AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 16, 1998
REGISTRATION NO. 333-47583
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
______________________
INTERNATIONAL PAPER COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 2621 13-0872805
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION) TWO MANHATTANVILLE ROAD
PURCHASE, NY 10577
(914) 397-1500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
______________________
JAMES W. GUEDRY, ESQ.
INTERNATIONAL PAPER COMPANY
TWO MANHATTANVILLE ROAD
PURCHASE, NY 10577
(914) 397-1500
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
______________________
WITH COPIES TO:
ERIC J. FRIEDMAN, ESQ. NICHOLAS C. HOLLENKAMP, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP TURNER, GRANZOW & HOLLENKAMP
919 THIRD AVENUE 50 EAST THIRD STREET
NEW YORK, NY 10022 DAYTON, OH 45402
(212) 735-3000 (937) 228-4184
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of the Registration Statement and
the effective time of the merger (the "Merger") of Wolverine Acquisition
Corp. ("Sub"), an Ohio corporation and wholly owned subsidiary of
International Paper Company, a New York corporation ("International Paper"
or the "Registrant"), with and into The Weston Paper and Manufacturing Co.,
an Ohio corporation ("Weston"), as described in the Agreement and Plan of
Merger among International Paper, Sub and Weston, dated as of January 29,
1998 (the "Merger Agreement"), attached as Appendix A to the Proxy
Statement/Prospectus forming a part of this Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. ( )
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the
"Securities Act"), check the following box and list the Securities Act
registration statement number of the earlier effective registration
statement for the same offering. ( )____________
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. ( )___________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT
THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN
ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OR UNTIL THIS
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
==============================================================================
[WESTON LETTERHEAD]
March 16, 1998
Dear Weston Shareholder:
The Board of Directors of The Weston Paper and Manufacturing Co.
has approved a merger in which Weston will become a wholly owned
subsidiary of International Paper Company. In the merger, each share
of your Weston common stock will be exchanged for shares of
International Paper common stock with an aggregate value of $447.6051.
This merger will turn your Weston shares into shares of a
significantly larger worldwide producer of printing papers, packaging
and forest products. There are many opportunities for synergy and
growth between the two companies and that translates into an improved
competitive position and new opportunities for all of us.
The merger cannot be completed without the approval of Weston's
shareholders. We have scheduled a special meeting for our shareholders
to vote on the merger. YOUR VOTE IS IMPORTANT!
The date, time and place of the special meeting are:
APRIL 17, 1998, 11:30 A.M., EASTERN TIME
COUNTRY CLUB OF TERRE HAUTE
57 ALLENDALE PLACE
TERRE HAUTE, INDIANA 47802
Whether or not you plan to attend the special meeting, please
vote by completing the enclosed proxy card and mailing it to us. If
you fail to return your card, you will in effect vote against the
merger.
This Proxy Statement/Prospectus provides detailed information
about the proposed merger. You should read it carefully.
I strongly support this strategic combination between Weston and
International Paper and join with the Board in enthusiastically
recommending that you vote in favor of the merger.
Very truly yours,
/s/ Edward T. Turner, Jr.
Edward T. Turner, Jr.
Chairman and Chief Executive Officer
______________________________________
Neither the Securities and Exchange
Commission nor any state securities
regulator has approved or disapproved
the securities to be issued under
this Proxy Statement/Prospectus or
determined if this Proxy
Statement/Prospectus is accurate or
adequate. Any representation to the
contrary is a criminal offense.
This Proxy Statement/Prospectus dated
March 16, 1998 was first mailed to
shareholders on or about March 17,
1998.
TABLE OF CONTENTS
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Companies . . . . . . . . . . . . . . . . . . . . . . 1
Questions and Answers about the Merger . . . . . . . . . . 1
Other Information about the Merger . . . . . . . . . . . . 4
International Paper Selected Consolidated Financial Data . 5
Weston Selected Consolidated Financial Data . . . . . . . 6
Comparative Per Share Data . . . . . . . . . . . . . . . . 7
Comparative Market Price Information . . . . . . . . . . . 8
THE PROPOSED MERGER . . . . . . . . . . . . . . . . . . . . . . 9
Background of the Merger . . . . . . . . . . . . . . . . . . 9
Weston's Rationale for the Merger; Recommendation of the
Weston Board of Directors. . . . . . . . . . . . . . . . 11
Opinion of Weston's Financial Advisor . . . . . . . . . . 12
International Paper's Rationale for the Merger . . . . . . 14
Federal Income Tax Consequences of the Merger . . . . . . 15
Accounting Treatment . . . . . . . . . . . . . . . . . . . 16
Regulatory and Third-Party Approvals . . . . . . . . . . . 16
Dissenters' Appraisal Rights . . . . . . . . . . . . . . . 17
Stockholder Agreement . . . . . . . . . . . . . . . . . . 18
Interests of Certain Persons in the Merger . . . . . . . . 19
Cautionary Statement Concerning Forward-Looking
Statements . . . . . . . . . . . . . . . . . . . . . . . 20
Restrictions on Resales by Affiliates . . . . . . . . . . 20
INFORMATION CONCERNING THE WESTON SPECIAL MEETING . . . . . . 21
Purpose . . . . . . . . . . . . . . . . . . . . . . . . . 21
Record Date; Quorum; Vote Required . . . . . . . . . . . . 21
Proxies . . . . . . . . . . . . . . . . . . . . . . . . . 22
THE MERGER AGREEMENT . . . . . . . . . . . . . . . . . . . . 23
General . . . . . . . . . . . . . . . . . . . . . . . . . 23
Closing; Effective Time . . . . . . . . . . . . . . . . . 23
Surviving Corporation Articles of Incorporation . . . . . 23
Surviving Corporation Code of Regulations . . . . . . . . 23
Consideration to be Received in the Merger . . . . . . . . 23
Exchange of Certificates and Depositary Receipts;
Fractional Shares . . . . . . . . . . . . . . . . . . . 24
Representations and Warranties . . . . . . . . . . . . . . 24
Conduct of Business . . . . . . . . . . . . . . . . . . . 25
No Solicitation . . . . . . . . . . . . . . . . . . . . . 26
Conditions to the Consummation of the Merger . . . . . . . 27
Termination . . . . . . . . . . . . . . . . . . . . . . . 29
Termination Fees . . . . . . . . . . . . . . . . . . . . . 30
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 30
Amendment and Waiver . . . . . . . . . . . . . . . . . . . 30
COMPARISON OF RIGHTS OF SHAREHOLDERS OF INTERNATIONAL PAPER
AND WESTON . . . . . . . . . . . . . . . . . . . . . . . . 32
Authorized Capital . . . . . . . . . . . . . . . . . . . . 32
Board of Directors . . . . . . . . . . . . . . . . . . . . 32
Committees of the Board of Directors . . . . . . . . . . . 32
Newly Created Directorships and Vacancies . . . . . . . . 33
Removal of Directors . . . . . . . . . . . . . . . . . . . 33
Special Meetings of Shareholders . . . . . . . . . . . . . 33
Quorum at Shareholders Meetings . . . . . . . . . . . . . 33
Amendment of Governing Documents . . . . . . . . . . . . . 33
Fair Price and Other Provisions . . . . . . . . . . . . . 34
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . 35
WHERE YOU CAN FIND MORE INFORMATION . . . . . . . . . . . . . 35
WESTON'S CONSOLIDATED FINANCIAL STATEMENTS
INCLUDING MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . F-1
ANNEX A: Agreement and Plan of Merger
ANNEX B: Stockholder Agreement
ANNEX C: Opinion of SBC Warburg Dillon Read Inc.
ANNEX D: Dissenters' Appraisal Rights Statute
SUMMARY
This summary may not contain all the information that is
important to you. For a more complete understanding of the
merger, you should read this entire document carefully, as well
as the additional documents we refer to.
THE COMPANIES
INTERNATIONAL PAPER COMPANY
International Paper, in its 100th year of operation, is a global
paper and forest products company that produces printing and
writing papers, pulp, paperboard and packaging and wood products.
It also manufactures specialty items, including tissue products,
specialty chemicals, specialty panels and laminated products.
International Paper's domestic industrial packaging business
includes five containerboard mills and 23 box plants, and
International Paper owns or has joint venture interests in two
additional mills and 20 container plants internationally.
International Paper has operations in 31 countries, employs more
than 80,000 people and exports its products to more than 130
nations.
International Paper's headquarters is at Two Manhattanville Road,
Purchase, New York 10577, and its telephone number is (914) 397-
1500.
THE WESTON PAPER AND MANUFACTURING CO.
Weston, in its 49th year of operation, operates 11 corrugated
container plants with the capacity to produce over 6 billion
square feet of corrugated packaging and one paper mill that
produces more than 200,000 tons of corrugating medium per year.
It also owns 6,700 acres of forestland in the Terre Haute,
Indiana vicinity. Weston has approximately 1,650 employees and
nearly 8,000 customers.
Weston's headquarters is at 2001 North Nineteenth Street, Terre
Haute, Indiana 47804, and its telephone number is (812) 232-0521.
QUESTIONS AND ANSWERS ABOUT THE MERGER
WHY SHOULD WESTON MERGE WITH INTERNATIONAL PAPER?
Weston believes the merger will create value for its
shareholders. This value is made possible by the opportunities
for International Paper and Weston to take advantage of the
complementary strategic fit of their respective businesses.
Because the companies have very little overlap in markets and
industries, the merger allows both Weston and International Paper
to build off each other to grow market share in each area of
strength. Weston's facilities will initially operate as a
subsidiary of International Paper, but will eventually be
integrated with International Paper's domestic industrial
packaging businesses.
WHAT DOES WESTON'S BOARD OF DIRECTORS RECOMMEND?
Weston's Board of Directors has approved the merger and
recommends that Weston shareholders vote FOR the proposal to
approve the merger agreement.
WHAT WILL I RECEIVE FOR MY WESTON COMMON STOCK?
Each share of your Weston common stock will be exchanged for a
number of shares of International Paper common stock with an
aggregate value of $447.6051. The exact number of shares of
International Paper common stock you receive will depend on the
closing sale prices of such stock on the New York Stock Exchange
(NYSE) over a twenty trading day period ending on the fifth such
day prior to the date of the meeting at which you will vote on
the proposal to approve the merger agreement. You will receive a
cash payment for the value of any fraction of an International
Paper common share.
HOW WILL I BE TAXED ON THE MERGER?
We expect that for US federal income tax purposes
o you will not have taxable gain or loss on the exchange of
your Weston common stock for International Paper common
stock (except with respect to any cash you receive instead
of a fractional share of International Paper common stock or
as a result of you properly exercising dissenters' rights
under Ohio law), and
o the holding period for the International Paper common stock
that you receive in the merger generally will include the
holding period of your Weston common stock.
WHEN WILL THE MERGER BE COMPLETED?
We are working to complete the merger in the second quarter of
this year.
WHAT CIRCUMSTANCES MIGHT PREVENT THE MERGER?
Either Weston or International Paper can withdraw from the merger
if, despite its best efforts,
o the merger is not approved by Weston's shareholders,
o the merger is not cleared by regulatory authorities under US
antitrust laws,
o we cannot obtain other material regulatory approvals, or
o government or court action prevents or has a material
adverse effect on the merger.
Weston and International Paper can also withdraw from the merger
by mutual consent, and either can withdraw from the merger if
o the other materially breaches the merger agreement, or
o the merger is not completed by June 30, 1998 (other than
because the terminating party breached the merger
agreement). Either party can extend this date up to July 30,
1998 if the merger has not been completed because a
regulatory approval has not been obtained but the party
expects the approval within the extended period.
Weston's Board of Directors may also withdraw from the merger
under the circumstances described under "What happens if Weston
receives a better offer?" below.
Withdrawal can be before or after Weston shareholder approval.
WHAT HAPPENS IF WESTON RECEIVES A BETTER OFFER?
Weston's Board of Directors can withdraw from the merger if it
determines, consistent with its fiduciary duties to Weston's
shareholders, that Weston should enter into an acquisition
agreement its Board of Directors deems superior to the merger.
However, Weston must pay International Paper a termination fee of
$6.96 million if it withdraws from the merger on such grounds.
HOW WILL THE MERGER BE TREATED FOR ACCOUNTING PURPOSES?
We expect that the merger will be accounted for under the
"purchase" method of accounting. Accordingly, the consideration
to be paid to Weston shareholders in the merger will be allocated
to assets acquired and liabilities assumed by International Paper
based on their estimated fair values at the closing date of the
merger. The excess of such purchase price over the amounts so
allocated will be treated as goodwill.
WHEN AND WHERE IS THE WESTON SHAREHOLDER MEETING?
The special meeting of Weston shareholders to vote on the merger
will be held at 11:30 a.m., Eastern Time, on Friday, April 17,
1998, at Country Club of Terre Haute, 57 Allendale Place, Terre
Haute, Indiana 47802.
WHO CAN VOTE ON THE MERGER? WHAT VOTE IS REQUIRED TO APPROVE THE
MERGER?
Holders of Weston common stock at the close of business on March
11, 1998 can vote at the special meeting.
The merger must be approved by holders of at least two-thirds of
the outstanding shares of Weston common stock.
International Paper and certain Weston shareholders beneficially
owning approximately 28% of the outstanding shares of Weston
common stock have agreed that such shareholders will take all
actions necessary to vote their shares in favor of the merger.
WHAT SHOULD I DO NOW TO VOTE ON THE MERGER?
Just mail your signed proxy card in the enclosed return envelope
as soon as possible, so that your shares can be voted at the
Weston shareholder meeting.
CAN I CHANGE MY VOTE AFTER I MAIL MY PROXY CARD?
Yes, you can change your vote at any time before your proxy is
voted at the shareholder meeting. You can do this in three ways:
First, you can send Weston a written statement that you would
like to revoke your proxy. Second, you can send Weston a new
proxy card. You should send your revocation or new proxy card to
Weston's Secretary at the address set forth at the beginning of
this "SUMMARY." Third, you can attend the shareholder meeting
and vote in person. However, your attendance alone will not
revoke your proxy.
DO WESTON'S OFFICERS OR DIRECTORS HAVE ANY OTHER INTERESTS IN THE
MERGER?
Weston's officers and directors may have interests in the merger
that differ from the interests of Weston shareholders generally.
For example, if following completion of the merger, the
employment of certain officers is terminated in certain
circumstances, such officer will be entitled to a severance
payment equal to approximately two times the sum of his salary
and annual bonus, as well as medical and life insurance coverage
for two years following such qualified termination. Also, certain
existing indemnification arrangements for Weston's directors and
officers will be continued after the merger.
DO ANY WESTON SHAREHOLDERS HAVE DISSENTERS' APPRAISAL RIGHTS?
If the merger is consummated, holders of Weston common stock who
do not vote in favor of the proposal to approve and authorize the
merger will have dissenters rights under Ohio law, provided that
such shareholders properly comply with certain statutory
procedures. Failure to take any step in connection with the
exercise of such dissenters' rights may result in a loss of those
rights.
SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
No. After the merger is completed you will receive written
instructions for exchanging your Weston certificates for
International Paper certificates.
OTHER INFORMATION ABOUT THE MERGER
VALUE OF INTERNATIONAL PAPER STOCK TO BE EXCHANGED
The aggregate value of the shares of International Paper common
stock to be issued in the merger in exchange for all the
outstanding shares of Weston common stock will be $232 million.
REGULATORY APPROVALS AND THIRD-PARTY APPROVALS
The Hart-Scott-Rodino Antitrust Improvements Act of 1976
prohibits International Paper and Weston from completing the
merger until we have furnished certain information to the
Antitrust Division of the United States Department of Justice and
the United States Federal Trade Commission (FTC) and a required
waiting period has expired or been terminated. On March 9, 1998,
International Paper and Weston completed the required filings to
the Antitrust Division and the FTC. We expect the waiting period
to expire on April 8, 1998, unless additional information is
requested.
International Paper and Weston do not believe that the merger is
subject to any other material federal or state regulatory
requirements or approvals or third-party approvals. However,
failure to obtain a non-governmental consent or a non-material
governmental consent will not prevent completion of the merger.
AMENDING OR WAIVING TERMS OF THE MERGER AGREEMENT
International Paper and Weston may by mutual consent amend the
merger agreement before the completion of the merger. Also,
either International Paper or Weston can waive (i.e., ignore)
circumstances that, under the merger agreement, would permit it
to withdraw from the merger. However, once Weston's shareholders
approve the merger, applicable law may require that subsequent
amendments or waivers be approved by Weston's shareholders.
Neither company expects to waive any material condition to the
merger, and Weston will require, before completing the merger,
shareholder approval of any waiver that would have a material
adverse impact on its shareholders.
INTERNATIONAL PAPER SELECTED CONSOLIDATED FINANCIAL DATA
The following selected financial data for each of the five years
in the period ended December 31, 1996 have been derived from
International Paper's consolidated financial statements, which
have been audited by Arthur Andersen LLP, independent public
accountants. The data as of September 30, 1997 and 1996, and for
each of the nine months then ended have been derived from
International Paper's unaudited consolidated financial statements
which include, in management's opinion, all adjustments,
consisting of normal recurring adjustments, necessary to present
fairly the results of operations and financial position of
International Paper for the periods and dates presented. This
data should be read in conjunction with the respective audited
and unaudited consolidated financial statements of International
Paper, including the notes thereto, incorporated herein by
reference. See "WHERE YOU CAN FIND ADDITIONAL INFORMATION."
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
----------------- --------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
(In millions, except per share amounts)
(Unaudited)
RESULTS OF OPERATIONS:
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . . . $15,015 $14,999 $20,143 $19,797 $14,966 $13,685 $13,598
Costs and expenses, excluding interest . . . . . . . . 14,881 14,413 19,403 17,276 13,902 12,837 13,125
Earnings (loss) before income taxes, minority
interest, extraordinary item and cumulative
effect of accounting changes . . . . . . . . . . . . (241) 780 802 2,028 715(b) 538 226(c)
Earnings (loss) before extraordinary item and
cumulative effect of accounting changes. . . . . . . (283) 308 303 1,153 432(b) 289 142(c)
Earnings (loss) per common share before extraordinary
item and cumulative effect of accounting changes(a). $(0.94) $1.06 $1.04 $4.50 $1.73(b) $1.17 $0.58(c)
Cash dividends per common share(a) . . . . . . . . . . $0.75 $0.75 $1.00 $0.92 $0.84 $0.84 $0.84
BALANCE SHEET DATA:
Working capital . . . . . . . . . . . . . . . . . . . $279 $(333) $104 $1,010 $796 $472 $ (165)
Plants, properties and equipment, net. . . . . . . . . 12,387 13,078 13,217 10,997 9,139 8,872 8,884
Forestlands . . . . . . . . . . . . . . . . . . . . . 3,152 3,330 3,342 2,803 802 786 759
Total assets . . . . . . . . . . . . . . . . . . . . . 27,394 28,564 28,252 23,977 17,836 16,631 16,516
Long-term debt . . . . . . . . . . . . . . . . . . . . 6,656 6,183 6,691 5,946 4,464 3,601 3,096
Common shareholders' equity . . . . . . . . . . . . . $8,749 $9,414 $9,344 $7,797 $6,514 $6,225 $6,189
</TABLE>
- --------------------
(a) Earnings and cash dividends per common share reflect the
impact of a two-for-one stock split in September 1995.
(b) 1994 amounts exclude the cumulative effect of changing the
method of accounting for start-up costs.
(c) 1992 amounts exclude the cumulative effect of changing the
method of accounting for income taxes and an extraordinary
loss for the early extinguishment of debt.
Proforma combined earnings per share of International Paper
common stock for the year ended December 31, 1996 and for the
nine months ended September 30, 1997, when adjusted to give
effect to the merger and the issuance of an estimated number of
shares of International Paper common stock in connection
therewith, are not expected to differ materially from historical
earnings per share of International Paper common stock for those
periods.
Year-End 1997 Financial Results. On January 13, 1998,
International Paper announced its preliminary and unaudited
financial results for the year ended December 31, 1997.
International Paper reported net earnings before special items
recorded in the second and fourth quarters of $310 million, or
$1.03 per share, compared with earnings before special items of
$434 million, or $1.49 per share, in 1996. Sales in 1997 of
$20.1 billion were even with 1996 sales. For 1997, International
Paper recorded a loss of $151 million, or $.50 per share, after
special items.
WESTON SELECTED CONSOLIDATED FINANCIAL DATA
The following selected financial data for each of the three years
in the period ended December 31, 1997 have been derived from
Weston's consolidated financial statements, which have been
audited by Coopers & Lybrand L.L.P., independent public
accountants. This data should be read in conjunction with the
respective audited consolidated financial statements of Weston,
including the notes thereto. Such financial statements covering
the years ending 1997, 1996 and 1995 are included in this Proxy
Statement/Prospectus under "WESTON'S CONSOLIDATED FINANCIAL
STATEMENTS INCLUDING MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS." The following
selected financial data for the years ended December 31, 1994 and
1993 have been derived from Weston's audited consolidated
financial statements, copies of which may be obtained upon
request from Weston at the address set forth in "WHERE YOU CAN
FIND MORE INFORMATION."
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In millions, except per share amounts)
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . $ 218 $ 228 $ 258 $ 217 $ 199
Costs and expenses, excluding interest . . . . . . . . . . 221 211 224 209 192
Other income, net . . . . . . . . . . . . . . . . . . . . . 3 3 2 2 1
Earnings before income taxes and cumulative effect
of accounting changes . . . . . . . . . . . . . . . . . . - 20 36 10 8
Cumulative effect of accounting changes . . . . . . . . . . - - - - (2)
Net income . . . . . . . . . . . . . . . . . . . . . . . . - 12 22 6 2
Earnings per common share . . . . . . . . . . . . . . . . $ .08 $23.68 $43.44 $11.26 $4.79
Cash dividends declared per
common share . . . . . . . . . . . . . . . . . . . . . . . $6.00 $ 5.60 $ 6.00 $ 5.50 $5.50
BALANCE SHEET DATA:
Working capital . . . . . . . . . . . . . . . . . . . . . $ 32 $ 43 $ 48 $27 $21
Plants, properties and equipment, net . . . . . . . . . . . . 92 91 81 80 81
Total assets . . . . . . . . . . . . . . . . . . . . . . . . 161 163 155 134 127
Long-term debt . . . . . . . . . . . . . . . . . . . . . . - - - 1 2
Common shareholders' equity . . . . . . . . . . . . . . . . $ 121 $124 $ 115 $ 95 $ 91
</TABLE>
COMPARATIVE PER SHARE DATA
Set forth below are earnings before the cumulative effect of
accounting changes, cash dividends and book value per common
share data of International Paper and Weston on a historical and
historical equivalent basis. The International Paper equivalent
per share data for Weston shareholders represents International
Paper information multiplied by a fraction, the numerator of
which is $447.6051 (the aggregate value of the shares of
International Paper to be exchanged for each share of Weston
common stock) and the denominator of which is $51.625 (the closing
price of International Paper stock on the NYSE on March 12, 1998,
assumed here as the price of the International Paper common stock
to be used in determining the number of shares of such stock to
be issued in the merger). The actual number of shares of
International Paper common stock to be issued will depend on the
closing sale prices of such stock on the NYSE over a twenty
trading day period ending on the fifth such day prior to the date
of the meeting at which you will vote on the proposal to approve
the merger agreement (which price may be different from $51.625
per share). The information set forth below should be read in
conjunction with the respective audited and unaudited
consolidated financial statements of International Paper and
Weston, including the notes thereto, incorporated herein by
reference appearing elsewhere in this Proxy Statement/Prospectus.
See "WHERE YOU CAN FIND MORE INFORMATION."
Year ended on Year ended on or
or at at
December 31, December 31,
WESTON 1997 1996
Earnings (loss) per common
share . . . . . . . . . . $0.08 $23.68
Cash dividends per common
share . . . . . . . . . . . 6.00 5.60
Book value per common
share . . . . . . . . . . 234.59 $251.90
INTERNATIONAL PAPER
Earnings (loss) per common
share before
cumulative effect of
accounting changes . . . ($0.50)(a,c,d) $1.04(b)
Cash dividends per common
share . . . . . . . . . . 1.00 1.00
Book value per common 28.82(d) 31.13
INTERNATIONAL PAPER - EQUIVALENT PER SHARE DATA FOR WESTON
SHAREHOLDERS
Earnings (loss) per common
share before
cumulative effect of
accounting changes . . . . . $(4.34) $9.02
Cash dividends per common
share . . . . . . . . . . . . 8.67 8.67
Book value per common share . 249.88 269.91
- --------------------
(a) Includes a pretax business improvement charge of $535
million ($385 million after taxes or $1.28 per share) and a
$150 million pretax provision for legal reserve ($93 million
after taxes or $.31 per share).
(b) Includes a pretax restructuring and asset impairment charge
of $515 million ($362 million afer taxes or $1.35 per
share), a $592 million pretax gain on the sale of a west
coast partnership interest ($336 million after taxes and
minority interest expense or $1.25 per share) and a $165
million pretax charge ($105 million after taxes or $.35 per
share) for the write-down of the investment in Scitex.
(c) Includes a pre-tax charge of $125 million ($80 million after
taxes or $0.26 per share) for anticipated losses associated
with the sale of the imaging businesses and a pre-tax gain
of $170 million ($97 million after taxes and minority
interest expense or $0.32 per share) from the redemption of
certain retained partnership interests in Western
timberlands and the release of a related debt guaranty.
(d) Preliminary and unaudited.
COMPARATIVE MARKET PRICE INFORMATION
International Paper. International Paper common stock is
listed on the NYSE under the symbol "IP". The shares of
International Paper common stock to be issued in the merger will
be listed on the NYSE. The following table shows the high and low
share prices of International Paper common stock on the NYSE and
the cash dividends paid or declared per share for the periods
presented, based on published financial sources.
PRICE PER SHARE
OF INTERNATIONAL
PAPER
COMMON STOCK
High Low Dividend
Fiscal 1996 (ended December 31,
1996)
First Quarter . . . . . . . . . $ 41 1/2 $35 5/8 $.25
Second Quarter . . . . . . . . 43 3/8 36 7/8 .25
Third Quarter . . . . . . . . . 44 5/8 36 3/4 .25
Fourth Quarter . . . . . . . . 44 38 3/4 .25
Fiscal 1997 (ended December 31,
1997)
First Quarter . . . . . . . . . 43 5/8 38 3/4 .25
Second Quarter . . . . . . . . 51 7/8 38 5/8 .25
Third Quarter . . . . . . . . . 61 48 1/4 .25
Fourth Quarter . . . . . . . . 58 1/2 39 7/8 .25
Fiscal 1998 (ending December 31,
1998)
First Quarter (through March
12, 1998) . . . . . . . . . . . . 52 7/16 40 7/8 .25
On January 30, 1998, the last trading day immediately
preceding the public announcement of the proposed merger, and on
March 12, 1998, the most recent practicable date prior to the
mailing of this Proxy Statement/Prospectus, the closing sale
prices of International Paper common stock as reported on the
NYSE Composite Transactions tape were $45 11/16 and $51 5/8,
respectively.
Weston. As of the date of this Proxy Statement/Prospectus,
there were 518,314 shares of Weston common stock outstanding,
which shares were owned by 32 holders of record. Since there has
been no public market for Weston common stock, there is no
information as to the market value of such Weston common stock.
Set forth below are the cash dividends paid or declared on the
Weston common stock for the periods presented.
Dividend
Fiscal 1996 (ended December 31,
1996)
First Quarter . . . . . . . . . $1.00
Second Quarter . . . . . . . . 1.00
Third Quarter . . . . . . . . . 1.00
Fourth Quarter . . . . . . . . 2.60
Fiscal 1997 (ended December 31, 1997)
First Quarter . . . . . . . . . 1.10
Second Quarter . . . . . . . . 1.10
Third Quarter . . . . . . . . . 1.10
Fourth Quarter . . . . . . . . 2.70
Fiscal 1998 (ending December 31, 1998)
First Quarter . . . . . . . . 1.10
THE PROPOSED MERGER
The Weston Paper and Manufacturing Co. ("Weston") is
furnishing this Proxy Statement/Prospectus to holders of shares
of common stock, par value $.50 per share, of Weston ("Weston
Common Stock") in connection with the solicitation of proxies by
the Board of Directors of Weston (the "Weston Board") for use at
Weston's special meeting of shareholders to be held on April 17,
1998, at 11:30 a.m., Eastern Time, at Country Club of Terre
Haute, 57 Allendale Place, Terre Haute, Indiana 47802, Terre
Haute, Indiana, and at any adjournments thereof (the "Weston
Special Meeting"). At the Weston Special Meeting, the
shareholders of Weston will be asked to vote upon a proposal to
approve and adopt an Agreement and Plan of Merger, dated as of
January 29, 1998, among International Paper Company
("International Paper"), Wolverine Acquisition Corp., a wholly
owned subsidiary of International Paper ("Sub"), and Weston (the
"Merger Agreement"), and the transactions contemplated thereby.
This Proxy Statement/Prospectus also constitutes a
prospectus of International Paper, which is a part of the
Registration Statement on Form S-4 (the "Registration Statement")
filed by International Paper with the Securities and Exchange
Commission ("SEC") under the Securities Act of 1933, as amended
(the "Securities Act"), in order to register the shares of
International Paper's common stock, par value $1.00 per share
("IP Common Stock") to be issued to Weston shareholders in the
Merger (as defined below).
The Merger Agreement, a copy of which is included in Annex A
hereto, provides, among other things, for the merger of Sub with
and into Weston (the "Merger"), with Weston continuing as the
surviving corporation in the Merger (the "Surviving
Corporation"). In the Merger, other than shares held in Weston's
treasury and shares held by persons exercising dissenters rights
under Section 1701.85 of the Ohio Revised Code, each share of
Weston Common Stock issued and outstanding immediately prior to
the effective time of the Merger (the "Effective Time") will be
converted, without any action on the part of the holder thereof,
into the right to receive a number of shares (the "Exchange
Ratio") of IP Common Stock with an aggregate value of $447.6051,
with cash being paid in lieu of fractional shares. The exact
Exchange Ratio will be determined by dividing $447.6051 by the
arithmetic average of the closing sale prices of IP Common Stock
reported on the New York Stock Exchange ("NYSE") Composite Tape
on the last 20 trading days preceding the fifth such day prior to
the date of the Weston Special Meeting to vote on the Merger (the
"Average IP Common Stock Price").
It is a condition to closing of the Merger that the shares
of IP Common Stock issuable to Weston's shareholders in the
Merger will have been approved for listing on the NYSE, subject
to official notice of issuance.
BACKGROUND OF THE MERGER
International Paper and Weston have had a long-standing
business relationship in containerboard. In the summer of 1997,
International Paper's Container Division identified Weston as an
attractive acquisition candidate based on its study of all multi-
plant corrugated container companies in North America, and in
August 1997, John T. Dillon, Chairman and Chief Executive Officer
of International Paper, met with Edward T. Turner, Jr., Chairman
and Chief Executive Officer of Weston, to discuss a possible
acquisition of Weston by International Paper.
At its August 22, 1997 meeting, the Weston Board discussed
International Paper's interest and determined to confer with SBC
Warburg Dillon Read Inc. ("SBCWDR") and seek its advice regarding
options available to Weston. The Weston Board also considered
the consolidating nature of the industry, future prospects for
Weston as a relatively small participant in the industry and the
strategic value it might have to International Paper or other
larger companies.
On September 22, 1997, the Weston Board met and reviewed the
preliminary analysis and advice of SBCWDR and authorized Weston's
senior management to continue exploratory discussions with
International Paper.
On October 7, Weston and International Paper entered into a
confidentiality agreement.
At a meeting in October 1997 between representatives of
Weston and representatives of International Paper, Weston
provided certain financial and other information to International
Paper relating to the business and operations of Weston.
Beginning in late November 1997, representatives of Weston
and representatives of International Paper met to discuss the
terms of a proposed merger. In addition, representatives of
International Paper's Container Division visited certain of
Weston's plants in connection with its preliminary due diligence
review.
In early December 1997, executives of Weston and
International Paper agreed preliminarily that Weston would be
acquired by International Paper pursuant to a merger in which all
of the outstanding shares of Weston Common Stock would be
acquired by International Paper for $232 million of IP Common
Stock, subject to the satisfactory completion of due diligence by
International Paper and the negotiation of representations,
warranties, covenants and the other terms and conditions of a
definitive agreement.
On January 7, 1998, the Weston Board met with
representatives of SBCWDR, Keating, Muething & Klekamp, P.L.L.,
special counsel to Weston, and Turner, Granzow & Hollenkamp,
Weston's general counsel. The purpose of the meeting was to
review the proposal made by International Paper, consider and
discuss with SBCWDR its report to the Weston Board and consider
the aspects of a proposed merger agreement previously furnished
to the Weston Board. Representatives of SBCWDR made a
presentation to the Weston Board concerning the proposed
transaction with International Paper, which included an overview
of Weston, a discussion of the corrugated packaging industry,
critical issues facing Weston and a valuation of Weston using
several different methodologies. SBCWDR also presented an
overview of International Paper and discussed the material terms
of the proposed transaction as well as a preliminary schedule for
completing the proposed transaction. At this meeting SBCWDR,
subject to the information available to it at that time, stated
that it was of the opinion that the consideration to be received
by the shareholders of Weston in the proposed transaction in the
form of IP Common Stock with a value of $232 million was fair to
shareholders of Weston from a financial point of view;
subsequently, SBCWDR delivered a written opinion to that effect
dated January 29, 1998, the date on which the Merger Agreement
was executed.
Representatives of SBCWDR then excused themselves from the
remainder of the January 7 meeting. The Weston Board then
discussed with its counsel various aspects of the proposed merger
agreement, as well as the tax and legal aspects of the proposed
merger to shareholders. Weston's counsel also reviewed the
ability of the Weston Board to accept any higher offer that might
be presented prior to consummation of the transaction with
International Paper. Weston's counsel also noted that
shareholders would have dissenters' rights under Ohio law and
that the merger was subject to approval by the affirmative vote
of two-thirds of all outstanding shares. Following further
discussion, the Weston Board resolved by a vote of 5 to 1 that
Weston enter into a definitive merger agreement with
International Paper with substantially the same material terms as
presented at the meeting, subject to the negotiation of
representations, warranties, covenants and the other terms and
conditions of a definitive agreement. The Weston Board also
authorized, by the same vote, Weston's Chairman and Chief
Executive Officer to execute on behalf of Weston such a
definitive merger agreement and to do, on behalf of Weston, all
further acts that may be appropriate to consummate the merger
provided for thereunder.
During January, 1998, representatives of Weston and
International Paper negotiated the terms of the draft merger and
stockholder agreements which were initially provided by
International Paper to Weston.
On January 13, 1998, at its regularly scheduled meeting, the
International Paper Board of Directors (the "IP Board") reviewed
the proposed transaction with Weston. After discussion, the IP
Board approved the material terms of the proposed merger
presented to it by International Paper's senior management,
including the purchase price, and authorized such officers to
negotiate customary representations, warranties, covenants and
other terms and conditions of a definitive agreement and to
complete satisfactory due diligence of Weston.
On January 29, 1998, Weston, International Paper and Sub
executed and delivered the Merger Agreement. In addition,
International Paper and certain persons beneficially owning
approximately 28% of the outstanding shares of Weston Common
Stock (the "Consenting Shareholders") executed and delivered the
Stockholder Agreement (as defined and described under "--
Stockholder Agreement"), a copy of which is included as Annex B
hereto.
On February 20, 1998, the Weston Board met and, by a vote of
5 to 1, ratified and adopted the Merger Agreement, determining
that the terms and conditions thereof are fair to and in the best
interests of Weston and its shareholders. In addition, the
Weston Board resolved, by the same vote, to recommend that Weston
shareholders vote in favor of approving and adopting the Merger
Agreement.
WESTON'S RATIONALE FOR THE MERGER; RECOMMENDATION OF THE WESTON
BOARD OF DIRECTORS
In reaching its decision to approve the Merger Agreement and
to recommend that Weston shareholders vote to approve and adopt
the Merger Agreement, the Merger and the other transactions
contemplated by the Merger Agreement, the Weston Board considered
various factors, including the following:
(i) the fact that Weston shareholders will receive in
the Merger shares of the common stock of a publicly traded,
financially strong and well-developed international business
organization and benefit from the growth and business
opportunities available to International Paper;
(ii) that the Merger would qualify as a tax-free
exchange of securities;
(iii) the fact that the capacity of Weston's Terre
Haute mill is insufficient to support additional box plants
and therefore, very large capital investments would be
required in order for Weston to continue to grow;
(iv) the consolidating nature of the industrial
packaging industry, the future prospects for Weston as a
relatively small participant in such industry and the
improved competitive position and new opportunities
available as part of International Paper's more diversified,
global operations;
(v) SBCWDR's opinion, subject to the assumptions,
limitations and qualifications set forth therein, that the
consideration to be received by the Weston shareholders is
fair from a financial point of view; and
(vi) certain material terms and conditions of the
Merger Agreement, including the fact that the Merger
Agreement permits the Weston Board, in the exercise of its
fiduciary duties, to provide information to third parties
making unsolicited bona fide inquiries regarding alternative
business combinations and to engage in negotiations, in
certain circumstances, with third parties concerning
potentially superior takeover proposals.
Based on this analysis, the Weston Board determined that the
Merger is fair to, and in the best interests of, the Weston
shareholders. The foregoing discussion of the information and
factors considered by the Weston Board is not intended to be
exhaustive and were considered collectively by the Weston Board
in connection with its review of the Merger Agreement. In view
of the wide variety of factors considered in connection with its
evaluation of the Merger, the Weston Board did not quantify or
assign any relative weights to the factors considered in reaching
its determination, although its individual members may have given
different weights to different factors. For a discussion of the
interests of the executive officers and directors of Weston in
the Merger, see "Interests of Certain Persons in the Merger."
