30 0.37
Option forfeiture rate 3% 3% 3% 28%
- ---------------------------------------------------------------------------------------------------
-------------
The Timber Company
Risk-free interest rate 4.9% 5.9% 6.4% 5.8%
Expected dividend yield 4.4% 3.9% 3.2% 2.3%
Expected life 9 years 10 years 10 years 2 years
Expected volatility 0.32 0.37 0.27 0.29
Option forfeiture rate 3% 3% 3% 28%
- ---------------------------------------------------------------------------------------------------
-------------
</TABLE>
* 1997 Purchase Plan.
The weighted average grant date fair value per share, including modifications,
of Georgia-Pacific Group options and The Timber Company options granted during
the year using the Black-Scholes option pricing model was $29.38 and $5.80,
$13.44 and $8.55, and $11.87 and $7.54 for 1999, 1998 and 1997, respectively.
The weighted average grant date fair value per share of shares subscribed under
the 1997 Purchase Plan was $8.85 and $6.52 for the Georgia-Pacific Group and The
Timber Company, respectively. The total pro forma compensation cost calculated
under SFAS No. 123 was allocated between the Georgia-Pacific Group and The
Timber Company based on the number of employees in each group for periods prior
to December 17, 1997. Management believes that this method of allocation is
equitable and provides a reasonable estimate of the costs attributable to each
group.
NOTE 10. OTHER COMPREHENSIVE INCOME
In 1998, The Timber Company adopted SFAS No. 130, which establishes standards
for reporting and display of comprehensive income and its components. For the
years ended January 1, 2000 and December 31, 1998 and 1997, The Timber Company's
total comprehensive income was $400 million, $176 million and $215 million,
respectively. Other comprehensive income was insignificant for The Timber
Company during 1999, 1998 and 1997.
<PAGE>
NOTE 11. COMMITMENTS AND CONTINGENCIES
Total rental expense was approximately $5.5 million, $4.0 million and $3.7
million in 1999, 1998 and 1997, respectively.
The Corporation is a party to various legal proceedings incidental to the
businesses of the Georgia-Pacific Group and The Timber Company and is subject to
a variety of environmental and pollution control laws and regulations in all
jurisdictions in which it operates. As is the case with other companies in
similar industries, the Corporation faces exposure from actual or potential
claims and legal proceedings involving environmental matters. Liability
insurance in effect during the last several years provides very limited coverage
for environmental matters. The management of The Timber Company believes that
the Corporation has established adequate reserves for probable losses with
respect to such environmental matters and legal proceedings. However, holders of
The Timber Company stock are shareholders of the Corporation and are subject to
all of the risks associated with an investment in the Corporation, including the
environmental matters and legal proceedings involving the Georgia-Pacific Group
discussed below.
COMMITMENTS AND CONTINGENCIES WITH RESPECT TO THE TIMBER COMPANY. The Timber
Company is subject to various legal proceedings and claims that arise in the
ordinary course of its business. Although the ultimate outcome of these matters
and legal proceedings cannot be determined with certainty, based on presently
available information, management of the Corporation believes that the final
outcome of such matters and legal proceedings will not have a material adverse
effect on the results of operations, liquidity or financial position of The
Timber Company.
Commitments and Contingencies with Respect to Georgia-Pacific Group. The
following sets forth legal proceedings to which the Corporation is a party and
claims related to the operations of the Georgia-Pacific Group.
The Corporation is involved in environmental remediation activities at
approximately 173 sites, both owned by the Corporation and owned by others,
where it has been notified that it is or may be a potentially responsible party
under the Comprehensive Environmental Response, Compensation and Liability Act
or similar state "superfund" laws. Of the known sites in which it is involved,
the Corporation estimates that approximately 46% are being investigated,
approximately 30% are being remediated and approximately 24% are being monitored
(an activity that occurs after either site investigation or remediation has been
completed). The ultimate costs to the Corporation for the investigation,
remediation and monitoring of many of these sites cannot be predicted with
certainty, due to the often unknown magnitude of the pollution or the necessary
cleanup, the varying costs of alternative cleanup methods, the amount of time
necessary to accomplish such cleanups, the evolving nature of cleanup
technologies and government regulations, and the inability to determine the
Corporation's share of multiparty cleanups or the extent to which contribution
will be available from other parties. The Corporation has established reserves
for environmental remediation costs for these sites in amounts that it believes
are probable and reasonably estimable. Based on analysis of currently available
information and previous experience with respect to the cleanup of hazardous
substances, the Corporation believes it is reasonably possible that costs
associated with these sites may exceed current reserves by amounts that may
prove insignificant or that could range, in the aggregate, up to approximately
$56 million. This estimate of the range of reasonably possible additional costs
is less certain than the estimates upon which reserves are based, and in order
to establish the upper limit of such range, assumptions least favorable to the
Corporation among the range of reasonably possible outcomes were used. In
estimating both its current reserve for environmental remediation and the
possible range of additional costs, the Corporation has not assumed it will bear
the entire cost of remediation of every site to the exclusion of other known
potentially responsible parties who may be jointly and severally liable. The
ability of other potentially responsible parties to participate has been taken
into account, based generally on the parties' financial condition and probable
contribution on a per site basis.
<PAGE>
The Corporation and many other companies are defendants in suits brought in
various courts around the nation by plaintiffs who allege that they have
suffered personal injury as a result of exposure to asbestos-containing
products. These suits allege a variety of lung and other diseases based on
alleged exposure to products previously manufactured by the Corporation. In many
cases, the plaintiffs are unable to demonstrate that they have suffered any
compensable loss as a result of such exposure, or that any injuries they have
incurred in fact resulted from exposure to the Corporation's products.
The Corporation generally settles asbestos cases for amounts it considers
reasonable given the facts and circumstances of each case. The amounts it has
paid to date to defend and settle these cases have been substantially covered by
product liability insurance. The Corporation is currently defending claims of
approximately 44,800 such plaintiffs as of January 31, 2000 and anticipates that
additional suits will be filed against it over the next several years. The
Corporation has insurance available in amounts that it believes are adequate to
cover substantially all of the reasonably foreseeable damages and settlement
amounts arising out of claims and suits currently pending. The Corporation has
further insurance coverage available for the disposition of suits that may be
filed against it in the future, but there can be no assurance that the amounts
of such insurance will be adequate to cover all future claims. The Corporation
has established reserves for liabilities and legal defense costs it believes are
probable and reasonably estimable with respect to pending suits and claims, and
has also established a receivable for expected insurance recoveries.
On May 6, 1998, a lawsuit was filed in state court in Columbus, Ohio, against
the Corporation and Georgia-Pacific Resins, Inc. (GPR), a wholly owned
subsidiary of the Corporation. The lawsuit was filed by eight plaintiffs who
seek to represent a class of individuals who at any time from 1985 to the
present lived, worked, resided, owned, frequented or otherwise occupied property
located within a three-mile radius of the GPR's resins manufacturing operations
in Columbus, Ohio. The lawsuit alleges that the individual plaintiffs and
putative class members have suffered personal injuries and/or property damage
because of (i) alleged "continuing and long-term releases and threats of
releases of noxious fumes, odors and harmful chemicals, including hazardous
substances" from GPR's operations and/or (ii) a September 10, 1997 explosion at
the Columbus facility and alleged release of hazardous material resulting from
that explosion. Virtually all activity in this case has been stayed pending a
decision on a motion by plaintiffs for reconsideration of a case management
order issued by the court. The Corporation has denied the material allegations
of this lawsuit. While it is premature to evaluate the claims asserted in this
lawsuit, the Corporation believes it has meritorious defenses. Prior to the
filing of the lawsuit, the Corporation had received a number of
explosion-related claims from nearby residents and businesses. These claims were
for property damage, personal injury and business interruption and were being
reviewed and resolved on a case-by-case basis. On January 12, 2000, five
plaintiffs, including one of the class representatives in the state class
action, filed a lawsuit against the Corporation and GPR pursuant to the citizen
suit provisions of the federal Clean Air Act and the Community Right-to-Know
law. This suit alleges violations of these federal laws and certain state laws
regarding the form and substance of the defendants reporting of emissions and
alleged violations of permitting requirements under certain regulations issued
under the Clean Air Act. This suit seeks civil penalties of $25,000 per day, per
violation, an injunction to force the defendants to comply with these laws and
regulations and other relief. The defendants have denied the material
allegations of the complaint and have sought a ruling from a federal appeals
court to the effect that the regulations under which the alleged violations of
the Clean Air Act are premised are not applicable to the defendants. While it is
premature to completely evaluate these claims, the Corporation believes it has
meritorious defenses.
In May 1997, the Corporation and nine other companies were named as defendants
in a lawsuit brought by the Attorney General of the State of Florida alleging
that the defendants engaged in a conspiracy to fix the prices of sanitary
commercial paper products, such as towels and napkins, in violation of various
federal and state laws. Shortly after the filing of this suit, approximately 55
similar suits were filed by private plaintiffs in federal courts in California,
Florida, Georgia and Wisconsin, and in the state courts of California,
Wisconsin, Minnesota and Tennessee. On July 28, 1999, the Corporation and the
Attorney General of the State of Florida entered into a Settlement Agreement
pursuant to which the State will dismiss its claims against the Corporation. The
Settlement Agreement states that the Attorney General is dismissing its claims
in the public interest and consistent with its responsibilities.
<PAGE>
The Agreement also provides that the Corporation continues to deny that there is
any evidence that it engaged in the alleged price-fixing conspiracy. In
addition, the Corporation agreed to donate an immaterial amount of real property
to the State of Florida, Board of Trustees of the Internal Improvement Trust. In
addition, as part of the formation of the joint venture with Chesapeake, the
Corporation and Wisconsin Tissue assigned, and Georgia-Pacific Tissue agreed to
assume, the liabilities of both companies in connection with these antitrust
cases. The Corporation and Wisconsin Tissue have denied that they have engaged
in any of the illegal conduct alleged in these cases and intend to defend
themselves vigorously.
