AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 9, 1998
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
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 JURISDICTION OF (PRIMARY STANDARD INDUST (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
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 (212) 474-1000
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. o
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. /_/ ___________
------------------------
CALCULATION OF REGISTRATION FEE
===========================================================================
PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED PRICE(1) FEE(2)
Common Stock, $1.00 par
value per share $232,000,000 $68,440
===========================================================================
(1) Calculated in accordance with Rule 457(o), by multiplying (A) 518,314,
representing the estimate of the maximum number of shares of the common
stock, par value $0.50 per share ("Weston Common Stock"), of Weston
expected to be exchanged in connection with the Merger, by (B)
$447.6051, representing the value of the shares of common stock, par
value $1.00 per share, of International Paper to be issued per share of
Weston Common Stock in the Merger.
(2 The registration fee of $68,440 was calculated pursuant to Rule 457(f)
under the Securities Act by multiplying .000295 times the proposed
maximum aggregate offering price.
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 , 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:
_____________, 1998, __:00 _.M., EASTERN TIME
[LOCATION]
TERRE HAUTE, INDIANA 47804
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,
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 , 1998 was
first mailed to shareholders on or about March , 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....................................11
International Paper's Rationale for the Merger...........................14
Federal Income Tax Consequences of the Merger............................14
Accounting Treatment.....................................................15
Regulatory and Third-Party Approvals.................................... 16
Dissenters' Appraisal Rights.............................................16
Stockholder Agreement....................................................18
Interests of Certain Persons in the Merger...............................18
Cautionary Statement Concerning Forward-Looking Statements...............19
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......31
Authorized Capital.......................................................31
Board of Directors.......................................................31
Committees of the Board of Directors.....................................31
Newly Created Directorships and Vacancies................................32
Removal of Directors.....................................................32
Special Meetings of Shareholders.........................................32
Quorum at Shareholders Meetings..........................................32
Amendment of Governing Documents.........................................32
Fair Price and Other Provisions..........................................33
EXPERTS.....................................................................34
LEGAL MATTERS...............................................................34
WHERE YOU CAN FIND MORE INFORMATION.........................................34
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 10:00 a.m., Eastern Time, on _____________________, _______ __,
1998, at _______________________________.
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 February 20,
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 __, 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 __, 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 extra-
ordinary 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.
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."
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995 1994 1993
----------------------------------
(In millions, except
per share amounts)
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,
extraordinary item and
cumulative effect of accounting
changes................................ - 20 36 10 8
Net income .............................. - 12 22 6 5
Earnings per common share................ $ .08 $23.68 $43.44 $11.26 $9.15
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
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. Historical amounts for International Paper are adjusted to reflect
the two-for-one stock split which was payable on September 15, 1995. 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 $48.50 (the closing price of International
Paper stock on the NYSE on March 4, 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 $48.50 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."
Nine months
Year ended on ended on or Year ended on
or at December at September or at December
31, 1997 30, 1997 31, 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............... - $(0.94)(a) $1.04(b)
Cash dividends per common share.. - 0.75 1.00
Book value per common share...... - 28.93 31.13
INTERNATIONAL PAPER - EQUIVALENT PER SHARE DATA FOR WESTON SHAREHOLDERS
Earnings (loss) per common share
before cumulative effect of
accounting changes............... - ($8.68) $9.60
Cash dividends per common share.. - 6.92 9.23
Book value per common share...... - 266.99 287.30
(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.
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 __, 1998)..
On January 30, 1998, the last trading day immediately preceding the
public announcement of the proposed merger, and on March __, 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 $_____, 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 19 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 __, 1998, at _____:00__.m., Eastern Time, at _____________________,
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 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 which were included in
SBCWDR's presentation to the Weston Board. 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 __, 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 27.9% 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") other than Mr. Turner,
Charles E. Beaman and Paul H. Granzow of Weston or of the Wabash Fibre Box
Company, an Arkansas corporation and wholly owned subsidiary of Weston
(together with Weston, the "Corporation"), 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 (as well as to certain other related individuals or entities).