OPINION OF WESTON'S FINANCIAL ADVISOR
SBCWDR has delivered a written opinion to the Weston Board
to the effect that, and based upon and subject to the
assumptions, limitations and qualifications set forth therein, as
of January 29, 1998, the consideration to be paid in connection
with the Merger is fair, from a financial point of view, to
Weston shareholders.
The full text of the opinion of SBCWDR dated January 29,
1998, which sets forth the assumptions made, matters considered
and limits on the review undertaken, is attached as Annex C to
this Proxy Statement/Prospectus. SBCWDR's opinion does not
constitute a recommendation to any Weston shareholder as to how
such shareholder should vote at the Weston Shareholder Meeting.
Shareholders are encouraged to read carefully the opinion in its
entirety, especially with regard to the assumptions made and
matters considered by SBCWDR. Although SBCWDR evaluated the
fairness of the consideration to be paid by International Paper
in the Merger, the specific purchase price per share of Weston
Common Stock was determined by Weston and International Paper
through arms-length negotiations. The summary of the opinion of
SBCWDR set forth in this Proxy Statement is qualified in its
entirety by reference to the full text of such opinion.
In arriving at its opinion, SBCWDR has, among other things:
(i) reviewed certain financial information and other data
relating to the business and prospects of Weston provided to
SBCWDR by Weston, some of which is not publicly available, (ii)
reviewed certain financial budget information prepared by the
management of Weston, (iii) reviewed certain publicly available
business and financial information relating to International
Paper, (iv) conducted discussions with members of the senior
managements of Weston and International Paper with respect to the
operations, financial condition, history and prospects of each
company, (v) reviewed publicly available financial and stock
market data with respect to certain other companies in lines of
business which SBCWDR believes to be generally comparable to
those of Weston and International Paper, (vi) reviewed the
financial terms, to the extent publicly available, of certain
other merger and acquisition transactions which SBCWDR believes
to be generally comparable to the Merger, (vii) reviewed the
historical market prices of IP Common Stock, (viii) reviewed the
Merger Agreement, and (ix) conducted such other financial
studies, analyses, and investigations, and considered such other
information as SBCWDR deemed necessary or appropriate, but none
of which were individually considered to be material. SBCWDR's
opinion was necessarily based on economic, monetary, market and
other conditions in effect on, and the information made available
to SBCWDR as of January 29, 1998.
In connection with its review, with the consent of Weston
and International Paper, SBCWDR did not assume any responsibility
for independent verification of any of the information reviewed
by it for the purpose of its opinion and, with the consent of
Weston and International Paper, relied on such information being
complete and accurate in all material respects. In addition,
SBCWDR did not make or receive any evaluation or appraisal of any
of the assets or liabilities (contingent or otherwise) of Weston
or International Paper. With respect to the financial budget
information provided to or otherwise reviewed by or discussed
with SBCWDR, SBCWDR assumed that such information was reasonably
prepared on bases reflecting the best currently available
estimates and judgments of the management of Weston as to the
future financial performance of the Company. SBCWDR was not
authorized to contact or hold discussions with any parties other
than International Paper as potential acquirors. In rendering
its opinion, SBCWDR assumed, with the consent of Weston, that the
Merger will qualify as a tax-free reorganization. No limitations
were imposed by the Weston Board upon SBCWDR with respect to the
investigations made or procedures followed by SBCWDR in rendering
its opinion.
SBCWDR s opinion does not address Weston s underlying
business decision to effect the Merger nor does it constitute a
recommendation to any shareholder of Weston as to how such
shareholder should vote with respect to the Merger. Further,
SBCWDR s opinion does not imply any conclusions as to the trading
range of the International Paper Common Stock following the
Merger, nor is SBCWDR making any recommendation to the holders of
Weston Common Stock with respect to the advisability of disposing
of or retaining IP Common Stock received in the Merger.
In arriving at its opinion, SBCWDR did not assign any
particular weight to any analysis or factor considered by it, but
rather made qualitative judgments based on its experience in
providing opinions and on then existing economic, monetary,
market and other conditions as to the significance and relevance
of each analysis and factor. Accordingly, SBCWDR believes that
its analysis must be considered as a whole and that selecting
portions of its analyses and the factors considered, without
considering all analyses and factors, could create a misleading
or incomplete view of the processes underlying its opinion. In
its analyses, SBCWDR made numerous assumptions with respect to
industry performance, general business and economic conditions
and other matters, many of which are beyond the control of
Weston, International Paper, or SBCWDR. Any assumed estimates
contained in SBCWDR s analyses are not necessarily indicative of
actual values or predictive of future results or values, which
may be significantly more or less favorable than as set forth
therein. Such estimates relating to the value of a business or
securities do not purport to be appraisals or necessarily reflect
the prices at which the companies or securities may actually be
sold.
In connection with rendering its opinion on January 29,
1998, SBCWDR performed certain financial and comparative
analyses. The following is a brief summary of the material
analyses performed by SBCWDR in arriving at its opinion but does
not purport to be a complete description of the analyses
performed by SBCWDR for such purposes.
Generally Comparable Public Company Analysis: Using publicly
available information, SBCWDR reviewed the performance of
companies which, in SBCWDR s judgment, were generally comparable
to Weston for the purposes of this analysis. SBCWDR analyzed the
historic operating performance of corrugated and related
packaging divisions or subsidiaries of publicly traded companies
including Chesapeake Corporation, Longview Fibre, Mead
Corporation, Temple-Inland Inc., and Union Camp Corporation, as
well as the results of comparable corrugated and related
packaging companies including Stone Container Corporation,
Gaylord Container Corporation, Jefferson Smurfit Corporation, and
St. Laurent Paperboard Inc. This analysis included, but was not
limited to, a review of operating margins, growth rates and
capital investment ratios for the last five years. In addition,
SBCWDR separately analyzed the market enterprise (market value of
equity plus the book value of debt, preferred stock and minority
interest less cash and cash equivalents) and market equity
multiples of publicly traded packaging companies most comparable
to Weston s business, namely Stone Container Corporation, Gaylord
Container Corporation, Jefferson Smurfit Corporation, and St.
Laurent Paperboard Inc. Such data and ratios primarily included
the ratio of current enterprise value to: (i) average earnings
before interest, taxes, depreciation and amortization ( EBITDA )
for the last five years, (ii) EBITDA for the five-year peak
earnings year (1995), and (iii) EBITDA for 1998 as forecasted by
Weston management.
The foregoing analysis resulted in a range of enterprise
value-to-EBITDA multiples for each EBITDA category which were
compared to the relevant multiples implied by International
Paper s offer. Specifically, multiples of current enterprise
value to (i) average EBITDA for the last five years ranged from
7.3 to 7.6, (ii) five-year peak EBITDA ranged from 3.3 to 4.6,
and (iii) 1998 forecasted EBITDA ranged from 4.2 to 7.7. In each
of these cases, the multiple implied by International Paper's
offer exceeds the respective ranges. No public company utilized
as a comparison is identical to Weston. An analysis of the
results of such a comparison is not mathematical; rather it
involves complex considerations and judgments concerning
differences in financial and operating characteristics of the
comparable companies and other factors that could affect the
public trading value of the comparable companies to which Weston
is being compared.
Generally Comparable Acquisitions Analysis: Using publicly
available information, SBCWDR analyzed certain completed mergers
in the corrugated packaging segment which, in SBCWDR s judgment,
were generally comparable to the Merger in order to derive the
implied multiples of (i) total enterprise value to EBITDA for the
five-year peak earnings year and (ii) implied mill enterprise
value (total enterprise value less book value of net working
capital less an estimated value for non-mill assets) to total
mill production capacity. The comparable transactions which were
used included seven transactions occurring during the time period
between 1985 and 1997, but emphasis was given to the two most
recent transactions which were completed in 1996 and 1997.
The range for the multiple of total transaction values to
EBITDA five-year peak earnings was 3.8 to 4.3 for the comparable
transactions occurring during the time period 1996 to 1997. The
multiple implied by International Paper's offer exceeds this
range. The multiple of net transaction value to mill production
capacity (in dollars per annual ton) indicated a range for the
comparable transactions occurring during the time period 1996 to
1997 of $457 to $463. The multiple implied by the International
Paper offer also compares favorably to the multiples implied by
the comparable transactions that involve facilities which, in the
judgment of SBCWDR, are significantly larger and lower-cost than,
and therefore warrant a valuation multiple premium to, Weston s
Terre Haute mill.
Acquiror Consideration Analysis: In analyzing the trading
valuation of the IP Common Stock to be rendered as consideration
in the Merger, SBCWDR reviewed the past financial performance of
International Paper, the source of International Paper s revenue
growth over the past ten years as well as International Paper s
market positions within its major product grades. SBCWDR also
reviewed International Paper s recently announced restructuring
initiatives and the impact equity research analysts expect that
this restructuring will have on International Paper. The
relative share price performance of International Paper as
compared to Champion International Corporation, Georgia-Pacific
Corporation, Union Camp Corporation, Weyerhaeuser Company and
Willamette Industries, Inc., which in the opinion of SBCWDR
represent generally comparable diversified paper companies (the
"Diversified Companies"), was also analyzed. Based on multiples
of enterprise value to various cash flow statistics, SBCWDR also
analyzed International Paper s market valuation relative to that
of the Diversified Companies. SBCWDR also reviewed information
relating to International Paper and held discussions with
International Paper's senior management on a number of factors
affecting International Paper performance and valuation,
including but not limited to International Paper s industry
outlook, earnings estimates, acquisitions and divestitures, and
restructuring initiatives.
SBCWDR is an internationally recognized investment banking
firm engaged, among other things, in the valuation of businesses
and their securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities and private
placements. The Weston Board selected SBCWDR as its financial
advisor because of its experience and independence and because
the principals of SBCWDR have substantial experience in
transactions similar to this transaction and are familiar with
Weston's business. In the past, the predecessor of SBCWDR
provided investment banking services to International Paper and
received customary compensation for such services. In the
ordinary course of business, SBCWDR and its affiliates may trade
or hold equity securities of International Paper for their own
account or the accounts of their customers.
Pursuant to the terms of an engagement letter dated November
24, 1997, Weston to date has paid SBCWDR $600,000 for acting as
its financial advisor in connection with the Merger, including
rendering its opinion. SBCWDR will receive an additional fee of
$1,500,000, payable at the time of the consummation of the
Merger. No additional fees will be paid to SBCWDR for its
opinion. Whether or not the Merger is consummated, Weston has
also agreed to reimburse SBCWDR for its reasonable out-of-pocket
expenses, including all reasonable fees and disbursements to
counsel, and to indemnify SBCWDR and certain related persons
against certain liabilities relating to or arising out of its
engagement, including certain liabilities under Federal
securities laws. SBCWDR will not be compensated for any
solicitation of proxies by such firm on behalf of Weston.
INTERNATIONAL PAPER'S RATIONALE FOR THE MERGER
The IP Board believes that the Merger is in the best
interests of International Paper and its shareholders because it
will strengthen International Paper's industrial packaging
operations, one of its vital core businesses. In addition to
opening up new markets offering attractive freight economics for
International Paper's containerboard facilities, the IP Board
also believes that the Weston facilities will provide additional
market penetration for International Paper in key markets and
increased economies of scale, operating efficiencies and other
synergies.
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion is a summary of material United
States federal income tax consequences of the Merger to a
shareholder of Weston (a "Holder") that holds its shares of
Weston Common Stock as a capital asset at the Effective Time.
The discussion is based on laws, regulations, rulings and
decisions in effect on the date hereof, all of which are subject
to change (possibly with retroactive effect) and differing
interpretations. This discussion is for general information
only, and does not address all aspects of federal income taxation
that may be relevant to particular Holders in light of their
personal investment circumstances or to Holders subject to
special treatment under the Internal Revenue Code of 1986, as
amended (the "Code") (including, but not limited to, banks, tax-
exempt organizations, insurance companies, dealers in securities
or foreign currency, Holders who are not U.S. persons (as defined
in section 7701(a)(30) of the Code) or who acquired shares of
Weston Common Stock pursuant to the exercise of an employee stock
option or otherwise as compensation) or to Holders who exercise
dissenters' rights under Section 1701.85 of the Ohio Revised
Code. In addition, the discussion does not address the state,
local or foreign tax consequences of the Merger.
The Merger is intended to qualify as a reorganization under
Section 368(a) of the Code. Consummation of the Merger is
conditioned upon the receipt by Weston of the opinion of Keating,
Muething & Klekamp, P.L.L., special counsel to Weston, dated as
of the Effective Time, to the effect that, on the basis of facts,
representations and assumptions set forth or referred to in such
opinion, for federal income tax purposes, (i) the Merger will
constitute a "reorganization" within the meaning of Section
368(a) of the Code, (ii) International Paper, Sub and Weston will
each be a party to such reorganization within the meaning of
Section 368(b) of the Code, and (iii) no gain or loss will be
recognized by Weston or Weston's shareholders as a result of the
Merger, except with respect to cash received by Weston
shareholders in lieu of fractional shares of International Paper
Common Stock or cash received by Weston shareholders pursuant to
the exercise of dissenters' rights under Section 1701.85 of the
Ohio Revised Code (collectively, clauses (i) through (iii)
referred to herein as the "Tax Opinion"). The Tax Opinion will
be subject to certain limitations and qualifications and will be
based on, among other things, certain representations of Weston
and International Paper. The Tax Opinion is not binding on the
Internal Revenue Service ("IRS") and does not preclude the IRS
from adopting a contrary position. An opinion of counsel only
represents such counsel's best legal judgement and has no binding
effect or official status of any kind, and no assurance can be
given that contrary positions will not be taken by the IRS or a
court considering the issues. In addition, the parties will not
request, and the Merger is not conditioned upon, a ruling from
the IRS in connection with any of the federal income tax
consequences of the Merger.
The discussion below summarizes the material federal income
tax consequences of the Merger to a Holder who exchanges Weston
Common Stock for International Paper Common Stock pursuant to the
Merger, assuming that the Merger will qualify as a
"reorganization" within the meaning of Section 368(a) of the
Code.
A Holder that exchanges shares of Weston Common Stock solely
for shares of IP Common Stock pursuant to the Merger will not
recognize gain or loss except in respect of cash received in lieu
of a fractional share of IP Common Stock (as discussed below).
The aggregate adjusted tax basis of the shares of IP Common Stock
received (including fractional shares) in that exchange will be
equal to the aggregate adjusted tax basis of the shares of Weston
Common Stock surrendered therefor, and the holding period of such
IP Common Stock received in the Merger will include the period
during which the shares of Weston Common Stock were held. If the
Holder has differing bases or holding periods in respect of its
shares of Weston Common Stock, it should consult its tax advisor
prior to the exchange with regard to identifying the bases or
holding periods of the particular shares of IP Common Stock
received in the exchange.
Cash received by a Holder in lieu of a fractional share
interest in IP Common Stock generally will be treated as received
in redemption of such fractional share and gain or loss will be
recognized, equal to the difference between the amount of cash
received and the portion of the basis of the share of Weston
Common Stock surrendered that is allocable to such fractional
share interest. Such gain or loss will be capital gain or loss
and will be long-term capital gain or loss if the holding period
for such share of Weston Common Stock was greater than one year
at the Effective Time. For an individual Holder, long-term
capital gain is generally subject to a maximum federal income tax
rate of (i) 28% in respect of property with a holding period of
more than one year but not more than 18 months and (ii) 20% in
respect of property with a holding period of more than 18 months.
EACH HOLDER OF WESTON COMMON STOCK IS URGED TO CONSULT SUCH
HOLDER'S TAX ADVISOR WITH RESPECT TO THE FEDERAL, STATE, LOCAL
AND FOREIGN TAX CONSEQUENCES OF THE MERGER.
ACCOUNTING TREATMENT
International Paper and Weston expect that the Merger will
be accounted for using the "purchase" method of accounting.
Accordingly, the consideration to be paid to Weston shareholders
in the Merger will be allocated to assets acquired and
liabilities assumed by International Paper based on their
estimated fair values at the Closing Date. Income (or loss) of
Weston prior to the Closing Date will not be included in income
of International Paper. The excess of such purchase price over
the amounts so allocated will be treated as goodwill by
International Paper.
REGULATORY AND THIRD-PARTY APPROVALS
U.S. Antitrust Filing. Under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the
rules and regulations promulgated thereunder, certain
transactions, including the Merger, may not be consummated unless
certain waiting period requirements have expired or been
terminated. On March 9, 1998, International Paper and Weston
filed a Premerger Notification and Report Form pursuant to the
HSR Act with the United States Department of Justice (the "DOJ")
and the Federal Trade Commission (the "FTC"). Under the HSR Act,
the Merger may not be consummated until 30 days (unless early
termination of this waiting period is granted) after the initial
filing or, if the DOJ or the FTC issues a Request for Documents
and Other Additional Information (a "second request"), 20 days
after International Paper and Weston have substantially complied
with such a second request (unless this period is shortened
pursuant to a grant of early termination). At any time before or
after the Effective Time, the FTC, the DOJ or others could take
action under the antitrust laws with respect to the Merger,
including seeking to enjoin the consummation of the Merger, to
rescind the Merger, or to require the divestiture of certain
assets of International Paper or Weston. There can be no
assurance that a challenge to the Merger on antitrust grounds
will not be made or, if such a challenge is made, that it would
not be successful.
Other Regulatory Approvals. While International Paper and
Weston do not presently believe that there are any other material
governmental approvals necessary to consummate the Merger, under
the Merger Agreement, International Paper and Weston have agreed
to use their best efforts to obtain all necessary actions or
nonactions, waivers, consents and approvals from any governmental
authority necessary, proper or advisable to consummate and make
effective the Merger. In the event such an approval is necessary,
International Paper and Weston believe that they would receive
the requisite regulatory approvals for the Merger, although there
can be no assurance regarding the timing of such approvals or the
ability of the companies to obtain such approvals on satisfactory
terms or otherwise. It is a condition to the parties' respective
obligations to consummate the Merger that the waiting period (and
any extension thereof) applicable to the Merger under the HSR Act
shall have been terminated or shall have expired and that all
other consents, approvals and actions of, filings with and
notices to a governmental authority required to consummate the
Merger be made or obtained, the failure of which to be obtained
or taken is reasonably expected to have a material adverse effect
on Weston, as the Surviving Corporation in the Merger, and its
prospective subsidiaries, or will result in a violation of any
laws. See "THE MERGER AGREEMENT--Conditions to the Consummation
of the Merger."
Third-Party Approvals. International Paper and Weston do not
believe that there are any material consents, approvals or
waivers from third parties required to consummate the Merger.
DISSENTERS' APPRAISAL RIGHTS
Holders of Weston Common Stock will be entitled to relief as
dissenting shareholders pursuant to Ohio Revised Code Section
1701.84. However, any such holder will be entitled to such
relief only upon strict compliance with Ohio Revised Code Section
1701.85 ("Section 1701.85"). The following summary does not
purport to be a complete statement of the method of compliance
with Section 1705.85 and is qualified in its entirety by
reference to that Section, the full text of which is attached
hereto as Annex D. A holder of Weston Common Stock who is
considering the possibility of dissenting is urged to read
Section 1705.85 in full, and is encouraged to consult his or her
own counsel.
A shareholder who wishes to perfect his or her rights as a
dissenting shareholder MUST, if the Merger is adopted:
(a) have been a record holder of the Weston Common Stock as to
which he or she seeks relief on the Weston Record Date (as
defined under "INFORMATION CONCERNING THE WESTON SPECIAL MEETING
-- Record Date, Quorum, Vote Required");
(b) NOT have voted such Weston Common Stock in favor of
adoption of the Merger Agreement; and
(c) DELIVER to Weston, not later than ten days after the Weston
Special Meeting, a written demand for payment of the fair cash
value of the shares as to which he or she seeks relief. This
written demand must state the name of the shareholder, his or her
address, the number of shares as to which he or she seeks relief,
and the amount claimed as the "fair cash value" thereof.
A vote against the adoption of the Merger Agreement or a
failure to vote will NOT satisfy the requirements of a written
demand for payment as described in clause (c) above. Any written
demand for payment must be DELIVERED to The Weston Paper and
Manufacturing Co., 2001 North 19th Street, Terre Haute, Indiana
47804, Attention: Corporate Secretary. Because the written
demand must be delivered within the ten-day period immediately
following the Weston Special Meeting, a shareholder should use a
means of delivery, including hand delivery, that will assure
timely delivery, and should consider use of a means of delivery
that would provide a receipt establishing the timeliness thereof.
If Weston sends to the dissenting shareholder, at the
address specified in his or her demand, a request for the
certificate(s) representing the shares as to which he or she
seeks relief, the dissenting shareholder must DELIVER such
certificate(s) to Weston for endorsement as to the fact or his or
her demand. Failure to meet this requirement may, at the option
of the Weston Board, terminate any dissenters' rights unless a
court for good cause shown otherwise directs. Such request by
Weston would not be an admission by Weston that the shareholder
is entitled to relief under Section 1701.85.
Unless the dissenting shareholder and Weston shall agree on
the fair cash value per share of Weston Common Stock as to which
relief is sought, either Weston or the dissenting shareholder
may, within three months after the delivery of the written demand
by the shareholder, file a complaint in the Court of Common Pleas
of Montgomery County, Ohio. If the court finds that the
shareholder is entitled to be paid the fair cash value of any
shares, the court may appoint one or more appraisers to receive
evidence and to recommend a decision on the amount of the fair
cash value.
Fair cash value will be determined as of the day prior to
the Weston Special Meeting, will be the amount a willing seller
and willing buyer would accept or pay with neither being under
compulsion to sell or buy, will not exceed the amount specified
in the shareholder's written demand, and will exclude any
appreciation or depreciation in market value resulting from the
Merger. Unless Weston and the dissenting shareholder shall
otherwise agree in writing, or except in the case of any of the
eventualities (1)-(4) summarized below, a court shall make a
finding as to the fair cash value of a share of Weston Common
Stock and render judgment against Weston for its payment with
interest at such rate and from such date as the court considers
equitable. The costs of these proceedings shall be assessed or
apportioned as the court considers equitable. Weston does not
intend to file such a complaint. Therefore, a dissenting
shareholder must timely file such a complaint to protect his
rights to a judicial determination under Section 1701.85.
Exercise of dissenters' rights may result in a judicial
determination that the "fair cash value" of the dissenting
shareholder's shares is higher or lower than the value of the IP
Common Stock to be paid for each share of Weston Common Stock in
the Merger.
The rights, if any, of a dissenting shareholder will
terminate if (1) he or she has not strictly complied with Section
1701.85 unless the Weston Board waives such failure; (2) Weston
abandons or is enjoined or prevented from carrying out the
Merger, or the Holders of Weston Common Stock rescind their
adoption of the Merger Agreement; (3) the dissenting shareholder
withdraws his or her written demand, with the consent of the
Weston Board; or (4) Weston and the dissenting shareholder shall
not have agreed upon the fair cash value per share of Weston
Common Stock and neither shall have timely filed or joined in a
complaint in an appropriate court for a determination of the fair
cash value of the shares.
From the time of giving the demand until either the
termination of the rights and obligations arising from it or the
purchase of the shares of Weston Common Stock, all other rights
accruing from such shares of Weston Common Stock, including
voting and dividend or distribution rights, are suspended. If,
during the suspension, any dividend or distribution is paid in
money upon shares of Weston Common Stock or any dividend or
distribution is paid in money upon shares of IP Common Stock
issued upon cancellation and conversion of such shares of Weston
Common Stock, an amount equal to the dividend or distribution
that, except for the suspension, would have been payable upon
such shares shall be paid to the shareholder of record as a
credit upon the fair cash value of the shares of Weston Common
Stock; provided that, if the right to receive fair cash value is
terminated otherwise than by the purchase of the shares of Weston
Common Stock, all rights of the shareholder shall be restored and
all distributions that, except for the suspension, would have
been made shall be made to the shareholder of record of the
shares of Weston Common Stock at the time of termination.
For information relating to the Weston Special Meeting, see
"INFORMATION CONCERNING THE WESTON SPECIAL MEETING."
BECAUSE A PROXY WHICH DOES NOT CONTAIN VOTING INSTRUCTIONS
WILL, UNLESS REVOKED, BE VOTED FOR AUTHORIZATION AND ADOPTION OF
THE MERGER AGREEMENT, A WESTON SHAREHOLDER WHO WISHES TO EXERCISE
DISSENTER'S RIGHTS MUST EITHER NOT RETURN A PROXY OR, IF HE OR
SHE RETURNS A PROXY, VOTE AGAINST OR ABSTAIN FROM VOTING ON THE
AUTHORIZATION AND ADOPTION OF THE MERGER AGREEMENT.
STOCKHOLDER AGREEMENT
This section of the Proxy Statement/Prospectus describes
material provisions of the Stockholder Agreement. The description
of the Stockholder Agreement contained in this Proxy
Statement/Prospectus does not purport to be complete and is
qualified in its entirety by reference to the Stockholder
Agreement, a copy of which is included in Annex B hereto and is
incorporated herein by reference.
Provisions Concerning the Weston Securities. In connection
with the execution by Weston and International Paper of the
Merger Agreement, International Paper entered into the
"Stockholder Agreement," with the Consenting Shareholders.
Pursuant to the Stockholder Agreement, the Consenting
Shareholders have agreed with International Paper to vote or
cause to be voted all of their shares of Weston Common Stock (i)
in favor of the Merger, the execution and delivery by Weston of
the Merger Agreement and the approval of the terms thereof and
each of the other actions contemplated by the Merger Agreement
and the Stockholder Agreement and any actions required in
furtherance thereof; and (ii) against any Takeover Proposal (as
defined under "THE MERGER AGREEMENT No Solicitation") or any
other action or agreement that would in any manner impede,
frustrate, prevent or nullify any of the transactions
contemplated by the Merger Agreement, including the Merger, or
result in a breach of any covenant, representation or warranty or
any other obligation or agreement of Weston under the Merger
Agreement or which would result in any of the conditions to
Weston's or International Paper's obligations under the Merger
Agreement not being fulfilled.
Other Matters. In connection with the Voting Agreement, each
of the Consenting Shareholders made certain customary
representations and warranties with respect to ownership of
Weston Common Stock, and each of the Consenting Shareholders and
International Paper made certain customary representations and
warranties with respect to its authority to enter into and
perform its obligations under the Stockholder Agreement and the
absence of conflicts and requisite governmental consents and
approvals.
As of the close of business on February 20, 1998, the
Consenting Shareholders beneficially owned 144,794 shares of
Weston Common Stock, representing approximately 28% of the total
outstanding shares of such stock.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain officers and directors of Weston may be deemed to
have certain interests in the Merger that are in addition to
their interests as shareholders of Weston generally. The Weston
Board was aware of these interests and considered them, among
other matters, in approving the Merger Agreement and the
transactions contemplated thereby.
Officers Change in Control Severance Plan. On January 29,
1998, the Weston Board adopted the Officers Change in Control
Severance Plan (the "Severance Plan"). Pursuant to the terms of
the Severance Plan, in the event the employment of an officer (an
"Officer") of Weston or of the Wabash Fibre Box Company, an
Arkansas corporation and wholly owned subsidiary of Weston
(together with Weston, the "Corporation"), other than Mr. Turner,
Charles E. Beaman and Paul H. Granzow, is terminated within two
years following a change in control ("Change in Control") by the
Corporation without Cause (as defined in the Severance Plan) or
by the Officer for "good reason" (defined to mean a material
change in the Officer's authorities, duties or responsibilities
from those in effect as of 30 days prior to the Change in
Control), the Officer will be entitled to receive a severance
payment (the "Severance Payment") equal to two times the sum of
(i) the Officer's annual base salary and (ii) the average of the
Officer's annual bonus paid for the five calendar years preceding
his or her termination. If an Officer is entitled to a Severance
Payment, he or she will also be entitled to receive medical and
life insurance benefits, under the same terms and conditions as
if he or she were still an active employee of the Corporation,
for a period of two years following his or her termination or, if
shorter, until the date the Officer becomes eligible for coverage
under another employer's medical benefits plan, policy or program
or when the Officer becomes eligible for Medicare. The Officer
will also be entitled to outplacement services for a period of
six months following his or her termination, or, if shorter,
until the Corporation spends $10,000 on such outplacement
services.
If the Severance Payment payable to an Officer would be
subject to the excise tax imposed by Section 4999 of the Code
such Severance Payment will be reduced to an amount such that the
Severance Payment would not be subject to such an excise tax.
A Change in Control is defined in the Severance Plan to mean
the consummation of a merger, consolidation, share exchange,
asset sale or similar form of corporate reorganization of Weston
with International Paper or any wholly owned subsidiary of
International Paper. Messrs. Turner, Beaman and Granzow are not
covered by any severance plan.
Indemnification and Insurance. The Merger Agreement
provides that International Paper will maintain in accordance
with their terms all rights to indemnification and exculpation
from liabilities for acts or omissions existing in favor of the
current or former directors, officers, Voting Trustees (as
defined below), other persons or employees of Weston and its
subsidiaries as provided in Weston's Code of Regulations (the
"Weston Regulations").
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
International Paper and Weston have each made
forward-looking statements in this document (and in certain
documents that are incorporated by reference by International
Paper in this Proxy Statement/Prospectus) that are subject to
risks and uncertainties. These statements are based on the
beliefs and assumptions of the respective company's management,
and on information currently available to such management.
Forward-looking statements include the information concerning
possible or assumed future results of operations of International
Paper and Weston (including with respect to cost savings and
operational efficiencies expected to be realized from the Merger)
set forth under "SUMMARY," "International Paper Selected
Consolidated Financial Data," "Weston Selected Consolidated
Financial Data," "THE PROPOSED MERGER--Background of the Merger,"
--Weston's Rationale for the Merger; Recommendation of the
Weston Board of Directors" "--International Paper's Rationale
for the Merger" and statements preceded by, followed by or that
include the words "believes," "expects," "anticipates,"
"intends," and "plans," "estimates" or similar expressions.
Forward-looking statements are not guarantees of
performance. They involve risks, uncertainties and assumptions.
The future results and shareholder values of International Paper
and Weston may differ materially from those expressed in these
forward-looking statements. Many of the factors that will
determine these results and values are beyond International
Paper's and Weston's ability to control or predict. Shareholders
are cautioned not to put undue reliance on any forward-looking
statements. In addition, International Paper and Weston do not
have any intention or obligation to update forward-looking
statements after they distribute this Proxy Statement/Prospectus,
even if new information, future events or other circumstances
have made them incorrect or misleading. For those statements,
International Paper and Weston claim the protection of the safe
harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995.
Shareholders of Weston should understand that the following
important factors, in addition to those discussed elsewhere in
the documents which are incorporated by reference into this Proxy
Statement/ Prospectus, could affect the future results of the
combined company following the Merger, and could cause results to
differ materially from those expressed in such forward-looking
statements: (i) the effect of economic conditions and interest
rates on a national, regional or international basis; (ii) the
ability of International Paper and Weston to successfully
integrate their operations; (iii) competitive pressures in the
industrial packaging industry; (iv) the financial resources of,
and products available to, competitors; (v) changes in laws and
regulations, including changes in accounting standards; (vi)
changes in the securities markets; (vii) the timing of the
implementation of changes in operations of Weston's facilities to
promote synergies between the companies; and (viii) opportunities
that may be presented to and pursued by the combined company
following the Merger.
RESTRICTIONS ON RESALES BY AFFILIATES
The shares of IP Common Stock to be issued to Weston
shareholders in the Merger have been registered under the
Securities Act. These shares may be traded freely and without
restriction by those shareholders not deemed to be "affiliates"
of Weston as that term is defined under the Securities Act. An
affiliate of Weston, as defined by the rules promulgated under
the Securities Act, is a person who directly or indirectly,
through one or more intermediaries, controls, is controlled by,
or is under common control with, Weston. Any subsequent transfer
by an affiliate of Weston must be one permitted by the resale
provisions of Rule 145 promulgated under the Securities Act or as
otherwise permitted under the Securities Act. These restrictions
are expected to apply to the directors and executive officers of
Weston.
In connection with its entering into the Merger Agreement,
Weston undertook to use its best efforts to deliver to
International Paper for each of Weston's affiliates, an agreement
that such person will not dispose of any IP Common Stock in
violation of the Securities Act or the rules and regulations
promulgated thereunder.
INFORMATION CONCERNING THE WESTON SPECIAL MEETING
PURPOSE
This Proxy Statement/Prospectus is being furnished to
shareholders of Weston in connection with the solicitation of
proxies by the Weston Board from holders of Weston Common Stock
for use at the Weston Special Meeting and at any adjournments
thereof. At the Weston Special Meeting, holders of Weston Common
Stock will be asked to consider and vote upon (i) a proposal to
approve and adopt the Merger Agreement and the transactions
contemplated thereby, including the Merger; and (ii) such other
matters as may properly come before the Weston Special Meeting.
RECORD DATE; QUORUM; VOTE REQUIRED
The Weston Board has fixed the close of business on March
11, 1998 as the record date for determining the holders of Weston
Common Stock entitled to notice of, and to vote at, the Weston
Special Meeting (the "Weston Record Date"). Only holders of
record of Weston Common Stock at the close of business on the
Weston Record Date will be entitled to notice of, and to vote at,
the Weston Special Meeting.
As of the date of this Proxy Statement/Prospectus, 481,776
shares of Weston Common Stock (representing 92.95% of the total
outstanding shares of Weston Common Stock) were subject to the
Voting Trust Agreement (the "Voting Trust Agreement"), dated as
of February 1, 1971 (as amended, with an effective termination
date extended through April 30, 2006), among certain holders of
Weston Common Stock and Ruel F. Burns, Jr., Edward T. Turner, Jr.
and Paul H. Granzow, as trustees (the "Voting Trustees").
Pursuant to the terms of the Voting Trust Agreement, shares of
Weston Common Stock subject thereto will be voted on the proposal
to approve the Merger Agreement in accordance with the action of
a majority of the Voting Trustees. A majority of the Voting
Trustees have indicated that they intend to vote in favor of the
Merger. Notwithstanding the foregoing, holders of shares subject
to the Voting Trust Agreement may vote their respective shares by
requesting a proxy from the Voting Trustees in writing. Such
written request must indicate the address to which the proxies
should be mailed.
At the close of business on the Weston Record Date, 518,314
shares of Weston Common Stock were issued and outstanding and
were held by approximately 32 holders of record. Holders of
record of Weston Common Stock are entitled to one vote per share
on any matter which may properly come before the Weston Special
Meeting. Votes may be cast at the Weston Special Meeting in
person or by proxy. See "--Proxies."
The presence at the Weston Special Meeting, either in person
or by proxy of the holders of a majority of the outstanding
Weston Common Stock entitled to vote is necessary to constitute a
quorum in order to transact business at the Weston Special
Meeting. However, in the event that a quorum is not present at
the Weston Special Meeting, it is expected that such meeting will
be adjourned or postponed in order to solicit additional proxies.
The affirmative vote of the holders of at least two-thirds
of the outstanding shares of Weston Common Stock is required to
approve and adopt the Merger Agreement and the transactions
contemplated thereby, including the Merger. Under applicable Ohio
law, in determining whether the proposal to approve and adopt the
Merger Agreement has received the requisite number of affirmative
votes, the failure to vote or an abstention will have the same
effect as a vote against the proposal.
As of the close of business on the Weston Record Date,
Weston's directors and executive officers and their affiliates,
may be deemed to be the beneficial owners of 189,214 outstanding
shares of Weston Common Stock (collectively representing
approximately 36.5% of the total outstanding shares of Weston
Common Stock). It is expected that the executive officers and
directors of Weston beneficially owning approximately 30.4% of
the total outstanding shares of Weston Common Stock will vote for
approval of the Merger Agreement.
The Consenting Shareholders also have entered into the
Stockholder Agreement with International Paper pursuant to which
the Consenting Shareholders have agreed to vote for approval of
the Merger Agreement.
THE WESTON BOARD HAS APPROVED THE MERGER AGREEMENT, HAS DETERMINED
THAT THE MERGER IS FAIR AND IN THE BEST INTERESTS OF WESTON AND ITS
SHAREHOLDERS AND RECOMMENDS THAT WESTON SHAREHOLDERS VOTE FOR
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER.
PROXIES
Shares of Weston Common Stock represented by properly
executed proxies received in time for the Weston Special Meeting
will be voted at the Weston Special Meeting in the manner
specified on such proxies. Proxies which are properly executed
but which do not contain voting instructions will be voted FOR
approval of the Merger Agreement. It is not expected that any
matter other than approval of the Merger Agreement will be
brought before the Weston Special Meeting; however, if other
matters are properly presented, the persons named in such proxy
will have authority to vote in accordance with their judgment on
any other such matter, including without limitation, any proposal
to adjourn or postpone the meeting or otherwise concerning the
conduct of the meeting.
The grant of a proxy on the enclosed Weston proxy card does
not preclude a shareholder from voting in person at the Weston
Special Meeting. A shareholder may revoke a proxy at any time
prior to its exercise by (i) delivering, prior to the Weston
Special Meeting, to Dwight McKay, Treasurer and Corporate
Secretary, The Weston Paper and Manufacturing Co., 2001 North
19th Street, Terre Haute, Indiana 47804, a written notice of
revocation bearing a later date or time than the proxy; (ii)
delivering to the Secretary of Weston a duly executed proxy
bearing a later date or time than the revoked proxy; or (iii)
attending the Weston Special Meeting and voting in person.