Although the ultimate outcome of these environmental matters and legal
proceedings cannot be determined with certainty, based on presently available
information, management believes that adequate reserves have been established
for probable losses with respect thereto. Management further believes that the
ultimate outcome of such environmental matters and legal proceedings could be
material to operating results in any given quarter or year but will not have a
material adverse effect on the long-term results of operations, liquidity or
consolidated financial position of the Corporation.
NOTE 12. RELATED-PARTY TRANSACTIONS
For all periods in which the separate accompanying combined statements of income
of the groups are presented, timber has been transferred from the Corporation's
timberlands at prices intended to reflect fair market prices based on prices
paid by independent purchasers and sellers for similar kinds of timber.
During 1999 and 1998, The Timber Company sold timber deeds to the
Georgia-Pacific Group. The Timber Company recognizes revenues and earnings from
these related-party timber deeds as the timber is cut by the Georgia-Pacific
Group. Had The Timber Company recognized revenues and earnings on these
related-party timber deeds at the time of the agreement (which is the applicable
accounting policy for timber deeds sold to third parties), pro forma net sales,
depreciation and cost of timber harvested, income before income taxes and
extraordinary items, net income, and basic and diluted earnings per share would
have been as follows:
Georgia-Pacific Corporation-The Timber Company
<TABLE>
<CAPTION>
Year ended
-------------------------------------------------------------------
----------
January 1, December 31,
2000 1998
(In millions, except per share amounts) As reported Pro forma* As reported Pro forma*
- -----------------------------------------------------------------------------------------------------------------
--------------
<S> <C> <C> <C> <C>
Net sales $ 526 $ 522 $ 534 $ 541
Depreciation and cost of timber harvested 42 41 44 45
Income before income taxes and extraordinary
items 657 654 293 299
Net income 400 398 176 180
Basic earnings per share 4.75 4.73 1.95 1.99
Diluted earnings per share 4.73 4.70 1.94 1.98
=================================================================================================================
==============
</TABLE>
* Reported on a pro forma basis as if The Timber Company had recognized
revenues and earnings on timber deeds sold to the Georgia-Pacific Group at
the time of the contract, which is the applicable accounting treatment
utilized in the case of timber deeds sold to third parties.
As of January 1, 2000 and December 31, 1998, The Timber Company had
approximately $4 million and $12 million, respectively, in unrecognized earnings
related to the uncut portion of timber on timber
<PAGE>
contracts sold to the Georgia-Pacific Group. This amount is included in "Other
liabilities" on the accompanying balance sheets.
During the second quarter of 1998, the Georgia-Pacific Group and The Timber
Company revised the operating policy, which they had entered into in 1997, with
respect to sales of timber by The Timber Company to the Georgia-Pacific Group.
These revisions arose from sharp changes in the prices of timber from the first
quarter to the second quarter of 1998, a significant decrease in the volume of
timber purchased by the Georgia-Pacific Group in the second quarter, and other
issues in the policy. At the time these revisions were negotiated, The Timber
Company sold a timber deed to the Georgia-Pacific Group in the amount of
approximately $23 million, and the Georgia-Pacific Group made a one-time $3
million payment to The Timber Company for 1998 second quarter adjustments due
under the revised policy. The Timber Company recognized revenues and earnings
from this timber deed, and other contracts to sell timber to the Georgia-Pacific
Group, as the timber was cut.
Under the revised policy, beginning July 1, 1998, the prices for Southern timber
sold by The Timber Company are adjusted monthly, rather than quarterly, and
represent the average of prices paid by the Georgia-Pacific Group for timber
purchased from third parties in a particular forest over the most recent
three-month period. In most of The Timber Company's Southern forests, it must
offer 80% of its projected annual harvest from those forests to the
Georgia-Pacific Group, and the Georgia-Pacific Group must purchase not less than
60% nor more than 80% of that projected annual harvest. In addition, premiums
charged by The Timber Company for the right to harvest a significant percentage
of wood from its Southern forests have been reduced.
In two key Southern forests, the price paid by the Georgia-Pacific Group for
timber purchased from The Timber Company will be based on the average prices
paid over the most recent three months by the Georgia-Pacific Group for timber
purchased from third parties, and prices received by The Timber Company for
timber sold to third parties, in each forest. In those same forests, the
Georgia-Pacific Group has agreed to purchase, each quarter, 20% of the annual
volume of timber it has committed to purchase from The Timber Company during
that year. The revised policy reduces the volume of timber that the
Georgia-Pacific Group can purchase in these same two forests from 80% to 70% of
The Timber Company's annual harvest in those forests, and also reduces the
Georgia-Pacific Group's minimum annual purchase obligation in those forests from
60% to 50% of the annual harvest in 1999 and 2000.
These changes are intended to cause prices paid by the Georgia-Pacific Group for
timber sold by The Timber Company to more quickly reflect market prices in
particular forests, to allow the Georgia-Pacific Group more flexibility in
purchasing wood from third parties, and to allow The Timber Company greater
flexibility in the timing of sales of its annual harvest on the open market. The
revised policy also contains additional provisions that resolve issues related
to certain operating practices of The Timber Company and the Georgia-Pacific
Group. This policy will remain in effect through 2000.
The Georgia-Pacific Group and The Timber Company are negotiating the terms of a
new long-term agreement to govern the purchases and sales of timber beginning in
2001. If such negotiations are unsuccessful, neither the Georgia-Pacific Group
nor The Timber Company will have any obligation to buy timber from or sell
timber to the other.
The Corporation is a 50% partner in a joint venture (GA-MET) with Metropolitan
Life Insurance Company (Metropolitan). GA-MET owns and operates the
Corporation's main office building in Atlanta, Georgia. The Corporation accounts
for its investment in GA-MET under the equity method, which is included on the
Georgia-Pacific Group's financial statements.
At January 1, 2000, GA-MET had an outstanding mortgage loan payable to
Metropolitan in the amount of $144 million. The note bears interest at 9-1/2%,
requires monthly payments of principal and interest through 2011, and is secured
by the land and building owned by the joint venture. In the event of
foreclosure, each partner has severally guaranteed payment of one-half of any
shortfall of collateral value to the outstanding secured indebtedness. Based on
the present market conditions and building occupancy, the likelihood of any
obligation to the Georgia-Pacific Group or The Timber Company with respect to
this guarantee is considered remote.
<PAGE>
NOTE 13. UNAUDITED SELECTED QUARTERLY FINANCIAL DATA
Georgia-Pacific Corporation-The Timber Company
<TABLE>
<CAPTION>
(In millions, except per share amounts) First Quarter Second Quarter
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------
---------------
<S> <C> <C> <C> <C>
Net sales $ 141 $ 145 $ 138 $ 119
Gross profit (net sales minus cost of sales) 117 126 117 96
Income before extraordinary items 47 52 99 38
Net income 47 50 99 38
Dividends declared per share 0.25 0.25 0.25 0.25
Basic per share:
Income before extraordinary items 0.54 0.56 1.17 0.41
Net income 0.54 0.54 1.17 0.41
Diluted per share:
Income before extraordinary items 0.54 0.56 1.16 0.41
Net income 0.54 0.54 1.16 0.41
- ------------------------------------------------------------------------------------------------------------------------
---------------
Price range of common stock:
High $ 24.06 $ 27.25 $ 27.13 $ 27.00
Low 19.88 21.25 22.00 19.69
- ------------------------------------------------------------------------------------------------------------------------
---------------
<CAPTION>
(In millions, except per share amounts) Third Quarter Fourth Quarter
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------
---------------
<S> <C> <C> <C> <C>
Net sales $ 139 $ 143 $ 108 $ 127
Gross profit (net sales minus cost of sales) 119 103 103 95
Income before extraordinary items 49 41 205 47
Net income 49 41 205 47
Dividends declared per share 0.25 0.25 0.25 0.25
Basic per share:
Income before extraordinary items 0.59 0.46 2.48 0.54
Net income 0.59 0.46 2.48 0.54
Diluted per share:
Income before extraordinary items 0.59 0.46 2.47 0.54
Net income 0.59 0.46 2.47 0.54
- ------------------------------------------------------------------------------------------------------------------------
---------------
Price range of common stock:
High $ 27.19 $ 23.19 $ 25.81 $ 24.56
Low 22.00 18.00 22.38 17.38
- ------------------------------------------------------------------------------------------------------------------------
---------------
</TABLE>
The first quarter of 1998 included an after-tax extraordinary loss of
$2 million ($0.02 per share) on early extinguishment of debt.