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 February 20, 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, __________shares
of Weston Common Stock (representing __% 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, (i) 518,314
shares of Weston Common Stock were issued and outstanding and were held by
approximately 19 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, (i) may be deemed to
be the beneficial owners of ___________ outstanding shares of Weston Common
Stock (collectively representing approximately ___% of the total
outstanding shares of Weston Common Stock). It is expected that the
executive officers and directors of Weston beneficially owning
approximately __% 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 at 10:00
a.m. on the Closing Date, which will be no later than the second day after
satisfaction or waiver of the conditions set forth in the Merger Agreement,
unless another time or date is agreed to by International Paper and Weston.
The Closing will be held at the offices of Skadden, Arps, Slate, Meagher &
Flom LLP, special counsel to International Paper, located in the City of
New York.
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 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 (iv) 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 (iv) 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 Weston Articles, the Weston
Regulations, the IP Certificate and the IP By-Laws. Copies of the IP
Certificate and the IP By-Laws are attached to this Proxy
Statement/Prospectus as Exhibits 3.1 and 3.2, respectively, 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 for 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.
INTERNATIONAL PAPER SEC FILINGS
(FILE NO. 1-9924) PERIOD
- ------------------------------- ------
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).
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 ________ __, 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 __, 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, 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 $44.9
million, a decrease of $3.0 million from December 31, 1996, primarily due
to lower cash and investments. The decrease in cash and investments was
primarily due to lower average net selling prices for the Company's
products.
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 ----------------------------
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
Other assets 4,326,650 3,723,334
----------------------------
$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
0 300,000
Notes payable ----------------------------
Total current liabilities 20,261,455 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
92,976,654 99,237,293
Retained earnings ----------------------------
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.
<TABLE>
<CAPTION>
THE WESTON PAPER AND MANUFACTURING CO.
CONSOLIDATED STATEMENT OF INCOME
for the years ended December 31, 1997, 1996, and 1995
1997 1996 1995
<S> <C> <C> <C>
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 ---------------------------------------
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
=======================================
</TABLE>
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 0 22,490,554 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 0 (2,805,027) 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 0 12,275,286 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 0 (2,760,412) 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) (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.
<TABLE>
<CAPTION>
THE WESTON PAPER AND MANUFACTURING CO.
CONSOLIDATED STATEMENT OF CASH FLOWS
for the years ended December 31, 1997, 1996, and 1995
1997 1996 1995
Cash flows from operating activities:
<S> <C> <C> <C>
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 securitites 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:
1997 1996 1995
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
========= ========== ===========
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:
1997 1996 1995
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
========= ========== ===========
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:
1997 1996 1995
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
=========== ========= ==========
The funding status of the plans and the prepaid pension cost at
December 31 are as follows:
1997 1996
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
============ ===========
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:
1997 1996 1995
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
========= ========= =========
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:
1997 1996
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
========== ==========
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. Section 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.
Section 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
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 ADDRESS AND
FACSIMILE NUMBER NUMBER OF SHARES
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Charles E. Beaman /S/ CHARLES E. BEAMAN 1,271
Charles E. Beaman,
Executor of Estate of
Margaret E. Beaman,
deceased /S/ CHARLES E. BEAMAN 5,888
Mayme Boatman Trust,
Paul H. Granzow,
Trustee /S/ PAUL H. GRANZOW 2,255
James A. Coffield Trust,
Paul H. Granzow,
Trustee /S/ PAUL H. GRANZOW 5,864
Lana Turner Granzow /S/ LANA TURNER GRANZOW 1,165
Paul H. Granzow /S/ PAUL H. GRANZOW 11,044
Paul H. Granzow,
Executor of Estate of
Kathryn C. Lange,
deceased /S/ PAUL H. GRANZOW 33,917
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
Hazel Robinson /S/ DAVID L. ROBINSON &
HAZEL ROBINSON 850
Hazel Robinson,
Custodian for
Dale Lewis Robinson /S/ HAZEL ROBINSON 473
Hazel Robinson,
Custodian for
Daniel L. Robinson /S/ HAZEL ROBINSON 473
Hazel Robinson,
Custodian for
Deborah L. Robinson /S/ HAZEL ROBINSON 475
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 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;
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;
(iiiTo 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 9, 1998.