Attendance at the Weston Special Meeting will not by itself
constitute revocation of a proxy. Weston will not adjourn the
Weston Special Meeting for a period of time long enough to
require the setting of a new record date for such meeting. If an
adjournment occurs, it will have no effect on the ability of
Weston's shareholders of record as of the record date to exercise
their voting rights or to revoke any previously delivered
proxies.
Weston will bear the cost of solicitation of proxies from
its shareholders, except that Weston and International Paper
intend to share equally the cost associated with this Proxy
Statement/Prospectus, including related filing fees. In addition
to solicitation by mail, the directors, officers and employees of
Weston and its subsidiary may solicit proxies from shareholders
of Weston by telephone, facsimile or in person.
WESTON SHAREHOLDERS SHOULD NOT SEND IN ANY STOCK
CERTIFICATES WITH THEIR PROXY CARDS. A TRANSMITTAL FORM WITH
INSTRUCTIONS FOR THE SURRENDER OF STOCK CERTIFICATES WILL BE
MAILED BY INTERNATIONAL PAPER TO FORMER WESTON SHAREHOLDERS AS
SOON AS PRACTICABLE AFTER THE CONSUMMATION OF THE MERGER.
THE MERGER AGREEMENT
GENERAL
The Merger Agreement contemplates the merger of Sub with and
into Weston, with Weston continuing as the Surviving Corporation.
This section of the Proxy Statement/Prospectus describes material
provisions of the Merger Agreement. The description of the Merger
Agreement contained in this Proxy Statement/Prospectus does not
purport to be complete and is qualified in its entirety by
reference to the Merger Agreement, a copy of which is attached as
Appendix A to this Proxy Statement/Prospectus and is incorporated
herein by reference. Capitalized terms in this Section have the
meanings assigned to them in the Merger Agreement. All
shareholders of Weston are urged to read carefully the Merger
Agreement in its entirety.
CLOSING; EFFECTIVE TIME
The closing of the Merger (the "Closing") will take place no
later than the second day after satisfaction or waiver of the
conditions set forth in the Merger Agreement, unless another date
is agreed to by International Paper and Weston.
Subject to the provisions of the Merger Agreement, as soon
as practicable on the Closing Date, the parties will consummate
the Merger by filing a Certificate of Merger or other appropriate
documents with the Secretary of State of Ohio. The Merger will
become effective at such time as the Certificate of Merger is
duly filed with the Secretary of State of Ohio, or at such
subsequent date or time as International Paper and Weston will
agree and specify in the Certificate of Merger.
SURVIVING CORPORATION ARTICLES OF INCORPORATION
Pursuant to the Merger Agreement, the Articles of
Incorporation of Sub, as in effect immediately prior to the
Effective Time, will become the Articles of Incorporation of
Weston as the Surviving Corporation.
SURVIVING CORPORATION CODE OF REGULATIONS
Pursuant to the Merger Agreement, the Code of Regulations of
Sub, as in effect immediately prior to the Effective Time, will
become the Code of Regulations of Weston as the Surviving
Corporation until thereafter changed or amended as provided
therein or by applicable law.
CONSIDERATION TO BE RECEIVED IN THE MERGER
Conversion of Weston Common Stock. At the Effective Time,
by virtue of the Merger and without any action on the part of the
holder of any shares of Weston Common Stock, each issued and
outstanding share of Weston Common Stock (other than shares to be
cancelled as described below) will be converted into the right
to receive a number of validly issued, fully paid and
nonassessable shares of IP Common Stock with an aggregate value
of $447.6051.
Each issued and outstanding share of Weston Common Stock
owned by Weston as treasury stock will be automatically cancelled
and retired at the Effective Time and will cease to exist, and no
securities of International Paper or other consideration will be
delivered in exchange therefor.
As of the Effective Time, all shares of Weston Common Stock
to be exchanged for IP Common Stock will no longer be outstanding
and will automatically be cancelled and retired and will cease to
exist. Each holder of a stock certificate representing shares of
Weston Common Stock will cease to have any rights with respect
thereto, except (i) the right to receive the shares of IP Common
Stock in accordance with the Exchange Ratio and any cash in lieu
of fractional shares of IP Common Stock to be issued or paid in
consideration therefor upon surrender of such certificate in
accordance with the terms of the Merger Agreement and (ii)
dissenters' rights that may be perfected under Section 1701.85 of
the Ohio Revised Code.
EXCHANGE OF CERTIFICATES AND DEPOSITARY RECEIPTS; FRACTIONAL
SHARES
At or prior to the Effective Time, International Paper will
deposit, or cause to be deposited, with ChaseMellon Shareholder
Services, L.L.C. (the "Exchange Agent"), for the benefit of the
holders of certificates of Weston Common Stock, certificates
representing the shares of IP Common Stock (and cash in lieu of
fractional shares of IP Common Stock, if applicable) to be issued
in the Merger.
As soon as is practicable after the Effective Time, the
Exchange Agent will mail a form of transmittal letter to the
holders of certificates representing shares of Weston Common
Stock. The form of transmittal letter will contain instructions
with respect to the surrender of such certificates in exchange
for shares of IP Common Stock (and cash in lieu of fractional
shares of IP Common Stock, if applicable).
WESTON STOCK CERTIFICATES SHOULD NOT BE RETURNED WITH THE
ENCLOSED PROXY CARD AND SHOULD NOT BE FORWARDED TO THE EXCHANGE
AGENT EXCEPT WITH A TRANSMITTAL FORM, WHICH WILL BE PROVIDED TO
HOLDERS FOLLOWING THE EFFECTIVE TIME.
No dividends or other distributions declared with respect to
IP Common Stock with a record date after the Effective Time will
be paid to the holder of any certificate representing shares of
Weston Common Stock until such certificate or receipt has been
surrendered for exchange. Holders of certificates representing
shares of Weston Common Stock will be paid the amount of
dividends or other distributions with a record date after the
Effective Time after surrender of such certificates, without any
interest thereon.
No certificates or scrip representing fractional shares of
IP Common Stock will be issued upon the surrender for exchange of
stock certificates and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a
shareholder of International Paper. In lieu of fractional shares
of IP Common Stock, the Surviving Corporation will pay each
former holder of Weston Common Stock an amount in cash equal to
the product obtained by multiplying (A) the fractional share
interest to which such former holder (after taking into account
all shares of Weston Common Stock held of record at the Effective
Time by such holder) would otherwise be entitled by (B) the
Average IP Common Stock Price.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains certain customary mutual
representations and warranties by each of International Paper and
Weston relating to, among other things, (i) corporate
organization, structure and power; (ii) subsidiaries; (iii)
capitalization; (iv) authorization, execution, delivery,
performance and enforceability of, required consents, approvals,
orders and authorizations of governmental authorities relating
to, and noncontravention of certain agreements as a result of,
the Merger Agreement; (v) the accuracy of information contained
in Weston's audited and unaudited financial statements and in
documents filed by International Paper with the SEC, as the case
may be, and the absence of undisclosed liabilities of each of
International Paper and Weston; (vi) the accuracy of information
supplied by each of International Paper and Weston in connection
with the Registration Statement; (vii) absence of material
changes or events with respect to each of International Paper and
Weston since January 1, 1997; and (viii) engagement of and
payment of fees to brokers, investment bankers, finders and
financial advisors in connection with the Merger Agreement.
In addition, the Merger Agreement contains certain
additional representations and warranties by Weston relating to:
(i) compliance with applicable law and litigation; (ii) matters
relating to the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"); (iii) tax matters; (iv) required
shareholder vote in connection with the Merger; (v) intellectual
property matters; (vi) certain material contracts; (vii)
environmental matters; (viii) transactions with affiliates of
Weston; (ix) insurance matters; (x) real property matters; and
(xi) labor matters.
CONDUCT OF BUSINESS
Pursuant to the Merger Agreement, Weston has agreed that,
except for certain exceptions, as otherwise expressly
contemplated by the Merger Agreement or as consented to by
International Paper in writing, such consent not to be
unreasonably withheld or delayed, during the period from the date
of the Merger Agreement to the Effective Time, Weston will, and
will cause its subsidiaries to, carry on their respective
businesses in the ordinary course consistent with past practice
and in compliance in all material respects with all applicable
laws and regulations and, to the extent consistent therewith, to
use all reasonable efforts to preserve intact their current
business organizations, use all reasonable efforts to keep
available the services of their current officers and other key
employees and preserve their relationships with those persons
having business dealings with them to the end that their goodwill
and ongoing businesses will be unimpaired at the Effective Time.
Without limiting the generality of the foregoing (but
subject to the above exceptions), during the period from the date
of the Merger Agreement to the Effective Time, Weston has agreed
that it will not, and will not permit any of its subsidiaries
(except as specifically set forth in the Merger Agreement or in
Weston's disclosure schedule thereto) to:
(i) other than dividends and distributions by a direct
or indirect wholly owned subsidiary of Weston to its parent,
or by a subsidiary that is partially owned by Weston or any
of its subsidiaries, provided that Weston or any such
subsidiary receives or is to receive its proportionate share
thereof, (a) declare, set aside, or pay any dividends on, or
make any other distributions in respect of, or enter into
any agreement with respect to the voting of, any of Weston's
capital stock (except for quarterly cash dividends on Weston
Common Stock at a rate not in excess of $1.10 per share of
such stock); (b) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in
substitution for shares of its capital stock; or (c)
purchase, redeem or otherwise acquire any shares of capital
stock of Weston or its subsidiaries or any other securities
thereof or any rights, warrants, or options to acquire any
such shares or other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber
or subject to any lien any shares of its capital stock, any
other voting securities or any securities convertible into,
or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities;
(iii) amend Weston's Articles of Incorporation (the
"Weston Articles"), Weston Regulations or other comparable
organizational documents;
(iv) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion
of the assets of, or by any other manner, any business or
any person;
(v) sell, lease, license, mortgage or otherwise
encumber or subject to any lien or otherwise dispose of any
of its properties or assets that are material in relation to
Weston and its subsidiaries taken as a whole (including
securitizations), other than in the ordinary course of
business consistent with past practice;
(vi) take any action that would cause the
representations and warranties set forth under clause (v)
under "Representations and Warranties" above to no longer be
true and correct;
(vii) incur any indebtedness for borrowed money or
issue any debt securities or assume, guarantee or endorse,
or otherwise become responsible for the obligations of any
person; or make any loans, advances or capital contributions
to, or investments in, any person other than its wholly
owned subsidiaries, except in the ordinary course of
business consistent with past practice;
(viii) change its methods of accounting (or
underlying assumptions) in effect at December 31, 1996,
except as required by changes in generally accepted
accounting principles, or change any of its methods of
reporting income and deductions for federal income tax
purposes from those employed in the preparation of the
federal income tax returns of Weston for the taxable years
ending December 31, 1996 and 1995, except as required by
changes in law or regulation;
(ix) pay, discharge or satisfy any claims, liabilities
or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge
or satisfaction in the ordinary course of business
consistent with past practice or in accordance with their
terms, of liabilities reflected or reserved against in
Weston's consolidated balance sheet dated September 30, 1997
or incurred in the ordinary course of business consistent
with past practice since the date of such balance sheet;
(x) create, renew, amend, terminate or cancel, or take
any other action that may result in the creation, renewal,
amendment, termination or cancellation of any of Weston's
material contracts except in the ordinary course of
business;
(xi) pay, loan or advance any amount to, or sell,
transfer or lease any properties or assets (real, personal
or mixed, tangible or intangible) to, or enter into any
agreement or arrangement with, any of its officers or
directors or any affiliate or the immediate family members
or associates of any of its officers or directors other than
compensation in the ordinary course of business consistent
with past practice; or
(xii) authorize, or commit or agree to take, any of
the foregoing actions.
NO SOLICITATION
The Merger Agreement provides that Weston will not, nor will
it permit any of its subsidiaries to, nor will it authorize or
permit any of its officers, directors or employees or any
investment banker, financial adviser, attorney, accountant or
other representative retained by it or any of its subsidiaries
to, directly or indirectly through another person, (i) solicit,
initiate, or encourage (including by way of furnishing
information), or take any other action designed to facilitate,
any inquiries or the making of any Takeover Proposal (as defined
below) or (ii) participate in any discussions or negotiations
regarding any Takeover Proposal. However, if the Weston Board
determines in good faith, after consultation with outside
counsel, that it is necessary to do so in order to act in a
manner consistent with its fiduciary duties to its shareholders
under applicable law, Weston may, in response to an unsolicited
bona fide inquiry which did not otherwise result from a breach of
this provision of the Merger Agreement and which is made or
received prior to the obtaining of the approval of the Weston
shareholders in regard to the Merger, from a third party ("Third
Party") which the Weston Board believes in good faith has the
intention of making and the capacity of consummating a Superior
Proposal (as defined below), and subject to providing written
notice of its decision to take such action to International Paper
and compliance with the obligation under the Merger Agreement to
advise International Paper of any request for information or any
Takeover Proposal, their material terms and conditions and the
identity of the person making such request or Takeover Proposal,
pursuant to a customary confidentiality agreement (as determined
by Weston based on the advice of its outside counsel, the terms
of which are no more favorable to such person than the
confidentiality agreement, dated October 7, 1997, between Weston
and International Paper), furnish to the Third Party financial
statements of Weston, a list of Weston's facilities and summary
of Weston's production capacities and volumes for each of the
past three fiscal years. The Merger Agreement provides further
that Weston will not participate in negotiations with a Third
Party until such Third Party has submitted to Weston a Superior
Proposal. For purposes of the Merger Agreement, a "Takeover
Proposal" means (1) any inquiry, proposal or offer from any
person relating to any direct or indirect acquisition or purchase
of a business that constitutes 10% or more of the net revenues,
net income or the assets of Weston and its subsidiaries, taken as
a whole, or 10% or more of any class of equity securities of
Weston, (2) any tender offer or exchange offer that if
consummated would result in any person beneficially owning any
equity securities of Weston or (3) any merger, consolidation,
business combination, recapitalization, liquidation, dissolution
or similar transaction involving Weston (or any subsidiary of
Weston whose business constitutes 10% or more of the net
revenues, net income or the assets of Weston and its
subsidiaries, taken as a whole), other than the transactions
contemplated by the Merger Agreement.
Except as expressly permitted by the Merger Agreement,
neither the Weston Board, nor any committee thereof, will (i)
withdraw or modify, or propose publicly to withdraw or modify, in
a manner adverse to International Paper, the approval or
recommendation by the Weston Board or such committee of the
Merger or the Merger Agreement, (ii) approve or recommend or
propose publicly to approve or recommend any Takeover Proposal or
(iii) cause Weston to enter into any letter of intent, agreement
in principle, acquisition agreement or other similar agreement
related to any Takeover Proposal (an "Acquisition Agreement").
Notwithstanding the foregoing, the Weston Board, to the extent
that it determines in good faith, after consultation with outside
counsel, that, in light of a Superior Proposal, it is necessary
to do so in order to act in a manner consistent with its
fiduciary duties to its respective shareholders under applicable
law, may terminate the Merger Agreement, solely in order to enter
into an Acquisition Agreement with respect to any Superior
Proposal, but only at a time that is after the fifth business day
following International Paper' receipt of written notice advising
International Paper that the Weston Board is prepared to accept a
Superior Proposal specifying the material terms and conditions of
such Superior Proposal and identifying the person making such
Superior Proposal. For purposes of the Merger Agreement, a
"Superior Proposal" means any proposal made by a third party to
acquire, directly or indirectly, including pursuant to a tender
offer, exchange offer, merger, consolidation, business
combination, recapitalization, liquidation, dissolution or
similar transaction, for consideration consisting of cash and/or
securities, more than 50% of the combined voting power of the
shares of the Weston Capital Stock or all or substantially all
the assets of Weston and otherwise on terms which the Weston
Board determines in its good faith judgment (based on the advice
of an independent financial advisor of naturally recognized
reputation) to be more favorable to Weston's shareholders than
the Merger and for which financing, to the extent required, is
then committed or which, in the good faith judgment of the Weston
Board, is reasonably capable of being obtained by such third
party. Under certain circumstances, Weston must pay International
Paper up to $6.96 million in termination fees. See
"--Termination" and "--Termination Fees."
International Paper has agreed that neither it, Sub nor any
of their affiliates will assert any claim or action for money
damages against any of Weston, its officers or directors or any
third party arising from or based upon any actual, proposed or
potential termination of the Merger Agreement by Weston pursuant
to the provisions set forth in the preceding two paragraphs,
provided that (i) Weston complies in all material respects with
such provisions, and (ii) such termination by the Weston Board is
required to satisfy the directors' fiduciary duties under
applicable law and they are so expressly advised in writing by
counsel to Weston or to the Weston Board.
CONDITIONS TO THE CONSUMMATION OF THE MERGER
Each party's obligation to effect the Merger is subject to
the satisfaction or waiver on or prior to the Closing Date of
various conditions, which include, in addition to the other
customary closing conditions, the following:
(i) the Weston shareholders having approved and
adopted the Merger Agreement and the transactions
contemplated thereby, including the Merger (See "INFORMATION
CONCERNING THE WESTON SPECIAL MEETING--Record Date; Quorum;
Vote Required");
(ii) the waiting period (and any extension thereof)
applicable to the Merger under the HSR Act having expired or
been terminated;
(iii) other than the filing with the Secretary of
the State of Ohio described under "--Closing; Effective
Time" and filings pursuant to the HSR Act, all consents,
approvals and actions of, filings with and notices to any
federal, state, local or foreign government, any court,
administrative, regulatory or other governmental agency,
commission or authority or any nongovernmental
self-regulatory agency, commission or authority (a
"Governmental Entity") required of Weston, International
Paper or any of their subsidiaries to consummate the Merger
and the other transactions contemplated thereby, the failure
of which to be obtained or taken (a) is reasonably expected
to have a material adverse effect on the Surviving
Corporation and its prospective subsidiaries, taken as a
whole, or (ii) will result in a violation of any laws having
been obtained or waived;
(iv) no judgment, order, decree, statute, law,
ordinance, rule or regulation enacted, entered, promulgated,
enforced or issued by any court or other Governmental Entity
of competent jurisdiction or other legal restraint or
prohibition (collectively, "Restraints") being in effect (a)
preventing the consummation of the Merger, or (b) which
otherwise is reasonably likely to have a material adverse
effect on Weston or International Paper, as applicable;
provided, however, that each of the parties shall have used
its best efforts to prevent the entry of any such Restraints
and to appeal as promptly as possible any such Restraints
that may be entered;
(v) the Registration Statement having become effective
under the Securities Act prior to the mailing of this Proxy
Statement/Prospectus by Weston to its shareholders and not
being the subject of any stop order or proceedings seeking a
stop order, threatened, entered or pending by the SEC; and
(vi) the shares of IP Common Stock issuable to Weston
shareholders in the Merger having been approved for listing
on the NYSE, subject to official notice of issuance.
In addition, each party's obligation to effect the Merger is
subject to the satisfaction or waiver of the following additional
conditions:
(i) the representations and warranties of the other
party to the Merger Agreement set forth in the Merger
Agreement being true and correct in all material respects
(or in all respects in the case of any representation or
warranty containing any materiality qualifier) both when
made and as of the Closing Date as if made as of such time
(except to the extent expressly made as of an earlier date,
in which case as of such date), and each party having
received a certificate to that effect dated the Closing Date
and signed by a senior executive officer of such party; and
(ii) the other party to the Merger Agreement having
performed in all respects all obligations required to be
performed by it under the Merger Agreement at or prior to
the Closing Date, and each party having received a
certificate to that effect dated the Closing Date and signed
by a senior executive officer of such party.
International Paper's obligation to effect the Merger is
subject to the satisfaction or waiver of the following additional
conditions:
(i) no action, suit or proceeding by any Governmental
Entity or other party before any court or governmental or
regulatory authority being pending or threatened against
Weston or International Paper or any of their subsidiaries
challenging the validity or legality of the transactions
contemplated by the Merger Agreement or the Shareholder
Agreement, other than actions, suits or proceedings which,
in the reasonable opinion of counsel to Weston and
International Paper, are unlikely to result in an adverse
judgement;
(ii) International Paper having completed a due
diligence investigation of Weston and its subsidiaries,
including, but not limited to meetings with management,
plant visitations and other informational requests in scope,
detail, substance and result reasonably satisfactory to
International Paper; this condition has been deemed to have
been satisfied; and
(iii) International Paper having received, in form
and substance reasonably satisfactory to International
Paper, an environmental assessment of Weston's real
property. The condition described in this clause (iii)
shall be deemed to have been satisfied unless the reasonable
cost of any matters identified in such environmental
assessment, including, but not limited to: (a) the
investigation and/or remediation of contamination at any of
Weston's properties; (b) fines, penalties or compliance
obligations related to violations of applicable
environmental laws or regulations; (c) liability for
release, disposal or transportation of hazardous substances,
oils, pollutants or contaminants sent to off-site locations
or at former Weston facilities; and (d) capital costs to
comply with environmental laws and regulations as in effect
on the date of the Merger Agreement that will impose
obligations on Weston that are not otherwise included in
Weston's budgets, are not likely to exceed, in the
aggregate, $10 million.
Weston's obligation to effect the Merger is subject to the
satisfaction or waiver of the following additional conditions:
(i) Weston having received from its legal counsel,
Keating, Muething & Klekamp, P.L.L., an opinion dated as of
the Closing date to the effect that (a) the Merger will
constitute a "reorganization" within the meaning of Section
368(a) of the Code, (b) International Paper, Sub and Weston
will each be a party to such reorganization within the
meaning of Section 368(b) of the Code, and (c) no gain or
loss will be recognized by Weston or Weston's shareholders
as a result of the Merger, except with respect to cash
received by Weston shareholders in lieu of fractional shares
of IP Common Stock or cash received by Weston shareholders
exercising dissenters' rights under Section 1701.85 of the
Ohio Revised Code; and
(ii) Weston having received from Skadden, Arps, Slate,
Meagher & Flom LLP, special counsel to International Paper,
an opinion dated as of the Closing Date to the effect that
the shares of IP Common Stock covered by the Registration
Statement have been registered under the Securities Act for
issuance to Weston shareholders pursuant to the terms of the
Merger.
Subject to certain limited exceptions specified in the
Merger Agreement, a "material adverse change" or "material
adverse effect" means, when used in connection with International
Paper or Weston, any change, effect, event, occurrence or state
of facts that is, or would reasonably be expected to be,
materially adverse to the business, financial condition or
results of operations of International Paper or Weston and their
respective subsidiaries taken as a whole, and the terms
"material" and "materially" have correlative meanings.
TERMINATION
The Merger Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of the
Merger Agreement and the transactions contemplated therein,
including the Merger, by the Weston shareholders:
(i) by mutual written consent of International Paper
and Weston;
(ii) by either International Paper or Weston:
(a) if the Merger has not been consummated
by June 30, 1998; provided, however, that the
right to terminate the Merger Agreement as
described in this clause (a) will not be available
to any party whose failure to perform any of its
obligations under the Merger Agreement has
resulted in the failure of the Merger to be
consummated by such date; provided, however, that
the Merger Agreement may be extended not more than
30 days by either party by written notice to the
other party if the Merger has not been consummated
as a direct result of the condition described in
clause (iii) of the first paragraph under
"--Conditions to the Consummation of the Merger"
failing to have been satisfied;
(b) if the Weston shareholders have not
approved the Merger Agreement at the Weston
Special Meeting duly convened therefor or at any
adjournment or postponement thereof; or
(c) if any Restraints having the effects
described in clause (iv) under "--Conditions to
the Consummation of the Merger" are in effect and
have become final and nonappealable; provided that
the party seeking to terminate the Merger
Agreement pursuant to the termination right
described in this clause (c) has used best efforts
to prevent the entry of and to remove such
Restraint;
(iii) by International Paper, on the one hand, or
Weston, on the other hand, if the other party has breached
or failed to perform in any material respect any of its
representations, warranties, covenants, or other agreements
contained in the Merger Agreement, which breach or failure
to perform would give rise to the failure of those
conditions to the Merger described in clauses (i) and (ii)
of the second paragraph under "--Conditions to the
Consummation of the Merger," and which breach is incapable
of being cured by the party in breach, or is not cured
within 45 days of written notice thereof;
(iv) by International Paper, if the condition
described in clause (iii) of the third paragraph under
"Conditions to the Consummation of the Merger," are not
satisfied;
(v) by Weston, prior to a vote of the Weston
shareholders approving the Merger, in accordance with the
second sentence of the second paragraph under "--No
Solicitation;" provided that, in order for the termination
of the Merger Agreement pursuant to the termination right
described in this clause (v) to be deemed effective, Weston
shall have complied with all the provisions described under
"--No Solicitation," including the notice provisions therein
and payment of the applicable termination fee described
under "--Termination Fees."
TERMINATION FEES
The Merger Agreement provides that if Weston terminates the
Merger Agreement pursuant to the termination right described in
clause (v) under "--Termination," then Weston shall pay
International Paper $6.96 million within five days of such
termination.
EXPENSES
Whether or not the Merger is consummated, all fees and
expenses incurred in connection with the Merger, the Merger
Agreement and the transactions contemplated thereby will be paid
by the party incurring such fees or expenses.
AMENDMENT AND WAIVER
The Merger Agreement may be amended by the parties thereto
at any time before or after the approval of the Merger Agreement
by the Weston shareholders; provided, however, that, after any
such approval, there will not be made any amendment that by law
requires further approval by Weston's shareholders without the
further approval of such shareholders. The Merger Agreement may
not be amended except by an instrument in writing signed on
behalf of all of the parties.
At any time prior to the Effective Time, a party may (i)
extend the time for the performance of any of the obligations or
other acts of the other parties, (ii) waive any inaccuracies in
the representations and warranties of the other parties contained
in the Merger Agreement or in any document delivered pursuant to
the Merger Agreement or (iii) subject to the provision of the
first sentence of the immediately preceding paragraph, waive
compliance by the other parties with any of the agreements or
conditions contained in the Merger Agreement. Any agreement on
the part of a party to any such extension or waiver will be valid
only if set forth in an instrument in writing signed on behalf of
such party. The failure of any party to the Merger Agreement to
assert any of its rights under the Merger Agreement or otherwise
will not constitute a waiver of such rights.
COMPARISON OF RIGHTS OF SHAREHOLDERS OF
INTERNATIONAL PAPER AND WESTON
The rights of IP shareholders are currently governed by the
New York Business Corporation Law ("NYBCL") and International
Paper's Restated Certificate of Incorporation ( the "IP
Certificate") and By-Laws of International Paper, as amended
February 12, 1997 (the " IP By-Laws"). The rights of Weston
shareholders are currently governed by the Ohio Revised Code,
the Weston Articles and the Weston Regulations. In accordance
with the Merger Agreement, at the Effective Time, Weston
shareholders will receive IP Common Stock as consideration.
Accordingly, upon consummation of the Merger, the rights of
Weston shareholders who become shareholders of International
Paper in the Merger will be governed by the NYBCL, the IP
Certificate and the IP By-Laws. The following are summaries of
the material differences between the current rights of
International Paper shareholders and Weston shareholders.
The following discussions are not intended to be complete
and are qualified in their entirety by reference to the Ohio
Revised Code, the NYBCL, the Weston Articles, the Weston
Regulations, the IP Certificate and the IP By-Laws. Copies of
the IP Certificate and the IP By-Laws are included as Exhibits
3.1 and 3.2, respectively, to this Proxy Statement/Prospectus,
and are incorporated herein by reference. Copies of the Weston
Articles and the Weston Regulations are incorporated by reference
herein and will be sent to shareholders of Weston, upon request.
See "WHERE YOU CAN FIND MORE INFORMATION."
AUTHORIZED CAPITAL
International Paper. The authorized capital stock of
International Paper consists of 400,000,000 shares of IP Common
Stock, 8,750,000 shares of serial preferred stock, par value
$1.00, and 400,000 shares of Cumulative $4 Preferred Stock,
without par value (the "IP $4 Preferred Stock").
Weston. The authorized capital stock of Weston consists of
3,000,000 shares of Weston Common Stock.
BOARD OF DIRECTORS
International Paper. Pursuant to the IP Certificate, the
number of directors of International Paper will not be less than
9 nor more than 18, with the precise number determined by a
majority of the IP Board. The current number of International
Paper directors is 13. The IP Board is divided into three
classes with each class consisting as nearly as possible of one-
third of the total number of directors on the IP Board elected
for a three-year term. At each annual meeting of shareholders,
one class of directors is elected. Classification of directors
has the effect of making it more difficult for shareholders to
change the composition of the IP Board. A quorum at any meeting
of the IP Board consists of a third of the total number of
directors if there were no vacancies. The NYBCL does not provide
for cumulative voting in the election of directors unless
provided for in the certificate of incorporation. The IP
Certificate does not provide for cumulative voting.
Weston. Pursuant to the Weston Articles and Weston
Regulations, the number of directors will be seven. Such number
may be amended from time to time by the Weston shareholders but
will not be less than three. Currently, there are six Weston
directors. The Weston Board is not divided into classes and the
directors are elected for one-year terms at Weston's annual
shareholders meeting. Cumulative voting is available to Weston
shareholders in the election of directors.
COMMITTEES OF THE BOARD OF DIRECTORS
International Paper. Pursuant to the IP By-Laws, the IP
Board may, by a majority vote, designate one or more committees
of the directors of International Paper.
Weston. Pursuant to the Weston Regulations, the Weston
Board may, by a majority vote, designate one or more committees
of the directors of Weston.
NEWLY CREATED DIRECTORSHIPS AND VACANCIES
International Paper. Pursuant to the IP Certificate and the
IP By-Laws, vacancies occurring in any International Paper
directorship and newly created International Paper directorships
shall be filled by a majority vote of the remaining directors,
except if such a director has been elected by the holders of IP
$4 Preferred Stock, then the vacancy may only be filled by the
holders of the IP $4 Preferred Stock.
Weston. Pursuant to the Weston Articles, any vacancy on the
Weston Board may be filled by the affirmative vote of a majority
of the remaining directors then in office.
REMOVAL OF DIRECTORS
International Paper. Pursuant to the IP Certificate, no
director may be removed from office prior to the expiration date
of the director's term of office, except for cause and by the
affirmative vote of the holders of 80% of the combined voting
power of the then outstanding shares of stock entitled to vote
generally in the election of directors, voting together as a
single class, a similar vote is required in order to amend this
provision.
Weston. The Weston Articles and Weston Regulations do not
address the removal of directors. However, the Ohio Revised Code
provides that a director may be removed without cause by the
affirmative vote of the holders of a majority of the outstanding
shares of stock entitled to vote for the election of directors.
SPECIAL MEETINGS OF SHAREHOLDERS
International Paper. A special meeting of International
Paper shareholders may be called by the IP Board, the Chairman of
the Board or by the President. The President or Secretary of
International Paper is required to call a special meeting
whenever requested in writing to do so by shareholders holding
not less than 20% of the International Paper capital stock then
outstanding and entitled to vote.
Weston. A special meeting of Weston shareholders may be
called by the Chairman of the Weston Board, the President, any
Vice President, the Secretary, an Assistant Secretary, the Weston
Board by action at a meeting, a majority of the directors acting
without a meeting or by persons who hold 25% or more of the
outstanding shares of Weston Common Stock and are entitled to
vote at a meeting.
QUORUM AT SHAREHOLDERS MEETINGS
International Paper. The IP By-Laws provide that the
holders of one-third of the issued and outstanding stock entitled
to vote thereat, present in person or by proxy, shall constitute
a quorum at all shareholder meetings.
Weston. The holders of a majority of the shares entitled to
vote at any meeting of the shareholders, present in person or by
proxy, shall constitute a quorum at all shareholder meetings.
AMENDMENT OF GOVERNING DOCUMENTS
International Paper. Under the NYBCL, except for certain
specified matters, an amendment or change to the IP Certificate
must be authorized by the IP Board, followed by the affirmative
vote of the majority of all outstanding shares entitled to vote
thereon at a meeting of shareholders. In addition, certain
specified amendments affecting the rights of holders of a class
of securities must be approved by a vote of the majority of all
outstanding shares of such class entitled to vote thereon, even
though they ordinarily would not have voting rights. Under the
NYBCL, certain specified amendments to a company's articles of
incorporation may be made by the board of directors without
shareholder approval. Under the IP Certificate, any proposal to
amend or repeal certain provisions of the IP Certificate
including provisions relating to business combinations, the size
of the board of directors, classifications of directors, removal
of directors, indemnification of directors and transactions with
interested directors requires the affirmative vote of not less
than 80% of the outstanding shares entitled to vote. Under the
NYBCL, by-laws may be adopted or repealed by a majority vote of
all shareholders entitled to vote in the election of directors.
When provided by a company's certificate of incorporation or a
by-law adopted by the shareholders, as is the case with
International Paper, a majority of the board of directors may
also adopt, amend or repeal by-laws. Any by-law adopted by a
company's board of directors without shareholder approval may be
amended or repealed by a majority of votes cast at a meeting of
shareholders. By their terms, the IP By-Laws may be amended at
any annual meeting, or at any special meeting called for that
purpose, by a vote of majority of the shares represented and
entitled to vote thereat. By majority vote of the whole IP
Board, the IP Board may amend the IP By-Laws but any such action
may be amended by the shareholders at any annual meeting.
Weston. The Ohio Revised Code provides that the vote of
two-thirds of all outstanding shares of Weston Common Stock is
required to amend the Weston Articles. The Weston Regulations
may be amended by the vote of a majority of all outstanding
shares of Weston Common Stock at any meeting of shareholders.
FAIR PRICE AND OTHER PROVISIONS
International Paper. Section 912 of the NYBCL prohibits a
company from entering into a business combination (e.g., a
merger, consolidation, sale of 10% or more of a company's assets,
or issuance of securities with an aggregate market value of 5% or
more of the aggregate market value of all of the company's
outstanding capital stock) with a beneficial owner of 20% or more
of a company's securities (a "20% shareholder") for a period of
five years following the date such beneficial owner became a 20%
shareholder (the "stock acquisition date"), unless, among other
things, such business combination or the purchase of stock
resulting in the 20% shareholder's beneficial ownership was
approved by the company's board of directors prior to the stock
acquisition date or the business combination is approved by the
affirmative vote of the holders of a majority of the outstanding
voting stock exclusive of the stock beneficially owned by the 20%
shareholder.
Weston. Chapter 1704 of the Ohio Revised Code prohibits
Weston from entering into a Chapter 1704 Transaction (as defined
herein) with the beneficial owner or affiliates of such
beneficial owner of 10% or more of the outstanding shares of the
corporation (an "interested shareholder") for at least three
years following the date on which the interested shareholder
attains such 10% ownership, unless the Weston Board approves,
prior to such person becoming an interested shareholder, either
the transaction or the acquisition of shares resulting in a 10%
ownership. A Chapter 1704 Transaction is broadly defined to
include, among other things, a merger or consolidation with, a
sale of substantial assets to, or the receipt of a loan, guaranty
or other financial benefit which is not proportionately received
by all shareholders from the interested shareholder. Following
the expiration of such three-year period, a Chapter 1704
Transaction with the interested shareholder is permitted only if
either the transaction is approved by the holders of at least
two-thirds of the voting power of the corporation, including a
majority of the outstanding shares, excluding those owned by the
interested shareholder, or the business combination results in
the shareholders other than the interested shareholder receiving
a prescribed fair price for their shares. One significant effect
of Chapter 1704 is to cause an interested shareholder to
negotiate with the board of directors of a corporation prior to
becoming an interested shareholder. The Weston Board has
approved the proposed merger with International Paper for
purposes of Chapter 1704.
Section 1701.831 of the Ohio Revised Code requires a vote of
shareholders in order for any person to surpass 20%, 33-1/3% and
50% ownership thresholds. Persons seeking to acquire such
percentage of ownership and executive officers of the corporation
are prohibited from voting on the proposed share acquisition. A
majority of those shares voting is required to approve the
transaction. This section does not apply to the proposed Merger.
Section 1707.043 of the Ohio Revised Code requires a person
or entity that makes a proposal to acquire the control of a
corporation to repay to that corporation any profits made from
trades in the corporation's stock within 18 months after making
the control proposal.
EXPERTS
The consolidated financial statements and schedule included
in International Paper's Annual Report on Form 10-K for the year
ended December 31, 1996, incorporated by reference in this Proxy
Statement/Prospectus, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports
with respect thereto, and are incorporated by reference herein,
in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.
The consolidated financial statements of Weston for the
years ended December 31, 1997, 1996 and 1995 have been audited by
Coopers & Lybrand L.L.P., independent accountants, as indicated
in their reports with respect thereto, in reliance upon the
authority of said firm as experts in accounting and auditing in
giving said reports.
LEGAL MATTERS
Certain legal matters with respect to the validity of the IP
Common Stock to be issued pursuant to the Merger will be passed
upon for International Paper by Skadden, Arps, Slate, Meagher &
Flom LLP, International Paper's special counsel. Certain legal
matters with respect to the federal income tax consequences of
the Merger will be passed upon for Weston by Keating, Muething &
Klekamp P.L.L., Weston's special counsel.
WHERE YOU CAN FIND MORE INFORMATION
International Paper files annual, quarterly and current
reports, proxy statements and other information with the SEC. You
may read and copy any reports, statements or other information
that the companies file at the SEC's public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois.
Please call the SEC at 1-800-SEC-0330 for further information on
the public reference rooms. International Paper's public filings
are also available to the public from commercial document
retrieval services and at the Internet World Wide Web site
maintained by the SEC at "http://www.sec.gov." Reports, proxy
statements and other information concerning International Paper
also may be inspected at the offices of the NYSE, 20 Broad
Street, New York, New York 10005.