<PAGE>
SELECTED FINANCIAL DATA - OPERATIONS
Georgia-Pacific Corporation--The Timber Company
<TABLE>
<CAPTION>
Year ended
---------------------------------------------------------
--------
(Dollar amounts, except per share, and shares January 1, December 31,
are in millions) 2000 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------
------------------
<S> <C> <C> <C> <C>
Operations
Net sales $ 526 $ 534 $ 551 $ 547
- ------------------------------------------------------------------------------------------------------------
------------------
Costs and expenses
Cost of sales 70 114 137 132
Depreciation and cost of timber harvested 42 44 48 57
General and administrative 43 36 43 45
Interest 69 71 84 105
Other income (355) (24) (114) -
- ------------------------------------------------------------------------------------------------------------
------------------
Total costs and expenses (131) 241 198 339
- ------------------------------------------------------------------------------------------------------------
------------------
Income before income taxes and extraordinary
items 657 293 353 208
Provision for income taxes 257 115 138 81
- ------------------------------------------------------------------------------------------------------------
------------------
Income before extraordinary items 400 178 215 127
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Extraordinary items, net of taxes - (2) - -
- ------------------------------------------------------------------------------------------------------------
------------------
Net income $ 400 $ 176 $ 215 $ 127
============================================================================================================
==================
Cash provided by operations $ 159 $ 201 $ 212 $ 164
============================================================================================================
==================
Other statistical data Basic per share:
Income before extraordinary items $ 4.75 $ 1.97 $ 2.35
Extraordinary items, net of taxes - (0.02) -
- ------------------------------------------------------------------------------------------------------------
------------------
Net income $ 4.75 $ 1.95 $ 2.35
- ------------------------------------------------------------------------------------------------------------
------------------
Diluted per share:
Income before extraordinary items $ 4.73 $ 1.96 $ 2.33
Extraordinary items, net of taxes - (0.02) -
- ------------------------------------------------------------------------------------------------------------
------------------
Net income $ 4.73 $ 1.94 $ 2.33
============================================================================================================
==================
Average number of shares outstanding, basic 84.1 90.3 91.4
Average number of shares outstanding, diluted 84.6 90.8 92.1
Earnings to fixed charges 10.3 5.1 5.2 3.0
Cash flow to interest 3.3 3.8 3.5 2.6
Effective income tax rate 39.1% 39.2% 39.1% 38.9%
============================================================================================================
==================
<CAPTION>
Year ended
------------------
-----
(Dollar amounts, except per share, and shares are December 31,
in millions) 1995
- ---------------------------------------------------------------------
---------------
<S> <C>
Operations
Net sales $ 493
- ---------------------------------------------------------------------
---------------
Costs and expenses
Cost of sales 122
Depreciation and cost of
timber harvested 55
General and administrative 45
Interest 111
Other income -
- ---------------------------------------------------------------------
---------------
Total costs and expenses 333
- ---------------------------------------------------------------------
---------------
Income before income taxes and extraordinary
items 160
Provision for income taxes 63
- ---------------------------------------------------------------------
---------------
Income before extraordinary items 97
Extraordinary items, net of taxes -
- ---------------------------------------------------------------------
---------------
Net income $ 97
=====================================================================
==============
Cash provided by operations $ 132
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
=====================================================================
==============
Other statistical data Basic per share:
Income before extraordinary items
Extraordinary items, net of taxes
- ---------------------------------------------------------------------
---------------
Net income
- ---------------------------------------------------------------------
---------------
Diluted per share:
Income before extraordinary items
Extraordinary items, net of taxes
- ---------------------------------------------------------------------
---------------
Net income
=====================================================================
==============
Average number of shares outstanding, basic
Average number of shares outstanding, diluted
Earnings to fixed charges 2.4
Cash flow to interest 2.2
Effective income tax rate 39.4%
=====================================================================
==============
</TABLE>
EARNINGS TO FIXED CHARGES
Income before income taxes and extraordinary items plus total interest cost
(interest expense plus capitalized interest) and one-third of rent expense,
divided by total interest cost plus one-third of rent expense.
CASH FLOW TO INTEREST
Cash provided by operations plus interest expense divided by total interest cost
(interest expense plus capitalized interest).
EFFECTIVE INCOME TAX RATE
Provision for income taxes divided by income before income taxes and
extraordinary items.
SELECTED FINANCIAL DATA - FINANCIAL POSITION, END OF YEAR
Georgia-Pacific Corporation-The Timber Company
<TABLE>
<CAPTION>
Year ended
---------------------------------------------------------
-------
(Dollar amounts, except per share, and shares January 1, December 31,
are in millions) 2000 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------
------------------
<S> <C> <C> <C> <C>
Financial position, end of year
Timber and timberlands $ 1,127 $ 1,144 $ 1,130 $ 1,284
Property, plant and equipment, net 19 24 20 25
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Investment in real estate held for development
and sale - - 14 13
Note receivable 350 - - -
Other assets 25 6 7 4
- ------------------------------------------------------------------------------------------------------------
------------------
Total assets $ 1,521 $ 1,174 $ 1,171 $ 1,326
- ------------------------------------------------------------------------------------------------------------
------------------
Debt $ 970 $ 983 $ 971 $ 1,316
Other liabilities 50 32 9 8
Deferred income tax liabilities 376 244 240 174
- ------------------------------------------------------------------------------------------------------------
------------------
Total liabilities $ 1,396 $ 1,259 $ 1,220 $ 1,498
- ------------------------------------------------------------------------------------------------------------
------------------
Shareholders' equity $ 125 $ (85) $ (49) $ (172)
- ------------------------------------------------------------------------------------------------------------
------------------
Other statistical data
Property, plant and equipment
investments $ 2 $ 6 $ 2 $ 4
Timber and timberland investments 78 59 44 48
Per share*
Market price:
High $ 27.19 $ 27.25 $ 25.88
Low $ 19.88 $ 17.38 $ 22.50
Year-end $ 24.63 $ 23.81 $ 22.69
Book value $ 151 $ (0.98) $ (0.53)
Shares of stock outstanding at year end 82.9 87.1 92.6
Dividends declared per share $ 1.00 $ 1.00 $ -
Total debt to capital, book basis 65.6% 85.6% 83.4% 99.6%
Total debt to capital, market basis 32.2% 32.2% 31.6%
============================================================================================================
==================
<CAPTION>
Year ended
------------------
------
(Dollar amounts, except per share, and shares are December 31,
in millions) 1995
- ---------------------------------------------------------------------
---------
<S> <C>
Financial position, end of year
Timber and timberlands $ 1,293
Property, plant and equipment, net 27
Investment in real estate held for development
and sale 16
Note receivable -
Other assets 12
- ---------------------------------------------------------------------
---------
Total assets $ 1,348
- ---------------------------------------------------------------------
---------
Debt $ 1,365
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Other liabilities 10
Deferred income tax liabilities 180
- ---------------------------------------------------------------------
---------
Total liabilities $ 1,555
- ---------------------------------------------------------------------
---------
Shareholders' equity $ (207)
- ---------------------------------------------------------------------
---------
Other statistical data
Property, plant and equipment investments $ 6
Timber and timberland investments 62
Per share* Market price:
High
Low
Year-end
Book value
Shares of stock outstanding at year end
Dividends declared per share
Total debt to capital, book basis 100.0%+
Total debt to capital, market basis
=====================================================================
=========
</TABLE>
* 1997 amounts are for the period from December 17, 1997 through December 31,
1997.
BOOK VALUE PER SHARE
Shareholders' equity divided by shares of common stock outstanding as of the end
of the year.
TOTAL DEBT TO CAPITAL, BOOK BASIS
Debt divided by the sum of total debt, deferred income taxes, net, other
long-term liabilities and shareholders' equity as of the end of the year.
TOTAL DEBT TO CAPITAL, MARKET BASIS
Debt divided by the sum of total debt and the market value of shareholders'
equity as of the end of the year.
INVESTOR INFORMATION
Georgia-Pacific Corporation and Subsidiaries
CORPORATE HEADQUARTERS
The Timber Company
100 Peachtree Street, N.W.
Atlanta, Georgia 30303
(404) 586-0275
STOCK EXCHANGES AND SYMBOLS
The Timber Company common stock are listed on the New York Stock Exchange
(NYSE).
The NYSE symbol for The Timber Company common stock is "TGP."
The Timber Company options are traded on the Philadelphia Stock Exchange.
TRANSFER AGENT AND REGISTRAR
First Chicago Trust Company
a Division of Equiserve
Post Office Box 2500
Jersey City, New Jersey 07303-2500
(800) 519-3111
ENVIRONMENTAL AND SAFETY REPORT
Requests for Georgia-Pacific Corporation's most recent Environmental and Safety
Report should be addressed to: Corporate Communications, Georgia-Pacific
Corporation, Post Office Box 105605, Atlanta, Georgia 30348. The report can also
be viewed on-line at www.gp.com.
SHAREHOLDER INFORMATION
<PAGE>
For shareholder information, contact the Transfer Agent and Registrar, First
Chicago Trust Company, a Division of Equiserve, at Post Office Box 2500, Jersey
City, New Jersey 07303-2500, or telephone (800) 519-3111.
Registered Timber Company shareholders are eligible to participate in the Timber
Group Dividend Reinvestment Plan. For information on the Plan, contact the
Plan's agent, First Chicago Trust Company, a Division of EquiServe, Dividend
Reinvestment Plan, Post Office Box 2598, Jersey City, New Jersey 07303-2598, or
by telephone at (800) 414-6280.
Web site: www. fctc.com.
Number of The Timber Company shareholders of record at January 1, 2000: 33,810.
FINANCIAL INFORMATION
A copy of the Georgia-Pacific Corporation 1999 Annual Report to the Securities
and Exchange Commission on Form 10-K and the Georgia-Pacific Corporation 1999
Consolidated Financial Statements will be supplied without charge. For current
quarterly financial updates telephone (800) 340-2384. Copies of corporate news
releases are available through fax-on-demand by telephoning (800) 758-5804,
extension 357498.
All other requests for financial information should be directed to: Investor
Relations, Georgia-Pacific Corporation, P.O. Box 105605, Atlanta, Georgia 30348,
or telephone (404) 652-5555. Information concerning The Timber Company can also
be found at our Web site at www.thetimbercompany.com.
EXHIBIT 21
GEORGIA-PACIFIC CORPORATION SUBSIDIARIES
The following table lists each subsidiary of the Registrant as of
January 1, 2000 indented under the name of its immediate parent, the percentage
of each subsidiary's voting securities beneficially owned by its immediate
parent and the jurisdiction under the laws of which each subsidiary was
organized:
Each subsidiary is included in the consolidated financial statements of the
Registrant.