INTERNATIONAL PAPER COMPANY
By: /s/ JAMES W. GUEDRY
-------------------------------
James W. Guedry
Vice President and Corporate
Secretary
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
James W. Guedry and Barbara L. Smithers, and each of them, his true and
lawful attorneys-in-fact and agents with full power of substitution and
resubstitution, for him and in his name, place and stead, and in any and
all capacities, to sign any and all amendments (including post-effective
amendments) to the Registration Statement on Form S-4 covering the offering
and issuance of the common stock of International Paper Company (the
"Company") pursuant to such registration statement in connection with the
merger of a wholly owned subsidiary of the Company with and into The Weston
Paper and Manufacturing Co. and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and
Exchange Commission, and hereby grants to such attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done as fully to all
intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or any of them or
his or their substitute or substitutes may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ JOHN T.DILLON Director and Chairman of March 9, 1998
- ----------------- the Board (Chief
John T. Dillon Executive Officer)
/s/ C. WESLEY SMITH Executive Vice President March 9, 1998
C. Wesley Smith and Director
/s/ PETER I. BIJUR Director March 9, 1998
- ------------------
Peter I. Bijur
/s/ WILLARD C. BUTCHER Director March 9, 1998
- -----------------------
Willard C. Butcher
/s/ ROBERT J. EATON Director March 9, 1998
- -------------------
Robert J. Eaton
/s/ JOHN A. GEORGES Director March 9, 1998
- --------------------
John A. Georges
/s/ THOMAS C. GRAHAM Director March 9, 1998
- --------------------
Thomas C. Graham
/s/ JOHN R. KENNEDY Director March 9, 1998
- -------------------
John R. Kennedy
/s/ DONALD F. MCHENRY Director March 9, 1998
- ---------------------
Donald F. McHenry
/s/ PATRICK F. NOONAN Director March 9, 1998
- ---------------------
Patrick F. Noonan
/s/ JANE C. PFEIFFER Director March 9, 1998
- --------------------
Jane C. Pfeiffer
/s/ EDMUND T. PRATT, JR. Director March 9, 1998
- ------------------------
Edmund T. Pratt, Jr.
/s/ CHARLES R. SHOEMATE Director March 9, 1998
- -----------------------
Charles R. Shoemate
/s/ MARIANNE M. PARRS Senior Vice President and March 9, 1998
- --------------------- Chief Financial Officer
Marianne M. Parrs
/s/ ANDREW R. LESSIN Vice President and March 9, 1998
- -------------------- Controller and
Andrew R. Lessin Chief Accounting Officer
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 (included as part of the signature page of this
Registration Statement).
*99.1 Form of proxy card to be used in soliciting holders of The Weston
Paper and Manufacturing Co. Common
Stock.
- ------------------
* Filed herewith.
EXHIBIT 5.1
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK 10022-3897
TEL: (212) 735-3000
FAX: (212) 735-2000
March 9, 1998
International Paper Company
Two Manhattanville Road
Purchase, New York 10577
Re: International Paper Company
Registration Statement on Form S-4
Ladies and Gentlemen:
We have acted as special counsel to International Paper Company,
a New York corporation ("International Paper"), in connection with the
Registration Statement on Form S-4 (the "Registration Statement") filed by
International Paper with the Securities and Exchange Commission (the
"Commission") pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), on the date hereof.
The Registration Statement relates to the proposed issuance by
International Paper of up to $232,000,000 of International Paper common
stock, par value $1.00 per share (the "Common Stock"), pursuant to the
Agreement and Plan of Merger, dated as of January 29, 1998 (the "Merger
Agreement"), among International Paper, Wolverine Acquisition Corp., an
Ohio corporation and wholly owned subsidiary of International Paper
("Sub"), and The Weston Paper and Manufacturing Co., an Ohio corporation
("Weston").
The Merger Agreement provides for the merger of Sub with and into
Weston (the "Merger"), with Weston continuing as the surviving corporation.
The Registration Statement includes a proxy statement/prospectus (the
"Proxy Statement/Prospectus") to be furnished to stockholders of Weston in
connection with the approval of the Merger.
This opinion is being furnished in accordance with the
requirements of Item 601 (b)(5) of Regulation S-K under the Securities Act.