International Paper has filed the Registration Statement to
register with the SEC the shares of IP Common Stock to be issued
to Weston shareholders in the Merger. This Proxy
Statement/Prospectus is a part of the Registration Statement and
constitutes a prospectus of International Paper, as well as a
proxy statement of Weston for the Weston Special Meeting.
As allowed by SEC rules, this Proxy Statement/Prospectus
does not contain all the information that shareholders can find
in the Registration Statement or the exhibits to the Registration
Statement.
The SEC allows International Paper to "incorporate by
reference" information into this Proxy Statement/Prospectus,
which means that International Paper can disclose important
information to you by referring you to another document filed
separately with the SEC. The information incorporated by
reference is deemed to be part of this Proxy
Statement/Prospectus, except for any information superseded by
information contained directly in the Proxy Statement/Prospectus.
This Proxy Statement/Prospectus incorporates by reference the
documents set forth below that International Paper has previously
filed with the SEC. These documents contain important information
about International Paper and its financial condition.
<TABLE>
<CAPTION>
International Paper SEC Filings (File No. 1-9924) Period
------------------------------------------------- ------
<S> <C>
Annual Report on Form 10-K . . . . . . . . . . . . Year ended December 31, 1996
Quarterly Reports on Form 10-Q . . . . . . . . . . Quarters ended March 31, 1997, June 30, 1997 and
September 30, 1997
Current Reports on Form 8-K. . . . . . . . . . . . Dated February 12, 1997, April 9, 1997, June 23, 1997,
July 8, 1997, July 23, 1997, January 13, 1998 and
January 20, 1998
Registration Statement on Form 8-A . . . . . . . . Dated July 20, 1976, as amended, setting forth a description
of the International Paper capital stock and dated April 17,
1987, as amended December 14, 1989, relating to the common
share purchase rights described therein (and the related
Current Report on Form 8-K filed April 17, 1987).
</TABLE>
International Paper incorporates by reference additional
documents that it may file with the SEC between the date of this
Proxy Statement/Prospectus and the date of the Weston Special
Meeting. These include periodic reports, such as an Annual
Report on Form 10-K, Quarterly Report on Form 10-Q and Current
Reports on Form 8-K, as well as proxy statements.
International Paper has supplied all information contained
or incorporated by reference in this Proxy Statement/ Prospectus
relating to International Paper, and Weston has supplied all such
information relating to Weston.
If you are a shareholder, you can obtain any of the
documents incorporated by reference through International Paper,
or the SEC or the SEC's Internet World Wide Web site described
above. Documents incorporated by reference are available from
International Paper without charge, excluding all exhibits unless
specifically incorporated by reference as exhibits in this Proxy
Statement/Prospectus. Shareholders may obtain documents
incorporated by reference in this Proxy Statement/Prospectus by
requesting them in writing or by telephone from International
Paper at the following address:
INTERNATIONAL PAPER COMPANY
TWO MANHATTANVILLE ROAD
PURCHASE, NEW YORK 10577
(914) 397-1500
Documents incorporated by reference are available from Weston
without charge, excluding all exhibits unless specifically
incorporated by reference as exhibits in this Proxy
Statement/Prospectus. Shareholders may obtain documents
incorporated by reference in this Proxy Statement/Prospectus by
requesting them in writing or by telephone from Weston at the
following address:
THE WESTON PAPER AND MANUFACTURING CO.
2001 NORTH NINETEENTH STREET
TERRE HAUTE, INDIANA 47804
(812) 232-0521
If you would like to request documents from International
Paper or Weston, please do so by April 10, 1998 to receive them
before the Weston Special Meeting. If you request any such
documents, the companies will mail them to you by first-class
mail, or other equally prompt means, within one business day of
receipt of your request.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS TO
VOTE YOUR SHARES AT THE WESTON SPECIAL MEETING. WESTON AND
INTERNATIONAL PAPER HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU
WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS
PROXY STATEMENT/PROSPECTUS. THIS PROXY STATEMENT/PROSPECTUS IS
DATED MARCH 16, 1998. YOU SHOULD NOT ASSUME THAT THE INFORMATION
CONTAINED IN THE PROXY STATEMENT/PROSPECTUS IS ACCURATE AS OF ANY
DATE OTHER THAN THAT DATE, AND NEITHER THE MAILING OF THIS PROXY
STATEMENT/PROSPECTUS TO SHAREHOLDERS NOR THE ISSUANCE OF
INTERNATIONAL PAPER'S SECURITIES IN THE MERGER SHALL CREATE ANY
IMPLICATION TO THE CONTRARY.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Weston manufactures corrugating medium which it uses in
the production of corrugated containers. Demand for corrugated
containers is cyclical and has historically corresponded to
changes in the rate of growth in the United States economy.
Although Weston primarily sells its products in midwestern and
southern states, due to the international demand for paper
products, exchange rates for the United States dollar also impact
demand. Growth in the United States economy generally stimulates
demand for packaging products. The cyclicality of demand is
accentuated by the inelasticity of supply due to the capital
intensive nature of the industry. Because productive capacity
cannot be added quickly, during periods of rising demand,
inventory levels tend to fall, exerting upward pressure on
prices. In periods when capacity exceeds demand, efforts to
control inventory levels are limited because mills operate most
economically near capacity operating levels.
Results of Operations
1997 versus 1996
Net sales for 1997 were $217.9 million, a decrease of
approximately 4.3 percent compared with net sales of $227.8
million for 1996. Gross profit for 1997 was $17.6 million, a
decrease of approximately 53.8 percent, compared with gross
profit of $38.1 million for 1996. The operating loss for 1997
was $2.6 million compared with operating income of $17.2 million
for 1996. Net income decreased to $41,000 in 1997 from $12.3
million in 1996, and net income per common share decreased to
$0.08 per share in 1997 from $23.68 per share in 1996. Selling
and administrative expenses remained relatively flat, actually
decreasing to $20.2 million in 1997 from $20.9 million in 1996.
Sales and earnings in 1997 were adversely affected by
declining product prices which resulted in significantly lower
average selling prices for Weston's products compared with 1996.
This price pressure did not begin to reverse until the end of
Weston's third quarter of 1997. Lower average selling prices
decreased net sales by approximately $28.6 million versus the
prior fiscal year.
During 1997, published industry prices for corrugating
medium decreased approximately 23 percent from 1996 (with
corresponding decreases in converted product prices) before
recovering during the fourth quarter of 1997. Strengthening
industry fundamentals, including year-over-year growth in
corrugated product shipments and reduced containerboard mill
operating rates to control inventories, resulted in $40 per ton
increases in published industry prices for corrugating medium in
both June 1997 and August 1997 and subsequent increases in
converted product prices. Further, published industry prices for
containerboard increased an additional $50 per ton in October
1997.
Shipments of corrugated product were approximately 5.0
billion square feet in 1997, an increase of approximately 8.5%
from 1996.
1996 versus 1995
Net sales for 1996 were $227.8 million, a decrease of
approximately 11.7 percent compared with net sales of $257.8
million for 1995. Gross profit for 1996 was $38.1 million, a
decrease of approximately 30.6 percent, compared with gross
profit of $54.9 million for 1995. Operating income for 1996 was
$17.2 million, a decrease of approximately 49.8%, compared with
operating income of $34.3 million for 1995. Net income decreased
to $12.3 million in 1996 from $22.5 million in 1995, and net
income per common share decreased to $23.68 per share in 1996
from $43.44 per share in 1995. Selling and administrative
expenses remained relatively flat, increasing to $20.9 million in
1996 from $20.6 million in 1995.
Net sales in 1996 were adversely affected by declining
product prices which resulted in significantly lower average
selling prices for Weston's products compared with 1995. Lower
average selling prices decreased net sales by approximately $27.7
million versus 1995. Average selling prices for Weston's
corrugated product decreased approximately 10.8% in 1996 versus
1995.
Shipments of corrugated product were approximately 4.6
billion square feet in 1996, a decrease of approximately 1.0
percent from 1995.
Liquidity and Capital Resources
Weston has historically financed its operations through
cash provided by operating activities. Weston's principal uses
of cash are to pay operating expenses, fund capital expenditures
and make acquisitions. Net cash provided by operating activities
was $5.3 million, $23.8 million and $32.2 million in 1997, 1996
and 1995, respectively. The declining trend was primarily due to
lower operating earnings.
Capital expenditures of $10.8 million in 1997 decreased
from $15.2 million in 1996. Capital expenditures in 1997 were
used to increase equipment capacity and operating efficiencies at
Weston's box plants. Capital expenditures for 1998 are expected
to be approximately $12.0 million, which Weston anticipates to
fund through cash provided by operating activities.
In September 1996, Weston acquired certain assets of a
corrugated box plant in Kansas City, Missouri, for approximately
$5.7 million in cash and the assumption of approximately $89,000
in liabilities. The purchase was accounted for under the
purchase method of accounting and, accordingly, only the results
of its operations from the date of acquisition have been included
in Weston's 1996 consolidated statement of income. The
operations of the Kansas City box plant contributed significantly
to Weston's volume during 1997.
Weston sells its common stock only through its officer
and key employee bonus plans and its dividend reinvestment plan.
Sales of common stock in 1997, 1996 and 1995 were $0.7 million,
$0.5 million and $0.8 million, respectively. Weston purchased
$1.0 million, $0.4 million and $0.2 million in treasury stock,
respectively, in 1997, 1996 and 1995. Weston also declared $3.1
million in common stock dividends in 1997, $2.8 million in 1996
and $2.8 million in 1995. Weston repaid $0.3 million, $0.6
million and $0.6 million in notes payable relating to an earlier
acquisition in 1997, 1996 and 1995, respectively.
At December 31, 1997, Weston had working capital of
$32.2 million, a decrease of $10.4 million from December 31,
1996, primarily due to lower cash and short-term investments.
The decrease in cash and short-term investments was primarily due
to management's decision to increase long-term investments.
The signs of improvement in product price levels is
continuing during the first quarter of 1998.
The Company has conducted a review of its computer
systems to identify those areas that could be affected by the
"Year 2000" issue and is developing a plan to resolve the issue.
The Company believes that by modifying existing software, and
converting to new software, the Year 2000 problem can be resolved
without significant operational difficulties. Weston believes
that it will cost approximately $200,000 to become Year 2000
compliant.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
the Board of Directors
The Weston Paper and Manufacturing Co.
Terre Haute, Indiana
We have audited the consolidated balance sheets of The Weston
Paper and Manufacturing Co. and subsidiary as of December 31,
1997 and 1996, and the related consolidated statements of income,
changes in shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company'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 financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of The Weston Paper and Manufacturing Co. and
subsidiary as of December 31, 1997 and 1996, and the consolidated
results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997 in conformity
with generally accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
Indianapolis, Indiana
February 2, 1998
THE WESTON PAPER AND MANUFACTURING CO.
CONSOLIDATED BALANCE SHEET
December 31, 1997 and 1996
ASSETS 1997 1996
Current assets:
Cash and cash equivalents $ 854,108 $ 2,706,146
Marketable securities, at cost,
which approximates market 3,898,412 18,147,716
Accounts receivable, less
allowance for doubtful
accounts of $400,000 in 1997
and 1996 28,897,373 23,091,963
Inventories 18,633,969 18,262,605
Prepaid expenses 183,650 125,810
----------- ----------
Total current assets 52,467,512 62,334,240
----------- ----------
Properties and equipment, at cost:
Land and land improvements 6,956,692 6,726,365
Buildings 31,484,410 29,308,570
Machinery and equipment 157,652,942 149,798,762
----------- -----------
196,094,044 185,833,697
Less accumulated depreciation (105,465,381) (98,178,887)
------------ ------------
90,628,663 87,654,810
Construction in progress 1,024,564 3,623,390
------------ -----------
91,653,227 91,278,200
Long-term investments 12,699,526 5,280,675
------------ -----------
4,326,650 3,723,334
------------ -----------
Other assets $161,146,915 $162,616,449
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY 1997 1996
Current liabilities:
Accounts payable $ 16,014,013 $ 13,895,859
Accrued liabilities:
Salaries and wages 2,774,645 3,930,969
Taxes, other than income taxes 1,472,787 1,571,596
Income taxes payable 0 59,183
Notes payable 0 300,000
----------- -----------
Total current liabilities 20,261,445 19,757,607
----------- -----------
Postretirement benefit obligation 4,412,009 4,073,668
Deferred income taxes 15,345,213 14,385,213
Shareholders' equity:
Common stock, $.50 par value;
authorized 3,000,000 shares in 1997
and 800,000 shares in 1996; issued
517,055 and 496,807 shares in 1997
and 1996, respectively, including 708
and 2,955 shares in treasury in 1997
and 1996, respectively 258,528 248,404
Capital in excess of par value 27,987,230 25,304,324
Retained earnings 92,976,654 99,237,293
------------ -----------
121,222,412 124,790,021
Less treasury stock, at cost (94,164) (390,060)
------------- ------------
121,128,248 124,399,961
------------- ------------
$161,146,915 $ 162,616,449
============ =============
The accompanying notes are an integral part of the consolidated
financial statements.
THE WESTON PAPER AND MANUFACTURING CO.
CONSOLIDATED STATEMENT OF INCOME
for the years ended December 31, 1997, 1996, and 1995
1997 1996 1995
Net sales 217,931,855 $ 227,755,498 $ 257,816,716
Cost of goods sold 200,335,831 189,683,932 202,947,435
----------- ------------- --------------
Gross profit 17,596,024 38,071,566 54,869,281
Selling and administrative
expenses 20,214,164 20,850,340 20,591,085
---------- ------------ -------------
Income (loss) from
operations (2,618,140) 17,221,226 34,278,196
Other income, net (including
interest earned of $1,400,592,
$1,757,891 and $1,017,008 in
1997, 1996, and 1995,
respectively) 2,837,159 2,731,060 2,132,358
--------- ---------- ------------
Income before provision for
income taxes 219,019 19,952,286 36,410,554
Provision for income taxes 178,000 7,677,000 13,920,000
--------- ---------- ------------
Net income $ 41,019 12,275,286 $22,490,554
========= ========== ============
Net income per common share $ 0.08 $ 23.68 $ 43.44
========= ========== ===========
The accompanying notes are an integral part of the consolidated
financial statements.
THE WESTON PAPER AND MANUFACTURING CO.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
for the years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Capital in Total
Outstanding Common Excess of Retained Treasury Shareholders'
Shares Stock Par Value Earnings Stock Equity
----------- ------ ---------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1995 442,345 $ 221,891 $ 18,494,419 $ 75,974,919 $ (172,320) $ 94,518,909
Net income 0 0 22,490,554 0 0 22,490,554
Common stock issued
to key employees 864 0 0 0 103,680 103,680
Dividend reinvestment 5,914 2,957 728,123 0 0 731,080
Cash dividends
declared, $6.00 per
share 0 0 (2,805,027) 0 0 (2,805,027)
5% stock dividend 22,237 10,824 2,742,763 (2,824,147) 70,560 0
Purchase of treasury
stock (1,710) 0 0 0 (217,058) (217,058)
------------- ------------- ------------- ------------- ------------- -------------
Balance, December
31, 1995 469,650 235,672 21,965,305 92,836,299 (215,138) 114,822,138
Net income 0 0 12,275,286 0 0 12,275,286
Common stock issued
to key employees 3,567 937 236,934 0 215,138 453,009
Cash dividends
declared, $5.60 per
share 0 0 (2,760,412) 0 0 (2,760,412)
5% stock dividend 23,590 11,795 3,102,085 (3,113,880) 0 0
Purchase of treasury
stock (2,955) 0 0 0 (390,060) (390,060)
------------- ------------- ------------- ------------- ------------- -------------
Balance, December
31, 1996 493,852 248,404 25,304,324 99,237,293 (390,060) 124,399,961
Net income 0 0 0 41,019 0 41,019
Common stock issued
to key employees 1,668 0 0 0 220,176 220,176
Dividend reinvestment
plan 3,968 1,984 525,806 0 0 527,790
Cash dividends
declared, $6.00 per
share 0 0 0 (3,070,782) 0 (3,070,782)
5% stock dividend 24,353 8,140 2,157,100 (3,230,876) 1,065,636 0
Purchase of treasury
stock (7,494) 0 0 0 (989,916) (989,916)
------------- ------------- ------------- ------------- ------------- -------------
Balance, December
31, 1997 516,347 $ 258,528 $ 27,987,230 $ 92,976,654 $ (94,164) $ 121,128,248
============= ============= ============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
THE WESTON PAPER AND MANUFACTURING CO.
CONSOLIDATED STATEMENT OF CASH FLOWS
for the years ended December 31, 1997, 1996, and 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net Income $ 41,019 $ 12,275,286 $ 22,490,554
------------ ------------ ------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 10,856,028 10,482,739 10,291,711
Deferred taxes 960,000 482,000 (235,000)
Gain on sale of properties and
equipment (294,346) (146,391) (95,170)
Increase (decrease) in cash provided
by operating accounts:
Accounts receivable (5,805,410) 3,983,156 171,880
Inventories (371,364) (1,424,106) (1,538,248)
Prepaid expenses (57,840) 35,960 (15,139)
Other assets (1,178,282) (342,277) 248,696
Accounts payable 2,118,154 (477,947) (1,194,037)
Accrued liabilities (1,255,133) (198,926) 1,278,082
Postretirement benefit obligation 338,341 345,707 393,420
Income taxes payable (59,183) (1,202,344) 410,818
------------ ------------ ------------
Total adjustments 5,250,965 11,537,571 9,717,013
------------ ------------ ------------
Net cash provided by operating
activities 5,291,984 23,812,857 32,207,567
------------ ------------ ------------
Cash flows from investing activities:
Plant acquisition:
Inventories 0 (755,829) 0
Properties and equipment 0 (5,000,000) 0
Liabilities assumed 0 88,943 0
Proceeds from maturities of securities 36,014,542 52,315,648 19,853,253
Purchase of securities (29,184,089) (50,981,618) (41,162,252)
Proceeds from sale of properties and
equipment 398,384 321,883 324,980
Capital expenditures (10,797,814) (15,185,170) (9,709,288)
Timberland activity 37,687 29,483 36,563
------------ ------------ ------------
Net cash used in investing
activities (3,531,290) (19,166,660) (30,656,744)
------------ ------------ ------------
Cash flows from financing activities:
Dividends declared (3,070,782) (2,760,412) (2,805,027)
Issuance of common stock 747,966 453,009 834,760
Purchase of treasury stock (989,916) (390,060) (217,058)
Repayment of notes payable (300,000) (600,000) (600,000)
------------ ------------ ------------
Net cash used in financing
activities (3,612,732) (3,297,463) (2,787,325)
------------ ------------ ------------
Net increase (decrease) in
cash and cash equivalents (1,852,038) 1,348,734 (1,236,502)
Cash and cash equivalents beginning of year 2,706,146 1,357,412 2,593,914
------------ ------------ ------------
Cash and cash equivalents, end of year $ 854,108 $ 2,706,146 $ 1,357,412
============ ============ ============
Supplemental disclosure of cash flow
information:
Cash paid during the period:
Income taxes $ 132,176 $ 8,397,344 $ 13,744,182
============ ============ ============
Interest $ 9,273 $ 57,373 $ 108,341
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
THE WESTON PAPER AND MANUFACTURING CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
a. BUSINESS: The Weston Paper and Manufacturing Co. (the
"Company") operates principally as a manufacturer of
corrugated containers and sells its products primarily in
the midwestern and southern states to a variety of
industries including food products, manufacturing, and
wholesale trade.
b. SIGNIFICANT ACCOUNTING POLICIES: The preparation of
financial statements in conformity with generally accepted
accounting principles requires management to make
estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial
statements and the reported amounts of revenues and
expenses during the reporting period. Actual results
could differ from those estimates. Following is a summary
of the significant accounting policies used in the
preparation of these financial statements.
The consolidated financial statements include the accounts
and operations of The Weston Paper and Manufacturing Co.
and its subsidiary, Wabash Fibre Box Co. All significant
intercompany balances and transactions have been
eliminated.
The Company purchases certain grades of paperboard from
and sells other paperboard to the same unrelated
companies. Net sales of this kind, amounting to
$38,000,000, $45,000,000 and $69,000,000 in 1997, 1996 and
1995, respectively, have been omitted from net sales and
have reduced cost of goods sold in the accompanying
consolidated statement of income.
Cash equivalents include funds held in temporary,
short-term investments having maturities of not more than
three months. Marketable securities are short-term
investments having maturities from three months to one
year.
Inventories are stated at the lower of cost or market with
cost determined on the last-in, first-out (LIFO) basis for
the majority of inventories. Had the first-in, first-out
(FIFO) method been used, inventories would have been
$5,148,000, $4,102,000 and $8,854,000 greater than
reported at December 31, 1997, 1996 and 1995,
respectively.
Depreciation of properties and equipment is provided on
the straight-line method. Maintenance and repairs are
charged to income as incurred while renewals and
replacements are capitalized. When depreciable assets are
retired or sold, the cost and related accumulated
depreciation are removed from the accounts, with any gain
or loss included in income.
Marketable securities and long-term investments are mainly
in U.S. government securities. These securities and
investments are carried at amortized cost and considered
"available-for-sale." At December 31, 1997 and 1996 the
aggregate fair value approximated the carrying value and
gross unrealized holding gains and losses were immaterial.
The Company's long-term investments generally have
original maturities ranging from one to nine years. At
December 31, 1997, based on original maturity, the
Company's long-term investments included $6,756,940 in the
one to three year maturity category and $5,942,586 in the
greater than three year category.
Intangible assets have been recorded in connection with
various acquisitions. Such assets are being amortized
using the straight-line method over their estimated
remaining lives. Intangible assets are included with
other assets in the consolidated balance sheet.
Deferred income taxes are determined utilizing a liability
method, which gives consideration to the future tax
consequences associated with temporary differences between
financial accounting and the tax bases of assets and
liabilities. The differences relate to items such as
depreciable assets, postretirement benefits, and pension
expense.
Net income per common share is computed by using the
weighted average number of shares outstanding during the
year. The Company does not have dilutive potential common
shares. Net income per share reported in 1996 and 1995
has been restated to give effect to the 5% stock dividend
in 1997.
2. ACQUISITION:
In September 1996, the Company acquired certain assets of a
corrugated box plant in Kansas City, Missouri, for
approximately $5,667,000 in cash and assumed certain of its
liabilities totaling approximately $89,000. The acquisition
was accounted for by the purchase method of accounting and,
accordingly, only the results of its operations from the date
of acquisition have been included in the 1996 consolidated
statement of income.
3. NOTES PAYABLE:
Notes payable, which relate to a prior acquisition, were
payable in quarterly payments of $150,000 each, plus interest
at the prime rate (8.25% at December 31, 1996). Notes
payable were repaid in 1997.
4. INCOME TAXES:
A summary of the provision for income taxes for 1997, 1996
and 1995 is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Current:
Federal $(760,000) $6,485,000 $12,500,000
State (22,000) 710,000 1,655,000
--------- ---------- -----------
(782,000) 7,195,000 14,155,000
Deferred 960,000 482,000 (235,000)
--------- ---------- -----------
$178,000 $7,677,000 $13,920,000
========= ========== ===========
</TABLE>
The reconciliation of the provision for income taxes with the
amount computed by applying the statutory federal income tax
rate to income before income taxes is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Tax at statutory rate (35% for 1997, 1996 and 1995) $ 77,000 $6,983,000 $12,744,000
State income taxes, net of federal income tax benefit (64,000) 503,000 937,000
Nondeductible amortization of intangible assets 158,000 158,000 158,000
Other 7,000 33,000 81,000
--------- ---------- -----------
$ 178,000 $7,677,000 $13,920,000
</TABLE>
5. PENSION PLANS:
The Company has six noncontributory, defined benefit plans
covering substantially all employees. The plans provide
benefits based on participants' length of service and a flat
dollar benefit (four plans), highest average earnings (one
plan), and career average earnings (one plan). Benefits of
the two plans which are based on a measure of earnings are
integrated with Social Security benefits.
Pension costs are funded as required by statutory funding
standards. Contributions were $90,170, $85,891 and $126,313
for 1997, 1996 and 1995, respectively.
A discount rate of 6.75% in 1997, 7.25% in 1996, and 6.75% in
1995 and a rate of increase of 4.5% for 1997, 1996 and 1995
in future compensation levels were used in determining the
actuarial present value of the projected benefit obligation.
The assumed long-term rate of return on plan assets was 8%.
Pension cost included the following components:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Service cost of benefits earned during the year $ 1,685,726 $ 1,561,188 $ 1,398,096
Interest cost on projected benefit obligation 3,173,139 3,150,469 2,984,095
Actual investment return on assets (14,439,081) (9,811,726) (11,789,386)
Deferred gain on assets 9,424,640 5,384,718 8,224,407
Other, net (782,536) (208,719) (101,681)
------------- ----------- -----------
Pension cost (benefit) $ (938,112) $ 75,930 $ 715,531
============= =========== ===========
</TABLE>
The funding status of the plans and the prepaid pension cost
at December 31 are as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Vested benefit obligations $45,116,844 $36,704,044
Nonvested benefit obligations 3,808,346 2,587,000
----------- -----------
Accumulated benefit obligations 48,925,190 39,291,044
Additional amounts related to actuarially assumed
compensation increases 7,095,741 5,389,665
----------- -----------
Total projected benefit obligations 56,020,931 44,680,709
Plan assets at fair value, primarily commingled funds
and equity and interest-bearing securities 76,288,670 64,459,935
----------- ----------
Plan assets in excess of projected benefit obligations $20,267,739 $19,779,226
Unrecognized net gains (21,314,048) (19,154,246)
Remaining unrecognized transition asset (534,364) (811,854)
Prior service cost 5,205,900 2,783,819
----------- ----------
Prepaid pension cost, included in other assets $ 3,625,227 $2,596,945
</TABLE>
6. POSTRETIREMENT BENEFIT OBLIGATION:
The Company sponsors unfunded retiree medical and life
insurance plans for employees. The components of the net
periodic postretirement benefit cost charged to income for
1997, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Service cost $142,876 $140,465 $154,560
Interest cost 261,060 261,644 269,567
Amortization of unrecognized net loss (gain) (6,392) 7,623 14,048
-------- -------- --------
$397,544 $409,732 $438,175
======== ======== ========
</TABLE>
The current cost of the life insurance portion for 1997, 1996
and 1995 is $114,401, $95,549 and $94,459, respectively. An
annual increase of 6.5%, 6.7% and 7.0% in the cost of covered
medical benefits was assumed for 1997, 1996 and 1995,
respectively, and such rates are assumed to decrease linearly
to 5.6% by 2001 and remain at that level thereafter.
Increasing the assumed health care cost trend rate by one
percentage point would have increased the accumulated
postretirement benefit obligation by $294,488 and the net
periodic cost by $43,506 in 1997. The discount rate used in
determining the accumulated postretirement benefit obligation
was 6.75%, 7.25% and 6.75% for 1997, 1996 and 1995,
respectively, and the salary increase assumption used (life
insurance only) was 4.5% for 1997, 1996 and 1995.
The following table sets forth the plan's status reconciled
with the amount shown in the Company's balance sheet at
December 31:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retired plan participants $ 799,908 $ 721,663
Active plan participants 2,920,615 2,929,671
Unrecognized net gain 590,463 311,978
Unrecognized prior service cost 101,023 110,356
---------- ----------
Postretirement benefit obligation $4,412,009 $4,073,668
========== ==========
</TABLE>
7. SUBSEQUENT EVENT:
On February 2, 1998, the Company announced that it had
entered into a merger agreement pursuant to which all the
Company's outstanding common stock will be exchanged for
common stock of International Paper Co. The transaction,
which is valued at $232,000,000 and is subject to shareholder
and regulatory approval, is expected to be completed in the
second quarter of 1998.
The accompanying consolidated financial statements do not
include any adjustments to the historical carrying value of
the Company's assets or liabilities at December 31, 1997 that
may result from this transaction.
ANNEX A
AGREEMENT AND PLAN OF MERGER
AMONG
INTERNATIONAL PAPER COMPANY
WOLVERINE ACQUISITION CORP.
AND
THE WESTON PAPER AND MANUFACTURING CO.
DATED AS OF JANUARY 29, 1998
AGREEMENT AND PLAN OF MERGER dated as of January 29, 1998, by
and among INTERNATIONAL PAPER COMPANY, a New York corporation ("Parent"),
WOLVERINE ACQUISITION CORP., an Ohio corporation and a direct wholly owned
subsidiary of Parent ("Sub"), and THE WESTON PAPER AND MANUFACTURING CO.,
an Ohio corporation (the "Company").
WHEREAS, each of Parent, Sub and the Company desire to enter
into a transaction whereby Sub will merge with and into the Company (the
"Merger"), with the Company being the surviving corporation, upon the terms
and subject to the conditions set forth in this Agreement, whereby each
issued and outstanding share of common stock, par value $.50 per share, of
the Company ("Company Common Stock"), other than shares owned by Parent or
the Company, will be converted into the right to receive the Merger
Consideration (as defined in Section 2.1(c));
WHEREAS, the respective Boards of Directors of Parent, Sub and
the Company have each determined that the Merger and the other transactions
contemplated hereby are consistent with, and in furtherance of, their
respective business strategies and goals and are in the best interests of
their respective stockholders, and Parent has approved this Agreement and
the Merger as the sole stockholder of Sub;
WHEREAS, the parties desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also
to prescribe various conditions to the Merger;
WHEREAS, for federal income tax purposes, it is intended that
the Merger will qualify as a reorganization under the provisions of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code") and
that this Agreement is intended to be and hereby is adopted as a plan of
reorganization within the meaning of Section 368 of the Code; and
WHEREAS, concurrently with the execution of this Agreement, and
as an inducement to Parent and Sub to enter into this Agreement, Parent and
certain stockholders of the Company have entered into a Stockholder
Agreement, dated as of the date hereof (the "Stockholder Agreement"),
providing, among other things, that such stockholders will vote, or cause
to be voted, at the Company Stockholders Meeting (as defined in Section
2.1(c)) all of the shares of Company Common Stock owned by them in favor of
the Merger.
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this Agreement, the
parties agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the Ohio
General Corporation Law (the "OGCL"), Sub shall be merged with and into the
Company at the Effective Time (as defined in Section 1.3). Following the
Effective Time, the Company shall be the surviving corporation (in this
capacity, the "Surviving Corporation").
SECTION 1.2 Closing. The closing of the Merger (the "Closing")
will take place at 10:00 a.m. on a date to be specified by the parties (the
"Closing Date"), which shall be no later than the second business day after
satisfaction or waiver of the conditions set forth in Article VI at the
offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New
York, New York, unless another time, date or place is agreed to by the
parties hereto.
SECTION 1.3 Effective Time. Subject to the provisions of this
Agreement, as soon as practicable on the Closing Date, the parties shall
cause the Merger to be consummated by filing a certificate of merger or
other appropriate documents (in any such case, the "Certificate of Merger")
executed in accordance with the relevant provisions of the OGCL and shall
make all other filings or recordings required under the OGCL. The Merger
shall become effective at such time as the Certificate of Merger is duly
filed with the Secretary of State of Ohio, or at such subsequent date or
time as Sub and the Company shall agree and specify in the Certificate of
Merger (the time the Merger becomes effective being hereinafter referred to
as the "Effective Time").
SECTION 1.4 Effects of the Merger. The Merger shall have the
effects set forth in the OGCL.
SECTION 1.5 Articles of Incorporation and Code of Regulations
of the Surviving Corporation. The Articles of Incorporation and Code of
Regulations of Sub, as in effect immediately prior to the Effective Time,
shall be the Articles of Incorporation and Code of Regulations of the
Surviving Corporation (except that Article I of the Articles of
Incorporation of the Surviving Corporation shall be amended as of the
Effective Time to read as follows: "The name of the Corporation is THE
WESTON PAPER AND MANUFACTURING CO."), and thereafter may be changed or
amended only as provided therein or by applicable law.
SECTION 1.6 Directors and Officers. The directors and officers
of Sub at the Effective Time shall, from and after the Effective Time, be
the directors and officers, respectively, of the Surviving Corporation
until their successors shall have been duly elected or appointed or
qualified or until their earlier death, resignation or removal in
accordance with the Articles of Incorporation and the Code of Regulations
of the Surviving Corporation.
SECTION 1.7 Reservation of Right to Revise Transaction. Parent
shall have the right to change the method of effecting the business
combination between Parent and the Company, and each party to this
Agreement shall cooperate in such efforts; provided, however, that no such
change shall (i) alter or change the amount or kind of consideration to be
issued to holders of Company Common Stock, (ii) materially adversely affect
the proposed accounting treatment for the Merger or the tax treatment to
Parent, Sub, the Company or their respective stockholders, (iii) materially
delay receipt of any approval referred to in Section 6.1(d) or the
consummation of the transactions contemplated by this Agreement or (iv)
alter the meaning or accuracy, truth and correctness of the representations
and warranties of the Company.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
SECTION 2.1 Effect on Capital Stock. As of the Effective Time,
by virtue of the Merger and without any action on the part of the holder of
any shares of Company Common Stock:
(a) Capital Stock of Sub. Each issued and outstanding share of
the common stock, par value $.01 per share, of Sub issued and outstanding
immediately prior to the Effective Time shall be converted into and become
one fully paid and nonassessable share of common stock, par value $.01 per
share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock. Each share of Company
Common Stock held in the Company's treasury shall automatically be
cancelled and retired and shall cease to exist, and no consideration shall
be delivered in exchange therefor.
(c) Conversion of Company Common Stock.
(i) Subject to Section 2.2(e), each issued and outstanding
share of Company Common Stock (other than shares to be cancelled in
accordance with Section 2.1(b) and shares as to which dissenters'
rights are exercised) shall be converted into the right to receive
the number (the "Exchange Ratio") of fully paid and nonassessable
shares of common stock, par value $1.00 per share, of Parent ("Parent
Common Stock") (rounded, if necessary, to the nearest one-thousandth
of a share) determined by dividing $447.6051 by the Average Price (as
defined below).
(ii) "Average Price" shall mean the arithmetic average of the
closing sales prices of Parent Common Stock reported on the New York
Stock Exchange, Inc. ("NYSE") Composite Tape on the last twenty (20)
days on which Securities are traded on such exchange preceding the
fifth such day prior to the meeting of the Company's stockholders for
the purpose of voting on the adoption of this Agreement ("Company
Stockholders Meeting").
(iii) The consideration to be issued to holders of Company
Common Stock is referred to herein as the "Merger Consideration." As
of the Effective Time, all such shares of Company Common Stock shall
no longer be outstanding and shall automatically be cancelled and
retired and shall cease to exist, and each holder of a certificate
representing any such shares of Company Common Stock shall cease to
have any rights with respect thereto, except the right to receive the
Merger Consideration and any cash in lieu of fractional shares of
Parent Common Stock to be issued or paid in consideration therefor
upon surrender of such certificate in accordance with Section 2.2,
without interest.
SECTION 2.2 Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, Parent shall
enter into an agreement with such bank or trust company as may be
designated by Parent and reasonably satisfactory to the Company (the
"Exchange Agent"), which shall provide that Parent shall deposit with the
Exchange Agent as of the Effective Time, for the benefit of the holders of
shares of Company Common Stock, for exchange in accordance with this
Article II, through the Exchange Agent, certificates representing the
shares of Parent Common Stock (such shares of Parent Common Stock, together
with any dividends or distributions with respect thereto with a record date
after the Effective Time and any cash payable in lieu of any fractional
shares of Parent Common Stock being hereinafter referred to as the
"Exchange Fund") issuable pursuant to Section 2.1 in exchange for
outstanding shares of Company Common Stock.
(b) Exchange Procedures. As soon as reasonably practicable
after the Effective Time, the Exchange Agent shall mail to each holder of
record of a certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of Company Common Stock (the
"Certificates") whose shares were converted into the right to receive the
Merger Consideration pursuant to Section 2.1, (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such
other provisions, not inconsistent with the terms and conditions of this
Agreement, as the Company and Parent may reasonably specify) and (ii)
instructions for use in surrendering the Certificates in exchange for the
Merger Consideration. Upon surrender of a Certificate for cancellation to
the Exchange Agent, together with such letter of transmittal, duly
executed, and such other documents as may reasonably be required by the
Exchange Agent, the holder of such Certificate shall be entitled to receive
in exchange therefor a certificate representing that number of whole shares
of Parent Common Stock which such holder has the right to receive pursuant
to the provisions of this Article II, certain dividends or other
distributions with respect to Parent Common Stock in accordance with
Section 2.2(c) and cash in lieu of any fractional share of Parent Common
Stock in accordance with Section 2.2(e), and the Certificate so surrendered
shall forthwith be cancelled. Notwithstanding anything to the contrary
contained herein, no certificate representing Parent Common Stock, or cash
in lieu of a fractional share interest in Parent Common Stock, shall be
delivered to a person who is an affiliate of the Company for purposes of
qualifying the Merger for pooling of interests accounting treatment under
Opinion 16 of the Accounting Principles Board and applicable Securities and
Exchange Commission ("SEC") rules and regulations, unless such person has
executed and delivered an agreement in the form of Exhibit A hereto. In the
event of a surrender of a Certificate representing shares of Company Common
Stock which are not registered in the transfer records of the Company under
the name of the person surrendering such Certificate, a certificate
representing the proper number of shares of Parent Common Stock may be
issued to a person other than the person in whose name the Certificate so
surrendered is registered if such Certificate shall be properly endorsed or
otherwise be in proper form for transfer and the person requesting such
issuance shall pay any transfer or other taxes required by reason of the
issuance of shares of Parent Common Stock to a person other than the
registered holder of such Certificate or establish to the satisfaction of
Parent that such tax has been paid or is not applicable. Until surrendered
as contemplated by this Section 2.2, each Certificate shall be deemed at
any time after the Effective Time to represent only the right to receive
upon such surrender the Merger Consideration, as applicable, which the
holder thereof has the right to receive in respect of such Certificate
pursuant to the provisions of this Article II, certain dividends or other
distributions in accordance with Section 2.2(c) and cash in lieu of any
fractional share of Parent Common Stock in accordance with Section 2.2(e).