<TABLE>
<CAPTION>
% of Voting
Name Securities Jurisdiction
- ---- ---------- ------------
<S> <C> <C> <C>
GEORGIA-PACIFIC CORPORATION - GEORGIA
A) Arbor Property and Casualty Limited 100 Bermuda
B) Arkansas Louisiana & Mississippi Railroad Company 100 Delaware
C) Ashley, Drew & Northern Railway Company 100 Arkansas
D) Blue Rapids Railway Company 100 Kansas
E) Brown Board Holding, Inc. 100 Delaware
F) Brunswick Pulp & Paper Company 100 Delaware
G) Brunswick Pulp Land Company, Inc. 100 Delaware
H) CeCorr, Inc. 100 Indiana
I) Color-Box, LLC 100 Delaware
J) Fordyce and Princeton R. R. Co. 100 Arkansas
K) G-P Gypsum Corporation 100 Delaware
1) KMHC, Incorporated 100 California
a) Compania Occidental Mexicana, S.A. de C.V. 49 Mexico
L) G-P Receivables, Inc. 100 Delaware
M) Georgia-Pacific Childcare Center, LLC 100 Georgia
N) Georgia-Pacific Development Company 100 Delaware
1) Dunes West Joint Venture, A Partnership 100 (1) South Carolina
a) Dunes West Recreation Association, Inc. 100 Delaware
O) Georgia-Pacific Foreign Holdings, Inc. 100 Delaware
P) Georgia-Pacific Finance, LLC 100 Delaware
Q) Georgia-Pacific Holdings, Inc. 100 Delaware
R) Georgia-Pacific Investment Company 100 Oregon
S) Georgia-Pacific Resins, Inc. 100 Delaware
1) Maine Timber, Inc. 100 Maine
a) Maine Timber REIT, Inc. 100 Maine
2) Timber, Inc. 100 Delaware
a) Timber REIT, Inc. 100 Delaware
T) Georgia-Pacific Shared Services Corp. 100 Delaware
U) Georgia-Pacific Tissue, LLC 95 (2) Delaware
1) Wisconsin Tissue Management, LLC 100 Delaware
V) Georgia-Pacific West, Inc. 100 Oregon
1) Aztec Trading Company, S.A. 100 Panama
2) Flakeboard, Inc. 100 Oregon
a) G-P Flakeboard Company 67 Nova Scotia
3) GPMF, Inc. 100 Delaware
4) G-P Canada Finance Company 100 Nova Scotia
5) G-P Canada Holdings, Limited 100 Nova Scotia
a) Beaverwood Finance Company 100 Nova Scotia
b) Georgia-Pacific Canada, Inc. 100 Ontario
i) Flakeboard Canada Incorporated 100 Nova Scotia
ii) Georgia-Pacific (Barbados), Limited 100 Barbados
6) G-P Latin America, Incorporated 100 Barbados
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
% of Voting
Name Securities Jurisdiction
- ---- ---------- ------------
<S> <C> <C> <C>
a) Inversiones Georgia-Pacific 100 (3)
7) Georgia-Pacific Asia, Inc. 100 (4) Delaware
a) Georgia-Pacific-Asia (H. K.) Limited 100 Hong Kong
8) Georgia-Pacific Building Materials Sales, Ltd. 100 New Brunswick
9) Georgia-Pacific de Mexico, S. de R. L. de C. V. 100 (5) Mexico
10) Georgia-Pacific Foreign Sales Corporation 100 Barbados
11) Georgia-Pacific Global Corporation 100 Oregon
a) GPSP, Inc. 100 Delaware
12) Georgia-Pacific NZ Holdings, LLC 100 Delaware
a) G-P Securities Company 100 New Zealand
b) Georgia-Pacific NZ Company 100 New Zealand
13) Georgia-Pacific S.A. 100 Switzerland
14) Georgia-Pacific U.K. Limited 100 England
15) Georgia Steamship Company, Inc. 100 Delaware
16) St. Croix Pulpwood, Limited 100 New Brunswick
W) Georgia Temp, Inc. 100 Delaware
X) Gloster Southern Railroad Company 100 Delaware
Y) Great Northern Nekoosa Corporation 100 Maine
1) Chattahoochee Industrial Railroad 100 Georgia
2) Envases Industriales de Costa Rica, S.A. 33.33 Costa Rica
3) Fipasa-Fibras Panama, S.A. 50 Panama
4) Great Southern Paper Company 100 Georgia
5) Industria Panamena de Papel, S.A. 50 Panama
6) Leaf River Corporation 100 Delaware
a) Leaf River Forest Products, Inc. 100 Delaware
i) Old Augusta Railroad Company 100 Mississippi
7) Nekoosa Packaging Corporation 100 Delaware
8) Nekoosa Papers Inc. 100 Wisconsin
a) Georgia-Pacific Britain, L.L.C. 100 (6) Delaware
Z) North American Timber Corp. 100 Delaware
AA) Phoenix Athletic Club, Inc. 100 Georgia
AB) Saint Croix Water Power Company, The 100 New Brunswick
AC) Southwest Millwork and Specialties, Inc. 100 Delaware
1) Maderas Howrey S. A. de C. V. 100 (7) Mexico
AD) Sprague's Falls Manufacturing Company (Limited), The 100 Canada
AE) St. Croix Water Power Company 100 Maine
AF) Thacker Land Company 57 West Virginia
AG) Tomahawk Land Company 100 Delaware
AH) Unisource Worldwide, Inc. 100 Delaware
1) Alco Realty, Inc. 100 Delaware
a) Alco Canada Realty Ltd. 100 Canada
i) Braces Properties Corporation 50 Canada
2) BRT, Inc. 100 Delaware
3) Packaging Concepts International Corp. 100 New Jersey
4) Paper Corporation of North America 100 Delaware
a) Unisource Canada, Inc. 100 Canada
b) Unisource Distribudora, S.A. de C.V. 100 Mexico
Servicios Corporativos, Unisource, S.A. de C.V. 100 Mexico
ii) Unisource del Bajio y Occidente, S.A. de C.V. 100 Mexico
iii) Unisource del Centro, S.A. de C.V. 100 Mexico
iv) Unisource del Noreste, S.A. de C.V. 100 Mexico
v) Unisource del Pacifico, S.A. de C.V. 100 Mexico
vi) Unisource Empaque, S.A. de C.V. 100 Mexico
5) Portfolio Receivables, Inc. 100 Delaware
a) Portfolio Receivables, LLC 100 Delaware
6) UniMadison, Inc. 100 Wisconsin
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
% of Voting
Name Securities Jurisdiction
- ---- ---------- ------------
<S> <C> <C> <C>
7) Unisource Capital Corporation 100 Delaware
8) The Unisource Corporation 100 Texas
9) The Unisource Foundation 100 Pennsylvania
10) Unisource Holdings, Inc. 100 Delaware
11) Unisource International, Inc. 100 Delaware
a) Unisource International Handelgesellschaft m.b.H. 100 Austria
b) Unisource International Hong Kong Limited 100 Hong Kong
c) Unisource International Limited 100 Jamaica
d) Unisource International (South East Asia) PTE Limited 100 Singapore
e) Unisource Pimsa, S.A. de C.V. 100 Mexico
f) Unisource Planeacion, S.A. de C.V. 100 Mexico
g) Unisource Servicos, S.A. de C.V. 100 Mexico
12) Unisource Realty, Inc. 100 Delaware
13) Unisource Sales Corporation 100 Delaware
AI) XRS, Inc. 100 Delaware
</TABLE>
NOTES
(1) 50% of the partnership of Dunes West Joint Venture is owned by
Georgia-Pacific Development Company and 50% is owned by Georgia-Pacific
Investment Company.
(2) 95% of the partnership of Georgia-Pacific Tissue, LLC is owned by
Georgia-Pacific Corporation and the remaining 5% is owned by Wisconsin
Tissue Mills, Inc.
(3) 99% of the stock of Inversiones Georgia-Pacific [Group 1 841] is issued
to G-P Latin America, Incorporated and the remaining 1% is issued to
Georgia-Pacific (Barbados) Limited.
(4) 99.9% of the stock of Georgia-Pacific Asia (H.K) is issued to
Georgia-Pacific Asia, Inc. and the remaining 0.1% is issued to
Georgia-Pacific Holdings, Inc.
(5) Georgia-Pacific de Mexico, S. de R. L. de C. V. is owned by
Georgia-Pacific West, Inc. and Georgia-Pacific Investment Company.
(6) Georgia-Pacific Britain, L.L.C. is owned by Nekoosa Papers, Inc. (90%)
and Great Northern Nekoosa Corporation (10%).
(7) 99.6% of Series A stock of Maderas Howrey S. A. de C. V. is issued to
Southwest Millwork and Specialties, Inc. and the remaining .4% is
issued to Georgia-Pacific Shared Services Corp., Georgia-Pacific
Foreign Holdings, Inc., Georgia-Pacific Holdings, Inc. and
Georgia-Pacific West, Inc. in equal parts. 100% of Series B stock and
100% of Series C stock of Maderas Howrey S. A. de C. V. are issued to
Southwest Millwork and Specialties, Inc.
Each subsidiary is included in the consolidated financial statements of
Georgia-Pacific Corporation.
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports dated February 4, 2000 included or incorporated by reference in this
Annual Report on Form 10-K into Georgia-Pacific Corporation's previously filed
Registration Statement No. 2-61238; Registration Statement No. 2-93184;
Registration Statement No. 2-99381; Registration Statement No. 2-97165;
Registration Statement No. 2-99380; Registration Statement No. 2-76072;
Registration Statement No. 2-68688; Registration Statement No. 33-5964;
Registration Statement No. 33-16528; Registration Statement No. 33-18482;
Registration Statement No. 33-21018; Registration Statement No. 33-23776;
Registration Statement No. 33-25446; Registration Statement No. 33-26985;
Registration Statement No. 33-11341; Registration Statement No. 33-37930;
Registration Statement No. 33-38561; Registration Statement No. 33-48331;
Registration Statement No. 33-48329; Registration Statement No. 33-48330;
Registration Statement No. 33-34810; Registration Statement No. 33-39693;
Registration Statement No. 33-43453; Registration Statement No. 33-45892;
Registration Statement No. 33-48041; Registration Statement No. 33-51182;
Registration Statement No. 33-52815; Registration Statement No. 33-52823;
Registration Statement No. 33-62498; Registration Statement No. 33-58664;
Registration Statement No. 33-65208; Registration Statement No. 33-48328;
Post-Effective Amendment No. 1 to Registration Statement No. 2-64516;
Post-Effective Amendment No. 5 (with respect to the 1974 Employee Stock Option
Plan), Post-Effective Amendment No. 6 (with respect to the Savings and Capital
Growth Plan), and Post-Effective Amendment No. 7 (with respect to the Savings
and Capital Growth Plan) to Registration Statement No. 2-53427; Registration
Statement No. 33-59057; Registration Statement No. 33-60933; Registration
Statement No. 33-60127; Registration Statement No. 33-64673; Registration
Statement No. 333-01785; Registration Statement No. 333-35793; Registration
Statement No. 333-35813; Registration Statement No. 333-42597; Registration
Statement No. 333-61665; Registration No. 333-80757; Registration Statement No.