In connection with rendering this opinion, we have examined and
are familiar with originals or copies, certified or otherwise identified to
our satisfaction, of the following documents: (i) the Registration
Statement (including the Proxy Statement/Prospectus); (ii) the Restated
Certificate of Incorporation of International Paper, as amended to the date
hereof; (iii) the By-Laws of International Paper, as amended to the date
hereof; (iv) the Merger Agreement; (v) resolutions of the Board of
Directors of International Paper relating to the transactions contemplated
by the Merger Agreement and the Registration Statement; (vi) a specimen
certificate of Common Stock; and (vii) such other certificates, instruments
and documents as we considered necessary or appropriate for the purposes of
this opinion.
In our examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original
documents of all documents submitted to us as certified, conformed or
photostatic copies and the authenticity of the originals of such copies.
In making our examination of documents executed by parties other than
International Paper, we have assumed that such parties had the power,
corporate or other, to enter into and perform all obligations thereunder
and also have assumed the due authorization by all requisite action,
corporate or other, and execution and delivery by such parties of such
documents and the validity and binding effect thereof on such parties. As
to any facts material to the opinion expressed herein which we have not
independently established or verified, we have relied upon statements and
representations of officers and other representatives of International
Paper and others.
Members of our firm are admitted to the Bar of the State of New
York, and we do not express any opinion as to the law of any other
jurisdiction.
Based upon and subject to the foregoing, we are of the opinion
that the shares of Common Stock, when issued in accordance with the terms
and conditions of the Merger Agreement, will be validly issued, fully paid
and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to
the Registration Statement and to the references to our firm under the
caption "Legal Matters" in the Proxy Statement/Prospectus forming a part of
the Registration Statement. In giving this consent, however, we do not
thereby admit that we are within the category of persons whose consent is
required under Section 7 of the Securities Act and the rules and
regulations of the Commission thereunder.
Very truly yours,
/S/ SKADDEN, ARPS, SLATE, MEAGHER
& FLOM LLP
EXHIBIT 8.1
[LETTERHEAD OF KEATING, MUETHING & KLEKAMP, P.L.L.]
March 9, 1998
Board of Directors
The Weston Paper and Manufacturing Co.
2001 N. 19th Street
Terre Haute, Indiana 47804
Gentlemen:
You have requested our opinion regarding the discussion of the
material U.S. federal income tax consequences under the captions "Summary"
and "The Proposed Merger Federal Income Tax Consequences of the Merger" in
the Proxy Statement/Prospectus filed in the Registration Statement on Form
S-4 by International Paper Company on the date hereof with the Securities
and Exchange Commission under the Securities Act of 1933. The Proxy
Statement/Prospectus relates to the proposed merger of a subsidiary of
International Paper Company with and into The Weston Paper and
Manufacturing Co. This opinion is delivered in accordance with Item
601(b)(8) of Regulation S-K under the Securities Act.
We have reviewed the Proxy Statement/Prospectus and such other
materials as we have deemed necessary or appropriate as a basis for our
opinion described therein, and have considered the applicable provisions of
the Internal Revenue Code of 1986, as amended, Treasury regulations,
pertinent judicial authorities, rulings of the Internal Revenue Service,
and such other authorities as we have considered relevant to such opinion.
Based on the foregoing, it is our opinion that the statements
made under the captions "Summary" and "The Proposed Merger Federal Income
Tax Consequences of the Merger" in the Proxy Statement/Prospectus, to the
extent that they constitute matters of law or legal conclusions, are
correct in all material respects.
We hereby consent to the use of our name under the caption "Legal
Matters" in the Proxy Statement/Prospectus and to the filing of this
opinion as an Exhibit to the Registration Statement.
Your truly,
KEATING, MUETHING & KLEKAMP, P.L.L.
BY: /S/ JOSEPH P. MELLEN
____________________________
Joseph P. Mellen
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 5, 1998
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 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.
Coopers & Lybrand L.L.P.
Indianapolis, Indiana
March 5, 1998
EXHIBIT 99.1
Proxy THE WESTON PAPER AND MANUFACTURING CO.
PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
SPECIAL MEETING OF SHAREHOLDERS
ON APRIL , 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 __, 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 __,
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)