No interest shall be paid or will accrue on any cash payable to holders of
Certificates pursuant to the provisions of this Article II.
(c) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to Parent Common Stock with a
record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Parent Common Stock
represented thereby, and, in the case of Certificates representing Company
Common Stock, no cash payment in lieu of fractional shares shall be paid to
any such holder pursuant to Section 2.2(e), and all such dividends, other
distributions and cash in lieu of fractional shares of Parent Common Stock
shall be paid by Parent to the Exchange Agent and shall be included in the
Exchange Fund, in each case until the surrender of such Certificate in
accordance with this Article II, subject to Section 2.2(f). Subject to the
effect of applicable escheat or similar laws, following surrender of any
such Certificate, there shall be paid to the holder of the certificate
representing whole shares of Parent Common Stock issued in exchange
therefor, without interest, (i) at the time of such surrender, the amount
of dividends or other distributions with respect to the Parent Common Stock
with a record date after the Effective Time theretofore paid with respect
to such whole shares of Parent Common Stock and, in the case of
Certificates representing Company Common Stock, the amount of any cash
payable in lieu of a fractional share of Parent Common Stock to which such
holder is entitled pursuant to Section 2.2(e) and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record
date after the Effective Time and with a payment date subsequent to such
surrender payable with respect to such whole shares of Parent Common Stock.
(d) No Further Ownership Rights in Company Common Stock. All
shares of Parent Common Stock issued upon the surrender for exchange of
Certificates in accordance with the terms of this Article II (including any
cash paid pursuant to this Article II) shall be deemed to have been issued
(and paid) in full satisfaction of all rights pertaining to the shares of
Company Common Stock, as applicable, theretofore represented by such
Certificates. This provision, however, is subject to the rights of the
stockholders of the Company under Section 1701.85 of the OGCL and to the
Surviving Corporation's obligations to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have
been declared or made by the Company on such shares of Company Common Stock
which remain unpaid at the Effective Time. There shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Exchange
Agent for any reason, they shall be cancelled and exchanged as provided in
this Article II, except as otherwise provided by law.
(e) No Fractional Shares.
(i) No certificates or scrip representing fractional shares of
Parent Common Stock shall be issued upon the surrender for exchange
of Certificates, no dividend or distribution of Parent shall relate
to such fractional share interests and such fractional share
interests will not entitle the owner thereof to vote or to any rights
of a stockholder of Parent.
(ii) The Surviving Corporation shall pay each former holder of
Company Common Stock an amount in cash equal to the product obtained
by multiplying (A) the fractional share interest to which such former
holder (after taking into account all shares of Company Common Stock
held of record at the Effective Time by such holder) would otherwise
be entitled by (B) the Average Price as determined in accordance with
Section 2.1.
(iii) As soon as practicable after the determination of the
amount of cash, if any, to be paid to holders of Certificates
formerly representing Company Common Stock with respect to any
fractional share interests, the Exchange Agent shall make available
such amounts to such holders of Certificates formerly representing
Company Common Stock subject to and in accordance with the terms of
Section 2.2(c).
(f) Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the holders of the Certificates for six
months after the Effective Time shall be delivered to Parent, upon demand,
and any holders of the Certificates who have not theretofore complied with
this Article II shall thereafter look only to Parent for payment of their
claim for Merger Consideration, any dividends or distributions with respect
to Parent Common Stock, and any cash in lieu of fractional shares of Parent
Common Stock.
(g) No Liability. None of Parent, Sub, the Company, the
Surviving Corporation or the Exchange Agent shall be liable to any person
in respect of any shares of Parent Common Stock, any dividends or
distributions with respect thereto, any cash in lieu of fractional shares
of Parent Common Stock or any cash from the Exchange Fund, in each case
delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(h) Investment of Exchange Fund. The Exchange Agent shall
invest any cash included in the Exchange Fund, as directed by Parent, on a
daily basis. Any interest and other income resulting from such investments
shall be paid to Parent.
(i) Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such person of a bond
in such reasonable amount as the Surviving Corporation may direct as
indemnity against any claim that may be made against it with respect to
such Certificate, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed Certificate the Merger Consideration and, if
applicable, any unpaid dividends and distributions on shares of Parent
Common Stock deliverable in respect thereof and any cash in lieu of
fractional shares of Parent Common Stock, in each case pursuant to this
Agreement.
SECTION 2.3 Certain Adjustments. If between the date hereof and
the Effective Time, the outstanding shares of Parent Common Stock shall be
changed into a different number of shares by reason of any
reclassification, recapitalization, split-up, combination or exchange of
shares, or any dividend or other distribution payable in stock or other
securities shall be declared thereon with a record date within such period,
the Exchange Ratio shall be adjusted accordingly to provide to the holders
of Company Common Stock the same economic effect as contemplated by this
Agreement prior to such reclassification, recapitalization, split-up,
combination, exchange or dividend.
SECTION 2.4 Shares of Dissenting Stockholders. Notwithstanding
anything to the contrary, any issued and outstanding shares of Company
Common Stock held by a stockholder of the Company exercising rights under
Section 1701.85 of the OGCL to dissent from the Merger and require
appraisal of their shares of Company Common Stock (a "Dissenting
Stockholder") shall not be converted as described in Section 2.1(c) but, as
of the Effective Time, shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist and shall
become the right to receive such consideration as may be determined to be
due to such Dissenting Stockholder pursuant to the laws of the State of
Ohio; provided, however, that the shares of Company Common Stock
outstanding immediately prior to the Effective Time and held by a
Dissenting Stockholder who shall, after the Effective Time, withdraw his
demand for appraisal, otherwise fail to perfect his right of appraisal or
lose his right of appraisal, in either case as of the Effective Time, shall
be converted into the right to receive the Merger Consideration. The
Company shall give Parent (i) prompt notice of any written demands for
appraisal of shares of Company Common Stock received by the Company and
(ii) the opportunity to direct all negotiations and proceedings with
respect to such demands. The Company shall not, without the prior written
consent of Parent, voluntarily make any payment with respect to, or settle,
offer to settle or otherwise negotiate, any such demands.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Company.
Except as set forth on the Disclosure Schedule delivered by the Company to
Parent prior to the execution of this Agreement (the "Company Disclosure
Schedule") and making reference to the particular subsection of this
Agreement to which exception is being taken, the Company represents and
warrants to Parent as follows:
(a) Organization, Standing and Corporate Power.
(i) Each of the Company and its subsidiaries is a corporation
or other legal entity duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is organized
and has the requisite corporate or other power, as the case may be,
and authority to carry on its business as now being conducted,
except, as to subsidiaries, for those jurisdictions where the failure
to be in good standing individually or in the aggregate would not
have a material adverse effect (as defined in Section 8.3) on the
Company. Each of the Company and its subsidiaries is duly qualified
or licensed to do business and is in good standing (with respect to
jurisdictions that recognize such concept) in each jurisdiction in
which the nature of its business or the ownership, leasing or
operation of its properties makes such qualification or licensing
necessary, except for those jurisdictions where the failure to be so
qualified or licensed or to be in good standing individually or in
the aggregate would not have a material adverse effect on the
Company.
(ii) The Company has delivered to Parent prior to the execution
of this Agreement complete and correct copies of its Articles of
Incorporation and Code of Regulations, each as amended to date, and
has made available to Parent prior to the execution of this Agreement
complete and correct copies of the Articles of Incorporation, Code of
Regulations or comparable organizational documents, in each case as
amended to date, of each of its subsidiaries.
(iii) In all material respects, the minute books of the Company
contain accurate records of all meetings and accurately reflect all
other actions taken by the stockholders, the Board of Directors and
all committees of the Board of Directors of the Company since January
1, 1994.
(b) Subsidiaries. Section 3.1(b) of the Company Disclosure
Schedule sets forth a true and correct list of all of the subsidiaries of
the Company and identifies the jurisdiction of incorporation or
organization and the officers and directors for each such subsidiary. All
the outstanding shares of capital stock of, or other equity interests in,
each Company subsidiary have been validly issued and are fully paid and
nonassessable and are owned directly or indirectly by the Company, free and
clear of all pledges, claims, liens, charges, encumbrances and security
interests of any kind or nature whatsoever (collectively, "Liens") and free
of any other restriction (including any restriction on the right to vote,
sell or otherwise dispose of such capital stock or other ownership
interests).
(c) Capital Structure. The authorized capital stock of the
Company consists of 3,000,000 shares of Company Common Stock. As of the
date of this Agreement, (i) 518,314 shares of Company Common Stock were
issued and outstanding; and (ii)708 shares of Company Common Stock were
held by the Company in its treasury. All outstanding shares of Company
Common Stock have been duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. Except as set forth in
this Section 3.1(c), there are (x) not issued, reserved for issuance or
outstanding (A) any shares of capital stock or other voting securities of
the Company, (B) any securities of the Company or any Company subsidiary
convertible into or exchangeable or exercisable for shares of capital stock
or voting securities of the Company, (C) any warrants, calls, options or
other rights to acquire from the Company or any Company subsidiary, and any
obligation of the Company or any Company subsidiary to issue, any capital
stock, voting securities or securities convertible into or exchangeable or
exercisable for capital stock or voting securities of the Company, and (y)
no outstanding obligations of the Company or any Company subsidiary to
repurchase, redeem or otherwise acquire any such securities or to issue,
deliver or sell, or cause to be issued, delivered or sold, any such
securities. There are no outstanding (A) securities of the Company or any
Company subsidiary convertible into or exchangeable or exercisable for
shares of capital stock or other voting securities or ownership interests
in any Company subsidiary, (B) warrants, calls, options or other rights to
acquire from the Company or any Company subsidiary, and any obligation of
the Company or any Company subsidiary to issue, any capital stock, voting
securities or other ownership interests in, or any securities convertible
into or exchangeable or exercisable for any capital stock, voting
securities or ownership interests in, any Company subsidiary or (C)
obligations of the Company or any Company subsidiary to repurchase, redeem
or otherwise acquire any such outstanding securities of Company
subsidiaries or to issue, deliver or sell, or cause to be issued, delivered
or sold, any such securities. Neither the Company nor any Company
subsidiary is a party to any agreement restricting the transfer of,
relating to the voting of, requiring registration of, or granting any
preemptive or antidilutive rights with respect to, any securities of the
type referred to in the two preceding sentences. Other than Company
subsidiaries identified in Section 3.1(b) of the Company Disclosure
Schedule, the Company does not directly or indirectly beneficially own any
securities or other beneficial ownership interests in any other entity.
(d) Authority; Noncontravention. The Company has all requisite
corporate power and authority to enter into this Agreement and, subject, in
the case of the Merger, to the Company Stockholder Approval (as defined in
Section 3.1(k)) to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by the Company and
the consummation by the Company of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate action on
the part of the Company, subject, in the case of the Merger, to the Company
Stockholder Approval. This Agreement has been duly executed and delivered
by the Company and, assuming the due authorization, execution and delivery
by Parent and Sub, constitutes the legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms.
Except as set forth in Section 3.1(d) of the Company Disclosure Schedule,
the execution and delivery of this Agreement do not, and the consummation
of the transactions contemplated by this Agreement and compliance with the
provisions of this Agreement will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration
of any obligation or loss of a benefit under, or result in the creation of
any Lien upon any of the properties or assets of the Company or any of its
subsidiaries under, (i) the Articles of Incorporation, Code of Regulations
of the Company or the comparable organizational documents of any of its
subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession,
franchise, license or similar authorization applicable to the Company or
any of its subsidiaries or their respective properties or assets or (iii)
subject to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to the Company or any of its subsidiaries or
their respective properties or assets, other than, in the case of clauses
(ii) and (iii), any such conflicts, violations, defaults, rights, losses or
Liens that individually or in the aggregate would not (x) have a material
adverse effect on the Company or (y) reasonably be expected to impair in
any material respect the ability of the Company to perform its obligations
under this Agreement. No consent, approval, order or authorization of,
action by or in respect of, or registration, declaration or filing with,
any federal, state, local or foreign government, any court, administrative,
regulatory or other governmental agency, commission or authority or any
nongovernmental self-regulatory agency, commission or authority (a
"Governmental Entity") is required by or with respect to the Company or any
of its subsidiaries in connection with the execution and delivery of this
Agreement by the Company or the consummation by the Company of the
transactions contemplated by this Agreement, except for (1) the filing of a
pre-merger notification and report form by the Company under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"); (2) the filing of a pre-merger notice, application or other
information pursuant to the Illinois Responsible Party Transfer Act; (3)
the filing of the Certificate of Merger with the Secretary of State of Ohio
and such filings with Governmental Entities to satisfy the applicable
requirements of state securities or "blue sky" laws; and (4) such consents,
approvals, orders or authorizations the failure of which to be made or
obtained individually or in the aggregate would not (x) have a material
adverse effect on the Company or (y) reasonably be expected to impair in
any material respect the ability of the Company to perform its obligations
under this Agreement.
(e) Financial Statements; Undisclosed Liabilities.
(i) The audited consolidated financial statements of the
Company for the fiscal years ended [December 31, 1996 and 1995] and
the unaudited financial statements of the Company for the [nine-month
period ended September 30, 1997] (collectively, the "Company
Financial Statements") have been prepared from, and are in accordance
with, the books and records of the Company and its consolidated
subsidiaries, have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present in all material
respects the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to
normal year-end adjustments).
(ii) Except (A) as reflected or reserved against in the
Company's consolidated balance sheet dated as of September 30, 1997
included in the Company Financial Statements (the "Balance Sheet") or
in the notes thereto, (B) for liabilities or obligations incurred
after September 30, 1997 in the ordinary course of business
consistent with past practice and which, individually or in the
aggregate, would not have a material adverse effect on the Company,
or (C) for liabilities or obligations incurred in connection with
this Agreement or the transactions contemplated hereby, neither the
Company nor any of its subsidiaries has any material liabilities or
obligations (whether absolute, accrued, contingent or otherwise) of
any nature.
(iii) Set forth in Section 3.1(e) of the Company Disclosure
Schedule is a true and complete list of all material businesses of
the Company and its subsidiaries which have been sold, transferred or
otherwise disposed of or discontinued within the past five years (the
"Discontinued Businesses"). Except as set forth in Section 3.1(e) of
the Company Disclosure Schedule, neither the Company nor any of its
subsidiaries has incurred, since the respective dates such
Discontinued Businesses were sold, transferred or otherwise disposed
of or discontinued, any liabilities or obligations (whether absolute,
accrued, contingent or otherwise) of any nature, and neither the
Company nor any of its subsidiaries has any ongoing liabilities,
obligations or contingencies with respect to such Discontinued
Businesses.
(f) Information Supplied. None of the information supplied or
to be supplied by the Company specifically for inclusion or incorporation
by reference in (i) the registration statement on Form S-4 to be filed with
the SEC by Parent in connection with the issuance of Parent Common Stock in
the Merger (the "Form S-4") will, at the time the Form S-4 becomes
effective under the Securities Act of 1933, as amended (the "Securities
Act"), contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading or (ii) the Proxy Statement (as defined
in Section 5.1) will, at the date it is first mailed to the Company's
stockholders or at the time of the Company Stockholders Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
(g) Absence of Certain Changes or Events. Except for
liabilities or obligations incurred in connection with this Agreement or
the transactions contemplated hereby and except as disclosed in Section
3.1(g) of the Company Disclosure Schedule and except for liabilities and
obligations permitted by Section 4.1(a), since January 1, 1997, the Company
and its subsidiaries have conducted their business only in the ordinary
course, and there has not been (i) any material adverse change (as defined
in Section 8.3) in the Company, (ii) any declaration, setting aside or
payment of any dividend or other distribution (whether in cash, stock or
property) with respect to any of the Company's capital stock, except for
regular quarterly cash dividends declared in the amount of $1.10 per share
of Company Common Stock, (iii) any split, combination or reclassification
of any of the Company's capital stock or any issuance or the authorization
of any issuance of any other securities in respect of, in lieu of or in
substitution for shares of the Company's capital stock, (iv)(A) any
granting by the Company or any of its subsidiaries to any current or former
director, executive officer or other key employee of the Company or its
subsidiaries of any increase in compensation, bonus or other benefits,
except for normal increases as a result of promotions, normal increases of
base pay in the ordinary course of business or as was required under any
employment agreements in effect as of January 1, 1997, (B) any granting by
the Company or any of its subsidiaries to any such current or former
director, executive officer or key employee of any increase in severance or
termination pay, or (C) any entry by the Company or any of its subsidiaries
into, or any amendment of, any employment, deferred compensation,
consulting, severance, termination or indemnification agreement with any
such current or former director, executive officer or key employee, (v)
except insofar as required by a change in GAAP, any change in accounting
methods, principles or practices by the Company materially affecting its
assets, liabilities or business, (vi) any tax election that, individually
or in the aggregate, would have a material adverse effect on the Company or
any of its tax attributes or any settlement or compromise of any material
income tax liability, or (vii) any action taken by the Company or any of
the Company subsidiaries during the period from January 1, 1997 through the
date of this Agreement that, if taken during the period from the date of
this Agreement through the Effective Time, would constitute a breach of
Section 4.1(a).
(h) Compliance with Applicable Laws; Litigation.
(i) The Company, its subsidiaries and employees hold all
permits, licenses, variances, exemptions, orders, registrations and
approvals of all Governmental Entities which are required for the
operation of the businesses of the Company and its subsidiaries (the
"Company Permits"). Neither the Company nor any of its subsidiaries
has received notice that any Company Permit will be terminated or
modified or cannot be renewed in the ordinary course of business, and
the Company has no knowledge of any reasonable basis for any such
termination, modification or nonrenewal, except for such
terminations, modifications or nonrenewals as individually and in the
aggregate would not have or result in a material adverse effect on
the Company. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated
hereby do not and will not violate any Company Permit, or result in
any termination, modification or nonrenewals thereof, except for such
violations, terminations, modifications or nonrenewals thereof as
individually and in the aggregate would not have or result in a
material adverse effect on the Company. The Company and its
subsidiaries are in compliance in all material respects with the
terms of the Company Permits and all applicable statutes, laws,
ordinances, rules and regulations.
(ii) As of the date of this Agreement, except as set forth in
Section 3.1(h) of the Company Disclosure Schedule, no action, demand,
requirement or investigation by any Governmental Entity and no suit,
action or proceeding by any person, in each case with respect to the
Company or any of its subsidiaries or any of their respective
properties which could result in a material adverse effect is pending
or, to the knowledge (as defined in Section 8.3) of the Company,
threatened.
(i) Benefit Plan Representations.
(i) Section 3.1(i) of the Company Disclosure Schedule contains
a complete and correct list of (A) any "employee benefit plan" within
the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), (B) any other employee
benefit plan, arrangement or policy, including without limitation,
any stock option, stock purchase, stock award, stock appreciation,
deferred compensation, pension, retirement, savings, profit sharing,
incentive, bonus, health, life insurance, cafeteria, flexible
spending, dependent care, fringe benefit, vacation pay, holiday pay,
disability, sick pay, workers compensation, unemployment, severance,
employee loan, educational assistance plan, arrangement or policy,
and (C) any employment, indemnification, consulting or severance
agreement, whether written or oral (each item listed herein, a
"Company Benefit Plan"), which is sponsored or maintained by the
Company, or to which the Company contributes or is required to
contribute, on behalf of current or former employees, consultants or
directors of the Company or their beneficiaries or dependents. The
Company has not communicated to present or former employees of the
Company or formally adopted or authorized any additional Company
Benefit Plan or any change in or termination of any existing Company
Benefit Plan. The Company has not made any commitment to create any
additional Company Benefit Plan or to terminate or modify or change
in any respect any existing Company Benefit Plan. Each Company
Benefit Plan covers only current or former employees of the Company
and its beneficiaries or dependents.
(ii) The Company has made available to Parent complete and
correct copies of each Company Benefit Plan, or written summaries of
any unwritten Company Benefit Plan, any collective bargaining
agreement covering employees of the Company, any employee handbook
applicable to employees of the Company, and, with respect to each
Company Benefit Plan, the current summary plan description, related
trust agreements, insurance contracts and other material service
contracts, the latest Internal Revenue Service ("IRS") determination
letter, the latest annual financial statements, the last three years'
annual reports on IRS Form 5500 (including all required schedules and
accountant's opinions), the last three years' actuarial reports, and
the last three years' Pension Benefits Guaranty Corp. ("PBGC")
Forms-1 (and, if applicable, Forms 1-ES).
(iii) Each Company Benefit Plan is and has been operated and
administered, in all material respects, in accordance with its terms,
the terms of any applicable collective bargaining agreement and all
applicable laws. Each employee benefit plan which is a "group health
plan," within the meaning of Section 4980B of the Code maintained by
the Company, and any of its ERISA Affiliates has been operated and
administered in material compliance with the continuation coverage
requirements of Section 4980B of the Code and Part 6 of Title I of
ERISA. Each Company Benefit Plan intended to be tax-qualified under
Section 401(a) of the Code has received a favorable determination
letter from the IRS as to its tax-qualified status under the Code and
to the knowledge of the Company nothing has occurred since the date
of such favorable determination letter which would adversely affect
the qualified status of such plan.
(iv) No Company Benefit Plan provides health or life insurance
benefits to retirees or other terminated employees of the Company
other than continuation coverage required by Section 4980B of the
Code, except as set forth in Section 3.1(i) of the Company Disclosure
Schedule.
(v) No Company Benefit Plan is a multiemployer plan within the
meaning of Section 3(37) of ERISA ("Multiemployer Plan"), and the
Company has no outstanding liability with respect to any
Multiemployer Plan.
(vi) With respect to any "defined benefit plan", within the
meaning of Section 3(35) of ERISA, maintained or contributed to by
the Company or any of its ERISA Affiliates: (a) no such plan has
incurred an "accumulated funding deficiency" (within the meaning of
Section 412 of the Code), whether or not waived; (b) all
contributions required to have been made to any such plan under
Section 412 of the Code or Section 302 of ERISA have been made when
due; (c) no notice of intent to terminate any such plan has been
filed with the PBGC or distributed to participants and no amendment
terminating any such plan has been adopted; (d) no proceedings to
terminate any such plan have been instituted by the PBGC and no event
or condition has occurred which might constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any such plan, (e) no amendment has been
adopted which has or could reasonably be expected to subject the plan
to the requirements of Section 401(a)(29) of the Code; (f) no
"reportable event" within the meaning of ERISA Section 4043 of ERISA
(for which the 30-day notice requirement has not been waived by the
PBGC) has occurred within the last six years; (g) no lien has arisen
under ERISA or the Code, or is likely to arise, on the assets of the
Company and (h) neither the Company nor any of its ERISA Affiliates
has incurred any liability under Title IV of ERISA (contingent or
otherwise) other than for PBGC premiums not yet due.
(vii) No material event has occurred and no material condition
exists with respect to any Company Benefit Plan or any employee
benefit plan previously maintained by the Company which could subject
any Company Benefit Plan, the Company, Parent or any of their
employees, agents, directors or affiliates (as defined in Section
8.3), directly or indirectly (through an indemnification agreement or
otherwise), to a material liability for a breach of fiduciary duty,
or a "prohibited transaction," within the meaning of Section 406 of
ERISA or Section 4975 of the Code, or a material tax, penalty or fine
under Section 502 of ERISA or Subtitle D, Chapter 43 of the Code.
(viii) No Company Benefit Plan or related trust is liable for
any federal, state, local or foreign taxes.
(ix) There are no material actions, suits or claims (other than
routine claims for benefits in the ordinary course) with respect to
any Company Benefit Plan pending which could give rise to a material
liability, or to the knowledge of the Company, threatened, and to the
knowledge of the Company, there are no facts which could give rise to
any such material actions, suits or claims (other than routine claims
for benefits in the ordinary course). No Company Benefit Plan is
currently under governmental investigation or audit and, to the
knowledge of the Company, no such investigation or audit is
contemplated or under consideration.
(x) Except as set forth in Section 3.1(i) of the Company
Disclosure Schedule, neither the execution of this Agreement nor the
consummation of the transactions contemplated by this Agreement, will
(a) increase the amount of benefits otherwise payable under any
Company Benefit Plan, (b) result in the acceleration of the time of
payment, exercisability, funding or vesting of any such benefits, or
(c) result in any payment (whether severance pay or otherwise)
becoming due to, or with respect to, any employee or director of the
Company. No payment or series of payments that would constitute a
"parachute payment" (within the meaning of Section 280G of the Code)
has been made or will be made by the Company directly or indirectly
to any employee in connection with the execution of this Agreement or
as a result of the consummation of the transactions contemplated
hereby.
(xi) Substantially adequate and complete records have been and
are maintained with respect to each Company Benefit Plan and are in
the custody of the Company or a third party service provider retained
by the Company.
(j) Taxes.
(i) Except as set forth in the Section 3.1(j) of the Company
Disclosure Schedule:
(A) Each of the Company and its subsidiaries has (x) duly
filed (or there have been filed on its behalf) with the
appropriate Governmental Entities all Tax Returns (as defined
below) required to be filed by it on or prior to the date
hereof, and such Tax Returns are true, correct and complete in
all material respects, and (y) duly paid in full or made
provision in accordance with GAAP (or there has been paid or
provision has been made on its behalf) for the payment of all
Taxes (as defined below) for all periods ending through the
date hereof;
(B) There are no Liens for Taxes upon any property or
assets of the Company or any of its subsidiaries, except for
liens for Taxes not yet due;
(C) Each of the Company and its subsidiaries has complied
in all respects with all applicable laws, rules and regulations
relating to the payment and withholding of Taxes (including,
without limitation, withholding of Taxes pursuant to Sections
1441 and 1442 of the Code or similar provisions under any
foreign laws) and has, within the time and the manner
prescribed by law, withheld and paid over to the proper
Governmental Entities all amounts required to be so withheld
and paid over under applicable laws;
(D) No federal, state, local or foreign audits or other
administrative proceedings or court proceedings are presently
pending with regard to any Taxes or Tax Returns of the Company
or any of its subsidiaries, and neither the Company nor any of
its subsidiaries has received a written notice of any pending
audits or proceedings;
(E) Neither the Company nor any of its subsidiaries has
granted in writing any power of attorney which is currently in
force with respect to any Taxes or Tax Returns;
(F) Neither the Company nor any of its subsidiaries has
requested an extension of time within which to file any Tax
Return in respect of a taxable year which has not since been
filed and no outstanding waivers or comparable consents
regarding the application of the statute of limitations with
respect to Taxes or Tax Returns has been given by or on behalf
of the Company or any of its subsidiaries;
(G) Neither the Company nor any of its subsidiaries is a
party to any agreement providing for the allocation or sharing
of Taxes;
(H) Neither the Company nor any of its subsidiaries is a
party to any agreement, contract or arrangement that could
result, separately or in the aggregate, in the payment of any
"excess parachute payments" within the meaning of Section 280G
of the Code;
(I) The Company is not a United States real property
holding company as defined in Section 897(c)(2) of the Code;
and
(J) Neither the Company nor any of its subsidiaries has
taken any action or knows of any fact, agreement, plan or other
circumstance that is reasonably likely to prevent the Merger
from qualifying as a reorganization within the meaning of
Section 368(a) of the Code.
(ii) The Tax Returns of the Company and its subsidiaries have
been examined by the applicable taxing authorities (or the applicable
statutes of limitation for the assessment of Taxes for such periods
have expired) for all periods through and including 1993, and no
material deficiencies were asserted as a result of such examinations
which have not been resolved and fully paid;
(iii) For purposes of this Agreement (A) "Taxes" shall mean any
and all taxes, charges, fees, levies or other assessments, including,
without limitation, income, gross receipts, excise, real or personal
property, sales, withholding, social security, occupation, use,
service, service use, license, net worth, payroll, franchise,
transfer and recording taxes, fees and charges, imposed by the IRS or
any taxing authority (whether domestic or foreign including, without
limitation, any state, county, local or foreign government or any
subdivision or taxing agency thereof (including a United States
possession)), whether computed on a separate, consolidated, unitary,
combined or any other basis; and such term shall include any
interest, fines, penalties or additional amounts attributable to, or
imposed upon, or with respect to, any such amounts, and (B) "Tax
Return" shall mean any report, return, document, declaration or other
information or filing required to be supplied to any taxing authority
or jurisdiction (foreign or domestic) with respect to Taxes,
including, without limitation, information returns, any documents
with respect to or accompanying payments of estimated Taxes, or with
respect to or accompanying requests for the extension of time in
which to file any such report, return, document, declaration or other
information.
(k) Voting Requirements. The affirmative vote at the Company
Stockholders Meeting (the "Company Stockholder Approval") of the holders of
at least two-thirds of all outstanding shares of Company Common Stock to
adopt this Agreement is the only vote of the holders of any class or series
of the Company's capital stock necessary to approve and adopt this
Agreement and the transactions contemplated hereby, including the Merger.
(l) State Takeover Statutes. The Board of Directors of the
Company has approved this Agreement and the Stockholder Agreement and the
transactions contemplated hereby and thereby and such approval constitutes
approval of the Merger and the Stockholder Agreement and the other
transactions contemplated hereby and thereby by the Company Board of
Directors under the provisions of Chapter 1704 of the OGCL such that
Chapter 1704 of the OGCL does not apply to this Agreement and the
Stockholder Agreement and the transactions contemplated hereby and thereby.
To the knowledge of the Company, no other state takeover statute is
applicable to the Merger or the Stockholder Agreement or the other
transactions contemplated hereby or thereby.
(m) Accounting Matters. To its knowledge, neither the Company
nor any of its affiliates (as such term is used in Section 5.9) has taken
or agreed to take any action that would prevent the business combination to
be effected by the Merger from being accounted for as a pooling of
interests and the Company has no reason to believe that the Merger will not
qualify for "pooling of interests" accounting.
(n) Opinion of Financial Advisor. The Company has received the
opinion of SBC Warburg Dillon Read Inc. ("Dillon Read") dated the date of
this Agreement, to the effect that, as of such date the amount of the
Merger Consideration is fair from a financial point of view to the
stockholders of the Company.
(o) Brokers. No broker, investment banker, financial advisor or
other person, other than Dillon Read, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company.
(p) Intellectual Property.
(i) The Company and its subsidiaries own or have a valid and
enforceable license to use all trademarks, service marks, trade
names, patents and copyrights (in each case, free and clear of any
material Liens or other material limitations or restrictions)
(including any registrations or applications for registration of any
of the foregoing) (collectively, "Company Intellectual Property")
necessary to carry on its business substantially as currently
conducted, except for such Company Intellectual Property the failure
of which to own or validly license individually or in the aggregate
would not have a material adverse effect on the Company, and the
consummation of the Merger and the other transactions contemplated
hereby will not result in the loss of any such rights (or require the
payment of any material additional fees or royalties in order to
maintain such rights). Section 3.1(p) of the Company Disclosure
Schedule sets forth a true and correct list of all of the material
Company Intellectual Property and indicates those items which the
Company owns (distinguishing between exclusive and non-exclusive
ownership and indicating any licenses granted to other persons) or
has the exclusive right to use or license. Neither the Company nor
any such subsidiary has received any notice of infringement of or
conflict with, and, to the Company's knowledge, there are no
infringements of or conflicts with the rights of others with respect
to the use of, or the rights by others with respect to, any Company
Intellectual Property that individually or in the aggregate, in
either such case, would have a material adverse effect on the
Company.
(ii) The Company and its subsidiaries own or have a valid and
enforceable license to use all computer and telecommunication
software including source and object code and documentation and any
other media (in each case, free and clear of any material Liens or
other material limitations or restrictions) (including, without
limitation, manuals, journals and reference books) (collectively,
"Company Software") necessary to carry on its business substantially
as currently conducted, except for such Company Software the failure
of which to own or validly license individually or in the aggregate
would not have a material adverse effect on the Company, and the
consummation of the Merger and the other transactions contemplated
hereby will not result in the loss of any such rights (or require the
payment of any material additional fees or royalties in order to
maintain such rights). Neither the Company nor any such subsidiary
has received any notice of infringement of or conflict with, and, to
the Company's knowledge, there are no infringements of or conflicts
with the rights of others with respect to the use of, or the rights
by others with respect to, any Company Software that individually or
in the aggregate, in either such case, would have a material adverse
effect on the Company. Except as set forth in Section 3.1(p) of the
Company Disclosure Schedule, and to the knowledge of the Company, all
Company Software that contains or calls on a calendar function that
is indexed to a computer processing unit clock, provides specific
dates or calculates spans of dates, is able, or can, without material
expense, be made to be able to record, store, process and provide
true and accurate dates and calculations for dates and spans of dates
including and following January 1, 2000.
(q) Certain Contracts. Except as set forth in Section 3.1(q) of
the Company Disclosure Schedule, neither the Company nor any of its
subsidiaries is a party to or bound by (i) any agreement relating to
indebtedness (including sale and leaseback and capitalized lease
transactions and other similar financing transactions), or guarantees of
indebtedness, providing for payment or repayment in excess of $100,000,
(ii) any agreements providing for the indemnification by the Company or one
of its subsidiaries of any person, except those entered into in the
ordinary course of business, (iii) any agreements relating to the
purchasing of goods by, or furnishing of services to, the Company or one of
its subsidiaries thereof (A) requiring financial commitments in excess of
$100,000 or (B) having a term which is greater than six months and an
aggregate commitment in excess of $100,000 and which is not terminable by
the Company or one of its subsidiaries on less than ninety (90) days'
notice without the payment of any termination fee or similar payment, (iv)
any contracts, agreements and other arrangements for the sale of
inventories, goods or assets or for the furnishing of services by the
Company or any of its subsidiaries (A) with firm commitments having a value
in excess of $500,000 or (B) having a term which is greater than six months
and which is not terminable by the Company or any of its subsidiaries on
less than ninety (90) days' notice without payment of any termination fee
or similar payment, (v) any confidentiality agreements entered into by the
Company or any of its subsidiaries during the period commencing two years
prior to the date hereof pursuant to which confidential information has
been provided to a third party or by which the Company or any of its
subsidiaries was restricted from providing information to third parties,
(vi) any material joint venture, partnership or similar documents or
agreements, (vii) any agreements that limit or purport to limit the ability
of the Company or any of its subsidiaries to own, operate, sell, transfer,
pledge or otherwise dispose of any assets having an aggregate value in
excess of $100,000, (viii) any non-competition agreement or any other
agreement or obligation which purports to limit in any respect the manner
in which, or the localities in which, any business may be conducted, (ix)
manufacturer's representative, sales agency and distribution contracts and
agreements that (A) have a term of one year or more and are not terminable
by the Company or one of its subsidiaries on less than six (6) months'
notice without the payment of any termination fee or similar payment or (B)
are otherwise material, (x) contracts or agreement providing for future
payments that are conditioned, in whole or in part, on a change of control
of the Company or any of its subsidiaries, or (xi) any contract or other
agreement not made in the ordinary course of business which is material to
the Company and its subsidiaries taken as a whole or which would prohibit
or materially delay the consummation of the Merger or any of the
transactions contemplated by this Agreement (all contracts of the type
described in clauses (i) through (xi) being referred to herein as "Company
Material Contracts"). Each Company Material Contract is valid and binding
on the Company (or, to the extent a Company subsidiary is a party, such
subsidiary) and is in full force and effect, and the Company and each
Company subsidiary have in all material respects performed all obligations
required to be performed by them to date under each Company Material
Contract. Neither the Company nor any Company subsidiary knows of, or has
received notice of, any material violation or default under (nor, to the
knowledge of the Company, does there exist any condition which with the
passage of time or the giving of notice or both would result in such a
material violation or default under) any Company Material Contract.
(r) Environmental Liability. As of the date of this Agreement,
except as set forth in Section 3.1(r) of the Company Disclosure Schedule or
except (with the exception of the matters covered by subparagraphs (iii),
(iv), (vi) and (vii)) as would not have a material adverse effect on the
Company and its subsidiaries taken as a whole:
(i) The Company and its subsidiaries have obtained all permits,
licenses and other authorizations which are required under
Environmental Laws (as defined below) for the ownership, use and
operation of each location owned, operated or leased by the Company
or any of its subsidiaries (the "Property"), all such permits,
licenses and authorizations are in effect, no appeal nor any other
action is pending to revoke or modify in a manner adverse to the
Company or any of its subsidiaries any such permit, license or
authorization, and the Company and its subsidiaries are in compliance
with all terms and conditions of all such permits, licenses and
authorizations.
(ii) The Company, its subsidiaries and the Property are in
compliance with all Environmental Laws including, without limitation,
all restrictions, conditions, standards, limitations, prohibitions,
requirements, obligations, schedules and timetables contained in the
Environmental Laws or contained in any regulation, code, plan, order,
decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder.