333-93793 and Registration Statement No. 333-96007.
Atlanta, Georgia
March 27, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-END> JAN-01-2000
<CASH> 25
<SECURITIES> 0
<RECEIVABLES> 2,323
<ALLOWANCES> 25
<INVENTORY> 2,010
<CURRENT-ASSETS> 4,559
<PP&E> 15,878
<DEPRECIATION> 8,799
<TOTAL-ASSETS> 16,897
<CURRENT-LIABILITIES> 4,191
<BONDS> 5,484
0
0
<COMMON> 155
<OTHER-SE> 3,720
<TOTAL-LIABILITY-AND-EQUITY> 16,897
<SALES> 17,977
<TOTAL-REVENUES> 17,977
<CGS> 13,333
<TOTAL-COSTS> 13,333
<OTHER-EXPENSES> 1,013
<LOSS-PROVISION> 9
<INTEREST-EXPENSE> 495
<INCOME-PRETAX> 1,821
<INCOME-TAX> 705
<INCOME-CONTINUING> 1,116
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,116
<EPS-BASIC> 4.17<F1>
<EPS-DILUTED> 4.07<F2>
<FN>
<F1> The Timber Company EPS-BASIC is 4.75.
<F2> The Timber Company EPS-DILUTED is 4.73.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-END> OCT-02-1999
<CASH> 64
<SECURITIES> 0
<RECEIVABLES> 2,420
<ALLOWANCES> 26
<INVENTORY> 1,740
<CURRENT-ASSETS> 4,410
<PP&E> 14,996
<DEPRECIATION> 8,648
<TOTAL-ASSETS> 15,469
<CURRENT-LIABILITIES> 3,953
<BONDS> 5,010
0
0
<COMMON> 153
<OTHER-SE> 3,352
<TOTAL-LIABILITY-AND-EQUITY> 15,469
<SALES> 12,785
<TOTAL-REVENUES> 12,785
<CGS> 9,457
<TOTAL-COSTS> 9,457
<OTHER-EXPENSES> 735
<LOSS-PROVISION> 3
<INTEREST-EXPENSE> 350
<INCOME-PRETAX> 1,210
<INCOME-TAX> 474
<INCOME-CONTINUING> 736
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 736
<EPS-BASIC> 3.15<F1>
<EPS-DILUTED> 3.07<F2>
<FN>
<F1> The Timber Company EPS-BASIC is 2.30.
<F2> The Timber Company EPS-DILUTED is 2.29.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE>5
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-END> JUL-03-1999
<CASH> 47
<SECURITIES> 0
<RECEIVABLES> 2,328
<ALLOWANCES> 24
<INVENTORY> 1,777
<CURRENT-ASSETS> 4,332
<PP&E> 14,896
<DEPRECIATION> 8,512
<TOTAL-ASSETS> 15,352
<CURRENT-LIABILITIES> 4,394
<BONDS> 4,588
0
0
<COMMON> 153
<OTHER-SE> 3,191
<TOTAL-LIABILITY-AND-EQUITY> 15,352
<SALES> 7,259
<TOTAL-REVENUES> 7,259
<CGS> 5,265
<TOTAL-COSTS> 5,265
<OTHER-EXPENSES> 475
<LOSS-PROVISION> 1
<INTEREST-EXPENSE> 217
<INCOME-PRETAX> 762
<INCOME-TAX> 305
<INCOME-CONTINUING> 457
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 457
<EPS-BASIC> 1.81<F1>
<EPS-DILUTED> 1.76<F2>
<FN>
<F1> The Timber Company EPS-BASIC is 1.71.
<F2> The Timber Company EPS-DILUTED is 1.70.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-END> APR-03-1999
<CASH> 5
<SECURITIES> 0
<RECEIVABLES> 1,368
<ALLOWANCES> 24
<INVENTORY> 1,337
<CURRENT-ASSETS> 2,802
<PP&E> 14,551
<DEPRECIATION> 8,368
<TOTAL-ASSETS> 12,806
<CURRENT-LIABILITIES> 2,716
<BONDS> 4,112
0
0
<COMMON> 150
<OTHER-SE> 2,996
<TOTAL-LIABILITY-AND-EQUITY> 12,806
<SALES> 3,409
<TOTAL-REVENUES> 3,409
<CGS> 2,509
<TOTAL-COSTS> 2,509
<OTHER-EXPENSES> 236
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 111
<INCOME-PRETAX> 246
<INCOME-TAX> 100
<INCOME-CONTINUING> 146
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 146
<EPS-BASIC> 0.57<F1>
<EPS-DILUTED> 0.56<F2>
<FN>
<F1> The Timber Company EPS-BASIC is 0.54.
<F2> The Timber Company EPS-DILUTED is 0.54.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 5
<SECURITIES> 0
<RECEIVABLES> 1,258
<ALLOWANCES> 25
<INVENTORY> 1,280
<CURRENT-ASSETS> 2,645
<PP&E> 14,453
<DEPRECIATION> 8,204
<TOTAL-ASSETS> 12,700
<CURRENT-LIABILITIES> 2,648
<BONDS> 4,125
0
0
<COMMON> 150
<OTHER-SE> 2,974
<TOTAL-LIABILITY-AND-EQUITY> 12,700
<SALES> 13,342
<TOTAL-REVENUES> 13,342
<CGS> 10,231
<TOTAL-COSTS> 10,231
<OTHER-EXPENSES> 997
<LOSS-PROVISION> 14
<INTEREST-EXPENSE> 443
<INCOME-PRETAX> 491
<INCOME-TAX> 202
<INCOME-CONTINUING> 289
<DISCONTINUED> 0
<EXTRAORDINARY> (15)
<CHANGES> 0
<NET-INCOME> 274
<EPS-BASIC> 0.55<F1>
<EPS-DILUTED> 0.54<F2>
<FN>
<F1> The Timber Company EPS-BASIC is 1.95.
<F2> The Timber Company EPS-DILUTED is 1.94.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 7
<SECURITIES> 0
<RECEIVABLES> 1,434
<ALLOWANCES> 15
<INVENTORY> 1,305
<CURRENT-ASSETS> 2,869
<PP&E> 14,443
<DEPRECIATION> 8,182
<TOTAL-ASSETS> 12,941
<CURRENT-LIABILITIES> 2,693
<BONDS> 4,131
0
0
<COMMON> 148
<OTHER-SE> 3,112
<TOTAL-LIABILITY-AND-EQUITY> 12,941
<SALES> 9,928
<TOTAL-REVENUES> 9,928
<CGS> 7,594
<TOTAL-COSTS> 7,594
<OTHER-EXPENSES> 740
<LOSS-PROVISION> 7
<INTEREST-EXPENSE> 338
<INCOME-PRETAX> 376
<INCOME-TAX> 160
<INCOME-CONTINUING> 216
<DISCONTINUED> 0
<EXTRAORDINARY> (15)
<CHANGES> 0
<NET-INCOME> 201
<EPS-BASIC> 0.40<F1>
<EPS-DILUTED> 0.40<F2>
<FN>
<F1> The Timber Company EPS-BASIC is 1.41.
<F2> The Timber Company EPS-DILUTED is 1.40.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 7
<SECURITIES> 0
<RECEIVABLES> 1,418
<ALLOWANCES> 12
<INVENTORY> 1,269
<CURRENT-ASSETS> 2,871
<PP&E> 14,162
<DEPRECIATION> 8,024
<TOTAL-ASSETS> 12,999
<CURRENT-LIABILITIES> 2,589
<BONDS> 4,140
0
0
<COMMON> 148
<OTHER-SE> 3,300
<TOTAL-LIABILITY-AND-EQUITY> 12,999
<SALES> 6,530
<TOTAL-REVENUES> 6,530
<CGS> 5,010
<TOTAL-COSTS> 5,010
<OTHER-EXPENSES> 491
<LOSS-PROVISION> 2
<INTEREST-EXPENSE> 225
<INCOME-PRETAX> 234
<INCOME-TAX> 98
<INCOME-CONTINUING> 136
<DISCONTINUED> 0
<EXTRAORDINARY> (15)
<CHANGES> 0
<NET-INCOME> 121
<EPS-BASIC> 0.18<F1>
<EPS-DILUTED> 0.18<F2>
<FN>
<F1> The Timber Company EPS-BASIC is 0.95.
<F2> The Timber Company EPS-DILUTED is 0.94.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 29
<SECURITIES> 0
<RECEIVABLES> 1,384
<ALLOWANCES> 12
<INVENTORY> 1,317
<CURRENT-ASSETS> 2,850
<PP&E> 14,149
<DEPRECIATION> 7,925
<TOTAL-ASSETS> 12,846
<CURRENT-LIABILITIES> 3,126
<BONDS> 3,519
0
0
<COMMON> 146
<OTHER-SE> 3,280
<TOTAL-LIABILITY-AND-EQUITY> 12,846
<SALES> 3,223
<TOTAL-REVENUES> 3,223
<CGS> 2,465
<TOTAL-COSTS> 2,465
<OTHER-EXPENSES> 240
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 114
<INCOME-PRETAX> 117
<INCOME-TAX> 49
<INCOME-CONTINUING> 68
<DISCONTINUED> 0
<EXTRAORDINARY> (14)
<CHANGES> 0
<NET-INCOME> 54
<EPS-BASIC> 0.02<F1>
<EPS-DILUTED> 0.02<F2>
<FN>
<F1> The Timber Company EPS-BASIC is 0.54.