(iii) The Company has heretofore made available to Parent true
and complete copies of (A) all environmental studies in the
possession or control of the Company, any of its subsidiaries or
their agents submitted to or issued by a governmental agency or made
by or at the direction of the Company or any of its subsidiaries
relating to the Property or any other property or facility previously
owned, operated or leased by the Company or any of its subsidiaries
for which the Company or any of its subsidiaries reasonably would be
expected to incur material Environmental Liabilities and Costs (as
defined below) and (B) all material studies or reports relating to
the exposure of employees of the Company or any of its subsidiaries
to Hazardous Substances and to the impact of any Hazardous
Substances, Oils, Pollutants or Contaminants (as defined below) from
any facility of the Company or any of its subsidiaries upon residents
in the area of the facilities and upon surrounding properties.
(iv) There is no civil, criminal or administrative action,
suit, demand, claim, hearing, notice of violation, investigation,
proceeding, notice or demand letter which would reasonably be
expected to result in material liability existing or pending, or, to
the knowledge of the Company, threatened, relating to the Company,
any of its subsidiaries, the Property or any other property or
facility owned, operated or leased, or previously owned, operated or
leased by the Company or any of its subsidiaries relating in any way
to the Environmental Laws or any regulations, code, plan, order,
decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder.
(v) Neither the Company nor any of its subsidiaries have, and
to the best of the Company's knowledge, no other person has, Released
(as defined below), placed, stored, buried or dumped any Hazardous
Substances, Oils, Pollutants or Contaminants or any other wastes
produced by, or resulting from, any business, commercial or
industrial activities, operations or processes, on or beneath the
Property or any property formerly owned, operated or leased by the
Company or any of its subsidiaries except for inventories of such
substances to be used, and wastes generated therefrom, in the
ordinary course of business of the Company and its subsidiaries
(which inventories and wastes, if any, were and are used, stored,
Released or disposed of in accordance with applicable laws and
regulations and in a manner such that there has been no Release of
any such substances into the environment in violation of the
Environmental Laws).
(vi) No Releases or Cleanup (as defined below) has occurred at
the Property which could result in the assertion or creation of a
Lien on the Property by any governmental body or agency with respect
thereto, nor has any such assertion of a Lien been made by any
governmental body or agency with respect thereto.
(vii) Neither the Company nor any of its subsidiaries have
received any written notice or order from any governmental agency or
private or public entity advising it that it is responsible for or
potentially responsible for paying for any material cost of Cleanup
of any Hazardous Substances, Oils, Pollutants or Contaminants or any
other waste or substance and neither the Company nor any of its
subsidiaries has entered into any such agreements concerning such
Cleanup, nor is the Company aware of any facts which might reasonably
give rise to such notice, order or agreement.
(viii) Neither the Company nor any of its subsidiaries are
currently undertaking any Cleanup, removal, treatment or remediation
of any Hazardous Substances, Oils, Pollutants or Contaminants which
would, or would reasonably be expected to, expose the Company or any
of its subsidiaries to material Environmental Liabilities and Costs.
(ix) With regard to the Company, any of its subsidiaries and
the Property, there are no past or present (or, to the knowledge of
the Company, future) events, conditions, circumstances, activities,
practices, incidents, actions or plans which may interfere with or
prevent compliance or continued compliance, with the Environmental
Laws as in effect on the date hereof or with any regulation, code,
plan, order, decree, judgment, injunction, notice or demand letter
issued, entered, promulgated or approved thereunder, or which may
give rise to any common law or legal liability under the
Environmental Laws, based on or related to the manufacture,
generation, processing, distribution, use, treatment, storage, place
of disposal, transport or handling, or the Release or threatened
Release into the outdoor environment by the Company or any of its
subsidiaries or a facility of the Company or any of its subsidiaries,
of any Hazardous Substances, Oils, Pollutants or Contaminants which
is either unlawful or which would subject the Company to liability
for Cleanup.
(x) For the purposes of this Agreement, the following terms
shall have the meanings set forth below:
"Cleanup" shall mean all actions required by Environmental Laws
to: (1) clean up, remove, treat or remediate Hazardous Substances,
Oils, Pollutants or Contaminants in the indoor or outdoor
environment; (2) prevent the Release of Hazardous Substances, Oils,
Pollutants or Contaminants so that they do not migrate, endanger or
threaten to endanger public health or welfare or the indoor or
outdoor environment; (3) perform studies, investigations or
monitoring; or (4) respond to any government requests for information
or documents in any way relating to clean up, removal, treatment or
remediation or potential clean up, removal, treatment or remediation
of Hazardous Substances, Oils, Pollutants or Contaminants in the
workplace or outdoor environment.
"Environmental Laws" shall mean all applicable foreign,
federal, state and local laws, regulations, rules and ordinances
relating to pollution or protection of health, safety and the
environment, including, without limitation, laws relating to Releases
or threatened Releases of Hazardous Substances, Oils, Pollutants or
Contaminants into the outdoor environment (including, without
limitation, ambient air, surface water, groundwater, land, surface
and subsurface strata) or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, Release, transport
or handling of Hazardous Substances, Oils, Pollutants or
Contaminants, and all laws and regulations with regard to
recordkeeping, notification, disclosure and reporting requirements
respecting Hazardous Substances, Oils, Pollutants or Contaminants,
and all laws relating to endangered or threatened species of fish,
wildlife and plants and the management or use of natural resources.
"Environmental Liabilities and Costs" shall mean all
liabilities, obligations, responsibilities, obligations to conduct
Cleanup, losses, damages, deficiencies, punitive damages,
consequential damages, treble damages, costs and expenses (including,
without limitation, all reasonable fees, disbursements and expenses
of counsel, expert and consulting fees and costs of investigations
and feasibility studies and responding to government requests for
information or documents), fines, penalties, restitution and monetary
sanctions, interests, direct or indirect, known or unknown, absolute
or contingent, past, present or future, resulting from any claim or
demand, by any person or entity, whether based in contract, tort,
implied or express warranty, strict liability, joint and several
liability, criminal or civil statute, under any Environmental Law, or
arising from environmental, health or safety conditions, or the
Release or threatened Release of Hazardous Substances, Oils,
Pollutants or Contaminants into the environment, as a result of past
or present ownership, leasing or operation of any Properties, owned,
leased or operated by the Company.
"Hazardous Substances, Oils, Pollutants or Contaminants" shall
mean all substances defined as such in the National Oil and Hazardous
Substances Pollution Contingency Plan, 40 C.F.R. ss. 300.5, or
defined as such by, or regulated as such under, any Environmental
Law.
"Release" shall mean any release, spill, emission, discharge,
leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration into the indoor or outdoor environment
(including, without limitation, ambient air, surface water,
groundwater, and surface or subsurface strata) or the movement of
Hazardous Substances, Oils, Pollutants or Contaminants through or in
the air, soil, surface water or groundwater.
(s) Transactions with Affiliates. As of the date hereof, except
as disclosed in Section 3.1(s) of the Company Disclosure Schedule, (i)
there are no outstanding amounts payable to or receivable from, or advances
by the Company or any of its subsidiaries to, and neither the Company nor
any of its subsidiaries is otherwise a creditor or debtor to, any
stockholder, officer, director, employee or affiliate of the Company or any
of its subsidiaries, and (ii) neither the Company nor any of its
subsidiaries is a party to any transaction agreement, arrangement or
understanding with any stockholder, officer, director or employee of the
Company or any of its subsidiaries.
(t) Insurance. Section 3.1(t) of the Company Disclosure
Schedule describes all primary, excess and umbrella policies of general
liability, fire, workers' compensation, products liability, completed
operations, employers, liability, health, bonds and other forms of
insurance providing insurance coverage in excess of $50,000 to the Company
or any of its subsidiaries. The Company has heretofore made available to
Parent true, complete and correct copies of all such policies. With respect
to all such policies, all premiums currently payable or previously due and
payable with respect to all periods up to and including the Effective Time
have been paid and no notice of cancellation or termination has been
received with respect to such policy.
(u) Real Property; Assets.
(i) Section 3.1(u) of the Company Disclosure Schedule contains
a list of all real property owned or leased by the Company (the "Real
Property") or its subsidiaries, indicating whether such property is
owned or leased. With respect to all Real Property, the Company or
one of its subsidiaries, as the case may be, has good and marketable
title in fee simple to all Real Property owned by such entity, and
enjoys peaceful and undisturbed possession and has valid leasehold
interests in all Real Property leased (whether pursuant to real
property leases, subleases, licenses or use or occupancy agreements)
by such entity, in each case free and clear of all Liens, except for
all easements and restrictions of record and defects in title or
Liens which do not and will not materially interfere with the use of
the Real Property as presently used, otherwise materially impair
business operations at such properties or materially detract from the
value of the Real Property. The current use of the Real Property by
the Company and its subsidiaries does not materially violate the
certificate of occupancy thereof, any instrument of record or
agreement affecting the Real Property or any local zoning or similar
land use or other laws and none of the occupiable structures on the
Real Property materially encroaches upon real property of another
person, and no occupiable structure of any other person materially
encroaches upon any Real Property, except in each case for any such
use or encroachment which does not have a material adverse effect on
the Company. Neither the Company nor any of its subsidiaries has
received notice of any pending or threatened condemnation proceeding,
or of any sale or other disposition in lieu of condemnation,
materially affecting any of the Real Property. No current use by the
Company or any of its subsidiaries of the Real Property is dependent
on a nonconforming use or other approval of a Governmental Entity,
the absence of which individually or in the aggregate would have or
result in a material adverse effect on the Company. Each parcel of
Real Property abuts on or has direct vehicular access to a public
road. Except as set forth in Section 3.1(u) of the Company Disclosure
Schedule, there are no leases, subleases, licenses, concessions or
other agreements granting to any parties or party the right of use or
occupancy of any material portion of any of the owned Real Property
and there are no outstanding options or rights of first refusal to
purchase any of the owned Real Property. Except as set forth in
Section 3.1(u) of the Company Disclosure Schedule, neither the
Company nor any of its subsidiaries leases any Real Property from any
affiliate of the Company.
(ii) The Company and its subsidiaries have valid title to all
assets (other than the Real Property which is the subject of
paragraph (i) above and Company Intellectual Property which is the
subject of Section 3.1(p) hereof) reflected on the Balance Sheet or
acquired since the date of the Balance Sheet, free and clear of all
Liens, other than Liens which would not in the aggregate have a
material adverse effect on the Company or materially impair the
ability to use such assets as currently used, other than assets
disposed of since the date of the Balance Sheet in the ordinary
course of business consistent with past practice which would not in
the aggregate be material. To the knowledge of the Company, such
assets are in good operating condition and repair (ordinary wear and
tear excepted), have been reasonably maintained consistent with
standards generally followed in the industry, are suitable for their
present uses and, in the case of structures, are structurally sound,
except in each case as would not result in a material adverse effect
on the Company.
(iii) The Real Property and the other assets owned or leased by
the Company and its subsidiaries constitute all of the properties and
assets necessary for them to conduct their respective businesses as
currently conducted.
(v) Labor Matters.
(i) Except as set forth in Section 3.1(v) of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries
is a party to or bound by and none of their employees is subject to
any collective bargaining agreement relating to the terms and
conditions of employment for any group of employees (any such
agreement, memorandum or document, a "Collective Bargaining
Agreement"), and there are no labor unions or other organizations
representing or, to the knowledge of the Company, purporting to
represent, any employees employed by any of the Company and its
subsidiaries. No labor union is currently engaged in or, to the
knowledge of the Company, threatening, organizational efforts with
respect to any employees of the Company or any of its subsidiaries.
The Company and its subsidiaries are not in material breach of or
default under any Collective Bargaining Agreement. Except as set
forth in Schedule 3.1(v) of the Company Disclosure Schedule, since
January 1, 1992, there has not occurred or been threatened, any
strike, slowdown, picketing, work stoppage, concerted refusal to work
overtime or other similar labor activity with respect to any
employees of the Company or any of its subsidiaries.
(ii) Since the enactment of the Worker Adjustment and
Retraining Notification Act (the "WARN Act"), neither the Company nor
any of its subsidiaries has effectuated (i) a "plant closing" (as
defined in the WARN Act) affecting any site of employment or one or
more facilities or operating units within any site of employment or
facility of the Company or any of its subsidiaries, or (ii) a "mass
layoff" (as defined in the WARN Act) affecting any site of employment
or facility of the Company or any of its subsidiaries; nor has the
Company or any of its subsidiaries been affected by any transaction
or engaged in layoffs or employment terminations sufficient in number
to trigger application of any similar state, local or foreign law or
regulation; and none of the Company's or any of its subsidiaries'
employees has suffered an "employment loss" (as defined in the WARN
Act) during the six month period prior to the date of this Agreement.
SECTION 3.2 Representations and Warranties of Parent. Except as
disclosed in the Parent Filed SEC Documents (as defined in Section 3.2(g))
or as set forth on the Disclosure Schedule delivered by Parent to the
Company prior to the execution of this Agreement (the "Parent Disclosure
Schedule") and making reference to the particular subsection of this
Agreement to which exception is being taken, Parent represents and warrants
to the Company as follows:
(a) Organization, Standing and Corporate Power.
(i) Each of Parent and its subsidiaries (including Sub) is a
corporation or other legal entity duly organized, validly existing
and in good standing (with respect to jurisdictions which recognize
such concept) under the laws of the jurisdiction in which it is
organized and has the requisite corporate or other power, as the case
may be, and authority to carry on its business as now being
conducted, except, as to subsidiaries, for those jurisdictions where
the failure to be in good standing individually or in the aggregate
would not have a material adverse effect on Parent. Each of Parent
and its subsidiaries is duly qualified or licensed to do business and
is in good standing (with respect to jurisdictions which recognize
such concept) in each jurisdiction in which the nature of its
business or the ownership, leasing or operation of its properties
makes such qualification or licensing necessary, except for those
jurisdictions where the failure to be so qualified or licensed or to
be in good standing individually or in the aggregate would not have a
material adverse effect on Parent.
(ii) Parent has delivered to the Company prior to the execution
of this Agreement complete and correct copies of its Certificate of
Incorporation and By-laws, as amended to date.
(b) Subsidiaries. Section 3.2(b) of the Parent Disclosure
Schedule sets forth a true and correct list of all the Significant
Subsidiaries (as such term is defined in Rule 1-02 of Regulation S-X
promulgated by the SEC) of Parent as of the date of this Agreement. Except
as set forth in Section 3.2(b) of the Parent Disclosure Schedule, all the
outstanding shares of capital stock of, or other equity interests in, each
such Significant Subsidiary have been validly issued and are fully paid and
nonassessable and are owned directly or indirectly by Parent, free and
clear of all Liens and free of any other restriction (including any
restriction on the right to vote, sell or otherwise dispose of such capital
stock or other ownership interests).
(c) Capital Structure. The authorized capital stock of Parent
consists of 400,000,000 shares of Parent Common Stock, 8,750,000 shares of
serial preferred stock, par value $1.00 per share (the "Serial Preferred
Stock"), and 400,000 shares of Cumulative $4 Preferred Stock, without par
value (the "$4 Preferred Stock"). At the close of business on December 31,
1997: (i) 302,909,842 shares of Parent Common Stock were issued and
outstanding; (ii) 726,380 shares of Parent Common Stock were held by Parent
in its treasury or by subsidiaries of Parent; (iii) no shares of the Serial
Preferred Stock were issued and outstanding; (iv) 392,400 shares of the $4
Preferred Stock were issued and outstanding; (v) 11,543,788 shares of
Parent Common Stock were reserved for issuance upon exercise of outstanding
employee stock options or other rights to purchase or receive Parent Common
Stock under Parent's stock option plans (collectively, "Parent Stock
Options"); and (vi) 8,333,333 shares of Parent Common Stock were reserved
for issuance upon the conversion of outstanding Trust Issued Tax Deductible
Convertible Preferred Stock (the "Trust Preferred Stock"). All outstanding
shares of capital stock of Parent are, and all shares which may be issued
pursuant to this Agreement or otherwise will be, when issued, duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. Except as set forth in this Section 3.2(c) and except
for changes since December 31, 1997 resulting from the issuance of shares
of Parent Common Stock pursuant to Parent Stock Options, as of the date
hereof, (x) there are not issued, reserved for issuance or outstanding (A)
any shares of capital stock or other voting securities of Parent, (B) any
securities of Parent or any Parent subsidiary convertible into or
exchangeable or exercisable for shares of capital stock or voting
securities of Parent, (C) any warrants, calls, options or other rights to
acquire from Parent or any Parent subsidiary, and any obligation of Parent
or any Parent subsidiary to issue, any capital stock, voting securities or
securities convertible into or exchangeable or exercisable for capital
stock or voting securities of Parent, and (y) there are no outstanding
obligations of Parent or any Parent subsidiary to repurchase, redeem or
otherwise acquire any such securities or to issue, deliver or sell, or
cause to be issued, delivered or sold, any such securities. As of the date
hereof, there are no outstanding (A) securities of Parent or any Parent
subsidiary convertible into or exchangeable or exercisable for shares of
capital stock or other voting securities or ownership interests in any
Parent subsidiary, (B) warrants, calls, options or other rights to acquire
from Parent or any Parent subsidiary, and any obligation of Parent or any
Parent subsidiary to issue, any capital stock, voting securities or other
ownership interests in, or any securities convertible into or exchangeable
or exercisable for any capital stock, voting securities or ownership
interests in, any Parent subsidiary or (C) obligations of Parent or any
Parent subsidiary to repurchase, redeem or otherwise acquire any such
outstanding securities of Parent subsidiaries or to issue, deliver or sell,
or cause to be issued, delivered or sold, any such securities.
(d) Authority; Noncontravention. Each of Parent and Sub has all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement. The execution
and delivery of this Agreement by each of Parent and Sub and the
consummation by each of Parent and Sub of the transactions contemplated by
this Agreement have been duly authorized by all necessary corporate action
on the part of Parent and Sub. This Agreement has been duly executed and
delivered by each of Parent and Sub and, assuming the due authorization,
execution and delivery by the Company, constitutes the legal, valid and
binding obligations of each of Parent and Sub, enforceable against each of
Parent and Sub in accordance with its terms. The execution and delivery of
this Agreement does not, and the consummation of the transactions
contemplated by this Agreement and compliance with the provisions of this
Agreement will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any
obligation or loss of a benefit under, or result in the creation of any
Lien upon any of the properties or assets of Parent or any of its
subsidiaries (including Sub) under, (i) the Certificate of Incorporation or
By-laws of Parent or the comparable organizational documents of any of its
subsidiaries (including Sub), (ii) any loan or credit agreement, note,
bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise, license or similar authorization applicable to
Parent or any of its subsidiaries (including Sub) or their respective
properties or assets or (iii) subject to the governmental filings and other
matters referred to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Parent or any of
its subsidiaries (including Sub) or their respective properties or assets,
other than, in the case of clauses (ii) and (iii), any such conflicts,
violations, defaults, rights, losses or Liens that individually or in the
aggregate would not (x) have a material adverse effect on Parent or (y)
reasonably be expected to impair the ability of Parent to perform its
obligations under this Agreement. No consent, approval, order or
authorization of, action by, or in respect of, or registration, declaration
or filing with, any Governmental Entity is required by or with respect to
Parent or any of its subsidiaries (including Sub) in connection with the
execution and delivery of this Agreement by each of Parent or Sub or the
consummation by Parent and Sub of the transactions contemplated by this
Agreement, except for (1) the filing of a pre-merger notification and
report form by Parent under the HSR Act; (2) the filing with the SEC of (A)
the Form S-4 and (B) such reports under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as may be required in connection
with this Agreement and the transactions contemplated by this Agreement;
(3) the filing of the Certificate of Merger with the Secretary of State of
Ohio and such filings with Governmental Entities to satisfy the applicable
requirements of state securities or "blue sky" laws; (4) such filings with
and approvals of the NYSE to permit the shares of Parent Common Stock that
are to be issued in the Merger to be listed on the NYSE; and (5) such
consents, approvals, orders or authorizations the failure of which to be
made or obtained individually or in the aggregate would not (x) have a
material adverse effect on Parent or (y) reasonably be expected to impair
the ability of Parent to perform its obligations under this Agreement.
(e) Regulatory Documents; Undisclosed Liabilities. Since
January 1, 1994, Parent and its affiliates or subsidiaries have filed all
required registration statements, prospectuses, reports, schedules, forms,
statements and other documents (including exhibits and all other
information incorporated therein) with the SEC (the "Parent SEC
Documents"). Parent will deliver or make available to the Company after the
filing thereof a complete copy of each Parent SEC Document filed by or on
behalf of Parent or any of its subsidiaries or affiliates with the SEC
after the date hereof and prior to the Closing Date. As of their respective
dates, the Parent SEC Documents complied in all material respects with the
requirements of the Securities Act and the Exchange Act, as the case may
be, and none of the Parent SEC Documents when filed contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading.
The financial statements of Parent included in the Parent SEC Documents
have been prepared from, and are in accordance with, the books and records
of Parent and its consolidated subsidiaries, comply, as of their respective
dates of filing with the SEC, in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with GAAP (except,
in the case of unaudited statements, as permitted by Form 10-Q of the SEC)
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present the consolidated
financial position of Parent and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations and cash
flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). Except (i) as reflected
in such financial statements or in the notes thereto or (ii) for
liabilities incurred in connection with this Agreement or the transactions
contemplated hereby, neither Parent nor any of its subsidiaries has any
liabilities or obligations of any nature which, individually or in the
aggregate, would have a material adverse effect on Parent.
(f) Information Supplied. None of the information supplied or
to be supplied by Parent specifically for inclusion or incorporation by
reference in the Form S-4 will, at the time the Form S-4 becomes effective
under the Securities Act, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading. The Form S-4 will
comply as to form in all material respects with the requirements of the
Securities Act and the rules and regulations thereunder, except that no
representation or warranty is made by Parent with respect to statements
made or incorporated by reference therein based on information supplied by
the Company specifically for inclusion or incorporation by reference in the
Form S-4.
(g) Absence of Certain Changes or Events. Except for
liabilities incurred in connection with this Agreement or the transactions
contemplated hereby, and except as permitted by Section 4.1(b), since
January 1, 1997 to the date of this Agreement, Parent and its subsidiaries
have conducted their business only in the ordinary course or as disclosed
in any Parent SEC Document filed since such date and prior to the date
hereof (as amended to the date hereof, the "Parent Filed SEC Documents"),
and there has not been (i) any material adverse change in Parent, (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of Parent's
capital stock, other than the payment of regular quarterly dividends on the
Parent Common Stock and $4 Preferred Stock in the per share amounts of $.25
and $1.00, respectively, (iii) any split, combination or reclassification
of any of Parent's capital stock or any issuance or the authorization of
any issuance of any other securities in respect of, in lieu of or in
substitution for shares of Parent's capital stock, except for issuances of
Parent Common Stock upon exercise of Parent Employee Stock Options or upon
conversion of Parent Convertible Securities, (iv) except insofar as may
have been disclosed in Parent Filed SEC Documents or required by a change
in GAAP, any change in accounting methods, principles or practices by
Parent materially affecting its assets, liabilities or business, or (v) any
action taken by Parent or any of the Parent subsidiaries during the period
from January 1, 1997 through the date of this Agreement that, if taken
during the period from the date of this Agreement through the Effective
Time would constitute a breach of Section 4.1(b).
(h) Brokers. No broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf
of Parent.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 Conduct of Business. (a) Conduct of Business by the
Company. Except as set forth in Section 4.1(a) of the Company Disclosure
Schedule, as otherwise expressly contemplated by this Agreement or as
consented to by Parent in writing, such consent not to be unreasonably
withheld or delayed, during the period from the date of this Agreement to
the Effective Time, the Company shall, and shall cause its subsidiaries to,
carry on their respective businesses in the ordinary course consistent with
past practice and in compliance in all material respects with all
applicable laws and regulations and, to the extent consistent therewith,
use all reasonable efforts to preserve intact their current business
organizations, use reasonable efforts to keep available the services of
their current officers and other key employees and preserve their
relationships with those persons having business dealings with them to the
end that their goodwill and ongoing businesses shall be unimpaired at the
Effective Time. Without limiting the generality of the foregoing (but
subject to the above exceptions), during the period from the date of this
Agreement to the Effective Time, the Company shall not, and shall not
permit any of its subsidiaries to:
(i) other than dividends and distributions by a direct or
indirect wholly owned subsidiary of the Company to its parent, or by
a subsidiary that is partially owned by the Company or any of its
subsidiaries, provided that the Company or any such subsidiary
receives or is to receive its proportionate share thereof, (x)
declare, set aside or pay any dividends on, make any other
distributions in respect of, or enter into any agreement with respect
to the voting of, any of its capital stock (except for regular
quarterly cash dividends payable prior to the Effective Time at a
rate not in excess of $1.10 per share of Company Common Stock), (y)
split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock, or (z)
purchase, redeem or otherwise acquire any shares of capital stock of
the Company or any of its subsidiaries or any other securities
thereof or any rights, warrants or options to acquire any such shares
or other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber or
subject to any Lien any shares of its capital stock, any other voting
securities or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, voting securities or
convertible securities;
(iii) amend its articles of incorporation, code of regulations,
by-laws or other comparable organizational documents;
(iv) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by
any other manner, any business or any person;
(v) subject to compliance with Section 5.13, sell, lease,
license, mortgage or otherwise encumber or subject to any Lien or
otherwise dispose of any of its properties or assets (including
securitizations), other than in the ordinary course of business
consistent with past practice;
(vi) take any action that would cause the representations and
warranties set forth in Section 3.1(g) (with each reference therein
to "ordinary course of business" being deemed for purposes of this
Section 4.1(a)(vi) to be immediately followed by "consistent with
past practice") to no longer be true and correct;
(vii) incur any indebtedness for borrowed money or issue any
debt securities or assume, guarantee or endorse, or otherwise become
responsible for the obligations of any person; or make any loans,
advances or capital contributions to, or investments in, any person
other than its wholly owned subsidiaries, except in the ordinary
course of business consistent with past practice;
(viii) change its methods of accounting (or underlying
assumptions) in effect at December 31, 1996, except as required by
changes in GAAP, or change any of its methods of reporting income and
deductions for federal income tax purposes from those employed in the
preparation of the federal income tax returns of the Company for the
taxable years ending December 31, 1996 and 1995, except as required
by changes in law or regulation;
(ix) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business consistent with past practice or in
accordance with their terms, of liabilities reflected or reserved
against in the Balance Sheet or incurred in the ordinary course of
business consistent with past practice since the date of the Balance
Sheet;
(x) create, renew, amend, terminate or cancel, or take any
other action that may result in the creation, renewal, amendment,
termination or cancellation of any Company Material Contract except
in the ordinary course of business;
(xi) pay, loan or advance any amount to, or sell, transfer or
lease any properties or assets (real, personal or mixed, tangible or
intangible) to, or enter into any agreement or arrangement with, any
of its officers, directors or partners or any affiliate or the
immediate family members or associates of any of its officers,
directors or partners other than compensation advances in the
ordinary course of business consistent with past practice; or
(xii) authorize, or commit or agree to take, any of the
foregoing actions;
provided that the limitations set forth in this Section 4.1(a) (other than
clause (iii)) shall not apply to any transaction between the Company and
any wholly owned subsidiary or between any wholly owned subsidiaries of the
Company.
(b) Other Actions. Except as required by law, the Company and
Parent shall not, and shall not permit any of their respective subsidiaries
to, voluntarily take any action that would, or that could reasonably be
expected to, result in (i) any of the representations and warranties of
such party set forth in this Agreement that are qualified as to materiality
becoming untrue at the Effective Time, (ii) any of such representations and
warranties that are not so qualified becoming untrue in any material
respect at the Effective Time, or (iii) any of the conditions to the Merger
set forth in Article VI not being satisfied.
(c) Advise of Changes. The Company and Parent shall promptly
advise the other party orally and in writing to the extent it has knowledge
of (i) any representation or warranty made by it contained in this
Agreement that is qualified as to materiality becoming untrue or inaccurate
in any respect or any such representation or warranty that is not so
qualified becoming untrue or inaccurate in any material respect, (ii) the
failure by it to comply in any material respect with or satisfy in any
material respect any covenant, condition or agreement to be complied with
or satisfied by it under this Agreement and (iii) any change or event
having, or which, insofar as can reasonably be foreseen, could reasonably
be expected to have a material adverse effect on such party or on the truth
of their respective representations and warranties or the ability of the
conditions set forth in Article VI to be satisfied; provided, however, that
no such notification shall affect the representations, warranties,
covenants or agreements of the parties (or remedies with respect thereto)
or the conditions to the obligations of the parties under this Agreement.
SECTION 4.2 No Solicitation by the Company.
(a) The Company shall not, nor shall it permit any of its
subsidiaries to, nor shall it authorize or permit any of its directors,
officers or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by it or any of its
subsidiaries to, directly or indirectly through another person, (i)
solicit, initiate or encourage (including by way of furnishing
information), or take any other action designed to facilitate, any
inquiries or the making of any proposal which constitutes any Company
Takeover Proposal (as defined below) or (ii) participate in any discussions
or negotiations regarding any Company Takeover Proposal; provided, however,
that if the Board of Directors of the Company determines in good faith,
based on the advice of outside counsel, that it is necessary to do so in
order to act in a manner consistent with its fiduciary duties to the
Company's stockholders under applicable law, the Company may, in response
to an unsolicited bona fide inquiry, which did not otherwise result from a
breach of this Section 4.2(a) and which is made or received prior to the
obtaining of the Company Stockholder Approval, from a third party (a "Third
Party") which the Board of Directors of the Company believes in good faith
has the intention of making, and the capability of consummating, a Company
Superior Proposal (as defined in Section 4.2(b), and subject to providing
prior written notice of its decision to take such action to Parent and
compliance with Section 4.2(c), pursuant to a customary confidentiality
agreement (as determined by the Company based on the advice of its outside
counsel, the terms of which are no more favorable to such person than the
Confidentiality Agreement (as defined in Section 5.4)) furnish to the Third
Party financial statements of the Company, a list of the Company's
facilities and a summary of the Company's production capacities and volumes
for each of the past three fiscal years; provided, further, that the
Company shall not participate in negotiations with a Third Party until such
Third Party has submitted to the Company a Company Superior Proposal. For
purposes of this Agreement, a "Company Takeover Proposal" means any
inquiry, proposal or offer from any person relating to any direct or
indirect acquisition or purchase of a business that constitutes 10% or more
of the net revenues, net income or the assets of the Company and its
subsidiaries, taken as a whole, or 10% or any equity securities of the
Company, any tender offer or exchange offer that if consummated would
result in any person beneficially owning any equity securities of the
Company, or any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
the Company (or any Company subsidiary whose business constitutes 10% or
more of the net revenues, net income or the assets of the Company and its
subsidiaries, taken as whole) or the Company's capital stock, other than
the transactions contemplated by this Agreement.
(b) Except as expressly permitted by this Section 4.2, neither
the Board of Directors of the Company nor any committee thereof shall (i)
withdraw or modify, or propose publicly to withdraw or modify, in a manner
adverse to Parent, the approval or recommendation by such Board of
Directors or such committee of the Merger or this Agreement, (ii) approve
or recommend, or propose publicly to approve or recommend, any Company
Takeover Proposal, or (iii) cause the Company to enter into any letter of
intent, agreement in principle, acquisition agreement or other similar
agreement (each, a "Company Acquisition Agreement") related to any Company
Takeover Proposal. Notwithstanding the foregoing, at any time prior to the
obtaining of the Company Stockholder Approval, the Board of Directors of
the Company, to the extent that it determines in good faith, based upon the
advice of outside counsel, that it is necessary to do so in order to act in
a manner consistent with its fiduciary duties to the Company's stockholders
under applicable law, may (subject to this and the following sentences)
terminate this Agreement solely in order to concurrently enter into a
Company Acquisition Agreement with respect to any Company Superior
Proposal, but only at a time that is after the fifth business day following
Parent's receipt of written notice advising Parent that the Board of
Directors of the Company is prepared to accept a Company Superior Proposal,
specifying the material terms and conditions of such Company Superior
Proposal and identifying the person making such Company Superior Proposal.
For purposes of this Agreement, a "Company Superior Proposal" means any
proposal made by a third party to acquire, directly or indirectly,
including pursuant to a tender offer, exchange offer, merger,
consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction, for consideration consisting of cash
and/or securities, more than 50% of the combined voting power of the shares
of the Company's capital stock then outstanding or all or substantially all
the assets of the Company and otherwise on terms which the Board of
Directors of the Company determines in its good faith judgment (based on
the advice of an independent financial advisor of nationally recognized
reputation) to be more favorable to the Company's stockholders than the
Merger and for which financing, to the extent required, is then committed
or which, in the good faith judgment of the Board of Directors of the
Company based on the advice of such financial advisor, is reasonably
capable of being obtained by such third party.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 4.2, the Company shall promptly (and
in any event, within 24 hours) advise Parent orally and in writing of any
request for information or of any Company Takeover Proposal, the material
terms and conditions of such request or Company Takeover Proposal and the
identity of the person making such request or Company Takeover Proposal.
The Company will keep Parent reasonably informed of the status and details
(including amendments or proposed amendments) of any such request or
Company Takeover Proposal.
(d) Nothing contained in this Section 4.2 shall prohibit the
Company from taking and disclosing to its stockholders a position required
by applicable law or from making any disclosure to the Company's
stockholders if, in the good faith judgment of the Board of Directors of
the Company, after consultation with outside counsel, failure so to
disclose would be inconsistent with its obligations under applicable law;
provided, however, that, except as provided in this Section 4.2, neither
the Company nor its Board of Directors nor any committee thereof shall
withdraw or modify, or propose publicly to withdraw or modify, its position
with respect to this Agreement or the Merger or approve or recommend, or
propose publicly to approve or recommend, a Company Takeover Proposal.
(e) Neither Parent nor Sub nor any of their affiliates shall
assert any claim or action for money damages against any of the Company,
its officers or directors or any third party arising from or based upon any
actual, proposed or potential termination of this Agreement by the Company
pursuant to this Section 4.2, provided that (i) the Company has complied in
all material respects with the terms of this Section 4.2, and (ii) such
termination by the Board of Directors of the Company is required to satisfy
their fiduciary duties under applicable law and they are so expressly
advised in writing by counsel to the Company or the Board of Directors.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Preparation of the Form S-4; Company Stockholders
Meeting. (a) As soon as practicable following the date of this Agreement,
Parent shall prepare and file with the SEC the Form S-4, in which the proxy
statement of the Company will be included as a prospectus (the "Proxy
Statement"). Each of the Company and Parent shall use reasonable best
efforts to have the Form S-4 declared effective under the Securities Act as
promptly as practicable after such filing. The Company will use all
reasonable best efforts to cause the Proxy Statement to be mailed to the
holders of Company Common Stock as promptly as practicable after the Form
S-4 is declared effective under the Securities Act. Parent shall also take
any action (other than qualifying to do business in any jurisdiction in
which it is not now so qualified or to file a general consent to service of
process) required to be taken under any applicable state securities laws in
connection with the issuance of the Parent Common Stock in the Merger and
the Company shall furnish all information concerning the Company and the
holders of Company Common Stock as may be reasonably requested in
connection with any such action. No filing of, or amendment or supplement
to, the Form S-4 will be made by Parent without providing the Company the
opportunity to review and comment thereon. Parent will advise the Company,
promptly after it receives notice thereof, of the time when the Form S-4
has become effective or any supplement or amendment has been filed, the
issuance of any stop order, the suspension of the qualification of the
Parent Common Stock issuable in connection with the Merger for offering or
sale in any jurisdiction, or any request by the SEC for amendment of the
Form S-4 or comments thereon and responses thereto or requests by the SEC
for additional information. If at any time prior to the Effective Time any
information relating to the Company or Parent, or any of their respective
affiliates, officers or directors, should be discovered by the Company or
Parent which should be set forth in an amendment or supplement to any of
the Form S-4, so that any of such documents would not include any
misstatement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, the party which discovers such
information shall promptly notify the other parties hereto and an
appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by law,
disseminated to the stockholders of the Company and Parent.
(b) The Company shall, as promptly as practicable after the
Form S-4 is declared effective under the Securities Act, duly call, give
notice of, convene and hold the Company Stockholders Meeting in accordance
with the OGCL and its Code of Regulations for the purpose of obtaining the
Company Stockholder Approval and, subject to its rights to terminate this
Agreement pursuant to Section 4.2(b), shall, through its Board of
Directors, recommend to its stockholders the approval and adoption of this
Agreement, the Merger and the other transactions contemplated hereby.
Without limiting the generality of the foregoing but subject to its rights
to terminate this Agreement pursuant to Section 4.2(b), the Company agrees
that its obligations pursuant to the first sentence of this Section 5.1(b)
shall not be affected by the commencement, public proposal, public
disclosure or communication to the Company of any Company Takeover
Proposal.
SECTION 5.2 Letters of the Company's Accountants. (a) The
Company shall cause to be delivered to Parent two letters from the
Company's independent accountants, one dated a date within two business
days before the date on which the Form S-4 shall become effective and one
dated a date within two business days before the Closing Date, each
addressed to Parent, in form and substance reasonably satisfactory to
Parent and customary in scope and substance for comfort letters delivered
by independent public accountants in connection with registration
statements similar to the Form S-4.
(b) Upon Parent's request, the Company shall use reasonable
best efforts to cause to be delivered to Parent and Parent's accountants a
letter from the Company's independent accountants addressed to Parent and
the Company, dated as of the date the Form S-4 is declared effective and as
of the Closing Date, stating that accounting for the Merger as a pooling of
interests under Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations is appropriate if the Merger is closed
and consummated as contemplated by this Agreement.
SECTION 5.3 Letters of Parent's Accountants. Parent shall cause
to be delivered to the Company two letters from Parent's independent
accountants, one dated a date within two business days before the date on
which the Form S-4 shall become effective and one dated a date within two
business days before the Closing Date, each addressed to the Company, in
form and substance reasonably satisfactory to the Company and customary in
scope and substance for comfort letters delivered by independent public
accountants in connection with registration statements similar to the Form
S-4.
SECTION 5.4 Access to Information; Confidentiality. Subject to
the Confidentiality Agreement dated October 7, 1997, between Parent and the
Company (the "Confidentiality Agreement"), and subject to restrictions
contained in confidentiality agreements to which such party is subject
(which such party will use its reasonable best efforts to have waived) and
applicable law, the Company shall, and shall cause each of its respective
subsidiaries to, afford to Parent and to the officers, employees,
accountants, counsel, financial advisors and other representatives of
Parent, reasonable access during normal business hours during the period
prior to the Effective Time to all their respective properties, books,
contracts, commitments, personnel and records and, during such period, the
Company shall, and shall cause each of its respective subsidiaries to,
furnish promptly to the Parent (a) a copy of each report, schedule and
other document filed by it during such period pursuant to the requirements
of federal or state law and (b) all other information concerning its
business, properties and personnel as such other party may reasonably
request. No review pursuant to this Section 5.4 shall affect any
representation or warranty given by the other party hereto. Parent will
hold, and will cause its respective officers, employees, accountants,
counsel, financial advisors and other representatives and affiliates to
hold, any nonpublic information in accordance with the terms of the
Confidentiality Agreement.
SECTION 5.5 Regulatory and Other Matters. (a) Upon the terms
and subject to the conditions set forth in this Agreement, each of the
parties agrees to use reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with
the other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable,
the Merger and the other transactions contemplated by this Agreement.
Nothing set forth in this Section 5.5(a) will limit or affect actions
permitted to be taken pursuant to Section 4.2.
(b) In connection with and without limiting the foregoing, the
Company and Parent shall (i) take all action necessary to ensure that no
state takeover statute or similar statute or regulation is or becomes
applicable to the Merger, this Agreement, the Stockholder Agreement or any
of the other transactions contemplated hereby or thereby and (ii) if any
state takeover statute or similar statute or regulation becomes applicable
to the Merger, this Agreement, the Stockholder Agreement or any other
transaction contemplated hereby or thereby, take all action necessary to
ensure that the Merger and the other transactions contemplated by this
Agreement and the Stockholder Agreement may be consummated as promptly as
practicable on the terms contemplated by this Agreement or the Stockholder
Agreement and otherwise to minimize the effect of such statute or
regulation on the Merger and the other transactions contemplated by this
Agreement or the Stockholder Agreement.
(c) Parent shall cooperate with the Company in obtaining the
opinion of Keating, Muething & Klekamp, P.L.L., special counsel to the
Company, dated as of the Effective Time, to the effect that the Merger will
constitute a reorganization within the meaning of Section 368(a) of the
Code. In connection therewith, each of Parent, Sub and the Company shall
deliver to Keating, Muething & Klekamp, P.L.L. customary representation
letters in form and substance reasonably satisfactory to such counsel (the
representation letters referred to in this sentence are, the "Tax
Certificates").
(d) The Company shall use its reasonable best efforts to cause
each stockholder of the Company to deliver to Parent prior to the Closing a
Certificate of Non-Foreign Status ("FIRPTA Certificate"), duly executed by
such stockholder, substantially in the form attached hereto as Exhibit B.
Notwithstanding anything to the contrary in this Agreement, in the event
Parent does not receive a FIRPTA Certificate with respect to any
stockholder, Parent shall be entitled to withhold from any Merger
Consideration paid to such stockholder the amount required to be withheld
under Section 1445 of the Code.
SECTION 5.6 Indemnification, Exculpation and Insurance. (a)
Parent agrees to maintain in effect in accordance with their terms all
rights to indemnification and exculpation from liabilities for acts or
omissions occurring at or prior to the Effective Time now existing in favor
of the current or former directors, officers, voting trustees, other
persons or employees of the Company and its subsidiaries as provided in
their respective Articles of Incorporation and Code of Regulations (or
comparable organizational documents) and any indemnification agreements of
the Company.
(b) In the event that Parent or any of its successors or
assigns (i) consolidates with or merges into any other person and is not
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers or conveys all or substantially all of its
properties and assets to any person, then, and in each such case, proper
provision will be made so that the successors and assigns of Parent assume
the obligations set forth in this Section 5.6.
(c) The provisions of this Section 5.6 (i) are intended to be
for the benefit of, and will be enforceable by, each indemnified party, his
or her heirs and his or her representatives and (ii) are in addition to,
and not in substitution for, any other rights to indemnification or
contribution that any such person may have by contract or otherwise.
SECTION 5.7 Fees and Expenses. (a) Except as provided in this
Section 5.7, all fees and expenses incurred in connection with the Merger,
this Agreement, and the transactions contemplated by this Agreement shall
be paid by the party incurring such fees or expenses, whether or not the
Merger is consummated.
(b) In the event that (i) a Company Takeover Proposal shall
have been made known to the Company or any of its subsidiaries or has been
made directly to its stockholders generally or any person shall have
publicly announced an intention (whether or not conditional) to make a
Company Takeover Proposal and thereafter this Agreement is terminated by
either Parent or the Company pursuant to Section 7.1(b)(i) or (ii), or (ii)
this Agreement is terminated by the Company pursuant to Section 7.1(g),
then the Company shall promptly, but in no event later than five days after
the date of such termination, pay Parent a fee equal to $6.96 million (the
"Termination Fee"), payable by wire transfer of same day funds. The Company
acknowledges that the agreements contained in this Section 5.7(b) are an
integral part of the transactions contemplated by this Agreement, and that,
without these agreements, Parent would not enter into this Agreement;
accordingly, if the Company fails promptly to pay the amount due pursuant
to this Section 5.7(b), and, in order to obtain such payment, Parent
commences a suit which results in a judgment against the Company for the
fee set forth in this Section 5.7(b), the Company shall pay to Parent its
costs and expenses (including attorneys' fees and expenses) in connection
with such suit, together with interest on the amount of the fee at the rate
on six-month U.S. Treasury obligations plus 300 basis points in effect on
the date such payment was required to be made.
SECTION 5.8 Public Announcements. Parent and the Company will
consult with each other before issuing, and provide each other the
opportunity to review, comment upon and concur with and use reasonable
efforts to agree on, any press release or other public statements with
respect to the transactions contemplated by this Agreement, including the
Merger, and shall not issue any such press release or make any such public
statement prior to such consultation, except as either party may determine
is required by applicable law, court process or by obligations pursuant to
any listing agreement with any national securities exchange.
SECTION 5.9 Affiliates. As soon as practicable after the date
hereof, the Company shall deliver to Parent a letter identifying all
persons who are, at the time this Agreement is submitted for adoption by
the stockholders of the Company, "affiliates" of the Company for purposes
of Rule 145 under the Securities Act or for purposes of qualifying the
Merger for pooling of interests accounting treatment under Opinion 16 of
the Accounting Principles Board and applicable SEC rules and regulations,
and such list shall be updated as necessary to reflect changes from the
date hereof. The Company shall use best efforts to cause each person
identified on such list to deliver to Parent not less than 30 days prior to
the Effective Time, a written agreement substantially in the form attached
as Exhibit A hereto.
SECTION 5.10 Stock Exchange Listing. Parent shall use
reasonable best efforts to cause the Parent Common Stock issuable under
Article II to be approved for listing on the NYSE, subject to official
notice of issuance, as promptly as practicable after the date hereof, and
in any event prior to the Closing Date.
SECTION 5.11 Stockholder Litigation. Each of the Company and
Parent shall give the other the reasonable opportunity to participate in
the defense of any stockholder litigation against the Company or Parent, as
applicable, and its directors relating to the transactions contemplated by
this Agreement.
SECTION 5.12 Tax Treatment. Each of Parent and the Company
shall use its reasonable best efforts to cause the Merger to qualify as a
reorganization under the provisions of Section 368 (a) of the Code. The
Company shall use its reasonable best efforts to obtain the opinion of
counsel referred to in Section 6.3(c) hereof.
SECTION 5.13 Pooling of Interests. The Company shall cooperate
with Parent in its efforts to cause the transactions contemplated by this
Agreement, including the Merger, to be accounted for as a pooling of
interests under Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations, and such accounting treatment to be
accepted by the SEC, and the Company agrees that it shall take no action
that would cause such accounting treatment not to be obtained.
Notwithstanding the foregoing, the Company acknowledges that the SEC's
acceptance of pooling of interests accounting treatment with respect to the
Merger and the other transactions contemplated by the Merger Agreement is
not a condition to either the Company's or Parent's obligations to effect
the Merger.
SECTION 5.14 Standstill Agreements; Confidentiality Agreements.
During the period from the date of this Agreement through the Effective
Time, the Company shall not terminate, amend, modify or waive any provision
of any confidentiality or standstill agreement to which it or any of its
respective subsidiaries is a party. During such period, the Company shall
enforce, to the fullest extent permitted under applicable law, the
provisions of any such agreement, including by obtaining injunctions to
prevent any breaches of such agreements and to enforce specifically the
terms and provisions thereof in any court of the United States of America
or of any state having jurisdiction.
SECTION 5.15 Environmental Assessment. Parent shall have the
right, between the execution of this Agreement and the Closing Date, to
conduct a Phase I environmental assessment of any of the Real Property
owned, leased or operated by the Company. Based on the results of the Phase
I environmental assessment, Parent shall have the right, in its absolute
discretion, to conduct additional environmental investigations at any of
the Real Property owned, leased or operated by the Company, which
investigations may include the collection and analysis of soil samples,
subsurface soil samples, surface water samples, groundwater samples,
sediment samples, or samples of any other environmental media at said Real
Property. The Company agrees that it shall fully cooperate with Parent with
respect to the environmental investigations hereunder, including, but not
limited to, providing Parent and its representatives, agents, attorneys,
and consultants with all requested documents and information in the
possession of Company; making Company employees available for interviews;
and assisting Parent and its representatives, agents, attorneys and
consultants to the extent necessary to properly implement any environmental
sampling to be conducted by or on Parent's behalf. All environmental
investigations conducted by Parent pursuant to this Section 5.15 shall
constitute the "Environmental Assessment". Parent agrees to indemnify and
hold harmless the Company from any and all damage to persons or property
caused by the performance of the Environmental Assessment, except to the
extent such damage is due to the negligence of the Company or its employees
or to pre-existing conditions known to the Company but undisclosed to
Parent or its representatives performing the Environmental Assessment. This
indemnity shall survive the termination of this Agreement.
SECTION 5.16 Audited 1997 Financial Statements. As soon as
practicable after December 31, 1997, the Company shall deliver to Parent
(a) the audited consolidated balance sheet of Company as of December 31,
1997 and the related audited consolidated statements of income, retained
income and cash flows for the year ended December 31, 1997, together with
the report thereon by the Company's independent accountants (the "Audited
1997 Financial Statements") and (b) a certificate, duly executed by the
chief financial officer or chief accounting officer of the Company
restating with respect to the Audited 1997 Financial Statements, the
representations and warranties set forth in Section 3.1(e) with respect to
the Audited Financial Statements.
SECTIOM 5.17 Company Benefit Plans. Parent agrees that for a
period of two years following the Effective Time, it will maintain or cause
the Surviving Corporation to maintain in effect in accordance with their
respective terms, and provide benefits under, the Company's officer and
non-officer key employees severance plans referred to in Section 5.17 of
the Company Disclosure Schedule. Parent further agrees that for a period of
one year following the Effective Time, it will maintain or cause the
Surviving Corporation to maintain in effect in accordance with its terms,
and provide benefits under, the Company's severance plan for salaried
employees referred to in Section 5.17 of the Company Disclosure Schedule.
Parent further agrees that after the Effective Time it will maintain or
cause the Surviving Corporation to maintain in effect in accordance with
their respective terms, and provide benefits under, the plan for enhanced
retirement benefits and the policy regarding post-retirement health care
benefits referred to in Section 5.17 of the Company Disclosure Schedule.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the Merger is
subject to the satisfaction or waiver on or prior to the Closing Date of
the following conditions:
(a) Stockholder Approval. The Company Stockholder Approval
shall have been obtained.
(b) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or
shall have expired.
(c) Governmental and Regulatory Approvals. Other than the
filing provided for under Section 1.3 and filings pursuant to the HSR Act
(which are addressed in Section 6.1(b)), all consents, approvals and
actions of, filings with and notices to any Governmental Entity required of
the Company, Parent or any of their subsidiaries to consummate the Merger
and the other transactions contemplated hereby and in order for the
Surviving Corporation to operate its business after consummation of the
Merger as currently conducted by the Company, the failure of which to be
obtained or taken (i) is reasonably expected to have a material adverse
effect on the Surviving Corporation and its prospective subsidiaries, taken
as a whole, or (ii) will result in a violation of any laws, shall have been
obtained or waived, including those set forth in Section 6.1(c) of the
Company Disclosure Schedule, all in form and substance reasonably
satisfactory to the Company and Parent.
(d) No Injunctions or Restraints. No judgment, order, decree,
statute, law, ordinance, rule or regulation, entered, enacted, promulgated,
enforced or issued by any court or other Governmental Entity of competent
jurisdiction or other legal restraint or prohibition (collectively,
"Restraints") shall be in effect (i) preventing the consummation of the
Merger, or (ii) which otherwise is reasonably likely to have a material
adverse effect on the Company or Parent, as applicable; provided, however,
that each of the parties shall have used its reasonable best efforts to
prevent the entry of any such Restraints and to appeal as promptly as
possible any such Restraints that may be entered.
(e) Form S-4. The Form S-4 shall have become effective under
the Securities Act prior to the mailing of the Proxy Statement by the
Company to its stockholders and no stop order or proceedings seeking a stop
order shall be threatened by the SEC or shall have been entered or be
pending by the SEC.
(f) NYSE Listing. The shares of Parent Common Stock issuable to
the Company's stockholders as contemplated by Article II shall have been
approved for listing on the NYSE, subject to official notice of issuance.
SECTION 6.2 Conditions to Obligations of Parent. The obligation
of Parent to effect the Merger is further subject to satisfaction or waiver
of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company set forth herein shall be true and correct in all
material respects (or in all respects in the case of any representation or
warranty containing any materiality qualifier) both when made and at and as
of the Closing Date, as if made at and as of such time (except to the
extent expressly made as of an earlier date, in which case as of such
date), and Parent shall have received at the Closing a certificate to that
effect dated the Closing Date and signed by a senior executive officer of
the Company.
(b) Performance of Obligations of the Company. The Company
shall have performed in all material respects all obligations required to
be performed by it under this Agreement at or prior to the Closing Date,
and Parent shall have received at the Closing a certificate to that effect
dated the Closing Date and signed by a senior executive officer of the
Company.
(c) No Action. No action, suit or proceeding by any
Governmental Entity or other party before any court or governmental or
regulatory authority shall be pending or threatened against the Company or
Parent or any of their subsidiaries challenging the validity or legality of
the transactions contemplated by this Agreement or the Stockholders
Agreement, other than actions, suits or proceedings which, in the
reasonable opinion of counsel to the parties hereto, are unlikely to result
in an adverse judgment.
(d) Completion of Satisfactory Due Diligence. Parent shall have
completed a due diligence investigation of the Company and its
subsidiaries, including, but not limited to meetings with management, plant
visitations and other informational requests in scope, detail, substance
and result reasonably satisfactory to Parent; provided, that if Parent
shall not have exercised its termination right pursuant to Section 7.1(d)
hereof within thirty-four (34) days of the date of this Agreement, this
condition shall be deemed to be satisfied.
(e) Environmental Assessment. Parent shall have received the
Environmental Assessment, which shall be in form and substance reasonably
satisfactory to Parent. This condition shall be deemed to have been
satisfied unless the reasonable cost of any matters identified in the
Environmental Assessment, including, but not limited to: (i) the
investigation and/or remediation of contamination at any of the Company's
properties; (ii) fines, penalties or compliance obligations related to
violations of applicable Environmental Laws; (iii) liability for the
Release, disposal or transportation of Hazardous Substances, Oils,
Pollutants, or Contaminants sent to off-site locations or at former
facilities of the Company; and (iv) capital costs to comply with
Environmental Laws as in effect on the date of this Agreement that will
impose obligations on the Company that are not otherwise included in the
Company's budgets, are not likely to exceed, in the aggregate, $10 million.
SECTION 6.3 Conditions to Obligations of the Company. The
obligation of the Company to effect the Merger is further subject to
satisfaction or waiver of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent set forth herein shall be true and correct in all
material respects (or in all respects in the case of any representation or
warranty containing any materiality qualifier) both when made and at and as
of the Closing Date, as if made at and as of such time (except to the
extent expressly made as of an earlier date, in which case as of such
date), and the Company shall have received at the Closing a certificate to
that effect dated the Closing Date and signed by a senior executive officer
of Parent.
(b) Performance of Obligations of Parent. Parent shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and the Company
shall have received at the Closing a certificate to that effect dated the
Closing Date and signed by a senior executive officer of Parent.
(c) Tax Opinions. The Company shall have received from Keating,
Muething & Klekamp, P.L.L., counsel to the Company, an opinion dated as of
the Closing Date, to the effect that (i) the Merger will constitute a
"reorganization" within the meaning of Section 368(a) of the Code, (ii)
Parent, Sub and the Company will each be a party to such reorganization
within the meaning of Section 368(b) of the Code, and (iii) no gain or loss
will be recognized by the Company or the Company's stockholders as a result
of the Merger, except with respect to cash received by Company stockholders
in lieu of fractional shares of Parent Common Stock or cash received by
Company stockholders pursuant to the exercise of rights under Section
1701.85 of the OGCL. In rendering such opinion, counsel for the Company may
require delivery of and rely upon the Tax Certificates.
(d) Securities Opinion. The Company shall have received from
Skadden, Arps, Slate, Meagher & Flom LLP, counsel to Parent, an opinion
dated as of the Closing Date to the effect that the shares of Common Stock
covered by the Form S-4 (which shall include all of the shares issuable to
the Company's stockholders as contemplated by Article II) have been
registered under the Securities Act of 1933, as amended, for issuance to
stockholders of the Company pursuant to the terms of the Merger.
SECTION 6.4 Frustration of Closing Conditions. Neither Parent
nor the Company may rely on the failure of any condition set forth in
Section 6.1, 6.2 or 6.3, as the case may be, to be satisfied if such
failure was caused by such party's failure to use best efforts to
consummate the Merger and the other transactions contemplated by this
Agreement, as required by and subject to Section 5.5.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination. This Agreement may be terminated at
any time prior to the Effective Time, and (except in the case of 7.1(g))
whether before or after the Company Stockholder Approval or the Parent
Stockholder Approval:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if the Merger shall not have been consummated by June 30,
1998; provided, however, that the right to terminate this Agreement
pursuant to this Section 7.1(b)(i) shall not be available to any
party whose failure to perform any of its obligations under this
Agreement results in the failure of the Merger to be consummated by
such time; provided, further, that this Agreement may be extended not
more than 30 days by either party by written notice to the other
party if the Merger shall not have been consummated as a direct
result of Parent or the Company having failed to receive all
regulatory approvals required to be obtained with respect to the
Merger;
(ii) if the Company Stockholder Approval shall not have been
obtained at the Company Stockholders Meeting duly convened therefor
or at any adjournment or postponement thereof;
(iii) if any Restraint having any of the effects set forth in
Section 6.1(d) shall be in effect and shall have become final and
nonappealable; provided, that the party seeking to terminate this
Agreement pursuant to this Section 7.1(b)(iv) shall have used best
efforts to prevent the entry of and to remove such Restraint;
(c) by Parent, if the Company shall have breached or failed to
perform in any material respect any of its representations, warranties,
covenants or other agreements contained in this Agreement, which breach or
failure to perform (A) would give rise to the failure of a condition set
forth in Section 6.2(a) or (b), and (B) is incapable of being cured by the
Company or is not cured within 45 days of written notice thereof;
(d) by Parent, if it shall not be reasonably satisfied with its
due diligence investigation of the Company and its subsidiaries
contemplated in Section 6.2(d) hereof; provided, that if Parent shall not
have exercised its termination right contained in this Section 7.1(d)
within thirty-four (34) days of the date of this Agreement, this
termination right shall be deemed to have lapsed;
(e) notwithstanding subparagraph (d) above, by Parent, if the
condition set forth in Section 6.2(e) shall not have been satisfied;
(f) by the Company, if Parent shall have breached or failed to
perform in any material respect any of its representations, warranties,
covenants or other agreements contained in this Agreement, which breach or
failure to perform (A) would give rise to the failure of a condition set
forth in Section 6.3(a) or (b), and (B) is incapable of being cured by
Parent or is not cured within 45 days of written notice thereof; or
(g) prior to receipt of the Company Stockholder Approval, by
the Company in accordance with Section 4.2(b); provided that, in order for
the termination of this Agreement pursuant to this paragraph (g) to be
deemed effective, the Company shall have complied with all provisions of
Section 4.2, including the notice provisions therein, and with applicable
requirements, including the payment of the Termination Fee as provided in
Section 5.7.
SECTION 7.2 Effect of Termination. In the event of termination
of this Agreement by either the Company or Parent as provided in Section
7.1, this Agreement shall forthwith become void and have no effect, without
any liability or obligation on the part of Parent or the Company, other
than the provisions of Section 3.1(o), Section 3.2(h), the last sentence of
Section 5.4, Section 5.7, the penultimate sentence of Section 5.15, this
Section 7.2 and Article VIII, which provisions survive such termination.
SECTION 7.3 Amendment. This Agreement may be amended by the
parties at any time before or after the Company Stockholder Approval;
provided, however, that after any such approval, there shall not be made
any amendment that by law requires further approval by the stockholders of
the Company without the further approval of such stockholders. This
Agreement may not be amended except by an instrument in writing signed on
behalf of all of the parties.
SECTION 7.4 Extension; Waiver. At any time prior to the
Effective Time, a party may (a) extend the time for the performance of any
of the obligations or other acts of the other parties, (b) waive any
inaccuracies in the representations and warranties of the other parties
contained in this Agreement or in any document delivered pursuant to this
Agreement or (c) subject to the proviso of Section 7.3, waive compliance by
the other party with any of the agreements or conditions contained in this
Agreement. Any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed
on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not
constitute a waiver of such rights.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Nonsurvival of Representations and Warranties. None
of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time and no claim of breach of any representation or warranty may be made
after the Effective Time. This Section 8.1 shall not limit any covenant or
agreement of the parties which by its terms contemplates performance after
the Effective Time.
SECTION 8.2 Notices. All notices, requests, claims, demands and
other communications under this Agreement shall be in writing and shall be
deemed given if delivered personally, telecopied (which is confirmed) or
sent by overnight courier (providing proof of delivery) to the parties at
the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to Parent or Sub, to
International Paper Company
Two Manhattanville Road
Purchase, New York 10577
Telecopy No.: (914) 397-1612
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Telecopy No.: (212) 735-2000
Attention: Eric J. Friedman
(b) if to the Company, to
The Weston Paper and Manufacturing Co.
2001 North 19th Street
Terre Haute, IN 47804
Telecopy No.: (812) 232-0529
Attention: General Counsel
with a copy to:
Turner, Granzow & Hollenkamp
50 East Third Street
Dayton, Ohio 45402
Telecopy No.: (937) 228-4708
Attention: Nicholas C. Hollenkamp
SECTION 8.3 Definitions. For purposes of this Agreement:
(a) except as otherwise provided for in this Agreement, an
"affiliate" of any person means another person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, such first person, where "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a person, whether through the
ownership of voting securities, by contract, as trustee or executor, or
otherwise;
(b) "material adverse change" or "material adverse effect"
means, when used in connection with the Company or Parent, any change,
effect, event, occurrence or state of facts that is, or would reasonably be
expected to be, materially adverse to the business, financial condition or
results of operations of such party and its subsidiaries taken as a whole;
and the terms "material" and "materially" have correlative meanings;
(c) "person" means an individual, corporation, partnership,
limited liability company, joint venture, association, trust,
unincorporated organization or other entity;
(d) a "subsidiary" of any person means another person, an
amount of the voting securities, other voting ownership or voting
partnership interests of which is sufficient to elect at least a majority
of its Board of Directors or other governing body (or, if there are no such
voting interests, 50% or more of the equity interests of which) is owned
directly or indirectly by such first person; and
(e) "knowledge" of any person which is not an individual means
the knowledge of such person's executive officers, including those
individuals identified in Section 8.3(e) of the Company Disclosure
Schedule, based upon reasonable inquiry.
SECTION 8.4 Interpretation. When a reference is made in this
Agreement to an Article, Section or Exhibit, such reference shall be to an
Article or Section of, or an Exhibit to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed
to be followed by the words "without limitation". The words "hereof",
"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. All terms defined in this Agreement
shall have the defined meanings when used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined
therein. The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such term. Any agreement,
instrument or statute defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement, instrument or
statute as from time to time amended, modified or supplemented, including
(in the case of agreements or instruments) by waiver or consent and (in the
case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
References to a person are also to its permitted successors and assigns.
SECTION 8.5 Counterparts. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have
been signed by each of the parties and delivered to the other parties.
SECTION 8.6 Entire Agreement; No Third-Party Beneficiaries.
This Agreement (including the documents and instruments referred to herein)
and the Confidentiality Agreement (a) constitute the entire agreement, and
supersede all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter of this Agreement
and (b) except for the provisions of Article II and Section 5.6 are not
intended to confer upon any person other than the parties any rights or
remedies.
The Company shall not be deemed to have made to Parent or Sub
any representation or warranty other than is expressly set forth in Article
III of this Agreement. Without limiting the generality of the foregoing,
and notwithstanding any otherwise express representations and warranties
made by the Company in Article III, the Company makes no representation or
warranty with respect to any projections, estimates or budgets of future
revenues, expenses or expenditures or future results of operations or with
respect to any other information or documents made available to Parent or
Sub or their counsel, accountants or advisors with respect to the Company.
SECTION 8.7 Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York,
regardless of the laws that might otherwise govern under applicable
principles of conflict of laws thereof; provided, however, that the laws of
the respective jurisdictions of incorporation of the parties shall govern
the relative rights, obligations, powers, duties and other internal affairs
of each party and its board of directors and stockholders.
SECTION 8.8 Assignment. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties
hereto without the prior written consent of the other parties; provided,
however, that Sub may assign its rights and obligations, in whole or in
part, under this Agreement to any other wholly owned subsidiary of Parent.
Any assignment in violation of the preceding sentence shall be void.
Subject to the preceding two sentences, this Agreement will be binding
upon, inure to the benefit of, and be enforceable by, the parties and their
respective successors and permitted assigns.
SECTION 8.9 Headings. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement.
SECTION 8.10 Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any
rule of law or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect. Upon such
determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by
applicable law in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
[Remainder of page intentionally blank]
IN WITNESS WHEREOF, Parent, Sub and the Company have caused
this Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
INTERNATIONAL PAPER COMPANY
By /S/ W. MICHAEL AMICK
--------------------------------
Title: Executive Vice President
WOLVERINE ACQUISITION CORP.
By /S/ W. MICHAEL AMICK
---------------------------------
Title: Executive Vice President
THE WESTON PAPER AND
MANUFACTURING CO.
By /S/ EDWARD J. TURNER, JR.
---------------------------------
Title: Chairman of the Board &
Chief Executive Officer
TABLE OF CONTENTS
PAGE
ARTICLE I
SECTION 1.1 The Merger.....................................A-2
SECTION 1.2 Closing........................................A-3
SECTION 1.3 Effective Time.................................A-3
SECTION 1.4 Effects of the Merger..........................A-3
SECTION 1.5 Articles of Incorporation and Code of
Regulations of the Surviving Corporation.....A-3
SECTION 1.6 Directors and Officers.........................A-3
SECTION 1.7 Reservation of Right to Revise Transaction.....A-3
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
SECTION 2.1 Effect on Capital Stock........................A-4
SECTION 2.2 Exchange of Certificates.......................A-4
SECTION 2.3 Certain Adjustments............................A-7
SECTION 2.4 Shares of Dissenting Stockholders. ............A-7
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the
Company........................................A-8
(a) Organization, Standing and Corporate Power.......A-8
(b) Subsidiaries.....................................A-9
(c) Capital Structure................................A-9
(d) Authority; Noncontravention......................A-9
(e) Financial Statements; Undisclosed Liabilities...A-10
(f) Information Supplied............................A-11
(g) Absence of Certain Changes or Events............A-11
(h) Compliance with Applicable Laws; Litigation.....A-12
(i) Benefit Plan Representations....................A-12
(j) Taxes...........................................A-15
(k) Voting Requirements.............................A-16
(l) State Takeover Statutes.........................A-16
(m) Accounting Matters..............................A-17
(n) Opinion of Financial Advisor....................A-17
(o) Brokers.........................................A-17
(p) Intellectual Property...........................A-17
(q) Certain Contracts...............................A-18
(r) Environmental Liability.........................A-19
(s) Transactions with Affiliates....................A-22
(t) Insurance.......................................A-22
(u) Real Property; Assets...........................A-22
(v) Labor Matters...................................A-23
SECTION 3.2 Representations and Warranties of Parent......A-24
(a) Organization, Standing and Corporate Power......A-24
(b) Subsidiaries....................................A-24
(c) Capital Structure...............................A-24
(d) Authority; Noncontravention.....................A-25
(e) Regulatory Documents; Undisclosed Liabilities...A-26
(f) Information Supplied............................A-26
(g) Absence of Certain Changes or Events............A-27
(h) Brokers.........................................A-27
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 Conduct of Business...........................A-27
SECTION 4.2 No Solicitation by the Company................A-30
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Preparation of the Form S-4; Company
Stockholders Meeting........................A-32
SECTION 5.2 Letters of the Company's Accountants..........A-32
SECTION 5.3 Letters of Parent's Accountants...............A-33
SECTION 5.4 Access to Information; Confidentiality........A-33
SECTION 5.5 Regulatory and Other Matters..................A-33
SECTION 5.6 Indemnification, Exculpation and Insurance....A-34
SECTION 5.8 Public Announcements..........................A-35
SECTION 5.9 Affiliates....................................A-35
SECTION 5.10 Stock Exchange Listing.......................A-35
SECTION 5.11 Stockholder Litigation.......................A-35
SECTION 5.12 Tax Treatment................................A-36
SECTION 5.13 Pooling of Interests.........................A-36
SECTION 5.14 Standstill Agreements; Confidentiality
Agreements.................................A-36
SECTION 5.15 Environmental Assessment.....................A-36
SECTION 5.16 Audited 1997 Financial Statements............A-36
SECTION 5.17 Company Benefit Plans. ......................A-37
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Each Party's Obligation to
Effect the Merger...........................A-37
SECTION 6.2 Conditions to Obligations of Parent...........A-38
SECTION 6.3 Conditions to Obligations of the Company......A-39
SECTION 6.4 Frustration of Closing Conditions.............A-39
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination...................................A-40
SECTION 7.2 Effect of Termination.........................A-41
SECTION 7.3 Amendment.....................................A-41
SECTION 7.4 Extension; Waiver.............................A-41
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Nonsurvival of Representations and
Warranties..................................A-41
SECTION 8.2 Notices.......................................A-41
SECTION 8.3 Definitions...................................A-42
SECTION 8.4 Interpretation................................A-43
SECTION 8.5 Counterparts..................................A-43
SECTION 8.6 Entire Agreement; No Third-Party
Beneficiaries...............................A-43
SECTION 8.7 Governing Law.................................A-44
SECTION 8.8 Assignment....................................A-44
SECTION 8.9 Headings......................................A-44
SECTION 8.10 Severability.................................A-44
ANNEX B
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT (this "Agreement"), dated as
of January 29, 1998, by and among International Paper
Company, a New York corporation ("Parent"), and each other
person and entity set forth on the signatures pages hereof
(each, a "Stockholder," and collectively, the
"Stockholders"). Capitalized terms used but not otherwise
defined herein shall have the meanings ascribed to them in
the Merger Agreement (as defined below).
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, concurrently with the execution and
delivery of this Agreement, an Agreement and Plan of Merger
(as such agreement may be amended from time to time, the
"Merger Agreement") is being entered into by and among
Parent, Wolverine Acquisition Corp., an Ohio corporation and
wholly owned subsidiary of Parent ("Sub"), and The Weston
Paper and Manufacturing Co., an Ohio corporation (the
"Company"), pursuant to which Sub has agreed to merge with
and into the Company, with the Company continuing as the
surviving corporation (the "Merger");
WHEREAS, as a condition to, and in consideration
for, Parent's willingness to enter into the Merger Agreement
and to consummate the transactions contemplated thereby,
Parent has required that the Stockholders enter into this
Agreement;
WHEREAS, each of the Stockholders, with respect to
the shares of Company Common Stock owned by such Stockholder
and listed opposite the signature of such Stockholder (its
"Shares"), has entered into a Voting Trust Agreement (the
"Voting Trust Agreement"), dated as of February 1, 1971 (as
amended, with an effective termination date extended through
April 30, 2006), among certain holders of Company Common
Stock and Ruel F. Burns, Jr., Edward T. Turner, Jr. and Paul
H. Granzow, as trustees (the "Voting Trustees"); and
WHEREAS, pursuant to the Voting Trust Agreement,
each of the Stockholders (i) has deposited, assigned,
transferred and delivered to the Voting Trustees its Shares
for the purpose of vesting in the Voting Trustees the right
to vote such Shares, subject to the terms of the Voting Trust
Agreement, and (ii) received from the Voting Trustees in
exchange for its Shares, certificates evidencing its rights
in such Shares ("Trust Certificates").
NOW, THEREFORE, in consideration of the foregoing
and the mutual representations, warranties, covenants and
agreements contained herein, the parties hereto, intending to
be legally bound, hereby agree as follows:
1. Definition. For purposes of this Agreement:
"Person" shall mean an individual, corporation,
partnership, limited liability company, joint venture,
association, trust, unincorporated organization or other
entity.
2. Agreements.
(a) Voting Agreement. Each Stockholder shall, as
to itself, with respect to any meeting of the holders of
Company Common Stock, however such meeting is called and
regardless of whether such meeting is a special or annual
meeting of the stockholders of the Company (a "Company
Stockholders Meeting"), or in connection with any written
consent of the stockholders of the Company (a "Written
Consent"), in accordance with Article SEVENTH of the Voting
Agreement, request in writing from the Voting Trustees a
proxy, with power of substitution. Pursuant to the proxy,
the Stockholder shall vote or cause to be voted all of such
Stockholder's Shares subject to the Voting Agreement (A) in
favor of the Merger, the execution and delivery by the
Company of the Merger Agreement and the approval of the terms
thereof and each of the other actions contemplated by the
Merger Agreement and this Agreement and any actions required
in furtherance thereof and hereof (collectively, the "Merger
Proposal"), and (B) against any Company Takeover Proposal or
any other action or agreement that would in any manner
impede, frustrate, prevent or nullify any of the transactions
contemplated by the Merger Agreement, including the Merger,
or result in a breach of any covenant, representation or
warranty or any other obligation or agreement of the Company
under the Merger Agreement or which would result in any of
the conditions to the Company's or Parent's obligations under
the Merger Agreement not being fulfilled. If the Voting
Trust Agreement is terminated prior to a Company Stockholders
Meeting or the obtaining of a Written Consent with respect to
the Merger Proposal or, in the case of Shares not subject to
the Voting Agreement, such Stockholder shall take such
actions as are necessary to vote or cause to be voted all of
such Stockholder's Shares not subject to the Voting
Agreement, including Shares previously subject to the Voting
Agreement, (A) in favor of the Merger Proposal and (B)
against any Company Takeover Proposal or any other action or
agreement that would in any manner impede, frustrate, prevent
or nullify any of the transactions contemplated by the Merger
Agreement, including the Merger, or result in a breach of any
covenant, representation or warranty or any other obligation
or agreement of the Company under the Merger Agreement or
which would result in any of the conditions to the Company's
or Parent's obligations under the Merger Agreement not being
fulfilled.
(b) No Inconsistent Arrangements. Each
Stockholder hereby covenants and agrees, severally and not
jointly and solely as to itself, that it shall not (i)
transfer (which term shall include, without limitation, any
sale, gift, pledge or other disposition), or consent to any
transfer of, any or all of its Shares or Trust Certificates,
or any interest therein if such transfer would result in the
Stockholder no longer having the power to vote or cause to be
voted its Shares on the Merger Proposal (pursuant to Section
2(a) hereof), (ii) enter into any contract, option or other
agreement or understanding with respect to any such transfer
of any or all of its Shares or Trust Certificates, or any
interest therein, (iii) except as otherwise provided under
the Voting Trust Agreement, grant any proxy,
power-of-attorney or other authorization in or with respect
to its Shares or Trust Certificates, (iv) deposit its Shares
into a voting trust or enter into a voting agreement or
arrangement with respect to such Shares, other than pursuant
to the Voting Trust Agreement or this Agreement, or (v) take
any other action that would in any way restrict, limit or
interfere with the performance of its obligations hereunder
or the transactions contemplated hereby or by the Merger
Agreement.
(c) No Solicitation. Each Stockholder hereby
agrees, in its capacity as a stockholder of the Company, that
the Stockholder shall not (and the Stockholder shall use
reasonable efforts to cause its officers, directors,
employees, representatives and agents, including, but not
limited to, investment bankers, attorneys and accountants,
not to), directly or indirectly, encourage, solicit,
participate in or initiate discussions or negotiations with,
or provide any information to, any Person (other than Parent,
any of its affiliates or representatives) concerning any
Company Takeover Proposal; provided that nothing contained in
this Section 2(c) shall restrict any Stockholder, or any
officer, director or employee of any Stockholder from taking
any action in his or her capacity as a director of the
Company which is permitted to be taken pursuant to Section
4.2 of the Merger Agreement.