<F2> The Timber Company EPS-DILUTED is 0.54.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 8
<SECURITIES> 0
<RECEIVABLES> 1,390
<ALLOWANCES> 19
<INVENTORY> 1,357
<CURRENT-ASSETS> 2,916
<PP&E> 14,134
<DEPRECIATION> 7,837
<TOTAL-ASSETS> 12,950
<CURRENT-LIABILITIES> 3,020
<BONDS> 3,713
0
0
<COMMON> 148
<OTHER-SE> 3,322
<TOTAL-LIABILITY-AND-EQUITY> 12,950
<SALES> 13,094
<TOTAL-REVENUES> 13,094
<CGS> 10,209
<TOTAL-COSTS> 10,209
<OTHER-EXPENSES> 1,017
<LOSS-PROVISION> 21
<INTEREST-EXPENSE> 465
<INCOME-PRETAX> 235
<INCOME-TAX> 106
<INCOME-CONTINUING> 129
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (60)
<NET-INCOME> 69
<EPS-BASIC> (0.80)<F1>
<EPS-DILUTED> (0.80)<F2>
<FN>
<F1> The Timber Company EPS-BASIC is 2.35.
<F2> The Timber Company EPS-DILUTED is 2.33.
</FN>
</TABLE>
EXHIBIT 99.1
<TABLE>
<CAPTION>
Georgia-Pacific Corporation - Georgia-Pacific Group
BUILDING PRODUCTS PLANTS AND MILLS
Capacities are stated as of January 1, 2000
STRUCTURAL PANEL PLANTS: 22
Softwood Plywood Plants: 16 Oriented Strand Board Plants: 6
5,506,000,000 sq. ft. annual capacity, 1/8" basis 1,830,000 sq. ft. annual capacity, ?" basis
5,314,000,000 sq. ft. 1999 shipments Capacity: sq. ft. 1,873,000,000 sq. ft. 1999 shipments Capacity: sq. ft.
---------------------------------------------------------- --------------------------------------------------------
<S> <C> <C> <C>
MAINE
ALABAMA Woodland........................................200,000,000
Peterman......................................315,000,000 MISSISSIPPI
Talladega.....................................322,000,000 Grenada.........................................365,000,000
ARKANSAS NORTH CAROLINA
Crossett......................................665,000,000 Dudley..........................................170,000,000
Fordyce.......................................310,000,000 VIRGINIA
FLORIDA Brookneal.......................................365,000,000
Hawthorne.....................................370,000,000 Skippers........................................365,000,000
GEORGIA WEST VIRGINIA
Madison.......................................367,000,000 Mt. Hope........................................365,000,000
Monticello....................................347,000,000
Warm Springs..................................340,000,000
INDUSTRIAL PANEL PLANTS:
22
MISSISSIPPI Hardboard Plants: 7
1,271,000 sq. ft. annual capacity, 1/8" basis
1,145,000,000 sq. ft. 1999 shipments.......Capacity sq. ft.
Gloster.......................................285,000,000 ARKANSAS
Louisville....................................290,000,000 Little Rock.....................................163,000,000
MINNESOTA
Taylorsville..................................355,000,000 Duluth..........................................280,000,000
NORTH CAROLINA
Conway..........................................205,000,000
NORTH CAROLINA OREGON
Dudley........................................366,000,000 Lebanon.........................................163,000,000
Whiteville....................................328,000,000
SOUTH CAROLINA SOUTH CAROLINA
Prosperity....................................250,000,000 Catawba.........................................290,000,000
Russellville..................................260,000,000
VIRGINIA WISCONSIN
Emporia.......................................336,000,000 Phillips.........................................90,000,000
Superior........................................140,000,000
</TABLE>
-1-
<PAGE>
<TABLE>
<CAPTION>
Georgia-Pacific Corporation - Georgia-Pacific Group
BUILDING PRODUCTS PLANTS AND MILLS (CONTINUED)
PARTICLEBOARD PLANTS: 8 MEDIUM DENSITY FIBERBOARD PLANTS: 3
1,295,000,000 sq. ft. annual capacity,1/4" basis 276,000,000 sq. ft. annual capacity,3/4" basis
1,233,000,000 sq. ft. 1999 shipments Capacity: sq. ft. 250,000,000 sq. ft. 1999 shipments Capacity: sq. ft.
---------------------------------------------------------------
<S> <C> <C> <C>
GEORGIA GEORGIA
Monticello..........................................62,000,000 Monticello...........................................36,000,000
Vienna.............................................140,000,000 SOUTH CAROLINA
MICHIGAN Holly Hill..........................................100,000,000
Gaylord............................................255,000,000 CANADA
MISSISSIPPI Sault Sainte Marie, Ontario.........................140,000,000
Louisville.........................................140,000,000
Oxford.............................................200,000,000 Softboard Plant: 1
250,000,000 sq. ft. annual capacity,1/2" basis
216,000,000 sq. ft. 1999 shipments
---------------------------------------------------------------
Capacity: sq. ft.
---------------------------------------------------------------
Taylorsville.......................................174,000,000 VIRGINIA
SOUTH CAROLINA Jarratt.............................................250,000,000
Russellville.......................................174,000,000 OTHER WOOD PANEL PLANT: 1
--------------------------
CANADA Particleboard Cut-to-size Operation: 1
28,000,000 sq. ft. annual capacity
28,000,000 sq. ft. 1999 shipments............Capacity: sq. ft.
---------------------------------------------------------------
Bancroft, Ontario..................................150,000,000 MISSISSIPPI
Eupora..............28,000,000
Hardwood Plywood Plants: 2
366,000,000 sq. ft. annual capacity, surface measure basis
363,000,000 sq. ft. 1999 shipments........Capacity: sq. ft.
- ------------------------------------------------------------
GEORGIA
Savannah...........................................126,000,000
OREGON
Eugene.............................................240,000,000
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
Georgia-Pacific Corporation - Georgia-Pacific Group
BUILDING PRODUCTS PLANTS AND MILLS (CONTINUED)
LUMBER MILLS: 38
- ----------------------------
Southern Pine Sawmills: 20 Southern Pine Stud Mills: 4
1,778,000,000 bd. ft. annual capacity 283,000,000 bd. ft. annual capacity
1,598,000,000 bd. ft. 1999 shipments Capacity: bd. ft. 270,000,000 bd. ft. 1999 shipments Capacity: bd. ft.
- --------------------------------------------------------------- ---------------------------------------------------------------
<S> <C> <C> <C>
ALABAMA ARKANSAS
Fayette 122,000,000 Crossett.............................................70,000,000
ARKANSAS GEORGIA
El Dorado 110,000,000 Monticello...........................................74,000,000
FLORIDA MISSISSIPPI
Cross City 84,500,000 Taylorsville.........................................67,000,000
Palatka 76,000,000 SOUTH CAROLINA
GEORGIA Russellville.........................................72,000,000
Claxton 85,000,000
Western Softwood Sawmills: 3
457,000,000 bd. ft. annual capacity
434,,000,000 bd. ft. 1999 shipments Capacity: bd. ft.
-------------------------------------------------------------
Sterling 106,000,000 CALIFORNIA
Warrenton 85,000,000 Ft. Bragg 144,000,000
MISSISSIPPI OREGON
Bay Springs 123,500,000 Coos Bay 173,000,000
Columbia 115,000,000 Philomath 120,000,000
New Augusta 100,000,000
Roxie 104,500,000 Southern Hardwood Sawmills: 3
58,000,000 bd. ft. annual capacity
53,000,000 bd. ft. 1999 shipments Capacity: bd. ft.
----------------------------------------------------------
NORTH CAROLINA NORTH CAROLINA
Ahoskie 78,000,000 Bowdens 19,000,000
Creedmoor 71,000,000 Enfield 20,000,000
Dudley 83,500,000 SOUTH CAROLINA
Whiteville 72,000,000 Alcolu 19,000,000
OKLAHOMA
Idabel 100,000,000
SOUTH CAROLINA
McCormick 70,000,000
Prosperity 85,000,000
Varnville 72,000,000
VIRGINIA
Wakefield 35,000,000
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
Georgia-Pacific Corporation - Georgia-Pacific Group
BUILDING PRODUCTS PLANTS AND MILLS (CONTINUED)
OTHER LUMBER FACILITIES: 17
------------------------------
Eastern Softwood Sawmill: 1 Laminated Veneer Lumber Mill: 1
66,000,000 bd. ft. annual capacity 5,000,000 cu. ft. annual capacity
26,000,000 bd. ft. 1999 shipments Capacity: bd. ft. 3,500,000 cu. ft. 1999 shipments Capacity: cu. ft.
- ------------------------------------------------------------- --------------------------------------------------------------
<S> <C> <C> <C>
MAINE NORTH CAROLINA
Woodland............................................66,000,000 Roxboro...............................................5,000,000
Appalachian Hardwood Sawmills: 6
105,000,000 bd. ft. annual capacity
109,000,000 bd. ft. 1999 shipments..........Capacity: bd. ft. Lumber Planing Operations:
50,000,000 sq. ft. annual capacity
44,000,000 sq. ft. 1999 shipments............Capacity: sq. ft.
---------------------------------------------------------------
PENNSYLVANIA MISSISSIPPI
Marble..............................................18,000,000 Tylertown............................................27,000,000
Tioga...............................................18,000,000 VIRGINIA
VIRGINIA Suffolk..............................................23,000,000
Buena Vista.........................................14,000,000 I Beam Manufacturing Operations: 2
48,000,000 l. ft. annual capacity
39,000,000 l. ft. 1999 shipments..............Capacity: l. ft.
---------------------------------------------------------------
WEST VIRGINIA FLORIDA
Green Valley........................................20,000,000 Ocala................................................24,000,000
Rainelle............................................18,000,000 NORTH CAROLINA
Richwood............................................17,000,000 Roxboro..............................................24,000,000
Pressure Treating Facilities: 12
---------------------------------
ALABAMA - Louisville, Athens, Nauvod
FLORIDA - Rockledge
GEORGIA - Sterling
ILLINOIS - Rochelle
INDIANA - Richmond
MAINE - Pleasant Hill
MISSOURI -
NORTH CAROLINA - Henderson, Roanoke Rapids
SOUTH CAROLINA - Rock Hill
TEXAS - Minola
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
Georgia-Pacific Corporation - Georgia-Pacific Group
BUILDING PRODUCTS PLANTS AND MILLS (CONTINUED)
GYPSUM OTHER GYPSUM PLANTS: 6
- ------------------ ----------------------------
Gypsum Board Plants: 21 Fire Door Core Plants: 2
7,066,000 sq. ft. annual capacity 650,000 cores annual capacity
6,366,000 sq. ft. 1999 shipments Capacity: sq. ft. 325,000 cores 1999 shipments Capacity: cores
- ------------------------------------------------------------- ----------------------------------------------------------
<S> <C> <C> <C>
CALIFORNIA MISSOURI
Antioch............................................340,000,000 Cuba...............................................335,000
Long Beach.........................................330,000,000 OREGON
GEORGIA Canby..............................................315,000
Brunswick..........................................570,000,000
Savannah...........................................300,000,000 Gypsum Joint System Plants: 4
INDIANA 131,000 tons annual capacity
74,000 tons 1999 shipments......................Capacity: tons
---------------------------------------------------------------
Wheatfield.........................................500,000,000 FLORIDA
IOWA Ft. Lauderdale.....................................14,000
Fort Dodge.........................................390,000,000 GEORGIA
KANSAS Marietta...........................................39,000
Blue Rapids........................................160,000,000 TEXAS
MICHIGAN Acme (at gypsum board plant).......................30,000
Grand Rapids (2 plants) ...........................380,000,000 VIRGINIA
NEVADA Milford............................................28,000
Las Vegas..........................................270,000,000 CANADA
NEW HAMPSHIRE Longueuil, Quebec..................................20,000
Newington..........................................600,000,000
NEW JERSEY
Camden.............................................316,000,000 Gypsum Plaster Mills (at gypsum board plants)
385,000 tons annual capacity
390,000 tons 1999 shipments.....................Capacity: tons
---------------------------------------------------------------
TEXAS CALIFORNIA
Acme...............................................645,000,000 Antioch............................................30,000
Sweetwater.........................................320,000,000 Long Beach.........................................10,000
UTAH GEORGIA
Sigurd.............................................160,000,000 Brunswick..........................................30,000
WASHINGTON KANSAS
Tacoma.............................................400,000,000 Blue Rapids.......................................210,000
WYOMING NEW JERSEY
Lovell.............................................300,000,000 Camden.............................................30,000
CANADA UTAH
Caledonia, Ontario (East)..........................475,000,000 Sigurd.............................................65,000
Edmonton, Alberta..................................250,000,000 CANADA
Surrey, British Columbia...........................220,000,000 Winnipeg, Manitoba.................................10,000
Winnipeg, Manitoba.................................140,000,000
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
Georgia-Pacific Corporation - Georgia-Pacific Group
BUILDING PRODUCTS PLANTS AND MILLS (CONTINUED)
CHEMICALS
- ---------------
Formaldehyde Plants: 14 Thermosetting Resin Plants: 15
2,410,000,000 lbs. annual capacity 3,444,000,000 lbs. annual capacity
2,354,000,000 lbs. 1999 shipments Capacity: lbs. 3,659,000 lbs. 1999 shipments Capacity: lbs.
- ------------------------------------------------------------- ----------------------------------------------------------
<S> <C> <C> <C>
ARKANSAS ARKANSAS
Crossett...........................................180,000,000 Crossett......................................258,000,000
GEORGIA CALIFORNIA
Vienna.............................................120,000,000 Elk Grove......................................55,000,000
MICHIGAN Ukiah.........................................160,000,000
Beaver Creek.......................................145,000,000 GEORGIA
MISSISSIPPI Savannah (Port Wentworth).....................180,000,000
Louisville.........................................150,000,000 Vienna........................................250,000,000
Taylorsville.......................................290,000,000 MICHIGAN
NORTH CAROLINA Beaver Creek..................................251,000,000
Conway.............................................159,000,000 MISSISSIPPI
Healing Springs....................................175,000,000 Louisville....................................295,000,000
OHIO Taylorsville..................................225,000,000
Columbus...........................................235,000,000 NORTH CAROLINA
OREGON Conway........................................375,000,000
Albany.............................................178,000,000 OHIO
White City.........................................180,000,000 Columbus......................................110,000,000
SOUTH CAROLINA OREGON
Hampton.............................................65,000,000 Albany........................................235,000,000
Russellville.......................................278,000,000 Eugene........................................160,000,000
TEXAS White City....................................235,000,000
Houston............................................110,000,000 SOUTH CAROLINA
Lufkin.............................................145,000,000 Russellville..................................325,000,000
TEXAS
Lufkin........................................330,000,000
OTHER BUILDING PRODUCTS FACILITIES
------------------------------------
Roofing Plant - Felt: 1
30,000 tons annual capacity
23,000 tons 1999 shipments......................Capacity: tons
---------------------------------------------------------------
OKLAHOMA: Pryor
Dry roofing felt...................................30,000
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
Georgia-Pacific Corporation - Georgia-Pacific Group
BUILDING PRODUCTS DISTRIBUTION CENTERS
DOMESTIC: 63
- ---------------------------------
<S> <C> <C>
ALABAMA LOUISIANA NORTH DAKOTA
Birmingham Baton Rouge Fargo
ARKANSAS New Orleans Ohio
Little Rock MAINE OKLAHOMA
CALIFORNIA Portland Tulsa
Los Angeles MARYLAND OREGON
Fairmont Baltimore Portland
Riverside MASSACHUSETTS PENNSYLVANIA
Sacramento Bellingham Allentown
San Diego MICHIGAN Pittsburgh
COLORADO Detroit SOUTH CAROLINA
Denver Grand Rapids Charleston
CONNECTICUT MINNESOTA SOUTH DAKOTA
Newtown Minneapolis Sioux Falls
FLORIDA St. Paul TENNESSEE
Jacksonville MISSISSIPPI Erwin
Lake City Jackson Memphis
Miami MISSOURI Nashville
Pensacola Kansas City TEXAS
Tampa Springfield El Paso
GEORGIA St. Louis Fort Worth
Atlanta NEW JERSEY Harlingen
IDAHO Denville Houston
Boise NEW MEXICO Lubbock
ILLINOIS Albuquerque San Antonio
Chicago NEW YORK VERMONT
INDIANA Buffalo Burlington
Elkhart Long Island VIRGINIA
IOWA NORTH CAROLINA Norfolk
Des Moines Asheville Richmond
KENTUCKY Charlotte WISCONSIN
Florence Raleigh Wausau
Whiteville
INTERNATIONAL: 1
- -------------------------------
Vancouver, Canada
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
Georgia-Pacific Corporation - Georgia-Pacific Group
CONTAINERBOARD AND PACKAGING PLANTS AND MILLS
Capacities are stated as of January 1, 2000
Linerboard (L) and Medium (M) Mills Corrugated Packaging Plants: 51
3,793,000 tons annual capacity 3,502,000 tons annual capacity
3,778,000 tons 1999 shipments Capacity: tons 2,941,000 tons 1999 shipments
- --------------------------------------------------- -----------------------------
<S> <C> <C> <C>
FLORIDA
Palatka............................................100,000
GEORGIA ALABAMA NEW JERSEY
Cedar Springs (L)..................................828,000 Huntsville Milford (3)
Cedar Springs (M)..................................243,000 Tarrant City NEW MEXICO
MISSISSIPPI CALIFORNIA Santa Teresa
Monticello (L)...................................1,114,000 Anaheim NEW YORK
OHIO Buena Park Batavia
Massilon (M)........................................85,000 Madera Schenectady
OREGON Modesto NORTH CAROLINA
Toledo (L).........................................522,000 San Francisco Asheboro (2)
Toledo (M).........................................374,000 West Fresno OHIO
VIRGINIA FLORIDA Akron
Big Island (L).....................................288,000 Lake Placid Cincinnati
Big Island (M).....................................319,000 GEORGIA Circleville
Masslon (M).........................................85,000 Albany Cleveland
SOUTH CAROLINA Augusta West Chester (3)
Sonoco (M).........................................190,000 Doraville PENNSYLVANIA
ILLINOIS Bradford
Other Paperboard Mills - Bleached Board (B)
and Gypsum Paperboard (G): 6
638,000 tons annual capacity
607,000 tons 1999 shipments Capacity: tons
ARKANSAS Chicago Mt. Wolf
Crossett (B).......................................206,500 Mount Olive Philadelphia
CALIFORNIA INDIANA SOUTH CAROLINA
San Leandro (G) ....................................72,000 Indianapolis Spartanburg
GEORGIA IOWA TENNESSEE