(d) Reasonable Best Efforts. Subject to the terms
and conditions of this Agreement, each of the parties hereto
agrees to use its reasonable best efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws
and regulations to consummate and make effective the
transactions contemplated by this Agreement and the Merger
Agreement; provided that nothing contained in this Section
2(d) shall restrict any Stockholder or any officer, director
or employee of any Stockholder from taking any action in his
or her capacity as a director of the Company which is
permitted to be taken pursuant to Section 4.2 of the Merger
Agreement.
3. Representations and Warranties.
(a) Each Stockholder (or if Stockholder is a
trust, the duly appointed trustee(s) ("Trustee") on behalf of
such Stockholder) hereby represents and warrants, severally
and not jointly and solely as to itself, to Parent as
follows:
(i) Ownership of Securities. On the date hereof,
the Stockholder, other than a Trustee, is the beneficial
owner of the Shares as set forth opposite the signature
hereto of such Stockholder, all of which Shares are
owned of record by the Voting Trustees. The Stockholder
has the sole power to vote or the sole power to issue
instructions to the Voting Trustee with respect to the
matters set forth in Section 2 hereof, sole power of
disposition, sole power of conversion, sole power (if
any) to demand appraisal rights and sole power to agree
to all of the matters set forth in this Agreement, in
each case with respect to all of the Shares with no
limitations, qualifications or restrictions on such
rights, subject to applicable securities laws and the
terms of this Agreement and the Voting Agreement.
(ii) Power; Binding Agreement. Each Stockholder or
Trustee on behalf of a Stockholder, as the case may be,
has the corporate power and authority to enter into and
perform all of its obligations under this Agreement.
The execution, delivery and performance of this
Agreement by the Stockholder will not violate any other
agreement to which the Stockholder is a party including,
without limitation, any voting agreement, proxy
arrangement, pledge agreement, shareholders agreement or
voting trust. This Agreement has been duly and validly
executed and delivered by the Stockholder and
constitutes a valid and binding agreement of the
Stockholder, enforceable against the Stockholder in
accordance with its terms. There is no beneficiary or
holder of a voting trust certificate or other interest
of any trust of which the Stockholder is a trustee whose
consent is required for the execution and delivery of
this Agreement or the compliance by the Stockholder with
the terms hereof.
(iii) No Conflicts. No filing with, and no
permit, authorization, consent or approval of, any
Governmental Entity is required for the execution of
this Agreement by the Stockholder and the consummation
by the Stockholder of the transactions contemplated
hereby, and none of the execution and delivery of this
Agreement by the Stockholder, the consummation by the
Stockholder of the transactions contemplated hereby or
compliance by the Stockholder with any of the provisions
hereof shall (A) conflict with or result in any breach
of any organizational documents applicable to the
Stockholder, (B) result in a violation or breach of, or
constitute (with or without notice or lapse of time or
both) a default (or give rise to any third party right
of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or
provisions of any note, loan agreement, bond, mortgage,
indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or
obligation of any kind to which the Stockholder is a
party or by which the Stockholder or any of its
properties or assets may be bound, or (C) violate any
order, writ, injunction, decree, judgment, order,
statute, arbitration award, rule or regulation
applicable to the Stockholder or any of its properties
or assets.
(b) Parent hereby represents and warrants to the
Stockholders, and to each of them, as follows:
(i) Power; Binding Agreement. Parent has the
corporate power and authority to enter into and perform
all of its obligations under this Agreement. The
execution, delivery and performance of this Agreement by
Parent will not violate any material agreement to which
Parent is a party. This Agreement has been duly and
validly executed and delivered by Parent and constitutes
a valid and binding agreement of Parent, enforceable
against Parent in accordance with its terms.
(ii) No Conflicts. No filing with, and no permit,
authorization, consent or approval of, any Governmental
Entity is required for the execution of this Agreement
by Parent and the consummation by Parent of the
transactions contemplated hereby, and none of the
execution and delivery of this Agreement by Parent, the
consummation by Parent of the transactions contemplated
hereby or compliance by Parent with any of the
provisions hereof shall (A) conflict with or result in
any breach of any organizational documents applicable to
Parent, (B) result in a violation or breach of, or
constitute (with or without notice or lapse of time or
both) a default (or give rise to any third party right
of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or
provisions of any material note, loan agreement, bond,
mortgage, indenture, license, contract, commitment,
arrangement, understanding, agreement or other
instrument or obligation of any kind to which Parent is
a party or by which Parent or any of its properties or
assets may be bound, or (C) violate any order, writ,
injunction, decree, judgment, order, statute,
arbitration award, rule or regulation applicable to
Parent or any of its properties or assets.
4. Stop Transfer. Except pursuant to the terms
of the Shares, no Stockholder may request or cause the Voting
Trustees to request that the Company or the Voting Trustees,
as the case may be, register the transfer (book-entry or
otherwise) of any certificate or uncertificated interest,
including without limitation the Trust Certificates,
representing any of its Shares, unless such transfer is made
in compliance with this Agreement. In the event of any
dividend or distribution, or any change in the capital
structure of the Company by reason of any non-cash dividend,
split-up, recapitalization, combination, exchange of
securities or the like, the term "Shares" shall refer to and
include each Stockholder's Shares as well as all such
dividends and distributions of securities and any securities
into which or for which any or all such Shares may be
changed, exchanged or converted.
5. Restriction on Sales of Securities. From the
date that is 30 days prior to the effective time of the
Merger, until after such time as results covering at least 30
days of post-Merger combined operations of the Company and
Parent have been published by Parent, in the form of a
quarterly earnings report, an effective registration
statement filed with the SEC, a report to the SEC on Forms
10-K, 10-Q or 8-K, or any other public filing or announcement
which includes such combined results of operations, no
Stockholder will sell, transfer or otherwise dispose of any
of its shares or Trust Certificates, any shares of Parent
Common Stock it receives in the Merger or any other shares of
Parent Common Stock or Parent preferred stock it holds.
6. Termination of Voting Trust Agreement.
Each Stockholder agrees to use its best efforts to cause the
Voting Trust Agreement to be terminated and to be of no
further force and effect as of the effective time of the
Merger.
7. Termination. This Agreement and the
covenants, representations and warranties and agreements
contained herein or granted pursuant hereto shall terminate
upon the earlier to occur of (i) the termination of the
Merger Agreement in accordance with Article VII thereof or
(ii) the consummation of the transactions contemplated by the
Merger Agreement, provided that the provisions of Sections 5
and 6 hereof shall survive the consummation of such
transactions in accordance with their terms (but shall not
survive the termination of the Merger Agreement).
8. Miscellaneous.
(a) Specific Performance. Each party hereto
recognizes and agrees that if for any reason any of the
provisions of this Agreement are not performed by any other
party in accordance with their specific terms or are
otherwise breached, immediate and irreparable harm or injury
would be caused to non-breaching parties for which money
damages would not be an adequate remedy. Accordingly, the
parties agree that, in addition to any other available
remedies, the non-breaching party shall be entitled to seek
an injunction restraining any violation or threatened
violation of the provisions of this Agreement.
(b) Severability. Any term or provision of this
Agreement which is invalid or unenforceable in any
jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and
provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this
Agreement in any other jurisdiction. Without limiting the
foregoing, with respect to any provision of this Agreement,
if it is determined by a court of competent jurisdiction to
be excessive as to duration or scope, it is the parties'
intention that such provision nevertheless be enforced to the
fullest extent which it may be enforced.
(c) Attorneys' Fees. If any action at law or
equity, including an action for declaratory relief, is
brought to enforce or interpret any provision of this
Agreement, the prevailing party shall be entitled to recover
reasonable attorneys' fees and expenses from the other party,
which fees and expenses shall be in addition to any other
relief which may be awarded.
(d) GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, REGARDLESS OF THE LAWS THAT MIGHT
OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF
LAWS THEREOF.
(e) Entire Agreement. This Agreement constitutes
the entire agreement among the parties hereto with respect to
the subject matter hereof and supersedes all other prior
agreements and understandings, both written and oral, among
the parties or any of them with respect to the subject matter
hereof.
(f) Notices. All notices, requests, claims,
demands and other communications hereunder shall be in
writing and shall be given (and shall be deemed to have been
duly given upon receipt) by delivery in person, by facsimile
(which is confirmed), or by registered or certified mail
(postage prepaid, return receipt requested):
If to a Stockholder, to the address set
forth on Schedule I
copy to:
Turner, Granzow & Hollenkamp
50 East Third Street
Dayton, Ohio 45402
Attention: Nicholas C. Hollenkamp, Esq.
Facsimile: (937) 228-4708
If to Parent, to:
International Paper Company
Two Manhattanville Road
Purchase, New York 10577
Attention: General Counsel
Facsimile: (914) 397-1612
copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Eric J. Friedman, Esq.
Facsimile: (212) 735-2000
or to such other address as the person to whom notice is
given may have previously furnished to the others in writing
in the manner set forth above.
(g) Descriptive Headings; Interpretation. The
descriptive headings herein are inserted for convenience of
reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
(h) Assignment; Binding Agreement. Neither this
Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any party hereto without the
prior written consent of the other parties hereto.
(i) Amendment, Modification and Waiver. This
Agreement may not be amended, modified or waived except by an
instrument or instruments in writing signed and delivered on
behalf of the party hereto against whom such amendment,
modification or waiver is sought to be entered.
(j) Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall be deemed to
be an original, but all of which shall constitute one and the
same agreement.
IN WITNESS WHEREOF, Parent has caused this
Agreement to be duly executed by its authorized
representative as of the day and year first above written.
INTERNATIONAL PAPER COMPANY
By:/S/ W. MICHAEL AMICK
--------------------------
Name: W. Michael Amick
Title: Executive Vice President
IN WITNESS WHEREOF, each undersigned Stockholder or
its authorized representative has duly executed this
Agreement as of the day and year first above written.
<TABLE>
<CAPTION>
STOCKHOLDER NAME STOCKHOLDER SIGNATURE NUMBER OF SHARES
<S> <C> <C>
Charles E. Beaman /S/ CHARLES E. BEAMAN 1,271
Charles E. Beaman, /S/ CHARLES E. BEAMAN 5,888
Executor of Estate of Margaret E. Beaman,
deceased
Mayme Boatman Trust, /S/ PAUL H. GRANZOW 2,255
Paul H. Granzow,
Trustee
James A. Coffield Trust, /S/ PAUL H. GRANZOW 5,864
Paul H. Granzow,
Trustee
Lana Turner Granzow /S/ LANA TURNER GRANZOW 1,165
Paul H. Granzow /S/ PAUL H. GRANZOW 11,044
Paul H. Granzow, /S/ PAUL H. GRANZOW 33,917
Executor of Estate of Kathryn C. Lange,
deceased
Nicholas C. Hollenkamp /S/ NICHOLAS C. HOLLENKAMP 7,302
Ward M. Hubbard /S/ WARD M. HUBBARD 32,596
David L. Robinson /S/ DAVID L. ROBINSON 3,686
David L. Robinson and /S/ DAVID L. ROBINSON & 850
Hazel Robinson HAZEL ROBINSON
Hazel Robinson, /S/ HAZEL ROBINSON 473
Custodian for Dale Lewis Robinson
Hazel Robinson, /S/ HAZEL ROBINSON 483
Custodian for Daniel L. Robinson
Hazel Robinson, /S/ HAZEL ROBINSON 475
Custodian for Deborah L. Robinson
Hazel Robinson /S/ HAZEL ROBINSON 3,084
Edward T. Turner, Jr. /S/ EDWARD T. TURNER, JR. 31,779
Phyllis D. Turner /S/ PHYLLIS D. TURNER 2,672
TOTAL N/A 144,794
</TABLE>
ANNEX C
[LETTERHEAD OF SBC WARBURG DILLON READ INC.]
January 29, 1998
The Board of Directors
The Weston Paper and Manufacturing Co.
2001 North 19th Street
Terre Haute, IN 47804
Gentlemen:
We understand that The Weston Paper and Manufacturing Co.
( Weston or the Company ) is undertaking a transaction whereby
a wholly-owned subsidiary of International Paper Company ( IP )
will be merged with and into the Company, pursuant to the terms
of an Agreement and Plan of Merger and the exhibits thereto, as
amended in January 1998 (the Merger Agreement ), such that
Weston becomes a wholly owned subsidiary of IP (the
"Transaction"). Pursuant to the Transaction, each outstanding
share of Weston s Common Stock, $0.50 par value (the "Weston
Common Stock"), shall be converted into shares of IP Common
Stock, $1.00 par value (the IP Common Stock ) at a variable
ratio that yields total consideration to Weston shareholders of
$232 million, as further specified in the Merger Agreement, (the
"Consideration"). The terms and conditions of the Transaction
are more fully set forth in the Merger Agreement.
You have requested our opinion as to whether the
Consideration to be received by the holders of Weston Common
Stock (the Holders ) in the Transaction is fair to such Holders,
from a financial point of view.
SBC Warburg Dillon Read Inc. has acted as financial advisor
to the Board of Directors of Weston in connection with the Merger
and will receive a fee upon the consummation thereof. In the
ordinary course of business, we may have traded securities of IP
for our own account and for the accounts of our customers and,
accordingly, may at any time hold a long or short position in
such securities.
In arriving at our opinion, we have, among other things: (i)
reviewed certain financial information and other data relating to
the business and prospects of Weston provided to us by Weston,
some of which is not publicly available, (ii) reviewed certain
financial budget information prepared by the management of
Weston, (iii) reviewed certain publicly available business and
financial information relating to IP, (iv) conducted discussions
with members of the senior managements of Weston and IP with
respect to the operations, financial condition, history and
prospects of each company, (v) reviewed publicly available
financial and stock market data with respect to certain other
companies in lines of business we believe to be generally
comparable to those of Weston and IP, (vi) reviewed the financial
terms, to the extent publicly available, of certain other merger
and acquisition transactions which we believe to be generally
comparable to the Transaction, (vii) reviewed the historical
market prices of IP Common Stock, (viii) reviewed the Merger
Agreement, and (ix) conducted such other financial studies,
analyses, and investigations, and considered such other
information as we deemed necessary or appropriate.
In connection with our review, we have not assumed any
responsibility for independent verification of any of the
foregoing information and have, with your consent, relied on such
information being complete and accurate in all material respects.
In addition, we have not made or received any evaluation or
appraisal of any of the assets or liabilities (contingent or
otherwise) of Weston or IP. With respect to the financial budget
information provided to or otherwise reviewed by or discussed
with us, we have assumed that such information is reasonably
prepared on bases reflecting the best currently available
estimates and judgments of the management of Weston as to the
future financial performance of the Company. Further, our
opinion is based on economic, monetary, and market conditions
existing on, and the information made available to us as of, the
date hereof.
SBC Warburg Dillon Read Inc. was not authorized to contact or
hold discussions with any parties other than IP as potential
acquirors.
In rendering our opinion, we have assumed, with your consent,
that the Transaction will qualify as a tax-free reorganization.
Our opinion does not address the Company's underlying
business decision to effect the Transaction nor does it
constitute a recommendation to any stockholder of the Company as
to how such stockholder should vote with respect to the
Transaction. Further, our opinion does not imply any conclusions
as to the trading range of the IP Common Stock following the
Transaction, nor are we making any recommendation to the Holders
with respect to the advisability of disposing of or retaining IP
Common Stock received in the Transaction.
Based upon and subject to the foregoing, it is our opinion
that, as of the date hereof, the Consideration to be received by
the Holders in the Transaction is fair to such Holders from a
financial point of view.
Very truly yours,
SBC WARBURG DILLON READ INC. SBC WARBURG DILLON READ INC.
By: /S/ H.C. Bowen Smith By: /S/ David M. Dickson, Jr.
-------------------- -------------------------
H.C. Bowen Smith David M. Dickson, Jr.
Managing Director Managing Director
ANNEX D
DISSENTERS' APPRAISAL RIGHTS
SECTION 1701.85 OHIO REVISED CODE
(A) (1) A shareholder of a domestic corporation is
entitle to relief as a dissenting shareholder in respect of the
proposals described in section s 1701.74, 1701.76, and 1701.84 of
the Revised Code, only in compliance with this section.
(2) If the proposal must be submitted to the
shareholders of the corporation involved, the dissenting
shareholder shall be a record holder of the shares of the
corporation as to which he seeks relief as of the date fixed for
the determination of shareholders entitled to notice of a meeting
of the shareholders at which the proposal is to be submitted, and
such shares shall not have been voted in favor of the proposal.
Not later than ten days after the date on which the vote on the
proposal was taken at the meeting of the shareholders, the
dissenting shareholder shall deliver to the corporation a written
demand for payment to him of the fair cash value of the shares as
to which he seeks relief, which demand shall state his address,
the number and class of such shares, and the amount claimed by
him as the fair cash value of the shares.
(3) The dissenting shareholder entitled to relief
under division (C) of section 1701.84 of the Revised Code in the
case of a merger pursuant to section 1701.80 of the Revised Code
and a dissenting shareholder entitled to relief under division
(E) of section 1701.84 of the Revised Code in the case of a
merger pursuant to section 1701.801 of the Revised Code shall be
a record holder of the shares of the corporation as to which he
seeks relief as of the date on which the agreement of merger was
adopted by the directors of that corporation. Within twenty days
after he has been sent the notice provided in section 1701.80 or
1701.801 of the Revised Code, the dissenting shareholder shall
deliver to the corporation a written demand for payment with the
same information as that provided for in division (A)(2) of this
section.
(4) In the case of a merger or consolidation, a
demand served on the constituent corporation involved constitutes
service on the surviving or the new entity, whether the demand is
served before, on, or after the effective date of the merger or
consolidation.
(5) If the corporation sends to the dissenting
shareholder, at the address specified in his demand, a request
for the certificates representing the shares as to which he seeks
relief, the dissenting shareholder, within fifteen days from the
date of the sending of such request, shall deliver to the
corporation, the certificates requested so that the corporation
may forthwith endorse on them a legend to the effect that demand
for the fair cash value of such shares has been made. The
corporation promptly shall return such endorsed certificates to
the dissenting shareholder. A dissenting shareholder's failure
to deliver such certificates terminates his rights as a
dissenting shareholder, at the option of the corporation,
exercised by written notice sent to the dissenting shareholder
within twenty days after the lapse of the fifteen-day period,
unless a court for good cause shown otherwise directs. If shares
represented by a certificate on which such a legend has been
endorsed are transferred, each new certificate issued for them
shall bear a similar legend, together with the name of the
original dissenting holder of such shares. Upon receiving a
demand for payment from a dissenting shareholder who is the
record holder of uncertificated securities, the corporation shall
make an appropriate notation of the demand for payment in its
shareholder records. If uncertificated shares for which payment
has been demanded are to be transferred, any new certificate
issued for the shares shall bear the legend required for
certificated securities as provided in this paragraph. A
transferee of the shares so endorsed, or of uncertificated
securities where such notation has been made, acquires only such
rights in the corporation as the original dissenting holder of
such shares had immediately after the service of a demand for
payment of the fair cash value of the shares. A request under
this paragraph by the corporation is not an admission by the
corporation that the shareholder is entitled to relief under this
section.
(B) Unless the corporation and the dissenting shareholder
have come to an agreement on the fair cash value per share of the
shares as to which the dissenting shareholder seeks relief, the
dissenting shareholder or the new entity, within three months
after the service of the demand by the dissenting shareholder,
may file a complaint in the court of common pleas of the county
in which the principal office of the corporation that issued the
shares is located or was located when the proposal was adopted by
the shareholders of the corporation, or, if the proposal was not
required to be submitted to the shareholders, was approved by the
directors. Other dissenting shareholders, within that three-
month period, may join as plaintiffs or may be joined as
defendants in any such proceeding, and any two or more such
proceedings may be consolidated. The complaint shall contain a
brief statement of the facts, including the vote and the facts
entitling the dissenting shareholder to the relief demanded. No
answer to such a complaint is required. Upon the filing of such
a complaint, the court, on motion of the petitioner, shall enter
an order fixing a date for a hearing on the complaint and
requiring that a copy of the complaint and a notice of the filing
and of the date for hearing be given to the respondent or
defendant in the manner in which summons is required to be served
of substituted service is required to be made in other cases. On
the day fixed for the hearing on the complaint or any adjournment
of it, the court shall determine from the complaint and from such
evidence as is submitted by either party whether the dissenting
shareholder is entitled to be paid the fair cash value of any
shares and, if so, the number and class of such shares. If the
court finds that the dissenting shareholder is so entitled, the
court may appoint one or more persons as appraisers to receive
evidence and to recommend a decision on the amount of the fair
cash value. The appraisers have such power and authority as is
specified in the order of their appointment. The court thereupon
shall make a finding as to the fair cash value of a share and
shall render judgment against the corporation for the payment of
it, with interest at such rate and from such date as the court
considers equitable. The costs of the proceeding, including
reasonable compensation to the appraisers to be fixed by the
court, shall be assessed or apportioned as the court considers
equitable. The proceeding is a special proceeding and final
orders in it may be vacated, modified, or reversed on appeal
pursuant to the Rules of Appellate Procedure and, to the extent
not in conflict with those rules, Chapter 2505 of the Revised
Code. If, during the pendency of any proceeding instituted under
this section, a suit or proceeding is or has been instituted to
enjoin or otherwise to prevent the carrying out of the action as
to which the shareholder has dissented, the proceeding instituted
under this section shall be stayed until the final determination
of the other suit or proceeding. Unless any provision in
division (D) of this section is applicable, the fair cash value
of the shares that is agreed upon by the parties or fixed under
this section shall be paid within thirty days after the date of
final determination of such value under this division, the
effective date of the amendment to the articles, or the
consummation of the other action involved, whichever occurs last.
Upon the occurrence of the last such event, payment shall be made
immediately to a holder of uncertificated securities entitled to
such payment. In the case of holder of shares represented by
certificates, payment shall be made only upon and simultaneously
with the surrender to the corporation of the certificates
representing the shares for which the payment is made.
(C) If the proposal was required to be submitted to the
shareholders of the corporation, fair cash value as to those
shareholders shall be determined as of the day prior to the day
on which the vote by the shareholders was taken, and, in the case
of a merger pursuant to section 1701.80 or 1701.801 of the
Revised Code, fair cash value as to shareholders of a constituent
subsidiary corporation shall be determined as of the day before
the adoption of the agreement of merger by the directors of the
particular subsidiary corporation. The fair cash value of a
share for the purposes of this section is the amount that a
willing seller who is under no compulsion to sell would be
willing to accept and that a willing buyer who is under no
compulsion to purchase would be willing to pay, but in no event
shall the fair cash value of a share exceed the amount specified
in the demand of the particular shareholder. In computing such
fair cash value, any appreciation or depreciation in market value
resulting from the proposal submitted to the directors or to the
shareholders shall be excluded.
(D) (1) The right and obligation of a dissenting
shareholder to receive such fair cash value and to sell such
shares as to which he seeks relief, and the right and obligation
of the corporation to purchase such shares and to pay the fair
cash value of them terminates if any of the following applies:
(a) The dissenting shareholder has not complied with
this section, unless the corporation by its directors waives
such failure;
(b) The corporation abandons the action involved or is
finally enjoined or prevented from carrying it out, or the
shareholders rescind their adoption, of the action involved;
(c) The dissenting shareholder withdraws his demand,
with the consent of the corporation by its directors;
(d) The corporation and the dissenting shareholder
have not come to an agreement as to the fair cash value per
share, and neither the shareholder nor the corporation filed
or joined in a complaint under division (B) of this section
within the period provided in that division.
(2) For purposes of division (D)(1) of this section,
if the merger or consolidation has become effective and the
surviving or new entity is not a corporation, action required to
be taken by the directors of the corporation shall be taken by
the general partners of a surviving or new partnership or the
comparable representatives of any other surviving or new entity.
(E) From the time of the dissenting shareholder's giving of
the demand until either the termination of the rights and
obligations arising from it or the purchase of the shares by the
corporation, all other rights accruing from such shares,
including voting and dividend or distribution rights, are
suspended. If during the suspension, any dividend or
distribution is paid in money upon Shares of such class or any
dividend, distribution, or interest is paid in money upon any
securities issued in extinguishment of or in substitution for
such shares, an amount equal to the dividend, distribution, or
interest which, except for the suspension, would have been
payable upon such shares or securities, shall be paid to the
holder of record as a credit upon the fair cash value of the
shares. If the right to receive fair cash value is terminated
other than by the purchase of the shares by the corporation, all
rights of the holder shall be restored and all distributions
which, except for the suspension, would have been made, shall be
made to the holder of record of the shares at the time of
termination.
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 721 of the New York Business Corporation Law
("B.C.L.") provides that, in addition to indemnification provided
in Article 7 of the B.C.L., a corporation may indemnify a
director or officer by a provision contained in the certificate
of incorporation or by-laws or by a duly authorized resolution of
its shareholders or directors or by agreement provided that no
indemnification may be made to or on behalf of any director or
officer if a judgment or other final adjudication adverse to the
director or officer establishes that his acts were committed in
bad faith or were the result of active and deliberate dishonesty
and material to the cause of action, or that such director or
officer personally gained in fact a financial profit or other
advantage to which he was not legally entitled.
Section 722 (a) of the B.C.L. provides that a corporation may
indemnify a director or officer made, or threatened to be made, a
party to any action other than a derivative action, whether civil
or criminal, against judgments, fines, amounts paid in settlement
and reasonable expenses actually and necessarily incurred as a
result of such action, if such director or officer acted, in good
faith, for a purpose which he reasonable believed to be in, or
not opposed to, the best interests of the corporation and, in
criminal actions or proceedings, in addition, has no reasonable
cause to believe that his conduct was unlawful.
Section 722 (c) of the B.C.L. provides that a corporation may
indemnify a director or officer, made, or threatened to be made,
a party in a derivative action, against amounts paid in
settlement and reasonable expenses actually and necessarily
incurred by him in connection with the defense or settlement of
such action or in connection with an appeal therein if such
director or officer acted, in good faith, for a purpose which he
reasonable believed to be in, or not opposed to, the best
interests of the corporation, except that no indemnification will
be available under Section 722 (c) of the B.C.L. in respect of a
threatened or pending action which is settled or otherwise
disposed of or any claims as to which such director or officer
shall have been adjudged liable to the corporation, unless and
only to the extent that the court in which the action was
brought, or, if no action was brought, any court of competent
jurisdiction, determines, upon application, that, in view of all
the circumstances of the case, the director or officer is fairly
and reasonably entitled to indemnity for such portion of the
settlement amount and expenses as the court deems proper.
Section 723 of the B.C.L. specifies the manner in which
payment of indemnification under Section 722 of the B.C.L. or
indemnification permitted under Section 721 of the B.C.L. may be
authorized by the corporation. It provides that indemnification
may be authorized by the corporation. It provides that
indemnification by a corporation is mandatory in any case in
which the director or officer has been successful, whether on the
merits or otherwise, in defending an action. In the event that
the director or officer has not been successful or the action is
settled, indemnification must be authorized by the appropriate
corporate action as set forth in Section 723. Section 724 of the
B.C.L. provides that, upon application by a director or officer,
indemnification may be awarded by a court to the extent
authorized under Section 722 and 723 of the B.C.L. Section 725 of
the B.C.L. contains certain other miscellaneous provisions
affecting the indemnification of directors and officers.
Section 726 of the B.C.L. authorizes the purchase and
maintenance of insurance to indemnify (1) a corporation for any
obligation which it incurs as a result of the indemnification of
directors and officers under the above sections, (2) directors
and officers in instances in which they may be indemnified by a
corporation under such sections, and (3) directors and officers
in instances in which they may not otherwise be indemnified by a
corporation under such sections, provided the contract of
insurance covering such directors and officers provides, in a
manner acceptable to the New York State Superintendent of
Insurance, for a retention amount and for co-insurance.
Article VII of the Restated Certificate of Incorporation of
International Paper Company provides in part as follows:
"Each Director of the Corporation shall be indemnified by
the Corporation against expenses actually and necessarily
incurred by him in connection with the defense of any
action, suit or proceeding in which he is made a party by
reason of his being or having been a Director of the
Corporation, except in relation to matters as to which he
shall be adjudged in such action, suit or proceeding to be
liable for negligence or misconduct in the performance of
his duties as such Director, provided that such right of
indemnification shall not be deemed exclusive of any other
rights to which a Director of the Corporation may be
entitled, under any by-law, agreement, vote of
stockholders or otherwise."
Article IX of the By-laws, as amended, of the Company provides
as follows:
"The Corporation shall indemnify each Officer or Director
who is made, or threatened to be made, a party to any
action by reason of the fact that he or she is or was an
Officer or Director of the Corporation, or is or was
serving at the request of the Corporation in any capacity
for the Corporation or any other enterprise, to the
fullest extent permitted by applicable law. The
Corporation may, so far as permitted by law, enter into an
agreement to indemnify and advance expenses to any Officer
or Director who is made, or threatened to be made, a party
to any such action."
The Company has purchased certain liability insurance for its
officers and directors as permitted by Section 727 of the B.C.L.
and has entered into indemnity agreements with its directors and
certain officers providing indemnification in addition to that
provided under the B.C.L., as permitted by Section 721 of the
B.C.L.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits. See Exhibit Index.
(b) Financial Statement Schedules. Not Applicable.
(c) Report, Opinion or Appraisal. See Exhibits 5.1 and 8.1
in Exhibit Index.
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act;
(ii) To reflect in the Proxy Statement/Prospectus any
facts or events arising after the effective date of
the Registration Statement (or the most recent
post-effective amendment thereof) which,
individually or in the aggregate, represent a
fundamental change in the information set forth in
the Registration Statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the Registration Statement or any material change to
such information in the Registration Statement.
provided, however, that paragraphs (1)(i) and (1)(ii) above do
not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant with or furnished to
the Securities and Exchange Commission pursuant to Section 13
or Section 15(d) of the Exchange Act that are incorporated by
reference in the Registration Statement.
(2) That for the purpose of determining any liability
under the Securities Act, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act,
each filing of the Registrant's Annual Report pursuant to Section
13(a) or Section 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions
described under Item 20, or otherwise, the Registrant has been
advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of
the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned Registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this
Registration Statement, by any person or party who is deemed to
be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters,
in addition to the information called for by the other items of
the applicable form.
The Registrant undertakes that every prospectus: (i) that is
filed pursuant to the immediately preceding paragraph, or (ii)
that purports to meet the requirements of Section 10(a)(3) of the
Act and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an amendment to
the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any
liability under the Securities Act, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offering therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
The undersigned Registrant hereby undertakes to respond to
requests for information that is incorporated by reference into
the prospectus pursuant to Item 4, 10(b), 11 or 13 of this Form,
within one business day of receipt of such request, and to send
the incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration
Statement through the date of responding to the request.
The undersigned Registrant hereby undertakes to supply by
means of a post-effective amendment all information concerning a
transaction, and the company being acquired involved therein,
that was not the subject of and included in the Registration
Statement when it became effective.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Company has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Purchase, State of New York, on March
16, 1998.
INTERNATIONAL PAPER COMPANY
By: /s/ JAMES W. GUEDRY
-------------------
James W. Guedry
Vice President and Corporate
Secretary
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Amendment to the Registration Statement has been
signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
* Director and Chairman of the March 16, 1998
--------------------- Board (Chief Executive Officer)
John T. Dillon
* Executive Vice President and March 16, 1998
--------------------- President and Director
C. Wesley Smith
* Director March 16, 1998
---------------------
Peter I. Bijur
* Director March 16, 1998
---------------------
Willard C. Butcher
* Director March 16, 1998
---------------------
Robert J. Eaton
* Director March 16, 1998
---------------------
John A. Georges
* Director March 16, 1998
---------------------
Thomas C. Graham
* Director March 16, 1998
---------------------
John R. Kennedy
* Director March 16, 1998
---------------------
Donald F. McHenry
* Director March 16, 1998
---------------------
Patrick F. Noonan
* Director March 16, 1998
---------------------
Jane C. Pfeiffer
* Director March 16, 1998
---------------------
Edmund T. Pratt, Jr.
* Director March 16, 1998
---------------------
Charles R. Shoemate
* Senior Vice President and March 16, 1998
--------------------- Chief Financial Officer
Marianne M. Parrs
* Vice President and Controller March 16, 1998
--------------------- and Chief Accounting Officer
Andrew R. Lessin
</TABLE>
*By /s/James W. Guedry
------------------
James W. Guedry
Attorney-in-fact
EXHIBIT INDEX
Exhibits required by Item 601 of Regulation S-K:
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
2.1 Agreement and Plan of Merger, dated as of January 29,
1998, among International Paper Company, Wolverine
Acquisition Corp. and The Weston Paper and Manufacturing
Co., included as Annex A to the Proxy
Statement/Prospectus included as part of this
Registration Statement.
3.1 Restated Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit 3(a) to the
Registrant's Current Report on Form 8-K, filed November
30, 1990, File No. 1-3157).
3.2 By-Laws of the Registrant as amended February 12, 1997
(incorporated by reference to Exhibit 99.1 to the
Registrant's Current Report on Form 8-K, filed February
12, 1997 (File No. 1-3157)).
*5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to
the legality of the shares being issued (including
consent).
*8.1 Opinion of Keating, Muething & Klekamp, P.L.L. regarding
the federal income tax consequences of the Merger
(including consent).
10.1 Stockholder Agreement, dated as of January 29, 1998, by
and among International Paper Company and the
shareholders set forth on the signature pages thereto,
included as Annex B to the Proxy Statement/Prospectus
included as part of this Registration Statement.
**23.1 Consent of Arthur Andersen LLP relating to the audited
financial statements of the Registrant.
**23.2 Consent of Coopers & Lybrand L.L.P. relating to the
audited financial statements of Weston.
*23.3 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1).
*23.4 Consent of Keating, Muething & Klekemp, P.L.L. (included
in Exhibit 8.1).
*24 Powers of Attorney.
**99.1 Form of proxy card to be used in soliciting holders of
The Weston Paper and Manufacturing Co. Common Stock.
__________________
* Previously filed.
** Filed herewith.
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our reports dated February
7, 1997 included in International Paper Company's Annual Report on Form
10-K for the year ended December 31, 1996, and to all references to our
Firm included in this registration statement.
/S/ ARTHUR ANDERSEN LLP
New York, New York
March 12, 1998
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4
(File No. 333- 47583) of our report dated February 2, 1998, on our audits
of the consolidated financial statements of The Weston Paper and
Manufacturing Co. as of December 31, 1997 and 1996 and for the years ended
December 31, 1997, 1996 and 1995. We also consent to the references to our
firm under the captions "Experts" and "Weston Selected Consolidated
Financial Data".
/S/ COOPERS & LYBRAND L.L.P.
Indianapolis, Indiana
March 13, 1998
Proxy THE WESTON PAPER AND MANUFACTURING CO.
PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
SPECIAL MEETING OF SHAREHOLDERS
ON APRIL 17, 1998
The undersigned stockholder of The Weston Paper and Manufacturing Co.
("Weston") hereby appoints Edward T. Turner, Jr. and Paul H. Granzow, and
each of them individually, with full power of substitution, the proxy of
the undersigned, to vote all shares of Common Stock, par value $0.50 per
share, of Weston ("Weston Common Stock") which the undersigned is entitled,
in any capacity, to vote at the Special Meeting of Shareholders to be held
on April 17, 1998 and any and all adjournments or postponements thereof
(the "Special Meeting"), with all powers the undersigned would possess if
personally present, as follows:
1. To approve and adopt the Agreement and Plan of Merger, dated as of
January 29, 1998, between Weston, International Paper Company and a wholly
owned subsidiary of International Paper ("Sub"), pursuant to which Sub will
be merged with and into Weston, with Weston being the surviving corporation
in the merger (the "Merger"). Approval of this proposal will also
constitute approval of the transactions contemplated by the Merger
Agreement, including the Merger.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. In their discretion, to vote upon all matters incident to the
conduct of the Special Meeting and such other matters as may properly come
before the Special Meeting or any adjournments or postponements thereof.
THE BOARD OF DIRECTORS OF WESTON RECOMMENDS A VOTE FOR
THE APPROVAL OF THE MERGER AGREEMENT
(Continued, and to be signed and dated on reverse side)
(Face of proxy card)
This proxy, if properly executed and returned, will be voted in
accordance with the instructions appearing on the proxy and at the
discretion of the proxy holders as to any other matters that may properly
come before the Special Meeting. In the absence of specific instructions,
this proxy will be voted FOR approval of the stated proposal and at the
discretion of the proxy holders as to any other matter that may properly
come before the Special Meeting.
THE UNDERSIGNED HEREBY ACKNOWLEDGES NOTIFICATION OF THE SPECIAL
MEETING AND RECEIPT OF THE PROXY STATEMENT/PROSPECTUS DATED MARCH 13, 1998,
RELATING TO THE SPECIAL MEETING.
PLEASE SIGN, DATE, AND MAIL THIS PROXY PROMPTLY IN THE RETURN
ENVELOPE whether or not you expect to attend the Special Meeting. You may
nevertheless vote in person if you do attend.
Date _________________________
______________________________
______________________________
Signature(s)
Note: Please sign this proxy exactly as name appears hereon. If shares are
held as joint tenants, both joint tenants should sign. Attorneys-in-fact,
executors, administrators, trustees, guardians, corporation officers or
others signing in a representative capacity should indicate the capacity in
which they are signing.
(Reverse of proxy card)