Brunswick (B) .....................................120,000 Dubuque Cleveland
NEW JERSEY Monticello Lebanon
Delair (G)..........................................60,000 LOUISIANA Memphis
OKLAHOMA West Monroe Ooltewah
Pryor (G)...........................................69,000 MASSACHUSETTS TEXAS
Franklin Denton
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CANADA MICHIGAN Waxahachie
Thorold, Ontario (G)...............................110,000 Jackson VIRGINIA
Kraft Paper Mill: 1 Milan Martinsville
322,000 tons annual capacity
18,000 tons 1999 shipments.................Capacity: tons
- ----------------------------------------------------------
FLORIDA Owosso WASHINGTON
Palatka............................................322,000 MISSOURI Olympia
Kansas City WISCONSIN
Oshkosh
Sheboygan
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
Georgia-Pacific Corporation - Georgia-Pacific Group
PULP AND PAPER PLANTS AND MILLS
Capacities are stated as of January 1, 2000
Communication Papers Mills: 7 Fluff (F) and Sulfite (S): 5
2,294,000 tons annual capacity 1,990,000 tons annual capacity
2,164,000 tons 1999 shipments Capacity: tons 1,805,000 tons 1999 shipments Capacity tons
- --------------------------------------------------- -------------------------------------------------
<S> <C> <C> <C>
ARKANSAS ARKANSAS
Ashdown............................................824,000 Ashdown (HW)............................................145,000
Crossett...........................................224,000 Ashdown (SW).............................................30,000
LOUISIANA GEORGIA
Port Hudson........................................573,000 Brunswick (F)...........................................700,000
MAINE MAINE
Woodland...........................................130,000 Woodland (HW)...........................................380,000
MICHIGAN MISSISSIPPI
Kalamazoo..........................................140,000 New Augusta (HW)........................................150,000
WISCONSIN New Augusta (SW)........................................450,000
Nekoosa............................................218,000 WASHINGTON
Port Edwards.......................................125,000 Bellingham (S)..........................................135,000
Tissue Mills: 8 Tissue Product Mills: 10
1,079,000 tons annual capacity 1,284,000 tons annual capacity
826,000 tons 1999 shipments.............Capacity: tons 790,000 tons 1999 shipments......................Capacity: tons
- ------------------------------------------------------- ---------------------------------------------------------------
ARIZONA ARIZONA
Flagstaff...........................................42,000 Bellemont................................................82,000
ARKANSAS ARKANSAS
Crossett...........................................256,500 Crossett................................................227,500
FLORIDA FLORIDA
Palatka............................................222,000 Palatka.................................................170,000
ILLINOIS GEORGIA
Alsip...............................................60,500 LaGrange.................................................58,500
INDIANA NEW MEXICO
Gary................................................35,500 Toluca...................................................15,000
NEW YORK NEW YORK
Plattsburgh........................................154,000 Plattsburgh.............................................149,000
WASHINGTON Greenwich................................................73,500
Bellingham..........................................93,000 VERMONT
WISCONSIN Brattleboro..............................................81,500
Menasha............................................215,500 WASHINGTON
Bellemont................................................82,500
WISCONSIN
Neenah..................................................342,000
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Georgia-Pacific Corporation - Georgia-Pacific Group
PULP AND PAPER PLANTS AND MILLS (CONTINUED)
<S> <C> <C> <C>
OTHER PULP AND PAPER FACILITIES: 9
Other Converting Plants: 3 Capacity: tons
ARKANSAS: Crossett
Poly coating.....................................140,000
101,000 tons shipped in 1999.
CALIFORNIA: Madera
Graphics Coralure.................................18,000
22,000 tons shipped in 1999. Other Chemical Plant: 1
7,000,000 gals. Annual capacity
7,000,000 gals. 1999 shipments......................Capacity: gals.
--------------------------------------------------------------------
GEORGIA: Valdosta WASHINGTON: Bellingham
Preprinted linerboard.............................27,000 Alcohol....................................................7,000,000
30,000 tons 1999 shipments OTHER OPERATIONS: 2
Lignin Product Plants: 2 Polyethylene Film Plant: 1
21,000,000 lbs. Annual capacity
21,000,000 lbs. 1999 shipments.......................Capacity: lbs.
--------------------------------------------------------------------
271,000 tons annual capacity NORTH CAROLINA
250,000 tons 1999 shipments Capacity: tons Hamlet....................................................21,000,000
- ----------------------------------------------------------
TEXAS: Houston POLYETHYLENE WRAPPING PLANT: 1
6,500 tons annual capacity
6,000 tons 1999 shipments............................Capacity: tons
--------------------------------------------------------------------
Lignin converting.................................11,000 NEW YORK
WASHINGTON: Bellingham Warwick........................................................6,500
Lignin...........................................260,000
Tall Oil and Specialty Chemical Plants: 3
408,000,000 lbs. Annual capacity Capacity: lbs.
ARKANSAS: Crossett (2 plants)
Tall oil......................................34,000,000
9,000,000 lbs. 1999 shipments
Tall Oil Distillation..........................220,000,000
223,000,000 lbs. 1999 shipments
Rosin derivatives.............................18,000,000
15,000,000 lbs. 1999 shipments
Rosin size...................................107,000,000
79,000,000 lbs. 1999 shipments
ILLINOIS
Chicago.........................................29,000,000
5,000,000 lbs. 1999 shipments
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Georgia-Pacific Corporation - Georgia-Pacific Group
PAPER DISTRIBUTION CENTERS
Total Locations: 331
<S> <C> <C> <C>
ALASKA GEORGIA MISSISSIPPI SOUTH CAROLINA
Anchorage Atlanta (3) Jackson Columbia
Fairbanks College Park Tupelo South Dakota
ALABAMA Columbus Montana Sioux Falls
Birmingham (2) Doraville Billings TENNESSEE
Dothan Gainesville Great Falls Chattanooga
Mobile Macon Missoula Knoxville
ARKANSAS Marietta NORTH CAROLINA Memphis
Bentonville Roswell Castle Hayne Nashville (3)
Little Rock Savannah Charlotte TEXAS
ARIZONA Valdosta Garner Amarillo
Flagstaff IOWA Winston-Salem Arlington
Glendale Cedar Rapids NORTH DAKOTA Austin (2)
Mesa Des Moines Fargo Beaumont
Phoenix IDAHO NEBRASKA Carrollton
Tucson (2) Boise (2) Omaha Corpus Christi
Van Buren Idaho Falls NEW HAMPSHIRE Dallas (2)
Yuma ILLINOIS Concord (2) El Paso (2)
CALIFORNIA Addison (3) NEW JERSEY Freeport
Bakersfield Aurora East Rutherford Ft. Worth
Burlingame Chicago Little Ferry Garland
Chico Decatur Moonachie Harlingen
City of Commerce (2) Des Plaines New Mexico Houston
Colton Elk Grove Village Albuquerque (3) Lake Charles
El Cajon Itasca (2) Farmington Laredo
El Centro Joliet Gallup Lubbock
Emeryville Kankakee Las Cruces Lufkin
Escondido Lisle Roswell McAllen (2)
Fresno (2) Milan Santa Fe San Antonio (2)
Gardena Morton Nevada Tyler (2)
Glover Beach Peoria Las Vegas (2) Utah
Hayward Quincy Sparks Salt Lake City
Huntington Beach University Park NEW YORK St. George
Los Angeles (2) INDIANA Albany Virginia
Mira Loma Evansville Binghamton Norfolk
Palm Springs Fort Wayne Buffalo Richmond (2)
Pleasanton Indianapolis Deer Park WASHINGTON
Rancho Cucamonga South Bend (3) Farmingdale Kent
</TABLE>
-12-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Richmond Kansas Farmington Pasco
Sacramento Lenexa Johnson City Renton
Salinas Olathe Long Island City Spokane (2)
San Bernadino Wichita Mineola Yakima
San Diego (3) KENTUCKY New York City (2) WISCONSIN
San Jose Louisville OHIO Appleton (2)
San Luis Obispo LOUISIANA Cincinnati (3) Brookfield
Santa Ana Baton Rouge (2) Columbus (2) Ferndale
Santa Barbara Lake Charles Dayton Janesville
Santa Clara Shreveport Milford La Crosse
Santa Rosa MASSACHUSETTS OKLAHOMA New Berlin
South San Francisco Mansfield (3) Oklahoma City North Hudson
Visalia Southborough Tulsa (4) Wisconsin Rapids
West Sacramento MARYLAND OREGON WEST VIRGINIA
COLORADO Capitol Heights Bend Huntington
Aurora Frederick Eugene (2)
Colorado Springs Jessup Medford
Denver Rockville Merrill
Eagle MAINE Milwaukie (3)
Pueblo Bangor Pendleton
CONNECTICUT MICHIGAN Portland
Milford Ann Arbor Tigard
Windsor (3) Kalamazoo
DELAWARE Lansing
New Castle Livonia (2)
FLORIDA Rochester Hills PENNSYLVANIA
Clearwater (2) Saginaw Exton
Ft. Lauderdale Southfield Fort Washington
Jacksonville (7) Sterling Hts. Holmes
Longwood MINNESOTA Philadelphia
Miami (2) Brooklyn Park Pittsburgh
Miramar Minneapolis East Providence
Orlando (2) Roseville
Sarasota MISSOURI
St. Petersburg Independence
Tallahassee St. Louis (3)
Tampa (4)
West Palm Beach
</TABLE>
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<PAGE>
CANADA: 26 MEXICO: 22
- ----------------------------------- --------------
Alberta Tlalnepantla
Edmonton Queretaro
Calgary (2) Veracruz
British Columbia Guadalajara
New Westminister Leon
Saanichlon San Luis Potosi
Prince George Puerto Vallarta
Manitoba Morelia
Winnipeg (2) Santa Catarina
New Brunswick Reynosa
Moncton Nuevo Laredo
Saint John Hermosillo
Nova Scotia Obregon
Dartmouth Nogales
Ontario Chihuahua
Ottawa Juarez
Richmond Hill Los Mochis
Windsor Mazatlan
London Tijuana
Scarborough Cabo San Lucas
Mississauga (2) Cancun
Thunder Bay Acapulco
Quebec
Quebec
Lasalle
Dorval
St. Laurent (2)
Saskatchewan
Saskaloon
Regina
-14-
